Bangkok--4 Mar--PwC Thailand
PwC’s Global NextGen Survey 2019 - Thailand Report reveals that digital transformation is the top challenge facing Thai family businesses over the long term, even as a looming recession and the Covid-19 outbreak provide more immediate worries.
Small-sized family businesses face a high risk of collapse if they fail to balance costs and reduce risks that could lead to business failure, PwC Thailand warns.
To survive and thrive in the long term, the report recommends that the next generation of leaders adopt digital transformation and the upskilling of employees.
Niphan Srisukhumbowornchai, Clients and Markets Leader, Entrepreneurial and Private Business Leader, and Tax Partner at PwC Thailand, said that the downturn in Thailand’s economy is generating concern in many sectors. He predicted that it’s possible that both the Thai and global economies will continue to face an economic slowdown for a while longer due to several negative factors.
For Thailand, severe drought conditions, a delayed fiscal budget and the Covid-19 outbreak have impacted supply chains and production. Domestic consumption is plagued with shrinking purchasing power caused by dwindling income in the logistics and tourism sectors.
Specifically, farmer incomes are projected to decrease as a result of the drought, while factory workers have also been affected by manufacturing shutdowns – both temporary and permanent. These factors are putting pressure on economic growth, he said.
Niphan believed that the economic downturn will impact family business, small and medium-sized enterprises (SMEs), and small-scale companies with low cash flows.
If the economic situation doesn’t improve in the next few months, these businesses are in danger of collapse. During these tough times, small-and-medium sized family businesses need to deal with the situation by reducing unnecessary costs.
“Thailand’s economy this year has been hit hard by the severe drought and ongoing Covid-19 outbreak, leading to an overall decrease in consumer spending. There is concern that a Covid-19 pandemic will trigger another global financial crisis. We need to keep an eye on this situation; how long the surge in Covid-19 infections will continue and when Covid-19 will stop spreading. If the outbreak continues to widen, we will see some small companies close down.
“On the other hand, this is an acquisition opportunity for family businesses with high cash-rich that are looking for the right partner at a good price because of low interest rates,” Niphan said.
Digital disruption seen as the top challenge for family firms Niphan said the survey found that NextGens perceive digital disruption to be the top challenge for family business.
The first Thailand Report is part of PwC’s Global NextGen Survey 2019, which assessed the views of more than 950 next-generation (NextGen) family business leaders worldwide, including 31 respondents from Thailand.
Digitalisation is a strategic priority for NextGens to transform their family business to deal with technological changes and gain a competitive advantage in business.
According to the survey, 83% of NextGens said the top priority is to make a business strategy fit for the digital age. Other top priorities included attracting and retaining talent (62%) and upskilling staff (62%).
Moreover, a significant 79% of Thai NextGens believe digital transformation is an area where they can personally add the most value in realising family business goals.
Digitalisation is not new, but ensuring a smooth and successful transformation is a struggle for many Thai family businesses.
“The findings show that the NextGens really want to digitally transform their family businesses because they’ve grown up with emerging technologies and are familiar with innovations,” Niphan said.
“However, during the economic downturn, family businesses have to manage business priorities and balance business growth and challenges to get through all the difficulties smoothly.”
Upskilling leaders and employees today at no cost The report shows that 83% of Thai NextGens believe they can add significant value to the family business in skill development. The percentage is higher than their peers in the Asia Pacific (62%) and around the world (61%).
The economic slowdown may not help facilitate digital transformation and upskilling, but Niphan said that doing nothing will cause even more pain.
Every organisation, including family businesses, eventually must pay close attention to digital transformation and upskilling since they will be beneficial to the firm in the long run. The survey results found that companies that adopt new technologies into their operations can manage costs in the current situation better than those that have not. In addition, new technologies help enhance production efficiency.
“Upskilling is something that can’t wait,” Niphan said.
“There are so many ways NextGens and staff can upskill themselves, including learning from websites, applications, or taking courses that provide knowledge about necessary skills in the future. Currently, some universities provide free digital online courses. NextGens and business leaders should realise that even though the economy is not good, they have to develop themselves and their organisations. Upskilling is everyone’s duty and responsibility to survive and thrive in the digital world,” he concluded.