Strategies for surviving rough terrains
Adebayo Adeyemi Komolafe
June 10, 2009
Times are tough for every one no doubt. Even corporate giants have fallen flat on their faces. Still I believe these are the best times for those who will listen well and deploy the right strategies. It was said that in good times, around a third of SMEs close after two to three years, and that number is likely to go up substantially. This means the current trends are not going to be easy on your business. A CBN study states the challenges small businesses face includes; inability to access adequate and properly structured capital; inadequate access to management skills; low access to technical expertise, and poor physical support infrastructure amongst other things. These challenges make it obvious that some measure of support is required if these enterprises are to survive let alone attain global competitiveness.
Small firms are an important and integral part of Nigeria´s economy. They employ a large percent of the informal sector and a substantial percent of the formal sector. SMEs account for about 30 per cent of global GDP and 58 per cent of the world´s working population. In Nigeria, SMEs account for over 65 per cent of the total employment and about 60 per cent of the industrial output thus providing a means of livelihood for over 90 million people. If you are an entrepreneur in these perilous times, you might be bothered about the future of your business and life. Not to worry. To overcome these economic downturns, one will have to deploy some key strategies and put some issues on the front burner. Let me run through some them:
1. Production Improvement
New uses of a product can revitalize an old brand. Promoting new uses can increase sales by increasing usage frequency. In some cases, this strategy is cheaper than trying to convert new users in a matured market.
2. Lean Manufacturing
Consider reducing the amount of people doing a particular task with regards to efficiency and cost effectiveness. Train a few hands to handle more tasks efficiently. Remember to reward well else you will lose them to competition.
3. Another way of improving production is to become an expert or by adhering strictly to regulatory standards. Avoid cutting corners. One of the surest ways SMEs "can become globally competitive is to ensure that every aspect of their businesses [product, services, operations] are certified by relevant organizations, institutions or agencies. Eventually if a foreign investor is looking for an SME to invest in, the preference would be for the business that its people, systems and processes have been certified by relevant regulatory agencies.
4. Automation and linking suppliers and customers in a tight supply chain can improve efficiency. In addition to this, investing in new technology and capacity building will enhance the competence of SME owners thereby guaranteeing them increasing return on their investments. In this present scenario where input costs are more and the national inflation rate is in the realm of the doubles it may be difficult for SMEs to get margins from the output cost. To tame this crisis SMEs need to add more value to owners and investors. Thus Realizing how fast the competition moves, SMEs ought to relentlessly invest in new capabilities and restructuring.
Such restructuring sometimes rely on adequate government support. The government could set up a Productivity and Standards Board, to ensure that there is sustainable growth and improvement for small businesses thus affording them the unique opportunity of becoming world class organizations. The (PSB) Productivity and Standards Board in Singapore did this by launching a program that assisted about one-third of small businesses in Singapore to transact online using the internet.
The government must believe that small and medium sized businesses are crucial to a successful enterprise economy and thus be fully committed to stimulating the creation, competitiveness and growth of new and small businesses. The government can also foster an enterprise culture that encourages innovators and risk takers; providing and maintaining a supportive economic environment; identifying and removing barriers to growth and providing high quality business support for firms at all stages of their development.
Well organized and properly managed developing economies provide fertile ground for SMEs to thrive. In decades past, Asia provided such fertile ground for small industries to grow. Now Asian economies attract and continue to attract massive foreign investment which has fuelled remarkable economic growth in places like Hong Kong, Singapore and Malaysia.
Finally Charles Darwin has commented that "It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change." This is equally applicable in our business environment today. With nimbleness and flexibility and the determination to transform, SMEs can create value and wealth far greater than what they have achieved in the past. Indeed, constant adaptation to change is the key to survival. There is no reason why we cannot have more world-class SMEs, provided we are alert to the changes in the business environment, and look for new "cheese".
Small firms are an important and integral part of Nigeria´s economy. They employ a large percent of the informal sector and a substantial percent of the formal sector. SMEs account for about 30 per cent of global GDP and 58 per cent of the world´s working population. In Nigeria, SMEs account for over 65 per cent of the total employment and about 60 per cent of the industrial output thus providing a means of livelihood for over 90 million people. If you are an entrepreneur in these perilous times, you might be bothered about the future of your business and life. Not to worry. To overcome these economic downturns, one will have to deploy some key strategies and put some issues on the front burner. Let me run through some them:
1. Production Improvement
New uses of a product can revitalize an old brand. Promoting new uses can increase sales by increasing usage frequency. In some cases, this strategy is cheaper than trying to convert new users in a matured market.
2. Lean Manufacturing
Consider reducing the amount of people doing a particular task with regards to efficiency and cost effectiveness. Train a few hands to handle more tasks efficiently. Remember to reward well else you will lose them to competition.
3. Another way of improving production is to become an expert or by adhering strictly to regulatory standards. Avoid cutting corners. One of the surest ways SMEs "can become globally competitive is to ensure that every aspect of their businesses [product, services, operations] are certified by relevant organizations, institutions or agencies. Eventually if a foreign investor is looking for an SME to invest in, the preference would be for the business that its people, systems and processes have been certified by relevant regulatory agencies.
4. Automation and linking suppliers and customers in a tight supply chain can improve efficiency. In addition to this, investing in new technology and capacity building will enhance the competence of SME owners thereby guaranteeing them increasing return on their investments. In this present scenario where input costs are more and the national inflation rate is in the realm of the doubles it may be difficult for SMEs to get margins from the output cost. To tame this crisis SMEs need to add more value to owners and investors. Thus Realizing how fast the competition moves, SMEs ought to relentlessly invest in new capabilities and restructuring.
Such restructuring sometimes rely on adequate government support. The government could set up a Productivity and Standards Board, to ensure that there is sustainable growth and improvement for small businesses thus affording them the unique opportunity of becoming world class organizations. The (PSB) Productivity and Standards Board in Singapore did this by launching a program that assisted about one-third of small businesses in Singapore to transact online using the internet.
The government must believe that small and medium sized businesses are crucial to a successful enterprise economy and thus be fully committed to stimulating the creation, competitiveness and growth of new and small businesses. The government can also foster an enterprise culture that encourages innovators and risk takers; providing and maintaining a supportive economic environment; identifying and removing barriers to growth and providing high quality business support for firms at all stages of their development.
Well organized and properly managed developing economies provide fertile ground for SMEs to thrive. In decades past, Asia provided such fertile ground for small industries to grow. Now Asian economies attract and continue to attract massive foreign investment which has fuelled remarkable economic growth in places like Hong Kong, Singapore and Malaysia.
Finally Charles Darwin has commented that "It is not the strongest of the species that survive, nor the most intelligent, but the ones most responsive to change." This is equally applicable in our business environment today. With nimbleness and flexibility and the determination to transform, SMEs can create value and wealth far greater than what they have achieved in the past. Indeed, constant adaptation to change is the key to survival. There is no reason why we cannot have more world-class SMEs, provided we are alert to the changes in the business environment, and look for new "cheese".
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