7 Game-Changing Trends for Philippine SMEs in 2024

During 2023, small and medium enterprises (SMEs) in the Philippines encountered a range of obstacles that impeded their growth and sustainability. These challenges included reduced consumer spending, supply chain disruptions, and limited financial access. Many SMEs struggled with adapting to digitalization and the evolving landscape of remote work and e-commerce.

In 2024, SMEs will continue to confront these same challenges, along with fresh opportunities in technology, governance, and global markets. To leverage these opportunities, they must strengthen their capabilities and consider alternative financing options to enhance adaptability and resilience. Successfully navigating these emerging business trends in the Philippines is vital for the long-term viability and prosperity of SMEs.

1. AI in daily operations

The utilization of artificial intelligence (AI) to automate tasks and offer predictive analytics is narrowing the gap between small businesses and large corporations. Small and medium-sized enterprises (SMEs) that embrace AI can accelerate the production of marketing content, enhance online customer service through chatbots, and minimize manual administrative tasks, thus boosting efficiency and enhancing their competitive advantage.

Nevertheless, the effectiveness of AI tools relies on the proficiency of the individuals utilizing them. To fully leverage the potential of AI tools, SMEs need to enhance the skills of their workforce. Moreover, organizations need to establish guidelines that ensure a balanced integration of AI in the workplace. This approach will uphold the quality of outputs while safeguarding the job security of employees who might be affected by AI advancements.

2. Outsourcing as a strategic move

The growth of outsourcing crucial functions, such as human resources and accounting, is primarily driven by the rise of outsourcing companies that offer a cost-effective solution. This trend in the business sector of the Philippines has enabled small and medium enterprises to access specialized skills and expertise without the need to train in-house staff, allocate office space, invest in software or infrastructure, or cover employee benefits.

For SMEs looking to leverage this trend in 2024, exploring outsourcing can be a strategic approach to address specific challenges or accomplish particular objectives. Is your company dedicating excessive time to administrative tasks or non-core activities? Are you facing seasonal variations that demand workforce flexibility? Do you possess the resources to expand operations to different time zones or locations, but lack the necessary know-how or personnel? Outsourcing presents an opportunity for your organization to realign focus on core competencies, enhance efficiency, and adjust operations as required.

3. E-commerce challenge

Despite the promising outlook for e-commerce growth in the Philippines, the resurgence of traditional shopping and the proliferation of online stores have intensified competition in the market. With a plethora of choices available, consumers are more inclined to switch between brands based on various factors like pricing, convenience, and recommendations. Additionally, younger, tech-savvy consumers are heavily swayed by social media trends and digital marketing campaigns that continually introduce new brands, prompting them to experiment with different options rather than sticking to a single brand.

In order to adapt to this business landscape by 2024, small and medium-sized enterprises (SMEs) should focus on niche markets and cultivate strong relationships with consumers through personalized experiences, exceptional customer service, and innovative marketing tactics that set them apart from competitors.

4. Rising business costs

Global industries are facing challenges due to escalating operational expenses caused by supply chain disruptions and market fluctuations. The potential rise in inflation may prompt the Bangko Sentral ng Pilipinas to increase interest rates in 2024, with the intention of curbing consumer spending. This scenario poses difficulties for small and medium enterprises (SMEs) as it could result in narrower profit margins and more expensive business loans.

To address the issue of mounting costs, SMEs are advised to explore solutions such as acquiring a credit line to manage cash flow effectively. By obtaining a credit line that comes with no opening fees, businesses can access a readily available source of funds for unexpected expenditures or business ventures. Furthermore, it enables SMEs to negotiate better terms with their suppliers. Lastly, a credit line serves as a prudent risk management tool during periods of economic uncertainty, without incurring any costs unless the credit limit is utilized.

5. Exporting opportunities

Government support and advantageous trade agreements are facilitating the country's access to global markets, a significant development for small and medium-sized enterprises (SMEs) in the Philippines. One notable example is the Regional Comprehensive Economic Partnership (RCEP), a trade deal involving 15 countries, including the Philippines, aimed at boosting trade, investment, economic cooperation, and competitiveness within Southeast Asia.

Exporting is projected to be a key business trend in 2024, particularly benefiting industries such as agriculture, electronics, business process outsourcing, e-commerce, tourism, and financial services. Through RCEP, tariffs on traded goods among member nations will be lowered, customs processes streamlined, and the movement of goods and services between countries expedited. Consequently, this initiative is expected to lower raw material costs for the mentioned sectors, attract more investments for local enterprises, and provide SMEs with opportunities to collaborate with new international partners and talents.

6. Ethical brands gain favor

There is a growing preference among Filipino consumers for ethical and sustainable brands, placing importance on both eco-friendly initiatives and honest marketing. A recent incident where a franchise posted an insensitive job advertisement underscores the significance of maintaining brand sensitivity across all aspects, such as customer service and employee relations, to fulfill customer demands.

This emerging business trend in 2024 transcends local boundaries and has global implications, emphasizing the crucial role of corporate responsibility in brand development.

7. Remote and hybrid work

Flexibility in the work environment is a key priority for employees, impacting talent acquisition and retention in SMEs. According to AT&T, there is a projected 81 percent global increase in the adoption of hybrid work models, with Gen Z showing particular enthusiasm for this approach.

SMEs should engage in open communication with their employees to identify the most suitable work arrangements, encompassing remote/hybrid and in-office options. To support remote or hybrid work setups, it is crucial to invest in technology and streamline online and offline processes. In the case of in-office models, emphasis should be placed on promoting work-life balance, providing learning opportunities, fostering career advancement, and implementing wellness initiatives to attract and retain top talent.

Looking ahead to 2024, Philippine SMEs will encounter a mix of challenges and opportunities in the business landscape. By embracing AI, strategically outsourcing, adapting to e-commerce trends, managing cost increases, exploring export opportunities, upholding ethical standards, and accommodating preferences for remote work, SMEs can effectively navigate the evolving business landscape in the Philippines.