20 Feb 2017
SME Support in Southeast Asia
Starting a business has never been easier in Malaysia, according to participants at the SME Solutions Expo last September in Kuala Lumpur. The ease of starting a business in the country, however, is also heating up competition. Only niche businesses with a clearly differentiated product range are considered likely to survive.
"As the start-up phase is easy, competition is very fierce,” said Brian Lee, Managing Director of Elephant Mountain Coffee, the exclusive Malaysian franchisee of Thailand's Doi Chaang Caffe. “We have been operating in Malaysia since 2013 and have had to compete with many of the bigger coffee shop chains, notably Starbucks and Coffee Bean. We have survived because we have stuck to our proposition of offering good-quality coffee at a reasonable price. That is what gives us our edge – quality and price."
Flexible Payment Scheme
Another exhibitor, VVV Suites, a Malaysian business that provides serviced offices, virtual offices and meeting rooms to SMEs and start-up firms, said it, too has sought to differentiate itself from international competitors.
"One way we do that is by providing flexible payment schemes for start-ups and SMEs,” said Nora Ariff, a Sales Executive with the company. “Other companies that offer serviced offices typically have a strict initial payment requirement of 2+1 – meaning start-ups need to pay up to three months in advance. By contrast, we only require a two-month initial payment. We understand that start-ups and small businesses do not have a huge budget for office space."
The company plans to expand into other markets, including Dubai, Australia and Singapore. "We believe the market for serviced offices and meeting rooms in those countries is particularly vibrant. We are currently in the process of securing operating licenses in each of them," said Ms Ariff.
Another exhibitor, Syspex Technologies, the company behind the YellowBox.com website, was banking on its niche market position to maintain its competitiveness Malaysia. "We know that there are a lot of other online stores in the country, so we focus solely on offering packaging, warehousing, safety and industrial products,” said Jasmine Lim, Syspex Sales Manager. “This makes us unique in Malaysia."
One company targeting what it believes is an under-served market is Interlight Technology, a small Malaysian business specialising in digital signage, multimedia advertising players and LED displays.
"Competition is soft right now for us as there are not so many players in this sector,” said Kenneth Leong, the company's Sales Director. “At the same time, nearly every business in the country is looking at technology-led solutions as a way of gaining more clients, which has provided a huge boost for us.
"We offer a wide range of LCD and display products, and this technology is set to make the printing industry obsolete within a few years. We help SMEs by cutting their printing costs and ensuring they can engage their customers through interactive displays."
Red Wheels Marketing, a family-owned Malaysian business that supplies customised safety vests and apparel is a domestic market leader and exports to Hong Kong, Germany and Thailand. Its range includes customised raincoats, safety vests, work coveralls, customised clothing, safety wear, insulated delivery bags and even backpack beverage dispensers.
"We started out by producing eight T-shirts for a local client,” said Haji Kamaruzaman, the company's General Manager. “Now we are the leader in Malaysia in the safety apparel market, while also supplying a number of international clients keen to buy our in-house designed products.
"Overall, there are a lot of opportunities for SMEs in Malaysia. We have good infrastructure, a big market and the government is very supportive. My advice to those starting up here is to never give up, have patience, start small first and minimise your risks."
Amy Seok, founder and Chief Executive of the SMEs Venture Group, a business consultancy, is blunt about the route companies need to take. "In Malaysia, you have to find a niche and specialise if you want to survive. There is a very vibrant SME scene here, one backed by a number of government incentives and support schemes.
"For our part, we provide SMEs with business coaching and marketing strategies. Basically, we teach them what they need to know in order to ensure their businesses can be successful."
Ms Seok may have found herself in a particularly lucrative niche, with Safwan Zahari, Assistant Vice-President for Projects at the New Entrepreneurs Foundation, believing that the majority of Malaysian small-business owners need all the support they can get. "While Malaysia's SME sector may be booming, the majority of small-business owners lack the skills needed to market their products or services properly, while also not having an understanding of how to approach potential investors for financing,” said Mr Zahari.
"Many of them do not even know how to brand or package their products. SMEs need to seek professional help in these areas if they are going to be successful."
To tackle this skill and knowledge shortfall, the New Entrepreneurs Foundation was established. As a non-profit organisation with a remit to nurture sustainable entrepreneurship, it has already helped more than 80 SMEs meet their funding and marketing requirements. "We can pretty much do it all for SMEs. We can even test out the market and pitch directly to investors," said Mr Zahari.
"While Malaysia's SME sector may be booming, the majority of small-business owners lack the skills needed to market their products or services properly, while also not having an understanding of how to approach potential investors for financing”
Overall, the lack of sound financial knowledge poses the biggest problem among many of Malaysia's entrepreneurs. "As company owners are busy making money, someone must take care of their business finances in the event of unexpected disasters,” said Emmy Choo, a Senior Associate at the Capspring Temasek Financial Group, an independent financial advisory company. “SMEs need insurance against such risks as an employer running off with the company's money or one of their key machines failing.
"Many SMEs are also keen to capitalise on the opportunities offered by the Internet, often not realising that this means exposing themselves to a whole series of new risks, including cyber-attacks and online fraud. We can help them minimise these risks."
For more market opportunities, please visit: http://research.hktdc.com/.