The Impact of Digital Transformation on Business Model in SMEs

Abstract

This study examines the impact of digital transformation on the business models of small and medium-sized enterprises (SMEs) in Malaysia, with a focus on identifying the challenges faced during this transition. SMEs are crucial contributors to Malaysia’s economy, yet they encounter significant obstacles in adapting to the digital era. Digital transformation has enabled SMEs to enhance customer engagement, operational efficiency, and market reach through the adoption of online platforms and digital tools. However, managing the dual demands of physical and digital storefronts presents operational challenges that require strategic resource planning. The study identifies financial constraints, such as the high costs of adopting digital technologies, and a lack of digital skills among employees as key barriers. These challenges are compounded by the competitive digital marketplace, which demands innovative branding and customer engagement strategies. The findings highlight the importance of government support, financial subsidies, and targeted training programs in facilitating digital transformation for SMEs. By addressing these challenges, SMEs can achieve sustainable growth and competitiveness in the digital economy. This research contributes to the broader understanding of digital transformation in SMEs, offering valuable insights for policymakers and practitioners aiming to support these enterprises in their digital journeys.