Engineering Consultancy Practice ( ECP ) Business Model in Malaysia : A Structural Equation Modeling ( SEM ) Approach

The implementation of liberalization in Malaysia has offered opportunities to the Malaysian to expand business. The salient point of liberalization of Engineering Consultancy Practices (ECP) is the opening of the flood gate for non-professionals (including foreigners) to register and operates consultancy practices. This would create an excessive competitive environment to the Malaysian ECP. The aim of this study is to identify the successful business model to be adopted by Engineering Consultancy Practice (ECP) for building its capacity and competitiveness. This study is important in the sense that it serves as one of the pioneer studies, focusing on the engineering consultancy practices, from the perspective of business model. Principal Component Analysis (PCA) is employed to analyze data from a quantitative survey. Three components are extracted through PCA approach: (1) Profit Structure factor, (2) Management Capability factor and (3) Stakeholder Relationship factor. Consequently, Structural Equation Modeling (SEM) is utilized to perform analysis on the data extracted from PCA. Two (2) Business Model Indices are formed to examine the business performance in terms of business model criteria and business performance. Through the data validation, it is found that ECP Business Performance Index is best to evaluate the business performance. Understanding the core values related to the Engineering Consultancy Practices could help the local stakeholders to have better preparation and planning to face a greater challenge lies as a result of the liberalization.


Introduction
Liberalization is first introduced in October 2011 in Malaysian Budget 2012, to be enforced in seventeen (17) sectors, including construction services, i.e. engineering consultancy practices.Engineering Consultancy Practices (ECP) are referring to architectural, civil and structural, mechanical and electrical consultancy and others professional engineer.
The nature of the services sector has changed radically as a result of Malaysia's commitment to the General Agreement on Trade in Services (GATS).The salient point of the changes is that the ownership of the ECP has now opened to the foreign service provider accordingly.Lim (2005) suggested that Malaysian services industries will have to adapt to a more open market environment, where the sector needs to build up efficiency, productivity, and thus competitiveness, through essential market means as it becomes increasingly open to foreign participation and global best practice standards, including transparency of rules and regulations.
The liberalization of the ECP has posed great deal of challenges.While the flood gate of ECP ownership has inevitably opened to the foreign service provider, the huge competitiveness of the environment is foreseeable in the sense that only the winner can survive.Consequently, the liberalization of the ECP has inspired the motive of this study to establish a successful business model to be adopted by ECP for building its capacity and competitiveness.At the meantime, this study serves as the pioneer study in Malaysian ECP in examining their business performance.
The significant of this study can be seen from both the theoretical and practical aspects.From the theoretical aspect, it covers mainly the field of academics and educations.The result of this study is able to enrich the context of the business management in academia and management philosophy.In addition, despite the fact that this study only focuses on the Malaysian ECP, it can be served as a solid basis upon conducting an international comparative study of the business performance in Southeast Asia or even Asia.This could further broader the horizon on how to manage a business performance in different geographical locations.
From the practical aspect, the outcome of this study, a causal relationship framework is developed to draw attention of the ECP practitioners, thereby improving the general understanding business management in ECP.Meanwhile understanding the ECP success criteria could help to evaluate the success of a business.Managing business criteria is complex in nature and multifaceted.Also, it is impossible to focus on every aspects of a business performance criteria.Therefore, understanding ECP business success factors and criteria could help to focus the restrained resources on certain aspect of the business (input), thereby enhancing the output of the business.

Engineering Consultancy Practice (ECP)
The Board of Engineers Malaysia (BEM), with the aim of facilitating the registration of engineers and regulating the professional conduct and practice of registered engineers in order to safeguard the safety and interest of the public, was only formed in 23 rd August 1972.The BEM is fall in the ambit responsibility of the Minister of Works, where the Board Member and the Registrar is appointed by the Minister.More specifically, for the interest of the public, especially those who come from the background of engineering, it is uncommon that the primary role of BEM is a statutory body enabling the registration of Profession Engineers.With the registration of Profession Engineers, one can legally endorse drawings from their respective discipline, where this act is generally associated with maximizing profit.However, the role of BEM is not limited to registration of Profession Engineers, but also promoting Engineering Consultancy Practices (ECP), which serves as the main subject of this study.
In Malaysia, those either sole proprietorship, partnership or body corporate desirous of practicing as consulting engineers shall register with BEM.As such, the definition of ECP mostly adapted from the rule and regulations of BEM.BEM first defines 'Professional engineering services' as engineering services and advice in connection with any feasibility study, planning, survey, design, construction, commissioning, operation, maintenance and management of engineering works or projects and includes any other engineering services approved by the Board.
Meanwhile, ECP encompass the independent performance of engineering related study, preparation of reports, making design, supervision of construction and similar advisory activities in the engineering disciplines in conformity with generally accepted professional techniques and sound management practices.Also, the requirements and procedure of the ECP has stressed that, regardless of single discipline or multi discipline, the ownership of the ECP must comprise of Professional Engineers, Professional Architects and registered Quantity Surveyors.The ownership of ECP is not open to the public in accordance with the requirements and procedure of the Board as per stated in Engineering Act (7) (A) (1); (2); (3).
The amendment of Engineering Act (2013) due to liberalization has allowed (i) the owner from a sole proprietorship, partners and in case of body corporate, 2/3s of the board of directors and 70% of the equity shall be or with Professional Engineers (local or foreign) with a Practicing Certificate; (ii) ensure that all the decisions of a body corporate shall be made by a Professional Engineer with a Practicing Certificate; and (iii) equity to be stated in these acts is for the ease of future amendments.
The liberalization of the ECP has posed great deal of challenges.While the flood gate of ECP ownership has inevitably opened to the foreign service provider, the huge competitiveness of the environment is foreseeable in the sense that only the winner can survive.Consequently, the liberalization of the ECP has inspired the motive of this study to establish a suitable business model to be adopted by ECP in Malaysia to build its competitiveness.

Business Model
Southeast Asia countries are potentially high growth regions in both local and internationally.This positioning in Southeast Asia countries encourage further development in both public and private partnership, adapting business models for expansion and moving with greater agility.These imperatives will be critical not only for global businesses seeking to expand into Southeast Asia, but also for large domestic businesses that are aiming to assert a leadership position in the region or in Asia more broadly (Accenture, 2011).
Business model remains essential to every successful organization, whether it is a new venture or an established player.It is referring to the organization production and managerial system.It shows a highly simplifies and aggregate form which resources play an important role in the organization.A good business model facilitates the f the business model is based on the suitability and types of the business conducted.A competitive business model articulates the logic and provides that demonstrates how a business creates and delivers value to customers.It is greatly rely on the strategy and innovative renovation in the model to suit the business.The recent stage in business model development is very much depended on structure of an organization, cultural behavior and the potential customers in determining a business model.Taking into consideration of Engineering Consultancy Practice (ECP) business development in Malaysia, the liberalization has brought direct impact to the ECP development, creating competitiveness and flexibility to the ECP service providers.Moreover, the ECP business model development is still considered young in its business performance resulting in the Malaysian ECP today is facing greater challenges in sustaining their business.
The adoption of suitable business model is able to help ECP in managing the firm in a systematic way to ensure revenue stream.As the selection and suitability of the business model is relied on the eleven business core values, hence formation of best ECP business model could be generated by review the core values and criteria to suit the Malaysian consultancy industry.

Research Methodology
The review on business model is intended to examine the existing business performance in Malaysian's civil and structure engineer in order to justify their competitiveness in overcoming the challenges due to liberalization.Based on binomial distribution, 95% confidence level of 3500 population size (civil and structure engineers only), 346 sets questionnaire were distributed.125 sets questionnaire were collected, 84 sets valid questionnaire were received, representing 24.3% of response rate.According to Fellow et al. (1997), the normal expected responses rate is ranging from 25%-35%.Thus, the response rate for this study is considered acceptable.
The questionnaire is designed in 5 points Likert Scale."5" represent strongly agree, "1" representing strongly disagree meanwhile "3" representing less agree.This is to prevent neutral opinion given by the respondents.
Principal Component Analysis (PCA) and Structural Equation Modeling (SEM) were utilized to examine the causal relationship of ECP business model in Malaysia.One of the main reasons this study employs Structural Equation Modeling (SEM) lies with its capability of modeling the relationship among multiple independent and dependent constructs simultaneously (Zainudin, 2012).

Analysis and Discussion
Principal Component Analysis (PCA) is conducted through Statistical Package for Social Sciences (SPSS).The results of PCA are utilized to compute ECP Business Model through Analysis of Moment Structure (AMOS).The analysis is discussed in following sections.

Principal Component Analysis
Principal Component Analysis is greatly relying on the reliability and sampling adequacy test (Field, 2005).Cronbach's alpha is commonly used to measure of the internal consistency of the factors which correlated to each other.The higher Cronbach's Alpha represent the higher reliability of the variable set.It is suggested that the threshold value for the Cronbach's Alpha is set at 0.7 (Nunnally & Bernstein, 1994).The Cronbach's Alpha recorded in this study is 0.895, suggesting a high internal consistency as well as high level of reliability of the survey instrument.Meanwhile, Kaiser-Meyer-Olkin (KMO) and Bartlett's measure are normally used to measure the sampling adequacy in factor analysis.The threshold value of KMO should be greater than 0.5 if the sample size is adequate (Child, 1990).The test result of KMO is 0.600 suggesting that the sample size is adequate for factor analysis.
As this study involves 69-factors (refer Appendix), for the sake of interpretability, the coefficient display format was set to suppress absolute values of less than 0.7.Meanwhile, the extraction method was set to principal component while the rotation method was set to varimax.As Meyers et al. (2006) suggests the threshold value for the cumulative of total variance explained is 50 per cent total variance explained, the number of groups account for 50 per cent is three as shown in Table 1.The next step after the formation of the formula is to introduce a measurement method for the ECP Business Model Index.This could be obtained by referring to the standardized weight in Table 5.Based on the standardized weight tabulated from the SEM model, the equation can be reformed as: From (1), ECP Business Model Index = 0.27PS+0.58MC+0.11SR (3) From ( 2), ECP Business Performance Index = 0.83IN+0.66MP+0.80FI+0.62PH(4) The equations are then converted to a common value system, in order to evaluate the level of delay in the project by following the rating scale created.This can be achieved through mathematical approach by dividing the standardized weigh with the total standardized weight in the particular equation.The final equations are shown as follows: From (3), ECP Business Model Index = 0.28PS+0.60MC+0.12SR From ( 4), ECP Business Performance Index = 0.29IN+0.23MP+0.27FI+0.21PH6) After computing the ECP indexes, a measurement scale is created to measure the business performance.A rating scale from -5 to 5 is created as shown in Figure 6.
Figure 6.Business performance rating scale The practitioners are able to examine their business performance by utilizing the rating scale as shown in Figure 6.A minimum of -5 and maximum of 5 is used to measure their business performance according to intellectual, manpower, financial and physical.The final calculation of the business performance index will be rated based on the rating system created in Figure 6.0.The selection of an academician in validating the business model is essential to identify the functionality of the business model in terms of theoretical perspective.Justification of the formation of ECP business performance index from the selection of business model core values, categorization and developing performance index is important to validate the methodology framework.The opinions of practitioners such as consultants are undeniable essential.

Data Validation
From the data validation, it is found that ECP Business Performance Index is best to describe a business organization due to its ability to identify the business performance through the strength in business resources.

Conclusion
The concept of Engineering Consultancy Practices (ECP) in Malaysia is explored.Understanding of ECP would result in the building its capacity and competitiveness to face the great challenges due to the liberalization.As this study serves as the pioneer study that focuses on the ECP in Malaysia from the aspects of business model factor and a structural model that depicts the relationships between ECP factors and criteria.
Investigation into the ECP success factors reveals three main components namely Profit Structure factor, management capability factor and stakeholder relationship factor.The three components, together with four criteria namely intellectual (knowledge, patents, copyrights), human (manpower), financial (cash, stocks) and physical (facilities, building) form the input data and output data for an ECP model.More specifically, ECP success factors provide input into the ECP model, which is evaluated by four ECP criteria as mentioned.The development of the ECP model is important in the sense that it provides insight into: (1) the depiction of relationships between the ECP success factors and ECP success criteria, (2) the formulation of an ECP business performance index (0.29IN+0.23MP+0.27FI+0.21PH).
The model proved its practicality through case studies validation.The practitioners are able to identify their business performance through the ECP Business Performance Index which examining their business intellectual property, financial, manpower and physical assts.These four criteria highlighted the essence of a business model.Therefore, the ECP Business Performance Index is considered comprehensive in terms of practicality and reliability.
There are few considerations have been taken while carrying this study.Due to the resources and time constraint, the study is limited to, Civil & Structure Engineering Consulting firms in Malaysia; the study is conducted to large, medium and small consulting firms and the social desirability bias is omitted.Meanwhile, data collection is carried out through questionnaire survey in Malaysia, therefore the social desirability bias is omitted.
Apart from that, there is limitation lies with the methodology such as the method employed in this study, Structural Equation Modeling.Given the dataset of this study consist of 84 sets returned valid questionnaire, future studies may require more set of questionnaire.Also, more case studies are needed to validate the findings of this study.Both quantitative and qualitative approach is needed to investigate into the issues regarding the Engineering Consultancy Practices (ECP) in Malaysia.
In addition, as this study serves as one of the pioneer studies into the Engineering Consultancy Practices (ECP), the focus of this study (success factors) is rather broad and more specific case studies are needed to comprehensively look into the issues related to ECP.Finally, as a result of globalization, more comparative study across countries should be encouraged to compare the issues related to ECP across geographical location.

Five
experts are selected to validate the research output, whereby the respondents are currently: (1) Senior Lecturer, Faculty of Management, Universiti Teknologi Malaysia; (2) Immediate Past Chairman, The Institution of Engineers Malaysia (Southern Branch); (3) Vice Chairman, The Institution of Engineers Malaysia (Southern Branch); (4) Honorary Secretary, The Institution of Engineers Malaysia (Southern Branch); (5) Local Authority Officer.