The global economic environment continues to be soft and Singapore has not been spared, as evidenced by the low 1.8% growth in 2016.
Growth projections remain low at 1.5% to 2% for 2017. Singapore was home to over 190,000 enterprises in 2015, of which 82% were locally owned enterprises (LOE) having at least 50% Singaporean equity. Considering that 99% of these enterprises comprise the small and medium enterprise (SME) segment — defined as enterprises having annual operating receipts below S$100 million or a workforce smaller than 200 people — the survival and success of SMEs is vital to Singapore’s overall economy.
Having just celebrated its 50th independence anniversary, Singapore is still a young economy which has evolved from its origins as an “entrepôt port” into one of the world’s most open economies by encouraging and attracting of foreign direct investment. As a result, Singapore’s LOEs have the advantage of exposure to “global-regional” business acumen to a greater extent than those of neighbouring economies.
This article explores different survival and growth challenges as well as “probable-win” strategies for SMEs.
The challenges of SME survival, success and scale
Singapore enterprises seeking to grow in today’s slow growth environment, which is further constrained by Singapore’s small domestic market, are encouraged to look elsewhere for growth opportunities. Despite the heritage described above, many Singaporean entrepreneurs who have pursued overseas expansion have encountered challenges arising from differences in work and business culture, ethics and belief systems. “What works and is obvious in Singapore, does not necessary work elsewhere” is the comment of one such entrepreneur who has embarked on business expansion beyond Singapore. Perhaps the challenge lies in the management models of these businesses.
Another successful entrepreneur lamented that scaling businesses locally is also challenging, particularly in labour dependent industries due to mind-set challenges and continually rising workforce expectations. Entrepreneurs often cite labour (manpower) issues and the rising cost of doing business as challenges impairing growth and profitability. Timely cash management is a challenge for smaller enterprises as well as those which are not well-funded.
As such, many enterprises have invested in process streamlining and automation to improve efficiency. These gains, however, cannot be sustained when process complexities creep back due to habitual and old mind-set paradigms, hence increasing business costs again. Singapore’s government has designed and introduced many schemes and incentives to help enterprises improve their productivity, efficiency and scale through innovation to combat these challenges.
Succeeding and Scaling a Singapore SME in a Soft Economy