Thai SMEs Look to Overseas Markets for More Opportunies

Bangkok, October 05, 2010

Annual UPS Survey reveals Thai SMEs remain positive despite recent domestic challenges

Thai small-to-medium enterprise (SME) decision makers are putting the political challenges behind them and are finding ways to unlock business opportunities by planning to venture out to overseas markets, and to improve their supply chain management practices, according to the UPS Asia Business Monitor (ABM) 2010 survey.

Since 2005, the ABM has been providing key insights to the changing business needs of SMEs across Asia Pacific. This year, the UPS ABM 2010 surveyed 1,350 SME decision makers from 13 key Asia Pacific markets, including Thailand.

"Thailand's overall economy in the second half has continued to recover after several difficult challenges earlier in the year, thanks to its large domestic and export markets, excellent transport infrastructure, efficiency of its labor market, and a relatively wellfunctioning goods market.  General business sentiment therefore remains positive and we also see this optimism among the Thai SMEs surveyed in this year's ABM survey," said Edmund Lo, managing director, UPS Thailand. "However, to cope with the increasing competition in regional trade and commerce, it is crucial for Thai businesses to optimize their strengths. These include capitalizing on their highly-skilled human resources, their strategic geographic location as an intra-ASEAN hub, and the adoption of the right technologies and solutions to grow their businesses." 

Thai SMEs: Making things happen

Recent challenges in the political environment have led Thai SMEs to be the second most pessimistic about in-country business opportunities among the SMEs surveyed in the region. Only the Korean SMEs were more pessimistic.

However, the Thai SMEs surveyed are exhibiting a go-getter attitude and are making plans to leverage opportunities overseas. Over the next three years, 78 percent of the respondents intend to expand their business further within the Asia Pacific, 49 percent to Europe, 45 percent to the Middle East, 41 percent to Africa, 31 percent to Latin America and 21 percent to North America. Currently, Thai SMEs focus up to 84.6 percent of their business on Asia Pacific, with only 7.3 percent on Europe, 3.3 percent on North America and 3.2 percent on the Middle East.

Leaders have a clear understanding of the ingredients for success

Thai SMEs feel that flexibility and being able to offer better quality services are key strengths they can offer that big enterprises can't. They also believe they can outcompete big corporations by giving quality service. All these reflect a sense of confidence among Thai SME leaders, which is again, reflected when 85 percent of Thai SMEs gave their opinion that they are critical to the future of the country's economy.

Up to 44 percent of Thai SMEs say that they need to focus on improving internal factors, meaning factors within their control, to take advantage of new business opportunities. The top three key internal factors are ensuring higher quality standards in their products and services (83 percent), engaging better management practices (79 percent) and ensuring better supply-chain efficiency (78 percent).

External factors, factors beyond their control, that affect the development of Thai SMEs include access to market intelligence and other business information (59 percent), availability of qualified workforce (59 percent), free-market economy/free trade agreements (53 percent) and access to funding and working capital (51 percent).

While the majority of SMEs in the region see the most opportunities in the IT and manufacturing sectors, Thai SMEs continue to regard agriculture, forestry & fishing (40 percent) and automotive (36 percent) sectors as industries with the biggest growth opportunities in 2010. This is in line with reports showing Thailand to be the world's leading exporter of rice and a major exporter of shrimp. In 2009, the agriculture industry contributed approximately 11.6% to Thailand's economy. Other reports show Thailand's auto industry stands to benefit tremendously from the elimination of import duties on automobiles and parts under the ASEAN Free Trade Area initiative. Leisure and tourism, which placed second in last year's ABM survey, has significantly dropped from 48 percent to 13 percent which is primarily a result of the recent domestic political situation.

Thai SMEs also displayed the most progressive attitudes toward cost-cutting via socially responsible methods. The ABM shows that out of all SMEs surveyed, the Thais (47 percent) are most open to investing in environmentally conscious mechanisms immediately. They believe that by doing so they can achieve long-term cost savings.

Recognizing the importance of better supply chain management

Thai SMEs continue to recognize that supply chain management is key to cost savings (34 percent). Furthermore, 26 percent see supply chain as a method to benefit customers. "The survey over the recent years revealed Thai SMEs realize supply chain goes beyond cutting transportation and distribution costs. They recognize the importance of changing their supply chain practices," said Mr. Lo. "UPS understands the logistics needs of Thai SMEs and has introduced a range of products and services, technology solutions and logistics expertise to address those needs."

"The recent launch of new products, such as UPS Import Control - allowing shippers to have better control on their returned shipments, and, UPS Carbon Neutral - enhancing the ability for shippers to achieve their environmental commitment, has demonstrated our determination to address their dynamic needs for logistics solutions. UPS realizes that Thai SMEs are looking for partners who can bring them reliability, flexibility, visibility and scalability. These traits will help them achieve sustainable growth and increase customer satisfaction," he added.

Remaining challenges for Thai SMEs

In 2010, the most pressing business concerns for Thai SMEs are industry downturn (50 percent), skills shortages (38 percent), competition (29 percent), and government legislation and taxation (29 percent).  This is in contrast to the regional results that show Asian SMEs to be most concerned about costs (40 percent).  Only 28 percent of Thai SMEs said there aren't enough   institutions willing to lend to small businesses, significantly down from 45 percent in 2009.

Conflicting attitudes to the economy and trade

Thai SMEs are not very optimistic toward regional economic growth. Only 47 percent of Thai SMEs expect growth in 2010, and of these, approximately 40 percent are expecting only slight economic growth.

Sentiments toward trade growth however are more optimistic. Nearly 70 percent of Thai SMEs – almost as many as during the 2008 pre-crisis levels – expect their county's trade activity to increase within Asia Pacific. This is a vast improvement when compared with only 28 percent last year who expected Thailand's trade with other Asia Pacific markets to grow. Other regions where they are projecting trade growth with Thailand to occur are the Middle East (40 percent), Europe (40 percent) and North America (38 percent).

Unfortunately, many Thai SMEs still do not feel that they reap the benefits of global trade. While 64 percent of SMEs in Asia Pacific view global trade as having a positive impact on their business growth, only 47 percent of Thai SMEs believe this is true for their businesses. Perhaps this is why, as stated earlier, Thai SMEs are planning to proactively reach out to overseas markets versus waiting to experience the trickle down effects of global trade within their current trading and business models.

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Notes to Editors

• UPS Asia Business Monitor series provides the latest insights into the changing opinions, attitudes and habits of business leaders from the region's small and medium sized enterprises.
• UPS Asia Business Monitor 2010 surveyed 1,351 decision makers of SMEs between March 11, 2010 – May 4, 2010. Interviews were conducted by an independent research organization, TNS, using the respondents' native language in Singapore. SMEs are defined as companies with fewer than 250 employees.
• Interviews were conducted in the following 13 markets: Australia (100 respondents), China (150), Hong Kong (100), India (101), Indonesia (100), Japan (100), Korea (100), Malaysia (100), the Philippines (100), Singapore (100), Taiwan (100), Thailand (100) and Vietnam (100).
• Respondents were from a range of industries: automotive, garments & textiles, healthcare & pharmaceuticals, toys & sporting goods, electronics & electricals, gifts & housewares, timepieces, jewellery & optical goods, and others.
• The average SME has been in business for nearly 22.6 years.
• The full ABM 2009 presentation deck is also available at www.ups.com/abm.