By Hoem Seiha
As foreign investors are looking for business opportunities in Cambodia, local enterprises are expected both to face challenges and be flooded with expansion opportunities for a few years to come.
An influx of foreign investors into the Kingdom’s market has driven local business activities, yet some local business sectors are playing a price competition among one another, which is believed by experienced enterprise leaders to bring about bankruptcy of the enterprises themselves.
One of such business types that are facing a stiff competition among one another is ICT sector, in which local suppliers are trying to lower prices of their services and that often leads to a provision of low service quality.
“If a strong foreign IT company comes to invest in the sector, it’s more likely to win the market because it would focus on good quality rather than cheap prices,” said Chan Nath, president of Cambodia ICT Association (CiTA).
Nath also continued that local ICT enterprises are not trying to strengthen themselves for the competition with foreign companies ahead. “If that behavior still persists, I’m afraid local businesses will make no stand and could end up a closure,” he said.
Ieng Se, co-founder and executive chairman of Atech IT Solutions, a local software development company, said that competition is the nature of free market and business strategies, but he maintained the competition should be fair and benefit both consumers and the enterprises themselves.
“It’s okay to decrease the prices, but it’s a self-destruction to lower both the prices and quality of the products,” said Ieng Se, explaining that unconventionally lowering prices would automatically result in a low quality that affects both the consumers and service providers.
“Consumers expect a good quality, just as enterprises expect a repetition of service uses and continual incomes,” Se continued.
One of the Kingdom’s industry drivers, ICT spending has been expected to reach US$209 million by 2015, growing from well over US$100 million in 2011 and the trend keeps clinging to the rising line, according to Ministry of Post and Telecommunications.
Nath suggests a strategic partnership among local ICT suppliers rather than a copycat of business models, which results in a low price and quality competition.
For the long run, local enterprises are to face both expansion opportunities and challenges, especially by the time of ASEAN Economic Integration when foreign companies are expected to pin themselves in the Kingdom to gain a meager market share.
For opportunities of growth, experienced business leaders explained that local enterprises can partner with foreign companies in any forms to make the business larger in scale and scope.
Strategies for business expansion are merging with, gaining shares of, or acquiring a company within the local market. Foreign companies may look for a similar business and merge into one to be bigger.
“To do that, interested local enterprises have to reform and prepare themselves by having transparency, standard corporate governance, and strong human resources,” said Chit Uys Stevyxo, chief executive officer at Vtrust Appraisal Co., Ltd., a local company specializing in corporate asset evaluating for pre-IPO, bank-loan proposal, and merger or acquisition purposes.
Stevyxo continued that some foreign companies are not likely to set up any new companies here if there are existing businesses in which they can merge with their businesses.
Stevyxo said, “Mergers or acquisitions are a way to start operating instantly and avoid startup from scratch that takes some years to see the results,” continuing that a startup of a new business that already exists in the market will make the competition becomes stiffer.
One of the stories, Hello Axiata in early 2013 merged with Smart Mobile as a part of a $155-million deal to play around in the oversaturated telecoms market. Experts believe it is the way other local enterprises may be merged with foreign companies to be a stronger and bigger one.
Park Café, Foods & Beverages Co. Ltd., gains a financial support from and is studying the feasibility of sharing a deal with Emerging Market Investments, which is a foreign equity fund management firm.
Chan Sy, general manager at Park Café, said, “It’s one of our strategies to expand our operational scale, and the next step is that we’re studying a feasibility of franchising and initial public offerings that enable us to grow even bigger.”
As foreign investors are looking for business opportunities in Cambodia, local enterprises are expected both to face challenges and be flooded with expansion opportunities for a few years to come.
An influx of foreign investors into the Kingdom’s market has driven local business activities, yet some local business sectors are playing a price competition among one another, which is believed by experienced enterprise leaders to bring about bankruptcy of the enterprises themselves.
One of such business types that are facing a stiff competition among one another is ICT sector, in which local suppliers are trying to lower prices of their services and that often leads to a provision of low service quality.
“If a strong foreign IT company comes to invest in the sector, it’s more likely to win the market because it would focus on good quality rather than cheap prices,” said Chan Nath, president of Cambodia ICT Association (CiTA).
Nath also continued that local ICT enterprises are not trying to strengthen themselves for the competition with foreign companies ahead. “If that behavior still persists, I’m afraid local businesses will make no stand and could end up a closure,” he said.
Ieng Se, co-founder and executive chairman of Atech IT Solutions, a local software development company, said that competition is the nature of free market and business strategies, but he maintained the competition should be fair and benefit both consumers and the enterprises themselves.
“It’s okay to decrease the prices, but it’s a self-destruction to lower both the prices and quality of the products,” said Ieng Se, explaining that unconventionally lowering prices would automatically result in a low quality that affects both the consumers and service providers.
“Consumers expect a good quality, just as enterprises expect a repetition of service uses and continual incomes,” Se continued.
One of the Kingdom’s industry drivers, ICT spending has been expected to reach US$209 million by 2015, growing from well over US$100 million in 2011 and the trend keeps clinging to the rising line, according to Ministry of Post and Telecommunications.
Nath suggests a strategic partnership among local ICT suppliers rather than a copycat of business models, which results in a low price and quality competition.
For the long run, local enterprises are to face both expansion opportunities and challenges, especially by the time of ASEAN Economic Integration when foreign companies are expected to pin themselves in the Kingdom to gain a meager market share.
For opportunities of growth, experienced business leaders explained that local enterprises can partner with foreign companies in any forms to make the business larger in scale and scope.
Strategies for business expansion are merging with, gaining shares of, or acquiring a company within the local market. Foreign companies may look for a similar business and merge into one to be bigger.
“To do that, interested local enterprises have to reform and prepare themselves by having transparency, standard corporate governance, and strong human resources,” said Chit Uys Stevyxo, chief executive officer at Vtrust Appraisal Co., Ltd., a local company specializing in corporate asset evaluating for pre-IPO, bank-loan proposal, and merger or acquisition purposes.
Stevyxo continued that some foreign companies are not likely to set up any new companies here if there are existing businesses in which they can merge with their businesses.
Stevyxo said, “Mergers or acquisitions are a way to start operating instantly and avoid startup from scratch that takes some years to see the results,” continuing that a startup of a new business that already exists in the market will make the competition becomes stiffer.
One of the stories, Hello Axiata in early 2013 merged with Smart Mobile as a part of a $155-million deal to play around in the oversaturated telecoms market. Experts believe it is the way other local enterprises may be merged with foreign companies to be a stronger and bigger one.
Park Café, Foods & Beverages Co. Ltd., gains a financial support from and is studying the feasibility of sharing a deal with Emerging Market Investments, which is a foreign equity fund management firm.
Chan Sy, general manager at Park Café, said, “It’s one of our strategies to expand our operational scale, and the next step is that we’re studying a feasibility of franchising and initial public offerings that enable us to grow even bigger.”