The Particular External Environment of STABILO Malaysia - Research Paper Example

Your STABILO Malaysia Introduction The Swan Malaysia Sdn Bhd is a subsidiary of Schwan-STABILO Schwanhaeusser GmbH & Co, a German company (Swan Malaysia Sdn Bhd). It was formed as the first joint venture of a German and Malaysian companies in the manufacturing field 1967 (Swan Malaysia Sdn Bhd). The parent company, the Schwan-STABILO group is a multi-national company of pens, pencils, cosmetics and outdoor gears and equipments which started in 1985 with the ownership of Gustav Schwanhuer (Schwanhuer Industrie Holding GmbH & Co. KG). Originally named as Groberger & Kurz, the company was renamed 'Schwan-Bleistift-Fabrik' and has since become an international company, until in 1996 when it was again renamed Schwan-STABILO Schwanhuer GmbH & Co.KG, a company converted into a holding company (Schwanhuer Industrie Holding GmbH & Co. KG). Swan Malaysia Sdn Bhd is one of the three production facilities of the Schwan-STABILO Group "that guarantee the best materials and resources, workmanship and experienced staff" (Swan Malaysia Sdn Bhd). Main Body It is the goal of this paper to analyze the particular external environment of STABILO Malaysia or the Swan Malaysia Sdn Bhd subsidiary as an aid to better business policy. Effective management and evaluation tools such as the PEST Analysis, The Porter's Five Forces Analysis, the Competitor Analysis and the Market Trend Analysis will all be done in this particular case. General Societal Trends: PEST Analysis The external environment may seem out of company's control as the political, economic, social and technological climate are determined by outside factors, but the responsibility to forecast, adjust and reconcile the company's direction to them is within the company's scope and capability. Political. Malaysia espouses the Parliamentary democracy, with a constitutional monarch, the King of Malaysia as the head of state and the government administration divided among the Executive, Judicial and Legislative branches (Malaysian Administrative Modernisation and Management Planning Unit, 2010). The country's judiciary in Malaysia is said to be not independent as there seems to be "excessive influence of the executive over the judiciary, especially in politically motivated cases" thus foreigners cannot be guaranteed an impartial trial from the country's judiciary (Alibaba.com, 2008). As to tax rates, the coutnry requires to Value Added Tax (VAT), but there is a sales tax which is normally at 5%, except for cigarette which is taxed 25% and wine and beer which is taxed at 20% (Alibaba.com, 2008). For corporation, capital gains tax range from 0% to 28% (Alibaba.com, 2008). Economic. Malaysia is one of the growing economies in Asia. Although it posted a -2.8% growth rate in 2010 its inflation rate was moderate at 0.4% in the same year (IndexMundi, 2010). Malaysia Ringgit is a relatively strong currency, which is currently exhcanged for 3.26 to 1.00 USD compared to Philippines' 45.9 to 1.00 USD (http://www.xe.com, 2010). Malaysia's competitive ranking surged to 10th compared to 18th a year ago "as the country benefited from strong demand from Asia as well as implementation of efficient policies, especially government policies" (Sidhu, 2010). Investment banker attributes the leap from the government's strong commitment to "reshapre the country's competitive landscape" (Sidhu, 2010). The ranking which was based from four main criteria including economic performance, governmen efficiency, business, efficiency and infrastructure is expected to boost the country's private investment (Sidhu, 2010). Social. The country currently houses 28.96 million individuals, with a projected average growth rate of 1.6% per year, a figure which is lower than the previous years and is primarily attributed Malaysians' decision to delay marriage and pursue higher education and career advancement (Malaxi.com, 2010 cited in Department of statistic and economic planning unit). 63.6% of the population is from 15-64 years old, 31.7% aged 0-14 and the remaining aged 65 above (Malaxi.com, 2010 cited in Department of statistic and economic planning unit). The figure shows a declining number of young population. Technological. The Malaysian government puts forth great effort in improving its technology. It has the yearly Malaysia Technology Expo and gives invention and innovation awards (Malaysia Technology Expo 2010, 2010). It also has the Malaysia Technology Development Corporation (MTDC) which was created by the Malaysia government in 1992 "to spearhead the development of technology businesses in Malaysia. Its initial role was to concentrate on the promotion and commercialisation of local research and invests in new ventures that can bring in new technologies from abroad" (http://www.mtdc.com.my/, 2010). Analysis. The political, economic and technological situation of Malaysia all direct to better business for the Swan Malaysia Sdn Bhd. The government has a relatively low corporate tax of 5% and the government doesn't seem to have an inclination to increase the figure. There is also a relatively stable political climate which enhances business efficiency and stability. Although, the government suffered negative GDP growth, which was primarily similar to other countries, recent figures show recovery and growth. The enhanced competitiveness of Malaysia will boost its export and local industry. One of the companies that will benefit to this is the STABILO Malaysia. Increased competitiveness will increase the company's access to better technology and market expansion. Increased per capita income will also increase possibility of huge sales. The only concern for the company is the decreasing percentage of young population. Its pens and pencil products are still primarily targeted to the young population especially at the elementary or high school levels. With the decrease in the size of this population, sales will be affected. There are however corporate solution to this, such as improving the products for the ageing population such as the office materials. Industry Competitive Position: Porter's Five Forces Rivalry. Stabilo pen faces tough competition from other ballpen brands. Aside Parker, Pilot and Kilometrico, there are also other brands such as Faber Castle, G-Shock and Staedler (Reed Business Information, 2010). The pen industry has a lot of players and most of which are also foreign brands. There are no significant barriers to entry or exit, so competition is fierce. The growing economy of Malaysia, however works for the expensive but high-quality pens such as Parker and Pilot. Increased disposable income enables Malaysian to shell out money for ordinary necessities such as pens, pencils and highlighters. The products are not entirely different, but recent innovations such as new designs for ergonomics for Stabilo creates differentiation. Barriers to Entry. The pen industry in Malaysia is a competitive industry, therefore we expect that products are homogeneous and there are no barriers to entry and exit. There are also no unnecessary government requirement to put up a business. The technology used in pen manufacturing is also accessible and available. In terms of innovation, Malaysian government provides a secure environment as there are definite laws that govern them. "Inventions can be patented only if they are new, little obvious and industrially applicable. A patent expires after 15 years but can be renewed in certain cases. The protection of registered trademarks is governed in Malaysia by the 1976 and 1983 Laws" (Alibaba.com, 2008). Supplier Power The Swan Malaysia Sdn Bhd of Malaysia is one of the main manufacturers and suppliers of the entire Stabilo Group (Swan Malaysia Sdn Bhd). As a subsidiary of Schwan-STABILO Schwanhaeusser GmbH & Co, a German company, Stabilo Malaysia is in the forefront of innovation, quality and reliability (Swan Malaysia Sdn Bhd). Since the industry is composed of cheaper and smaller products, economies of scale can be enjoyed by manufacturers. Increased in manufacturing volume can save on costs. This is in tune with the growing manufacturing sector of Malaysia (Advameg, Inc., 2010). Threats of Substitutes. The pen industry faces extreme threat from the growing use of computers. Drawing, writing and other things which are used to be created with pens can now be done using computers more conveniently. The use of computer can also be more cost effective and time-saving that manual. People have greater inclination to computer use now that writing. This Buyer Power. The case of Malaysia is one where buyer volume is decreasing, with the decrease in the population growth and decline of the young population- the primary targets of drawing and writing pens. However, the industry may benefit from the higher buyer purchasing power (Malaxi.com, 2010 cited in Department of statistic and economic planning unit). With increased income and purchasing power, buyers are not price sensitive, alternatively, they are more conscious of quality. Analysis. There is a strong reason to believe that the pen industry is weakened by the presence of computers. Computers pose a very strong substitute to manual writing and drawing. There are however, other aspects of visual arts that cannot be done using computers, therefore this provides a stable market for pens. With the economic trend, it is very likely that manufacturers will go for high-quality but expensive pens and pencils. Competitor Analysis (6) In Readers' Digest survey conducted in October 2009, Kilometrico, Parker and Pilot (Adoi Magazine, 2009). These are top cmpetitors for Stabilo pens. Among these, Parker pen is considered the most expensive followed by Pilot and Kilometrico. The price of Stabilo ranges something in between Pilot and Kilometrico. The Kilometrico brand is known to be cheap. Some note that Kilometrico pens "write very well, the colour comes out smoothly and very dark" and is very affordable for the students (http://blog.fansub.tv, 2009). Therefore, the brand captures the market who cannot afford a Parker, a Pilot nor a Stabilo pen. On the other extreme are Parker and Pilot pens. Parker pens are highly expensive, but are known to last long and therefore still cost effective in the end. The brand also exudes a good image and status symbol. This is usually used in the offices and by professionals. The target market ranges from Class A, B and C. The Pilot brand is also more expensive than Stabilo, but lesser than Parker. Pilot pens are convenient to use and also cost-effective. The Staedler brand is also more expensive that Stabilo, and is it usually used by engineers. Known to last long and of high-quality, consumers are willing to shell out larger amount of money for the Staedler brand. Other brands such as Faber castle and G-Shock are cheaper than Stabilo pens. They imitate Stabilo's designs but are known to be of less quality. Stabilo is seen to be a very creative brand. Its espouses ergonomics by producing pens which "makes writing easier, promotes a good posture, protects you against getting cramp and prevents your hand from getting tired too quickly" (STABILO US, 2010). These innovations will make the company capture larger market, especially those who are willing to pay for style and convenience. Market Trend Analysis The growing competition both from possible substitute to pens and from within the pen industry has forced pen companies to innovate. Stabilo is one of these companies that espoused recent technology and concepts to produce something new. Innovations are geared towards comfort and convenience. In the case of Parker, the introduction of Parker Premier, a "state of the art and high-precision writing instrument" gives customer superb writing comfort (Parker Corporate Website). Pilot pen also has a recent innovation: the "precise V5/V7, the first direct ink "needle point" rolling ball pen which became and still is the #1 selling rolling ball pen in the U.S" (Pilot Pen Corporate Website, 2010). The Pilot Namiki brand is one of their most expensive pens with "multiple layers of lacquer decorated with powders and flakes of gold, silver and colored pigments as well as thin slivers of abalone shell" (Pilot Pen Corporate Website, 2010). Although, these have not been recorded to have reached Malaysia, the innovations are expected to also reach Malaysian soil soon. Stabilo also has its ergonomics concept embedded in their new designs (STABILO US, 2010). They have also introduced pens for those who are just starting to write, unfortunately their market for Malaysian kids are expected to shrink with the decline in population (STABILO US, 2010). This trend combats the threats posed by the increasing use of computers. One thing that they do is to make writing enjoyable. Conclusion The Swan Malaysia Sdn Bhd is in a tough situation, especially with formidable competitors such as Pilot and Parker. The growing economy of Malaysia and the government's effort to increase competitiveness will definitely provide a better environment for the business. The political economy is also stable, with a very attractive taxing scheme. The only problem with Stabilo pens is how to pronounce its creativity to a greater number of people so as to reach a wider market. It can target high school and university level students both Classes A, B and C with its stylish and innovative designs, instead of competing with Parker and Pilot for the adult Class A and B. It has to focus its innovation on this target market. Works Cited (2009, January 4). Retrieved May 20, 2010, from http://blog.fansub.tv: http://blog.fansub.tv/samthebear/2009/01/04/kilometrico-pens/ (2010, May 20). Retrieved May 20, 2010, from http://www.xe.com: http://www.xe.com/ucc/convert.cgiAmount=1&From=USD&To=MYR&image.x=25&image.y=14&image=Submit (2010, May 19). Retrieved May 20, 2010, from http://www.mtdc.com.my/: http://www.mtdc.com.my/ Adoi Magazine. (2009, October). Malaysia's Top Brand Names In Reader's Digest Survey. Adoi Magazine . Retrieved May 20, 2010 from http://www.adoimagazine.com/newhome/index.phpoption=com_content&view=article&id=5723&catid=1&Itemid=5 Advameg, Inc. (2010). Retrieved May 20, 2010, from http://www.nationsencyclopedia.com: http://www.nationsencyclopedia.com/economies/Asia-and-the-Pacific/Malaysia.html Alibaba.com. (2008, October 29). Retrieved May 20, 2010, from http://news.alibaba.com/: http://news.alibaba.com/article/detail/country-profiles%2523malaysia/100019485-1-malaysia-business-environment.html IndexMundi. (2010). Retrieved May 20, 2010, from http://www.indexmundi.com: http://www.indexmundi.com/malaysia/gdp_real_growth_rate.html IndexMundi. (2010). Retrieved May 20, 2010, from http://www.indexmundi.com: http://www.indexmundi.com/malaysia/inflation_rate_(consumer_prices).html Malaxi.com. (2010). Retrieved May 20, 2010, from http://www.malaxi.com: http://www.malaxi.com/population_size_age_structure2001_2010.html Malaysia Technology Expo 2010. (2010). Retrieved May 20, 2010, from http://mte2010.protempgroup.com/: http://mte2010.protempgroup.com/ Malaysian Administrative Modernisation and Management Planning Unit. (2010). Retrieved May 20, 2010, from http://www.malaysia.gov.my: http://www.malaysia.gov.my/EN/Main/MsianGov/Pages/AboutMsianGov.aspx New Zealand Ministry of Foreign Affairs and Trade. (n.d.). Retrieved May 20, 2010, from http://www.asean.fta.govt.nz: http://www.asean.fta.govt.nz/malaysia-political-situation Parker Corporate Website. (n.d.). Retrieved May 20, 2010, from http://www.parkerpen.com: http://www.parkerpen.com/en/discovery/range/iconic/premier Pilot Pen Corporate Website. (2010). Retrieved May 20, 2010, from http://www.pilotpen.us: http://www.pilotpen.us/about/corpfacts/ Reed Business Information. (2010, May 19). Retrieved May 20, 2010, from http://www.eguide.com.my: http://www.eguide.com.my/MY/SEARCH/KILOMETRICO/1 Schwanhuer Industrie Holding GmbH & Co. KG. (n.d.). Retrieved May 19, 2010, from http://www.schwan-stabilo.com: http://www.schwan-stabilo.com/gb/unternehmen/profil.php Sidhu, J. S. (2010, May 20). Top ten: Malaysia rises up competitiveness ranking. The Star Online . Retrieved May 20, 2010 from HYPERLINK "http://thestar.com.my/news/story.aspfile=/2010/5/20/nation/6298481&sec=nation" http://thestar.com.my/news/story.aspfile=/2010/5/20/nation/6298481&sec=nation STABILO US. (2010). Retrieved May 20, 2010, from http://www.stabilo.com: http://www.stabilo.com/pages-us/ergonomics/index.php Swan Malaysia Sdn Bhd. (n.d.). Retrieved May 19, 2010, from http://www.stabilo.com.my: http://www.stabilo.com.my/html/profile.html Read More