UPS study finds Philippine SMEs remain optimistic, rethink practices to survive market slowdown
MAKATI CITY, Philippines, 25 June 2009 -- Philippine small and medium-sized enterprises (SMEs) have started to re-evaluate their business practices and strategies as a result of the global economic slowdown, according to results of the 2009 UPS Asia Business Monitor (ABM). Philippine SMEs now face the main challenge of adapting to an evolving global economic environment especially since growth opportunities in North American and European markets have become limited. However, the 2009 UPS ABM findings show that Philippine SMEs are optimistic about the state of the national economy despite the global credit crunch in comparison to SMEs in other Asia Pacific countries. In fact, a majority of Philippine SMEs are looking to explore growth prospects within Asia Pacific and the Middle East).
The UPS ABM is an annual study that takes the pulse of SMEs across the region -- from the issues keeping them up at night to business challenges that keeps them from growing. Since 2005, UPS has been conducting the ABM annually to evaluate changing trends for SMEs, which make up the largest business community in the Asian region. The survey, conducted in January and February, covers 1,200 SME decision makers across 12 countries, including 100 Philippines-based SMEs.
SMEs move out-of-the-box, turn attention to strong Asia Pacific and Middle East for growth
Since the negative effects of the economic slowdown were first felt in the North American and European markets, the markets in Asia Pacific and the Middle East region offer relatively more room for Philippine SMEs growth. Also, shrinking demand in North American and European markets mean that Philippine SMEs are looking to do business with companies located closer to home. Trade within the Asia Pacific remains the strongest. One noteworthy change is the slight increase of SMEs exploring companies in Africa as trade partners.
UPS Philippines managing director Tim Gohoc noted that strong trade relations within countries in the Asia Pacific in particular, has helped buoy these markets amidst the global economic slowdown. "The economic downturn has emphasized the role of globalization in determining a country's progress and policy direction," he said.
The study also has found that while 58 per cent of the respondents worry about the effect of the credit crunch on their businesses, Philippine SMEs are optimistic that the national and global economies will recover and see better days by 2011.
Facing the (economic) survival of the fittest
Business owners in the Philippines and the rest of the Asia Pacific region are learning quickly when it comes to riding out and eventually surviving the global recession. According to the UPS ABM, Philippine SMEs expect modest economic growth for 2009 and are directing their focus to three key areas for long-term growth: Exploring new markets (24 per cent), moving to higher value-added products and services (20 per cent), and strengthening the workforce with good talent (16 per cent).
The 2009 UPS ABM also found that the economic downturn has caused Philippine SMEs to rethink their business efficiencies. For example, results of the study show that Philippine SMEs plan to reduce their transportation and distribution costs in response to the current economic conditions. Certain respondents said that they intend to move their supply chain operations closer to areas where they often deliver or ship their services to save costs, while some are expected to shift to less expensive transportation alternatives from air freight to ocean freight to manage increasing costs.
"It's only practical for business owners to focus on critical management and operations-related issues to steer their companies in the right direction. In order to save resources, we see companies switching from premium to other non-premium products and those that previously made use of air freight services are now shifting to ocean freight," Gohoc said.
He added, "Forward-looking SMEs would look to examining their supply chain and seek to increase internal efficiencies, providing long-term solution which will help them flourish when the economy rebounds. Being the world leader in supply chain and freight services, we at UPS are ready to help SMEs transition through this difficult period by providing cost effective products and value-added tools to help operate a more efficient supply chain."
Answering China's challenge
The 2009 UPS ABM also found that Philippine SMEs see China both as a boost and a threat to their businesses.
Other findings in the 2009 UPS ABM include:
- Only 15 per cent of SMEs across the 12 respondent countries are planning to reduce their workforce, with more than 90 per cent stating the availability of a qualified workforce as the most important determinant of their competitiveness.
- Forty-one percent of SMEs in Asia Pacific cite insufficient collateral as a major obstacle to raising funds, possibly reflecting a decline in companies' balance sheets or the low number of feasible and sustainable business ventures that gain approval from financial institutions and similar agencies.
- Sixty-three per cent of the 1,200 surveyed indicate diversifying and/or exploring new revenue streams as part of their contingency plans to ride out the global economic slowdown.
- Sixty-five per cent of Asian SMEs expect the economy to decline in 2009, compared to just two per cent in 2008.
About UPS
UPS (NYSE: UPS) is the world's largest package delivery company and a global leader in supply chain and freight services, offering an extensive range of options for synchronizing the movement of goods, information and funds. Headquartered in Atlanta, Georgia, USA, UPS serves more than 200 countries and territories worldwide. UPS's stock trades on the New York Stock Exchange (UPS) and the company can be found on the Web at www.UPS.com. To get UPS news direct, visit pressroom.ups.com/RSS.
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