Small food enterprises (SFE), forming part of small-sized enterprises play a pivotal role in advancing economic

development within developing economies. Their operations generate employment and contribute to social

development and national progress. Nevertheless, these enterprises face enduring structural and operational

platforms, and analysis of strategic management-focused business advisory reports covering three Malaysian

and three Indonesian food-related enterprises. The findings reveal strong owner commitment, emphasis on

product quality, and customer-centric practices. However, internal barriers and external pressures continue to

challenge growth. Despite variations in operational structures and government support, both nations’ SFEs

confront fundamentally similar obstacles. This study enriches limited literature and provides valuable insights

for policymakers seeking to strengthen resilience, advance digital transformation, and promote sustainable

development of local food manufacturers. Importantly, the study introduces the concept of social learning,

referring to the systematic dissemination of research findings and strategic recommendations to participating

business owners. This feedback mechanism enables enterprises to apply informed insights for continuous

improvement, thereby enhancing their adaptability and contributing to the broader sustainable development of

product (GDP), employment opportunity, business activities and economic resilience (Asian Development Bank,

2024). Contribution to the national 2023 GDP by MSE in Malaysia worth RM613.1 billion, which amounted to

39.1% of total output. Furthermore, MSE in Indonesia show a more dominant role with contribution to 2023

GDP worth 61% of output (Department of Statistics Malaysia, 2024; Antara News, 2024). Hence, these

revelations supported the substantial impact that small businesses have on economic growth and productivity. In

addition, these enterprises also play their roles as job creators from the perspective of employment. For instance

the national workforce in Malaysia of 48% is accounted by MSE in contrast to Indonesia of 97% workforce

which depicts their significant roles in providing employment opportunity, especially in underserved and rural

areas (EY, 2023; Antara News, 2024). Furthermore, MSE command pervasive presence in many sectors in

Malaysia representing 97.4% among business establishments registered, which signal its vitality towards

been provided (KADIN Indonesia, 2023). It can be said that MSE pose strategic significant in supporting national

development agendas as evidenced in MADANI policy framework in Malaysia where they are seen as key

players contributing to growth inclusivity as well as resilience in economy (EY, 2023). This notion is also shared

in Indonesia with MSE seen as critical in maintaining grassroots economic functions, supporting equitable

development regionally as key drivers of the economy

(KADIN Indonesia, 2023). Nevertheless, despite being

seen as significant economic drivers in both countries which include emerging markets, MSE do experience

problems such as financial distress and bankruptcy, derived from limited access to financing and continuous

financial vulnerabilities. For instance, considerable chunk of bankruptcy cases in Malaysia consists of MSE,

although overall cases have slightly declined in beginning 2025, signalling this sector’s financial instability

growth and sustainability, at the GDP rate of 19% as identified by G20 GPFI (G20 Global Partnership for

Financial Inclusion, 2024).

Multiple challenges also being experienced by SFE in Malaysia covering issues related to regulatory, financial

and competitiveness. For instance, small food manufacturers ranked the top to fail within early five-years of their

operation among those 50 to 60 percent of small and medium enterprises (SME) that succumbed in Malaysia

(SME Corporation Malaysia, 2020). This is also going on in Indonesia with small food manufacturers among 30

percent of SME that failed within operation of two years resulting from financial constraints and intense

competition, as reported by Ministry of Cooperatives and SME. The failure became worse, leading to bankruptcy

among many small businesses especially during the time of COVID-19 pandemic (Ministry of Cooperatives and

SMEs of the Republic of Indonesia, 2021). Hence, micro and small enterprises including SFE continue to

SFE handling of resources management, risks negotiation, customers and suppliers engagement may be

influenced by such cultural dimensions including on matters of halal practices and community trust (Fischer,

2016; Ali, 2021). Nevertheless, clear variations do exist in institutional governance aspects between both

countries with Malaysia endorsing regulatory enforcement in structured way, centralised governance and

stronger institutional frameworks, in contrast to Indonesia with a more decentralised governance structure, and

more disparities in policy execution and business support (ACCMSME, ERIA & OECD 2024).Thus, in light of

these similarities and variants relating to socio-culture and institutional context, have made both Malaysia and

Indonesia SFE as suitable subjects for cross-national comparative research in revealing both common and

distinct challenges encountered.

This research examines the challenges encountered by six SFE from both Malaysia and Indonesia, with 3 SFE

with evidences to support their further competitive improvement. This is in support of social learning agenda in

building sustainability among SFE by improving their business resilience and competitiveness.

include financial barriers together with regulatory hurdles and technological difficulties and human resource

constraints. The research conducted by Berisha, Hoti and Hoti (2023) used quantitative survey methods to

evaluate 250 micro, small and medium enterprises (MSMEs) in Kosovo regarding their financial access. The

study revealed that MSMEs primarily depend on their internal funding sources because high interest rates

combined with strict collateral requirements make external financing difficult to obtain. Dabić et al. (2021) used

a mixed-methods research design to examine bank financing accessibility in Kosovo and North Macedonia. The

study demonstrated that bank loan accessibility depends on business age and firm size as well as the type of

collateral and business owner education level. The research by Ongbali et. al. (2024) employed quantitative

methods to determine obstacles that prevent SMEs from growing. The research showed that restricted market

access together with limited innovation capabilities act as major obstacles for businesses to expand. The

The topic of digitalization has received growing interest as a broader theme. Morales et al. (2024) conducted

fuzzy logic analysis of empirical data to determine that financial constraints together with digital skills deficits

and change resistance were the primary barriers to digital transformation. Gutiérrez et al. (2025) conducted

Structural Equation Modeling (SEM) analysis of 14,972 Ibero-American firms to demonstrate that technological

readiness and external support act as essential factors for digital adoption. Survey data from 7,265

microenterprises across 18 Ibero-American countries showed Viana et al. (2023) that higher digital maturity

leads to better resilience and post-crisis business performance. Jackson and Ali (2024) contributed to this

discussion through their empirical case studies which demonstrated that digital strategies enable businesses to

maintain continuity and achieve antifragility during crises. The COVID-19 pandemic has triggered multiple

research studies about resilience together with recovery. The analysis of 450 MSMEs through Partial Least

adoption in MSMEs with financial limitations and lack of technological infrastructure as major challenges. The

research by Chakraborty et al. (2025) analyzed 188 academic articles to identify strategic pathways and barriers

for circular economy implementation. The research by Vásquez, Gallego and Soto (2024) demonstrated through

applied case research that rural MSMEs can implement circular practices with sufficient guidance and

institutional support. Multiple research studies focused on institutional and regulatory and policy aspects. Tu et

al. (2024) used panel regression analysis on data from seven Central and West Asian countries from 2010 to

2021. The study results showed that higher perceived corruption levels actually boosted MSME activity but

regulatory barriers continued to restrict growth. The qualitative research by Loo, Ramachandran & Raja Yusof

Melaku et al. (2025) demonstrated that legal, financial, and institutional barriers continue to block MSME growth

and inclusion. Gao, Jiang, and Zhou (2023) used machine learning methods to enhance SME financial distress

which leads to better cultural understanding. This research methods are essential for creating effective applicable

strategies which support the resilience and growth of micro and small enterprises (MSEs) which include SFE.

Malaysia and Indonesia. Furthermore, this method enables comparative analysis to be performed on multiple

countries by taking into consideration differences in economic, cultural and regulatory settings. The research

was part of the international service-learning initiative involving students and academic advisors from three

universities namely Universiti Teknologi MARA (UiTM Malaysia), Universitas Padjajaran (UNPAD Indonesia)

and Universitas Singaperbangsa Karawang (UNSIKA Indonesia). Six small food enterprises (SFE) were selected

purposively, comprising of three SFE from each respective country, that met the definition of small food

enterprises. All SFE participants have stated their willingness to participate without hesitant. These SFE

constitute of the following business nature:

• Malaysia: one (1) café and two (2) traditional snack manufacturers.

• Indonesia: one (1) café and two (2) traditional snack manufacturers.

gauge on their online activities and digital visibility. In ensuring the thoroughness and reliability of the findings,

triangulation was made on qualitative methods as follows:

Interview session which lasted between 45 minutes to 1.5 hours were conducted with owners, managers and

employees of SFE. The interview allows matters relating to issues due from supply chain, regulatory challenges,

digital approach, internal operations, market engagement and financial management to be explored in detail.

Direct observations were made by participating students on the premise of business, primarily on matters relating

to process of production, practices of hygiene, workforce structure, usage of equipment, and customer service

performance. All information collected from observations were recorded in field notes.

strategic management tools such as Value Chain, PESTEL, Porter’s 5 forces, Strategic Direction, Finance and

SWOT. The analysis details were included into a report which were later reviewed and included in the current

study data for comparative analysis.

The qualitative data gathered from interviews, field observations, and online platform analysis were analyzed

using thematic analysis, inline with the framework proposed by Braun and Clarke (2006). This approach provides

a systematic yet flexible way to identify, analyze, and interpret recurring patterns within qualitative data, while

also allowing for the recognition of unique contextual variations between Malaysian and Indonesian small food

enterprises (SFE). The analysis combined both inductive and deductive coding techniques to ensure the findings

were grounded in the data while remaining guided by the study’s conceptual framework, which emphasized

Differences in interpretation were discussed and resolved collectively to strengthen code validity. The coded data

were then examined and grouped into six key themes such as: Common Strengths, Common Weaknesses, Shared

Opportunities, Common Threats, Cross-Country Similarities, and Cross-Country Differences. These themes

reflected both the internal dynamics and external challenges of the participating enterprises, as well as the

comparative differences between the two national contexts. The emerging themes were reviewed repeatedly

against the dataset to ensure internal coherence and clarity. Following the coding and thematic development, a

cross-case matrix was constructed to compare and contrast findings across the six enterprises. This matrix

allowed the identification of both shared regional patterns and country-specific characteristics, highlighting areas

where Malaysian and Indonesian SFEs demonstrated similarities or divergences in business practices, resource

utilization, and operational maturity. The synthesized findings were then presented through thematic tables

This research was conducted strictly in accordance to recognized ethical standards. Participation by businesses

and individuals was strictly voluntary, based on informed consent obtained in writing prior to data collection.

All participants were assured of the confidentiality and anonymization of their data, with unique identifiers used

in transcripts and reports in place of real names or business identities. Data was securely stored and accessed

only by authorized members of the research team. At all stages, the study prioritized transparency, respect, and

the protection of sensitive business information.

The research findings from this chapter reveal the internal and external obstacles which Small food enterprises

a family-run or sole proprietorship model. The level of owner commitment creates quick responses to operational

issues and customer preferences. Quality of products became a universal characteristic which appeared

throughout every business case. The entrepreneurs dedicated themselves to maintaining both authenticity, flavour

and consistency of their food products which originated from traditional recipes and local cultural heritage. The

cultural significance of food throughout Malaysia and Indonesia creates consumer loyalty since traditional

cuisine represents a fundamental part of national heritage. The quality commitment functions as a strategic

advantage in competitive market environments that base their purchasing decisions on price and other factors.

The SFE employed affordable pricing strategies consistently throughout their operations. The SFE structured

their pricing strategies to serve customers from the lower and middle income brackets including students and

residents of their local neighbourhoods. This pricing approach aligns with the buying behavior in these nations

leading levels in this region. Through these digital platforms small businesses gain an affordable way to connect

with broader consumer bases while boosting their product promotion and establishing direct customer contact.

All business cases showed a customer-centric approach as their main approach. Staff members and business

owners provided individualized service through personalized greetings and feedback reception which led to

service modifications. The level of personalized engagement with customers becomes essential in these contexts

because it builds brand loyalty and promotes word-of-mouth advertising.

The internal obstacles experienced by small food enterprises (SFE) in Malaysia and Indonesia prevented their

growth and sustainability over time. With reference to table 2, the main challenge arose from their continued

dependency on manual processes. The bookkeeping, inventory management and order processing tasks of these

companies used handwritten records or basic spreadsheets as their main tools. These operations suffered from

problem for food businesses as it threatens their fundamental requirements of hygiene and safety as well as

product consistency. Financial management emerged as the third widespread weakness as businesses lacked

functional budgeting systems, cash flow tracking capabilities and financial performance monitoring methods.

This was also contributed by the owners of businesses who performed financial management outside of

established systems by mixing personal funds with business assets. Furthermore, businesses without digital

accounting tools experienced worse financial planning because it reduced their lending credibility and cut off

external funding opportunities. The lack of formal financial systems throughout developing countries presents a

widespread challenge that small businesses need to overcome. Human resource practices were also identified to

operate without proper structure. The businesses employed family members, seasonal workers and part-time

employees without contracts and unclear job descriptions. In addition, these companies operated without formal

struggled to establish themselves and compete with established brands because of their ineffective online market

presence.