SMEs adapt or die

Continual change (strong baht, minimum wage hike, AEC in 2016) forces SMEs to change way they do business. Some survive, others don't.

The countries of ASEAN are increasingly doing business with each other and will soon form the Asean Economic Community (AEC).

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SMEs

Adapting to change

Faced with challenges from high wages to the strong baht, Thai SMEs are seeking ways to turn crisis into opportunity, with varying degrees of success
3/06/2013
Pathom Sangwongwanich

Five months after the 300-baht daily minimum wage took effect nationwide, the mileage varies among small and medium-sized enterprises (SMEs), with some taking a big blow and others feeling only a scratch.

Apparently, the key factor setting them apart is their ability to adapt to the wage hike and the strong baht as well as other future challenges, both seen and unforeseen.

Among the lucky ones is T.M.C. Industrial Plc. Chief executive Surachet Kamolmongkolsuk said the wage hike has affected the company's business only slightly, as most of its employees are skilled workers such as engineers, who are already on a higher pay scale.

The company has complied with the higher wage only with housekeepers and has so far managed to withstand the effects, he said.

As for the ongoing baht fluctuations, Mr Surachet said exports account for 9% of sales, so these too have a limited impact on his company.

"We even benefit from the baht appreciation, as we import steel for production and it's cheaper," he said.

As his company produces hydraulic press products for the Japanese auto giant Toyota, Mr Surachet sees a continuous flow of foreign investment into the auto industry in Thailand as a vote of confidence in the adequacy of the industry's skilled labour pool. 

Once the flow of goods and services grows after the Asean Economic Community (AEC) comes into effect in 2016, the company may hire more foreign engineers with the right qualifications and skills, he said. 

As a listed company on the Stock Exchange of Thailand (SET), T.M.C. plans to make use of its status by mobilising capital for future expansion, said Mr Surachet. 

However, not every company enjoys smooth sailing like T.M.C. does.

Somsak Vatinchai, the managing director of Design Alternative, said the wage hike has affected his company substantially, as it has pushed up salary costs by 40%.

The wage hike forced a major rebalance of the company's payroll, as it could not just raise the minimum wage only for labourers.

Employees with vocational certificates, diplomas and bachelor's degrees wanted a raise as well, said Mr Somsak.

Despite higher expenses, the laboratory furniture company has managed to adapt to the wage hike by reducing costs in other areas.

Reducing electricity use is a vital part of the strategy, said Mr Somsak, adding that the company now turns on air conditioners 15 minutes before working hours and has replaced the factory's windows with skylights.

"We also put meters on our machines to assess the peak levels of electricity usage to reduce the production cost," he said.

The cost savings has enabled the company to pay annual bonuses and discard the idea of laying off employees.

"The minimum wage hike has added to the value of human resources, and the company has actually increased staff to 198 from 140," he said.

The company has mitigated the impact of the baht appreciation by negotiating with neighbouring countries, particularly Cambodia, Laos and Myanmar, to pay for its products in the Thai currency.

The firm also fixes the exchange rate for its exports to Bangladesh and India at 29.50 baht to the US dollar to avoid any impact, said Mr Somsak.

He said the company will likely hire foreign skilled workers once the AEC kicks off, as its work involves architecture, engineering and mechanical design.

In the longer term, the company will mobilise funds by listing on the SET by 2015 or 2016, he added.

An SME source said labour-intensive SMEs are having problems coping with the 300-baht wage policy.

The impact of the wage hike has severely added to a decline in sales for them.

Affected companies should cut costs to mitigate the effects and improve productivity by adding value to products, the source said.

Despite the challenges, only a handful of SMEs have relocated their production bases to Cambodia and Vietnam, the source added.

The Industrial Estate Authority of Thailand projected the SME business would grow by 5.1% this year, with prospects of 20-30% expansion next year.

There are 2.7 million SMEs in Thailand. Last year, their GDP was 3.12 trillion baht or 37% of GDP.

A study by the Thailand Development Research Institute (TDRI) showed Thailand needs to upgrade its workforce in terms of both quantity and quality.

Yongyuth Chalamwong, the TDRI's research director for labour development, said technology can alleviate the labour shortage problem, while a proper labour-import procedure can help calculate quotas for an immigrant workforce.

As well, the public and private sectors must cooperate to enhance labour skills. Apart from initiating training programmes, improved social security benefits and tax incentives can increase productivity, he said.

(Source: Bangkok Post, SMEs, Adapting to change, Faced with challenges from high wages to the strong baht, Thai SMEs are seeking ways to turn crisis into opportunity, with varying degrees of success, 3/06/2013, Pathom Sangwongwanich, link) 

 
SMEs Vocabulary

Asean Economic Community (AEC) - the countries of Southeast Asia (Thailand, Vietnam, Burma, Malaysia, Singapore, Indonesia, Brunei, Cambodia, Laos) joining to lower tariffs and make it easier for skillled labour to flow between countries starting in 2016 (See Wikipedia)


adapting to change

wages - the amount of money earned per hour by a worker
high wages

challenges - difficult tasks that require great effort and determination to solve
faced with challenges from high wages to the strong baht

crisis - an urgent, difficult or dangerous situation วิกฤตการณ์  วิกฤต
opportunity - a situation when it is possible to do something that you want to do (See glossary)

ways to turn crisis into opportunity
seeking ways to turn crisis into opportunity

varying
degrees 
varying degrees of success
they are having varying degrees of success in solving the problems 

Faced with challenges from high wages to the strong baht, Thai SMEs are seeking ways to turn crisis into opportunity, with varying degrees of success

mileage - the number of miles that a car gets per litre of gasoline ระยะทางที่รถวิ่ง
medium - (1) a person who says that they can receive messages from people who are dead (2) wearing a middle clothing size, i.e., not large, not small
medium - a method or way of expressing something สื่อ
enterprises - companies

wage - an amount of money that you earn for working, usually according to how many hours or days you work each week or month ค่าจ้าง
minimum wage took
the 300-baht daily minimum wage took effect nationwide

take effect - when a new law or rule starts being used
nationwide - throughout a whole country ทั่วทั้งประเทศ ทั่วประเทศ
took effect nationwide

the mileage varies among small and medium-sized enterprises (SMEs)

blow - an event that damages your chances of success สิ่งที่ทำให้เกิดความเสียหาย  เรื่องที่
scratch (verb) -  เกา, ขูด,ตะกุย, ครูด, เอาเล็บหรือสิ่งที่มีลักษณะคล้ายเล็บครูดผิวหนังเพื่อให้หายคัน
scratch (noun) - the act of scratching
feeling only a scratch

some taking a big blow and others feeling only a scratch

Five months after the 300-baht daily minimum wage took effect nationwide, the mileage varies among small and medium-sized enterprises (SMEs), with some taking a big blow and others feeling only a scratch.

key - important คนสำคัญ
factor - a fact or situation which influences the result of something ปัจจัย
key factor

set apart - make different (from others)
the key factor setting them apart

adapt - change to meet new situation ทำให้เหมาะ, ทำให้เข้ากับ, ปรับ
ability to adapt to the wage hike
the strong baht as well as other future challenges, both seen and unforeseen.

challenge - something that will be difficult to do (completing the task and achieving success will be a test of your ability)
seen challenges - challenges that you can see or predict as happening in the future
unforeseen challenges - challenges that you cannot see or predict as happening in the future
challenges, both seen and unforeseen

Apparently, the key factor setting them apart is their ability to adapt to the wage hike and the strong baht as well as other future challenges, both seen and unforeseen.

scale - size (relative size)
on a higher pay scale

the wage hike has affected the company's business only slightly, as most of its employees are skilled workers such as engineers, who are already on a higher pay scale.

withstand - strong enough not to be destroyed or harmed by a bad event; to be strong enough not to be hurt or damaged by extreme force, extreme conditions, etc. ทนทาน
withstand the effects

The company has complied with the higher wage only with housekeepers and has so far managed to withstand the effects.

ongoing - continuing, currently happening right now ไม่หยุดยั้ง, อย่างต่อเนื่อง
fluctuations - value going up and down
impact - an effect or influence ผลกระทบ
As for the ongoing baht fluctuations, Mr Surachet said exports account for 9% of sales, so these too have a limited impact on his company.

appreciation - when a country's currency becomes more valuable compared to the currencies of other countries (which makes goods exported from the country more expensive)
baht appreciation

benefit - to get help or an advantage from something ผลประโยชน์
benefit from the baht appreciation

import - to buy or bring in products from another country นำเข้า
import cheaper steel for production  

"We even benefit from the baht appreciation, as we import steel for production and it's cheaper," he said.

hydraulic press
his company produces hydraulic press products for the Japanese auto giant Toyota

investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)
foreign investment

foreign investment into the auto industry in Thailand
a continuous flow of foreign investment into the auto industry in Thailand

confidence - trusting and believing in something; feel sure about something ความเชื่อมั่น  ความมั่นใจ
a vote of confidence - when people choose something because they believe in it and are confident about it

skilled - knowing how to do some task or job very well, with special training or experience ซึ่งมีทักษะ
skilled labour

pool - a group of people available for work สมาคม กลุ่มสถาบัน
skilled labour pool

adequacy - good enough to get the job done
he adequacy of the industry's skilled labour pool

a vote of confidence in the adequacy of the industry's skilled labour pool

As his company produces hydraulic press products for the Japanese auto giant Toyota, Mr Surachet sees a continuous flow of foreign investment into the auto industry in Thailand as a vote of confidence in the adequacy of the industry's skilled labour pool. 

flow - moving from one place to another place
services - บริการต่างๆ 
flow of goods and services into and out of the country

comes into effect - starts being used
the Asean Economic Community (AEC) comes into effect in 2016

qualifications - the abilities, qualities, degrees, etc. that you need for a particular job or activity
skills - a type of work or task requiring special training and knowledge ทักษะ ความสามารถเฉพาะทาง

hire more foreign engineers with the right qualifications and skills

Once the flow of goods and services grows after the Asean Economic Community (AEC) comes into effect in 2016, the company may hire more foreign engineers with the right qualifications and skills, he said. 

listed company - a company whose shares are traded on the stock exchange (which makes it easier to raise money in future)
a listed company on the Stock Exchange of Thailand (SET)

capital - money invested in a business
mobilising capital - to be able to attract and get people to invest in the business

expansion - when something increases in size, number or importance การขยายออก
future expansion
mobilising capital for future expansion

status - official or legal position สถานภาพ สถานะ the category or classification of a person, thing, or organization

as a listed company on the Stock Exchange of Thailand (SET), the company plans to make use of its status by mobilising capital for future expansion

smooth sailing - operating without problems
However, not every company enjoys a smooth sailing like T.M.C. does.

salary - a fixed amount of money that you earn each month or year from your job เงินเดือน
salary costs
the wage hike pushed up salary costs

Somsak Vatinchai, the managing director of Design Alternative, said the wage hike has affected his company substantially, as it has pushed up salary costs by 40.

rebalance - to put in balance again (after going out of balance)
payroll - the list of people to be paid for their work

The wage hike forced a major rebalance of the company's payroll, as it could not just raise the minimum wage only for labourers.

vocational - teaching the skills necessary for particular jobs การสอนวิชาชีพ
vocational certificates
diplomas

a raise  - an increase in salary or amount of money a company (employer) pays you for your work
want a raise

Employees with vocational certificates, diplomas and bachelor's degrees wanted a raise as well.

vital - very important; necessary for the success or continued existence of something จำเป็นสำหรับชีวิต; สำคัญมาก
strategy - a plan to achieve long term goals ('strategy' gives the big picture, 'tactics' the details)
vital part of the strategy

Reducing electricity use is a vital part of the strategy, said Mr Somsak, adding that the company now turns on air conditioners 15 minutes before working hours and has replaced the factory's windows with skylights.

peak - highest level; the time when something is at its highest or greatest level ช่วงเวลาที่พบมากที่สุด
peak levels
peak levels of electricity usage

assess - to carefully consider a situation, person, or problem in order to make a judgment ประเมิณสถานการณ์
assess the peak levels of electricity usage

We also put meters on our machines to assess the peak levels of electricity usage to reduce the production cost.

annual - happening once a year ประจำปี
bonuses - money employees get at the end of the year for good performance เงินโบนัส
annual bonuses

The cost savings has enabled the company to pay annual bonuses and discard the idea of laying off employees.

resources - things such as money, workers and equipment that can be used to help achieve something ทรัพยากร
human resources

staff - workers, employees พนักงาน

"The minimum wage hike has added to the value of human resources, and the company has actually increased staff to 198 from 140," he said.

currency - a widely used the money accepted for exchange of goods in an economy เงินตรา (See Wikipedia)

The company has mitigated the impact of the baht appreciation by negotiating with neighbouring countries, particularly Cambodia, Laos and Myanmar, to pay for its products in the Thai currency. 

firm - company บริษัท
exchange rate

The firm also fixes the exchange rate for its exports to Bangladesh and India at 29.50 baht to the US dollar to avoid any impact, said Mr Somsak.

architecture - the activity of designing and constructing buildings, houses, and other structures (See Wikipedia) สถาปัตยกรรม

He said the company will likely hire foreign skilled workers once the AEC kicks off, as its work involves architecture, engineering and mechanical design.

mobilise - 1. gathering together people and things to do something  รวบรวม 2. (of soldiers, police or other groups of people) to prepare to do something such as fight a war เตรียมกำลังพร้อมรบ
funds - money needed or available to spend on something เงินทุน
mobilise funds

listing - (of a company) the process of becoming a member of a the stock market and having shares sold to the public
listing on the SET

In the longer term, the company will mobilise funds by listing on the SET by 2015 or 2016, he added.

source - someone who gives information to the media แหล่งข่าว
an SME source

intensive - using something a lot
labour-intensive
labour-intensive SMEs

policy - a plan of action to guide decisions and achieve outcomes นโยบาย (See Wikipedia)
300-baht wage policy

coping with - dealing and solving a problem

An SME source said labour-intensive SMEs are having problems coping with the 300-baht wage policy.

Affected companies should cut costs to mitigate the effects and improve productivity by adding value to products, the source said.

mitigate - to make something less harmful or serious บรรเทา to make better ทำให้ดีขึ้น
mitigate the negative effects

productivity - producing more with the same amount of inputs (labour, energy, etc) การผลิตสินค้า
improve productivity

handful - a small number (could fit in your hand) จำนวนน้อยมาก
only a handful of SMEs

relocated - moved to a new place
relocated their production bases to Cambodia

Despite the challenges, only a handful of SMEs have relocated their production bases to Cambodia and Vietnam, the source added.

projected - expected, forecast;  what people believe it will in the future
prospects - the possibility that things will happen, especially something good ความเป็นไปได้

The Industrial Estate Authority of Thailand projected the SME business would grow by 5.1% this year, with prospects of 20-30% expansion next year.


A study by the Thailand Development Research Institute (TDRI) showed Thailand needs to upgrade its workforce in terms of both quantity and quality

upgrade - improve; make new, modern, and up-to-date
workforce - all the people in an area or country available for work, all the people who work for a company แรงงาน



Yongyuth Chalamwong, the TDRI's research director for labour development, said technology can alleviate the labour shortage problem, while a proper labour-import procedure can help calculate quotas for an immigrant workforce.

development - the gradual growth and formation of something
labour development

shortage - when there is not enough of something การขาดแคลน
labour shortage

alleviate - make better, make a bad situation better
alleviate the labour shortage problem

procedure - a way of doing something ขั้นตอนการดำเนินการ
the proper procedure - the right way to do task
a proper labour-import procedure

immigrant - a person who has come to a different country in order to live there permanently ผู้อพยพ, คนย้ายถิ่น
immigrant workforce

calculate - to discover a number or amount using mathematics คำนวน
quotas - the limited amount (that a participant is allowed)
calculate quotas

can help calculate quotas for an immigrant workforce

enhance - to improve the quality, amount or strength of something ปรับปรุง, ทำให้ดีขึ้น
enhance labour skills.

cooperate - to work together with other people to achieve a result that is good for everyone involved การร่วมมือกันระหว่าง
cooperate to enhance labour skills

As well, the public and private sectors must cooperate to enhance labour skills.

training - to teach people how to do an activity or job การฝึกฝน
initiating training programmes

initiate - start or begin something
initiating training programmes

security - the need to provide safety from attack, harm or damage ความปลอดภัย
social security benefits

increase productivity

benefits - money, services, or goods you receive from a government or company programme เงินช่วยเหลือ

incentives - a reward to encourage people to do something; rewards for behaving in a certain manner สิ่งกระตุ้น
tax incentives

Apart from initiating training programmes, improved social security benefits and tax incentives can increase productivity, he said.