Monday, September 20, 2010

Does Malaysia’s SMEs ready for e-business?

Small and medium enterprises (SMEs which make up 99.2% of the business in Malaysia) are urged to increase their penetration into the non-traditional markets such as Brazil, Russia, Middle East, China and India as to improve their performance. SMI Association of Malaysia President, Chua Tiam Wee said, the nontraditional markets provide vast opportunities and can help reduce the dependency on the traditional export market. In order to go global, SMEs need a greater management information system as easy for them to manage the entire business.

In digital economy, the potential benefits of information and communication technologies (ICTs) to SMEs are well known where it enhance SME efficiency, reduce costs, and broaden market reach, both locally and globally. It also provides large opportunities for entrepreneurs and business entities to operate their business through online and apply an innovative business models. In some industries, businesses are learning now that electronic business is not only an option to consider, but a requirement for survival. Just in year 2006, close to 140 million SMEs in 130 countries employed 65 percent of the total labour force.

The contribution of SMEs in providing employment opportunities and countries’ GDP can be strengthen by having ICT and implement the electronic business as to run the business smoothly. However, implementing ICT could be more challenging than we thought especially among SMEs! Investing the ICT in the company require huge cost and the firm need to ensure the return on investment (ROI).

To what extend implementation of the electronic business was reach the desired outcome?
On top of that, those queries should be answered first if the SMEs want to implement electronic business as a medium to do the business transaction. Why Malaysia’s SMEs need e-business as a requirement for survival? Does the traditional business transaction is not relevant anymore to them in current? And how about the affordability to finance the information and technology in the firm?

What is e-business?
E refers to electronic. As the name implied, e-business is do a business electronically. In other word, it is a transaction of buying and selling goods and services, servicing customers, collaborating with business partners, conducting e-learning and conducting electronic transactions within an organization. Based on this definition, e-business can be implemented if the organization is large enough and have a few branches which are the electronic transaction become a main function for the firm run their business.

Business capacity

* MRS: Manufacturing-Related Services
** ICT: Information and Communications Technology

Based on the table above, SMEs have three different sizes and different number of employees depends on the industries that the firm is in. Look at the micro SMEs in primary agriculture, manufacturing and services sector, the number of employees are less than five (5) employees. By looking at this figure, does the electronic business is relevant to the firm? By having a small number of employees, of course the business activities are not large enough and the income of the company is not that high.

Financial stability
SMEs in developing countries face greater challenges in implementing electronic businesses compared to businesses in developed countries. Those challenges includes constraints related to technical infrastructure (access and pricing), laws and regulations in such countries, ability to learn new thing among entrepreneurs, limited logistics systems (roads, rail, and air), and more. Chua also had identified the key problems of local SMEs including financial facilities, market access, adoption of information communications, technology (ICT), competitiveness and human resource. Even though government provides funding for SMEs for example for investing in ICT, the industry is still facing difficulties in securing financing. SMEs need to have good track record of their financial situation as to get fund from government. However, many SMEs especially the micro and small SMEs didn’t have strong financial capacity.

Skill and competencies
Lack of ICT skill becomes a major weakness of SMEs in implementing the electronic business. Commonly, SMEs didn’t have specialist in ICT due to small capacity of labor and financial capability in having external ICT expertise. Thus, governments play major roles in promoting and providing basic ICT skills in primary and secondary school, and have an important role in conjunction with education institutions, business, and individuals in providing the framework to encourage ICT skill formation at higher levels, in vocational training and in ongoing lifelong learning.

Regulatory Trust
Does SMEs able to ensure the regulatory system will address security, privacy and consumer protection interests? This become a major issue when a business is planning to implement electronic business because the e-business always facing the problem regarding to cyber-crimes and cyber-security, spam, cross-border cooperation, and presence of low-cost online dispute resolution mechanisms among firms, and between firms and consumers. The common solutions to help businesses and government agencies take control of their entire IT infrastructure is like Tripwire, Webtrust and many more.

Implementing electronic business in small and medium enterprise might be a great idea as to improve the performance of the firm in running a business. However, it require a full commitment by the firm to apply the ICT function and ability to bring it into the firm. Therefore, implementing ICT could be more challenging than we thought.


Payne, J. E. (2002). E-commerce readiness for SMEs in developing countries: A guide for development professionals. Learnlink.

Zakaria, M.& Hashim, M. K. (2009). Perception of e-business among Malaysian SMEs : A recent survey. Malaysian Management Review.

By Arnida Jahya


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