Table of Contents

CHAPTER ONE: INTRODUCTION TO THE STUDY.........................2

BACKGROUND TO THE RESEARCH.............................................2
REVIEW OF PAST RESEARCH WORK & IDENTIFICATION OF
GAPS....................................................................................................3
PROBLEMS IN RESEARCH............................................................10
JUSTIFICATION OF THE RESEARCH...........................................10
CHAPTER TWO: LITERATURE REVIEW.........................................14
INTRODUCTION: ............................................................................14
FINDINGS BY OTHERS...................................................................14
Limitations & problems of the research by others .............................14
GAPS IN THE TOPIC........................................................................15
SIMILAR RESEARCH WORK IN THIS FIELD.............................15
TECHNICAL RESEARCH METHODOLOGY................................16
Limitation............................................................................................18
CHAPTER ONE: INTRODUCTION TO THE STUDY

BACKGROUND TO THE RESEARCH

The halal industry in Malaysia provides immense opportunities for Malaysian
manufacturers. With a global Muslim population of about 2 billion, the market for halal food is
estimated at US$547 billion a year. The concept of halal is associated with food products which
are of high quality in terms of cleanliness, sanitation and compliance with religious
requirements. Malaysia's food manufacturer can contemplate joint-ventures with established food
manufacturer's, particularly from Australia and New Zealand, to service the ASEAN, Middle
East, European and US markets which have sizeable Muslim populations. Local halal food
products can gain easy access into these halal markets as Malaysia's halal certification is globally
recognized. In 2008, the food processing industry contributed about 10% of Malaysia's
manufacturing output and companies in this industry are predominantly Malaysian-owned.

Malaysia's food industry is as diverse as the multi-cultures of Malaysia, with a

wide range of processed food with Asian tastes. Major food imports in 2008 were cereal and
cereal preparations, cocoa, vegetables and fruits, dairy products and animal feed. Raw materials
such as cereals and dairy products will continue to be imported for further processing for human
consumption as well as for the production of animal feed. In Malaysia, the food industry is
dominated by small and medium scale companies. The major sub-sectors are fish and fish
products, livestock and livestock products, fruits, vegetables and cocoa. The fisheries product's
sub-sector includes processed seafood products such as frozen and canned fish, crustaceans and
molluscs, surimi and surimi products. This sub-sector remained the main contributor to the
exports of processed food. In the livestock sub-sector, Malaysia is the third largest producer of
poultry meat in the Asia Pacific region. Malaysia is self sufficient in poultry, pork and eggs, but
imports about 80% of its beef requirements.

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Among the dairy products produced are milk powder, sweetened condensed milk, pasteurized or
sterilized liquid milk, ice cream, yoghurt and other fermented milk. Currently, Malaysia is the
largest cocoa processor in Asia and ranks fifth in the world. However, most of the cocoa beans
are imported. Malaysia is also one of the world major producers of spices. In 2008, Malaysia's
was ranked as the fifth largest exporter of pepper and pepper-related products (specialty pepper,
processed pepper and pepper sauces).In the Ninth Malaysia Plan, the production of fruits and
vegetables is targeted to reach 2.56 million tonnes and 1.13 million tonnes, respectively, by
2010. Vegetables are mainly grown on a small scale for fresh consumption, and are exported
mainly to Singapore. The major locations for the cultivation of vegetables are in Johor, Pahang,
Kelantan and Perak. In 2008, Malaysia's was ranked as the fifth largest exporter of pepper and
pepper-related products (specialty pepper, processed pepper and pepper sauces).

In the fruits sub-sector, besides mangos, star fruits and papayas, the cultivation of pittaya (dragon
fruit) is gaining interest among farmers. Most of these fruits are to cater for the domestic market.
Increasing consumer awareness in nutrition value and food fortification for healthcare has
created the demand for functional/healthy, minimally processed fresh food, organic food and
natural food flavors from plants and seafood.
Functional/health food produced in Malaysia is mainly in the form of food products that are
enriched. Food ingredients such as customized formulations required by food manufacturers,
natural food additives and flavors have the potential for further growth. The halal industry in
Malaysia provides immense opportunities for Malaysian manufacturers. With a global Muslim
population of about 2 billion, the market for halal food is estimated at US$547 billion a year. The
concept of halal is associated with food products which are of high quality in terms of
cleanliness, sanitation and compliance with religious requirements. Malaysia's food manufacturer
can contemplate joint-ventures with established food manufacturer's, particularly from Australia
and New Zealand, to service the ASEAN, Middle East, European and US markets which have
sizeable Muslim populations. Local halal food products can gain easy access into these halal
markets as Malaysia's halal certification is globally recognized.

REVIEW OF PAST RESEARCH WORK & IDENTIFICATION OF GAPS

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Lots of research has been conducted in this field. But there are very few researches which are
specifically conducted for the halal food industry. So this is a unique research which specifically
concentrates on the niche halal food industry. This will help the industry to come up with
necessary innovations so that they can compete at a global level, thus contributing to the
Malaysian GDP.

Research problem or research question

1. What type of food products does your company produce?

HALAL FOOD PRODUCTS
NON HALAL FOOD PRODUCTS
BOTH

Objective: This question was asked to know the core competency of the business.
Observation:
Inference:
2. Who purchases and consumes most of your food products?
MUSLIM CONSUMERS
NON-MUSLIM CONSUMERS
BOTH
Objective: This question was asked to determine the type of consumers. This will help us in
dividing the consumer into different segment.
Observation:
Inference:

3. Is quality management system a problem into your company in context of managing products?
A. YES
B. NO
Objective: To gauge “Why the Malaysian halal food process industry does not match with
international standards”. This is the main research objective of the study. This will directly aid us
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in finding out the solution to the problem. This question is framed in context to the quality
management system in place, whether it is effective or not.
Observation:
Inference:
4. Does labeling, packaging, storage, handling and branding matter in your company?
A. YES
B. NO

Objective: All the above mentioned parameters may also contribute for the perception in low
quality. This question is directly targeted at finding mapping out qualitative deficiencies.
Observation:
Inference:
5. Is your production department use Total Quality Management Concept?
A. YES
B. NO
C. OTHER, please specify ………………………………
Objective: To find out whether the company follows world class manufacturing techniques or
not.
Observation:
Inference:
6. Does your company implement Quality Assurance System during the production process?
A. YES
B. NO
Objective: To find out the companies operational excellence. Whether there is any formalized
procedure in this regard.
Observation:
Inference:
7. What is the volume of halal food or beverage products that your company exports overseas?
A. SMALL
B. LARGE
C. MEDIUM
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 D. ALL THE ABOVE
Objective: This question was framed to know if the company is heavily dependent on foreign
exports and to what extent of volume do they export.
Observation:
Inference:
8. Who are your main competitors in the world market?
LOCAL ENTERPRISES
FOREIGN ENTERPRISES
NEIGHBORING COUNTRY ENTERPRISES
MULTINATIONAL ENTERPRISES
ALL THE ABOVE

Objective: To find out the type of competition faced by the small scale halal food processing
industries.
Observation:
Inference
9. What type of support do you receive from the government or trade agencies from your
country?
A. FINANCIAL SUPPORT
B. LOAN SUPPORT
C. EXPERTISE SUPPORT
D. RESOURCES SUPPORT
E. TRAINING PROGRAMMES
Objective: Whether government policy is favorable towards the halal food industry. If in case
any incentives are offered both in terms of monetary or financial assistance. This helps us in
gauging whether the environment is constructive for companies in this sector.
Observation:
Inference:
10. What methods does your production department use in improving the value of food
products?
HALAL FOOD CONTROL SYSTEM
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TECHNOLOGY
INNOVATION
OTHER, please specify ……………………………………
Objective: Is to find out what measures are being taken by the company to improve the quality
of the finished product.
Observation:
Inference:

11. What challenges does your company face in the global market competition?
……………………………………..
…………………………………........
………………………………………
Objective: To find out what are the other major problems that the company is facing
Observation:
Inference:
12. The price set by your company; does it favor either all consumers or a specific group of
consumers?
IF YES, how? ............................................................................................................
IF NO, why? ……………………………………………………………………….
Objective: Is to find out the pricing strategy of the company.
Observation:
Inference:
13. Is it easy to acquire resources from within your country or from overseas halal trading
countries?
YES
NO, Why? …………………………………………………………………………
Objective: Helps us in finding out quality of material being sourced from within the country.
Observation:
Inference:

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14. What strategies does your company plan to use in future so as to attain the global competitive
advantages?
……………………………………………………………………………………
……………………………………………………………………………………
Objective: Is to know about the strategies of the companies to fight the global competition. How
professionally competent are they prepared to compete with global companies?
Observation:
Inference:
15. How is R &D department useful to the company?
……………………………………………………………………………………
……………………………………………………………………………………
Objective: Has the company invested in R&D and what importance do they give to R&D.
Observation:
Inference:
16. How does marketing department promote brand awareness on the halal food products?
…………………………………………………………………….
…………………………………………………………………….
Objective: To find out what marketing and branding strategies have been adopted by the
company’s management.
Observation:
Inference:

17. How does working environment motivate employees in achieving company’s goals and
competitive advantage?
………………………………………………………………………
……………………………………………………………………….
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Objective: To objectively assess the working conditions of employees and how it affects their
productivity and quality of work done.
Observation:
Inference:
18. How does your company handle complaints from the customers?
…………………………………………………………………………
………………………………………………………………………….
Objective: Documents the complaint handling procedure followed by the company. This helps
us in determining the frequency of complaints handled.
Observation:
Inference:
19. What are essential steps in your company strategy?
VISION
MISSION
STATEGY (near term goals towards vision)
TACTICS (implementation details of the strategy)
Objective: What approach is followed by the company in adopting a long term strategy, so as to
improve the profitability and to motivate company employees?
Observation:
Inference:
20. Does the company take into consideration the customers’ satisfaction?
YES
NO
Objective: What is the importance of customer satisfaction for the company? How are they
trying to improve the quality of the product for increased customer satisfaction?
Observation:
Inference:
The establishment and successful operation of small-scale food processing enterprises face
several constraints.

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PROBLEMS IN RESEARCH
 Due to the time constraint (9 months), response from the industry is very limited.

 It is a expensive to conduct a secondary data collection from institutions keeping the

budgetary constraints in mind. We accomplished the survey by reducing the sample size. This in
turn affected the accuracy of our research.

 It was very difficult to fix an appointment with the halal management representatives of
companies. We faced a lot of hurdles in taking their interviews.

 Due to culture constraints it becomes nearly impossible for foreigners to organize research
and collect information unless there is a representative from within the industry to introduce us.

JUSTIFICATION OF THE RESEARCH

There is a lot of research conducted for food industry in Malaysia which is a major contributor
toward the GDP of Malaysia. But there are very few researches conducted for halal products. So
this research was conducted with an aim to find out the problem faced by the halal food industry.
This research will provide the industry with valuable insights on how to bring about the right
changes so that they can compete at a global level. The researcher expects to gather essential
information from both primary and secondary data collection which would then be used in
outlining the past, present and future challenges faced by the industry. This will present an
opportunity to have a clearer understanding of the measures that can be undertaken to overcome
all those obstacles that SME’s face in light of globalization.

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The research analysis will enable the enterprises to undertake feasibility studies and improve
their production processes with increased marketing possibilities for their halal
products. The study will highlight possible solutions and help companies build effective
marketing strategies and in gaining a competitive advantage over their rivals.
The researcher expects to find effective international standards that will be suitable for small or
medium food processing enterprises not only for their local Halal Certification purposes but also
standards that are recognized internationally so that Malaysian halal food products can compete
successfully in terms of quality and price in the global markets.

Hypothesis
Hypothesis is the assumption between two variables. Highlighted below are a few of the
hypothesis with whose help we will try to find whether our hypothesis is right or not. The
reasons for low quality (according to global standard) of the finish halal products are given
below.

Insufficient Supply of Good-quality Raw Materials

Quality of the raw material available for halal industries is affecting the finished product. There
is a deficiency of good quality raw material and government policies lack in providing quality
guidelines to the halal industry.

Low Level of Technology

Small-scale food processing enterprises generally use traditional methods of processing. This is
because of financial constraints because of which they cannot afford sophisticated machinery and
lack technical information to compete on a global scale.

Research and Development (R&D)

No research activity is undertaken at a factory level. Most of the research and development on
food processing technology is undertaken by research institutions such as the Food Technology
Research Centre, MARDI and some universities. This is as a result of less funding for these
projects.

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Competitive Market
Many small-scale food enterprises are processing similar types of products. These are items that
require a low capital investment and a lower level of technology. Due to the large number of
firms involved, they face stiff competition in terms of their market share. However, some
enterprises are able to expand their enterprises, because they are innovative and have an
aggressive market strategy.

Quality Problems

The product quality of small-scale food enterprises is inconsistent, due to a lack of facilities for
quality control or awareness of the need for these, and due to poor manufacturing practices.

Lack of Small-Scale Food Processors' Associations

There is no association of small-scale food processors, or if such an association exists it is
inactive. The lack of any organization to safeguard the interests of its members has led
enterprises to compete among themselves for the same market share by lowering their selling
prices.

Food Packaging
Some entrepreneurs still produce goods packed in low-quality packaging material with a rather
unattractive packaging design.

Level of Educational Background

Entrepreneurs with an elementary school education tend to be less receptive to new technologies
compared to their counterparts who have a college education. This has made it difficult to
transfer new technology and improve productivity.

Lack of Finance
This is a common problem facing small-scale food entrepreneurs. Financial institutions have
more confidence in big industries, while small-scale industries have little collateral. They also

12
have problems in preparing a project paper to show the viability of their business and its future
plans.

Lack of Managerial approach

Most small-scale food enterprises are managed by the owners, who do not know modern
techniques of management, including book-keeping and maintaining proper records. They are
not innovative and motivated. They tend to be satisfied with what they have.

METHODOLOGY

The study was conducted by means of personal interviews of small and medium entrepreneurs in
Malaysia who work in halal food processing industries. The research was done in Kuala Lumpur,
Malaysia, and the Klang Valley areas.

Questionnaire’s required about 15 minutes to complete. Interviewees were asked to rate their
companies on parameters based on their opinion or past experience. Interviews were conducted
during different times of the week.

CONCLUSION
It is envisaged that small-scale food processing will continue to play a very important role in the
Malaysian economy. To maintain industrial growth, the Malaysian government needs to put into
place various policies and incentives, applicable not only to food processing but to other
industries as well. Government agencies need to take an active role in supporting the
development of small-scale food processing enterprises by providing technical expertise, and
financial and marketing assistance.

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CHAPTER TWO: LITERATURE REVIEW

INTRODUCTION:
Most of the research conducted in this field has emphasized on the following topics.

1) Export/import imbalance
2) Environmental protection
3) Informational expertise about markets
4) Total quality management
5) Competitiveness in global markets

FINDINGS BY OTHERS

Lots of research has been conducted in this field. But overall most of the researches are fore the
Malaysia’s food industry as a whole. But there are very few researches which are specifically
conducted for the halal food industry. So this is a unique kind of research which will specifically
concentrate on the halal food industry. And it will help the halal food industry of the Malaysia to
come up with necessary changes so that they can compete at the global level.

Limitations & problems of the research by others

Most of the research conducted for Malaysia’s food processing industry talks about the problems
that the domestic food industry is facing, but it doesn’t give the solution. For example a research

14
conducted by Hasnah Ali.which is published in www.bizresearchpapers.com tells us that the
small scale halal food processing industry is very important for the growth of Malaysia’s
economy. Hasnah Alis also highlighted that food processors were not able to meet the global
standards because of the lack of good quality instrument. But he didn’t give much emphasis on
how the halaal food processing industry can overcome this problem and deliver a high quality
product.

GAPS IN THE TOPIC

The major gap in the topic is that although the research done on halal food industry talks about
the importance and the problem faced by the Malaysia food industry, none of them talks about
the solution for overcoming this gap. Our research in this field helps us to pinpoint some of the
ways we can fill this gap by finding a viable solution.
This research is just an extension of previous researches conducted in this field and has helped us
identify problems such as low quality regulations, equipment, lack of government support etc.

SIMILAR RESEARCH WORK IN THIS FIELD

There are many articles and researches done on Malaysia’s halal food processing industry. Some
of the links for these reports are given below.

Aseansource.com 2004, Malaysia Food and Beverage Industries & Manufacturers, online,
retrieved on 17th July 2009, from

http://www.aseansources.com/jsp/malaysia_food_beverage.jsp

Hua, B 2006, The Impact of HACCP Implementation on the Performance of Malaysian Food
Industry, online, retrieved on 17th July 2009, from

15
http://eprints.usm.my/8321/1/THE_IMPACT_OF_HACCP_IMPLEMENTATION_ON_THE_P
ERFORMANCE_OF_MALAYSIA_FOOD_INDUSTRIES.pdf.

TECHNICAL RESEARCH METHODOLOGY

Research methodology we followed to analyze our primary objective of “identifying the

shortcomings encountered by the halal food processing enterprises with a view to taking
corrective measures and adopting strategies that will strengthen the SMEs and their contribution
to the economic progress of the country.”
Objective can be divided as follow:
Breaking down the PRO into SRO.

To find out how Insufficient Supply of Good-quality Raw Materials is affecting the quality of
finish products.

To find out what quality management system are company using and how it
is affecting the performance.

1) To find out What type of support do industry is getting from the government or trade
agencies.
2) To find out how much emphasize is given on R &D.
3) To find out what is the method to handle the customer complaint.

A customer questionnaire was prepared so as to collect data pertaining to each Secondary

Research Objective.An exploratory research (Survey) was carried out to facilitate the detailed
qualitative analysis to find out customer responses towards the factors affecting the halal food
industry.A quantitative analysis, using basic and advanced statistical techniques, of the responses
of the customers was carried out.Based on the qualitative and quantitative analysis, inferences
and recommendations were made.

Define research problem

16
 Review
Review
previous
concept
research and
& theory
findings

Formulate hypothesis

Design research

Collect data

Analyses data

Interpret & report

17
Limitation
We were not able to segregate serious and non serious respondents from the total number of
respondents. The sample size (number of responses we received) was not adequate for
conducting a detailed research which might cause sampling

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