SMEs pandemic risk and opportunity

According to United Nations special report on SME Day 2020, small, medium and start-up enterprises, which generally employ fewer than 250 persons, are the backbone of most economies worldwide and currently play a key role in developing countries.

According to the data provided by the International Council for Small Business (ICSB), formal and informal small and medium-sized enterprises (SMEs) make up over 90% of all firms and account. While they may be small individually, new ILO data show that micro and small enterprises, together with own account workers, account for a staggering 70% of employment worldwide.

These types of enterprises, with a large share of those classed as micro firms consisting of fewer than ten employees, are responsible for significant employment and income generation opportunities across the world and have been identified as a major driver of poverty alleviation and development.

SMEs tend to employ a larger share of the vulnerable sectors of the workforce, such as women, youth, and people from poorer households – populations with high vulnerability in times of COVID-19. SMEs can sometimes be the only source of employment in rural areas. As such, SMEs as a group are the main income provider for income distribution at the “base of the pyramid”.

Across all countries, SMEs do more than create employment: they are also engines of economic growth and social development. In most OECD countries, SMEs contribute more than 50% of GDP, and some global estimates put this figure as high as 70%. This contribution varies across sectors, and is particularly high in the service industry, where SMEs account for 60% or more of GDP in nearly all OECD countries.

To continue playing their crucial role in creating decent jobs and improving livelihoods, small businesses depend more than ever on an enabling business environment, including support for access to finance, information, and markets.

The Indonesian-based Archipelago Strategic & Partners Indonesia (ASPI) business and management consulting, for their part, play an active role in helping both local SMEs and large enterprises meet ISO standards requirements through system development, competency-based certified training course, and reliable publication to support their partners’ business sustainability.

ASPI marketing director Felice Arlene, M.Si, said that trust is fundamental, as in every business scenes around the globe, but her team are also committed to deliver creative and practical approach to support businesses circumvent risks, while foreseeing the opportunities on the flip side of the coin.

Central Jakarta business district

See also: ASPI business and management consulting portfolio

Small businesses, including those run by women and young start-up entrepreneurs, are being hit hardest by the economic fall-out of the pandemic. Unprecedented lockdown measures enacted to contain the spread of the coronavirus have resulted in supply chain disruptions and a massive drop in demand in most sectors.

A global survey by the International Trade Centre, an agency of WTO and UN, reported in SME Competitiveness Outlook 2020, showed that The majority (55%) of businesses had been strongly affected by the pandemic and the measures taken to contain it. Smaller companies tended to be more strongly affected by COVID-19 than larger ones. Nearly two-thirds of micro and small firms said their business operations were strongly affected by the crisis, compared with about 40% for large companies.

Companies operating in services have been most affected by COVID-19 (Figure 24), with the most severity reported by those in accommodation and food services, followed by non-food manufacturing; retail and wholesale; and travel and transport. Micro, small and medium-sized enterprises are overrepresented in most of these sectors. In accommodation and food services, 76% of businesses said their operations were strongly affected by COVID-19 as a result of partial and full lockdown (Figure 24). More than three quarters of companies in this sector experienced a reduction in sales.

On the other hand, COVID-19 has presented an opportunity for some manufacturing firms. About 10% of firms in agri-food processing experienced an increase in sales due to COVID-19.

According to Forbes, a venture capital General Catalyst announced USD 2.3 billion plan for three series of funding, comprising seed funding, growth funding, and further support for the leagues of established start-ups to aim for bigger sales.

In April, General Catalyst executives said of how the pandemic brings forth the technology that allows them to rethink several core services in healthcare, education, and SMEs. Abound with optimism, they believed the founders will march forward while creating wonders out of the pandemic.

Experts opined that it is the time for start-up enterpreneurs to convince the public that they can endure the pandemic. The developing situation suggests some tech-driven opportunities leaning towards several industries including logistics, education, healthcare, and cyber security.

Online-based education start-up Yuanfudao from China recently acquired USD 1 billion fundings, adding up to their valuation at USD 7.8 billion. Initiated by Hillhouse and Tencent Holdings, investors can see the opportunity that underlies parents decision to move their children’s learning activities home, making advantage of all possible virtual means.  

English learning platform Lingumi brought in GBP 4 million in fundings when users recorded 50% increase during strict measures among Chinese citizen.

The founders of the artificial intelligence hotel booking company Pruvo in Israel are delighted to get USD 1.1 billion in seed fundings when the timing seem all at odds for many companies to attract investors.

Opportunity-driven investors are also found in a number of app-based retailers. Data collected by analytics company Apptopia suggested, several apps from the US recorded daily download rates surging in March compared to February.

Coupled with preventive measures by the US governments, the demand for goods delivery and household stocks had boosted Instacart up 218 per cent, Walmart Grocery 160 per cent, and Shipt 124 per cent.


About think archipelago

Since 2012, think archipelago has provided concise business and management publication of various topics to cater for the stakeholders at Archipelago Strategic & Partners Indonesia (ASPI). As it expands into reaching wider audience, the ASPI media subsidiary now also features insightful articles covering environmental and social issues, art studies, history, accompanied by critical review by ASPI professionals.

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