BY TAH WEE HAN AND LEO KAH MUN

SINGAPORE'S SMEs are bracing themselves for tough times ahead, as the local economy, buffetted by the global financial crisis, is geared towards a weaker performance this year with official forecasts for GDP growth at 4-5 per cent.

As such, it becomes imperative for our SMEs to critically reassess their internationalisation strategies.

This is even more important during a recession as they can ill-afford to err on their overseas expansion plans given their tightening organisational resources vis-à-vis their larger multinational counterparts.

While companies should leverage on such uncertain times to augment their business capacity and gear up for the recovery phase, a recession still offers a plethora of opportunities in foreign markets for companies that actively seek them. However, this should be done in the right manner to increase the chances of success in international markets in current times.

Companies will do well to consider the internationalisation process in four progressive steps.

Know yourself - Entity Diagnosis

The first step starts with a self-assessment of one's company when deciding to expand overseas. Key elements may include:

• Degree of knowledge and awareness of own product capability, regional and global market developments, competitors and consumers and potential partners;
• Resource availability and efficacy of the human, financial, intellectual assets and business technology;
• Existing overseas outreach and identifying both potential drivers and barriers to new markets based on previous lessons;
• Effectiveness of overall corporate strategy, market positioning and usage of various market research tools and information.

Know your battleground - Market Assessment

This entails evaluating the attractiveness of potential markets and ascertaining the market entry viability. Both favourable and unfavourable market conditions should be analysed to streamline and guide the firm's investment decision. Key issues may include:

• Strengths in vast market size, potential growth, availability of raw resources/suppliers and logistic convenience;
• Weaknesses due to high operating costs, bureaucratic red tape and inadequate transport infrastructure;
• Opportunities that may exist in consumer affluence, income, cultural similarity and receptivity towards the company's products and services;
• Threats from constant inflation, key competitors and possible geographic vulnerability evident from historic occurrences;
• Leveraging strengths by attracting target consumers, establishing vast supplier networks, providing unique F&B products, enhancing customer receptivity, exploring and developing other potential streams of revenue.

Harmonise your findings - Strategic Formulation

The findings from the two steps detailed above should then be amalgamated to conceive an overall business strategy that represents a clear harmonisation of the organisation's capability and prevalent conditions within the chosen markets. The four strategies proposed below serve as guidelines in streamlining and guiding the firm's decision. They include:

• Leveraging strengths by attracting target consumers, establishing vast supplier networks, providing unique F&B products, enhancing customer receptivity, exploring and developing other potential streams of revenue;
• Overcoming weaknesses by engaging local expertise and labour, forming strategic alliances and leveraging actively on business growth catalysts which possesses the extensive international network and business expertise to bring them overseas;
• Exploiting opportunities by maximising consumer spending, optimising first mover advantage and addressing market gaps ignored by competitors;
• Mitigating threats by adopting a cost saving culture, proactive market intelligence activities, and developing contingency plans.

Plan your market entry - Business Planning

This encompasses the development of viable business plans and their actionable steps to implement the firm's market entry into the selected markets. Key aspects should include market entry mode, marketing and advertising, operation, financial, logistics and contingency plans.

Despite the recent proliferation of internationalisation and its related activities among our SMEs, challenges still linger for many companies seeking to embark or build on their overseas growth plans.

While knowing one's roadmap for internationalisation will enhance the chances of success, companies should also consider a synergistic approach whereby rather than venturing overseas alone, they band together.

A group of companies offering complementary products and services or sharing common objectives may prove to be a viable option. At the same time, companies should invest time and resources in finding the right overseas partners which may expedite and ease the entry into new overseas markets.

With the ongoing turmoil in the global markets, companies should also keep abreast of latest developments by tapping on various channels available.

For instance, they could utilise the newly launched quarterly Economic Business Outlook & Sentiments series by the Singapore Business Federation (SBF) to obtain and share timely information on both local and regional developments among various members.

Additionally, the one-stop Business Advisory Centre at IE Singapore has established itself as a viable conduit with the aim of providing businesses with a wide range of market information and also matching their needs to the relevant advisory services.

Tah Wee Han is a director of management consulting and Leo Kah Mun is a manager of management consulting of BDO Raffles.

This article was first published in The Business Times on November 10, 2008.