Transferability of Chinese Human Resource Management Practices in Bangladesh: A Case Study

Academy of Taiwan Business Management Review 1
Relationship of Osmosis: Rise of Emirates, The Airline and Dubai,
The City
Dr. Achinto Roy, Deakin University, Australia
ABSTRACT
A relationship of economic osmosis is noticed between an airline and the country whose flag it
flies. Economic impact studies prepared by government organisations and airline managements
usually point out the economic benefits of setting up a new airline or flying a new route. These
benefits arise for the airline’s home base by way of greater connectivity with the world and include a
number of tangibles such as growth in tourism, increase in retail revenue from transit passengers,
access to cargo transport for importers and exporters, employment opportunities and a host of indirect
benefits that the local populace can gain from exposure to other countries and cultures. One also
notices two very important intangibles associated with an airline and the nation of origin- national
pride and national security. This paper analyses the remarkable success story of mutual growth shared
by Emirates, the airline and Dubai, the city, over the past twenty-five years and the opportunities that
the success of this duo signifies for others in the region.
INTRODUCTION
Success or failure of a nation’s flag carrier is usually perceived as an issue of national pride. This
is perhaps one of the key reasons why many governments in different parts of the world have
undertaken government bailout of national flag carriers from financial crisis and near bankruptcy.
Coupled with the much publicised national pride exists the underlying issue of self-interest in keeping
alive the airline that flies the national flag. Primarily, it is to provide the nation access to global
business opportunities and stimulate internal economic growth as well as to prevent foreign airlines
from gaining uncontrolled access to one’s home skies. Regardless of these objectives, the airline
industry is a rigorously competitive arena where Darwin’s law of survival of the fittest operates with a
vengeance and consistent commercial success year after year of operation is never assured.
During the past decade, under competitive pressures, the airline industry witnessed the
introduction of budget, no frills airlines in every major continent of the world including the Middle-
East. In this competitive scenario, the growth and consistent profitability of Emirates as a full service
premium airline is a remarkable success story built on a relationship of osmosis between Dubai, the
city and Emirates, the airline; made possible by the vision of a dedicated management team that
continues to work with the airline even after a quarter of a century.1
Today, Emirates is a global airline of repute flying a very young fleet of 1472
aircraft to over 100
destinations in all six continents and Dubai a much visited transit cum tourist destination. The
Emirates- Dubai combination represents the growth opportunities for an airline-transit hub osmosis
strategy which both Qatar Airways and Etihad Airways in the region are attempting to emulate. The
Emirates-Dubai story also represents the many challenges that one faces in the airline industry,
especially when one poses a serious competitive threat to other established players on their home
territory. This paper analyses the Emirates and Dubai duo as an excellent case study of a small airline
and a port city that grew into a global airline-transit hub combine of significance in 25 years. The
geographical location of Dubai has helped Emirates create a global air transit hub from where one can
fly to all six continents non-stop. The first section of this paper traces the history and rise of Emirates,
followed by an analysis of the success factors behind Emirates and the relationship of osmosis with
Dubai in section two. The third section discusses some of the challenges that Emirates has
encountered followed by the concluding section that briefly touches on what the future may hold for
airline-transit hubs in the region.
FORMATION AND RISE OF EMIRATES
It all started when Gulf Air, the then leading airline in the middle-east decided to cut back its
services to and from Dubai International Airport where 25 other airlines operated. Gulf Air did this
largely because it felt that it was acting as a feeder airline for other rival airlines operating out of
Dubai airport to European destinations, thus aiding and benefiting its own competition. Gulf Air was
owned by a consortium of four nations, namely, Abu Dhabi, Bahrain (headquarters), Sultanate of
Oman and Qatar. Gulf Air’s decision to withdraw its services from Dubai acted as a catalyst for the

1
Emirates started out in 1985 and still have with them Maurice Flanagan, KBE as founding CEO (now the Executive Vice
Chairman), Tim Clark (now President) and HH Sheikh Ahmed Bin Saeed Al Maktoum, Chairman of Emirates.
2
Emirates to hire 700 pilots over next 18 months, Gulf News, 4 June,2010 at http://gulfnews.com/business/
aviation/emirates-to-hire-700-pilots-over-next-18-months-1.636488 accessed on 14/01/11

2 Academy of Taiwan Business Management Review
creation of Emirates as it prompted Dubai’s ruler to back the launching of a Dubai based airline.
Emirates, the airline, was thus born in 1985 with a capital of USD 10 million and two wet leased
aircraft, namely a Boeing 737, an Airbus 300 B4 leased from Pakistan International Airlines and
another two Boeing 727s loaned by Dubai’s royal family from Dubai Air wing. The airlines’ maiden
flight, EK 600 took off on 25th
October, 1985 from Dubai to Karachi, Pakistan but Emirates was
forced to fly 80 of its staff incognito in order to cover up a dismal sale of tickets and avoid a public
relations disaster.3
The airline initially operated flights to three destinations, namely Karachi, Bombay
(now Mumbai) and New Delhi. During its first year of operation, Emirates carried 260,000 passengers
and 10,000 tons of freight taking away business from its rival Gulf Air whose revenues dropped by
30%.4
Emirates posted a modest profit in its very first year of operations and decided to expand and
invest in infrastructure.
The following year, Emirates posted a loss due to investments in infrastructure but grew its flight
network to Amman, Colombo, Cairo and Dhaka.5
In 1987, Emirates took delivery of its first
purchased aircraft from Airbus fitted to its own specifications designed to enhance passenger comfort
and deliver a superior customer flying experience over its rivals.6
Consistent increases in revenue,
profits, passengers flown and cargo carried, occurred over the next few years. Emirates doubled the
number of destinations flown to, every year between the years 1989 and 1991 (Monteiro, 2005:37).
Thus, within six years of operation, Emirates was flying via Dubai 25000 passengers per week to 23
destinations and had acquired nine aircraft.7
Both Kuwait wars in 1990 and 1991 provided an opportunity for Emirates to go against the
industry trend. Every other airline had grounded or reduced flights in the region, while some regional
airlines suffered losses as a result. Emirates continued to fly retaining 90% of its services except for a
few hours in 1991 when the liberation war for Kuwait began.8
The airline continued to make profits
throughout these times when others suffered losses and expanded by placing orders for seven Boeing
777s (Birtles, 1998:75) in 1991.
Later in 1992, Emirates acquired an exclusive terminal for its use at Dubai International airport
and became the first airline to order a USD 20 million full flight simulator from Airbus for training
purposes. The airline also introduced some notable industry firsts in the areas of customer service in
order to achieve superior service in the field over its rivals. In flight personal video systems for
passengers in all classes, telecommunications in all three classes and on flight fax facility were
introduced. Perhaps in recognition of superior customer service and innovative facilities provided by
Emirates, the airline won the “Executive Travel Airline of the year” award in 1994. This was very
encouraging for Emirates as it meant recognition in the business class passenger segment was a
landmark achievement as no other Middle-Eastern airline had received this award before.
Celebrating its 10th
anniversary in business, Emirates acquired the Emirates Aviation College,
previously owned by the Dubai Civil Aviation Authority, and expanded its services to Africa by
flying to Johannesburg and Nairobi in addition to 34 other destinations in Europe, Far East and the
Middle-East.9
By 1998, Emirates had flown 3.7 million passengers, increased its capacity by 26%
over previous years and carried 200,000 tonnes of cargo, largely using Dubai as the transit point. In
recognition of its superior customer service and innovative approach to service delivery, the airline
was voted as the ‘World’s Best Airline’ at the OAG awards.10
In 2001, Emirates placed the largest order for aircraft in the history of the aviation industry. The
airline ordered 58 new aircraft (mix of Airbus and Boeings) at a contract price of USD 15 billion.11
This was followed in 2005 by the largest ever order for Boeing 777s worth USD 9.7 billion for 42
aircraft12
and a historic civil aviation order for 120 Airbus A350s, 11 A380s and 12 Boeing 777-
300ERs in November 2007 estimated to be worth USD 34.9 billion per list prices.
Simultaneously, the Emirates-Dubai combination sought recognition in global markets not only
through the introduction of new destinations via Dubai but also brand associations with high profile
international events through sponsorships. Currently, some prominent sponsorship associations are:
FIFA World Cup, Rugby Union World Cup 2011, ICC World Cup 2011, Cricket Australia, Emirates
Team New Zealand, 15 International Golf Tournaments, equestrian events such as the Melbourne Cup,
Singapore Derby and the Dubai World Cup, Auto racing, Tennis, Arts and Culture.13

3
http://www.theemiratesgroup.com/english/our-company/our-history.aspx#y1985 accessed on 8/01/11
4
http://www.referenceforbusiness.com/history2/10/The-Emirates-Group.htmlReference for Business accessed on 7/01/115
6
Ibid.
7
Ibid.
8
Ibid
9
10
Ibid
11
http://www.emirates.com/english/about/about_emirates.aspx accessed on 14/01/11
12
Ibid
13
http://www.emirates.com/english/about/sponsorships/sponsorships.aspx accessed on 14/01/11

Currently, Emirates flies 1118 flights per week out of Dubai to all six continents14
and is
considered amongst the top ten airlines15
in the world. The airline has won over 400 awards16
during
the past 25 years and is amongst the most awarded airlines on a number of counts by a range of rating
agencies. The airline has a fleet of 14717
aircraft flying to over 100 destinations in 60 countries,
employing 30,000 people of 100 different nationalities. For the year ended March 31, 2010, Emirates
earned a net income of USD 964 million18
with annual revenues of over USD 6 billion. In 2010,
Emirates carried 27.5 million passengers with 78% percent seat load factor.19
The airline is reported to
be the fastest growing airline in the world today20
and has grown at an average rate of 20% for some
years returning profits every year since its inception except for a financial loss in 1986. The global
financial crisis appears to have had very little impact on either its ambitions or financial performance
beating the global aviation industry trend where a number of international airlines such as Lufthansa
and British Airways are losing money and curtailing operations.
DUBAI AND EMIRATES:A RELATIONSHIP OF ECONOMIC OSMOSIS
Perhaps national pride prompted Dubai to launch Emirates when Gulf Air withdrew services but
this had an economic logic of ensuring that Dubai’s trade links with the world did not suffer. Taking
into consideration the relationship between Dubai the city state and Emirates the airline, the success of
Emirates as a global and a consistently profitable airline can be attributed to a great extent to its
location in Dubai, among other factors. The airline has adopted the hub and spoke strategy with Dubai
as the central hub where all flights arrive and disembark passengers and then those passengers catch
flights to go their respective destinations or spend a few days exploring Dubai before they again fly
out to their actual destination. The hub and spoke strategy, if executed correctly, has the potential to
bring in tourism and retail spending at the central hub i.e. Dubai in this case.
The downside to this strategy is the amount of aircraft waiting time for the airline (can lead to
increase in airport ground costs and lower aircraft utilization rates as most airports have night
restrictions on flying in) due to delay in the arrival of connecting flights. This is a significant
disadvantage as aircraft utilization rates can be lower pushing up operational costs as compared to a
point to point flight (directly flying to the destination without a change-over to another flight).
However, in case of Emirates, the airline also achieved one of the highest aircraft utilization rates in
the industry at 18 hours per day as there are no night flight restrictions at Dubai International airport,
thus overcoming the only major disadvantage of the hub and spoke strategy. Currently Emirates flies
non-stop to all six continents from a single hub, i.e. Dubai demonstrating successful of the hub and
spoke strategy to grow the duo of Dubai and Emirates.
Paul Griffiths, CEO of Dubai Airports believes that Dubai has a number of distinct advantages
that will ensure Dubai International airport’s growth in the future (and thus the growth of Emirates).
According to Griffiths, “Dubai’s location, which puts it just four hours flying time from one-third of
the world’s population and 12 hours from 80 per cent of the population; an open skies policy that
welcomes competition, top notch infrastructure and compelling tourist attractions”21
will help both
keep growing. Thus, Dubai as the central hub for the airline has undoubtedly helped Emirates expand
air services to areas of heavy passenger traffic in Asia, Europe and Africa as well as launch onward
connections to United States and far off destinations such as Australia and New Zealand. The
phenomenal growth of Emirates has created a relationship of osmosis between the airline and the
continuous expansion of airport facilities at Dubai. Brand Emirates is also linked to “brand Dubai” as
a tourism destination. Dubai boasts of the world’s largest duty free shopping and an unsurpassable
retail experience, among other attractions. In addition, the airline has one of the youngest fleet of wide
bodied, long haul aircraft that can carry up to 500 passengers contributing to a lower per passenger-
per mile costs with a very healthy 78% seat loading factor (seat occupancy). Emirates enjoys access to
exclusive parking and maintenance facilities at its own terminals at Dubai Airport. The airline
significantly benefits from Dubai being a tax free emirate and a place where trade unionism is not
permitted- all of which contribute to the airlines profitability.

14
http://www.emirates.com/english/about/about_emirates.aspx accessed on 14/01/11
15
http://www.worldairlineawards.com/main/2010Awards.htm accessed on 14/01/11
16
A list of all awards that Emirates has received can be accessed at http://www.emirates.com/english/about/awards/awards.
aspx (accessed on 17/01/11
17
Emirates to hire 700 pilots over next 18 months, Gulf News, 4 June,2010 at http://gulfnews.com/business/aviation/
emirates-to-hire-700-pilots-over-next-18-months-1.636488 accessed on 14/01/11
18
Emirates Annual Profit to beat last year’s CEO says (update 1), 7 June 2010 at http://www.businessweek.com/news/
2010-06-07/emirates-annual-profit-to-beat-last-year-s-ceo-says-update1-.html accessed on 14/01/11
19
‘Rulers of the New Silk Road’, The Economist, 3 June, 2010 from http://www.economist.com/node/16271573 accessed
on 12/01/11
20
There are several other airlines who claim to be the fastest growing airlines in the world such as Etihad Airways, Qatar
Airways, Easy Jet and Ryan Air.
21
“Dubai International on course to become fastest growing major international airport” http://www.dubaiairport.com/
DubaiAirports/English/Media+Center/Press+Release/DANews13Jan10.htm accessed on 13/01/11

Dubai, too, benefits from the presence of Emirates in a big way. In 2008, Dubai International
airport was refurbished and a new Terminal was opened for the exclusive use of Emirates. This
contributed to 9.2% growth in passenger traffic during 200922
at Dubai International airport contrary
to the downtrend in passenger traffic elsewhere due to the global financial crisis. The airline’s
promotion of Dubai as not just a stopover point but also a holiday destination through its “Discover
Dubai” promotions further contributed to this growth. If one reviews growth in passenger capacity of
Dubai airport since 1974 to 2010, one notices an unrelenting growth and a positive correlation
between the growth of Dubai airport passenger capacity and Emirates’ expansion of services.23
In 2010, Dubai opened the first phase of a second international airport i.e. Dubai World Central-
Al Maktoum International airport. When both international airports in Dubai start operating by 2012,
Dubai will have the capacity to handle more than 90 million passengers. This shall exceed the
combined capacities of London’s Heathrow and Paris’s Charles De Gaulle airports. In 2010, Dubai
International airport experienced a 15% growth of transit traffic passing through Dubai. The airport
authorities expect to receive 4 million passengers every month in 201124
. Therefore, Dubai already
competes very successfully with rival transit hubs such as Singapore, Bangkok, Kuala Lumpur and
Seoul and is likely to challenge other transit hubs in Europe especially in case of travellers flying to
USA or Latin America from Asia and Australasia.
THE CHALLENGES
Emirates faced some challenging times after September 11, 2001. With the downtrend in global
air travel, rising security costs many major airlines faced financial trouble. Swiss Air closed business
while three major US airlines (Delta, United and US Airways) reduced staff and faced near
bankruptcy. British Airways launched a major cost cutting initiative while Air France and Lufthansa
scaled down their growth prospects (Monteiro, 2005: 39). Most airlines started reducing employees,
cutting down operational costs and routes; but Emirates decided to do take steps contrary to the norm
of announcing redundancies. HH Sheik Ahmed sent out an email to all Emirates employees telling
them (as cited in Monteiro, 2005: 39)
“We are a family, and I want to address you as the head of the family. I want to reassure you that
your safety and well-being is our paramount concern. My message is that this is the time to prove that
Emirates Group really is the best multinational team in the travel business. Show respect to each
other, and we will emerge an even stronger team.”
The airline industry had barely emerged from the aftermath of September 11, when it was again hit
by a substantial increase in oil prices in 2004 and once again in 2008-9 by the global financial crisis.
The last decade has been the most challenging for the airline industry worldwide. It is estimated that
post 9/11 worldwide the airline industry has lost around USD 50 billion (Falconer 2010). Contrast this
depressing scenario with the phenomenal growth of Emirates, the airline and passenger traffic at
Dubai during the same period. Essentially, it speaks of the airline’s ability to overcome challenges
thrown by shifting conditions in the global business environment.
Although Emirates has overcome the hurdles experienced by the airline industry in the past decade, it
still faces challenges in expanding operations. In recent times Emirates has faced opposition in
expanding its network to Canada and obtaining landing slots at the new airport in Berlin, Germany.
Canadian newspapers have reported that Emirates was in negotiations with Air Canada during 2006 to
fly into Toronto and other Canadian airports but business terms did not work out between the two
airlines.25
Possibly, as a result, the present Canadian government has denied Emirates landing rights
for additional flights that Emirates had proposed for Canada.26
In Germany, Lufthansa has accused
Emirates of gaining an unfair advantage in its services to Germany stating that Emirates flies into four
German cities while Lufthansa flies to only one city i.e. Dubai. Lufthansa has also approached the
German government to deny additional landing slots to Emirates at the new airport in Berlin
approaching completion.27

22
“Dubai International on course to become fastest growing major international airport” http://www.dubaiairport.com/
DubaiAirports/English/Media+Center/Press+Release/DANews13Jan10.htm accessed on 13/01/11
23
“Dubai International celebrates 50 years of growth: Airport transformed from humble airstrip to leading global aviation
hub” at http://www.dubaiairport.com/DubaiAirports/English/Media+Center/Press+Release/Dubai+International+
Celebrates+50+years+of+Growth.htm accessed on 17/01/1124
Dubai International’s traffic surges 15% in November at http://www.dubaiairport.com/DubaiAirports/English/Media+
Center/Press+Release/Dubai+International+passenger+traffic+surges+15+per+cent+in+November.htm accessed on
18/01/11
25
‘Air Canada proposed Emirates deal in 2006:documents’ at http://www.theglobeandmail.com/news/politics/air-canada-
proposed-emirates-deal-in-2006-documents/article1868756/ accessed on 18/01/11
26
‘Air Canada proposed Emirates deal in 2006: documents at http://www.theglobeandmail.com/news/politics/air-canada-
proposed-emirates-deal-in-2006-documents/article1868756/
27
‘Emirates fires at Lufthansa in battle over Berlin slots’ , at http://www.thenational.ae/business/aviation/emirates-fires-at-
lufthansa-in-battle-over-berlin-slots accessed on 18/01/11

EMIRATES AND DUBAI:FLYING INTO THE FUTUE
The airline industry in the Middle East has two entrants who are working towards emulating the
Emirates-Dubai success story, namely Etihad Airways from neighbouring Abu Dhabi as the central
hub and Qatar Airways from Doha, Qatar as the central hub. All three airlines have ordered large
numbers of aircraft from both Boeing and Airbus at a point in time when most airlines are not placing
large orders. In 2008, Abu Dhabi’s Etihad Airways placed a massive order of 205 aircraft worth USD
43 billion at list prices with Boeing and Airbus,28
while Qatar Airways had 140 aircraft on order in
2007.29
Emirates also are not lagging behind these two. In June 2010 the airline ordered additional 32
Airbus A 380s at a cost of USD 11.5 billion making it the single largest order ever for that aircraft.30
Again in July 2010 at the Farnborough Air show, UK, Emirates placed orders for 40 new Boeing 777s
at a cost of USD 9 billion. This turned out to be the single largest order at the show where the
combined dollar value of all orders amounted to USD 25 billion.31
Between the three airlines, the next
decade will see an addition of substantial number of aircraft. Assuming that some of those will be
used to replace old aircraft in case of Emirates, the region will have still added substantial capacity.
Coupled with these massive orders for aircraft, if one reviews the airport expansion plans and
developments taking place in Abu Dhabi, Dubai and Qatar, a very interesting picture emerges. For
instance, a new airport is being built in Doha to ultimately handle 50 million passengers, two million
tonnes of cargo and 320,000 landings and takeoffs each year from 2015 onwards.32
Add to this the
developments at Dubai and Abu Dhabi and one can visualise the Middle-East as the ultimate central
hub for all air travellers crossing the date line from either side. As a result, Europe may lose its
importance as a transit hub for air travel to North America in particular.
All these developments certainly augur well for the region. However, the outcomes will also
depend on how competition evolves in the region and whether each of these three airlines and their
respective central hubs reach a certain level of resource similarity. If they do reach similar levels of
resources then applying the logic in Chen (1996) firms with high degree of resource similarity will
engage in similar competitive actions. Likewise market commonality as defined in Chen (1996) will
also apply in this case. It will also have a significant bearing on the intensity of rivalry and therefore
the nature of competitive actions these airlines will engage in. Since all three airlines will be catering
to common markets at a certain point in time and all three will have similar resource capabilities, it is
expected that they will not compete with each other but end up cooperating with each other.
REFERENCES
Birtles, P. (1998:75) Boeing 777: Jetliner for a New Century, MBI Publishing Co., USA.
Chen, M. (1996), Competitor Analysis and Inter-firm rivalry: Towards a theoretical integration,
Academy of Management Review, 21: 100-134.
Falconer, T. (2010) Emirates’ Airlines Profits soars, Wall Street Journal, November 1, 2010
Monteiro, F. (2005) Hub of the World, Business Strategy Review: Spring 2005, pp.35-40

28
http://www.etihadairways.com/sites/etihad/ae/en/aboutetihad/mediacenter/newslisting/newsdetails/Pages/Etihadplacesor
derforupto205aircraft.aspx accessed on 18/01/1129
http://www.qatarairways.com/global/en/our-fleet.html accessed on 18/01/11
30
http://gulfnews.com/business/aviation/emirates-stuns-industry-with-11-5b-a380-order-1.638357 accessed on 18/01/11
31
http://www.economist.com/node/16634898?story_id=16634898 accessed on 9/01/11
31
http://www.airport-technology.com/projects/doha accessed on 18/01/11

Do Managerial Characteristics Promote Export Development? A Case
of Manufacturing Small and Medium Enterprises in Indonesia
Rita R. Pidani, Amir Mahmood and Frank Agbola
Newcastle Business School, Faculty of Business and Law
The University of Newcastle, Australia
ABSTRACT
This paper examines the extent to which the managerial characteristics of small and
medium-sized enterprises (SMEs) in the manufacturing sector impact on export development in
Indonesia. Utilising descriptive and inferential statistics techniques, we find that differences exist
between exporting and non-exporting firms in relation to the managerial characteristics of education
level, foreign language ability and international business experience. The findings indicate that a
manager’s educational attainment, foreign language skills, and international business experience have
a significant impact on the export development of the firm. The implication of the findings is that the
Indonesian government should pursue policies aimed at encouraging training and improving language
skills of managers, as well as promoting international business experience of managers, as these
policies are capable of enhancing the export competitiveness of manufacturing small and medium
enterprises in Indonesia
INTRODUCTION
In the last two decades small and medium-sized enterprises have played a critical role as an
engine of growth in both developed and developing countries. SMEs productive capacity contributes
to increased exports, they serve as subcontractors for a variety of input utilised by large-scale
businesses and provide a source of innovation. Their ability to adapt quickly to changes and to
identify market niches has placed them in a key position within the labour market. Their flexibility to
the shifting economic structure of a country has also allowed them to play a major role in removing
regional and sector imbalances in the economy. An economy that meets the needs of its SMEs
enhances the chances of job growth which then translates into a vibrant economy (Urata, 2002;
UNESCAP, 2009). In particular, in developing countries, where large government enterprises are
downsizing in response to the changing global economy (WTO, 2009), the creation of a healthy
business environment to help support small and medium businesses will, in turn, help with the
retention of skilled workers. It is, therefore, pertinent to understand the operation of SMEs and
establish effective support systems to help boost growth within these enterprises.
In Indonesia, the SMEs’ role in economic and social development has been a subject of empirical
research (see for example, Soesastro and Basri, 2005; Tambunan, 2007; Wengel and Rodrigues, 2006;
Thee, 2006). Their importance is often associated with the government’s efforts to eliminate the
imbalances caused by the uneven process of development between urban and rural areas. Although the
majority of Indonesian small enterprises do not evolve from small to medium to large enterprises
(Liedholm and Mead, 1999), most SMEs have achieved considerable growth while maintaining their
size thus retaining their fairly stable share of employment during volatile economic periods (Wengel
and Rodriguez, 2006). Despite the domination of large enterprises (hereafter LEs) in the past, the
recent priority of Indonesian government policies has shifted to that of SMEs due to the growing
evidence of the importance of SMEs as a source of income and employment and their ability to serve
as a catalyst to reduce poverty as well as the trade deficit in the country.
According to the Indonesian Ministry of Co-operative and SMEs (hereafter MOCSME), the
contribution of SMEs (excluding micro-enterprises) to the total GDP was nearly 25 per cent in 2010
(MOCSME, 2012). The number of persons employed by SMEs stood at around 6.4 million which was
almost three times larger than that of large enterprises (hereafter LEs) in the same year. The
contribution of SMEs to export was estimated to be 15 per cent compared to 84 per cent of LEs in 2010
(MOCSME, 2012). The narrowing gap between SMEs and LEs’ contributions to GDP and export
shares is seen as both a threat and an opportunity by exporters and non-exporters alike. The Indonesian
government through its MOCSME and National Agency for Export Development (hereafter NAFED)
has introduced various schemes and programs aimed at increasing SMEs’ export performance in the
global market. These initiatives are expected to also scaffold the Indonesian government trade policy
reforms that are aimed at transforming the government’s import-substituting pattern of industrialisation
during the oil boom era of the 1970s to an export-oriented one today (Thee, 2006).
Arguably, a shift from reliance on the oil and gas sectors to other sectors of the economy,
particularly the manufacturing sector, would create confidence among entrepreneurs and investors
thereby stimulating non-oil exports to offset the decline in tax revenue derived from oil exports. To
most Indonesian SMEs, however, achieving productivity and export operation remain challenging
tasks and their realization, to a large degree, falls back on the characteristics of individual firm.

Studies of SMEs and their problems have concluded that both managerial and organisational
physiognomies of SMEs require identification and quantification in order to address their difficulties
and weaknesses in order to close the productivity gap between themselves and larger businesses and
to equip corporate and public policy makers with strategic information in formulating and
implementing effective promotion programs.
The purpose of this study is to identify the characteristics of Indonesian SMEs and assess their
importance, particularly in the manufacturing industry. The rest of the paper is divided into three
sections. The next section provides an overview of recent developments of Indonesian manufacturing
SMEs. This is followed by a discussion of the managerial characteristics of SME manufacturers and
how this impacts on export development in Indonesia. Finally, we summarise key findings of the
study and make some policy recommendations for improving export competitiveness of SME
manufacturers in Indonesia.
SMALL AND MEDIUM ENTERPRISES IN INDONESIA: AN OVERVIEW
The roles of SMEs in the Indonesian economy are aligned with the primary goal of addressing
unemployment and income inequality. Recent statistics from the Ministry of Cooperative and Small
and Medium Enterprises in Indonesia has shown that small enterprise establishments, including micro
enterprises, amounted to 47,007,000 units in 2005, and increased by 14 per cent to 53,781,000 units in
2010 (MOCSME, 2012) (see Table 1). This strong growth has provided a positive impact on
employment opportunities especially for women and the young. According to MOCSME (2012), the
number of people employed in SMEs is larger than the number employed in large enterprises. In 2000,
for example, SMEs’ contribution was 5,169,329 employed persons. This number increased by 24 per
cent or 6,387,016 people in 2010, In contrast to the number employed in large enterprises which only
increased by 6 per cent and absorbed 2,839,711 people in 2010.
Table 1: Total Units of Enterprises by Size (by Employment Category in Thousand), 2005-2010
Size Category 2005 2006 2007 2008 2009 2010
MSEsa
47,007 48,985 50,108 51,369 52,723 53,781
MEsb
35.5 36.8 38.3 39.7 41.1 42.6
LEsc
6.8 4.6 4,5 4.7 4.7 4,8
Notes: a= Micro and Small enterprises; b = Medium enterprises; c = Large enterprises.
Source: MOCSME (2012).
Table 1 illustrates the dominance of SMEs in the Indonesian industrial structure. SMEs share of
the number of establishments consistently stood at more than ninety per cent during 2005-2010. Their
larger share of employment and larger number of establishments has also been significant in
improving their share of trade in the economy. According to the Indonesian Ministry of Industry and
Trade (hereafter MIT), SMEs’ trade value had increased by an average of five per cent during the
same period (MIT, 2011).
Although SMEs employ a large number of people in Indonesia, their low productivity compared
to that of large enterprises poses a great challenge to the industry. It is estimated that labour
productivity by large enterprises is about five times that of SMEs in Indonesia, thus demonstrating a
considerable gap in productivity across enterprises on the basis of size (MOCSME, 2009). In response
to this productivity gap, the Indonesian “New Order Era” government has implemented various
schemes aimed at providing assistance to SMEs to overcome the constraints faced by the industry, the
most notable being access to finance and poor managerial and marketing skills of SMEs. As well,
attention is being paid to the low level of technology adoption and innovation by SMEs (Thee, 2006).
These government initiatives are expected to boost SMEs’ productivity, create employment and
redistribute income throughout the nation-states (Hill, 2001). It is important to note that most of these
assistance programs have undergone a series of reviews given that they have often failed to achieve
the intended outcomes. Thee (2006) attributes the failure of government programs to the lack of
coordination between agencies in charge of SME programs, poor program design, and inadequate
monitoring and evaluation. In 1990, as part of the reform process in response to a high default rate
(which was more than 27 per cent) and debt collection problems, the financial assistance programs
introduced by the Indonesian government, such as the Kredit Industri Kecil (KIK) or Credit for Small
Investment and Kredit Modal Kerja Permanen (KMKP) or Credit for Permanent Working Capital,
were replaced by non-subsidised KUK (Credit for Small Business) (Thee, 2006).
Despite the unsatisfactory outcomes of assistance programs and the outstanding growth of
large-scale manufacturing in exports, the role of SMEs remains crucial for sustaining the economic
growth and development of economies in the developing world. One of the key reasons for the
continued policy focus on SMEs is their ability to exploit market niches that are not in the commercial
interest or are not within the technological interest of larger firms (Hill, 1995b). Another reason for an
emphasis on SMEs is their low import requirements and less reliance on formal credit (Wengel and
Rodriguez, 2006). The clustering feature of manufacturing SMEs, particularly in densely populated
regions, such as Java, a region which has the highest concentration of SMEs in Indonesia, has enabled
the sector to exploit agglomeration economies (Berry et al., 2001).

In recent times, the Indonesian government’s demand-driven and export market-oriented policy
has enhanced the export performance of SMEs. Although there are still a number of internal factors
that complicate the economic reforms in the SME sector, the schemes introduced by the Indonesian
government aimed at stimulating further entry and participation of SMEs in the export market, has
pushed the SMEs in Indonesia to the international stage and enabled greater competitiveness. In the
last two decades, the world has witnessed massive growth in global trade from a mere forty billion US
dollars in 1945 to more than twelve trillion in 2009 (WTO, 2010). This growth, and more recently the
volatile global economy, necessitates an understanding of the managerial characteristics of
manufacturing SMEs, and how these characteristics can be enhanced to achieve greater export
competitiveness of SMEs in Indonesia. This study seeks to achieve this by investigating
interrelationships between managerial characteristics and export development of manufacturing SMEs
in Indonesia.
METHOD
Participants and Procedure
For the purpose of this study, companies were chosen based on a list compiled by the
Indonesian National Agency for Export Development Program (NAFED) in 2007 and the 2007
Indonesian Yellow Pages. Any duplication in the listings was noted and deleted to avoid double
counting and to arrive at a complete list of SMEs from three selected industries. The sample
population in this study consists of small and medium sized firms dealing in exportable manufactured
products. The three types of industries examined are garments and footwear, furniture and wood
products. The main reason for targeting these industries is because most of the small and medium
sized firms involved in exporting in Indonesia fall under these three industries (Berry et al. 2001).
These industries can also be generalized as light industries or consumer goods industries which can
offer a better platform for export initiation, particularly in the context of developing countries (Ibeh
and Young, 2001; Tybout, 2000; and Wade, 2003). A questionnaire was administered in early 2008.
Given that there were 816 registered SMEs in Indonesia in these categories, utilising Cochran’s
(1963) method, the sufficient sample size was estimated to be 261. Based on this estimate, this study
aimed at interviewing 262 exporting and non-exporting firms. However, due to a non-response rate
which was about 54.6 per cent in this case, of the 435 invited exporters and non-exporters, only 204
of them agreed to participate in the survey. Ultimately, the study consisted of a sample of 197
manufacturing SMEs in Indonesia, after discarding 7 incomplete questionnaires. The above
non-response rate is consistent with personally administered questionnaires that range between 60
and 50 per cent (Groves, 1989; Ornstein, 1998; Massey et al. 1997).
Analysis
To understand the importance and characteristics of Indonesian SMEs, we used descriptive and
inferential statistics to describe the distribution of the data in the study. By using graphical analysis
we present a quantitative description of a set of observations that highlight the characteristics of
managers in manufacturing SMEs and their interrelationships with export development in Indonesia.
For testing significant differences between the groups, we used the implied correlation matrix. In
this study, we investigated the significant differences that exist between exporters and non-exporters
and across different sub-sectors and levels of export development using crosstab, chi-square test, the
t-test and Mann-Whitney U test. We also performed the Levene test for equality of variances to
ensure that homogeneity of variance assumption was not violated.
RESULTS
Sub-sector Characteristics of Manufacturing SMEs
The sub-sector shares of manufacturing SMEs in Indonesia are reported in Figure 1. Of the 197
firms surveyed, 80 firms or 41 per cent are from furniture and wood products, 60 firms or 30 per
cent are from garments, and 57 firms or 29 per cent belong to the footwear sub-sector. SMEs from
furniture and wood products were apparently more willing to participate in the survey compared to
garment and footwear which led to its larger sample composition than the other two sub-sectors.
Figure 1: Sub-sector Distribution of Manufacturing SMEs in Indonesia
Source: Derived from survey data.

Export development within each of the sub-sectors in the manufacturing industry is shown in
Figure 2. Figure 2 shows that the majority of exporters are in the furniture and wood products
sub-sector. Most of the non-exporters are in the garment and footwear sub-sectors. The furniture and
wood products subsectors experienced a strong revival in the 1970s and rapidly penetrated the
global market during the 1980s and 1990s, leading to an intense process of local industrial
expansion, a strengthening of inter-firm relationships of production, increasing sales and an
outsourcing of skilled carving work within SMEs clusters. Thus, although furniture and wood
product exports experienced a decline by the late 1990s as more countries entered into this
promising and profitable area of trade, this sector is still able to maintain its export share. Various
government schemes aimed at promoting value-added exports of furniture and wood products have
developed this sector’s capability of attracting investment to itself as well as to the relatively
unregulated forest sector. This in turn has also encouraged the use of non-wood materials and other
alternative materials from waste wood or plantation crops (IMI, 2009). Therefore, although timber
supply from clearing of conversion forests is scheduled to decline markedly by 2010 (FAO 1998;
ITTO, 1997), the furniture and wood products sub-sector will still be able to accommodate to
market conditions by improving quality control and superior design; meeting international
environment standards; and enhancing its marketing effort in international markets (Aswicahyono &
Hill, 2004). Furthermore, despite the fierce competition from countries such as China, Malaysia and
Vietnam, Indonesian furniture and wood products are able to maintain their competitive
characteristics by producing tropical hard-wood products with unique carving designs (IMI, 2009).
Figure 2: Manufacturing SMEs by Sub-sector and Share of Export Development
(Frequency Distribution)
The share of exports of the garment sub-sector in the survey stood at 5.1 per cent. The textile
and garment industry as a whole used to be the single leading foreign exchange earner in non-oil
and gas exports, reaching US$6.5 billion in 1997, a tremendous increase from US$559 million in
1985 (MIT, 2009). Since the early 1990s, about 16 per cent of the total value of Indonesian
manufacturing exports came from the clothing and garment sector. In 2000, the textile and garment
industry achieved a record US$8.2 billion in exports (MIT, 2009). This made Indonesia 10th among
the garment and textile producing countries. In 2003, Indonesia earned US$7.03 billion from
exporting textile and textile products but its rank slipped to 17th and accounted for only 2.15 per
cent of the US$500 billion global garment trade (Business News, 2006). Although the garment
sub-sector has existed downstream of the textile industry for longer than the wood and furniture
sub-sector has existed, in recent years it has been experiencing declines in exports due to the
increasing international competition from countries such as India, China, Pakistan, Bangladesh and
even from neighbouring ASEAN countries. Coupled with this, following the Asian financial crisis
in 1997, there has been a decline in capital investment in the garment sub-sector, (Akatiga, 2007).
Nevertheless, during the period 2000-2005, despite fierce international competition, exports from
the garment sub-sector grew steadily by the first half of 2006 by 0.82 per cent (Akatiga, 2007).
The share of exports of the footwear sub-sector was only 6.1 per cent (see Figure 2). Exports of
footwear grew in the late 1980s but declined following the financial crisis of 1997, peaking at
$US2.2 billion in 1996 (IMI, 2007). Following the Asian financial crisis, exports declined
dramatically with Indonesia’s ranking slipping from 3 to 10, being squeezed by major competitors
such as China, India, and Vietnam. Despite this loss in competitiveness, the growth experienced in
the global footwear market has meant that there is a potential for Indonesia to regain the competitive
edge it achieved prior to the crisis of 1997. This sub-sector is expected to catch-up as Indonesia’s
economy improves. Since 2007, foreign companies have been returning to Indonesia due to
increasing competitiveness of labour costs and skills (MIT, 2009).
The Pearson Chi-Square (χ2) test for independence was carried out to find out whether the
sub-sector and export development level had a relationship that could be used to explain the
distribution above. Prior to performing each test, the underlying assumptions of the test were

investigated. A contingency table generated by SPSS fulfilled the following conditions: (1) Each
observation is independent of all the others (that is each subject contributes data to only one cell).
Therefore, the sum of all cell frequencies in the table must be the same as the number of subjects in
the sample; (2) No more than 20 per cent of the expected counts are less than 5 and all individual
expected counts are 1 or greater (Yates, Moore, and McCabe, 1999). Following the test for
independence and given the calculated value of χ2 (2, N = 197) = 56.40 and a p-value of 0.000
which is less than the critical value of 0.05, the study rejects the null hypothesis and concludes that
there is a significant relationship between the sub-sector and the level of export development, at the
5% significance level.
Managerial Characteristics of Manufacturing SMEs in Indonesia
Age of the Manager
This study examines demographic or objective managerial characteristics instead of
subjective, psychological attributes of management to explain the physiognomies of the firm. The
management characteristics are: (a) age; (b) level of education; (c) overseas experience; and (d)
foreign language proficiency. Figure 3 shows that the majority of managers or owners in both
exporting and non-exporting firms are in a relatively mature age group. About 73.6 per cent of
respondents are aged 31 to 50 years. Some 15 per cent of sample firms are managed or owned by
people over 50. This pattern holds at the sub-sector level for both exporting and non-exporting
firms. This pattern is supported by Mann-Whitney U test which determines an insignificant
difference between exporting and non-exporting manufacturers in terms of their
owners/managers’ age (z=score = -0.754 and p-value = 0.451). Exporting and non-exporting firms
were found to have relatively equal mean ranks in their owners/managers’ age. These findings
suggest that in the context of Indonesia, the average age of the entrepreneur does not significantly
determine their tolerance toward challenges and risks of export endeavours. The results, then, fail
to provide support for previous empirical research findings (Leonidou et al. 1998; Ross, 1989;
Tseng and Yu; 1991; Ursic and Czinkota, 1989) suggesting the age of the entrepreneur as a
determinant of export involvement.
Figure 3: Manufacturing SMEs by Sub-sector, Export Development and Managerial Age
Level of Education
The investigation of the highest level of education achieved by owners/managers is presented
in Figure 4. These results show that the majority of respondents, regardless of their level of export
development, held a diploma or bachelor degree as their highest level of education (58 per cent).
About 12 per cent had achieved Master and PhD level and the other 30 per cent had finished
elementary or high school as their highest level. Exporters are more prominent than non-exporters
at the higher education levels. The findings at the sub-sector level show a relatively similar
distribution, in that firms of all sub-sectors were most numerous at the diploma and bachelor
degree level of education. None of the non-exporters owners/managers from wood products,
however, had a Masters or PhD. The findings from the Mann-Whitney U test support a significant
difference between exporters and non-exporters in relation to the owners/managers’ education
level as z-score = -3.357 and p-value = 0.001. The mean rank of exporters’ education (mean rank
= 109.80) is found to be significantly higher than that of non-exporters (mean rank = 85.62).
Hence, firms with significantly better educated work forces would be likely to have greater
commitment to exporting and increased ability to understand and anticipate foreign markets’
settings. These findings are consistent with Berry and Levy’s study in Berry and Nugent (1999).
They conducted fieldwork in Java among garment, wooden furniture and rattan SMEs exporters
and found SMEs exporters to be fairly well educated in comparison with SME entrepreneurs in
general. The complexity and accuracy needed for dealing with export documentation and
bureaucracy requires managers who are not only well educated but also able to understand the

operation and tackle the mechanics of exporting. While the role of education in export planning
and performance has been extensively discussed elsewhere (Samiee and Walters, 1999; Axinn,
1988; Reid, 1983; Simpson and Kujawa, 1974) the present findings have strengthened the
importance of knowledge acquisition in reducing the risk perceived by the individual (Gray, 1997)
which in turn promotes a more open-minded and interested evaluation of the benefits and
disadvantages of exporting (Garnier, 1982).
Figure 4: Manufacturing SMEs by Sub-sector, Export Development and Managerial Education
Notes: 1 = owners/managers without education; 2 = owners/managers with elementary and secondary education; 3
= owners/managers with diploma and bachelor education; 4 = owners/managers with master and doctoral
education (Suarez-ortega and Alamo-vera’s (2005) study).
Experience Abroad
Experience abroad refers to the owners/managers’ previous opportunities to live, work or
study abroad. Every respondent was asked a series of questions which were not necessarily
mutually exclusive, so an affirmative response to one or several of the statements (“I was born
overseas”; “my parents were born abroad”; “I have lived/worked abroad for some time”; and “I
have received some/all of my education abroad”), was treated as a single affirmative response. The
findings reveal that 85 per cent of the sample had not had any previous international exposure (see
Figure 5). The Mann-Whitney U test was conducted to find out whether there was a significant
difference between those exporters and non-exporters who had had international experience and the
results indicate that the mean rank of exporters’ international experience (mean rank = 104.38) was
significantly higher than that of non-exporters (mean rank = 92.34) at the 5 per cent significance
level. The results indicated a z-score of -2.402 and p-value of 0.016. These results reinforce
previous empirical findings suggesting that decision makers of exporting firms are likely to have
spent part of their lives abroad (Boatler, 1994; Garnier, 1982). Experience outside the country can
facilitate the chance for them to build contacts or networks that can be used to exploit international
market opportunities more than for those who do not have such connections.
Figure 5: Manufacturing SMEs by Sub-sector, Export Development and Managerial International
Experience (Frequency Distribution)

Source of data: Derived from the survey.
Foreign Language Proficiency
The study collected data on the number of foreign languages in which the owners of the firms
were proficient. Most of the owners or 62.5 per cent of the sample indicated that they were
proficient in at least one foreign language, usually English which is the common business
language of Indonesia. Along with English, 2 per cent of respondents indicated that they were
proficient in Italian, 4 per cent in German, and 3.5 per cent in each of French and Dutch. Figure 6

shows that the majority of respondents (42 per cent) indicate they have a fair level of proficiency
in English; 12.5 per cent did not know how to speak English at all; and only 6.5 per cent report an
excellent ability to converse in this language. Generally, exporters claimed greater English
language proficiency, that is, fair to excellent, than did non-exporters. as the proficiency level
advances from a fair to an excellent level. The Mann-Whitney U test results suggest that exporting
managers speak significantly better English than their non-exporting counterparts (z-score =
-4.544, p-value = 0.000). The mean rank of exporters’ proficiency level (mean rank = 114.80) was
higher than that of non-exporters (79.43). These significant results imply a positive link between
the language skills of the manager and the firm’s export development level. Pertaining to the data,
foreign language proficiency is not only useful in securing business transactions, but it is also
helpful in improving managers’ cultural understanding of overseas markets. The communication
breakdown identified in about a quarter of the total respondents could lead to a failure to adapt to
individual foreign markets’ specifications and requirements.
Figure 6: Manufacturing SMEs by Sub-sector, Export Development and Managerial English
Language Proficiency (Frequency Distribution)

Notes: 1 = not proficient at all; 2 = poorly proficient; 3 = fairly proficient; 4 = good proficiency in English;
excellent proficiency in English (Suarez-ortega and Alamo-vera’s study (2005).
CONCLUSION
This study contributes to the literature on exporting by examining the managerial characteristics
of small and medium manufacturing enterprises in Indonesia. By using cross sectional data collected
via survey questionnaire, the results indicate that managerial education level, international experience,
and foreign language proficiency are key determinants of an SME pursuing an export-oriented
strategy. Contrary to expectation, the age of a manager does not impact on the ability of a
manufacturing SME to become an exporter. The results emphasize that managerial skill development
is a key to achieving export development. Although formal education generally improves the
managerial skill base, the results of this study indicate that knowledge of a foreign language serves as
a catalyst for encouraging export development of manufacturing SMEs in Indonesia. This finding
suggests that, in addition to the governmental mandate of a Year 9 educational qualification for all
managers, there is the need for the Indonesian government to implement policies aimed at
encouraging managers of SMEs to pursue further education. This can be achieved by the government
implementing tax incentives by which managers who undertake further education and training could
claim the cost of the education from the government. Furthermore, as being able to speak a foreign
language is found to be key in enhancing the ability of a manager to engage in export activities, this
suggests the need for the Indonesian government to encourage managers of exporting firms to learn a
foreign language to enhance their negotiation skills and thereby promote export development. This
could be achieved by the Indonesian government implementing assistance schemes aimed at managers
upgrading their English and other foreign languages skills. We find that the more internationally
experienced a manager is the more likely it is that he will adopt an export development strategy. These
findings highlight the need for the Indonesian government to encourage and subsidize business-related
foreign trips and trade shows, or stage such trade shows domestically. Such programs are capable of
creating market opportunities and they generate self-confidence in SME managers to embark on an
export drive. This in turn will encourage innovation and product development for the export market.
Clearly, the results of this study provide some empirical evidence in support of the generally held
view of the growing importance of managerial characteristics in influencing export development. The
results highlight the need for pursuing greater public-private partnership aimed at enhancing
managerial knowledge, skills and competencies to encourage experiential learning thereby creating
the ability to enhance export development of manufacturing SMEs in Indonesia.

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Importance of Total Quality Management and Leadership
Communication to Enhance Islamic Quality at Malaysian Civil Service
Assoc. Prof. Dr. Raja Roslan Raja Abd. Rahman ,Dr. Kalthom Husain,Hassan Adnan
Mohamad Zahir Zainudin,Juan Rizal Sa’ari,Norazlina Mohd. Darus,Norwatee Abd. Rahman
Universiti Teknikal Maaysia Melaka,Malaysia
ABSTRACT
In the leadership communication styles, most of the middle management positions such as
managers, assistant managers and those at executives’ level are practicing good leadership
communication via enhancing the Islamic quality at Malaysian Public Service. A two-way
communication does exist among the staff especially in meetings, discussions and working in team. A
good leadership communication among the staff and their involvement are important in Malaysian
Civil Service in order to achieve the total quality management objective. Reason being is that the
leadership communication is the most important tool and vital part in all organisational operations.
Leadership communication could be the basis for understanding, cooperation, teamwork and positive
action, which without it such goals would be undermined at Malaysian Civil Service. Two-way
communication gives more opportunities to the staff to be involved in discussions and meetings which
create the spirit of togetherness in the organisation. The Total Quality Management (TQM) has
positively affected job satisfaction, the employees' ability to work together, improve the staff work
and builds leadership communication at Malaysian Public Service. Obviously, provide a significance
relationship between leadership communication and quality management in Islamic perspectives on
job satisfaction among the staff at Malaysian Public Service.
Keywords : Total Quality Management, Leadership, Leadership Communication, Job Satisfaction,
Malaysian Public Service.
INTRODUCTION
The Malaysian Public Service formerly known as the Malayan Civil Service (MCS) has assumed
a significant key role in the economic and social development of the country. Shaped by the country’s
historical development and its social and political institutions, the Malaysian Public Service has had a
remarkably interesting record. During the pre-independent period, the British introduced structures and
practices to help provide various basic services to the public in order to maintain law and order which
were aligned to the economic and political activities of the time. Those structures and practices set the
foundation of the Malayan Civil Service (www.pmo.gov.my/ksn/?frontpage/content/1995/2015).
With the aim of progressing towards self-determination after independence, the Malaysian Public
Service has undergone many changes to re-orientate and evolve into a civil service structure that is
relevant and progressive through the introduction of planned improvements and innovations to cope
with the developments at that time as well as future needs. To date, the Malaysian Public service has
staff strength of 1.2 million employees covering 28 schemes of service including the Federal Public
Service, the State Public Services, the Joint Public Services, the Education Service, the Judiciary, the
Legal Service, the Police and Armed Forces (Tan Sri Datuk Haji Arshad, 2008).
Since independence the Malaysian public service has assumed a multitude of roles in meeting the
needs and expectations of the public and other stakeholders. The public service, with the strength of
1.2 million members, has assumed the roles of negotiator, controller and facilitator. In addition, it has
also become the pace setter and the change agent for the country. In assuming these roles the public
service needs to perform numerous duties which include delivering services, handling public interest,
ensuring public security and safety, and community programmes (Wan Mansor Abdullah, 2005).
Significantly the Malaysian Civil Service has over the years carved its name and is recognised as
one of the best in the regions. It is credited for playing a key role in Malaysia’s development and
modernisation. Generally, the governmental efforts made during the past decades, have produced
favourable impacts in improving governance and the quality of services in the public sector.
In its efforts to meet the expectations of both the National Vision Policy and the National
Mission spanning from 2001 to 2020, the Malaysian Public Service continues to redefine itself in
these challenging times. Through the various tag lines such as “No Wrong Door Policy”, “Business is
not as Usual” and the creation of PEMUDAH for improving public service delivery system by
reducing bureaucratic obstacles and providing productive, creative and innovative services, it aspires
to become a strong partner with the different sectors in creating wealth for the nation. All in all the
Public Service has sought to be world-class and meet international benchmarks of performance and
excellence Dato’ Seri Syed Hamid, 2008)

PROBLEM STATEMENT
Leadership is the most important part of management. Leadership is stirring people so that they
are moved from within. It is stating goals that excite [people] and lift their sights. It is setting the
personal example, putting enthusiasm into the operation, and communicating with workers both ways,
listening as well as talking at Malaysian Civil Service. Leadership is a rewarding merit and penalizing
demerit, honestly and fairly. It is the right combination of these [qualities] that will lead people to do
the work that makes a business successful because they want to [Goble, 1972]. Leaders must
understand the difference between leadership and authority. Authority is delegated from those above
in the chain of command, whereas leadership is earned from those below and from peers [Rosenblatt
et. al, 1982]. In an organization, the utopian situation is for the individual who has been delegated the
leadership role from higher authorities to be leadership role from those below and from peers. Above
all, leadership is a position of servant hood [DePree, 1992]. The Japanese leader recognizes that rank
does not confer privileges, but that rank entails responsibilities [Drucker, 1992].
Leadership is one of the most important aspects in our life cycle. As we all noticed that leadership
communication is used in all elements at Malaysian Civil Service for example economic, social,
political, management, marketing, and many others. In leadership it consists all the needs to manage
your worker or your subordinates in an organization. Here the quality and leadership move together
towards their goals. For the past thousands years, philosophers, historian and social scientist
contemplated the phenomenon of leadership and their quality. The Ohio States of University have
made a research on this case since the past 40 years. This lead to understanding of leadership and the
quality as a set of behavior.
Leadership in quality at Malaysian Civil Service means that all the decision makers (leader) turn
to identify and define the skills and the abilities critical effectiveness at all level in a quality
organization. The importance of this concept is to translate these criteria along with the other quality
principles and practices into a set of leadership competencies. This is useful in selecting development
and rewarding in quality organization. It involves all the quality principles (the collective capacity of
the organization) and leadership practice (individual skill required for leadership success like
communication) at Malaysian Civil Service. So, the research question in this study were: What is the
importance of leadership the approaches of leadership at Malaysian Civil Service, Why the effective
communication skills and quality in islamic management importance at Malaysian Civil Service, What
is importance of Total Quality Management (TQM) and Leadership Communication at Malaysian Civil
Service, How the behaviour and attitude modification at Malaysian Civil Service, and What are the
Levels of Leadership Communication from the Islamic Perspective at Malaysian Civil Service?
OBJECTIVES
3.1 To understand the importance of leadership at Malaysian Civil Service.
3.2 To determine the approaches of leadership at Malaysian Civil Service.
3.3 To understand the importance of effective communication skills at Malaysian Civil Service.
3.4 To know the quality in islamic management at Malaysian Civil Service.
3.5 To understand the importance of Total Quality Management (TQM) at Malaysian Civil Service.
3.6 To know the importance of Leadership Communication at Malaysian Civil Service.
3.7 To understand the behaviour and attitude modification at Malaysian Civil Service.
3.8 To know the Levels of Leadership Communication at Malaysian Civil Service.
3.9 To understand the Leadership Communication from the Islamic Perspective at Malaysian Civil
Service.
LITERATURE REVIEW
Leadership
Leadership is the heart and soul of an organization at Malaysian Civil Service. No one really
manages an organization by shuffling numbers or rearranging organizational charts. What is really
managed in an organization is people! Leadership is the ability to inspire people to work together as a
team to achieve common objectives. People want to follow an effective leader [Geneen, 1984). No
leader can prove to a board of director show much leadership contributes to the bottom line in the
success of an organization at Malaysian Civil Service. However, leadership is, no doubt, the single
most important ingredient in organizational management, and good leadership which inspires people to
excel contributes as much as 80-90 per cent to an organization’s success [Geneen, 1984]. This
leadership can be exercised only through quality communication [Well and Spinks, 1992]. Leaders are
people who are able to express themselves fully; they know what they want, why they want it, and
more important, how to communicate what they want to others to gain co-operation and support
[Bennis, 1989)].
Total Quality Management
An emerging school of management thought today is the total quality management (TQM)
approach, emphasizing vision- and value driven leadership. This approach holds that an

organization elevates “customer focus” to a major element of its strategy. It presumes that all people
in an organization should strive constantly for the highest quality productivity possible [Well and
Spinks, 1992]. All employees must be dedicated to this commitment to excellence effort, and more
important, senior management must lead this quality effort [Walton, 1990]. The concentration is on
performing the best job possible on the first attempt and on working with any project as a team until
a high quality result is accomplished.
Total Quality Management can be defined as a meeting and striving to exceed the requirements
of the customers at Malaysian Civil Service. Another definition is providing the customer with
quality products and services at the right time and at the right place. According to Adnan (1996),
TQM is not a program, it is a transformational process of bringing positive change that is a positive
organizational change for:
a. Excellent performance
b. Comprehensive and balanced human development.
c. Everybody in the organization doing the right thing rightly.
d. Customer both external and internal is satisfied, confident and loyal.
To produce a quality service requires a quality process at Malaysian Civil Service. A quality
process can be defined as service delivery operation that utilize such as accepted TQM processes as
employee empowerment, employee education and training, solicitation of employee suggestions for
improvement, utilization of teams for problem solving and for getting work done, utilization of the
latest information and communication technology, utilization of concurrent engineering where
appropriate, development of focused units, focus on cycle time minimization, constant search for
productivity improvements, and other aspects of TQM (Pegels, 1995).
Effective Communication
Most leaders do not communicate effectively. They typically underestimate the importance of
communication to their success. Consequently, they often fail to communicate passionately their
vision, goals and expectations, elicit and act upon employee input, consistently share information
with employees, maintain sufficient information exchange with peers, customers and other
stakeholders, and regularly reinforce the goals and employees’ achievements at Malaysian Civil
Service. As a result, employees frequently feel uninvolved and uninspired. They are unlikely to
commit fully to their leader, to key goals, or to their organization. Productivity and retention suffer,
and customer loyalty weakens.
Islamic Quality Management
Islamic values provide a conducive framework for Quality Management with appropriate
techniques, approaches and management ethics. The Islamic concept of brotherhood and sisterhood
to each other is well defined. The distinction of race, colour, tribe, caste and language are not valid
criteria for superiority for it is quality behaviour that matters at Malaysian Civil Service.
All people are entitled to an ethically right behaviour irrespective of distinctions of caste, creed,
race and geographical locations. This has positive implications on attitudes towards one another and
this motivating factor of musawat (equality) given by Islam impacts a strong sense of responsibility
and belongingness. And this feeling further fosters a culture and incentives for continuous
improvement and commitment to work at Malaysian Civil Service. Islam considers work as ibadah
(deed).
Leadership Communication
Leadership communication consist of those messages from leaders that are rooted in the values
and culture of an organization and are of significant importance to key stakeholders, such as
employees, customers, strategic partners, shareholders, and the media at Malaysian Civil Service.
These messages affect the vision, mission, and transformation of an organization. The chief
intention of a leadership message is to build trust between the leader and her or his constituency at
Malaysian Civil Service. According to Baldoni (2003), traits of leadership communication reflect :
i. Significance. Messages are about big isues that reflect the present and future of the
organization (e.g.; people, performance, product, and services)
ii. Values. Message reflect vision, mission, and culture.
iii. Consistency. Message exemplify stated values and behaviors.
iv. Cadence. Messages occur with regularity and frequency.
In its simplest form, leadership communication is communication that flows from the
leadership perspective. It is grounded in the character of the leader as well as the values of the
organization. It is an expression of culture as well as an indicator of the climate, likes openness,
integrity, and honesty at Malaysian Civil Service. Leadership communications emerge from
organizational culture and values as from the values of the leader. Their ultimate aim is to build, or
continue to build, a relationship between leader and follower. The purpose of leadership
communication is to build (or establish) trust between leader and follower. This trust is essential to
leader’s credibility at Malaysian Civil Service.
There are many purposes and types of leadership communication. According Baldoni (2003),
each of the emerges from a leadership action that is communicated from the point of view of leader,

such as on doing what is beneficial for the organization and the people in it. Leadership
communications are designed to engage the listener, gain commitment, and ultimately create a bond
of trust between leader and follower. They also do something more such as drive results, enabling
leader and follower to work together more efficiently because they understand the issues and know
what has to be done to accomplish their goals at Malaysian Civil Service.
METHODOLOGY
Qualitative Research
In defining the qualitative research, Creswell (1998, 2007) argued that it is an inquiry process
of understanding based on distinct methodological traditions of inquiry that explore a social or
human problem in the natural setting. While, on the other hand Ghosh and Chopra (2003) defined
qualitative data as the form of descriptive accounts of observations. In real sense, qualitative
research is used to gain deeper understanding of the research concern, thus it is common in social
and behavioral sciences as well as among researchers interested to understand human behaviors and
functions (Ghauri & Grǿnhaug, 2005). Qualitative methods, indeed allow researchers to explore and
probe deeply into attitudes towards research issue; hence it is quite suitable for studying
organization, groups and individuals.
According to Myers (2009), qualitative research is good for exploratory research, when the
particular topic is new and there is not much previously published research on that topic. Researcher
also added that studying any specific subject in depth, qualitative research is the best. The most
common forms of qualitative research methods include such as participant observation, interview,
and focus group discussion used in the literature (Myers, 2009). According to Lincoln and Guba
(1985), qualitative method is appropriate to gain a ‘rich’ understanding of a phenomenon. In the
present study, researcher used interview method because this technique allows participants to
describe their perceptions, and also allow the researcher to question the participants directly about
how they understand their decision. Salkind (1997) argued that interviews are helpful to get
information that might otherwise be difficult to come by, including first-hand knowledge of
people’s feelings and perceptions. Thus, this study has been designed as library research approach to
understand the importance of total quality management and leadership communication to enhance
islamic quality at Malaysian Civil Service.
FINDINGS
Importance of Leadership at Malaysian Civil Service
Leaders understand that people is the most important component in an organization at
Malaysian Civil Service. To make people feel as though they are accomplishing something and not
just “putting in time”, a leader must work with people and not against them. A leader needs to create
an image which excites people and which inspires excitement at work [Goble, 1972]. Delegating
responsibility is as important a gift to followers as it is central to employee participation [DePree,
1992]. Since the beginning of time, people have been trying to determine whether one best approach
to leadership exists. The best approach appears to vary by culture and environment, but agreement
exists on some basic concepts. Leadership is a major component of the nation’s economic system
and its society. Quality leadership leads to greater productivity, which in turn produces a higher
standard of living for the nation’s population.
What is really managed in an organization is people! Leadership is the ability to inspire people
to work together as a team to achieve common objectives. Explores on several approaches to
leadership include the trait approach, the style approach, the effectiveness versus efficiency
approach, the contingency approach, the power approach, the function approach, the competence
approach, and the TQM approach. In addition, the role of leadership in behaviour and attitude
modification and the different leadership tasks of upper-level, middle-level, and lower level leaders
are looked at in Malaysian Civil Service.
Approaches to Leadership at Malaysian Civil Service
Although organizational communication consists of issuing orders and giving instructions, to
some extent, people must not think of leadership as “driving” employees to perform given tasks at
Malaysian Civil Service. In today’s world, successful executives inspire, not force, their employees.
Quality communication is the avenue by which leaders clarify their visions and foster participative
management within the organization [DePree, 1992 ]. Some approaches to describing leadership are
[Well and Spinks, 1992]: the trait approach; the style approach; and the effectiveness versus
efficiency approach; (1) the contingency approach; (2) the power approach; (3) the function
approach; (4) the competence approach; (5) the total quality management approach.
Trait approach
The trait approach explaining leadership assumes that leaders are born, not made. Some people,
because of their charisma and other personality traits, seem to be natural born leaders whom others
will follow automatically. People possessing charismatic traits need to learn to use and develop those

leadership traits consciously. Attempts to isolate leadership traits, however, have established that
many successful leaders do not possess a common body of personality traits which explain their
leadership abilities at Malaysian Civil Service. In fact, many great leaders of the past seem to have
had different personality traits. Quality leadership depends neither on charisma nor on personality
traits. Dwight Eisenhower, George Marshall (originator of the Marshall Plan), and Harry Truman
were quality leaders, yet none possessed charisma [Well and Spinks, 1992].
Style pproach
The style approach assumes use of leadership styles ranging from authoritarian to democratic,
including several points in between. The authoritarian leader makes decisions and proclaims these
downward to employees. However, the democratic leader encourages group decision making at
Malaysian Civil Service. Between these two extremes can be found several leadership styles
which use varying degrees of authority. All leaders, in actuality, use various styles under differing
circumstances. One is simply dominant, or frequently used [Well and Spinks, 1992].
Effectiveness versus Efficiency Approach
Some authorities consider leadership from the standpoint of focusing on effectiveness as
opposed to efficiency. The effective leader achieves desired results, whereas the efficient leader
produces a large output from a given input at Malaysian Civil Service. For example, a project
manager concludes a project by delivering its product on time and on budget. A manager of an
operating arm of a company might produce half again the raw product of a peer business unit
elsewhere in the organization, thereby increasing profitability [Well and Spinks, 1992].
Contingency Approach
The contingency approach to explaining why some leaders emerge successful contends that
the style of effective leadership is contingent on the nature of the situation at hand at Malaysian
Civil Service. This theory assumes that when circumstances are highly favourable or highly
unfavourable, an authoritarian leader is more successful. However, when circumstances are neither
highly favourable nor highly unfavourable or when a mixture of favourable and unfavourable
circumstances exists, a democratic leader tends to be more successful [Well and Spinks, 1992].
Power Approach
Leadership can also be described as the exercising of various kinds of power at Malaysian
Civil Service. Reward power is the power of the leader to bestow tangible rewards on followers.
Coercive power is the power to punish, such as the power to fire, demote, transfer, assign
undesirable tasks, and withhold desirable outcomes.
Legitimate power is the power associated with the individual’s position in the organizational
hierarchy and not necessarily with the individual per se. Expert power refers to the extent to which
followers perceive the leader to possess certain knowledge and abilities and to possess the
capability to use these towards desired outcomes [Well and Spinks, 1992].
Function Approach
The function approach to explaining leadership views leadership as the cumulative performance
of many functions, including motivating personnel, creating favorable public relations, or developing
plans at Malaysian Civil Service. Leadership ability is assumed to be the capability to perform
certain functions well. One leader may perform all the necessary leadership functions in a given
situation, or many leaders may perform various functions [Well and Spinks, 1992].
Competence Approach
Another strategy to interpreting leadership is the competence approach, including a scribing
the phenomenon of leadership to the exercise of competence at Malaysian Civil Service. Bennis
[1989] conducted a two-year study to isolate the basic competences of leaders. He undertook the
study of leadership assuming it is the central ingredient to the way progress is created and to the
way organizations develop and survive. After interviewing 90 leaders, five major competences
slowly emerged as significant. Management of attention is the ability of leaders to get others to
listen to their intentions and to get others to focus on their visions and their agendas. This ability
engenders reciprocity; that is, it also enables leaders to focus their attention on others.
Management of meaning is the ability of leaders to convey their goals, desires, objectives to others
clearly, effectively, and meaningfully using both words and symbols.
Management of trust requires that leaders remain constant in their views and that they have
commitment, integrity, reliability, stability, and predictability as these qualities so strongly affect
followers at Malaysian Civil Service. Trust is developed overtime through repeated interactions, A
leader’s actions and a leader’s professed beliefs must be congruent, as consistency is necessary for
trust to develop [Drucker, 1992]. Management of self recognizes that most leaders have strong
egos, high self-regard, and high regard for others. At an early age these leaders knew their
strengths, and throughout the years they continued to nurture these strengths. “The Wallenda
factor” is a term used to mean that successful leaders always look for challenges; they concentrate
on succeeding and not on failing; they enjoy taking calculated risks [Bennis, 1984].

Total Quality Management Approach
For TQM to be successful, its results should include delighted customers, empowered
employees, higher revenues, and lower costs at Malaysian Civil Service. Rewards are structured to
benefit quality performance rather than quantity of output [Well and Spinks, 1992]. What part
does quality communication play in the overall quality picture? TQM clearly emphasizes quality
of products and services [Thurow, 1992]; but, what about the quality of communication?
Communication is the lubricant used to turn the wheels in any leadership role. Perhaps, the term
“Big Q” couldbe a label for the enlarged scope of managing for quality, including quality of
communication. If this were the case, benchmarking techniques could be used for measuring a
company’s communication processes against those communication processes used at Malaysian
Civil Service renowned as leaders in their own communication functions. In addition to the
leadership approaches described above, other approaches to leadership have been described in
management literature.
The Importance of Effective Communication Skills at Malaysian Civil Service
Managers are likely to spend most of their time engaged directly in some form of
communication process. Diwan (1990) have done a research on how managers spend their time. It
was established that on average the 160 managers in her sample spent two-thirds of their time
working with other people. The rest of their time was mainly engaged in preparing information
reports. It seems reasonable to assume that most managers spend the bulk of their working day in
some type of communication activity at Malaysian Civil Service.
Even the 33 managers in the sample in "backroom"-type jobs spent about half of their time
working with other people. This may be through attendance at meetings, the giving and receiving of
instructions, discussions with colleagues and contact with customers or suppliers. Such contact may
be face to face or over the telephone or a combination of both at Malaysian Civil Service. Obviously,
communication is important to the business organization. According to one generally accepted
estimate, between 40 and 60 percent of the work time spent in a typical manufacturing plant
involves some phase of communication. Some employees spend much more of their time
communicating. In fact, the higher up the organization structure the employee is, the more
communicating he or she is likely to do. Typically, top executives spend from 75 to 95 percent of
their time communication (Diwan, 1990).
Communication is also important in the strategy implementation like quality management. For
successful strategy implementation, employees should create an environment where open and honest
dialogue and communication on strategies issues and changes can take place (Carpenter, 1986).
Additionally, top management has to regularly review with the departmental and divisional heads,
the long-range plans and the resource requirements of these plans so as to avoid production delays at
Malaysian Civil Service. This helps to improve the effectiveness of these plans being implemented.
Alexander (1985) and Reed and Burkley (1988) recommended a two way communication feedback
that permits questions from affected employees about the formulated strategy.
Quality in Islamic Management at Malaysian Civil Service
The implication of this concept is that work comprises the intention, prayer, profession, action,
reaction and behaviour of the people performing it. However, the result comes from Allah. Being
Muslim, one has to accept it whether positive or negative, because the will of Allah will prevail at
the end (Khaliq, 1996). For Muslims, any work can be ibadah given that requirement such as good
intention, permissible, profession, serious efforts, surrendering to Allah's will, be met during and
after its performance at Malaysian Civil Service.
Islam considers quality as a process of bringing positive changes for excellent performance in
daily life. Its final objective is to improve quality living of man. An organization without quality
will perish. Every task should be done to the level of excellence at Malaysian Civil Service. This
culture of excellence if we are able to practice in our daily life will bring a result in a quality society.
The Prophet Muhammad SAW advised the Muslims to work hard. It was reported that the Prophet
to have said; "The best income is that which is earned honestly by the hard working labourer."
(Majma al-Zawaid)
He also reminded the Muslims to be confident in carrying out their work. It was reported that
the Prophet to have said; "Ask Allah to help you and not fell incapable, for nothing is impossible."
(Sahih Muslim)
In Islam, quality is more important than quantity. Small quantity of performance may be has a
good quality in value or vice versa. In addition, poor quality performance may bring about adverse
outcome at Malaysian Civil Service. For example, sawm or fasting has been made obligatory for
Muslims (Al-Quran, 2:183). The sawm becomes useless when it is not of good in quality. It was
reported that the Prophet to have said ; “ Many fasting people get nothing from fasting except
hunger and many of those who offer salah (prayer) by night get nothing from it except the
discomfort of staying a wake."(Ibn Majah)
Thus, in Islam, quality is more important than quantity. But it does not mean that quantity
doesn't count at Malaysian Civil Service.

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