The Way to Internationalize

The journal discussed about the way to internationalize and improve the performance of Small and Medium (SMEs) in Malaysia. First and foremost, Dr. Shankar Chelliah was highlighted about the introduction of SMEs itself. He described SMEs as a 'born global' as the firms was generating the income more from global market than in home countries. Therefore, there are two main policies in order to encourage the development of SMEs sector. Firstly, the SMEs should provide high good quality of the goods and services. Secondly, the SMEs also need to increase the productivity using the technology in Malaysia in order to compete with other sectors. Obviously, these two policies play an important role to improve the SMEs performance in Malaysia.

According to Dr. Shankar, the criteria used to define SMEs in Malaysia are based on their employees and the annual turnover. If the firm has less than 50 full-time employees and annual turnover is not more than RM10 million, so the firm is define as small-scale firm. However, if the company has 51 to 150 employees and its annual turnover is between RM10 million and RM25 million, so the company is define as medium-scale enterprise. Besides, he also stated that the SMEs are expected to contribute 50 percent of the gross domestic product (GDP) in 2020. This is show that the SMEs firm has potential to contribute half of the GDP especially in year 2020 which Malaysia is expected to be a developed country.

Other than that, in term of SMEs internationalization, he said that there are two main motivations for firm's internationalization which are traditional motivations and emerging motivations. The firm should cover the main supplies especially minerals, energy and scarce raw material resources in order to bring firm to invest outside of this country. The firm also needs to set the low-cost factors of production as it is known as important rule in order to internationalize the firm. Based on the journal, the writer also state about how the internationalization is measured which are through the eigenvector-weighted sum of FSTS (foreign sales/total sales), FETE (number of foreign employees/number of total employees) and FOTO (number of foreign offices/number of total offices). In another side, sometimes people also measured the internationalization based on the firm activities such as import and direct export as well. In fact, there are many ways we can use to measure internationalization and the studies have found that using the percentage of sales and profits from international sources is a better way to measure internationalization.

At the end of his writing, Dr. Shankar found that SMEs that have internationalized are able to create knowledge and technology skills, diversify resources and stimulate development, growth and success. Therefore, the SMEs firm should use systematic internationalization approaches such as motivation and strategic planning, market research and market selection