CONFERENCE OF “INTERNATIONALISATION AND e-COMMERCE” Organised by Chamber of Commerce Very good morning to Mr Chairman, special guest, speaker, businessman or businesswoman and to all lucky person who site here today. First at all, I would like to thanks to our organiser, Chamber of Commerce that invite me to give a talk in this main session. In my remarks today, I will briefly review on the “Internationalisation and e-Commerce”.
Before that, for your information, I’m Information System Manager of SecretNetwork, pleased to be here to represent the SecretNetwork that trans-national computer suppliers company that supplies products to an international market. Today, I will focus on the issues of international business environment and the implication of e-commerce for international business. In this issue, I will share with you about globalization, trans-national Corporation and the national economic environment. Then, I will discuss about how e-commerce has affected trade in the trading nation and developing nation.
I also will touch about how e-commerce can influence local, national and global economies. Before I go through, let me asked you; ladies and gentlemen, one simple question; what is a business for you? Alright, I know, all of you have own definition of business because you’re businessman or businesswoman but for me, honestly, I describe business into two simple word that is customer and profit. Why I believed like that? Because I seeking a business is an activity of providing goods or services to fulfil customer need and want to generate profit and sustainable revenue.
This can refer to SecretNetwork; because we fulfil customer need and want in IT or ICT by provide a variety of computer supplies such as hardware and software program to gain more profitability. Ladies and Gentlemen, The history of my company; SecretNetwork is one of dramatic invention, adaptation and expansion. But this is not sadness story, so you can throw away your tissue (just kidding). Alright, audience, I will bring you back in 1987, a year that our company founder, Ahmed Rosly Ali found the SecretNetwork.
Maybe some of you might be surprise because in 1987, how come Ahmed Rosly Ali can create business based on computer and network while in Malaysia phenomenon of information technology and network starting famous after 1990s, right ?. So, the answers is; Ahmed Rosly Ali who is graduated in Business in 1986 from Iowa State University, that the first University built electronic computer in 1930s and by the late 1980s, computer network were expanding to embrace the general public and the internet was born (Swee Heng, Ain Nadzimah, Helen Tan, 2006).
When Ahmed Rosly Ali back to Malaysia in 1987, with knowledge and experience in university and predict that have big opportunity with computer business, he determined to run business that supplies personal computer, printer and some hardware. With own savings, he start small business and become as sole proprietorship, that control the business by own because sole proprietorship is one owner has complete control their business and profits or losses flow directly to him and paid taxed at individual rates (Bovee, Thill, Schatzman, 2004).
Until early 1990s, IT in Malaysia is still new, so it complicated to Ahmed Rosly Ali run his business because demand of his product is low and any legal damages or debts incurred by the business are his responsibility. As sole proprietorship, Ahmed Rosly Ali managed and make the decision for his business by own. So, he decided to ending private ownership or sole proprietorship to become partnership by hired his cousin, Ahmed Azman, a computer analysis to become his partners. As we know, to starting partnership business it needs two or more owners, right?
So, by the partners saving and bank loan, around RM 40 000, they expand their business by provide some software program others personal computers, printer and hardware to influence customer to purchase their product. By partnerships agreement, they entitled to equal control their business and share income and loses equally (Bovee, Thill, Schatzman, 2004). With efficiency management and planning of partnership, their business become growth wealth and they open 10 branches around Malaysia and involve in exporting their product. Ladies and gentlemen,
As we know, life sometime bad of rose, in 1998, Malaysia face critical economic recession and this recession give big impact to the SecretNetwork because they face finance crisis. To make sure that their company still running, Ahmed Rosly Ali and his partner, decided to become corporation by sell 40% from their share in SecretNetwork to the public include their employees. In corporation, the ownerships and management of the business are separate, so that as the major shareholder in SecretNetwork, Ahmed Rosly Ali become Non-Executive Chairman and Ahmed Azman becomes Chief Executive Officer until now.
In corporation, the profit or loses are taxed at corporate rates and profits are taxed again at individual rates when they are distributed to the investors (Bovee, Thill, Schatzman, 2004). With the good alternative planning and management in the corporation and Malaysia recover from economic recession in 2001 with GDP (Gross Domestic Product) increase 0. 3% (//ms. wikipedia. org/wiki/Malaysia), the SecretNetwork once again become growing company until now. Audiences, do you know why I told you this company background?
Because you and I know that we are come from a variety of background and have own history, some of you maybe starting business as sole proprietorship, partnership, corporation or corporative that an association of individual or firms whose purpose is to perform some business function for its members and perform its function more effectiveness than any member could by acting alone (Pride, Hughes, Kapoor, 2005). But whatever who is you; the point is we’re a businessman or businesswoman, right?
Like yours, my company starting with small business that serve product only to local market around Malaysia. But as business peoples, we need to think beyond and globally to compete with other company over the world to increase our profitability. So, with thinking and acting globally, nowadays our company profit around RM 70 million per years. Well, what do you think? How we can achieve that? Let me tell you the secret, the ways how we enlarge our profit. When my company established at the local market with open many braches around
Malaysia, we decided to involve in international market by exporting our product to Thailand and Singapore. After many years involved in exporting, demand of our product is over increase, so we decided to open our subsidiaries in Thailand and Singapore, after we make analysis and evaluate about many thing such as cost, competitors, economics and government policies and rules in that company. With maintain significant operations in Thailand and Singapore at once but the entire decision making still based in Malaysia as home country, our company become multinational corporation (MNCs).
After that, we decided to open our subsidiaries in Brunei and to become more efficient, we changing our strategy from MNCs to Trans-national Corporation (TNCs) by maintains significant operations in Thailand, Singapore and Brunei at once and decentralizes decision making in each operation to the that country as a local country. . Ladies and gentlemen, Alright, before this when I said about thinking and acting globally, what you imagine for? International? Multinational? Or Trans-national?
Okay audience, the reality is all of that is a process toward globalisation beginning from domestic market to international market and from international it going to Multinational Corporation and trans-national Corporation, just like my company. If you want to know, the term of globalization is has been used in early 1944, that means the increasing interdependence, integration and interaction among people and corporations in disparate location around the world. It’s an umbrella term which refers to a complex of economics, trade, social, technological, culture and political interrelationships (//en. wikipedia. rg/wiki/Globalisation). According to Pride, Hughes, and Kapoor in their book; Business, globalisation is tendency of the world’s economies to act as single interdependent economy. I know maybe this sound stereotype for you, but just look up ourselves, for simple example, we eat pizza and spaghetti from Italy, drink soft drink from US, wearing clothes from China cotton, drive German car, and watching Bollywood movies from India using television from Japan. So, this is some example to show that globalisation is interrelationships between economics, trade, social, technological, culture and political.
Okay audiences, before this I already touch about trans-national corporation, right? Trans-national corporation (TNCs) is a company that maintain significant operations in more than one country simultaneously and decentralizes decision making in each operation to local country (Robbins, DeCenzo, 2005). Trans-national corporation (TNCs) like SecretNetwork has played their own role in the globalization such as in term of customers, country, and government, others, give benefit to the company by increase the profit.
Alright, everyone know about Nestle, right? Nestle, it is the worlds largest food company, is the best example of TNCs, with operations in almost every country on the globe (Robbins, DeCenzo, 2005). This company provides and creates food to fulfil customer need and want over the world and fulfil customer demand. In the same time, this company gives opportunity of employment to the local people to work in their company, so that it will reduce unemployment to that country.
TNCs like SecretNetwork or Nestle will helping the country that we entered to increase growth rate because we need to paid such as taxation, and duties to the government and wages to the employees. TNCs also will increase GDP for the country we entered, for example, by 1999, nominal per capita GDP of Malaysia is $3,238 (//en. wikipedia. org/wiki/Economy_of_Malaysia) but in 2005, GDP per capita Malaysia is $11,160 because new foreign and domestic invest in Malaysia economy and some of that are TNCs. Beloved audiences,
The economics performance of the county also depend on inflation and international business cycle others than the government. The government and individual play their role in allocating a society resources depends on the society economic system that the rules for allocating resources to satisfy its citizen needs (Bovee, Thill, 2005). What is exactly economic system in the world? Free-market system or planned system? Free-market system is economics system in which decisions about what to produce and what quantities are decided by the markets buyers and seller that included either capitalism or mixed economy.
Capitalism or private enterprise is economics system based on economics freedom and competition, according to Adam Smith (famous capitalism philosophical) because the capitalism market is its own regulator, he opposed to government intervention. Contrasting with Smith, I believed that the government intervenes in free-market system to accomplish goals that leaders deem socially or economics desirable, this limited intervention is characteristics of a mixed economy or mixed capitalism (Bovee, Thill, 2005).
I also strongly believed that Malaysia as well as United State (Bovee, Thill, 2005) is practices mixed capitalism, even though some people said that United States is practice capitalism. Malaysia practices a mixed capitalism with a large private sector based on private enterprise is easy to start business here but along with substantial government intervention such as influencing particular allocations of resources through tax incentives, prohibiting or restricting the sale of certain goods and services or setting price control such as petroleum, gasoline and agricultural goods.
Nowadays, Malaysia also privatizing some of their government-owned enterprise by selling them to privately held firm (Bovee, Thill, 2005) such as water suppliers, national electric utility, airlines system and post office. Price changes, especially price increase, are another important economic indicator. Price increasing is one sensitive issue in the world because the purchasing power of a dollar erodes (Bovee, Thill, 2005), that means you can purchase fewer things with today’s dollar than you could in a previous period. Am I right?
Generally, when price is increase, it will make inflation. Inflation is a steady rise in the prices of goods and services throughout the economy (Bovee, Thill, 2005), or in other hand inflation is a continued increase in the general price level. Honestly, I see scenario of inflation happen because continued rise in the prices of fuel or petroleum others than because economy recession and Asian financial crisis in 1997. Once, price of petroleum is increase, indirectly many prices of goods or services will also increase together, right?
Look ladies and gentlemen, in 2005, inflation rate in Malaysia is 3. 5% (//en. wikipedia. org/wiki/Economy_of_Malaysia), but in February 2006, Malaysian government announced that increasing price of petroleum and diesel to 30 cent for one litre (www. utusan. com. my), that make inflation rate in 2006 is 3. 8% (www. cia. gov/cia/publications/factbook/geos/). I believed that, in this situation, Malaysian government use fiscal policies that use the government expenditure such as subsidies, taxation, or infrastructure to try to influence the level of the economics activity.
Why I said like that? Because after Malaysian government announced that increasing price of petroleum and diesel, they also introduce Fleetcard that give fuel subsidy to certain organisation such as in agriculture, transportation and some more to help this organisation to reduce the cost of fuel 15 cent compare to real price (www. utusan. com. my) and to encourage economics activity. This also some example how government play their role to manage inflation to make sure country economics performance is growth and stable.
As your information, if inflation happens because it is in a downtown, government may choose to use expansionary or reflationary monetary policies by reducing the level of interest rates and allowing the rate of growth of the money supply to increase (www. bized. ac. uk. virtual/economy). This ways to encourage investment to invest in Malaysia economy, because as we know, when inflation economics country not growth well because decrease in purchasing power and individual prefer to savings their money. Ladies and gentleman,
As I said before, the economics performance also depends on business cycle, right? The business cycle or economic cycle refers to the periodic fluctuations of economic activity about its long term growth trend. The cycle involves shifts over time between periods of relatively rapid growth of output (recovery and prosperity), alternating with periods of relative stagnation or decline (contraction or recession). These fluctuations are often measured using the real GDP. One of the government’s main roles is to smooth out the business cycle and reduce its fluctuations (//en. wikipedia. rg/wiki/Business_cycle). This can refer to economics cycles of Malaysia, during the 1970s, 1980s, and the 1990s, Malaysia involves in manufacturing of heavy industries flourished and become the country’s primary growth engine with consistent achieved more than 7% GDP growth along with low inflation. But in the year 1997 saw the drastic changes in local scenarios because Asian financial crisis. Foreign direct investment fell at an alarming rate and Ringgit depreciated substantially from MYR 2. 50 per USD to much level lower (up to MYR 4. 80 per USD at its bottom) as capital flowed out.
The Kuala Lumpur Stock Exchange’s composite index fell from approximately 1300 to nearly merely 400 points in a few short weeks. In response, the Malaysian government imposed capital controls and pegged the Malaysian Ringgit at 3. 80 to a US dollar while refusing economic aid from International Monetary Fund (IMF) which came with austere lending conditions. By refusing aid and thus the conditions attached thereof from the IMF, Malaysia was not affected to the same degree in the Asian Financial Crisis as Indonesia, Thailand and the Philippines (//en. wikipedia. org/wiki/Economy_of_Malaysia).
Economic recovery has been led by strong growth in exports, particularly of electronics and electrical products, to the United States, Malaysia’s principal trade and investment partner. Inflationary pressures remained benign, and, as a result, Bank Negara Malaysia, the central bank, had been able to follow a low interest rate policy. Later, the country enjoyed faster economic recovery compared to its neighbours though in many ways, the level of pre-1997 affluence has yet to be achieved. Nowadays, after recovery and economics strong growth, GDP of Malaysia in 2005 is $290 billion and GDP growth for 2006 is 5. 5% (//en. ikipedia. org/wiki/Economy_of_Malaysia). Alright audience, I think enough to talk about economics because maybe some of you felt boring hear that issues, right? Just kidding. Okay, as we know technologies is changing rapidly, right? Have you heard about e-commerce? Electronic commerce or e-commerce is the use of networks, especially the internets to promote and sell goods and services (Robbins, DeCenzo, 2005). Now, I will tell how e-commerce gives advantages to our business. Close your eye and imagine your shop, your showroom or your office that is open 24 hours per day, 7 days per week, in almost any part of the globe.
You have no staff to pay, no rates or rent, you don’t even have to sweep the floor. This is not a dream, just a few of the business advantages of using ecommerce. A website can bring your prospect from the point of advertising and information directly to the point of sale, seamlessly, without involving any other medium (www. web-design-uk. biz). Audiences, trust me if you using e-commerce in your business, it can reducing cost of transactions, which can create a cost-leaderships advantage because e-commerce system will take part o handle much of the work done manually in traditional commerce such as ordering, selling, billing and related activities of business are all done electronically, thus reducing cost. Am I right? All I said about e-commerce is my experience in SecretNetwork, because in SecretNetwork we apply e-commerce as our business strategic that including such as sales, e-payment and marketing like advertising and promotion. We implement business-to-consumer (B2C) e-commerce that involves selling our goods electronically to the final consumers, usually an individual.
As company that engage B2C, SecretNetwork become e-tailers that retail sales done electronically. The consumers can make selling or ordering our goods via our website anytime without wait until our shops opens to purchase goods. Geographic distance no longer matters because all transaction takes placed at electronic speed. It will reduce time and cost to the customers and also for us. With B2C, the consumers also can give directly any feedback about our product to us. We, at SecretNetwork also apply business-to-business (B2B) e-commerce to expanding our business.
With B2B, we selling our product and services electronically to others business organisation. As company apply B2B, SecretNetwork also known as supplier-oriented marketplace that provides e-commerce capabilities for other business to order our product (Robbins, DeCenzo, 2005), the functions of B2B is same ways with B2C. For those here, that supply their product or services to the government agencies, I would like to challenge you to engage with business-to-government (B2G) e-commerce because this big opportunity to expand your business.
Your businesses and government agencies use the website to exchange information and do business with each other more efficiently because B2G also include e-procurement services, in which business learn about purchasing needs of agencies and agencies request proposal response. Because B2G support the idea of a virtual workplace, you and an agency could coordinate the work on a contracted project by sharing a common site to coordinate online meeting, review plans and manage progress (http://whatis. techtarget. com/). So, what do you think? Ladies and gentlemen,
Why I try to influence you to engage your business with e-commerce? Because I strongly believed that nowadays the world is engaged in e-commerce, with many business organisations look upon e-commerce as the ways that providing an innovative approach for conducting business. Talking about business remind me about the trading blocs that a large free trade area formed by one or more tax, tariff and trade agreements. Typically trade pacts that define such a bloc specify formal adjudication bodies (//en. wikipedia. org/wiki/Trade_bloc) for instance ASEAN.
The Association of Southeast Asian Nations (ASEAN) had 10 members that included Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam. In January 1992, ASEAN initiated the ASEAN Free Trade Area, or AFTA which laid out a comprehensive program of regional tariff reduction (http://www. us-asean. org/afta. asp). AFTA is one ways for Malaysia to increase their economic performance because others it program of regional tariff reduction, it also has the potential to increase trade, investment cross flows and economic cooperation between the two countries.
Members of AFTA such as Singapore as developed country and Thailand as developing country, both of them are trading nations for Malaysia. I believed with advantages of e-commerce, the economics cooperation Malaysia within their trading blocs, trading nations and developing country will improve. Why I said it will improve? Because as I said before, for example using e-commerce it is a reduction in the cost of transaction and reduce time, right?
So the supplier and customers within trading blocs, trading nations, and developing country will reduce cost of transactions because e-commerce handle much of the work done manually in traditional commerce. The transaction also can make anytime, anywhere and become more easy and faster. That why, it can improve trade and economics cooperation. With e-commerce, it also encourages developing country business such as Malaysia, Thailand, and India to establish their business organisation over the world and encourage them to compete their product and services with developed country business like Canada, Denmark nd Germany. Others, with e-commerce system, members in trading blocs like ASEAN will share technology and knowledge about business, IT, ICT and more within their members to improve their county performance. I would like to share with you a take out of report on the 3rd Meeting of the ASEAN Telecommunications and IT Ministers (TELMIN), held in September 2003, adopted the Singapore Declaration –said that: “Brunei, Indonesia, Malaysia and Vietnam have indicated their readiness to implement the first phase of the ASEAN Telecommunications Regulators Council Mutual Recognition Arrangements (ATRC MRA) in 2003.
Bilateral MRAs were carried out between Brunei and Singapore and between Indonesia and Singapore. ASEAN continued to develop the e-commerce legal infrastructure to promote trust and consumer confidence”. Alright audience, I just want to be honest with you, not at all e-commerce can give advantage for us, e-commerce also has little disadvantages over traditional commerce. But I think, it normal because e-commerce is still new. Okay, what do you think when ASEAN continued to develop the e-commerce legal infrastructure to promote trust and consumers confidence?
I think this issue happens because many producers act dishonestly when doing business transaction using e-commerce and make consumer not trust and confidence to using e-commerce. For example, with e-commerce customers cannot see or touch the real product; only pictures or image of product are provided. When product received to the customers, it not same with actual product that they see in web sites and some time the product is not received immediately but delivered after some time. But this disadvantage is more important for retail customers and less for business customers (Robbins, DeCenzo, 2005).
Okay, let think about critical issue in e-commerce that give affected to trading blocs, trading nations and also developing country. Can you image if e-commerce becomes major ways in trade? And all business transaction is using e-commerce? AFTA maybe will reduce or remove all tariffs because there has no traditional commerce or trade at all. Personally, I think Malaysia will lost their primary source of revenue of domestic taxes and exporting duties and also tariff from their trading nations because all business transaction done electronically.
I also think if this happen, developing country cannot encourage their country to become developed country. The relationship between Malaysia and country of ASEAN, trading nations and developing country also will not too close. Others, issue that need highlight is about dangers of foreign exchange outflow on account e-commerce of developing countries, it is because the higher development of e-commerce within the country, the higher will be the purchase from within (Bovee, Thill, Schatzman, 2004).
For your information, a developing country like Malaysia, Thailand, Brazil, Turkey and some more is country with relatively low standard of living, undeveloped industrial base, and moderate to low Human Development Index (HDI). Contrasting with developed country such as US, UK, Singapore, and France is the country that has a higher income per capita with relatively very higher human development index and higher gross domestic product (GDP). Ladies and gentlemen,
Did you believed me if I say that e-commerce can influence the local, national, and global economics? Believed it or not, e-commerce influence country over the world to create of e-commerce legal or in other hand it can be cyber law as area of e-commerce. This is to prevent computer crime such as hacking, virus, racism on the internet and to resolved problem of encryption, data protection, security, intellectual property and copyright or trademark. In ASEAN if not my mistake, only 3 country already have e-commerce law that is Malaysia, Singapore and Philippine.
That why, as I said before, ASEAN nowadays continued to develop the e-commerce legal infrastructure. If doesn’t have e-commerce law, I think economics of the country will decrease because as we know nowadays there has many computer crime that can make business organisation of the certain country loss such as theft of business organisation money like a consultants (can be hacker) taps into the electronic funds transfers systems of a bank and transfers money to secret account, theft other organisation data and make destruction of data and software.
Others can make economic of country decrease, it also effect global economics decrease. I also see area of e-commerce is including of government and trading blocs’ policy. For example, Malaysian government encourage the local business especially Small Medium Enterprise (SMEs) to expand their business into national and hopefully into global, by the ways of ICT or e-commerce. ASEAN also encourage SMEs by building and training them to using ICT as the ways to develop and expand their business.
This can refer to report on the 3rd Meeting of the ASEAN Telecommunications and IT Ministers (TELMIN) that said like this: “ASEAN is building a network of ICT skills competency centers/agencies to promote collaboration amongst these centers and agencies, including training of ASEAN SMEs to harness the benefits of ICT applications. ASEAN has developed a Digital Divide Database to promote understanding of the dimensions of the ASEAN digital divide, exchange information on Universal Service Obligation (USO) schemes and develop joint studies and projects”.
We also must concern about e-commerce policy and strategy for each country as specific areas of e-commerce. All government need to highlight the issues of legal and taxation as well as the implication of e-commerce for economic and financial policy and vice versa. Policy setting is significant to every country to highlight this issue at the highest level of government in order to sure that is settlement the necessary importance that it deserves and to differentiate between national strategies and priorities and internationals strategies and negotiating position.
A strong national experience and infrastructure provide the strength and knowledge to perform at the level of global economics. In the future, maybe e-commerce being replaces traditional commerce, the World Trade Organisation (WTO) and others international organisation need to be concern about this, in the perspective of international trade and the agreement that exist and which may need to be further discussed. Developing countries need to priorities their policies and responses both from a local and national point of view.
They also need differentiate between the common issues of telecommunication, the internet and e-commerce and those specific aspects that directly influence them and their development and therefore of particular concern to distinguish between the specific issues related to the internet and e-commerce. Ladies and gentlemen, I think that all from me today, as conclusion, planning your strategic business to accomplish maximum profit by react to “internationalisation and e-commerce” as your unique ways of doing business.
Remember, business that has e-commerce capabilities have an advantage over their competitors that only use traditional commerce methods because of the innovation in e-commerce. And I just want all of you keep in mind to concern with economics environment and technologies if you want act to globalisation. I wish all of you all the best and good luck to being successful businessman or businesswoman. Thank you. REFERNCES BOOKS 1. Courtland L. Bovee, John V. Thill, and Barbara E.
Schatzman (2004), Business in Action, 2nd edn, New Jersey: Prentice Hall 2. Courtland L. Bovee and John V. Thill, (2005), Business in Action, 3rd edn, New Jersey: Prentice Hall 3. Chan Swee Heng, Ain Nadzimah Abdullah, and Helen Tan (2006), Model Test Paper MUET, 1st edn, Malaysia: Penerbit Fajar Bakti 4. William M. Pride, Robert J. Hughes, and Jack R. Kapoor (2005), Business, 8th edn, U. S. A: Houghton Mifflin Company 5. Stephen P. Robbins and David A. DeCenzo (2005), Fundamental Of Management, 5th edn, New Jersey: Prentice Hall
WEB SITES 1. http://ms. wikipedia. org/wiki/Malaysia 2. http://en. wikipedia. org/wiki/Globalisation 3. https://www. cia. gov/cia/publications/factbook/geos/th. html 4. http:// www. bized. ac. uk. virtual/economy 5. http://en. wikipedia. org/wiki/Business_cycle 6. http://en. wikipedia. org/wiki/Economy_of_Malaysia 7. http://www. web-design-uk. biz 8. http://whatis. techtarget. com/wsearchResults/0,,sid9,00. html? query=function+B2G 9. http://en. wikipedia. org/wiki/Trade_bloc 10. http://www. us-asean. org/afta. asp