Monday 27 August 2007

Accepting the Need to be Competitive

To most small businesses, competition is very scary term. Most would prefer to insulate their businesses from this evil and sail smoothly alone. What a wishful thinking! Like it or not, competition is something like air to business and no matter what business you are in and the size of your business, being competitive is the only safeguard that would ensure you will continue to be in business tomorrow.

So, how does a business is managed in order to be competitive?

First, an entrepreneur must accept that competition is a fact of business and he or she needs to put all necessary effort to attain competitiveness in the market the business is in. Acceptance is the key. Otherwise, the entreprenuer would continue operating by ignoring the key factor to sustain its business.

The second step is perhaps for the entrepreneur to figure out the value proposition it is offering to the market it is serving. This would require the "market" to be defined. If you are operating a burger stall by the road side, who are your intended customers? People living in the serrounding housing estates, students, office workers? By knowing the market, the business has to decide what would make it special to the people it intends to sell. Tasty food? Average food at low prices? Convenient? A combination of all these offerings? In figuring out the value proposition, one has to understand what the market wants and not just the business wants to sell. If the later is the case, effort in making the market to understand the value offered is critical.

The next step to deliver the product or services to the customers based on the value proposition that has been determined earlier. This is the complicated bit as it requires real performance. In the case of the burger stall, it has to be at the right location, the food must be tasty and clean, workers work fast enough based on the expectation of the customers and the price is both affordable to the customers and profitable to the business.

As in any other elements of life, the competitive factors keeps on changing and the entrepreneur has observe the changes in the market place to retain its competitiveness. For example, if business is good, a competitor may set up a similar business within the same vacinity. How do you respond to this? Lower prices? Offer new type of burgers? If your response is consistent with the value proposition that you offer, the chances of maintaining competitive edge is higher.
As described above, a business exist in a dynamic relationship with the market it serves. Therefore, an entrepreneur has to be clear of the value proposition it offers to the market as well as the competitors which may be focusing on the same space in the market. Understanding the dynamics and responsing fast enough to the changes in cirsumstances would provide a business a better chance of sustainability.

Saturday 4 August 2007

Opportunities for SMEs in Regional Development Approach

The Prime Minister has recently launched the Northern Corridor Economic Region (NCER) which covers the state of Perak, Penang, Kedah and Perlis. This is the second economic region after the Iskandar Development Region (IDR) which is principally in Johor but with focus on creating synergy with Singapore as well. The next development region which will be launched would be the Eastern Corridor Economic Region which will cover the east coast states.

Regional development concept is not new to Malaysia. The so called Klang Valley is an example of economic region which perhaps covers Kuala Lumpur, Petaling Jaya, Shah Alam and may be Nilai. The different between Klang Valley and the new economic regions is that Klang Valley is defined by the business needs and reality while the new economic regions are promoted by the government as a strategy to stimulate greater economic growth in those regional areas. Another regional concept that has been applied is the territorial development areas such as KADA, Ketengah etc. This approach focuses on smaller areas in states of Malaysia.

Why suddenly we are going the regional approach?

I suppose that Malaysia has reached a stage that we are mature enough to work on development beyond the "state" basis. The thinking now, perhaps, is that by linking growth centres across a defined region, the economic benefits would be greater than by allowing the centres to grow on their own. I am not surprised that the centres could also have policies which would neutralise the benefits of other centre, if left unchecked! It’s about the sum of the whole is greater than the sum of individual regions.

Where is the position of the SMEs in this regional developmental concept?

I suppose if we look at the details of the projects that have been identified; it provides the SMEs a clear understanding of the economic direction. The IDR for example is positioned as an international city, where there is lower barrier to trade and high level of competition. Whereas the NCER is focusing more on growing economic contribution from selected economic activities in which the region has the potential to excel, which covers, among others, agriculture, manufacturing, tourism and logistic services.

The regional approach also consolidates the market which SMEs could target. If, for example, at present the market is only targeted at a particular state, now it could be expended to cover the whole region by leveraging on the facilities that are introduced with the concept. The SMEs could start identifying their counterparts who they could work with within the economic regions who they could work with and compliment each other.

One of the message that I could deduce from the regional economic development approach is that the government wish to see Malaysian companies to perform and earn market respect, at least in those areas, before the greater challenges from globalisation become more adverse. For the SMEs, this is an opportunity to have another look at their business models and strategies so that they could sustain their competitive positions and survive.

This is another indicator that SMEs have to grow and play a different game to survive the competitive liberal world. So, let’s move on together and make Malaysia a pleasant country to live in.