The Importance of SME's Digital Transformation in Promoting the Malaysian Economy

Abstract

Abstract Small and medium enterprises (SMEs) contribute to the Malaysian economic indicators, such as the gross domestic Product (GDP) by producing goods and services, generating exports to expand the market, and creating job opportunities for employment. Following the Industrial Revolution 4.0 (IR 4.0), various technologies, such as artificial intelligence (AI), robotics, cloud computing, big data, and the internet of things (IoT) have been used in SMEs’ operations and productions. This leads to the process of digital transformation which in turn enables SMEs and all economic sectors apply more sophisticated technologies that can lead to innovations and new business models. Digitalization through the IR 4.0 technologies could increase people’s interactions, facilitate economic transactions, and change consumer consumption habits while stimulating new consumer demands. Businesses conducted through digitalization can be beneficial to both the supply side and the demand side of the economy, thereby accelerating the economic growth of the country. From the supply end, digitalization enhances workers’ productivity and production growth. It enables mass production of goods and services, reduces operations and production costs, and increases investment returns. From the demand side, digitalization provides the market platform with bigger interactions from business to customers (B2C), in terms of cataloguing, pricing, ordering, transfer payment, delivery tracking, and after sales service gained from features, such as customer reviews and refund matters. Digitalization can also create new task-delivery approaches, and job market landscapes for both the formal and informal sectors of business. In short, digital transformation can create a dynamic relationship between supply, demand, and the enablers. This would ultimately contribute to the economic growth of Malaysia.