SMEs must pull through this tough time
The persistence of the coronavirus is abnormal and deeply damaging.
The number of victims has passed 10 million; the number of deaths is over half a million. And both these numbers continue to increase. According to the World Health Organization, the outbreak is currently at its most dangerous level. Businesses around the globe are suffering, especially small firms, and social institutions are still struggling to find the best ways to deal with the global trauma.
It is as if TS Elliott's poem has come to life: We are in “The Wasteland.” Following the first stage of shock, fear, unpreparedness, and panic, the next stages are upon us, meaning that we must re-dedicate ourselves to fixing the damages and formulating strategies for the future. Thus countries are trying to keep the wheel of the economy moving (even if in a limited way) while also trying to contain the pandemic.
In this uncertain global time, some glimmers of hope and peace also have appeared in the daily news. For example, more than an additional 5,000 Bangladeshi products will gain duty-free access to the Chinese market, which about 97% of Bangladesh’s exports that go to China, spanning 8,256 products.
We know that there are still some technical details to resolve, so the announcement does not guarantee that our products will simply enter the Chinese market naturally starting on July 1. But still, the announcement is undeniably good news, coming at a time when tensions on the Indo-China border are at a peak.
I leave it to geo-political analysts and foreign affairs experts to offer guidance along these lines. Although international business is inevitably influenced by regional and global geo-politics, I do not address those complex considerations here. Instead, I offer a more precise discussion, focused on a business perspective.
For this perspective, I turn to the resource dependency theory (RDT), which states that trading partners who possess critical resources gain power and a favourable bargaining position. We need to assess and review which critical resources we own, then strategically determine the extent to which we are ready to capitalize on them. These considerations are especially pressing for small and medium-sized enterprises (SMEs), which already function under various limitations and have been particularly affected by the modern pandemic.
For these SMEs, the first consideration must be basic survival. Unfortunately, business schools tend to teach attack or growth strategies; survival strategies are often neglected in research and academia. But now is the time we need appropriate, sophisticated survival strategies.
They cannot be limited to reducing employee rolls to cut costs, though many SMEs have taken this route. Instead, layoffs should be a remote option; the institutional resources that companies have devoted to building a skilled and experienced staff should not be wasted by dismissing those valuable human resources.
A professional assessment by a trained accountant or financial analyst also is essential for defining a good survival strategy. Cost controls then can come from different approaches and allocations.
Beyond survival, networking, especially internationally, must continue. The situation will shift eventually, and human civilization will persist, creating a new sense of normalcy and activity. At that point, SMEs need to be able to rely on their well-established international trade relations.
In particular, Confucian philosophy remains highly relevant in East and Southeast Asia, and it requires proper social relationships. Even if the effects of Covid-19 are predicted to reduce global foreign direct investment (FDI) by 40% in 2020, those investments are likely to increase again, two or three years hence.
If Chinese FDI in Bangladesh increases, SMEs will need a pro-active strategy in place already. With the expectation that China will prefer Greenfield investment strategies over Brownfield versions, the country also needs to identify specific, strategic areas.
In developing these plans, we should turn to the lessons provided by the mixed experiences of Sri Lanka and Pakistan with Chinese FDI.
Although the prospects may seem gloomy, I reject the notion that the days ahead are only going to be grim. Good days ultimately will return. Therefore, SMEs must adopt a powerful, full survival mode that enables them to struggle through while also preparing for a brighter future.
This recommendation is not meant to discount the difficulties these companies face, but even as they overcome today’s challenges, they should be focused on preparing for a better future. If they can do so, our SMEs will be well-positioned to grasp the promising opportunities that might arrive on our borders within the next couple of years.
AFM Jalal Ahamed is a Senior Lecturer of Marketing at the University of Skövde, Sweden. His research interests include export-import relationships, transaction cost theories, relationship marketing, and consumer behaviour.