Part of an SME’s growth journey is adding new products and tapping into new markets bringing additional revenue over the short term, and long-term sustainable growth.
Typical strategies for SMEs include diversification of sales channels, repositioning of products to appeal to a new consumer base, and exporting its products. It takes resources and careful planning, but companies that manage diversification successfully are often companies that are best positioned to survive an economic downturn or take full advantage of a booming economy
Research recently conducted, reveals that most Malaysian SMEs who export are focusing on markets beyond the Asia Pacific (APAC) region, notably, contributing to 82% which by far exceeds the 55 per cent exporting within APAC.
However, exporting requires significant resources, such as research and planning, finding overseas connections, and especially financing. Although SMEs were once seen as a risky segment for financing, commercial banks are increasingly targeting SMEs as they themselves seek to diversify their revenue base.
Market diversification, commonly accompanied by product diversification, is the effort of growing into business segments previously untouched. It is accomplished by either targeting new client groups or adding new products/services within existing markets. It is an effective growth strategy favoured by both SME and MNCs alike.
Most enterprises tend to launch depending on one or two key clients, assimilating their own growth together. This exposes themselves to uncomfortable levels of risks, in which their sustainability heavily depends on these accounts. Diversification alleviates this problem by introducing new channels of revenue, addressing the question of market entry on multiple levels.
WHY IS IT
Effective For SMEs
SMEs own the advantage of versatility when introducing new market segments. They are free of corporate bureaucracy and trade barriers. Small and medium enterprises also have the option of starting with small scale entry to slowly build the momentum. This allows them to identify starting key-clients with much higher efficiency, plus a feedback of market data prior to full-scale investment.
BENEFITS AND CHALLENGE OF
“If it is so important, why isn’t everybody doing it?” Nothing important and effective is going to be simple. SMEs are challenged in terms of size, resources and management abilities. Appropriate market research and milestone planning is essential for its success. Comparatively, SMEs with successful diversification efforts perform better than their peers across the globe.
WHY THE SME CEO FORUM
Plays A Role?
At our Forum, you will get a chance to understand:
- What sets a part a good and bad diversification?
- What are the tools and data necessary to make this decision?
- Who are the people who has done it in Malaysia?