Small and midsize enterprises (SMEs) in the Asia-Pacific region are world leaders in terms of generating revenues outside their home countries. Only 12 percent of Asia Pacific SMEs earn their revenue exclusively at home—and this is expected to drop to just four percent in three years’ time, according to an Oxford Economics research program, sponsored by SAP.
As SMEs face increased competition from foreign companies, a majority see business transformation and technology investment as key strategic imperatives to speed up their globalisation progress while supporting longevity and sustainable growth.
The global survey of 2,100 executives from SMEs in 21 countries, including Australia, China, India, and Indonesia, shows they believe they are equipped to compete with larger firms and have some clear advantages over them. The findings overturn industry stereotypes of smaller companies as local or regional entities that are largely technophobic.
“Recognising the opportunities for international expansion is clearly not ‘new’ to this region, nor is the notion of business transformation,” said Bronwyn Hastings, senior vice president, Ecosystem and Channels, SAP Asia Pacific Japan. “However, maintaining competitive advantage across such a diverse range of markets is a key priority for SMEs in the Asia Pacific region, particularly when it comes to managing supply chains and subsidiaries. Having clear business insight across the entire organisation at any one time is of the utmost importance for those firms with a significant global footprint.”
Growth outside home markets
The report finds that Asia Pacific SMEs are expected to grow outside their home markets while facing increasing global competition at home. The number of firms expecting to generate as 31–40 percent of their revenue internationally jumps by nearly 90 percent in the next three years. Nine percent of respondents currently do business in six or more countries, a figure that is expected to rise to 26 percent in three years.
The number of Asia Pacific firms doing business in 10 or more countries will increase sharply in three years, with five-fold expansion among Australian firms and more than 100 percent growth among companies headquartered in China, India, and Indonesia.
Around one-third of respondents in Asia Pacific cite increasing global competition, economic uncertainty, and increasing labour costs as the top three trends affecting their business today. About 60 percent say competition from companies in other countries has increased substantially in the past two years. More than 65 percent say they are competing more with larger companies now than in the past.
More than three-quarters of all companies surveyed in Asia Pacific are at some stage of the transformation process (i.e., about to begin, in process, or recently completed), with transformation understood as making significant changes to a firm’s business model, technology, product offerings, or go-to-market strategy.
Over 80 percent of SMEs in Australia and India say transformation is essential to staying ahead of the competition, and nearly two-thirds of Indonesian firms agree. More than half of SMEs in Australia and China say they are more innovative than their key competitors, and nearly three-quarters of Indian firms make the same claim. More than half of the respondents in Asia Pacific say expanding product and service offerings is essential to driving growth in an era of new markets and empowered customers.
Top strategic priority
Investing in new technologies is a top strategic priority as SMEs remake their businesses for the global marketplace. Sixty percent of Asia Pacific SMEs strongly believe technology helps them achieve longevity and sustainable growth.
Asia Pacific firms expect business analytics (72 percent), business management software (67 percent), and social media (66 percent) to be widely adopted at their organisations in the next three years. However, less than one-quarter of Asia Pacific SMEs consider themselves early adopters of technology, compared with almost 47 percent of North American firms. Almost two of three Asia Pacific companies say their technology investment is contingent on a clear return on investment (ROI).
More than one-third of respondents in Asia Pacific cite creating a culture of innovation as a leading priority in their transformation efforts. Forty-seven percent of regional respondents are actively hiring employees to support their growth activities, and 41 percent find it increasingly difficult to recruit people with the right skills. More than 40 percent of the firms say cloud computing is key to driving cost efficiencies, and the adoption of cloud technologies is expected to grow rapidly in the next three years.
Skills gaps are a challenge to cloud adoption in Australia (42 percent) and India (52 percent), and more than half (54 percent) of SMEs across Asia Pacific worry about the accuracy and reliability of information when using data analytics. Forty-six percent cite data collection as the biggest challenge in this area.
Asia Pacific SMEs see improvement of product and service development and better customer service as the two biggest benefits from the adoption of disruptive technologies. Cloud computing and business analytics are expected to see the greatest increase in adoption across Asia Pacific SMEs, at 44 percent and 40 percent, compared to the global growth rate of 35 percent and 33 percent, respectively.
Consumer-goods firms, at 69 percent, will lead the regional industry growth for analytics, while Asia Pacific retail firms will adopt cloud platforms the fastest, with consumer firms and wholesalers close behind.
Sixty percent of SMEs in Asia Pacific expect that mobile will be widely in use at their firms in three years and retail companies (34 percent) expect to see the biggest increase in mobile adoption. Over half of the firms expect social media to have a significant impact on revenue growth over the next three years. However, less than one-third say the biggest benefit of social media will be improved customer service.
“The road ahead is well marked for SMEs in Asia Pacific,” said Edward Cone, managing editor and senior analyst at Oxford Economics. “Globalization, transformation, and technology will be the hallmarks of successful small and midsize companies.”