Factors Affecting SME Business Sentiments 2011 Slides Final... · SME DEVELOPMENT SURVEY 2011 MEDIA CONFERENCE Thursday, 20 October 2011 COMMERCIAL CONFIDENTIAL 72 Bendemeer Road

SME DEVELOPMENT SURVEY 2011 MEDIA CONFERENCE

Thursday, 20 October 2011 COMMERCIAL CONFIDENTIAL

72 Bendemeer Road #04-28 Luzerne Singapore 339941

Tel: (65) 6738 1900 Fax: (65) 6298 2310 Email: [email protected]

www.dpgroup.sg

Copyright 2011. DP Information Network Pte Ltd. All Rights Reserved. No part of this presentation may be sold, reproduced or transmitted in any form or by any means without the written permission of DP Information Network Pte Ltd. In the event of violation of its copyright, DP Information Network Pte Ltd will take the appropriate action to preserve its rights.

© DP Information Network Pte Ltd. All rights reserved. DP and the marks used herein are service marks or registered trademarks of DP Information Network Pte Ltd. Other product and company names mentioned herein may be the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of DP Information Network Pte Ltd.Restricted

DP Information Group

SME DEVELOPMENT SURVEY 2011

How Ready are our SMEs in Meeting Uncertain Times?

© DP Information Network Pte Ltd. All rights reserved.Restricted.

Factors Affecting SME Business Sentiments

1H 2H 1H 2H1H 2H 20102010 201120112009200920082008





www.dpgroup.sg



SURVEY OBJECTIVES


Survey Objectives

1. Key challenges faced by SMEs in 2011 and their key strategies moving forward

2. SMEs’ access to external financing and reliance on government schemes

3. Degree of internationalization and strategies adopted by SMEs in their internationalization effort

4. SMEs’ investment in information technology and adoption of technology innovation

5. SMEs’ understanding of productivity and possible actions to increase SMEs’ productivity

6. Human resource capability gaps and investment in staff training





www.dpgroup.sg



Survey Methodology

• Random sampling of 10,000 companies from 10 broad sectors

• Companies must have :• at least 30% local equity ownership (local SMEs)• not more than S$100m in annual sales / turnover • not more than 200 employees

Survey Respondent

• Questionnaire to capture opinions & general characteristics of SMEs via:• Mail-out• Posting on website at http://smesurvey.dpgroup.sg

• Financial statements to provide insight into SMEs’ financial performance

• Follow-up calls after mail-out of invitations

Survey Method


CHARACTERISTICS OF RESPONDENTS





www.dpgroup.sg



Characteristics of Respondents

� Higher response rate of 25% with the participation of 2,504 companies

� 21% repeat respondents from last year’s survey

� SME respondent make-up is similar to previous years

� Wholesale continues to dominate SME respondent landscape at 34%



SMEs’ improved performance following the global recession is evident

� 46% of SMEs reported >S$5million in turnover for FY2010 vs 37% last year

� SMEs generating up to S$1million in revenue fell from 27% in FY2009 to 21% in FY2010

� More SMEs from Manufacturing, Construction and Wholesale reported stronger turnover

However, SMEs’ turnover performance have yet to reach levels observed for FY2008

� 46% of SMEs achieved >S$5million in turnover for FY2010 as compared to 62% for FY2008





www.dpgroup.sg




Fall in representation of loss-making SMEs

� The percentage of SMEs reporting losses fell from 16% in FY2009 to 11% in FY2010

� 1 in 5 SMEs in the Information & Communications sector are in the red

Increasing costs are possibly eroding the profits of SMEs today

� Despite improved turnover levels for FY2010, a corresponding improvement in FY2010 profit has not been observed

� Retail SMEs reported stronger turnover numbers for FY2010, but this has not translated into strong profitability



SMEs’ sentiments have yet to return to the optimistic levels of 2008

� 18% of SMEs are in the Accelerating Stage in 2011 compared to 29% in 2008

� More Services SMEs (20%) have reported Acceleratinggrowth

SMEs’ performance outlook is shaping to be one that is less optimistic

� Close to half of the SMEs reported Moderate Growth

Start-up: First 3 years of operationAccelerating growth: Turnover growth of more than 10% per annum Moderate growth: Turnover growth of up to 10% per annum Mature: Zero growth in TurnoverDecline: Negative growth in Turnover





www.dpgroup.sg



SURVEY FINDINGS


Overseas Expansion





www.dpgroup.sg



Overseas Expansion

SMEs look to the Local Market for Growth due to uncertain global economic situations

� The proportion of companies with revenue generated from overseas has dropped to 44% in 2011

Among those with overseas components, there is a downward shift in SMEs’ overall reliance on overseas revenue

� More SMEs are deriving Up to 30% of revenue from overseas, from 42% in 2009 to 55% in 2011

� Fewer SMEs are generating More than 70% of turnover from overseas, from 23% in 2009 to 18% in 2011

Percentage of Turnover from Overseas

2011 2010 2009

Up to 30% 55% 47% 42%

>30% - 50% 13% 20% 17%

>50% - 70% 14% 13% 18%

>70% - 100% 18% 20% 23%

Total 100% 100% 100%


Overseas Expansion

Overseas expansion is an important element in the ultimate growth of SMEs

� 38% of the SMEs with overseas component are generating turnover greater than $10 million (without overseas component: 20%)

� More from Construction (73%), Services (68%) and Retail(68%) are relying solely on the local market

� SMEs from the Wholesale (56%) and Manufacturing (51%) sectors see a greater reliance on overseas revenue

No Overseas Components

Majority generating no

more than $5million in

turnover

More amongst Construction,

Retail and Services

With Overseas

Components

Majority generating turnover

greater than S$5million

More amongst Wholesale and Manufacturing





www.dpgroup.sg



Overseas Expansion

SMEs with overseas revenue have a higher turnover

� 56% of SMEs with overseas revenue have a turnover of over S$5 million, compared to 36% with no international revenue

FY2010 Overseas Revenue


Overseas Expansion

SMEs have a wide usage of weakening currencies

� SMEs with overseas operations employ the US Dollar (84%) and Euro (25%) as the primary currencies in their transactions

Strong Singapore Dollar (SGD) is hurting SMEs’ bottom line

� 63% of SMEs see strengthening SGD as a limitation with most citing a Reduction in net profit due to exchange loss (84%)

� SMEs from the export-oriented Wholesale (47%) and Manufacturing (20%) sectors are most negatively impacted by the strengthening SGD

Areas Aided by the strengthening SGD

% of Respondents

Cheaper Raw materials

42%

Increase net profit due to exchange gain

40%

Lower overseas operating cost

24%

Cheaper imports allow for lower prices which indirectly increases sales

19%

Alleviate impact of increasing oil and transport costs

8%





www.dpgroup.sg



Overseas Expansion

Asia remains a key destination for SMEs with overseas revenue, with Malaysia, China/HK and Indonesia retaining their place as top 3 countries for SMEs.

� Malaysia remains the top destination (65%)

� US and Australia regained their positions as markets of interest amongst our SMEs (2007)

� Korea and Japan have fallen out of the top 10 markets SMEs engage with this year


Overseas Expansion

Sufficient internal capability and adequate market understanding are important for new market entry

� Having Adequate finances (83%), Good business contacts (78%) and Right foreign partners (73%) are SMEs’ key considerations

SMEs today view the presence of a Strong government (75%) and Strong currency (71%) of potential markets as major considerations

Top 5 factors to new market entry

Very Important

----------------------------------Not at all important

Total

Adequate finances 83% 12% 3% 1% 1% 100%

Good business contacts

78% 17% 4% 1% 0% 100%

Strong and/or stable government

75% 16% 6% 2% 1% 100%

Right foreign partners 73% 18% 6% 2% 1% 100%

Strong and/or stable currency

71% 19% 8% 2% 0% 100%

Long term growth potential

70% 21% 6% 2% 1% 100%





www.dpgroup.sg



Overseas Expansion

66% have indicated the presence of an overseas strategy for 2011

�More SMEs have varying strategies in place for their overseas expansion compared to 2010

�Establishing a stronger foothold in existing markets (43%) and broadening their global presence (37%) are the top strategies for these SMEs.


Overseas Expansion

This year, more SMEs are aware and utilizing FTA

� 17% of our SMEs are aware and utilizing FTAs today, compared to 10% the previous year

� Products are not in the list for tariff concessions (26%) and Marginal tariff reduction (23%) are the primary motivations for SMEs not leveraging on FTAs

� Malaysia (54%), China (42%) and Indonesia (41%) continue to stand as the top 3 FTA partners that SME respondents engage with





www.dpgroup.sg



Funding / Financing


Fewer SMEs are facing financing challenges

� Only 15% of the SMEs are currently faced with financing issues as compared to 38% last year

� Cash Flow Problems (62%) has been cited as the main impediment

� SMEs from the Information & Communications (75%) and Transport/Storage (70%) sectors are most affected by Cash flow problems.

More are citing lack of funds to build internal competencies

� Manufacturing SMEs (30%) are more affected by the Lack of funds to build internal competencies

Funding / Financing

Financing Issues 2011 2010

Experiencing cash flow problems

62% 63%

Difficulties in obtaining bank financing

34% 37%

Lack of funds to build internal competencies

21% 18%

Do not meet criteria for Government Schemes

17% 18%





www.dpgroup.sg



Funding / Financing

SMEs need to be more vigilant and mindful of their financial matrix

� More SMEs (76%) are tapping on debt financing tools such as Term loans (47%) and Overdraft (27%)

� More Manufacturing SMEs (81%) are relying on debt financing

� Reliance on Shareholders’ funds/retained earnings has dropped from 86% to 79%

Greater reliance on Government Funding/Financing Schemes

• Reliance on Government Funding/Financing Schemes has risen from 21% to 50%

� More Services SMEs (59%) are turning to Government Funding Schemes

Top Funding Tools…

Term LoanShareholders’ funds/ retained

earnings

Workfare Training

Scheme (WTS)


Term loans has remained as a primary source of debt financing

� More than half of SMEs in each sector has relied on Term Loan

More SMEs are seeking to acquire capital equipment in a bid to cater to potential demand

� Hire purchase/ leasing has surfaced as a key debt financing tool among asset-intensive sectors such as Construction, Manufacturing and Transport/ Storage

Overdraft appears to be a popular source of financing among certain sectors this year

� More amongst SMEs in the Retail, Services and Transport/ Storage sectors are employing Overdraft as a form of financing

Funding / Financing

Construction

•Term loan (54%)•Hire purchase/ leasing

(45%)

Information & Communications


(30%)

Manufacturing


(33%)

Retail

•Term loan (86%)•Overdraft (31%)

Services

•Term loan (57%)•Overdraft (31%)

Transport/Storage


(32%) •Overdraft (32%)

Wholesale

•Term loan (60%)•Trade financing (43%)

Top 2 Debt Financing Tools by Sectors





www.dpgroup.sg



Workfare Training Scheme (WTS) -70%

Workfare Income Supplement (WIS) Scheme -67%

Micro Loan Programme (MLP) -47%

Local Enterprise Finance Scheme

(LEFS) -46%

New Bridging Loan

Programme(BLP) -44%

Funding / Financing

High level of awareness of Government Schemes

� About 1 in 2 are aware of the Micro Loan Programme(MLP) and Local Enterprise Finance Scheme (LEFS)

More SMEs are seeking to improve workers’ productivity and retain their older staff

� Workfare Training Scheme (WTS) (16%) and Workfare Income Supplement (WIS) Scheme (13%) have topped the list in terms of Government Funding Schemes

The withdrawal of the new Bridging Loan Programme (BLP) from 1 February 2011 saw fewer SMEs leveraging on this scheme

� SMEs tapping on the new Bridging Loan Programme (BLP) dropped from 13% to 6% this year.

Top 5 Successfully Applied Government Schemes 2011 2010

Workfare Training Scheme (WTS) 16% 13%

Workfare Income Supplement (WIS) Scheme 13% 4%

New Bridging Loan Programme (BLP) 6% 13%

Local Enterprise Finance Scheme (LEFS) 5% 7%

Micro Loan Programme (MLP) 5% 9%

Aware of Government Schemes Top 5 …


DP Credit Rating

DP Credit Rating 2011 2010 2009 2008

Investment Grade 18% 23% 22% 17%

High Yield 44% 47% 49% 58%

High Risk 38% 30% 29% 25%

Total 100% 100% 100% 100%

The Risk Profile of our SMEs Has Increase

� < 1 in 5 (18%) SMEs are in the Investment grade

� Close to 2 in 5 (38%) of our SMEs are in the High Risk grade

� Manufacturing (26%) SMEs out-perform the pack with more Investment grades

� Retail (12%) SMEs fared worst with the lowest number of Investment grades

� 3% more Construction SMEs had Investment grade compared with FY09

� More than half of Information & Communications SME are in the High Risk grade (57%)

Business Sector

DP Credit Rating

Investment Grade

(FY2010)

Investment Grade

(FY2009)

High Yield

(FY2010)

High Yield

(FY2009)

High Risk (FY2010)

High Risk (FY2009)

Construction 19% 16% 44% 56% 37% 28%

Information & Communications

16% 18% 27% 33% 57% 49%

Manufacturing 26% 27% 43% 44% 31% 29%

Retail 12% 14% 44% 43% 44% 43%

Services 16% 21% 33% 42% 51% 37%

Transport/Storage 16% 31% 48% 39% 36% 30%

Wholesale 18% 23% 51% 51% 31% 26%

Overall 18% 23% 44% 47% 38% 30%





www.dpgroup.sg



Liquidity

A quarter of our SMEs may have difficulty meeting their short term debt commitment

� 1 in 4 (26%) SMEs are likely to face challenges in fulfilling its debt obligation

� For SMEs with a current ratio of >1.5x, the distribution remain relatively unchanged

� While the norm varies by industry, SMEs should try to achieve current ratio of >1:1 and close to 2:1.


SMEs’ Strategies and Challenges





www.dpgroup.sg



SME Business Strategies

Expand existing range of products & services

Enhance products & services offered

Focus on expanding local market presence

Improve customer service

Introduce higher value-added products/ services

Hire more permanent staff

Top 3 Strategies …

More SMEs have strategized for their next phase of growth

� 94% of SMEs have shared their business strategies for the next 1 year

SMEs’ focus in 2010 :-

� Building of internal capabilities

SMEs’ focus in 2011 :-

� Extend their reach in the local market

� Expand range / enhance products & services to cater to improved local consumer sentiments


SME Business Strategies (Operations)

Growing confidence in the domestic demand

� Building a stronger local presence has taken centre stage in the year ahead (45%)

� Services (51%), Retail (49%) and Construction (47%) SMEs are more focused on Expanding local presence

SMEs still looking to expand in uncertain times.

� Upward trend with increase from 20% in 2010 to 29% in 2011

� 75% of SMEs with overseas revenue are more likely to continue to expand overseas

Improving customer service is no longer a priority for most sectors

� Proportion of SMEs citing improve customer services as a strategy has reduced by half





www.dpgroup.sg



SME Business Strategies (Products/ Services)

SMEs augment their focus on product/ service enhancement as a means to cater to improved consumer spending

� More are looking at expanding (61%) and enhancing (54%) products and services

SMEs are taking on a less proactive role in promotional efforts this year

� The percentage of SMEs focusing on increasing advertising and strengthening brand image has reduced by more than half

� SMEs from the Retail (24%), Services (18%) and Information & Communications (17%) continue to value the importance of advertising


Challenges faced by SMEs

SMEs are facing growing cost pressures

� More than half are troubled by high manpower costs(54%) and high material costs (51%)

� Construction and Manufacturing sectors are greatly hindered by both high manpower costs and high material costs

� High rental costs (44%) has also emerged as a key challenge faced by SMEs today

Sales & Cost-related Challenges

2011 2010 2009

High manpower costs 54% 39% 20%

High material costs 51% 28% -

Increasing competition 47% 82% 45%

High rental costs 44% 38% 20%

Experiencing delay in

receiving payments 23% 23% 44%

Slow growth in sales 10% 47% 76%





www.dpgroup.sg



Challenges faced by SMEs

Foreign Currency Exchange loss has emerged as a key challenge amongst SMEs today

� Wholesale (59%) and Manufacturing (49%) sectors are more impacted by the foreign currency exchange loss issue

Human resource continues to be a prominent concern among SMEs

� 38% cited foreign staff issues and 27% expressed concerns with lack of capable manpower

� More SMEs from Construction (58%), Retail (47%) andManufacturing (45%) are facing foreign staff issues

� More from Services (32%) and Information & Communication sectors (31%) are facing lack of capable manpower.

Other Challenges 2011 2010

Foreign currency exchange loss

43% 12%

Foreign staff issues 38% 16%

Lack of capable manpower 27% 30%

Rising customer expectation 21% -

Uncertain economic environment

16% 38%


Manpower





www.dpgroup.sg



SME Business Strategies (Manpower Strategies)

More intend to freeze new hire in the year ahead

� Having increased hiring activities in 2010, the proportion of SMEs freezing new hire in the year ahead has doubled.

Fewer SMEs are looking to invest in staff training and development

� The conclusion of SPUR in Nov 2010 has seen SMEs’ investment in staff training (13%) take a backseat

� More amongst SMEs from the Information & Communications (19%) are planning to invest in staff training

More intend to employ higher skilled workers


Manpower

With the tightening of the labour market, more SMEs are having difficulties retaining their staff

� 1 out of 2 SMEs facing HR Capabilities gaps cited Difficulties in retaining good managers and talents as their main concern as compared to 40% last year.

Close to 1 in 5 SMEs have cited the Lack of process to measure and improve employee satisfaction as an HR capability gap





www.dpgroup.sg



Human Capital

Majority have no plans to employ foreign workers in the next 6 months

� The percentage of SMEs turning to foreign labour to fill the gap drop from 69% to 29%.

� More from Construction (42%) and Manufacturing(36%) are planning to employ foreign workers in the next 6 months

The fall in the percentage of SMEs turning to foreign labour may not have been triggered by the stringent measures rolled out by the Government

� Among the 71% that are not hiring foreign workers, majority (88%) had No requirement to do so

� Of those hiring foreign workers, 44% shared that it is More expensive to employ foreign workers and a third felt that it is More difficult to employ foreign workers

Feedback% of

Respondent

More expensive to

employ foreign

workers

44%

New changes imposed

on foreign

employment have no

impact on decision

38%

More difficult to

employ foreign

workers

34%

Reasons for not

employing foreigners

% of

Respondent

No requirement 88%

Due to quota

limitation10%

More expensive to

employ foreign

workers

4%

More difficult to

employ foreign

workers

3%


Manpower

Greater reliance on foreign workers

� The proportion of foreign workers forming more than 25% of their workforce grew from 58% to 64%

SMEs’ reliance on foreign workers is expected to continue in the next 2-3 years

� There is only a marginal dip in SMEs that have manpower comprising of foreigners, from 76% currently to 71% over the Next 1 year and to 70% over the Next 2-3 years

�Manufacturing and Construction SMEs are expected to continue relying most on foreign workers

� Retail is expected to witness the greatest drop in percentage of SMEs with foreigners making up a proportion of their workforce





www.dpgroup.sg



Information Technology & Innovation



SMEs are placing more emphasis on meeting the demands of the day-to-day business

� Only half of SMEs have taken action to improve their technology innovation capabilities

� The drop in SMEs investing in technology innovation is observed across all business sectors except Services

� 41% of the SMEs felt that technology innovation has No direct contribution to product attractiveness/ functionality

More are focusing on acquisition of new machinery, equipment or software instead of building up their internal capabilities

� 8 in 10 (78%) have Acquired new machinery, equipment or software

� A significant drop in SMEs that had Sent staff for appropriate training courses and Hired staff with the required knowledge or experience

Acquired new machinery,

equipment or software

78% (2011)

70% (2010)

Hired staff with the required

knowledge/ experience

21% (2011)

31% (2010)

Sent staff for appropriate training

courses

19% (2011)

32% (2010)

Top 3 Actions Taken …





www.dpgroup.sg




Majority that have invested in technology innovation reported positive contribution to their business performance

� Close to 8 in 10 reported material impact

� More SMEs from Accelerating (82%) and Moderate(81%) stages are enjoying material impact

More are beginning to realize other benefits besides Increased productivity and Improved cost efficiency

� More are recognising Shorter turnaround time (25%), Development of new innovative products/ services (21%) and Facilitate customisation benefits(17%) as benefits

Benefits from adopting technology innovation

2011 2010 2009

Increased productivity 73% 84% 50%

Improved cost efficiency 54% 45% 36%

Shorter turnaround time 25% 8% 20%

Development of new innovative products/services

21% 8% 41%

Facilitate customisation 17% 4% 13%

Widen market coverage 16% 14% 11%

Enhanced image/ reputation

14% 11% 15%



7 out of 10 SMEs have plans to invest in IT and technology innovations in the next 12 months

� More are willing to spend on IT infrastructure viz. Software (60%) and Hardware/ Network (58%)

More may be incentivised by the benefits offered under the enhanced Productivity and Innovation Credit (PIC) Scheme to invest in technology innovation

� More SMEs willing to spend on IT and technology innovation

� SMEs’ expenditure threshold for IT and technology innovation is about S$50,000

� Slightly more SMEs are prepared to set aside a bigger budget on IT and technology innovation

Areas of expenditure 2011

Software 60%

Hardware/ Network 58%

Develop new products/

improve processes36%

IT Courses 32%





www.dpgroup.sg



SMEs’ Productivity



Growing awareness among SMEs that productivity is not about financial performance

� The proportion of SMEs tracking/ measuring productivity using Profit, Sales per employee ratio and Value added per employee ratio has reduced

� More are using Operational KPI (41%) and Cost per unit (16%) to measure productivity

More are using Cost per unit to measure productivity amidst growing cost concerns

� SMEs in Manufacturing (25%) and Retail (19%) are more likely to use Cost per unit as a measurement of productivity

Measurement of Staff Productivity …

Profit 52%

Profit63%

Operational KPI41%

Operational KPI31%

Sales per employee ratio19%

Sales per employee ratio24%

Cost per unit16%

Cost per unit7%

Value added per employee ratio6%

Value added per employee ratio8%





www.dpgroup.sg




Of those who do not

measure/ track productivity

66% 58%

41% 22%

32% 28%

19% 21%

19% 12%

13% 7%

7% 12%

Of those who measure/

track productivity

89% are keen to receive information to improve productivity

� Information on Training programmes is highly sought after to improve productivity

� The next most sought after among those not tracking productivity is information on Seminars and workshops

SMEs that are not tracking productivity probably do not understand the concept of productivity

� 1 in 5 SMEs that are not tracking productivity find information on Productivity concepts useful


Productivity

“Sales per Employee” generally declined

Sales per employee continued to decline across all sectors despite a stronger turnover performance in most sectors

� SMEs in the Services (-50%) and Transport/ Storage (-48%) sectors saw a greater drop in Sales per employee

“Staff cost per Employee” sees slight drop across most sectors

� Manufacturing SMEs saw a greater fall in Staff Cost per employee

� Construction SMEs recorded an 18% rise in Staff cost per employee

423,000

137,000

119,000

172,000

124,000

213,000

638,000

171,000 149,000

264,000 250,000

408,000

575,000

290,000

244,000

386,000 398,000

500,000

-34%

-20% -20%

-35%

-50% -48%

-60%

-50%

-40%

-30%

-20%

-10%

0%

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

Commerce Construction Information &

Communication

Manufacturing Services Transport/Storage

Sales per Employee

FY2010 FY2009 FY2007 % Change

35,000

20,000

31,000

26,00029,000

31,000

37,000

17,000

31,00033,000 32,000 32,000

47,000

40,000 37,000 41,000

51,000

40,000

-5%

18%

0%

-21%

-9%

-3%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

15%

20%

0

10,000

20,000

30,000

40,000

50,000

60,000

Commerce Construction Information &

Communication

Manufacturing Services Transport/Storage

Staff cost per Employee

FY2010 FY2009 FY2007 % Change





www.dpgroup.sg



Productivity

Labour productivity of SMEs observes a normal distribution

� Most SMEs recording $20,000 – S$50,000 in value-added per worker

More SMEs have posted lower labour productivity

� 24% of the SMEs are recording Up to $20,000 in value-add per worker for FY2010 as compared to 15% for FY2009

� More SMEs from Construction (36%) and Services (29%) sectors continue to post lower labour productivity of Up to $20,000 in Value-add per worker

� 22% of Commerce SMEs enjoy high labourproductivity of More than $100,000 in Value-add per worker

** Labour Productivity measures the Value Added (or Output Achieved) per Worker.


Productivity

The general landscape of SMEs’ labour cost competitiveness remains largely similar to FY2009

� Majority (58%) are producing More than 1 to 2 times in Value added per dollar of labour cost

Fewer SMEs have posted high labour cost competitiveness

� Fewer SMEs (27%) have posted high labour cost competitiveness of more than 2 times in Value added per dollar of labour cost

** Labour cost Competitiveness indicates the company’s efficiency and effectiveness in producing Value Added (or Output) per S$1 of Labour cost.





www.dpgroup.sg



KEY OBSERVATIONS


Key Observation # 1

Internationalisation – critical for SME growth

� Although Global Economic uncertainties have impacted SMEs, overseas expansion remains a key business strategy

� SMEs turning to Local Market for current Growth

� Focusing on expanding local market presence (45%) has taken centre stage in terms of SMEs’ operational strategy for the 12 months ahead

� 44% generated revenue from overseas as compared to 66% in 2010 and 68% in 2009

� Increase in SMEs considering overseas expansion as a business strategy despite uncertain times (from 20% in 2010 to 29% in 2011)

� Suggestions:

� SMEs to grow strategically in emerging markets, which have a more stable macroeconomic outlook and strong domestic demand





www.dpgroup.sg



Key Observation # 2

Strong drive needed for Productivity message

� Increasing awareness that productivity is not about financial performance but many yet to fully understand what productivity is all about

� SMEs in Singapore are keen to know more about productivity

� 22% fewer survey respondents that measure productivity � Profit still remain as an indicator used by a sizable proportion (52%)� 89% are keen to receive information on productivity� 35% are interested in information on productivity concepts, productivity

assessment tools, and guides to tools and methodologies to help them to improve their productivity levels

� 59% of SMEs still unaware of the PIC scheme

� Suggestion:

� Assess SME’s understanding of productivity and extent of assistance needed to implement productivity initiatives and track productivity performance

� Continue the promotions about the PIC scheme for SMEs


Key Observation # 3

SMEs to recognize values in investing in technology / innovation

� SMEs tend to emphasize on what they can best bring to their customers through new products / solutions

� Emphasis on meeting day-to-day demands of business operations and garnering

bigger market share

� Only half have taken action to improve their technology innovation capabilities as compared to 63% a year ago

� SMEs perceive Innovation, Technology and R&D (21%) and Good infrastructure(10%) as the least important aspects in their decision-making process of entering new markets abroad.

� Suggestions:

� Need for further brainstorming and efforts to spur SMEs to look to R&D/ IT Solutions/ technology not as once-off effort but a continuous investment to drive growth and expansion





www.dpgroup.sg



Key Observation # 4

Financial strength Needed to weather another economic downturn

� SMEs seem aware of the potential for another downturn

� Cost saving is now a priority

� New hires are being frozen� Budgets for technology innovation & staff training are being reduced� Expansionary expenditure like branding & advertising strategies are less

important

� SMEs may have depleted some reserves built up during pre-crisis years

� 7% fewer SMEs relying on Shareholders’ funds/ retained earnings� 24% more tapping on bank-related financing, in particular term loan� 39% reporting Cash-to-Short-term Debt ratio <0.5

� More High Risk Grades SMEs

� 23% reported Total Liabilities-to-Net-Worth ratio >3� 38% of SMEs are in the High Risk Grade, compared to previous year of 30%� A drop of 5% of SMEs in the Investment Grade ( from 23% to 18% ) � 3 in 5 (63%) of SMEs with Gearing ratio of >5x are rated High Risk


Strategic Partners

Sponsors





www.dpgroup.sg



QUESTIONS?


THANK YOU

Factors Affecting SME Business Sentiments 2011 Slides Final... · SME DEVELOPMENT SURVEY 2011 MEDIA CONFERENCE Thursday, 20 October 2011 COMMERCIAL CONFIDENTIAL 72 Bendemeer Road

Documents