Wed, Jun 13, 2007 - Page 12 News List

Local companies show pessimism on profit margins

By Jessie Ho  /  STAFF REPORTER

Local companies are worried that already razor-thin profit margins will continue to tumble, with as many as 80 percent of businesses seeing their margins drop to zero by 2015, a survey released yesterday showed.

More than 1,000 local companies were surveyed by 104 Job Bank (104人力銀行), the Chinese-language business monthly Global Views and Business Management Consultants Association, ROC (中華民國企業經營管理顧問協會).

Profit margins of the nation's notebook computer manufacturers was 18 percent in 1999, but that figure has declined to less than 5 percent today.

About 10 percent of companies were posting profit margins close to zero and that percentage could increase to 80 percent over the next eight years, the survey showed.

Small and medium-sized companies with a staff of 20 to 100 showed the most concern, with 89 percent of respondents saying they would likely face the zero-margin bottleneck in 2015.

Respondents gave an average 57.8 points, out of a 100, on their confidence level in future development.

Government efficiency, the level of internationalization and domestic economic strength were cited as the key elements affecting the survival of a company, the survey showed.

Pursuing technological developments, cross-strait business potential and internationalization were ways the companies sought to retain margins, the survey showed.

The margin of error was 2.21 percent

"To internationalize is the best strategy to adopt, but creating a new business model is also very important," Chu Po-young (朱博湧), a professor at National Chiao Tung University's Management Science Department, said during a press conference.

The increasingly difficult business environment is expected to affect salaries offered to employees.

Another poll conducted by 104 Job Bank with 1,966 workers showed that 18.5 percent expected no salary increases until 2015, while 37.7 percent expected a raise at or below 10 percent.

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