Developing SMEs in the digital era<\/p>\n
By Daniel Kingsley<\/p>\n
This is the second of two articles on advancing small and
\nmedium enterprises.<\/p>\n
JAKARTA (JP): The next issue is comparative advantages and a
\nlevel playing field. New e-trade companies are beginning to enter
\nthe rural market. Trade Management Indonesia is aware of several
\ne-trade start-ups that have very sophisticated marketing plans;
\nthey have recently identified the rural market as having strong
\npotential.<\/p>\n
These firms have chosen their target market based on careful
\nmarket research, which shows that: 1. Information is not freely
\navailable at the SME level; 2. There is a clear demand; 3. Public
\ninformation and facilities for its distribution exist in most
\nareas where SMEs operate, but are inadequate in terms of service
\nand technology.<\/p>\n
Commercial e-trade will only benefit those who can afford to
\nbuy the information, and many of the smaller enterprises cannot
\nafford this luxury.<\/p>\n
It is important that comparative disadvantages do not develop
\nand that those who cannot afford to access information through
\nthe free market have the system to access market information. It
\nis equally important that the system has the resources and
\nmanagement to function efficiently, maximize the quality of its
\ninformation and reach as many SMEs as possible.<\/p>\n
Since e-trade companies are starting up, and demand for
\ninformation exists, it is crucial to establish fluid lines of
\ninformation to those who cannot afford it through the market to
\ncreate a system of fair competition.<\/p>\n
If a level playing field is to be established within the SME
\nhierarchy, the most efficient correction measure is to balance
\ninformation constraints across socioeconomic borders by utilizing
\nexisting public services and allowing them to be useful for those
\nwho choose to use them.<\/p>\n
What about business alliances? Such alliances are extremely
\nsuccessful tactics for big business but are not common in the SME
\neconomy. Few use the concept and they are in a competitive
\ndisadvantage to those that do.<\/p>\n
Alliances will be one of the major advantages that develop
\nfrom an expanding information system, changing the way many firms
\noperate.<\/p>\n
Strategic business alliances are a mutual coordination of
\nplanning, managing, operating and purchasing between businesses
\nthat offer mutual benefits. They differ from traditional business
\npartnerships, which exist for a fixed time and\/or for specific
\nprojects and purposes.<\/p>\n
Joint ventures or contractual arrangements between partners
\nare limited in respect to future long-term expectations.<\/p>\n
Strategic alliances in business can be more fluid and lead to
\nlonger-term relationships and greater payoffs because they can
\nmaximize resource and distribution flows over time; they are more
\nstable relationships.<\/p>\n
With the introduction of e-business to SMEs, especially the
\nsmallest, there is an incredible amount of growth potential
\nthrough mutually beneficial alliances with the larger SMEs and
\nwith other ASEAN manufacturers, especially in Singapore.<\/p>\n
The information\/communication infrastructure does not
\nnecessarily need to be physically available to these smaller
\nfirms, as long as they are capable of receiving e-business
\ninformation.<\/p>\n
This can be accomplished in areas beyond the reach of
\nfacilities at the provincial and regional levels through hard
\ncopy distribution.<\/p>\n
A small industrious supplier of a simple component has the
\npotential to position himself as an export supplier. This type of
\nopportunity has never existed in Indonesia before. The potential
\nis there, but the infrastructure of information dissemination
\nmust be changed.<\/p>\n
The next point is dissemination strategy. Micro strategy which
\nfocuses on disseminating information on employment, export trade,
\ninterprovince trade, export exposure, investor exposure and
\npricing will have an immediate impact on SMEs.<\/p>\n
Information infrastructure is being built as we speak by many
\nof the e-trade firms. They can bring to their customers all of
\nthe above and more at a competitive market price. But we must be
\naware that the lowest levels in the SME hierarchy will not be
\nable to afford such services, either due to a lack of access to
\ncommunication lines or because of financial constraints.<\/p>\n
On the issue of structural reform, Indonesia's economy must
\nconcentrate on labor intensive industries. This is something that
\nany developing economy with some 210 million people to support
\nmust accept.<\/p>\n
The strategic business alliances will play an important role
\nin this development. The development of these alliances is a
\nmajor structural change for the SME economy and the most
\nimportant types of information to be disseminated and made
\navailable are management and logistical information, market
\ninformation and technical information.<\/p>\n
The two most important conditions are trust between potential
\npartners and reducing unnecessary costs of entering into these
\nalliances.<\/p>\n
There should be a minimum level of government intervention at
\nthe SME level, beyond providing services, which will be the best
\navenue the government could follow in encouraging the above
\nconditions.<\/p>\n
Government intervention can include overly aggressive tax
\nofficials, licensing bodies and legal officials (police\/justice
\ndepartment), as well as intimidation of potential foreign
\ninvestors by immigration officials.<\/p>\n
The government and the SMEs must work together to initiate
\npolicy that will create structural changes in the economy.<\/p>\n
The players in this economy, at any socioeconomic level, have
\na great opportunity to grow and attract investors, and to become
\nactive in the national and world economy. Indonesia cannot afford
\nto lose any competitive advantage it presently holds.<\/p>\n
In conclusion, it is critical for the government to prioritize
\nthe development of an electronic information access system that
\nwill allow SMEs to compete with each other and in the world
\neconomies, or risk isolation and limited growth potential as the
\nworld economies become united through information technology.<\/p>\n
The writer is managing director of PT Bumi Trade Management
\nIndonesia and a consultant on the development of small and medium
\nenterprises.<\/p>",
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