SMEs Survivingin Turbulent Times

Let banks be your strategic partner!

June 9th , 2009

Victor LeeManaging Director, SME banking, SCBTL

Presentation in APEC Symposium Session

2

Presentation Outline

a) Worldwide downturn & shrinking interbank confidence are perceivedb) Greatest Challenges to TWN business in 09: Shrinking demand and

confidencec) Winter is over, Spring is yet to come

a) Worldwide downturn & shrinking interbank confidence are perceivedb) Greatest Challenges to TWN business in 09: Shrinking demand and

confidencec) Winter is over, Spring is yet to come

Current Macroeconomic Market OverviewCurrent Macroeconomic Market Overview

a) Major SMEs marketing problem- a vicious circleb) Big 5 approaches to cope with reduced consumer demandc) Successful examples at Stan Char SME banking

a) Major SMEs marketing problem- a vicious circleb) Big 5 approaches to cope with reduced consumer demandc) Successful examples at Stan Char SME banking

Marketing strategy to win customers back. Let banks help you!Marketing strategy to win customers back. Let banks help you!

a) Key messageb) Concluding Remarks

a) Key messageb) Concluding Remarks

Key Message & SummaryKey Message & Summary

Here is the tragedy begins……Shipwrecks everywhere

Followed by credit crunch and confidence crisis

Major spike indicating diminished interbank confidence

Drop due to aggressive rate cuts by central banks

Reference: Bloomberg and Federal Reserve Board

Libor/OIS Spread and the Commercial Paper/TBill Spread

Greatest Challenges to TWN Businesses in 09 – Shrinking demand & lack of confidence

Taiwan export has been shrinking drastically Shrinking consumer confidence

Shrinking since 2008 Q3 & bottom

at 2009 Mar

Reference: 中央大學台灣經濟發展研究中心

Internet bubbles

Reference: 金管會「本國銀行對中小企業放款餘額統計表 」

Limits ↑10%Limits ↓2%

Loan Limits 08 to 09 Mar

TWD Billion

Taiwan SME loan limits has 10% growth (Jun ‘08 vs. Jun’07). Dropped by 2% starting from 2009

Greatest Challenges to Taiwanese Businesses in 09 – Limited access to fund financing

The worst part of winter may be over, but spring is yet to come

Gradual pick-up in exports is on trackGlobal PMI & orders clawing back pre-crisis level

Reference: BloombergReference: Hayer analytics

Improving cross-straits ties and fiscal stimulus could bring a recovery in Q1-2010

8

a) Worldwide downturn & shrinking interbank confidence are perceivedb) Greatest Challenges to TWN business in 09: Shrinking demand and

confidencec) Winter is over, Spring is yet to come

a) Worldwide downturn & shrinking interbank confidence are perceivedb) Greatest Challenges to TWN business in 09: Shrinking demand and

confidencec) Winter is over, Spring is yet to come

Current Macroeconomic Market OverviewCurrent Macroeconomic Market Overview

a) Major SME marketing problems- a vicious circleb) Big 5 approaches to cope with reduced consumer demandc) Successful examples at Stan Char SME banking

a) Major SME marketing problems- a vicious circleb) Big 5 approaches to cope with reduced consumer demandc) Successful examples at Stan Char SME banking

Marketing strategy to win customers back. Let banks help you!Marketing strategy to win customers back. Let banks help you!

a) Key messageb) Concluding Remarks

a) Key messageb) Concluding Remarks

Key Message & SummaryKey Message & Summary

Common problems faced by SMEs- a vicious circle

Limited access to business funding

Lacking marketing dollar

Unsophisticated marketingsolutions

Inferior selling power

Difficulties in accessingTimely information

Insufficient resource for product development

Weaker competitive advantage

Lower revenue and poor credit condition

When a bank encounters a reduced demand, Turning tough time into opportunities

Using research data to re-segment out target. Profit pool have changed.

Moving to lower cost solutions. Reduce branch/physical cost/constraints.

5 key strategies for ensuring SURVIVAL-ble growth5 key strategies for ensuring SURVIVAL-ble growth

PRODUCT DiversificationPRODUCT Diversification RESEARCHRESEARCH

INFRASTRUCTUREINFRASTRUCTURE

SALESSALES

Relentless analysis of sales productivity

MARKETINGMARKETING

Joint marketing & partnerships to share cost loads.

=> Low risk products for fitting bear Market,

Eg: Banking system is flushed with cash. Launch products that captures these cash turning it into revenues.

Eg: Launch mortgaged secured working capital loans

Eg: Governmental Guaranteed loans

Eg: Bring clients overseas to expand their markets.

Launch right products to weather the tough time:

Practical recommendations in turbulent times

1. Cost down1. Cost down

2. Reposition the products2. Reposition the products

3. Government and bank’s financial support3. Government and bank’s financial support

4. New Markets4. New Markets

5. Leverage on strategic partners5. Leverage on strategic partners

Approaches to deal with reduced demand Big 5 approaches (1)

Cost down : Cost down : In time of trouble, a penny saved is a penny earned!

Several cost down strategies you may employ:

1. Review cost structure and remove waste, especially overhead cost

2. Re-fine Process. Slow down is great time to revisit process issues.

3. Streamline organizational structure. Increase span of control.

4. Postpone/ re-prioritize investment projects

Approaches to deal with reduced demand Big 5 approaches (2)

Adapt, evolve, survive – reposition your product to catch the waveAdapt, evolve, survive – reposition your product to catch the wave

Companies should upgrade capacity and continuously develop diversified products through:

1. Engage and retool for rising industry/ new industries

Convert from motorcycle parts to Giant / Merida (world’s largest bicycle manufacturers) .

Even TSMC(Semi-conductor manufacturer) is retooling their production line for solar panel components

2. Focus on Value, not just Price:

In the absence of value, price is the only competitive advantage. Think Service. Think innovation.

Think segments solutions.

For the business scale for SME, think niche, don’t get over-ambitious, one step at a time.

Approaches to deal with reduced demand Big 5 approaches (3)

Securing sufficient fundingSecuring sufficient funding

Great mechanism to provide optimal protection to banks and SMEs

Great ways for local start-ups entrepreneurs and developed businesses

Government injection of another NTD 300 Billion is a firm gesture of Government’s determination to support SMEs

SMEG

(Government Support)

+

Bank Support SCB is the first international bank to have full engagement in SMEG

Be sure to keep sufficient operating capital for regular business course and the best capital financing source: financial institutions

Approaches to deal with reduced demand Big 5 approaches (4)

Diversification of markets to maximize business potentialDiversification of markets to maximize business potential

Geographically diversified-Go to emerging markets

Emerging markets:

Asia (China, India), Latin America (Brazil), Africa, and the Middle East

PMI Data Suggest Emerging Markets Set toOutperform Developed Markets in Recovery

Reference: Hayer analytics

PMI Surveys Suggest Emerging Asia WillRecover Before Europe

Reference: Hayer analytics

Approaches to deal with reduced demand Big 5 approaches (5)

Leveraging on strategic partners: Leveraging on strategic partners: business linkage will help the results of SME development & diversification

Controlled by SME itself

Match Match customer customer

needsneeds

public/private sector

linkages is necessary

Ref: ITC

Product diversification and

upgrade

Approaches to deal with reduced demand Big 5 approaches (5) Con’

Develop Strong networks and take advantage of acquired knowledge, examples are:

Areas support gained from partners You could leverage on……

Business information Key industry cluster groups, suppliers, buyers

Public sector linkage Bureau of foreign trade and overseas offices, Global trade associations, regional trade associations, etc

Global expansion Experienced direct counseling facilitate frameworks and business linkage with multiple partners

Financial funding Financial institutions, Banks

Key Messages

• When crisis is near the end and recovery is on the horizon, it is time for SMEs to re-engineer themselves for future growth

• Review and control your cost in the event of shrinking demand, a crucial step to maintain your profitability and business sustainability

• Diversify your products and markets to 1) catch the wave of rising industries / trends, 2) disperse your eggs into various baskets to mitigate the risk

• Secure your source of fund, both government and banks can be your good partner as long as you know where and how you seek support

• Manage and develop your strategic alliance / partners to leverage resources on all fronts at the minimum possible cost

Tomorrow’s weather forecasts

So long as SMEs and Banks work together, fair weather and clear sky will be back soon !