Section A: Learning journal
From this tutorial, I learnt about innovation and its value. Desserts do not need to be sweet and can have a different, unconventional flavor like salty. Change is the only constant. If there is a failure to innovate, companies can be left behind the competition. For example, Nokia was left behind Samsung and Apple in the mobile phone industry. It incorporated the touchscreen technology for its phones too late. From a dominant player in the market, Nokia has become a brand lagging behind its competitors. There is a need to not become complacent for present successes and sustain them with innovation. What works in the past may not work in the future. Even when the popularity of the product has faded, there is a need to sustain the business and withstand the test of time through continuously adapting and innovating.
Also, there are different key success factors for different SMEs. The success of an SME is the combined effect of different factors. A single advantage may not be sufficient. For example, first-mover advantage does not guarantee success. Although Trek 2000 was the first company to offer the thumbdrive, it was too focused on its product and was lacking in the competition. Without effective marketing, it eventually failed. Being the first to explore an idea requires calculated risk. The target market may not be receptive. If the idea is accepted by its target market, the SME would succeed in dominating the market for the beginning as the only provider of a service or product. This could be important in gaining customer loyalty. However, there is a need to sustain the business over time with substitute products and new entrants. While the new entrant may not have the first-mover advantage, it can learn from past success and failures. Being the first to be introduced in Singapore, Grab has the first-mover advantage. Uber was later introduced and offers a similar service as Grab. To maintain competitiveness, Grab had promotions to maintain customer loyalty. For success, there needs to be the right product or service at the right time, place and promotion. This differs from company to company. SMEs cannot just rely on 1 advantage alone.
Besides that, an SME needs to overcome challenges to go international. To expand overseas, there are different approaches adopted by the SMEs. For BreadTalk, the owner has chosen the country to expand in through personal experience of living there or networking. Other companies have adopted other ways such as joint venture, partnership and wholly-owned subsidiary. Joint ventures and partnerships reduce the risk of venturing overseas with knowledge from such as culture and other details like the laws of the country for setting up a business.
These approaches would help prevent misunderstanding and affect the business owner’s reputation. Acceptable actions in the local country may be deemed as offensive in the foreign country. While it is acceptable for women to wear pants in Singapore to conduct business, it can be considered offensive in Japan. Words can also have different meanings. In Singapore, the word, gift means a present while in Germany, gift means poison. Without correction, this could cause the original meaning to be lost. It may cause a false alarm and affects the effectiveness of the marketing campaigns.
Tutorial 3 From this tutorial, I learnt how brand rituals can become a part of our life. We may not realize the brand’s marketing efforts when the brand ritual becomes natural to us and a part of our lives. Because of the actions the brand gets us to do, we remember it more and perceive the brand to be better. Rituals become part of the reason we choose a brand over another. They shape the way we would choose Oreo over other biscuits with its “Twist, Lick, Dunk” ritual. It values add to the customer experience and allows them to sell at a premium. We are more comfortable with choosing the brand subconsciously. When a group of customers perform the same actions, it provides a sense of belonging. While they may be small actions, small details can make a difference and bring about big changes.
Additionally, we are influenced by the portrayal of products and brand. Customers can be tempted to try certain products by the product image. Endorsements by celebrities could tempt fans to try the products. The fame and story behind the celebrities inspires many fans. As a result, some fans view them as their role models and try to emulate them. Also, it helps to reach markets which may not have been achieved. By following their favourite celebrities, fans can be made aware of brands they previously did not know.
Besides that, although the various online marketing tools have advantages, not every SME should use all tools with varying needs. Depending on the type of business, relevant tools should be chosen. Using irrelevant or too many tools may add to the costs incurred and decrease productivity with time needed for training employees or employing trained employees. More is not always better.
Other than that, I learnt how to craft survey questions according to strengths, weaknesses, opportunities and threats to gather accurate information. There can be generic questions like whether the respondents gather with friends and families for desserts. Other aspects like visibility, branding and quality can be covered in the survey. It is important to not assume or craft leading questions. It should not be assumed that the respondents gather with friends and families for desserts. Moreover, clear instructions have to be given to avoid generating wrong survey results. In ranking questions, it should be stated clearly whether the smallest number is most favourable or the largest number is the most favourable. This will avoid misunderstanding of the survey questions. What we think will be the perception of the target audience cannot replace a survey. Surveys may give surprising results. These results can open up new research areas. It can also identify differences between what SMEs’ opinions on what consumers perceive and reality of consumers’ perception. While doing market research, it is important to not allow personal bias to affect the accuracy of the research. SMEs may overestimate or underestimate demand. This could result in loss in the form of stockouts or product obsolescence.
Tutorial 4There are different reasons for Small and Medium Enterprises (SMEs) to raise funds. Some SMEs raise funds to meet cash flow problems and fulfill debt obligations like a mortgage. In contrast, other SMEs may be looking into expanding and research and development efforts like market research and product development.
When raising funds, it is important to think from the perspective of investors and their potential profits. Before investing, they think about the returns within a period of time. Other factors like competition and whether is the product a need or want are also considered. For example, sponges are used by every household but a sunscreen viewer to check if there is sufficient sunscreen coverage may not be used by everyone. The usage of a product may depend on individual customers. A need for an individual may be a want for others. This predicts the number of users in the population and thus, potential revenue and profit.
By giving up equity in return for funds, they are accountable to shareholders with greater responsibility and possibly greater pressure. Previously, if the business fails, they may be just accountable to themselves and their creditors. However, if the business fails now, they are also accountable to shareholders. Raising funds through equity results in a healthier balance sheet and hence, more favourable financial ratios. This increases the chances of obtaining a bank loan if needed in the future. However, by giving up too much equity, they risk dilution of management control and an unwelcome takeover.
There are many factors to consider when buying the equity of a business like the debts, management capabilities, market trends and image. There is a need to look into financial and non-financial aspects of the business. Besides that, the reason for selling equity should be examined. While the past may not equal to the future, historical records of the SME can give an indication of future development.
Multinational Corporations (MNCs) and SMEs have different viewpoints and way of operations. There may be challenges in managing finances for SMEs. SMEs have limited resources and need to be more prudent in spending. They are less able to spend on human capital like a finance manager and have departments like Human Resource. However, SMEs tend to be more understanding when there is an absence of good results from the employees. MNCs have more resources with many shareholders. Being more established, MNCs can also obtain a loan more easily than SMEs. They can afford to have more capable management with a better track record and resources. As a result, MNCs tend to be more result-oriented with expectations for net profits. An underperforming employee might lose the job. There is a need for MNCs to be accountable to their shareholders with dividends and good results and pay attention to the bottom line. Otherwise, shareholders may become unhappy and the MNC would be less capable financially. Unhappy shareholders may sell their shares, leading to falling share prices. This would affect the MNC’s ability to obtain a loan from financial institutions. Also, there may be greater pressure from existing shareholders with a possibility of them voting out the current management.
When writing about a business idea, there are many aspects to consider like target market, potential market share and revenue, location and intensity of distribution. Identifying the correct target market is important to develop the right product and distribution channel.
Businesses do not just sell products or services but also customer’s value-added perception. When a product like a burger is sold, the business does not sell just ingredients placed between two buns but also the convenience of having a perceived wholesome and filling meal. Also, it sells the brand’s idea. For example, Subway is not just selling sandwiches but healthy, fresh and quick meals. Customers may choose a particular brand’s product for its perceived image. They may choose BMW over other car brands for the image of quality and luxury. There is a need to choose the right location to convey the right message of the brand’s image. A shop selling high grade diamonds may not be as successful if it chooses to sell it in the neighbourhood rather than shopping centres due to its perceived quality. In selling the product, perception is the sense of the customer’s reality.
In addition, it is important to value add to customers’ experience to gain an edge over competitors. When value-adding, SMEs should look at their advantage over their competitors. If it is not productive for it to provide a particular service, it can choose to sub-contract that area of the business for better productivity with time and cost savings. By using foreign labour, a business can cut costs significantly with much lower salaries in countries like Malaysia and Thailand. The salary for the same job could be US$706.50 in Singapore but US$8.40 in Thailand. Besides that, the quality of the product obtained could be higher with natural resources from other countries. In addition, it is important to look at the target market. Different consumers may have different expectations. It would be difficult to satisfy everyone. For example, in a cosmetics shop, some customers may prefer having assistance from the staff while others may prefer browsing on their own. The staff’s assistance is only seen as value-added by customers who wish to have assistance. It may be seen as a hindrance by customers who do not want assistance. By providing something better or more than the competitors’ aligned to the customers’ expectations, it generates a better image of the SME and allows them to charge a premium for higher profits.
Other than that, it is important to have satisfied customers. Promoters can boost a SME’s business greatly. Through the word of mouth, a SME that has not achieved good track records can be attractive to potential customers because of positive feedback from friends and family who have used the product or service. This would help them obtain customer loyalty critical to building up and sustaining a business. Attracting new customers and retaining existing customers are equally important. The value of a customer is not just the price of the product they bought but more than that. If a customer buys a $10 product monthly over 10 years, his or her value would be $1,200.
ICT can help businesses in different ways. They have changed the way business is conducted. Work done previously by pen and paper can now be done more efficiently via the use of computers and mobile devices. They also serve different purposes like in terms of data management, financial technology and communications.
With ICT, the use of low skilled human labour may be less needed. Rather than hiring surveyors to do personal observation, shopping malls can use ICT to find out more about customer demographics and satisfaction level through the use of integration with current technology like Closed-Circuit Television (CCTV). While the short-term costs of incorporating ICT may be high, there are long-term savings in the perspective of businesses. Besides that, it helps businesses avoid miscommunication among departments and the costs associated with it with greater integration. Rather than separate departments, they are working together as a whole in the enterprise. Employees can see the big picture better and operations are more streamlined. With artificial intelligence, human errors can be eliminated and standards can be maintained more easily. Incidents of delivering too much or too little would be less likely to occur.
With the rise in awareness of the benefits of ICT, software developers and SMEs have more opportunities to flourish. Developers are able to make profits from more people subscribing and SMEs can take advantage of more choices and better features.
When using ICT, it is important to make the right choice on which solution to use. Different ICT software target varying sizes of enterprises. Some software is suitable for SMEs while others are designed for medium companies and large corporations. Some solutions that may benefit a SME may not benefit other SMEs. Choosing the wrong solution may lead to wastage of time and even hinder productivity. ICT solutions involving a point of sales system would not be useful to a service provider like a SME providing accounting and secretarial services. However, it would be useful for a retail store.
While ICT may bring several benefits, there can be disadvantages. There may be concerns with privacy. With the use of CCTV to understand consumer behavior more, our movements are monitored and can be tracked. There may be concerns of the leak of personal information. Moreover, there may be a lack of personal touch. For example, with an automated self check-in for hotel, there is lesser interaction between the guests and the hotel employees. The interactions may value add to the guest’s holiday experience. Through providing good customer service during interactions, guests feel special. From the viewpoint of employees, they may be made redundant with the incorporation of ICT.
There are risks in doing business. While it is not possible to avoid it completely in the course of doing businesses, there are ways to manage it.
The ways to manage risk can depend on the size of the business, type of the business and situation faced by the business. Methods like self-insurance may suit some large corporations well but are not applicable to SMEs. It is important to assess the needs of the business. With limited cash reserves, SMEs hardly have the means to meet losses which size cannot be estimated. Also, if the business nature involves losses that cannot be easily predicted or estimated like cross border risks, it would be better to transfer the risk by buying insurance rather than bearing the risk. Losing a lawsuit may mean bankruptcy for a SME while it could be losses easily covered by large amounts of profits for large corporations. For businesses subject to laws covering negligence to customers, it would be important to have coverage under Commercial General Liability insurance. The risks faced by a business may vary in a different country with different business climates. With less access to regulations for business in countries like India, there is greater compliance risk.
In some cases, transferring business risk by selling and liquidating may be a better move than to continue the business. It is important to look at the long-term development of the business. A SME may not be able to survive in a long competition with a large corporation. It may have to close down due to being unable to counter the larger corporation’s efforts in maintaining competitiveness like price war. Large corporations have the capacity to withstand losses of pricing products or services at prices lower than cost which an SME may not be able to. This helps to reduce business losses completely rather than continuing the competition at the losing end. Another way of managing business risks could be mergers to increase the possibility of co-existing with bigger competitors and making good profits. It would be easier to bring the business to a higher level with greater capabilities and resources gathered.
SMEs cannot be complacent about initial successes. There is a need to anticipate risks like new entrants entering the business with similar products or services and existing competitors appealing to customers more. These risks can be managed by coming up with new product ideas and non-product aspects like good branding. Risk management should be a continuous effort with changing circumstances. Large scale changes can happen anytime.
Succession planning is important to the business. This is to ensure continuity of the business when a key person is unable to work. Without succession planning, there may be confusion among different partners and future business plans could be delayed, causing a loss of opportunity.