The dawn of the 21st century has brought about numerous changes to our society from economic, political, and socio-cultural influences, that has permanently impacted the way society operates. Perhaps the most successful product of modern society’s evolution these past decades is the innovation for globalization. In essence, societies have now been closer more than ever due to the acceptance for the interconnected relationships that countries now require from each other. With the help of the internet’s nascence, globalization intensified massively with the accessibility of everything and everyone online. Practically every service or goods that modern society has to offer can now be shipped, laboured, produced, commercialized, and sold to different countries in vast continents from around the world all within the palm of our hands. Looking at this in a business perspective, economies will almost certainly be affected as Small and Medium Enterprises (SMEs) tend to yield to the upward trend of globalization, streamlining their companies in hopes of achieving higher revenue.
But the current economic climate speaks otherwise. The trend these recent years, for the most part, saw a dwindling economy spiralling down to what most considered to be a recession. An article from the Harvard Business Review stated that turbulence and shocks during recent years impacted the global economy severely, these changes—particularly the COVID pandemic, involatile inflation, and Russia’s invasion of Ukraine—all contributed to a consumer-driven recession that would likely continue during 2023. These broader geopolitical concerns have all caused considerable disruption and difficulties for mid-market companies that rely on foreign supply chains. However, despite persistent economic uncertainties, many global business executives continue to view exports as a major driver of growth in terms of international trade. According to Grant Thornton’s International Business Report (IBR) survey of mid-market companies, optimism among business leaders had fallen to 59%, down from a recent high of 70% at the end of 2021. Despite this fall, optimism was still above historic averages, suggesting that mid-market firms or SMEs had confidence that conditions will improve, even when faced with some significant challenges. As more recent fears of impending slowdown recede in many markets, business leaders can plan ahead with increased assurance that conditions look set to improve.
Although there are signs of an improving global economic outlook, mid-market firms are under no illusions about the difficulties ahead. Economic uncertainty and energy costs remain the top concerns globally with 60% of mid-market businesses citing them as a constraint to growing their business. This is followed closely by the availability of skilled workers (57%) and labour costs (55%). Firms need to consider how they can respond to this business environment and ongoing uncertainty.
This holds true in the Philippine setting, as many Filipinos are eager to market their products internationally as more people in the country establish their enterprises in 2023, according to a recent article by The Manila Times. The article also emphasizes how Philippine SMEs looking to expand their businesses focus on increasing their client base, diversifying their product lines, spending money on infrastructure, and searching for new, more effective ways to export their products to other nations.
As such, to promote sustainable and inclusive growth while fostering strength against the highly volatile market, it is essential to raise the competitiveness of SME’s businesses. To give Philippine SMEs a better grasp on how better adapt to the harsh economic environment, here are a few key ideas to focus on.
One of the most vital aspects of successful competitive trading in the globalized world focuses on supply and demand. Multiple firms are taking the time to re-evaluate their supply chains. According to Grant Thornton’s International Business Report (IBR), one of the key insights from the most recent data is that many business leaders are focussed on working out whether they can deliver more value by shifting their trade routes, or if there are markets in which they can grow. Businesses are more likely to be flexible and able to act swiftly and decisively given the nature of the mid-market. A few things to consider would be the type of market, channels, and demographics that offer sustainable growth and support the overarching growth objectives for the business.
The second area of key insight deals with how leaders of SMEs should adapt to be constantly looking for opportunities, even as they are faced by some very real threats. Grant Thornton’s IBR research shows that prime among the issues weighing on business owners’ minds are economic uncertainty, inflation, and the risk of cyberattack, but they will also be only too aware that current economic turbulence may create other threats. The focus on this insight should revolve around directing businesses as effective operationally and financially as possible, along with the mindset on maximizing profit while minimizing risk and reducing expenses in the supply chain.
Thirdly, companies will need the proper teams in place to respond to these challenges effectively. As the Grant Thornton IBR data shows, finding and keeping the best personnel is still difficult due to a widespread skills shortage and rising labour costs for businesses.
Lastly, the fourth key finding from the Grant Thornton IBR data examines how business executives are trying to boost productivity. Deciding which investment opportunities will have the greatest impact on their ability to expand and stay one step ahead of the competition is also a very significant priority that should not go unnoticed.
As the world centres around globalization, the relationships of countries will inevitably be challenged consistently. With almost all the countries in the world intertwined with one another, overcoming these challenges should be second nature to us by now. Understanding the Philippine economy and how SMEs struggle to make the most out of the current economic situation gives everyone a better perception that silver linings can sometimes mean gold.
As published in The Manila Times, dated 05 July 2023
