Hong Kong Manufacturing SMEs: Preparing for the Future

96• Specialised products are not as vulnerable tomarket fluctuation as general products, and theytend to have a higher profit margin than generalproducts.• By being the leading manufacturer of a nicheproduct, the SME becomes more importantto customers that serve end markets for thoseproducts. This makes it difficult for othercompanies to compete with the firm.• SMEs that focus on specific niches are likely tohave fewer competitors, be more flexible, be ableto make decisions faster, more quickly adopt newtechnologies, and respond quicker to marketchanges.• SMEs should constantly evaluate their positionand adjust their business model and productdevelopment efforts in line with changes inmarket forces.• Applying for ISO 9001 certification demonstratesthe firm’s commitment to quality and may enableit to extract price premiums from the market.• SMEs should find ways to continuously innovateand improve their products and processes.Investing in ongoing research and developmentis the cornerstone of innovation, but often it isthe case that the most successful innovationsare neither very high-tech nor sophisticated, butresult from simple and creative thinking.• Establishing an internal design team may leadto innovations, creative thinking, and advancesin technology being applied across differentproducts, which maximises the value of investingin such a team.• SMEs that focus on OEM will face difficultcompetition.• SMEs may be able to stay ahead of thecompetition by focusing on OBM because brandsare harder to imitate and have unique value.• SMEs should consider partnerships with firmsthat possess skills, capabilities, or resources thatthey don’t when there is a clear strategic casefor doing so. Co-branding is one example of apartnership to leverage such capabilities.• Manufacturing products under licence mayenhance the overall profile of the firm and leadto increased orders for other products that thefirm produces.• Toy brands can be developed by partnering withentertainment companies that create and controlcontent that is distributed via television, theinternet, or other mass media.• SMEs should strive to keep in close contact withits customers through offices in locations inwhich there are significant sales. Face-to-facecontact can be very effective in securing customerorders even when customer budgets are tight.• Hong Kong SMEs will find it easier to sell inthe Chinese Mainland as intellectual propertyprotection improves, disposable incomes rise, andregulatory environments that favour Mainlandownedmanufacturers give way to a more levelplaying field.• As intellectual property protection and economicconditions improve in China’s second-tier andthird-tier cities, SMEs will find it easier to sell intothose cities.