Small and medium enterprises (SMEs) have been recognized as an engine for the economy and a generator of employment and growth. However, SMEs are affected by the challenges from the business environment which influence their performance. The competitive and market conditions have force the organization to seek long term success by achieving excellence in the business. The literature shows that there are many factors that can lead to the operational excellence including the internal and external environment factors. The objective of the study is to investigate the factors that influencing the operational excellence on SMEs sectors. The literature shows that the study on operational excellence for the SMEs sectors remains unclear. Literature indicates that there is a need for a study in the context of Malaysian SMEs sectors. This study attempts to combine the internal and external environment factors. This research proposes a conceptual framework that examines the factors that influencing the operational excellence. The outcome of this research may be useful for firms, managers and stakeholders in understanding and adopting efficiency of managing the internal and external environment factors in order to improve performance and achieve the operational excellence.
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