Friday 29 Mar 2024
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KUALA LUMPUR (April 24): Businesses that are prepared to scale up their operations to regional markets quickly are more likely to suceed, said Google Malaysia country head Sajith Sivanandan today.

Speaking at a forum titled ‘A Million Ways To Fail In Business — Why Some Make It And Most Don't’ at Invest Malaysia 2015, Sajith said companies that are set up without preparation to scale up quickly are likely to lose out to competition.

"I think that one of the weaknesses you can have is when you do not want to scale up fast enough," he told the audience.

He was responding to comments by Endeavour Malaysia Search and Growth head entrepreneur Anand Krishnan, who said businesses that tend to enter regional markets too soon, without sufficient understanding of user profiles in these markets, tend to fail.

"At the growth stage, we've seen a lot of entrepreneurs that have not perfected their business model, before moving regionally. You need to prove that you can make it work here, before expanding," said Anand.

Zalora Malaysia's regional managing director Giulio Xiloyannis agreed with Sajith, saying Zalora is built for scale.

However, he said the major weakness that entrepreneurs should avoid is not being aware of the business’ cash flow.

"In 2013, we pulled back from two categories: kids as well as home and living. We also closed down our operations in Taiwan," he said.

"None had long term-issues, but we had higher cash burns than our bank accounts could allow in 2013. We wasted a lot of money," he shared.

Giulio also said in Malaysia, the second largest company in a certain market tends to have a higher earnings before interest, tax, depreciation and amorisation (EBITDA), compared to the largest player.

"It depends on a case by case. The first player tends to grow, grow and grow. Hence, their profitability [usually] comes later," he said.

"Smaller players are more profitable faster. So rather than competing with the main player, it is much better to fill in the gaps," he added.

All three said Southeast Asia holds great opportunity for growth, as smartphone and internet penetration is increasing. The region now enjoys good economic growth, growing populations and high investments.

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