Asia Pacific SMEs Speed Up Globalization Progress

Oxford Economics' Global Study Sponsored by SAP Reveals Only Four Percent of Small and Midsize Firms in Asia Pacific will get Revenue Exclusively at Home in Three Years; Over 75 Percent are Planning or Conducting Business Transformation

SAP AG (NYSE: SAP) and Oxford Economics today announced survey findings from an Oxford Economics research program, sponsored by SAP, that show small and midsize enterprises (SMEs) in the Asia-Pacific region are world leaders in terms of generating revenues outside their home countries. Only 12 percent of Asia Pacific SMEs earn their revenue exclusively at home—and this is expected to drop to just four percent in three years’ time. As SMEs face increased competition from foreign companies, a majority see business transformation and technology investment as key strategic imperatives to speed up their globalization progress while supporting longevity and sustainable growth.

The global survey of 2,100 executives from SMEs in 21 countries, including Australia, China, India, and Indonesia, shows they believe they are equipped to compete with larger firms and have some clear advantages over them. The findings overturn industry stereotypes of smaller companies as local or regional entities that are largely technophobic.

"Recognizing the opportunities for international expansion is clearly not ‘new’ to this region, nor is the notion of business transformation," said Bronwyn Hastings, senior vice president, Ecosystem and Channels, SAP Asia Pacific Japan. "However, maintaining competitive advantage across such a diverse range of markets is a key priority for SMEs in the Asia Pacific region, particularly when it comes to managing supply chains and subsidiaries. Having clear business insight across the entire organization at any one time is of the utmost importance for those firms with a significant global footprint."

Important findings from the Asia Pacific region include the following:

  • Asia Pacific SMEs are expected to grow outside their home markets while facing increasing global competition at home. The number of firms expecting to generate as 31–40 percent of their revenue internationally jumps by nearly 90 percent in the next three years. Nine percent of respondents currently do business in six or more countries, a figure that is expected to rise to 26 percent in three years. The number of Asia Pacific firms doing business in 10 or more countries will increase sharply in three years, with five-fold expansion among Australian firms and more than 100 percent growth among companies headquartered in China, India, and Indonesia. Around one-third of respondents in Asia Pacific cite increasing global competition, economic uncertainty, and increasing labour costs as the top three trends affecting their business today. About 60 percent say competition from companies in other countries has increased substantially in the past two years. More than 65 percent say they are competing more with larger companies now than in the past.
  • Asia Pacific SMEs recognize they must embrace business transformation to compete. More than three-quarters of all companies surveyed in Asia Pacific are at some stage of the transformation process (i.e., about to begin, in process, or recently completed), with transformation understood as making significant changes to a firm’s business model, technology, product offerings, or go-to-market strategy. Over 80 percent of SMEs in Australia and India say transformation is essential to staying ahead of the competition, and nearly two-thirds of Indonesian firms agree. More than half of SMEs in Australia and China say they are more innovative than their key competitors, and nearly three-quarters of Indian firms make the same claim. More than half of the respondents in Asia Pacific say expanding product and service offerings is essential to driving growth in an era of new markets and empowered customers.
  • Technology is important for SMEs in Asia Pacific and a major element of transformation. Investing in new technologies is a top strategic priority as SMEs remake their businesses for the global marketplace. Sixty percent of Asia Pacific SMEs strongly believe technology helps them achieve longevity and sustainable growth. Asia Pacific firms expect business analytics (72 percent), business management software (67 percent), and social media (66 percent) to be widely adopted at their organizations in the next three years. However, less than one-quarter of Asia Pacific SMEs consider themselves early adopters of technology, compared with almost 47 percent of North American firms. Almost two of three Asia Pacific companies say their technology investment is contingent on a clear return on investment (ROI).
  • Focusing on talent and culture is an imperative for SMEs in Asia Pacific, and skills gaps are a challenge to cloud adoption. More than one-third of respondents in Asia Pacific cite creating a culture of innovation as a leading priority in their transformation efforts. Forty-seven percent of regional respondents are actively hiring employees to support their growth activities, and 41 percent find it increasingly difficult to recruit people with the right skills. More than 40 percent of the firms say cloud computing is key to driving cost efficiencies, and the adoption of cloud technologies is expected to grow rapidly in the next three years. Skills gaps are a challenge to cloud adoption in Australia (42 percent) and India (52 percent), and more than half (54 percent) of SMEs across Asia Pacific worry about the accuracy and reliability of information when using data analytics. Forty-six percent cite data collection as the biggest challenge in this area.
  • Innovative technology is key to improving product and service development and creating strong customer relationships. Asia Pacific SMEs see improvement of product and service development and better customer service as the two biggest benefits from the adoption of disruptive technologies. Cloud computing and business analytics are expected to see the greatest increase in adoption across Asia Pacific SMEs, at 44 percent and 40 percent, compared to the global growth rate of 35 percent and 33 percent, respectively. Consumer-goods firms, at 69 percent, will lead the regional industry growth for analytics, while Asia Pacific retail firms will adopt cloud platforms the fastest, with consumer firms and wholesalers close behind. Sixty percent of SMEs in Asia Pacific expect that mobile will be widely in use at their firms in three years and retail companies (34 percent) expect to see the biggest increase in mobile adoption. Over half of the firms expect social media to have a significant impact on revenue growth over the next three years. However, less than one-third say the biggest benefit of social media will be improved customer service.

"The road ahead is well marked for SMEs in Asia Pacific," said Edward Cone, managing editor and senior analyst at Oxford Economics. "Globalization, transformation, and technology will be the hallmarks of successful small and midsize companies."

For more information, visit the SAP Newsroom.

About the Research
This research program is based on an online survey conducted in April 2013. Survey respondents came from 21 countries around the world, with the total of 2,100 responses evenly divided (100 respondents each) among the following: Australia, China, India, Indonesia, Brazil, Canada, Chile, Colombia, the Czech Republic, France, Germany, Hungary, Italy, Mexico, Poland, Portugal, Russia, South Africa, Spain, the United Kingdom, and the United States. Industries represented include discrete manufacturing (25 percent), professional services (21 percent), consumer products (22 percent), retail (17 percent), and wholesale (16 percent). Respondents are C-level executives or direct reports, including CEO/President/Owner (10 percent) and a broad mix of senior leaders from IT, sales, finance, operations, marketing, and procurement. Revenue at respondent firms ranges from $20 million–$99 million (27 percent) to $100 million–$249 million (23 percent), to $250 million–$499 million (29 percent), and $500 million–$750 million (20 percent).

About Oxford Economics
Oxford Economics was founded in 1981 as a commercial venture with Oxford University’s business college to provide economic advice and forecasts to international organizations. Since then, it has become one of the world’s foremost independent global economic firms, producing forecasts, analysis, and data on 190 countries and regions, 100 industries, and 2,600 sub-regions and cities. Its team includes over 80 professional economists, industry analysts, and management experts.

Oxford Economics specializes in global quantitative analysis, and business and public-policy advice. The firm offers a sophisticated portfolio of forecasting services, consisting of regular reports, databases, and models on countries, cities, and industries. Oxford Economics is renowned for its evidence-based consulting and thought leadership services, including economic impact studies, scenario analysis, business modeling, risk assessment, market sizing, executive surveys, white papers, and public-sector analysis. The firm is distinguished by the quality of its quantitative analysis, caliber of its staff, and close links with Oxford University. For more information, visit www.oxfordeconomics.com.

About SAP
As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device—SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 248,500 customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

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For more information, press only:
Priscilla Hung, SAP, +65 6664 6863 / +852 2539 1932, priscilla.hung@sap.com, SGT
Jeremy Eagle, Oxford Economics, +1 (646) 503 3049, jeremyeagle@oxfordeconomics.com, EDT

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