MK Dutta September 2010MK Dutta September 2010 11

GMS- SME Business Networking- GMS- SME Business Networking- Challenges and ProspectsChallenges and Prospects

Madhurjya Kumar DuttaMadhurjya Kumar Dutta

Program Manager, Trade & InvestmentProgram Manager, Trade & Investment

Mekong InstituteMekong Institute

OutlineOutline

Structure and Issues of SMEs in GMSStructure and Issues of SMEs in GMS ChallengesChallenges ProspectsProspects

MK Dutta August 2008MK Dutta August 2008 22

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Structure of SMEs and Issues- Structure of SMEs and Issues- Dominance of unregistered informal enterprisesDominance of unregistered informal enterprises SMEs are relatively disadvantaged in organization, management, SMEs are relatively disadvantaged in organization, management,

financing, product, marketing and technological development.financing, product, marketing and technological development. Weak human capital- technical know how.Weak human capital- technical know how. Lack/access to capitalLack/access to capital Limited capacity to enforce standards, complianceLimited capacity to enforce standards, compliance

SMEs lack information SMEs lack information about laws, regulations (including export regulations), business about laws, regulations (including export regulations), business

opportunities, marketing, financial possibilities, sources of raw opportunities, marketing, financial possibilities, sources of raw material and possibilities of collaboration,material and possibilities of collaboration,

Lack information about useful technology, product standards, Lack information about useful technology, product standards, marketing, they need skills development and enterprise marketing, they need skills development and enterprise management. management.

Information may be available but the transaction cost of acquiring it Information may be available but the transaction cost of acquiring it may be too high for sme’s.may be too high for sme’s.

externalexternal

Key factors impeding the performance of Key factors impeding the performance of SMEsSMEs

Weak regulatory and legal framework, Weak regulatory and legal framework, SME access to financeSME access to finance Lack of SME support facilities.Lack of SME support facilities.

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Challenges aheadChallenges ahead

As Borderless economy deepens SMEs are struggling to As Borderless economy deepens SMEs are struggling to compete with imported goods manufactured by SMEs in compete with imported goods manufactured by SMEs in neighboring countries.neighboring countries.

Up scaling from micro to small to medium and large.Up scaling from micro to small to medium and large. Shift from service to manufacturingShift from service to manufacturing Enhancing competitiveness of SMEsEnhancing competitiveness of SMEs Increasing the number of technology based enterprisesIncreasing the number of technology based enterprises Improving quality of human resourceImproving quality of human resource

SME’s- in isolationSME’s- in isolation

Studies have shown that SME suffer from Studies have shown that SME suffer from isolation- isolation-

from each other from each other from connections to value chainfrom connections to value chain from domestic and foreign markets- from domestic and foreign markets- from lack of information.from lack of information.

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Networking and Clustering as Solutions Networking and Clustering as Solutions

Why networks and clustering –Why networks and clustering –

SME’s are unable to capture market opportunities which SME’s are unable to capture market opportunities which require large production quantities, homogenous require large production quantities, homogenous standards and regular supply.standards and regular supply.

Small size also constitutes a significant hindrance to Small size also constitutes a significant hindrance to internalization of functions such as training, market internalization of functions such as training, market intelligence, logistics and technology innovations- all of intelligence, logistics and technology innovations- all of which are core to firm dynamism.which are core to firm dynamism.

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Kinds of networking to consider:Kinds of networking to consider:

Networking among SMEs- which facilitates clustering Networking among SMEs- which facilitates clustering Networking of SMEs (assuming they are qualified) to Networking of SMEs (assuming they are qualified) to

other parts of value chain of production, marketing and other parts of value chain of production, marketing and sales. sales.

It helps toIt helps to Fill some of the information and knowledge gaps that Fill some of the information and knowledge gaps that

SME have.SME have. Networking and clustering also create synergies that Networking and clustering also create synergies that

combine the flexibility of small firms with opportunities for combine the flexibility of small firms with opportunities for economies of scale, facilitating cooperation and division economies of scale, facilitating cooperation and division of labor among SMEs as well as transfer of technology, of labor among SMEs as well as transfer of technology, knowledge and information.knowledge and information.

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Challenges in networkingChallenges in networking

Creating new networks is difficult.Creating new networks is difficult. Requires trust and building trust, if it does Requires trust and building trust, if it does

not come affiliation or from prior not come affiliation or from prior acquaintance or association- requires third acquaintance or association- requires third party intervention.party intervention.

Clustering- collaborative work and Clustering- collaborative work and information exchange , not just physical information exchange , not just physical proximity- also requires trust.proximity- also requires trust.

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How to go about itHow to go about it

Cluster networkingCluster networking Virtual Networking and ClusteringVirtual Networking and Clustering

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Cluster networkingCluster networking

Identifying regional clusters where regional networking Identifying regional clusters where regional networking would work.would work.

Involving Networking agency/broker to investigate Involving Networking agency/broker to investigate possibilities of creating a network or cluster, devise a possibilities of creating a network or cluster, devise a plan to do so, and implement.plan to do so, and implement.

Such cluster creation should be demand driven-or Such cluster creation should be demand driven-or customer driven network to be successful.customer driven network to be successful.

Such agency/broker means working with buyers or Such agency/broker means working with buyers or potential buyers to determine needs, then matching potential buyers to determine needs, then matching these with potential buyers or clusters.these with potential buyers or clusters.

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Virtual Networking and clusteringVirtual Networking and clustering

Internetworking- ideal regional networking- use of Internetworking- ideal regional networking- use of internet to connect SMEs with one another, potential internet to connect SMEs with one another, potential business partners, information, advice, database, business partners, information, advice, database, funding sources and other information.funding sources and other information.

An inter active portal- with SME knowledgeable staff to An inter active portal- with SME knowledgeable staff to maitain and update.maitain and update.

““Infomediary function”- to network with all relevant SME Infomediary function”- to network with all relevant SME institutions, national and international.institutions, national and international.

Creation of market place – e-commerce, network, Creation of market place – e-commerce, network, information and skills :an entrepreneurial business hub.information and skills :an entrepreneurial business hub.

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Portal ModelsPortal Models

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-efficient internal and

external communication

1. email --place in

worldwide

market

-window to

worldwide

suppliers

2. Website(gateway) --order and

pay online, reducing

cost

-maximize business

accessibility and speed

3. e-commerce -integrate

supply chain so

manufacture and

delivery become

seamlessMinimize waste at

every stage of the supply chain

4. e-business (service center)

-open systems

information for

customers, suppliers

and partners

-new business models

based on inter working

between organization

and individuals.

5. Transformed organizations

Increasing Organizational Change and Specialization

Business benefits

Stages of e-commerce developmentStages of e-commerce development

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Presence

•Content•Window to

the web•No

integration•E mail

Portals

•Profiles•2 way communication•E mail•Order placing•No $ Dollar transaction

Transaction Integration

•B2B/B2C•Communities•E Marketplace•Auctions•Low level collaboration

Enterprise Integration

•E2E•Full integration•E Business•E Commerce•Value Chain Integration•High Level collaboration

How use of internet can eventually transform businesses

What SME regional portals can doWhat SME regional portals can do

Providing important information to SME’sProviding important information to SME’s Serve as center for business to business and business Serve as center for business to business and business

to consumerto consumer Business to consumer may not be useful to majority of Business to consumer may not be useful to majority of

SMEs in GMSSMEs in GMS Large suppliers that use internet based enterprise Large suppliers that use internet based enterprise

resourceresource planning software for transactions with other firms in planning software for transactions with other firms in

remote countries, offer their products, information on remote countries, offer their products, information on

product capabilities, benefits, prices etcproduct capabilities, benefits, prices etc

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ExamplesExamples

http://ec.ec.europa.eu/enterprise/sme/text_en.htm

Enterprise Europe network- provides information and practical Enterprise Europe network- provides information and practical advice on market opportunities, legislation and policies relevant to advice on market opportunities, legislation and policies relevant to company or sectorcompany or sector

Helps SME to find suitable business partners using its business and Helps SME to find suitable business partners using its business and technology cooperation databases, providing information on tender technology cooperation databases, providing information on tender opportunities and international networkingopportunities and international networking

Develops research and innovation capacities of SMEs by helping to Develops research and innovation capacities of SMEs by helping to create synergies with other research actors, technological create synergies with other research actors, technological cooperation cooperation

Helps SMEs to share research resuklts, participate in research Helps SMEs to share research resuklts, participate in research programs and apply for funding.programs and apply for funding.

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http://www.thaitrade.com

Provides online trading, buying and selling leads, Provides online trading, buying and selling leads, import and export servicesimport and export services

https:www.tradexchange.gov.sghttps:www.tradexchange.gov.sg

Offers a complete range of online services for Offers a complete range of online services for trade and logistics community in Singapore. It trade and logistics community in Singapore. It enables cargo booking and tracking, exchange enables cargo booking and tracking, exchange of commercial documents etcof commercial documents etc

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Thank youThank you

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