Southeast Asian small and medium enterprises (SMEs) that have successfully tapped into the global value chain say the keys to success include maintaining product standards and quality, educating customers and offering full-service solutions.
Being unethical, such as creating your own certification to fool customers, and being similar to other competitors in terms of products and services will get you nowhere, they say.
For Harnn, the Thai producer of natural body-care, skin-care and home spa products, building consumer awareness of its unique natural products that exist only in Asia has been crucial.
"There is a tremendous potential for natural skin-care products because the current global market prefers natural products and medicines more than chemicals, but what we are able to offer is so unique that often we have to start our marketing by educating our consumers who do not live in Asia," founder and managing director Vudhichai Harnphanich said at a panel discussion on Asean SMEs during a Bangkok Post regional forum earlier this month.
Harnn founder Vudhichai Harnphanich has built a business in 14 countries with a strong emphasis on consumer lifestyle needs and absolute insistence on organic purity. harnn
Established in 1999, Harnn now has a presence in 14 countries. It operates a spa in Da Nang, Vietnam and retail shops in China, Indonesia, Japan, Mexico, South Africa and Switzerland. It boasts the largest spa collection in Asia but does not have a single flagship product.
"There is no 'hero' product that we sell because we offer a whole new approach to customers' lifestyles, which could be about skin-care problems but we also offer tea, we offer aromatherapy and we want to sell this as one lifestyle package for our global consumers," said Mr Vudhichai.
Standards are also important, as guaranteeing the authenticity of products builds trust among consumers, he added.
"There are a lot of brands in the market that are offering the same thing but there are only a few that are authentically natural. Some claim their products are organic but they are not certified and some even create their own certification which is not internationally accepted.
"We take organic very seriously because we would only launch an organic product when it is certified to ensure that it is accepted by international standards."
For those in trading and retail, an industry veteran says it's time to stop thinking as middlemen and to be more engaged with customers. They should aspire to be one-stop providers of full services instead of mere distributors, says Kich Aungvitulsatit, managing director of Excellent United International (EUI).
"What I wanted to do 30 years ago was to provide a full trading service for my customers, going right to the retailers and wholesalers in other countries to show them what kind of products Thailand has and helping bring the products over, so everyone is happy to buy from us," he said.
EUI started out in 1988 as a Thai representative buying office for an American company that now exports seasonal fresh fruits and vegetables all over the world. In 1992 it became the exclusive agent for Red Bull energy drinks and Three Lady Cooks canned fish in tomato sauce in Cambodia, Myanmar and Vietnam. By 1995 it had established itself as a well-known exporter of fresh Thai fruits and vegetables along with fast-moving consumer goods such as Twin Lotus herbal toothpaste and personal-care products.
At the same time, EUI started to penetrate the Thai market with imported goods by applying the same strategy as when it introduced Thai products abroad. Local distribution divisions with dedicated marketing teams and sales staff introduced products directly to retailers, an approach that continues to work well in the region.
"We established our company in 1988 and went into Myanmar in 1990, then to Cambodia and Vietnam," said Mr Kich. "With more than 150 staff in the country, we are now a distribution channel capable of selling to all districts in Myanmar, with two branches in Mandalay and Myawaddy, and we have done all of this by being the first at the doorsteps of our customers."
EUI is the exclusive distributor of 14 popular Thai and Japanese consumer product brands in Myanmar including Sponsor energy drinks, Singha soda water, and the Japanese mosquito repellent ARS. It aims to have 30 sub-distributors and at least 300 supermarkets and convenience stores within its network in Myanmar by the end of this year.
"You can [expand beyond the region] if you want to do it. The key is to have a full-service option for your customers, while product demonstration is one of the best methods to create brand awareness, especially in Myanmar," said Mr Kich, who recently sold his company in Vietnam to a company owned by billionaire Charoen Sirivadhanabhakdi, the founder of Thai Beverage Plc.
In the automotive industry, which employs some 800,000 people across Asean, SMEs that hope to excel as suppliers need to focus on research and development, says Yeap Swee Chuan, president and CEO of Aapico Hitech. Importantly, they need to absorb expertise from top producing countries, such as Japan and the United States, by actually going there.
Established in 1996, Aapico designs, manufactures and distributes assembly jigs, stamping dies, and original equipment manufacturer (OEM) automotive parts to leading assemblers in Thailand including Toyota and Isuzu. The Aapico Group comprises 37 subsidiary and associated companies including 27 in Thailand and 10 abroad, with two factories located in Ayutthaya and Rayong provinces.
"[Automotive businesses in Asean] may to have to set up R&D in Detroit or Japan because if you employ R&D engineers from Japan [locally], you will never get the best R&D engineers. You will probably get the second-grade ones, so the only way is to acquire or invest overseas," he told the forum.
For businesses that do not do their own manufacturing, collaboration is a sound approach. Harnn, for example, seeks out OEM suppliers that already have strong R&D teams in each product segment with support from partners all over the world.
"We basically get to pick the best in the world to work with and that is why our product quality is consistently excellent," Mr Vudhichai said.
Mr Vudhichai, an architect by training, established Harnn with his own savings of 50,000 baht. In the early stages he exported products to neighbouring countries but requested full payment before shipping.
"We grew quite fast but we basically financed ourselves from the money that we made, When we do exports we work with local investors to invest in setting up shops along with retail and marketing teams, which means that we needed no help from financial institutions to expand overseas," he said.
Government support is imperative for the development of SMEs, said Aapico's Mr Yeap, noting that the automotive industry has always had strong backing despite frequent political changes. Policy consistency and incentives have provided a good backbone for the country to become one of the world's biggest pickup truck and eco-car manufacturers.
Mr Vudhichai, meanwhile, said support from the Thai government for the wellness industry was still minimal and not effective enough to create a market. That is why "we have to set it up ourselves". He would like to see government representatives join major wellness conventions to learn about the challenges that the industry faces.
For Mr Kich of EUI, his own direct approach has served him well so far. "Frankly speaking, I never wait for support from the government."
