Business sentiment improves among large firms, but not SMEs


SMALL and medium enterprises (SMEs) are not as enthusiastic about next year’s outlook compared to larger firms as they expect operating environment, company prospects, growth and future revenue to decline in 2020.

A survey jointly conducted by Monash University Malaysia and CPA Australia shows that while the outlook for the business environment among big corporates remains favourable, sentiments among small businesses had declined.

The outcome of the findings indicated that 69% of the large firms believed that business environment in the next 12 months will be better, while 16% of the respondents expected a worse year ahead and 15% believed things will remain stagnant.

Meanwhile, business sentiment among SMEs has declined from 2018 to this year with 67% believed the business environment will improve compared to 76% last year.

Most small business owners expect performances to decline over the next 12 months as global demands go down amid economic uncertainties.

Monash Malaysia Research and Development CEO Prof Mahendhiran Nair said the sentiment decline was not surprising due to the deteriorating global economic environment as a result of the trade war and Brexit uncertainties.

“This year, the high cost of doing business remains as the top challenge, besides the weakening of the ringgit and increasing competition due to the increase of usage in sophisticated technology by new entrants into the market, which undertake horizontal and vertical integrations of the supply chain,” he said in a media briefing yesterday.

Similarly, the survey showed that medium-sized firms saw the economic conditions arising from global uncertainties impacting their supply chains and business sentiment in 2019.

“This year, only 69% of medium firms believe that the business environment will be better, in contrast to the 74% recorded last year,” Mahendhiran noted.

As for large corporations, 62% of them believe that their future revenue will be higher.

Mahendhiran added that the more upbeat business sentiment among large firms can be attributed to the fact that many of them are able to mitigate the uncertain economic conditions and intensive competition by adopting advanced technologies.

“Large firms are known to be able to capitalise from increasing foreign direct investments into Malaysia and the region due to the shift in investment amid trade disputes between the US and China, as well as political uncertainties in Europe,” he added.

The top three challenges faced by large firms this year, according to the survey, include the weakening ringgit, global economic uncertainty and increasing competition.

Overall results of the survey showed that about 74% of business leaders are cautiously proactive of their company’s prospects for the next 12 months amid external concerns.

The survey also showed that traditional businesses are cautious and concerned over the continuing emergence of disruptive technologies that threaten their position in the market.

Mahendhiran highlighted that in view of this, many business leaders have become aware of the need to be cautiously proactive in addressing emerging challenges head-on and seek new opportunities.

“Approximately 69% of the respondents believed that their business conditions will improve if they put in place strategies to enhance their innovative capabilities using the best talent, leadership styles, technology and business models.

“Consequently, we observed many leaders adopting business strategies to improve operational efficiency, quality of the products and services, expand market reach and improve branding and market positioning,” he added.