56% of SMEs Cite Management Burden Due to International Instability

MainBiz Association Releases Results of "SME Business Environment Survey"

A recent survey has revealed that instability in international affairs, such as the ongoing Middle East war, is increasing cost pressures and eroding profitability, thereby heightening the management burden for domestic small and medium-sized enterprises (SMEs).

The MainBiz Association (Korea Management Innovation SME Association) announced on July 6 the results of its "SME Business Environment Survey in Response to Changes in International Affairs."

The survey was conducted on 323 MainBiz companies nationwide to assess the impact of prolonged conflicts in the Middle East, international raw material prices, energy costs, foreign exchange fluctuations, and other changes in the external business environment on their operations.

According to the findings, 56.3% of companies responded that management burdens from changes in international affairs are significant, with the average burden level recorded at 62.2 points out of 100. Only 8.4% of companies reported increases in both sales and operating profit, while 56.0% reported decreases, indicating that external uncertainty has had a negative impact on the business performance of SMEs.

Level of Business Burden Due to Middle East Conflict and Changes in International Affairs. MainBIZ Association

Notably, the proportion of respondents feeling a significant management burden was higher among manufacturers (67.1%) and exporting companies (67.4%). Among manufacturing sectors, the burden was particularly pronounced in petroleum-chemical, electrical-electronics, and food-textile industries compared to others.

The most noteworthy result was that companies perceived cost increases, rather than supply chain disruptions, as the main factor behind the management crisis. The most frequently cited factor impacting companies was "rising purchase prices for raw materials and goods" (64.1%). This was followed by increases in energy costs, foreign exchange fluctuations, and higher logistics costs, indicating that rising costs and deteriorating profitability are imposing an even greater burden on company operations.

Examining the level of cost burden, 42.8% of companies said their operating costs—including raw material and goods purchases and energy expenses—account for over 50% of their sales. Among these, 21.4% reported that operating costs exceed 70% of sales.

The sector most significantly affected by the Middle East conflict. Main Business Association

In response to changes in international affairs, most companies focused on "monitoring the situation" and "cost reduction," with only 5.3% indicating that they have established proactive strategies, suggesting that their efforts are concentrated on short-term measures.

Likewise, the most common response to supply chain issues was "no separate response" (28.8%). Efforts to address rising costs also focused mainly on short-term cost management, indicating that companies' capabilities to deal with external uncertainty remain insufficient.

When asked about the most necessary government support, the highest proportion of companies (39.6%) cited "stabilizing the supply and prices of raw materials and goods and alleviating price burdens," followed by financial support (24.8%) and logistics and transportation support (11.5%).

Only 37.5% of companies evaluated the government's response as appropriate. The perceived effectiveness of government policies was relatively low, averaging 52.1 points out of 100.

Overall response level to changes in the external environment. Main Biz Association

The MainBiz Association diagnosed that changes in international affairs have become persistent, structural risks that threaten the cost structure and profitability of SMEs, rather than being mere temporary external shocks. Accordingly, it stated that policy shifts are needed to strengthen the capacity of SMEs for ongoing crisis response so that they can be prepared at all times.

To this end, it recommended moving beyond policies focused solely on short-term financial support and expanding measures to mitigate volatility in key operating costs, as well as distributing crisis management manuals and providing consulting to diversify clients and procurement channels to help improve business fundamentals. It also emphasized the importance of expanding customized support for manufacturers, exporters, and micro-businesses, as well as improving the accessibility and usability of existing support programs.

This content was produced with the assistance of AI translation services.