TECHNOLOGY PLATFORM AFFECTS SME’S BUSINESS PERFORMANCE IN HALAL

INDUSTRY: EMPIRICAL STUDY AT PERLIS

Nainatul Farzuha Nor1, Hartini Ahmad2, Ahmad Shabudin Ariffin3
1,2
School of Business Management, University Utara Malaysia,
3
Faculty of Business & Science Management, Kolej Universiti Islam Perlis.
nainazuha@gmail.com

Abstract

Adoption of technology platform among Small Medium Enterprises (SMEs) in the halal
industry has a positive impact and more important in enhancing the holistic
competitiveness in halal market challenging. Based on Halal food industry, technology
is an essential tool for development and continued growth in globalization market and
perhaps could produce possible promising business performance. This paper aims to
examine the adoption of technology platform towards SMEs business performance in
Halal food industry. The methodology used was quantitative method and the
questionnaires were distributed among SMEs food supplier at Perlis as a case study.
SMEs food supplier was selected for the study due to the fact that there are currently
many technological tools were used for Halal business. The finding established that the
adoption of technology affects SMEs business performance. The implications of the
findings could contribute to the understanding on the important factors of using
technology platform that need to be given attention by the SMEs in command to be
more competitive and gain excellence performance in Halal market.

Keywords: Halal Food Industry, Technology Platform, Business Performance, Halal

Business.
1. Introduction

Halal food industry can boost both the national and global revenues as a result of
increased consumer awareness of Halal products. Industry 4.0 will turn halal food
manufacturers into predictors instead of reactors. This will save time and money for
those who invest in the technology, then influence food manufacturer business
performance. Researchers have acknowledged that, among the major factors impacting
economic progress in today’s global business atmosphere is the transmission and
application of latest technologies platform in their business (Krusinskas & Vasiliauskait,
2005). Adoption of new technological platforms such as internet of things (IOT),
business websites, social media, e-commerce etc, in halal food industry also can be one
of investment which lead to achieve higher profit, higher productivity, greater activity
outcomes, reduced costs, improved quality, gaining competitive advantage, market
share and improve business performance at the same time.

Latest, new technology platforms such as digitalization is critical for SME sustainability
in the new economy. As digitalization continues to gather pace the world over, it is
imperative for Malaysian SMEs to embrace the digital economy to not only ensure they
are not to be left behind but also to help outgrowth of economic. In addition, a new
economic era, this new technology like E-commerce is a game-changer for SMEs with
an online existence, unlocking as it does vast new opportunities for SMEs to break away
from the limitations of a small business and into a global industry. From the cost
perspective, building an online presence comes with a fraction of the costs for a
physical store along with minimal investment in e-commerce solutions.

Besides that, Malaysian consumers widely adopting digital technologies as a new

platform in business world. The digitalisation of front-end business processes, such as
e-commerce and web development, has certainly gained momentum in the past year.
This is evident in the 26.3% year-on-year growth of the Department of Statistics
Malaysia’s (DOSM) online retail sales index, which tracks the nation’s e-commerce
activity, in December 2020 (Lim, 2021). This factor influenced of SMEs using this
platform to increase their business performance.

In Malaysia, the emergence of the halal food industry is a serious business to deliver
quality halal food to consumers. However, according to Ramdani et al. (2013), most of
SME still underutilized the potential value of technology by only restricting it for basic
management tasks. There is also a report on SMEs that faced technology constraints
due to the lack of education and technical skills, which is an important means to garner
competitive advantage in this global marketplace (Tan et al., 2009). A study by
Simmons et al. (2007) argued that internet adoption among SMEs is not unclearly
understood. New technology is believed to be an effective business platform to boost
halal business performance and increase halal products quality. However, halal food-
based SMEs are still slow of using technology in their production process as well as in
the halal supply chain system. This research examines the impact of technology
platform can increase business performance among SME.

2.0 Literature Review

2.1 Halal Food Industry

Food industry becomes one of the main sources of income for local community in
Malaysia. Latest trend in the global business market is a halal industry; because
demand for halal product was increasing by Muslim and non-Muslim consumer. The
halal food industry is vital important to the world wide Muslims to ensure hygiene and
cleanliness of product to their health and well-being life. Demanding on shelf life and
freshness needed for food is the reason why halal food industry is very attractive.

While the halal food industry growth, Malaysia needs to act fast to improve the
effectiveness in halal food industry. The success of the halal food industry, in both
domestic and export markets, depends on a broad range of policy developments
including those related to the law and regulations, support services and infrastructure,
such as human resource development, finance and R&D, as well as marketing and
promotional efforts.

2.2 Technology Platform

A modern technology platform typically includes analytics, database and data

management, tools for application development and extension, integration, and
intelligent technologies such as artificial intelligence (AI), machine learning, and the
Internet of Things (IoT). These foundational components – or building blocks – help to
drive innovation and business growth

The Economic Census 2016 (reference year 2015) conducted by the Department of
Statistics, Malaysia (DOSM) shows that computer usage among SMEs has surged, from
only 27.0% of SMEs in 2010 to 73.1%. In 2015, the internet was used by 56.5% of SMEs
and 20.1% has online presence for their business. The majority of SMEs (81.8%)
accessed the internet via fixed broadband while others used mobile broadband (26.9%)
and narrowband (5.5%). SMEs mainly used the internet for emails (71.2%), internet
banking (41.2%), obtaining information on goods and services (38.5%) and posting
information or instant messaging (36.9%).
 Figure 1: ICT usage among SME
Based on the Information and Communication Technology (ICT) Satellite Account 2018
published by DOSM, e-commerce contributed 8.0% to overall GDP in 2018, with its value-
added growing by 7.9% to RM115.5 billion compared with RM107.1 billion in 2017 when
growth was 11.9%. The findings also show that the contribution of ICT to the national
economy has continued to grow albeit by at slower pace of 6.9% to RM267.7 billion in
2018 compared with RM250.4 billion in 2017 when a 9.8% growth was recorded. ICT
contributed 18.5% to GDP in 2018 (2017: 18.3%), from which the industry contributed
12.6% (2017: 12.5%) and e-commerce for non-ICT industries contributed 5.9% (2017:
5.7%).

According to the 2019 SME Survey conducted by SME Corp. Malaysia which covered
1,347 firms, 35.3% of respondents are engaged in online business, a slight drop
compared with 37.9% in the third quarter of 2018. Interesting to note that an average of
15.0% of total business sales were generated from online sales. The majority of SMEs
(77.0%) mainly use social media platforms like Facebook (78.3%), WhatsApp (61.5%)
and Instagram (54.3%) for their online business. However, social media usage is
increasingly being complemented by online e-commerce marketplace platforms like
Shopee (used by 18.7% of respondents) and Lazada (14.9% of respondents) to
showcase their products or services.

Describing and measuring innovations generated in the Malaysian in food-based

industry is crucial so as to provide an understanding on innovations that has emerged.
Presently, more than ever before, global food and agricultural systems are undertaking a
process of rapid change. Rising consumer demand and changing consumer
preferences have emerged as key drivers of agricultural prices, technology, and trade.

Looking at the current scenario, as the COVID-19 pandemic reshapes the world, more
consumers have begun shopping online and businesses too have resorted to
technology and online platforms that will help them conduct business operation. This
pandemic has certainly brought some lights by accelerating the shift away from
physical stores to digital shopping globally, and we do expect the same growth
acceleration of e-commerce in Malaysia. For post COVID-19 period, the consumers
behavior and SMEs transformation from conventional business to online business
model will be the key factors in further expanding the e-commerce ecosystem.

2.3 Business Performance

Business performance is a level of organizational effectiveness that very well

comprises of strategy management, operations management, human resources,
organizational behaviour, information systems, marketing, and management accounting
and control are contributing to the field of business performance measurement. In
addition, the Balanced Scorecard approach of measuring performance exposes
business’s weaknesses, as well as opportunities for improvement, which are, then, used
to review and clarify its objectives and priorities (Sarkissian, 2015, p. 1). As a result, a
business is able to understand its internal and external contexts, which can compel it to
adopt better strategies for improving its management processes, as well as its
business performance in general (Caroline & Peter, 2016).

For business enterprise, ‘profit’ is the objective in order for a business to grow and
survive in the market (Selvam, M., 1991 and 1992). The social objective of public sector
could be related to quality in which it has the potential to attract the customers. (Selvam,
M., 1989 and 1990). Quality is the function of perceptions, expectations and
performance of business. (Clement Sudhar, J, and Selvam, M., 2007). The competitive
quality, in the destructive competition, is important for survival and for the existence of
company (Isaiah, et al., 2015). Rojas-Lema et al. (2020) find out that the research about
performance measurement in SMEs on different business contexts. Moreover, Bannour
and Mtar (2019) support the view that SMEs strive to gain a foothold in markets across
national borders, in a bid to remain profitable and increase their business performance.
Business models should be extended by studying specific capabilities which may
contribute to competitive advantage for SMEs’ international performance (Falahat et al.,
2020).

3. Methodology

The aim of this paper is to investigate the adoption of technology platform affects SME
business performance in halal food industry. The target group is to halal food supplier
at Perlis. The objective of the survey is to measure the business performance of halal
food supplier which adopted technology as their platform to sustain and competitive in
halal food industry. The main design for this study is through questionnaire. The
questionnaire is design to gather information was separated into three sections: firm
demographics, firm performance, and adoption of technology. There were 7 questions
related to adoption of technology towards business performance based on 5-point
Likert scale. The variables were categorised using the Likert scale, with 1 denoting
‘Never’, 2 Denoting ‘Rarely’, 3 denoting ‘Moderately’, 4 denoting ‘Frequently’, and 5
denoting ‘Very Frequently’. The total number of participants in this survey was 133
respondents. All of them are halal food supplier at Perlis. The rest of the respondents
are the of the business. All of them are looking forward to establish a bigger company
soon.

4. Findings and Discussions

This research survey encompasses halal food industries such as food producers,
bakeries, restaurants, and small-scale food and beverage production, among others, to
define the company kinds.

Table 1: Research Demography

Characteristic Frequency Percentage (%)

Ownership Status
Bumiputra 126 94.7
Non-Bumiputra 7 5.3
Total 133 100

Characteristic Frequency Percentage (%)

Number of Employee
Less than 5 57 42.9
Between 5-75 76 57.1
More than 75 0 0
Total 133 100
 Characteristic Frequency Percentage (%)
Sales Turnover
Less than 300,000 118 88.7
Between 300,000 – 15 Mil 15 11.3
More than 15 Mil 0 0
Total 133 100

As summarized in Table 1, according to the results, 94.7 of respondents are Bumiputra

and 5.3 are non-Bumiputera. The number of employees and sales turnover are used to
define each criterion, such as whether they are micro, small, or medium businesses.
This criterion classifies firms with less than 5 employees (42.9%) and their sales
turnover of less than RM300k as micro enterprises, firms with more than 5 to 75
employees are 57.1% and a yearly revenue of between RM300k and RM15 million as
small enterprises, and so on (smecorp.gov.my). Based on the data collected, 88.7% of
respondents are micro entrepreneurs/enterprises, while just 11.3 percent are small
businesses, and no medium businesses participate in or answer to the survey.

Table 2: Descriptive Analysis

Item Statistics
Mean Std. N
Deviation
Firm Business Performance 1 3.5188 .86691 133
Firm Business Performance 2 3.6391 .86461 133
 Firm Business Performance 3 3.4286 1.03196 133
Firm Business Performance 4 3.5564 .93269 133
Firm Business Performance 5 2.9850 .78803 133
Firm Business Performance 6 3.0902 .85687 133
Firm Business Performance 7 3.9023 3.68631 133

As illustrated in Table 2, reports the descriptive analysis for the firm performances.
Descriptive analysis is used to describe the basic features of the data in this study. The
data provide simple summaries about the sample and the measures. It is presented the
question about business performance on firm 7 showed the highest mean is at 3.9023
while the lowest mean is 2.9850 on the question about the performance on firm 7.
Secondly, the highest mean is 3.6391 for performance on firm 2. Performance on firm 4
which at 3.5564 and followed by performance on firm 1 at 3.5188.

Table 3: Reliability Analysis

Cronbach's Alpha Cronbach's Alpha Based N of Items Strength of
on Standardized Items association
.569 .869 7 Excellence

As summarized in Table 3, shows the summary of reliability analysis for the research
construct. This is indicating the study’s Cronbach’s alpha values based on firm
business performances. Based on the given table, the Cronbach alpha value score is
0.869, there is between 8.00-9.00, which indicated the very good association as ruled by
(Hair et al, 2016). So, it is proposed that the Cronbach’s alpha for the adoption of
technology platform affects SMEs business performance is acceptable. The strength of
association result shows that the dependent variable is ranged as excellent and the
independent variable is excellence. This result explained that the research instrument is
acceptable and reliable in measuring the respond. Based on the provided rule-of-thumb
most the reference agreed that 0.869 indicated high level of reliability
Table 4: Inter-Item Correlation

Item-Total Statistics
Scale Mean if Scale Corrected Squared Cronbach's
Item Deleted Variance if Item-Total Multiple Alpha if Item
Item Deleted Correlation Correlation Deleted
Firm Perform 20.6015 29.211 .633 .763 .476
1
Firm Perform 20.4812 28.842 .679 .872 .466
2
Firm Perform 20.6917 27.624 .664 .839 .448
3
Firm Perform 20.5639 29.172 .581 .700 .480
4
Firm Perform 21.1353 31.406 .438 .522 .522
5
Firm Perform 21.0301 30.863 .451 .553 .514
6
Firm Perform 20.2180 20.732 .047 .029 .923
7

Table 4 demonstrated that the item-total correlation amongst items within the sub-
construct, construct, and the seven dimensions were found to be acceptable, as
majority of the items had good correlation with other items except for a few exceptions
with having either lower or too high of the correlation values indicating not highly
correlated or redundant respectively. The item-total correlations were seen to be within
.40 to .70 and can be considered acceptable (de Vaus, 2004) besides having at least
50% of the retained items with total scores in the range of .40 and .70 (Carmines &
Zeller 1974). The instrument corrected item total score varies in the range .438 to .679
indicating good relationship of items with the construct, sub-constructs, and
dimensions.

DISCUSSION

Business performance is a company's ability to adapt to the market, accompanied by

changes in the industry that include customers, competitors and other power forces
that can alter the way business process. A good business strategy depends on
management’s ability to create congruence between the external and internal of the
company (Zainudin, Sugiono and Sufian, 2016).

Based on this study, can summarized that technology platform can improve the
business performance of halal food suppliers in Perlis. Adoption of new technological
platforms such as internet of things (IOT), business websites, social media, e-
commerce etc, in halal food industry also can be one of investment which lead to
achieve higher profit, higher productivity, greater activity outcomes, reduced costs,
improved quality, gaining competitive advantage, market share and improve business
performance at the same time. If the food supplier adopts technology platform
effectively, it can lead to an enhancement in firms' business performance as well as
exploiting the advantages of technology platform which are very important for business
performance and success for them in the future. Thus, a better relationship between
technology and firm business performance has been achieved by measuring firm
performance with increasing of sales. In addition, clearly identified adoption of
technology platform among SMEs Perlis can increase their business performance in
halal food industry. It also makes it easier for consumer to purchase items and make
payments using digitization. In addition, it can also improve the economy of Perlis in
halal food industry.
CONCLUSION

Business performance is relevant to the strategic management but it does suffer from
limited conceptualization, selection of indicators which is based only on convenience,
and no proper consideration of its dimensionality. This review paper makes a
contribution towards defining the performance-related measurements. It is true that a
comprehensive set of performance data is not available but these subjective measures
can throw more light on limited objective data (Ketokivi, M. A., & Schroeder, R. G., 2004).
The selection of dimensions should carefully evaluate the most likely affective
dimensions, as suggested by Ray et al., (2004). The appropriate scale is to be developed
for the subjective model future expansion and use and for refining the model
periodically, with additional dimensions and indicators suitable to the firms for time to
time.
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