The project falls under the Small and Medium Enterprises Promotion Office, and is responsible for analysing SMEs' ability to survive through changes in their way of business in a new environment.

The department studied the SMEs' financial situation in terms of profit and divided them into three categories: the more they sell, the more they lose (firms rated in danger); those making less profit (firms that need to be careful); and those that can make a good profit (firms rated as good).

The study covered 18 industries in the production sector and seven businesses in the trading and service sector.

According to the research, retail businesses face a negative impact from the expansion of international hypermarkets in Thailand that are changing consumer behaviour to buy products priced lower than traditional retail stores. The research shows that traditional outlets' sales have fallen by up to 58 per cent this year as a result.

Meanwhile, five industries in the production sector should be very careful in running their business and rapidly adapt themselves to conform to the present situation, according to the research. They comprise boat construction and renovation, shoes and leather, plastics, rice and meat.

Nuttapon Nimmanphatcharin, director of the SME Promotion Office's Early Warning System unit, expressed concern about the trading and service sector because SME operators face tough competition from large enterprises who have more connections and a strong network.

"Moreover, the rapid change in consumer behaviour is the key factor that affects the SME operators," he said.

He added that these industries were in trouble because they could not adapt and catch up with the current business situation.

He said they should add value to their products in order to avoid competition in the mass market with China and Vietnam.

For example, SMEs in the shoe and leather industries have a limited ability to produce made-to-order products, according to Nuttapon.

Another sector that he is concerned about is the software business.

Although the total IT industry will grow, IT in the SME sector has slowed down considerably. He said the problems for SMEs in this industry were that they did not register patents and consumers preferred purchasing international software.

The SME Promotion Office will focus on educating them about patents and promoting Thai software acceptable among local consumers, Nuttapon said.

Chalida  Ekvitthayavechnukul,

Somluck Srimalee

The Nation