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SMEs cite competition, product quality as top challenges

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Asian Institute of Management (AIM)
WWW.AIM.EDU

SMALL and medium-sized enterprises (SMEs) cited intense competition as their biggest challenge, topping other factors the need to offer quality products and corruption, according to a study conducted by a Philippine think tank.

The Asian Institute of Management’s (AIM) Rizalino S. Navarro Policy Center said its 2018 SME survey found that 34.4% of 480 respondents identified competition as a “severe obstacle.”

In a briefing Wednesday discussing the survey results in Makati City, the policy center issued a report called “Drivers of SME Competitiveness in the Philippines.”

In it the policy center said: “On average, SMEs reported that they have experienced above-medium intensity of competition during the current year.”

Some 68.5% of SMEs reported that they have five competitors.

Competition was more frequently cited as a challenge than the need to deliver quality products, cited by 32.1% or respondents, and corruption, cited by 30.4%.




“Our findings show that low quality of products is more likely to be seen as a severe obstacle by medium firms, as well corruption,” said Maribell Daño-Luna, a senior researcher with the policy center.

Other challenges turned up by the study were lack of management skills and information on the industry; access to inputs and supplies and to market information; the cost of raw materials and other inputs; and access to markets, technology and credit.

Challenges associated with the government aside from corruption were regulation; lack of projects for SMEs; low quality of infrastructure; and political instability.

The 480 randomly selected respondents were from 12 cities in the National Capital Region and five in nearby Calabarzon region — the two areas accounting for 48% of the country’s SMEs.

The study also identified factors that were viewed by SMEs as enablers, including management skills (80.2% of respondents), employee skills (69%) and product quality (64.4%).

“Small firms are more likely to rate as very important enabler those that are related to good management skills. For medium firms, what matters most is the good quality of product,” Ms. Daño-Luna added.

Other enablers at the enterprise level were software and other information and communications technology tools; use of the Internet in selling and marketing products; credit access; and export markets.

Based on these findings, the policy center recommends strengthening government institutions, promoting a mind-set geared toward growth and increasing SMEs’ awareness of tools that can spur their growth.

“Strengthening institutions is crucial to curb inefficiency caused by corruption, poor infrastructure and complicated export processes — which hamper capacity of SMEs to compete,” it said.

“Increasing awareness of SMEs of the benefits of access to technology, finance, government programs, and linkages with large and foreign firms can allow them to take advantage of available opportunities,” the report added.

In 2016, about 99.6% of operating firms in the Philippines were micro, small and medium enterprises.

Under Republic Act 6977 or the Magna Carta for Micro, Small and Medium Enterprises, a company is considered micro if it has assets not exceeding P3 million; small, if above P3 million and not exceeding P15 million; and medium if above P15 million and not exceeding P100 million. — Janina C. Lim

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