In 2023, Philippine small and medium enterprises (SMEs) faced several challenges that impacted growth and sustainability: reduced consumer spending, supply chain disruptions, and limited access to financing. Many SMEs continued to struggle with digital transformation and adapting to the new normal of remote work and e-commerce.
In 2024, SMEs will continue to face these challenges – as well as new business trends in technology, governance, and global markets. To capitalize on these, they should enhance their capabilities and explore alternative financing for adaptability and resilience. Navigating these emerging business trends in the Philippines is crucial for their long-term survival and success.
1. AI in Daily Operations
AI's role in automating tasks and providing predictive analytics is leveling the playing field between small businesses and large conglomerates. SMEs that are able to adapt AI can churn out marketing content in a shorter amount of time, create a better customer service experience online through chatbots, and reduce the amount of administrative work requiring human input — driving efficiency and increasing their competitive edge.
AI tools, however, are only as good as the humans using them. To maximize the capabilities of AI tools, SMEs must upskill their workforce. More importantly, organizations must create guardrails that balance the use of AI in the workplace. This will maintain output quality without threatening the job security of workers who may be displaced by AI development.
2. Outsourcing as a Strategic Move
Outsourcing vital roles like human resources and accounting is growing, mostly due to the increase of outsourcing firms that have made it a cost-efficient option. This business trend in the Philippines has allowed SMEs to tap into a pool of specialized skills and expertise without having to train internal staff, provide office space, invest in software or infrastructure, or spend on employee benefits.
SMEs taking advantage of this business trend should look into outsourcing as a way to solve specific problems or achieve specific goals. Does your organization spend too much time on administrative tasks or non-essential functions? Do you experience seasonal fluctuations that require staff flexibility? Do you have the capital to scale operations to another time zone or location, but not the expertise or the staff? Outsourcing can help your organization re-focus on core competency, promote efficiency, and scale your operations as needed.
3. The E-Commerce Challenge
While the Philippines is poised for further e-commerce growth, the return of in-person shopping and the increase of e-commerce stores have made the space more competitive. Consumers are bombarded by options, making it easier to switch allegiance between brands based on factors such as price, convenience, or recommendations. Younger and more tech-savvy consumers are also highly influenced by social media trends and digital marketing strategies that constantly introduce new brands into their consciousness, making them likelier to experiment with different brands rather than remain loyal to one.
To address this business trend in 2024, SMEs must explore niche markets and build meaningful connections with consumers through personalized experiences, superior customer service, and innovative marketing strategies that differentiate themselves from their competition.
4. Rising Business Costs
Increasing operational costs, influenced by supply chain issues and market changes, are impacting industries worldwide. Continued inflation could lead to higher interest rates from Bangko Sentral ng Pilipinas (BSP) in 2024, aimed at reducing consumer spending. This situation is challenging for SMEs, since this will mean shrinking profit margins and costlier business loans.
To counter these rising expenses, SMEs should consider options like a credit line for effective cash flow management. A free-to-open credit line such as First Circle's provides an always-available capital source for unforeseen costs or business opportunities. It also allows SMEs to negotiate better terms with suppliers. Lastly, a credit line is a prudent risk management tool during times of economic uncertainty – while costing you nothing unless you use your credit limit.
5. Opportunities in Exporting
Government support and favorable trade agreements are opening up the country to international markets — a business trend in the Philippines that SMEs should not take lightly. For instance, the Regional Comprehensive Economic Partnership (RCEP) — a trade agreement covering 15 nations including the Philippines — is set to increase trade, investment, economic integration, and competitiveness among Southeast Asian nations.
Exporting as a business trend in the Philippines is set to benefit the following industries the most: agriculture, electronics, business process outsourcing (BPOs), e-commerce, tourism, and financial services. RCEP will reduce tariffs on goods traded among RCEP members, simplify customs procedures, and speed up movement of goods and services between countries. In turn, this can reduce the cost of raw materials for the aforementioned industries, increase investments for local businesses, and enable SMEs to work with new overseas partners and talent.
6. Ethical Brands Gain Favor
Filipino consumers are favoring ethical and sustainable brands, valuing not just environmentally-friendly practices but integrity in marketing. A recent incident with a franchise's insensitive job posting highlights the importance of overall brand sensitivity, including customer service and employee treatment, to meet customer expectations.
This business trend in 2024 is not just local, but global — highlighting the importance of corporate responsibility in brand strategy.
7. Remote and Hybrid Work
Employees are actively seeking flexibility in their work environment, affecting talent acquisition and retention for SMEs. AT&T predicts a global rise of 81% in the adoption of the hybrid work model, with Gen Z amongst its most enthusiastic supporters.
SMEs should communicate with employees to determine the most suitable work models, considering both remote/hybrid and in-office options. For remote or hybrid work, investment in technology and efficient online and in-person processes is essential. For in-office models, focusing on work-life balance, learning opportunities, career growth, and wellness programs is key to attracting and retaining talent.
Business trends bring a mix of challenges and opportunities for Philippine SMEs, and it’s best to shore up capital as early as now to ensure preparedness. By embracing AI, outsourcing strategically, adapting to e-commerce shifts, managing rising costs, exploring exporting, committing to ethical practices, and adapting to remote work preferences, SMEs can navigate the evolving business trends in the Philippines successfully.
Consider a credit line to help you grow and succeed in today's competitive marketplace. First Circle’s Revolving Credit Line is a free-to-open, non-collateral SME loan with the following benefits:
- Up to ₱20 million of re-usable credit
- No collateral, application fees, or maintenance fees
- Interest rates as low as 0.99% per month
- Application processing in 2 business days
- Dedicated account manager
- Minimal documentary requirements
- Pay only for what you use; interest only applies to the amount borrowed
First Circle is a multi-awarded lending company supporting SMEs since 2016. To apply for a Revolving Credit Line, click here.