OPPORTUNITIES AND CHALLENGES AS AN ENTREPRENEUR/SMEs IN MALAYSIA  Smallbuss lecture2 (opps n challenges as entrepreneur)
Upcoming SlideShare
Loading in...5

Like this? Share it with your network


OPPORTUNITIES AND CHALLENGES AS AN ENTREPRENEUR/SMEs IN MALAYSIA Smallbuss lecture2 (opps n challenges as entrepreneur)






Total Views
Views on SlideShare
Embed Views



0 Embeds 0

No embeds



Upload Details

Uploaded via as Microsoft PowerPoint

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
  • If you liked this, you'll love BillionairesBrain.com..
    Are you sure you want to
    Your message goes here
Post Comment
Edit your comment

OPPORTUNITIES AND CHALLENGES AS AN ENTREPRENEUR/SMEs IN MALAYSIA Smallbuss lecture2 (opps n challenges as entrepreneur) Presentation Transcript

  • 2. SESSION OBJECTIVES At the end of the session, students should be able to:  Understand basic opportunities available for SMEs in Malaysia  Understand the various challenges faced by SMEs in Malaysia  The importance and challenges of women entrepreneurs in Malaysia EREE2102 Lecturer M.Ridzwan FEA, UM, KL 2
  • 3. BASIC OPPORTUNITIES  It is known that nurturing entrepreneurship is crucial in economic growth. Employment creations, increase in standard of living, increase in GDP and others. The nest or the measure of this success is the growth of SMEs  Nearly 56% of total employment comes from SMEs  Nearly 99% of total business establishment  Malaysia’s GDP at 31%  Despite Malaysia’s moderate economic growth, the SMEs is expected to have a steady and higher growth  For year 2011, growth is expected at 8.5% against 6% of GDP, which is consistently 2% higher than national GDP since 2004  Contribution of SMEs to GDP increased by 2.2% from 29% in 2005 to 31.2% in 2009  Sectors that are expected to grow for SMEs in the near future will be infrastructure, education, healthcare, oil and gas, and plantation. This is due to huge government and private sector investments in these areas of the economy EREE2102 Lecturer M.Ridzwan FEA, UM, KL 3
  • 4. BASIC OPPORTUNITIES Government’s efforts to promote entrepreneurship and SMEs…… Privatisation Policies  In early 80s, government made an effort to create entrepreneurs that will become the role model for future entrepreneurs  The privatisation exercise undertaken by government in various sectors namely in infrastructure and services is the answer to fast track entrepreneur development  The construction sector has seen massive privatisation exercise undertaken by the government where schools, government buildings, hospitals, road and highways, and others were given out to companies which were previously constructed by the Ministry of Infrastructure (Kementerian Kerja Raya) EREE2102 Lecturer M.Ridzwan FEA, UM, KL 4
  • 5. BASIC OPPORTUNITIES  Later, the privatisation has been extended to selling government owned companies to entrepreneurs such as telecommunication and post services, airlines, plantations and others  In its effort to create entrepreneurs, government has also privatised non essential services such as cleaning, security, back office processing and others  Some of its privatisation policies has created successful entrepreneurs while others are total failure especially on the policy of selling government owned companies to the entrepreneurs  Criticism has been on nepotism, unequal of wealth distribution, unfair distribution of contracts and others EREE2102 Lecturer M.Ridzwan FEA, UM, KL 5
  • 6. BASIC OPPORTUNITIES       Entrepreneur Development Program Government has formed PNS to encourage entrepreneurship in retail business especially among graduates and professionals Graduates were asked to undergo psychological test to determine the entrepreneur’s characteristics PNS provided training and seed money to start the business. Entrepreneurs will operate their business whilst monitoring and control of cash flows and strategic decisions were made by PNS Government has created MARA to inculcate entrepreneurships among bumiputra entrepreneurs Providing assistance for start up, funding, training and place to do business MARDI and SIRIM through their research findings will identify the suitable entrepreneurs to commercialize their products. These agencies will provide training to entrepreneurs and help entrepreneurs to market their research findings EREE2102 Lecturer M.Ridzwan FEA, UM, KL 6
  • 7. BASIC OPPORTUNITIES  At school level, entrepreneurships is part of co-curriculum and students’ activities  Subjects such as economics, accounting and others are the introductory to the basic entrepreneurships  At university level, it is the policy of Ministry of Higher Education to have a subject on entrepreneurships at all the public universities Financial Assistance  The formation of SME Bank and Bank Pembangunan Berhad are specifically to assist entrepreneurs in acquiring either start up money, additional capital or purchase of equipment  SME Bank has its own incubator program for entrepreneurs providing loans, place of business, advisory and export facilities  Agro Bank provides loans and advisory for agropreneurs. It regularly conduct training for entrepreneurs in agricultural sector EREE2102 Lecturer M.Ridzwan FEA, UM, KL 7
  • 8. BASIC OPPORTUNITIES  Majority of government funds and other financial subsidies for SMEs were channel through BSN and Bank Rakyat Research and Development  SIRIM is responsible in assisting SMEs to develop industrial products namely new products development, packaging, standards, modernisation of production processes and, mechanisation and automation  MARDI is involve in agricultural technology and food production. Development of new agricultural base products, mechanisation of agricultural sector and developing food production processes  Both agencies are also responsible to help SMEs in turning the production processes into more efficient and modern manufacturing activities EREE2102 Lecturer M.Ridzwan FEA, UM, KL 8
  • 9. BASIC OPPORTUNITIES     Trade and Business Promotion Ministry of International Trade and Industry (MITI) is responsible to promote and assist SMEs in their efforts to export their products and services overseas. Various trade missions and exhibitions were organised by MITI at potential export markets especially in USA, Europe and Asia Export funds, schemes, export guarantees and other forms of financial assistance were provided by MITI to assist SMEs in participating the trade missions and to export their products Regular workshops and seminars relating to SMEs’ export opportunities were conducted by MITI for entrepreneurs MITI is also responsible to provide market intelligent on specific market to SMEs especially on the overseas’ changing market trend, market’s needs and product’s requirements EREE2102 Lecturer M.Ridzwan FEA, UM, KL 9
  • 10. BASIC OPPORTUNITIES       Economic Development and Policies Development of Multimedia Super Corridor and Cyberjaya is an effort by the government to produce technopreneurs MSC is a place for technopreneurs to do business with all the necessary facilities available to produce and to market their products Cyberjaya is a place for technopreneurs incubation process. Future technopreneurs are trained and develop at Cyberjaya where they are free to develop any technologically base ideas and products In recognition of biotechnolgy as a potential growth sector, government has develop a bio nexus valley Entrepreneurs were provided with special funding for research and development in bio technology, seed money, infrastructure and facilities to start their business Business advisory, promotion and additional capital were also provided by the government EREE2102 Lecturer M.Ridzwan FEA, UM, KL 10
  • 11. BASIC OPPORTUNITIES Private sector’s role in promoting entrepreneurship and SMEs…         Vendor Development Program In-house or outside vendors In-house vendor program is to encourage and inculcate entrepreneurships among employees It is also a way to reduce manpower Companies just concentrate on their core activities whereas supporting activities were privatise to vendors Mentor Mantee Program Big corporation will act as mentor to SMEs Provide advisory, marketing expertise, operational experience and other aspects of operating the business Provide networking and benchmarking for SMEs Upon graduation on mentor-mantee program, some of these SMEs will become suppliers to these big corporation EREE2102 Lecturer M.Ridzwan FEA, UM, KL 11
  • 12. BASIC OPPORTUNITIES        Purchasing Policy The policy is to encourage SMEs to supply their products to big corporation An example of this policy is the practice adopted by the hypermarkets Hypermarkets will sign a contract manufacturing or commitment to purchase SMEs products These products were placed at similar shelf as other branded products Another method practiced by the hypermarket, is where the SMEs were provided with specific area to sell their products Some form of subsidies were provided to reduce the cost of doing business with the hypermarkets Promotional and marketing activities were also jointly organise by the hypermarkets together with the SMEs EREE2102 Lecturer M.Ridzwan FEA, UM, KL 12
  • 13. BASIC OPPORTUNITIES  Two major contribution that will help SMEs in their growth are the government’s ETP and its policies on moving from low-value manufacturing and plantation base to higher-value electrical and electronic, health, tourism and education sectors  In the 10th Malaysia Plan, ETP is a joint effort from the government and private sector initiatives to develop Northern, Southern and East Coast areas into high impact economic growth concentrating on service sector, industrial sector, agricultural sector. The investment will be from the private sector either foreign or local investors whilst government will invest in infrastructure, land and ease of doing business  In return, the SMEs will benefit from outsourcing business activities or act as the satellite for bigger companies in carrying out various projects  The formation and agreement of free trade areas between Malaysia and China, India, Korea and Japan is expected to help SMEs to grow further in the export activities EREE2102 Lecturer M.Ridzwan FEA, UM, KL 13
  • 14. SMEs BY SECTOR 87% Agriculture Manufacturing Services 7% 6% Agriculture includes Plantation & Horticulture, Fishery, Poultry Manufacturing includes Textiles and Apparels, Metal and Non-Metallic Products, Food and Beverages Services includes Wholesale and Retail, Restaurant and Hotel, Professionals and Other Businesses, Transport and Communication EREE2102 Lecturer M.Ridzwan FEA, UM, KL 14
  • 15. CHALLENGES Problems facing the SMEs that need immediate attention:  Access to funding – banks are selective due to lack of track record and poor cash flow management  Issues relating to research and development – SMEs does not allocate sufficient funds for R&D  Under utilization of information and communication technology – no allocation or minimum allocation of fund for ICT, for some, the owner are not interested or lack of ICT knowledge  Labour shortage – local labour shortage especially skills and nonskills manpower and difficulty of acquiring foreign labour as replacement EREE2102 Lecturer M.Ridzwan FEA, UM, KL 15
  • 16. CHALLENGES  Lack of branding awareness – many SMEs still consider brand is not important and lack of interest on the need to develop, pattern and promote their brand  Lack of access to domestic and international markets – lack of resources to promote products in overseas’ market (money, manpower and knowhow), difficulty to have their products on the display shelf especially in the hypermarkets and supermarkets, and limited distribution capabilities EREE2102 Lecturer M.Ridzwan FEA, UM, KL 16
  • 17. CHALLENGES Tackling the problems:  Access to funding  Shifting the mindset into establishing or building a credit track record with any established agency or institutions  Proper financial track records  Prudent cash management  Register with CGC for credit rating for future and on going loans applications  The needs to provide soft loans with low interest rate, thus entrepreneurs will work harder to repay the loans  Good credit cultures among business sector especially rating on the payment risk. It is the evaluation of each companies on the ability to pay their credits (CITOS for business) EREE2102 Lecturer M.Ridzwan FEA, UM, KL 17
  • 18. CHALLENGES  Other innovative financing such as venture capital, mezzanine financing, private equity financing, barter exchange system and forming cooperatives or consortiums  Increase in credit guarantee scheme. Government has topped up the funding of this scheme through CGC by another RM3 billion to a total of RM10billion in 2011  Additional funds for SMEs to consider includes Industry Restructuring Financing Guarantee Scheme for retooling activity to value add the products and to encourage the usage of green technology  Research and Development  There is a need to encourage the SMEs to innovate new products and further develop their existing products. Entrepreneurs should change their attitudes and mindset towards R&D  Government through various agencies has provided many funds for this purpose  Agencies such as MARDI, SIRIM and others has been providing a lot of assistance to willing entrepreneurs in developing their products EREE2102 Lecturer M.Ridzwan FEA, UM, KL 18
  • 19. CHALLENGES  ICT  Entrepreneurs should accept that ICT is a tool to enhance their business. It helps to streamline the business processes, increase customer base, customer loyalty, better communication, ease in monitoring and control  ICT should be an investment not one of the cost in doing business  SMEs should include expenditure on ICT in their annual budget  Government has introduce a scheme for SMEs to enhance their ICT capability but the take up percentage is very minimal against the number of SMEs in Malaysia  Tax reduction on ICT products by the government in recent budget should be a spur or incentive for SMEs to invest in ICT  Internet connectivity among SMEs are high with the introduction of wireless and fibre optic connections but more effort should be made by SMEs to make use of the internet to introduce and market their products  Internet should be consider as another marketing tools in the promotional and advertising activities of SMEs EREE2102 Lecturer M.Ridzwan FEA, UM, KL 19
  • 20. CHALLENGES  Labour shortage  Educational system for secondary, vocational and after schools     program should be revamp to match between the skills required for the SMEs and the job seekers The educational foundations acquired during schooling will prepare the job seekers for training during employment Government should relook at the minimum wage policies with the exception on SMEs Liberalisation on of the foreign labour policy by allowing SMEs to hire right people with the right skills SMEs should make full use of the training programs and special scheme provided by the Ministry of Human Resources for its employees to enhance their skills and knowledge EREE2102 Lecturer M.Ridzwan FEA, UM, KL 20
  • 21. CHALLENGES ● Brand awareness  Brand awareness is still low among SMEs and unwilling to invest in       branding The SMEs has to change this mindset on branding and ways of doing business SMEs need to look at branding as an asset and need to nurture this asset for future business success Brand as an intangible asset has its value and sometime, its intrinsic value is far more valuable than the business itself. This concept need to be educate to all entrepreneurs and business owners Government through various agencies especially MITI has been actively encouraging the SMEs to invest in branding so as the export potential can be achieved Education and seminars on branding needed to be further enhance among SMEs as the number of participants is less encouraging Trade associations, entrepreneurs associations and other such groups should increase their program on branding so that entrepreneurs are well aware on the importance of branding EREE2102 Lecturer M.Ridzwan FEA, UM, KL 21
  • 22. CHALLENGES ● Access to domestic and international market  There is a need for SMEs to enhance their product packaging either in design, material use and ease of use in order to attract the domestic market  Government through SIRIM, MARDI and universities has design facilities to help SMEs in this area  The mindset of the population need to change upon assuming local products are less superior than imported ones. Campaign and TV advertisements are not enough to ensure the success but a good start  Business associations, trade associations should work together with the government in promoting local products to local market  SMEs should find innovative way to distribute their products either through speciality stores or through efficient and effective deliveries  Big businesses should allow more local products into their operations and by having a local first policies EREE2102 Lecturer M.Ridzwan FEA, UM, KL 22
  • 23. CHALLENGES ● As for export market, efforts by government to organise trade mission and     trade exhibitions bears some success for SMEs although the number of SMEs participating are still marginal as compare to the total number of SMEs in Malaysia Many SMEs are unable to fulfill export orders due to their small production capacity but still interested to participate in the trade missions and export their products. Thus, capacity measuring should be put forward before participating in any trade missions Many SMEs lack financial resources to participate in trade mission although their products are export potential. Thus, special fund should be set up to help SMEs for this purpose Trade associations and business associations should establish consortiums or cooperatives to help their members reaching the overseas market Regular and schedule seminars or workshops organise by associations for members on export processes, the pitfall and the others EREE2102 Lecturer M.Ridzwan FEA, UM, KL 23
  • 24. WOMEN ENTREPRENEURS IN MALAYSIA Women entrepreneurs are becoming increasingly recognised as one of the important roles towards developing Malaysia’s economy. In year 2000, Population Survey indicated that 30% of total women employment in SMEs are working proprietors (part-timer) and active business partners. In 2003, 36.8% (1,122,000) of them are active business partners, indicating an ever increasing involvement of women in SMEs. In another report, a survey conducted found that 44% of Malaysian women expressed desire for self-employment either becoming part-time entrepreneur or active business person. This trend is expected to continue in the near future due to internal and external factors. Women have been involved in various business sectors even in areas where formerly being dominated by male entrepreneurs. EREE2102 Lecturer M.Ridzwan FEA, UM, KL 24
  • 25. WOMEN ENTREPRENEURS IN MALAYSIA The external factors that create the interest in entrepreneurship among women in Malaysia:  Government policies – Support for women business association, favorable policies on entrepreneurship and others  Education – School, universities, government organise program  Role Model – Successful women local and overseas  Life Style and Perceptions – Life style of successful business women and the changing perception of community towards women entrepreneurs  Financial Facilities – Private and Public  Economic Opportunities – Economic growth in the country, region and the world EREE2102 Lecturer M.Ridzwan FEA, UM, KL 25
  • 26. WOMEN ENTREPRENEURS IN MALAYSIA The internal factors are mostly concern on the push factors of the entrepreneurs namely:  Family Support and Encouragement - Parents, husband and friends  Psychological Factors - The Needs for Achievements and Recognitions  Ever Willing to Take Risk – The experience in risk taking during employment make women more brave to take risk in becoming an entrepreneur  Work Experience – Establish networks of suppliers, contractors, customers and even ideas during working EREE2102 Lecturer M.Ridzwan FEA, UM, KL 26
  • 27. WOMEN ENTREPRENEURS IN MALAYSIA Women approach their entrepreneurship process differently from men due to their socialisation experience. This socialisation through professional experience or social network affiliation shape their strategic choices during implementation stage of entrepreneurship process The choice of business creations and growth expectations are differ from men but their tendency to fail is no more than men-owned business. Women entrepreneurs are more likely to enter business due to intrinsic goals such as independence, flexibility in running the business and domestic lives. Whereas men, pursue business for financial gains. Therefore, women perform less well on quantitative measures such as profitability, job creation and turnover Women assess success through their achievement in self-fulfillment, goals attainment and satisfaction of being dual role activities EREE2102 Lecturer M.Ridzwan FEA, UM, KL 27
  • 28. WOMEN ENTREPRENEURS IN MALAYSIA     Women’s emphasis in achieving intrinsic goals and lower start up capital explain why women-owned businesses are poorer in performance and growth. Apart from that, barriers of entry for women entrepreneurs are higher than men, and raising the difficulty for women to establish and grow their business. Among the barriers for women entrepreneurs are: Credit facilities and availability Formal social and business networks Education and experience Dual role activity of being an entrepreneur and family care responsibilities EREE2102 Lecturer M.Ridzwan FEA, UM, KL 28
  • 29. WOMEN ENTREPRENEURS IN MALAYSIA Credit facilities and availability  Difficulties in obtaining credit and capital assistance  Including start up funds, marketing and promotional funds even additional capital for expansion  The difficulties are due to women being stereotyping as less successful in developing their business, limited financial success and lack on motivation to grow their business  Reluctant by financial institutions to provide capital and the tendency for women to start their business with smaller capital as compare to men, resulted in women seek their financial requirements from internal sources namely family, husband, their own savings or friends  However, there is a growing trend among women entrepreneurs seeking assistance for their start up capital, additional capital and financial assistance from government agencies EREE2102 Lecturer M.Ridzwan FEA, UM, KL 29
  • 30. WOMEN ENTREPRENEURS IN MALAYSIA  But it is found that those women entrepreneurs who used bank loans as a primary source of start up and additional capital perform better than those who borrowed from other sources  Although it is important to establish and maintain a relationship with the banking institutions, majority of women entrepreneur still faced with discrimination and obstacles  It is important for government agencies to provide financial assistance to potential entrepreneurs and existing entrepreneurs such as through SME Bank, MECD, Ministry of Agriculture, MITI, Ministry of Women, Family and Community Development and others  Government should have firm policies for banking institutions on providing financial facilities to women entrepreneurs EREE2102 Lecturer M.Ridzwan FEA, UM, KL 30
  • 31. WOMEN ENTREPRENEURS IN MALAYSIA Networking  Networking is critical element for women entrepreneurs because:  The survival of their business  Gaining access to capital and loans  Advice and information on their business  Access to suppliers and customers  Women entrepreneurs make use of family connections to provide them with:  Moral support  Source of cheap labour  Capital and loans  Access to social and business networking  However, women and men have different objectives in establishing networks. Men look at it as an instrument for personal and business gains. Women consider networking for socialising and relationships EREE2102 Lecturer M.Ridzwan FEA, UM, KL 31
  • 32. WOMEN ENTREPRENEURS IN MALAYSIA ● Women entrepreneurs often being excluded from the male dominated networks due to:  Perceptions that women entrepreneurs are inferior in doing business  Their management style is less sophisticated and irrelevant  Perceptions that the type of business created by women entrepreneurs are insignificant and very simplistic  When women entrepreneurs are confronted with business difficulties or problems, they seek assistant from:  Family  Close friends  Knowledgeable business sources (as last source to seek assistance), the order for men entrepreneurs are normally the opposite  Although the characteristics of women entrepreneurs are as such, this is compounded with the shortage of peer support networks, development program and others EREE2102 Lecturer M.Ridzwan FEA, UM, KL 32
  • 33. WOMEN ENTREPRENEURS IN MALAYSIA  Even though various industry associations and women entrepreneurs associations has been formed, the issue in networking remains prevalent especially for women entrepreneurs located outside major cities and rural areas.  Current activities of these associations includes:  Platform to establish networking, and exchange of information and experience  Training program  Seminars and workshops  Motivational program, leadership and self development and others  However, majority of women entrepreneurs were unable to join such associations or to participate in its activities due to geographical distance or the dual role of women entrepreneurs. EREE2102 Lecturer M.Ridzwan FEA, UM, KL 33
  • 34. WOMEN ENTREPRENEURS IN MALAYSIA  Those who stayed outside major cities or rural areas depends on the entrepreneurial activities and program organise by the government agencies  Inability to join or participate in these association limits their ability to seek formal/informal advices, and the survival and growth of their venture EREE2102 Lecturer M.Ridzwan FEA, UM, KL 34
  • 35. WOMEN ENTREPRENEURS IN MALAYSIA Education and Experience  Comparatively, women entrepreneurs lack the requisite level of education, training, business skills and entrepreneur training as compared to men entrepreneurs  Women are often in the disadvantage when training are concern due to:  Lack of awareness  Unable to afford the training cost (offered by private sector)  Geographical distance (located far from the central training locations)  Unwilling to depart from daily chores of running the business and being the housewife  Some are even not allowed by their husband to attend the training program when there are also men around EREE2102 Lecturer M.Ridzwan FEA, UM, KL 35
  • 36. WOMEN ENTREPRENEURS IN MALAYSIA  Women entrepreneurs are also slow in taking up the training program supported and organised by government agencies  Majority of training program provided by private or public sector are too general and not specifically tailored to the need of women entrepreneurs. It only emphasis on:  Start up processes less follow up training  Less strategic oriented training such as growth, expansion, export processes and others Thus…  Women entrepreneurs are most likely to seek and acquire their skills and experience from family members, close friends and working experience EREE2102 Lecturer M.Ridzwan FEA, UM, KL 36
  • 37. WOMEN ENTREPRENEURS IN MALAYSIA     Dual Role of Women Entrepreneurs Almost always women entrepreneurs play a dual role activities in their lives, being an entrepreneur and at the same time being a housewife and mother to their children Studies has shown that due to this dual role activities, majority of women entrepreneurs created their business based on the capability of juggling both roles concurrently In order to enhance the ability to manage their business and their household chores, the use of ICT is seen as the solution and practical component The use of ICT is crucial and unique in allowing women entrepreneurs to:  Sharpen their strategies in order to achieve success and growth  Provides greater access to the market, networking opportunities, and promotional activities  Enhance competitive advantage  Ease of managing their business via remote monitoring (work from home) EREE2102 Lecturer M.Ridzwan FEA, UM, KL 37
  • 38. WOMEN ENTREPRENEURS IN MALAYSIA      However.. Many SMEs in Malaysia lack internal internet infrastructure that will allow entrepreneurs to manage and monitor remotely Not more than 20% of SMEs have access to internet The digital gap between urban and rural not only widen the competitive advantage among entrepreneurs between these two areas but rural women entrepreneurs tends to be less efficient and organise than their counterparts in urban areas. Rural women entrepreneurs spent more time tending their family matters than managing their businesses Although efforts has been made by government agencies to bridge the digital gap and training programs on ICT for women entrepreneurs, only few have benefitted from such activities as compared to the total number of women entrepreneurs Government should emphasis more on training rural women entrepreneurs in ICT as their traditional cultures dictate them to consider family first before their business EREE2102 Lecturer M.Ridzwan FEA, UM, KL 38
  • 39. THANK YOU EREE2102 Lecturer M.Ridzwan FEA, UM, KL 39
  • 40. Tutorial Questions: Discuss the role of the trade and business associations in helping their members Has government successfully develop the entrepreneurship spirit Women entrepreneurs and their role in the economic development EREE2102 Lecturer M.Ridzwan FEA, UM, KL 40