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          An Analysis of Key Success Factors of SMEs:
           A Comparative Study of Singapore/Malaysia
                   and Australia/New Zealand

                            B C GHOSH
                       Associate Professor
                 Nanyang Technological University
                School of Accountancy and Business
                  Nanyang Avenue, SINGAPORE 2263
                       Phone: +65 791 1744
                        Fax: +65 791 3697

                           Wayne KWAN
             Singapore Institute of Labour Studies
        (Formerly of Edith Cowan University, Australia)


The research examines and compares the key success factors,
challenges, and issues facing SMEs in Singapore, Malaysia and
Australia. The Singapore/Malaysia study was based on 152
responses from small and medium sized enterprises (SMEs), while
the Australia/New Zealand study was based on 164 responses. A
mail survey was carried out to collect the data. The main
motivation behind this study was that there have been few studies
directly of this nature, fewer still with a cross-country

In general, there were fairly large similarities between the two
country groups. With respect to reasons for starting their
businesses, both Australia/New Zealand and Singapore/Malaysia
entrepreneurs rated the top four factors as (1) liked the
challenge, (2) personal need for growth, (3) greater personal
freedom, and (4) opportunity to use knowledge and experience
(From here onwards Australian will refer to Australia/New Zealand
and Singapore will refer Singapore/Malaysia groups). Problems
faced by emergent SMEs centred around financing, competition,
availability of skilled workers, and marketing. Marketing was
the top most concern for Australian SMEs while the Singaporean
SMEs ranked shortage of capital as the most critical problem.
Both sample reported that factors contributing to successful SMEs
were closely tied to having a good customer relationship,
effective management, and marketing. Constraints to success were
found mainly in the high cost of doing business and competition.
The Singapore sample ranked shortage of capital as the second
most important factor while the Australian sample rated it last.
General management was regarded by both sample as the most
important experience in helping to start their businesses. For
both sample personal savings was their most important source of

                                  Page 1



A small and medium-sized enterprise has been variously defined by
different authors. In a paper published by the World Bank, 60
different definitions of SMEs were found to have been used in 75
countries. In Singapore, the Association of Small and Medium
Enterprises (ASME) of Singapore generally defines an SME as
having fixed production assets not exceeding S$8 million,
employees not exceeding 100 and an annual turnover not exceeding
S$15 million. In Australia, a business is considered a SME if it
employs less than 20 people and in the case of manufacturing,
less than 100 staff. For the purpose of this study, these two
definitions will be used respectively for Singapore/Malaysia and
Australia/New Zealand sample, although admittedly differences
exist between Singapore and Malaysia and between Australia and
New Zealand. The currency differences between Singapore and
Malaysia and those between Australia and New Zealand have also
been ignored.

A comparison of key success factors and challenges of Australian
and Singapore small and medium-sized enterprises (SMEs) is
significant in that it takes place in a situation in which the
two nation groups having contrasting economic, cultural and
businesses aspirations. On the one hand, the weakness of
Australia's industrial competitiveness in world markets is well
chronicled and an established subject of highest national
concern. This concern is heightened by evidence that, despite
some encouraging absolute performance improvements in recent
times, the rate of growth is still lower than that of many other
countries in the Asia-Pacific region (Kwan and Yau, 1992). The
reasons for this weakness have been debated inconclusively with
the problem being variously attributed to macro-economic policy
shifts, adversarial politics, labour market rigidity, 'short-
terism' in financing and a non-export culture (Miller and Leptos,
1987). Once again, Australia refers Australia/New Zealand and
Singapore refers to Singapore/Malaysia samples respectively in
the study.

Australia's situation, therefore, seems to be one of catching up
and making some progress to establishing a competitive advantage.
The Australian government is recognizing the importance for
Australian enterprises to start viewing seriously the Asia-
Pacific as an area for business expansion.

Singapore (and Malaysia), on the other hand, as Asian tigers,
have experienced relatively robust growth. The primary concern
of the government here is for local enterprises not to become
complacent about the recent good times, but to become proactive

                                  Page 2

to ensure that growth will continue.

Much of Singapore's growth has been attributed to the presence of
multinational companies (MNCs). There is a recognition that
while MNC's will continue to play an important role in the
development of Singapore, that by itself is no longer sufficient
- local smaller enterprises must develop themselves at home and
abroad to propel the country to new heights of economic sources
(Hooi and Wan, 1993).

In both Australia and Singapore, SMEs are fast gaining
recognition as the economic backbone of a nation. In Australia,
SMEs account for one-third of the nation's production and
provides employment for more than two and half million people,
about half the private sector workforce. In Singapore, SMEs
constitute 90 per cent for the total number of establishments,
providing 44 per cent of employment and contributed 24 per cent
of value-added in the economy.

The main objective of this research is to examine and compare key
success factors, issues and challenges facing SMEs in Singapore
and Australia. The research will also compare the profile of
lead entrepreneurs of both country-groups.

                      LITERATURE REVIEW

A wealth of literature over the past five years or so has focused
on what makes an entrepreneur or enterprise successful. This
body of research, in our view, can be categorized into two broad
approaches - descriptive and prescriptive. The descriptive
approach seeks to describe the characteristics or attributes that
a successful entrepreneur will presumably possess. The
prescriptive approach seeks to prescribe the factors that
contribute to a successful enterprise. Both can be either a
conceptual model or an empirical model, though it is conceivable
that prescriptive models will use empirical studies as supporting
evidence more frequently than the descriptive ones.

The Descriptive Approach

The descriptive approach seeks to describe the characteristics or
attributes that a successful entrepreneur should possess. An
entrepreneur has been variously defined in the literature: as an
innovator (Schumpeter, 1971); as a risk-taker (Yee, 1991); and as
an opportunity-maximiser (Drucker, 1985). According to Herbert
(1989), an entrepreneur bought goods or services at a certain
price and sold at an uncertain price to make a profit and,
therefore, was at the centre of transactions that created wealth
in a society or market economy. Shapero (1975) viewed an
entrepreneur as a displaced individual which could have been

                                  Page 3

caused by a positive idea or a negative reason such as loss of
job. To Holt (1992), an entrepreneur was an incubator of novel
ideas who was distinguished from the run-of-mill business person:
such an "idea" person added value to the economic activity in
much more meangingly ways. Silver (1983) described an
entrepreneur as a person with a mission and a vision, somewhat
similar to Holt's way of looking at an entrepreneur. Gibb et al
(1982) viewed entrepreneurship as a social process; Kets de Vries
(1977) maintained that entrepreneurship was a product of
childhood experiences; Brockhaus (1980) viewed an entrepreneur as
one who had a high need for achievement, while Rotter (1966)
associated an entrepreneur as one with an internal locus of

For an entrepreneur to be successful, Graham (1992) believed that
he or she must possess five basic skills such as the ability to
develop original ideas, the ability to persuade others, and so
on. Danco (1992) felt that there was more than just talent in
success, that genius was about 90 per cent sweat applied to 50
per cent dumb-luck or accident and that a successful business
founder must have an absolute singleness of purpose to survive
the early days. In a research done by Duchesneau et al (1990),
lead entrepreneurs in successful firms were shown more likely to
have been raised by entrepreneurial parents, have had broader
business and start-up experiences, and believed that they had
less control of their success in business. According to
Plotkin (1990), successful small-business owners possessed an
intelligent mind that is creative and inquisitive, kept abreast
of technological developments and were able to put them to
productive use; they also possessed abundant energy, drive and
assertive ability.

A report prepared in 1989 showed that five personality
characteristics were found to be necessary for an individual to
succeed in a self-owned business which were drive, thinking
ability, human relations ability, communication ability and
technical knowledge. In a profile on Richard Friedkin, CEO of
Monarch Industries, by Palmer (1988) revealed that his success
was attributed to his financial expertise, intuitive nature and
courage to take chances. The Profit Building Strategies for
Business Owners (1988) reported that the most effective
entrepreneurs were those who could think creatively, that is,
those who had an open mind to new ideas.

Silver (1988) presented a typical entrepreneur to be a male
between the age of 27 and 34, who was dissatisfied with his
career path, but not his field, and who decided to make his mark
on the world by developing a product or service to make life
easier for people. According to him, a successful entrepreneur
needed the following traits: "heart", patience, drive, courage,

                                  Page 4

the ability to co-operate and an understanding of leverage. Jim
Gagan, CEO and founder of United Consumers Club (1988) believed
that honesty and integrity were crucial in building a successful
business. Cooper et al (1989) found that entrepreneurs starting
larger firms tended to have more education, more management
experience and objectives that were more managerial in nature.
Niehouse (1986) identified 10 characteristics common to
successful entrepreneurs among which were a personal vision, an
ability to organize resources, creativity and intuition, a belief
in ideas as a source of motivation, action-orientation, risk-
taking, impatience, restlessness, independence and individualism.
Sexton (1985) described an entrepreneur as one who was tolerant
of ambiguity, preferred autonomy, was aloof, enjoyed risk-taking,
resisted conformity and adapted readily to change. Nelson (1986)
believed that willingness to take risks was a key to becoming a
successful entrepreneur. Other necessary elements included luck,
timing, capital and persistent hard work.

The Prescriptive Approach

This approach seeks to prescribe the factors that contribute to
the success of an enterprise. According to Duncan (1991), a key
ingredient for business success is the skills of an entrepreneur
who can identify a market niche and develop a venture for that
niche. This is supported by another, similar study by DeHayes et
al (1990) who found that the most frequent reason for success
among businesses was their ability to identify and focus onto one
or a few market niches. Other reasons for success included the
ability of lead entrepreneurs who knew the 'craft' of the
industry and the ability of companies to develop and sustain a
technology advantage in their industry. A study by Steiner et al
(1988) also suggested that developing a competitive advantage
through specialization in products, markets or customers was a
key factor in the success of small manufacturing firms. Prescott
(1986) reported that developing a specialty or a niche could be
vitally important for small business.

In a study amongst Jamaican entrepreneurs, Huck et al (1991)
found technical knowledge and customer relations to be the
competencies most important for the success of small businesses.

In an article published by the Economist (1991), Wilkin and Sons,
which produces the famous Tiptree jams, was reported to have been
successful by spotting a trend in the market well before its
competitors; the company was also obsessed with quality and was
very close to its customers. McCormack (1989) agreed that one of
the most important factors to a successful business was a
commitment to quality, which to him was the only absolute
competitive edge. Profit-Building Strategies for Business Owners
(1989)(1990)(1991) identified that one of the factors in building

                                  Page 5

a successful business was the ability to deal effectively with
customer complaints. The success and failure of a small
enterprise also depended on the owner's personal qualities and
the way the business was managed. A successful business owner
must know how to get and manage the business, be dollar-conscious,
follow a good credit policy, have flexibility and have
financial intelligence. A profile on Joseph Maurelli, President
and CEO of Techmatics Inc. (1988), revealed that he attributed
his successful business to a strong company foundation which was
essential to achieving future company's objectives.

Foley (1987) reported in an unpublished PhD thesis three factors
of particular importance which were found to be consistently
important for successful business. These were a written business
plan, the development of new products and having a strong sales
and market team. Pollock (1989) and Barkham (1989) (also
unpublished PhD thesis) identified factors such as skill,
attitudes and the gathering of market information as factors
contributing to -the success of an enterprise. Pollock, in
particular, found that women proprietors placed a greater value
on the quality of life and hence preferred long-term stability to
repaid business growth. Moussavi (1988) in his unpublished PhD
thesis stated that experience on the part of the owner/manager
factor contributing to the survival of businesses. Also, of
importance is the ability of the entrepreneur to communicate

Evans (1986) emphasized that a firm's success in competing in a
hostile environment was attributable to top management's
involvement in all phases of the operation and upgrading of human
resources. Campbell (1991) identified 12 keys for a successful
business, amongst which were a clear mission statement and
corporate value system, a customer-oriented policy, a competitive
strategy and personal commitment from top management. Gaskill et
al (1989) identified six keys to a successful business which
included people power, a business plan, a study of the
competition, measurement of performance, not becoming too
comfortable with progress, and efficient financial reporting
systems. Beam et al (1989) reported that to be truly successful,
small-business owners must have a missionary zeal about their
product or service, be willing to be personally involved in it,
be willing to stick with the business, be able to define the
market clearly and pay attention to details. Mraz (1989) stated
that thorough planning was vital to starting a successful
business; finding customers, vendors, employees and financial
resources should be thought out in advance. Entrepreneurs should
link up with venture capitalists who could fund new businesses.
Ibrahim et al (1986) indicated that personality attributes,
managerial skills, interpersonal skills and environmental
characteristics were perceived to be success factors in small

                                  Page 6

businesses. Blanchard (1991) stated that to be successful, the
business owner needed to follow the four principles, namely
ensure that sales exceed expenses, collect outstanding bills,
take care of customers and take care of employees. According to
Schilit (1986), some guidelines to a successful business venture
were amongst other things, to develop a common value system,
ensure adequate capitalization (by using debt and equity
financing), develop a formal business plan, monitor the business
environment continually, retain a marketing orientation,
encourage entrepreneurial thinking throughout the company and not
to be afraid to delegate authority.

Haswell et al (1989) attributed the main causes of business
failures to management incompetence and inexperience. Wood
(1989) also confirmed that lack of experience was one of the
causes of business failures. Brazell (1991) stated that lack of
management skills, competence and experience were the greatest
contributing factors to failure. Lauzen (1985) prescribed five
steps that the owner had to take to ensure success of the
business, amongst which were to develop managerial skills and
possess determination and hard work. To Hornaday et al (1986),
managers of successful small businesses did set goals and achieve
them. According to Flahvin (1985), the reasons why businesses
failed were a lack of capital, lack of financial control and
accounting information, lack of management skills and experience,
and inability to respond and adapt to changes. Smallbone (1990)
concluded that a lack of revenue was the main reason for business
failures. On the whole the dividing line between describing an
entrepreneur and prescribing him is very thin.

Problems Encountered by SMEs

Ferguson (1987) reported in a Canadian study that not-so-
successful businesses often ignored early warning signs of
problems that eventually led to financial ruin. He believed that
troubling scenarios could be avoided by monitoring the potential
problem areas which could be captured in financial reports such
as monthly financial statements, inventory turn-around time,
backorders, etc. Howard (1989) reported that more CEOs perceived
problems facing their businesses to be increasing. The biggest
concerns were difficulty in finding qualified, motivated
employees, anxiety about a cash-flow squeeze, keeping cost under
control, too much government regulation and increased
competition. In his research study in assessing the most
important problem in running a business, Liebtag (1986) found
that 41 per cent of the respondents mentioned difficulties with
employees or partners. Recurring problems were noted with
recruiting and motivating employees and many owners ran their
businesses without a strategic plan. Steck (1985) found that
common errors start-up businesses are likely to make represent

                                  Page 7

failures to take advantage of marketplace success. The most
common mistake was finding success and not pursuing it. The
failure to put a competent management team in place in time was
also perhaps the most critical and avoidable of the common
entrepreneurial problems. According to Lauzen (1985),
undercapitalization was a common problem faced by small
businesses. One way to overcome this was by establishing a good
relationship with a local banker.


A survey questionnaire was developed based on our literature
survey, generally speaking. It was pilot tested both in
Singapore and Australia. A mail survey was used to collect the
data. In Singapore, questionnaires were mailed to 600 SMEs who
are members of the Association of Small and Medium Sized
Enterprises and three other business associations in
Singapore/Malaysia. 152 (25.3 percent) usable replies were
obtained. In Australia and New Zealand, the Key Business
Directory was used as a sampling frame to identify all SMEs,
defined as one that has less than 100 employees. A total of 950
questionnaires were mailed to SMEs across all states and New
Zealand, representing a wide cross-section of industries. 164
(17.2 per cent) usable responses were obtained from the mailout.
Z-test was used to test whether there is any significant
statistical difference between Singapore and Australia SMEs with
respect to the factors under study.

Since the two country-groups represent about the same population
size (approximately 20 million) and as both the groups are fairly
well developed now industrially, a general hypothesis of this
research is that their SME characteristics will be generally
similar too, with perhaps only minor variations of a local
nature. Another, perhaps related hypothesis, is that there
probably will be greater similarity in success factors than in
the problem areas which may be more local in nature.

Profile of Samples

Table 1 presents the profile of the Australia and Singapore
sample. Instead of showing every category of each variable, only
major categories (in percentage terms) are highlighted.

Personal Characteristics

In both samples, the majority of the respondents comprises of
male - 85 per cent in Singapore and 95 percent in Australia. It
is worth noting that there are more female entrepreneurs in
Singapore than in Australia. Most of the respondents are
married, 81 percent in Singapore and 93 percent in Australia.

                                   Page 8

With respect to education, 38 percent of the Singapore sample has
some form of tertiary education, while the Australian sample, has
40 percent. The majority of Singapore entrepreneurs, 88 percent,
are in the 30-49 age group. The Australian sample has 64 percent
aged 30-49 but it has 36 percent aged 50 and above, suggesting
that on average Australian entrepreneurs are older than those in
Singapore. This is expected, Singapore/Malaysia being NIEs
(newly industrialised economies).

79 percent of the Singapore sample held jobs before starting
their business whereas the percentage for the Australian sample
was higher at 95 percent. In the Singapore sample the largest
group (39 percent) had their previous jobs in the manufacturing
industry. The second largest group of 17 percent was from
banking and finance. In the Australian sample, the largest
group, 20 percent, also came from manufacturing. The rest were
mainly from construction (19 percent), transport/communication/
utilities (12 percent), and mining (10 percent).

The fact that Australian respondents were generally older and
more of them held jobs prior to coming to their own business
probably indicates the mature state of Australia/New Zealand
economies, and perhaps also that more of them came to own their
own businesses for different reasons. These variations are of a
local nature, it seems.


                               Singapore/      Australia/
                                Malaysia      New Zealand
                                (n 152)         (n 164)

Personal Characteristics

     Male                         85.0             95.0
     Female                       15.0              5.0

Marital Status
     Married                      81.0             93.0
     Others                       19.0              7.0

      30-49                       88.0             64.0
      Others                      12.0             36.0

     Less than Tertiary           58.0             60.0
     Tertiary                     38.0             40.0

                                  Page 9

Business Characteristics
     Actual Owner                    89.0         75.0
     Started Business                76.0         50.0
     First Business Attempt          88.0         64.0
     Held Job Before Business        79.0         95.0

Previous Job
     Manufacturing                   39.0         20.0
     Banking & Finance               14.0          6.0
     Others                          47.0         74.0

Nature of Business
     Manufacturing                   25.0         27.0
     Business Services               30.0         17.0
     Commerce                        34.0         18.0
     Others                          11.0         38.0

More than 5 Years In Operation       84.0         96.0

Business Characteristics

The Singapore sample has a higher proportion of actual owners of
their businesses, 89 percent, compared to the Australian sample
which has only 75 percent. 76 percent of the Singapore sample
started the businesses while only 50 percent of the Australian
sample did so. 88 percent of the Singaporean entrepreneurs
indicated that this was their first attempt in starting their
businesses while only 64 percent of Australian entrepreneur did
so. This may suggest that Australian entrepreneurs encountered
more business dissolutions or had experience with greater number
of businesses in the past. But it could also mean that the
Singapore sample contains some elements of respondent bias.

SMEs in the Singapore sample were mainly from commerce (34
percent) and financial/business services (32 percent), and
manufacturing (25 percent). The Australian sample consist mainly
of manufacturing (27 percent), services (17 percent) and
construction (13 percent). 84 percent of the Singapore businesses
were in operation for more than 5 years, while that for the
Australian sample was 96 percent. This perhaps reflects the
longer history of economic developments in Australia relative to

Main Reasons for Starting Business

Table 2 presents the Singapore and Australian entrepreneurs' main
reasons for starting their businesses. There was great
congruence between Australian and Singapore SMEs in the pattern
of weightage given to the reasons for starting their businesses.
Challenge, personal need for growth, greater personal freedom,

                                 Page 10

and opportunity to use own knowledge and experience ranked high
by entrepreneurs from both countries as important reasons for
starting their businesses. Of the nine reasons examined, only
personal need for growth was significantly more important
(p<0.05) for Singapore entrepreneurs (mean = 1.94) than their
Australian counterpart (mean = 2.49). Two others (challenge,
opportunity to use one's own knowledge) were significantly
different at 10% level of significance. Rank correlation is also
high. Family tradition, being a cultural factor, did not feature
that strongly.


                            Singapore/Malaysia         Australia/NZ
                               (n = 152)                  (n = 164)

                     (1) + (2) + (3) = 100%           (1) + (2) + (3) = 10
                     G.I.    M.L.   L.I. Mean Rank    G.I.   M.L.   L.I. Mea
n Rank
                      %       %      %                %      %      %
Personal need for
  growth*            80.0    5.8    14.2   1.94   1   72.8   20.4   6.8    2.
49 3
Liked challenge*     78.2    1.8    20.2   2.06   2   68.4   21.8   9.8    2.
23 1
Greater personal
  freedom            60.1   11.2    28.7   2.49   3   52.6   34.7   12.7   2.
46 2
Opportunity to use
  own knowledge
  and experience*    48.9   10.4    40.7   3.00   4   51.6   27.0   21.4   2.
62 4
Disliked working
  for others         31.2    4.7    64.1   3.70   5   34.1   15.4   50.5   3.
25 5
Influenced by family
  and/or friends     14.2   12.6    73.2   4.16   6   16.7   11.8   71.5   5.
00 7
Family tradition     14.1    6.3    79.6   4.31   7   18.0   11.7   70.3   4.
04 6
Promotion at previous
  workplace blocked   8.1    7.8    84.1   4.59   8   11.2   5.7    82.1   4.
47 8
Loss of job           1.6    0.0    98.4   4.92   9   6.6    0.0    93.4   4.
73 9

The 5-point scale was collapsed into three categories as follows:

G.I. - Of Great Importance - combines two categories of importance

                                    Page 11

     - Very Critical and Critical
M.L. - Of Moderate Importance
L.I. - Of Little Importance - combines two categories of
       importance - Slightly Critical and Not Critical
The lower the number the greater the importance of the factor.

* Means of Singapore/Malaysia and Australia/NZ samples are
  significantly different at the 0.10 level.

Problems Faced by Emergent Business

Table 3 presents the problems faced by emergent businesses. For
the Singapore entrepreneurs, the four most important problem
areas were shortage of capital, obtaining sources of financing,
strong competition, and lack of skilled/ trained workers. For
the Australian counterparts, marketing, shortage of capital,
obtaining sources of financing, and understanding of financial
issues were the four most important problems. Howard (1989) and
Lauzen (1985) also found that entrepreneurs of SMEs reported
major problems related to finance and competition in operating
their businesses. Production management is a common enough

Rank correlation in this table is not as strong as in Table 2,
indicating perhaps that problems faced by SMEs may well vary from
one country to another.

           Table 3:    Problems Faced By Emergent Business

                          Singapore/Malaysia                Australia/NZ
                             (n = 152)                         (n = 164)

                       (1) + (2) + (3) = 100%              (1) + (2) + (3) = 10
                       G.I.   M.L.   L.I.      Mean Rank   G.I.   M.L.   L.I.   Me
an Rank
                        %      %      %                     %      %      %
Shortage of capital*   62.1   16.0   21.9      2.40   1    38.7   30.6   30.7   2.
86 2
Obtaining sources of
  financing            54.7   18.8   26.5      2.58   2    29.6   25.6   44.8   3.
27 3
Strong competition*    53.7   22.6   23.7      2.63   3    24.3   27.9   47.8   3.
41 5
Lack of skilled or
  trained workers*     44.3   19.8   35.9      2.87   4    15.9   19.7   64.4   3.
83 9
  industry trends      29.7   17.2   43.1      3.42   8    22.2   30.6   47.2   3.

                                     Page 12

47 6
Lack of management
  skills*              30.1   23.4   46.5      3.33   7    12.8   23.8   63.4   3.
82 8
Marketing your
  products/services*   31.9   28.1   40.0      3.25   6    54.8   20.4   24.8   2.
69 1
  financial issues     23.5   15.6   60.9      3.63   9    24.8   26.6   48.6   3.
39 4
Economic recession*    28.2   32.8   39.0      3.17   5    16.2   16.2   67.6   4.
01 10
Producing your
  products             28.1   14.1   57.0      3.69   10   30.4   16.2   53.4   3.
50 7

* Means for Singaporean and Australian samples are significantly
  different at the 0.10 level.

In the Australian sample, marketing was considered the most
critical problem while in Singapore it was ranked as sixth
position. One plausible reason could be that market conditions
were less favourable in Australia than in Singapore, therefore
the need to focus on marketing. At the time of the research,
Australia was experiencing an economic recession. Singaporeans
generally operate in a more regional/global market, relatively

Shortage of capital and obtaining sources of financing was ranked
relatively high in both countries (1 and 2 respectively in
Singapore; 2 and 3 in Australia). Understandably, banks or
investors are rather cautious in providing capital for small
business ventures especially if they have no track record to start
with. And, this will be more so in an Asian situation.

Shortage of skilled/trained workers were rated as the fourth most
important problem by Singapore entrepreneurs but was only ranked
ninth by Australian entrepreneurs. The reason was that Singapore
(and Malaysia) was experiencing strong economic growth which
contributed largely to a tightening of the labour market. Strong
competition was ranked fourth as a problem by the Singapore
sample. However, the Australian ranked it as fifth. This could
again be explained by the contrasting economic situations of
Singapore and Australia. Singapore, being economically buoyant,
were attracting more players in the market, whereas Australia
being in a recession was facing less intense competition.

In examining individual problems and comparing each one across
the two countries, there was significant difference (p<0.10)
between the two countries in the importance they attached to

                                     Page 13

seven of the ten problems under investigation. Shortage of
capital, obtaining sources of financing, strong competition, lack
of skilled/trained workers, lack of management skills, and
economic recession were problems considered more critical by
Singapore entrepreneurs than Australian in starting their
businesses. Because Singaporeans market these products globally,
global recession of the last few years affects them.

Factors for Success

Table 4 presents the factors for success of Singapore and
Australian SMEs. In comparing individual success factors, there
was very little difference between Australian and Singapore
entrepreneurs concerning the importance of each factors
contributing to the success of their business. However, when the
rankings of the factors were considered, differences arose. For
Singapore, the top five factors in order of importance are (1) a
good customer relationship, (2) ability to identify and focus on
a market niche, (3) a good service and delivery system, (4)
availability of financial resources, and (5) a good and
responsive management system. In Australia, the top five factors
are (1) a good customer relationship, (2) a visionary, capable
and strong CEO; (3) a good and responsive management system, (4)
good service and delivery system, and (5) ability to identify and
focus on market niche. The findings appear to support the study
by Duncan (1991) and Dehayes et al (1990), Prescott (1986), and
Huck et al (1991). They reported that, among other things, the
most frequent reasons for success for small businesses were
identification and focus on a market niche and being close to the

                           Table 4:    FACTORS FOR SUCCESS

                           Singapore/Malaysia                Australia/NZ
                              (n = 152)                         (n = 164)

                       (1) + (2) + (3) = 100%               (1) + (2) + (3) = 10
                       G.I.   M.L.    L.I.      Mean Rank   G.I.   M.L.   L.I.   Me
an Rank
                       %      %        %                    %      %      %
A good customer
  relationship         92.2   5.7      2.1      1.51   1    89.6   6.7    3.7    1.
56 1
A good service and
  delivery system      78.1   10.9    11.0      1.89   3    73.6   14.8   11.6   1.
98 4
Able to identify and
  focus on a market
  niche                84.4   9.4      6.2      1.83   2    77.0   13.3   9.7    2.

                                      Page 14

01 5
Good product features   64.1   18.0   17.0      2.28   8    49.6   25.0   25.4   2.
69 11
A good network system   62.5   15.6   21.9      2.31   10   57.5   22.6   19.9   2.
47 9
Availability of
  financial resources   68.2   19.8   12.0      2.11   4    61.5   26.3   19.2   2.
28 6
A good and responsive
  management system     70.4   17.2   12.4      2.14   5    87.3   8.3    4.4    1.
87 3
A good HRM system       70.3   15.6   14.1      2.22   6    60.9   27.0   12.1   2.
33 7
Availability of human
  resources*            65.1   21.3   15.6      2.30   9    45.3   30.7   24.0   2.
62 10
Spouse/family support   61.0   18.8   20.2      2.38   10   50.8   31.3   17.9   2.
40 8
A visionary, capable
  and strong CEO*       72.9   12.5   14.6      2.23   7    80.0   14.2   5.2    1.
81 2
Ability to develop
  and sustains tech-
  nological advantage   59.4   18.6   21.8      2.53   11   50.6   21.0   22.4   2.
57 9

* Means of Singapore and Australian samples significantly different
  at the 0.10 level.

It is worth noting that both countries believe that being
customer-focused is the most important success factor. The most
significant different was in the factor of visionary and capable
CEO. Visionary and capable CEO was the second most important
success factor for Australian entrepreneurs but was ranked
seventh by Singapore entrepreneurs. In fact, this factor was
considered significantly more important (p <0.05) for the
Australian compared to Singapore entrepreneurs. This might
indicate that Australian SMEs tend to establish longer-term goals
compared to Singapore SMEs which might tend to pursue short-term
profits. This finding appears to lend support to the cross-
national research conducted by Ghosh et al. (1993) in which they
found that Australian firms has a longer-term orientation than
Singapore businesses. Alternatively, it could also mean a
greater degree of workplace camaraderie in Singapore/Malaysia
(Ghosh et al, 1995).

Availability of financial resources was ranked as one of the top
five important success factors for Singapore but not for
Australia. This might suggest that funds are more readily
available to SMEs in Australia than Singapore. In fact this was

                                      Page 15

borne out in Table 3 (problems faced by emergent businesses), in
which shortage of capital and obtaining sources of financing were
more serious problems for Singapore than Australian entrepreneur.
The overall rank correlation was less than very strong (59%).

Obstacles to Success

Table 5 presents the main constraints to success experienced by
Australian and Singapore entrepreneurs. High cost of doing
businesses was ranked as the most important obstacle to success
in both Singapore and Australia. However, the Singapore
entrepreneur placed significantly greater importance on this
factor than the Australian counterpart (p < 0. 10). This
probably suggests that the cost of doing business is higher in
Singapore than Australia. This has been reported amply in
newspapers and otherwise.

                   Table 5:    CONSTRAINTS TO SUCCESS

                          Singapore/Malaysia                Australia/NZ
                             (n = 152)                         (n = 164)

                       (1) + (2) + (3) = 100%              (1) + (2) + (3) = 10
                       G.I.   M.L.   L.I.      Mean Rank   G.I.   M.L.   L.I.   Me
an Rank
                        %     %       %                     %      %      %
Cost too high*         77.9   5.2    17.8      1.80   1    46.8   28.6   24.6   2.
66 1
Shortage of workers*   64.6   9.4    26.0      2.20   2    15.9   13.3   70.8   3.
97 10
Competition too
  strong*              56.3   21.9   21.8      2.40   3    27.8   25.6   26.6   3.
25 3
Too many
  competitors*         59.4   14.1   26.5      2.45   4    38.8   28.5   32.7   2.
88 2
Lack of capital for
  expansion            60.4   15.1   24.5      2.45   5    20.7   27.1   22.2   2.
70 1
No strong market
  niche*               48.5   17.2   34.3      2.97   6    22.1   15.0   62.9   3.
73 9
Lack of creativity
  of CEO               35.0   23.4   39.6      3.20   7    23.7   24.6   51.7   3.
38 4
Lack of leadership     26.6   23.4   50.0      3.39   8    24.6   18.4   57.0   3.
55 5
Lack of focus on
  primary objectives

                                     Page 16

  of business          31.2   17.2   51.6      3.40   9    24.7   21.9   53.4   3.
50 7
Weak management team   25.6   28.6   45.8      3.42   10   26.1   17.4   56.5   3.
40 6
Management not
  people-oriented      21.9   29.7   48.4      3.52   11   21.0   15.0   63.6   3.
70 8

* Means of Singapore and Australian samples are significantly different
  at the 0.10 level.

The Singaporean entrepreneur considered shortage of workers as
the second most important obstacle hindering success while the
Australian ranked it in the tenth position. This reflects the
contrasting economic and labour market situations in both
countries. Singapore is currently having a tight labour market
while Australia is experiencing serious unemployment.

Strong competition was ranked third by both the Australian and
the Singapore sample However, it was considered significantly
more important to the Singapore than the Australian entrepreneurs
(p <0.05). One possible explanation is that there is a greater
density of SMEs in Singapore than in Australia. In other words,
there are significantly more players relative to the market size
in Singapore/Malaysia than that in Australia. Again, this makes
local problems/constraints different from each other.

Prior Experiences Helpful in Starting Business

Table 6 presents the responses from entrepreneurs concerning the
significance of their prior work experience in helping to start
their businesses. Both Singapore and Australian entrepreneurs
ranked general management as the most important experience in
helping to start their business. This was not surprising since
starting and running a business requires a diverse range of
management knowledge and skills which general management
experience is able to provide.


                              Singapore     Rank      Australia    Rank
                                  %                       %
General Management              80.0        1           41.3         1
Marketing/Sales                 65.5        2           16.5         2
Human Resoruce Management       41.9        3            3.0         7
Engineering                     34.9        4           13.5         4
Banking and Finance             23.5        5            2.1         8
Production/Operations           23.5        5           13.5         3
Accounting/Auditing             20.9        7            6.2         5
Retail                           2.3        8            2.1         8

                                     Page 17

Other Experiences                2.3          8        3.1        6

Marketing was ranked as the second most important experience by
both samples in helping them start their businesses. Ultimately
the survival of a company is dependent on generating revenue and
profits, therefore the respondents considered marketing
experience as essential.

The Singapore sample ranked human resource management experience
as the third most important factor in helping them start their
businesses. It therefore appears that once revenue and profits
are forthcoming, the businesses could now focus on managing and
developing their employees. However this was not the case for
the Australian sample. The Australian sample ranked experience
in human resource management at seventh position. The reason why
human resource experience was given significantly more weight by
Singapore entrepreneurs is probably due to the fact that the
government has been constantly promoting to businesses the
importance of developing and optimising the use of human
resources. This was felt to be a critical factor for the
economic survival of Singapore since she has no natural
resources. Labour market is tight also.

Both Australian and Singaporean samples ranked engineering
experience as of fourth position. Therefore, it appears that
both samples believe that some specific technical skills was
helpful in starting a business. The importance of engineering
experience is also due the fact majority of the businesses are in
manufacturing and construction in which some measure of
engineering experience could be useful. The trend indicates that
the importance of prior experience moves from that of broad
management skills to that of specific management skills. Rank
correlation is pretty close in this table between the 2 samples.

Sources of Financing

Table 7 presents the various sources of financing for Singapore
and Australian SMEs. The findings indicate that both Singapore
and Australian SMEs ranked personal savings as their most
important source of financing for their businesses. This was
particularly critical at the start of the business since many
financial institutions tend to be cautious in lending to smaller
sized businesses.

                    Table 7:   SOURCE OF FINANCING

                               Singapore      Rank   Australia   Rank
                                   %                     %
Personal savings                  44.0           1     38.2      1
Loans from family                 19.5           2      7.0      5

                                       Page 18

Investment by family         14.7          3    12.6       3
Debt financing                9.7          4    31.8       2
Equity financing              9.0          5     9.8       4
Other sources                 3.1          6     0.8       6

Loans from family was regarded as the second most important
source of financing by Singapore SMEs but was ranked as fifth
position by Australian sample. One plausible explanation is that
the Asian family is a more closely-knitted social structure than
the Australian family. Therefore when the need arises, borrowing
monies from family members in the Asian culture is not an
uncommon practice. Lim (1986) Confirmed similar findings. In
fact in the Australian sample, it appears that when personal
financing was inadequate they would consider debt financing
(second most important source of financing instead of financing
from family). However, the Australian entrepreneur would
consider financing from family only if it is an investment in
their businesses. This source of financing was ranked third
position by both samples.


The research examines and compares the key success factors,
challenges, and issues facing SMEs in Singapore/Malaysia and
Australia/New Zealand. In this study, the comparison of
Australian and Singapore SMEs is particularly significant in the
light of the two country groups having contrasting cultural,
economic and business practices. For example, the
Singapore/Malaysian economy has prospered, hence such factors as
cost, shortage of workers, competition are viewed as problem
areas or as constraining factors. In contrast, the
Australian/New Zealand economy was experiencing a recession in
the recent years, hence shortage of workers was not an issue
whereas marketing was a major concern. From a cultural
perspective, Singapore in contrast to Australia, has a strong
family-orientation; hence the importance of family loans as an
important source financing. On the other hand, the Australian
sample would rather use debt financing than loans from family.
Thus, the current study should add to the body of knowledge in
the area of cross-national studies of SMEs which are few anyway.
This research could well be replicated over an interval of (say)
five years to examine the effect of time on the study.

On the question of the general hypothesis that the SME
characteristics of the two country-groups will be generally
similar, this is accepted at most partially only. There are
important differences quoted in Table 3 (Problems), Table 4
(Success Factors) and Table 5 (Constraints) which have been
discussed earlier. Whilst it is accepted that success factors
were more universal than the problems/constraints, this central

                                 Page 19

hypothesis of this paper was found to have only limited or
partial validity.


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                                 Page 24

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