9/2015 – Provide a level playing field for young entrepreneurs

by Tan Thiam Hock

Saturday, 9 May 2015

I had just attended a talk organised by Genovasi. The invited speaker, Malek Ali enthralled the crowd with stories on how he set an entrepreneurial culture in his smallish business radio station BFM 89.9. It was an interesting topic presented by a charismatic entrepreneur but I had other thoughts on my mind.

If you look at the radio industry in Malaysia, it is dominated by three major media groups. Astro owns AMP Radio which is a clear leader with first mover advantage. Then you have The Star Publications with Star Radio and Media Prima with its MP Radio stations. All three are multi media giants in their own right with strong political affiliations.

Picture a skinny Malek in the ring with three big sized sumo wrestlers. Can he survive?

Malek’s predicament is not a unique case. In many industries, you have the same scenario of market share domination by a few big boys with many little fellas running all over trying to find a niche in the market place. Survival is the name of the game in a mature market.

So if you plan to go on your own, would you venture into a battlefield knowing the big boys will probably eat you for breakfast? Or would you prefer to swim into a small pond where it is easier to be the top fish eating other smaller fishes? What is your appetite?

For starters, if it is a big pond, the market size is probably huge, worth zillions. So even a single-digit share is humongous money to a small entrepreneur. If it is a small pond, a big share might still be lucrative enough and definitely more sustainable as no big fish would go into a small pond.

Zillion dollar markets would normally require deep pockets as huge investments have to be made in terms of heavy capital expenditures or high customer acquisition costs or both. In some industries, getting an operating licence requires political assistance. In Malaysia, you have to compete with the GLCs which is financed by the government or indirectly by tax payers money. In such scenarios, my advice would be to stay out of this ring and let the rich tycoons play with the big boys.

Major sectors like banking, insurance, transportation etc are dominated by GLCs and big funds like EPF. The few remaining tycoons still in the business survived very well due to their entrepreneurial endeavours and the fact that they employ the best people to run their businesses. As these industries are normally controlled by licences issued by various ministries, new entrants are a rarity.

If you want to venture into these sectors, you would need to be really smart and find new ways to disrupt the old established regime. Focus on the the new growing market like Gen Y and beyond. As Malaysia has a growing young tech savvy population, there will be tremendous opportunities for entrepreneurs to take a bite size share from the big boys. A dollop of good luck will be most helpful.

Crowded space

In other major sectors like property development, entrepreneurs can still thrive but you will still have to navigate your business delicately as it is a crowded space with PNB swallowing the big players and special privileges given to GLC’s to compete. Think EPF given the RRIM land in Sg Buloh and 1MDB given the TRX and Sg Besi Airport land for a song.

This is an uneven playing field and will continue to be, as long as the Government wants to be involved in commercial business. We can argue until the cows come home on the merits of government competing with its citizens in many major sectors of the economy when they should just concentrate on managing the country effectively.

Entrepreneurs can survive better in major sectors like retail, food and beverage and other daily consumable necessities because of its fragmented multi level value chain from production to consumption. There are many opportunities along this value chain and you can scale it to national level if you have a good business model in place.

Speedmart 99 is a chain of about 600 mini market outlets serving residential suburbs. Franchised Kopitiams have spread all over the country and they are opening new outlets as fast as they are closing down. Traditional Hainanese coffee shops are a rarity nowadays and those that survived are generally managed by second or third generation children.

In the last 10 years, there have been too many entrepreneurial pursuits in opening restaurants and cafes. Every owner prides itself of its unique offerings not realising that in one street alone, there could be 20 restaurants and cafes basically offering food and beverage. The dropout rate is extremely high and I winced at the amount of wasted capital, time and effort of these entrepreneurs.

Similarly, the Gen Y entrepreneurs congregate into the Internet e-space like there are no other businesses worth looking at. This is the business of the future but do expect higher wastages and many more heartaches before they see Nirwana.

So can all the little Maleks survive in the big pond? As a perpetual underdog myself, I would like to think so. I certainly hope the Government will provide a level playing field for young entrepreneurs to survive and thrive. Then let the David’s take on the Goliaths.

I would love to see more replicas of maverick entrepreneurs like Tony F and Liew SK appearing in Malaysia. Our country can only compete in the global market if we allow entrepreneurs to grow and contribute their fair share of skills and innovation.

As for me, I will stay in the small pond and try to help the small fishes to survive. It is still an important part of the entrepreneurial ecosystem that needs nurturing with tender loving care.

Published: http://www.thestar.com.my/business/business-news/2015/05/09/provide-a-level-playing-field-for-young-entrepreneurs/

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