China's economy is set to become more open with its recent admission to the World Trade Organisation (WTO). However, controversy exists over whether Hong Kong businesses will benefit from this ... add that to a recent slump in the world economy and a weak US market due to September 11 and you have a perfectly dubious outlook for the SAR's small-and-medium-size enterprises (SMEs). So, what can SMEs in Hong Kong do to steer themselves out of such a situation?

Ken Wong, Managing Director of Victoria View International Limited, thinks a solution lies in the very nature of SMEs. "If we can take advantage of our versatility and enhance different aspects of our operations, then it's still possible for small enterprises to grow," he says.

Victoria View International Limited was established in 1999, and specialises in manufacturing and exporting garment products. The company has production lines in Guangdong, which employs some 300 staff, to manufacture its garment products. As the founder of Victoria View, Ken recounts how, in the beginning, the company mainly dealt with the local market and trading companies - similar to most other SMEs. In 1999, the local garment market was already shrinking and it was evident that the company needed to extend into international markets in order to generate more business. With that strategy, Ken set out to contact overseas buyers directly. Victoria View now services clients mainly from Australia and Europe - with the Australian market accounting for 80 per cent of the company's sales.

For local entrepreneurs, China's recent entry in the WTO is undoubtedly a hot topic. And, for the garment industry, this incident has added significance. Foreign market access to China-origin textiles and clothing products is about to greatly expand owing to the elimination of import quotas as stipulated in the previous agreement. As most Hong Kong garment manufacturers have production lines in China, this market access expansion will prove beneficial. On the other hand, China will be obliged to open its domestic market to allow more foreign participation, thus increasing the competition for business resources and market share.

Wong readily admits that for Hong Kong entrepreneurs the net effect of WTO entry is yet to be seen. "The quota system means we have to spend a lot of money on quota lots for our products, which adds to production costs and impairs our competitiveness. Once it is abolished, Hong Kong entrepreneurs will be better equipped to enter more markets by taking full advantage of their operations in China," he says.

"However, mainland China-based enterprises will also enjoy the benefits of WTO accession which will improve their competitiveness and make competition fierce. Companies that have production lines in South East Asia may move those operations back to China because of the potential for a more stable post-WTO political environment. These factors will contribute to even greater competition," says Ken.

With economic globalisation becoming the norm' in the business world, competition among garment manufacturers will become more fierce and globalised. According to Wong, manufacturers need to muster every effort to explore the international market so that their business' horizon can extend. In this aspect, SMEs are weak players with few resources to support business development. For instance, with the limited human resources that exist, many SME managers are responsible for business development in addition to their management duties.

Nevertheless, SMEs still have some operational advantages that enable entrepreneurs to foster their businesses and one obvious competitive edge that SMEs hold is their flexibility. "With simple organisational structure, SME management can monitor various operations within a company more closely. This allows for quick reactions to undesirable situations," says Ken.

In addition, SMEs can improve management and cost-control effectiveness by adopting information technology tools. When Victoria View looks for new clients it searches for buyers in online databases as well as sending out sales representatives. Using e-mail to communicate with clients allows the company to handle orders more efficiently and opens another channel for its clients' enquiries. Internal communications are carried out using e-mail and video-conferencing to significantly reduce communication costs between the Hong Kong office and the China factories.

Ken Wong admits that by incorporating greater information technology in his operations, he is imitating the business style of larger enterprises. "SMEs are bound to face more challenges than large enterprises. The only way that we can extend the survival of our companies is to make ourselves progress with every possible means," he says - displaying the attitude that has helped Victoria View grow and will help other SMEs face future challenges.