Small and Medium Enterprises in Malaysia

SMALL AND MEDIUM ENTERPRISES IN MALAYSIA: NEW CHALLENGES AND FUTURE RESEARCH

Nur Hafiza Binti Nordin

(Matric No. 1120154)

Faculty of Economics and Muamalat

UNIVERSITI SAINS ISLAM MALAYSIA

MARCH 2013

SUMMARIZATION OF ARTICLE

In the article "Small and Medium Enterprises in Malaysia: New Challenges and Future Research," by Dr. Chin Yee Whah, Lecturer, Department of Anthropology and Sociology, Universiti Sains Malaysia, we learn that small and medium enterprises (SMEs) in Malaysia are divided into two distinct categories. The first involves manufacturing and agro-based industries and the second comprises service, agriculture, and information and communication technology (ICT). In the 1970s, SMEs appeared when multinational companies (MNCs) began to operate in Malaysia and SMEs function to strengthen economic associations with MNCs, and the more technologically-advanced developed in their operation. Malaysian SMEs have advanced from a commodity-based to manufacturing sector indirectly attract more foreign direct investments (FDI) and contribute significantly to Malaysian economy.

Technological advancements and liberalization of the market under the Asean Free Trade Area and World Trade Organization (WTO) bring new challenges to local SMEs. Besides the transformation to knowledge-based economy, other crucial concerns are attention to the concepts of niche market, product differentiation, innovations and cost-effective strategies as enterprises restructure to encounter new challenges. SMEs are often constrained by many problems such as the lack of skilled workers, little innovations through research and development (R&D), limited economies of scale, and difficulty in shaking off traditional methods of operation.

In a sample study by the writer, it was found that 73 per cent had little or no basic ICT infrastructure and only 14 per cent of the SMEs provided formal training on the use of ICT to their workers. It is difficult for SMEs to face the challenge of globalization with this kind of progression. SMEs should enhance their technological capability in the area of ICT to keep up with MNCs in the use of advanced technology. For example, SMEs need to understand the concept of e-commerce and raise their awareness on the use of ICT in their business. Many SMEs in Malaysia have adapted fairly well to economic and political change and now we are in the process to transform from being conservative business enterprises to becoming more modern business enterprises. The use of ICT will help SMEs to enhance their performances especially in organizational structure, labour force and management style.

Dr. Chin