#smesstrategy

Let's face it: All Malaysian SMEs face increased competition pressure, no matter how big or small. On the one hand, we're seeing more aggressive foreign businesses entering Malaysia to compete with better pricing, offerings, technology, and innovation.

This is something familiar to entrepreneurs and business owners in Malaysia. Back then, we faced fierce competition from 'Made in China' products, where you could get the same product quality at a fraction of the cost Malaysians offer. And then, in terms of technology, we can't even compete with advanced offerings from the West, Japan, or Korea. Speaking of Japan and Korea, their cultural influence is also overwhelming, especially in the entertainment industry. Now, even Nasi Lemak stores must compete with the Big M for market share.

So, do we really stand a chance to compete with them?

Looking deep into this competition, we can identify four main factors that make them superior to Malaysian businesses: price, quality, technology, and brand name.

We will first talk about price and quality because what you pay is what you get. But how can those mega factories produce all the quality goods at a fraction of the cost in the world? The answer is economies of scale. While China produces silverware, it can supply its entire population of 1.4 billion (see China Population Data).

Even if only 2.5% of the population purchased their products, that equals 35 million people. And yes, that's the population size in Malaysia. So, how much can it sell if Malaysian silverware plays the same game and sells to 2.5% of the total population? Assuming one person purchases 1 silverware, it will be 850,000 (out of 34 million population). We also need to mention the exporting part. We can hardly compete in the number game!

Then, we look at technology. The brain drain problem in Malaysia is why we need talented people in the workforce. Technological advancement and innovation need to burn money, and the private and government sectors are working together to invest.

However, we can only advance as quickly as other countries if we have talented people to help with research and development. Not to mention that many businesses, including big names or listing companies, are reluctant to innovate in Malaysia. We understand they also need to consider the cost and ROI. But R&D and innovation are just not on their priority list!

And lastly, the brand. Your favorite coffee brand, the big one, makes so much money from the brand name itself. We all saw those videos on YouTube explaining the cost and how much those companies are profiting from every cup of coffee you buy. You can be angry about how much they're profiting off you. But that's business, isn't it?

Speaking of the coffee industry, we saw local brands investing in branding and competing heads-on with those big names. Which is definitely a good sign. But this doesn't happen a lot in other industries. Businesses, typically those established decades ago, are too reluctant to invest in branding and like to stick to the status quo of how they ran their business 30 years ago.

Looking at all these factors as to why Malaysian businesses cannot compete with international brands, even those big guns and listing companies in Malaysia don't stand a chance. But what else can SMEs do to stay afloat and gradually become the big gun and compete?

I believe Malaysian SMEs are just not playing the game of "resource integration" or "resource consolidation" like China did. China's growth has depended on how effectively it brings resources together or consolidates resources to maximize its strength, outputs, efficiency, and results.

A popular concept in China called 1+1>2 means that if 2 people or companies work together, they can produce something more significant than what they can do individually.

We can interpret this into business strategies such as partnership or collaboration, merger and acquisition, or even business process outsourcing.

Partnership or M&A could take longer, so let's table it for another discussion. Let's talk about how simple and no-brainer business process outsourcing could be.

Put it this way, how many small companies actually hire internal accountants or bookkeepers? And do they really need this role in their business? We're not trying to imply that these accountants or bookkeepers don't contribute or add value to the company; it is just that they could have outsourced it to a professional accounting or bookkeeping agency to do it.

Outsourcing will cost half or less than what they need to pay for a full-time employee working in the company. For small businesses, these human resources are often underutilized. On the other hand, an accounting agency could easily hire more accountants or bookkeepers to achieve economies of scale and continue to advance in their skills and abilities, or even invest in more technologically advanced tools and equipment to get their job done more efficiently. So that's both sides will win!

The accounting agency is only one example; you could be doing the same for marketing agencies, cleaning services, customer services, IT management, human resources, or even getting the copier machine suppliers in Malaysia to rent a photocopy machine, which is even worth it compared to owning one. You get the idea.

The whole point is that SMEs should always have an idea of how they can leverage specialized skills and resources available in the market rather than hiring on their own and taking up the responsibilities of hiring, training, retaining, and paying the payroll while the market can offer you something more cost-effective.