GMS- SME Business Networking Challenges and Prospects Madhurjya

GMS- SME Business Networking. Challenges and Prospects Madhurjya Kumar Dutta Program Manager, Trade & Investment Mekong Institute MK Dutta September 2010 1

Outline q Structure and Issues of SMEs in GMS q Challenges q Prospects MK Dutta August 2008 2

Structure of SMEs and IssuesØ Ø Ø Dominance of unregistered informal enterprises SMEs are relatively disadvantaged in organization, management, financing, product, marketing and technological development. Weak human capital- technical know how. Lack/access to capital Limited capacity to enforce standards, compliance SMEs lack information about laws, regulations (including export regulations), business opportunities, marketing, financial possibilities, sources of raw material and possibilities of collaboration, Ø Lack information about useful technology, product standards, marketing, they need skills development and enterprise management. Ø Information may be available but the transaction cost of acquiring it may be too high for sme’s. Ø 3

external Key factors impeding the performance of SMEs Ø Weak regulatory and legal framework, Ø SME access to finance Ø Lack of SME support facilities. 4

Challenges ahead As Borderless economy deepens SMEs are struggling to compete with imported goods manufactured by SMEs in neighboring countries. Ø Ø Ø Up scaling from micro to small to medium and large. Shift from service to manufacturing Enhancing competitiveness of SMEs Increasing the number of technology based enterprises Improving quality of human resource 5

SME’s- in isolation Studies have shown that SME suffer from isolationØ from each other Ø from connections to value chain Ø from domestic and foreign marketsØ from lack of information. 6

Networking and Clustering as Solutions Why networks and clustering – SME’s are unable to capture market opportunities which require large production quantities, homogenous standards and regular supply. Ø Small size also constitutes a significant hindrance to internalization of functions such as training, market intelligence, logistics and technology innovations- all of which are core to firm dynamism. Ø 7

Kinds of networking to consider: Networking among SMEs- which facilitates clustering Ø Networking of SMEs (assuming they are qualified) to other parts of value chain of production, marketing and sales. It helps to Ø Fill some of the information and knowledge gaps that SME have. Ø Networking and clustering also create synergies that combine the flexibility of small firms with opportunities for economies of scale, facilitating cooperation and division of labor among SMEs as well as transfer of technology, knowledge and information. Ø 8

Challenges in networking Ø Creating new networks is difficult. Ø Requires trust and building trust, if it does not come affiliation or from prior acquaintance or association- requires third party intervention. Ø Clustering- collaborative work and information exchange , not just physical proximity- also requires trust. 9

How to go about it Cluster networking Ø Virtual Networking and Clustering Ø 10

Cluster networking Identifying regional clusters where regional networking would work. Ø Involving Networking agency/broker to investigate possibilities of creating a network or cluster, devise a plan to do so, and implement. Ø Such cluster creation should be demand driven-or customer driven network to be successful. Ø Such agency/broker means working with buyers or potential buyers to determine needs, then matching these with potential buyers or clusters. Ø 11

Virtual Networking and clustering Internetworking- ideal regional networking- use of internet to connect SMEs with one another, potential business partners, information, advice, database, funding sources and other information. Ø An inter active portal- with SME knowledgeable staff to maitain and update. Ø “Infomediary function”- to network with all relevant SME institutions, national and international. Ø Creation of market place – e-commerce, network, information and skills : an entrepreneurial business hub. Ø 12

Portal Models Business benefits 4. ebusiness (service center) 3. ecommerce 2. Website (gateway) 1. email -efficient internal and external communication -place in worldwide market -window to worldwide suppliers --order and pay online, reducing cost -maximize business accessibility and speed -integrate supply chain so manufactur e and delivery become seamless Minimize waste at every stage of the supply chain 5. Transformed organizations -open systems information for customers, suppliers and partners -new business models based on inter working between organization and individuals. Increasing Organizational Change and Specialization 13

Stages of e-commerce development Presence Portals Transaction Integration • Content • Window to the web • No integration • E mail • Profiles • 2 way communication • E mail • Order placing • No $ Dollar transaction • B 2 B/B 2 C • Communities • E Marketplace • Auctions • Low level collaboration Enterprise Integration • E 2 E • Full integration • E Business • E Commerce • Value Chain Integration • High Level collaboration How use of internet can eventually transform businesses 14

What SME regional portals can do Ø Ø Ø Providing important information to SME’s Serve as center for business to business and business to consumer Business to consumer may not be useful to majority of SMEs in GMS Large suppliers that use internet based enterprise resource planning software for transactions with other firms in remote countries, offer their products, information on product capabilities, benefits, prices etc 15

Examples http: //ec. europa. eu/enterprise/sme/text_en. htm Ø Ø Enterprise Europe network- provides information and practical advice on market opportunities, legislation and policies relevant to company or sector Helps SME to find suitable business partners using its business and technology cooperation databases, providing information on tender opportunities and international networking Develops research and innovation capacities of SMEs by helping to create synergies with other research actors, technological cooperation Helps SMEs to share research resuklts, participate in research programs and apply for funding. 16

http: //www. thaitrade. com Provides online trading, buying and selling leads, import and export services https: www. tradexchange. gov. sg Offers a complete range of online services for trade and logistics community in Singapore. It enables cargo booking and tracking, exchange of commercial documents etc 17

Thank you 18