July 24, 2012
Read More »
Beijing, September 20, 2010
Chinese SMEs: Flexibility Is Their Competitive Advantage; Cited As "Most Competitive" By Their Counterparts
UPS today announced the results of its UPS Asia Business Monitor (UPS ABM) 2010. A main finding of the report indicated a renewed confidence in economic growth in the Asia Pacific and that most Chinese SMEs choose to conduct the majority of their business within the region.
Results revealed that 78 percent of Chinese SMEs currently conduct their business within Asia Pacific versus 6 percent with the U.S. and 10 percent with Europe. Additionally, over 70 percent of Chinese SMEs showed their extended faith in the region's potential by listing Asia Pacific as the top prospect for trade growth, as well as the top region for business expansion over the next three years.
The UPS Asia Business Monitor is an annual survey conducted with SME decision makers on SME sentiments, issues, pain points and opportunities across the region. This year's survey covered 1,350 SMEs across 13 markets: China, along with Australia, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, the Philippines, Singapore, Taiwan, Thailand and Vietnam.
"This year's UPS Asia Business Monitor reflects a strong belief in the continued global economic recovery, especially in Asia," said Richard Loi, President, UPS China, "In fact, the growth potential of the region is reflected in UPS's strong performance in Asia and export volume growth of 40 percent in China in the first two quarters of 2010."
Findings from UPS ABM 2010 reaffirmed the competitive edge of Chinese SMEs, with 78 percent of SMEs in Asia Pacific rating Chinese SMEs as "much more competitive" or "more competitive" than SMEs in their own countries.
Regarding Chinese SMEs' perception of their own competitiveness, one in four Chinese SMEs cited "flexibility" as the key competitive advantage they have when competing with multinationals. Most other countries in the region listed "offer better prices (23 percent)" and "better service or quality (22 percent)" as top competitive differentiators; factors which instead came in second and third on Chinese SMEs' list of top competitive advantages.
As to how Chinese SMEs have built and maintained their competitive edge, another insight uncovered by this year's ABM was a deep respect for innovative thinking within the organisation. "Innovation" was listed by 90 percent of Chinese SMEs as the most important factor in contributing to their competitiveness. However, they also recognised it as an area for improvement, since 68 percent of Chinese SMEs indicated innovation as something their organisation lacked.
In view of the world economy's continuing recovery, SMEs will play a key role in developing the entrepreneurial culture and spirit of innovation that is particularly important for stimulating overall economic activity. Although China has no shortage of labour, many companies are beginning to recognise the vital role a capable workforce plays in sustaining continuous innovation within an organisation. ‘Qualified talent' is listed by Chinese SMEs as the top critical influencer of sustainable innovation, followed by "Core competitive advantage" and "R&D".
Innovation aside, respondents to UPS ABM 2010 indicated that, despite general optimism towards an economic recovery, many SMEs still had concerns over costs and staff retention and remuneration.
At the same time, one in four Chinese SMEs surveyed perceived supply chain management largely as an effective means of cutting costs. Close to 80 percent of Chinese SMEs in this year's survey felt the need to change their supply chain practices in order to increase their organisation's competitiveness, including 26 percent who felt that they needed to "focus on reducing transportation and distribution costs".
"Operating costs are commonly cited as obstacles to organisational growth. Proper supply chain strategy and practices can help companies remove these obstacles, explore business opportunities in new industry sectors, and serve as a key driver of business development and accelerated globalisation. Remarkably, UPS ABM 2010 has shown that SMEs throughout the Asia Pacific are becoming increasingly aware of the tangible influence supply chain management has on building a company's competitiveness, both on a local level and at a global scale," said Richard.
Other UPS ABM 2010 highlights include the following:
For Chinese SMEs, the glass is half full in 2010
Respondents to UPS ABM 2010 exhibited increased optimism towards a continued economic recovery. Of those surveyed, 65 percent believe their company's prospects are much better in 2010 than in 2009. Furthermore, over half of the respondents in China anticipate positive economic growth prospects for the region, and another 34 percent expect the economic growth prospects to stay the same as last year. Only 12 percent of SMEs expect the economy to decline this year, which compares well to last year's figure of 61 percent.
SMEs plan to expand their businesses organically
One firm indicator of business success is the willingness of an organisation to take on additional labour costs. Almost half, or 47 percent, of Chinese SMEs indicated they would "increase workforce by up to or over 10 percent" in 2010, compared to 35 percent in 2009. Although SMEs may have difficulty in attracting top talent, advantages, such as system flexibility and development potential allow them to offer incentives compatible with their own organisational structures.
There are obstacles to getting off the ground
SMEs are encountering more problems with starting their businesses than growing their business. Of the Chinese SMEs surveyed, 70 percent believe they have encountered financing problems, with 49 percent indicating "bureaucracy and red tape in processing applications" as the problem most commonly encountered. Nonetheless, 2010 may turn out to be a promising year for Chinese SMEs as results show that much fewer SMEs are encountering financing problems. Close to a third (30 percent) of respondents indicated "no problems encountered" in financing their business, as compared to only 17 percent in 2009.
The grass is greener on the other side of the border
Chinese SMEs seem eager to explore business opportunities beyond their native borders. Almost half, or 46 percent, of Chinese SMEs surveyed felt that "market growth, growing business into other regions/overseas market/overseas resources" was the type of business opportunity they would be most willing to explore.
Given the changes in the financial services sector, perceived sector opportunities are shifting
With the impact of the global economic crisis on the financial services sector, many businesses, including Chinese SMEs are looking to other sectors when searching for new opportunities. When asked which industries would become key economic pillars for China over the next three to five years, SMEs listed building and construction (34 percent), IT (28 percent), and manufacturing (25 percent) as their top three. This is in line with recent global statistics, including an estimate by the World Bank, that approximately half of the world's new building construction will take place in China between now and 2015. Moreover, according to a forecast by Global Construction Perspectives and Oxford Economics, China will overtake the United States as the world's largest construction market by 2018.
| |||||
