Core Management Strategy for SMEs Next Year is 'Cost Reduction'

Korea Federation of SMEs, Survey on SME Management Status and 2025 Business Plans

'Cost reduction and tightening' was selected as the top core management strategy for small and medium-sized enterprises (SMEs) next year. This is due to more than half of SMEs expecting the business environment next year to be as challenging as this year.

The Korea Federation of SMEs announced the results of the 'SME Management Status and 2025 Management Plan Survey' conducted on 1,000 SMEs on the 10th. According to the survey, half of the responding companies (48.8%) evaluated this year's business environment as difficult, while only 16.5% responded that it was not difficult. The main factors of business difficulties (multiple responses) were sluggish domestic sales (74.4%) as the most common, followed by rising raw material prices (29.3%) and increased labor costs (28.9%).

Also, throughout this year, SMEs mainly made efforts to expand business partners (sales and promotion) (64.0%) to improve the business environment, followed by cost reduction and restructuring (46.2%), and expanding funding sources (30.9%). The most useful government (local government) policy was support for business stability (operating funds) (26.0%), followed by tax reductions and payment deferrals (20.5%), and loan maturity deferrals and extensions (17.9%).

Regarding next year's business environment, 59.7% of responding companies expected it to be similar to this year. Companies expecting deterioration accounted for 23.1%, while those expecting improvement were 17.2%. As the core management strategies for SMEs next year (multiple responses), 47.4% of companies responded with cost reduction and tightening, followed by new market expansion (45.2%) and business diversification such as new business promotion (42.8%).

For policies most needed to stabilize and grow SMEs (multiple responses), the highest proportion was for expanding SME win-win finance support (59.7%), followed by expanding support for research and development (R&D) and facility investment (36.5%), and expanding market and export support (34.2%).

In the mid-to-long term, the factor most unfavorable to SME management requiring preparation was a decrease in the labor population, as responded by more than one in four SMEs (27.0%). This was followed by regulations lagging behind industrial changes (18.5%) and widening gaps with advanced technology levels (15.5%).

Choo Moon-gap, head of the Economic Policy Division at the Korea Federation of SMEs, said, “More than half of SMEs expect next year's business environment to be as challenging as this year, and the chronic domestic demand slump is clearly reflected in the SMEs' perceived economy,” adding, “Since SMEs have identified cost reduction, new market expansion, and business diversification as the three core strategies to improve sluggish domestic sales both this year and next, to support SME investment activities in 2025, smooth liquidity must be supplied through expanding SME win-win finance and investment support.”