THE last three and a half years have been turbulent for                                                                                               
virtually all business enterprises in the country. Caught                                                                                             
unprepared against a backdrop of continuing economic                                                                                                  
prosperity for several years before the economic crisis, all                                                                                          
firms have been affected in one way or another.                                                                                                       
                                                                                                                                                      
The economic crisis has proven to be difficult and challenging                                                                                        
for the Malaysian business sector. The Malaysian economy went                                                                                         
into recession in 1998, and capital controls were subsequently                                                                                        
imposed to isolate the Malaysian, ringgit from speculation.                                                                                           
Decisive action on the part of the Malaysian Government to                                                                                            
resuscitate the economy contributed to the economic recovery                                                                                          
of 1999 and back to normal economic growth of 2000.                                                                                                   
                                                                                                                                                      
Described by economists as V-shaped economic movements, the                                                                                           
influence and impact on business enterprises must be quite                                                                                            
substantial. Even now, a major economic contributor of the                                                                                            
past, the construction industry, is suffering from a huge                                                                                             
overhang of vacant properties. Has the recovery permeated                                                                                             
across the Malaysian business sector?                                                                                                                 
                                                                                                                                                      
It is against this backdrop of uncertainty and anxiety that a                                                                                         
Malaysian Business Trends Survey for 2000 was carried out by                                                                                          
the Malaysian Institute of Management. The overall purpose of                                                                                         
the survey is to assess how Malaysian business leaders are                                                                                            
responding to the challenges faced by their respective                                                                                                
businesses.                                                                                                                                           
                                                                                                                                                      
The survey has been completed, the findings have been                                                                                                 
published and the report is how available from the Institute.                                                                                         
                                                                                                                                                      
What are the major findings? The macro-environmental factors                                                                                          
covered in the survey identified governmental policies, the                                                                                           
economy, technology and "green" issues as key determinants. It                                                                                        
would appear that most firms were cautiously optimistic about                                                                                         
Malaysia's economic outlook, recognise that the Government's                                                                                          
handling of the economy benefitted them, accepted the                                                                                                 
contribution of technology to business improvement, but were                                                                                          
relatively unconcerned about environmental, or "green," issues                                                                                        
influencing organisational policies.                                                                                                                  
                                                                                                                                                      
From macro issues, the survey examined industry                                                                                                       
competitiveness and business strategy. There appears to be                                                                                            
intense competition, and the main strategy employed has been                                                                                          
towards improving product/service quality, reliability and                                                                                            
speed 2 of response. The value chain has seen the use of                                                                                              
electronic database and communication, and the introduction of                                                                                        
just-in-time requirements by customers, as well as demands                                                                                            
made by companies on their suppliers.                                                                                                                 
                                                                                                                                                      
Other strategies employed to improve profitability include                                                                                            
targeted marketing, greater financial control, better working                                                                                         
capital management, and increased product focus. It is                                                                                                
interesting to note that the simple, most important measure of                                                                                        
financial performance is a positive cash flow.                                                                                                        
                                                                                                                                                      
While it is heartening to note the high concern for                                                                                                   
product/service quality as the key to gain competitive                                                                                                
advantage, this is not seen to be matched by efforts at                                                                                               
quality improvements through R&D, or training and development.                                                                                        
The majority of firms spent less than 1% of their capital                                                                                             
expenditure on R&D, and less than 1% of sales turnover on                                                                                             
training and development.                                                                                                                             
                                                                                                                                                      
As we move towards the knowledge economy, it is also                                                                                                  
heartening to note that most firms are embracing ICT, with                                                                                            
many producing a stated information strategy. There is the                                                                                            
expression by the firms surveyed that ICT is beneficial, and                                                                                          
its potential is yet to be fully realised.                                                                                                            
                                                                                                                                                      
The survey also covered manpower needs. Unlike the concern for                                                                                        
a drastic shortage of manpower in an earlier survey (1996),                                                                                           
the 2000 survey suggests that most firms do not anticipate any                                                                                        
labour or skills shortage in the current period for most job                                                                                          
categories.                                                                                                                                           
                                                                                                                                                      
Training is seen as the opportunity for increasing efficiency,                                                                                        
productivity and service quality. It is also significant to                                                                                           
note that most firms reported that their training is aimed at                                                                                         
changing employee attitude, adjustment to new technology, and                                                                                         
employee retention.                                                                                                                                   
                                                                                                                                                      
Given the increasing concern for corporate governance, the                                                                                            
survey reveals that the majority have an ethics code for                                                                                              
directors and managers, although fewer firms have a clear                                                                                             
mechanism for reporting violations.                                                                                                                   
                                                                                                                                                      
The Business Trends Survey 2000 is indicative of how 123                                                                                              
responding CEOs and senior managers, from different industries                                                                                        
and organisations, think about the near-term future and the                                                                                           
responses they are adopting to compete. The findings are not                                                                                          
very different from the findings of the pre-crisis survey of                                                                                          
1996.                                                                                                                                                 
                                                                                                                                                      
But the current business environment is very different from                                                                                           
1996. Globalisation and the AFTAIWTO regime, together with                                                                                            
substantial technological developments since, have combined to                                                                                        
make business operate in a different dimension, which should                                                                                          
attract different business models.                                                                                                                    
                                                                                                                                                      
For example, the focus on cost leadership strategy, rather                                                                                            
than on more innovative products and product delivery strategy                                                                                        
ala e-commerce, is not good nough to compete long-term in the                                                                                         
global market place. This will, of course, suggest a much                                                                                             
higher allocation for R&D and human resource development as                                                                                           
the prerequisite for innovation.                                                                                                                      
                                                                                                                                                      
Above all, we should learn from the turbulence of the recent                                                                                          
economic crisis. Prudent management is as much about                                                                                                  
protecting the organisation from an unexpected change, as                                                                                             
preparing for growth. Hence, issues of corporate governance                                                                                           
and risk management should feature prominently in the                                                                                                 
thinking, strategies, and direction of business enterprises in                                                                                        
the years to come.