PESTLE Analysis of Malaysia - Case Study Example

Table of Contents 1.0 Introduction 2 2.0 PESTEL Analysis 2 2.1. Political Environment 2 2.2. Economic Environment 3 2.3. Social-Cultural Environment 3 2.4. Technological Environment 4 2.5. Environmental Analysis 4 2.6. Legal Environment 4 3.0 SWOT Analysis 5 4.0 Recommendations 8 5.0 Conclusion 9 6.0 References 10 1.0 Introduction Malaysia has emerged as one of the most rapidly developing economy among the Southeast Asian countries. It serves as a great tourist destination and people all round the globe travel to Malaysia. Tourists in Malaysia spend handsome in shopping different products and electronics is no exception. Electronic industry is one the major source of revenue for Malaysian government. The country is further equipped with skilled workers and has a stronger export base.Samsung being a leading brand globally in electronics has huge scope in Malaysia, the brand itself induce a sense of loyalty, quality, performance, customer satisfaction, durability and societal status. There is further a good scope for Samsung to tap the market of Malaysia and further increase its market share. A study of the same has been elaborated and shown below by the help of PESTEL Analysis and further by conducting a SWOT Analysis of the same. 2.0 PESTEL Analysis For making any strategic, investing or business decision, information plays a vital role. A complete market report is the basic requirement for the same. It is of core importance that a complete study has to be made considering the economic scenario of the country (Gooderham & Nordhaug, 2003). A PESTEL Analysis for the same has been discussed as under. 2.1. Political Environment This describes the extent to which government intervenes in the businesses conducted in the economy, it describes different laws of the country like tax law, labour law, environmental laws etc. It further provides the scope of products which the government wants to induce into the economy and also provides a negative list of products which the government doesn’t want to induce into its economy. Electronics has huge scope in Malaysia and even the Malaysian Government is keen to provide subsidy for opening electronics based industry in the country. Further, tax reliefs are provided to encourage more industrial base in the country (Jeffrey, 2003). 2.2. Economic Environment It includes growth rates of the economy, percentage of inflation or deflation, current exchange rates prevailing and current market interest rates which helps a business to make its strategic and expansion decisions accordingly as it largely affects the cost of running a business in the economy (Peng & Luo, 2000). With an increase in the real income of Malaysia, people have more disposal income and electronics has a huge scope in the country. People having an increase in their purchasing power are more pruned to buy electronics and change their older ones to newer and latest electronic products (Jeffrey, 2003). 2.3. Social-Cultural Environment This factor focuses on the cultural aspects of the country, age distribution, population growth, safety measurements etc. Since, tourism plays an important role in Malaysia’s growth the country is often flooded by youth who always had an urge to buy electronics for both work and leisure. Samsung being an international brand will largely be accepted by its targeted customers and prove to be a tough competitor in the electronic industry of the country (Jeffrey, 2003). 2.4. Technological Environment Research and Development plays a major role in any industry. It is very important for a company to make changes in its products as per the technological changes. Electronic industry invests a huge fund to adapt to recent technological changes and design their products accordingly. Samsung being a global brand has best of the use of technology and its products offering the latest technology is often considered a benchmark in electronic industry. Further, Malaysia aims to become a high income country by 2020 which requires more fund invested towards its R&D (Jeffrey, 2003). 2.5. Environmental Analysis Climatic conditions play a major role in electronic industry as it helps company to launch different electronic products during different seasons. Further, country like Malaysia is more pruned to natural disasters like Tsunami which largely affects an organisations expansion strategy in the country as an organisation may incur huge losses in times of such natural disasters. For example, launching a high speed and low electricity consumption air conditioners during summer shall draw more attention of its customers. Proper checks are required to me made to ensure that safety of the products and consumers is rightly assured. 2.6. Legal Environment Different laws such as consumer related laws, health and safety related laws, employment laws etc affects a company’s demand of products, its cost of production and its targeted market. It is often difficult to patent electronic items designs since technology infringement creates legal issues in doing so (Jeffrey, 2003). Thus, PESTEL Analysis of Malaysia helps us in understanding the current scenario of the country and scope of operating a new business in the country or expanding of an existing one. Further, it is to be noted that Malaysia has an average growth rate of about 4 % in its GDP and electronic industry is one of major contributor to Malaysia’s economic growth. 3.0 SWOT Analysis A swot analysis is conducted to evaluate the favourable and unfavourable factors in laying the foundation of prime objectives of an organisation. It is of prime importance since it helps an organisation to know about its strengths and provide opportunity to overcome its weaknesses and threats. It helps in making future decisions and laying objectives accordingly (Mason and Gerard, 2007). It further provides meaningful information which helps an organisation to protect itself from future dangers and rather provide a path for future expansion and growth. A swot analysis of the same has been conducted as under. STRENGTHS This shows how an organisation has an edge over its competitors. Malaysia is a multi-cultural country and tourism industry is flourishing due to its natural beauty. Tourist comes from all over the globe to visit this part of the world as a result demand for electronic goods is on the higher forefront. Samsung owns a vide-variety of products range and holds significant market share in its products offered. Samsung follows the strategy of first mover advantage and offers the latest technology in its products offered (Zhang & Pearce, 2006). Samsung has a strong market position globally and its products are often considered as benchmarks for its competitors. It has well developed R&D and customers of Samsung are found to be loyal to their products and brand. Samsung further has a strong financial stability and can definitely invest huge funds to capture larger market share. WEAKNESSES: This shows how a competitor has an edge over the organisation studied. Since, there is a limit on export and import in Malaysia this might affect the sale of products. Further, operating profits of Samsung keeps on fluctuating due to its over leveraged financial position. Samsung depends fairly more over other organisations in terms of its software developments then its other counterparts who had set up their own software development systems. Samsung also fails to achieve economies of scale in its various products offered. OPPORTUNITIES: It implies factors which an organisation can exploit or take advantage for its growth. Samsung offers a vide range of products and targets the middle income and higher income group customer. Samsung by ensuring economies of scale can enlarge its market share by producing products for lower income group as well. Launching of customised products shall further enlarge its market share as products will be available even in rural parts of the country and demand shall rise (Witt & Lewin, 2007). Financial position of the company allows it to take future risks and expand its coverage globally. Samsung further advertises its products by sponsoring sporting events and creating brand equity and brand image which also helps in boosting up its sales and revenue. THREATS: It implies factors which might create problems in the smooth running or expansion of the organisation both in short and long runs. Malaysia is very prune to natural disasters like Tsunami which is a big threat as it might incur huge losses to industry and organisations set there. Further, government regulations and policies keep’s changing which is one of the major threats to the organisation. Since, Samsung offers a variety of products its competitors like Nokia focuses on single product segment giving them a competitive edge. Price of raw material is on the rise which affects the cost of production and makes the products costlier and affects the sales of the company. Price war from its competitors like LG, Haier further affects its sales. Technological changes makes the product life cycle smaller and intense competition offering latest technology sometimes makes the product wiped off from the market thus incurring huge losses to the company. Samsung faces tough competition from Chinese products mainly in cell phones since Asian markets are flooded with Chinese cell phones which offer latest technology cell phones at a much lower price than offered by Samsung for similar features in its cell phones (Mathews, 2003). Thus, SWOT Analysis help us in understanding the potential which can be exploited by Samsung and also help us in evaluating the threats and weaknesses which needs to be overcome. It further helps in developing business strategies planning both short term and long term objectives accordingly. SWOT Analysis plays a major role in understanding the environmental conditions for decision making regarding expansion of product range or expanding the market share both domestically and globally. 4.0 Recommendations Samsung has emerged a global brand name in the field of electronics. The company has been recently giving tough competition to its counterparts in its products especially in cell phones. Samsung has been able to capture a large market share in Asian countries like India, Srilanka, Thailand etc, thus the company has ample scope to target the Malaysian market and enlarge its market share. Samsung in order to control the rising prices of raw materials or rather for controlling its working capital requirement should introduce a Just-In-Time inventory system or should try to receive payments for its products before making payments of its raw materials. It should try to consolidate its stakeholder stake by creating brad image globally and maintaining proper mix of debts and equity in its capital structure. The company has a strong hardware system of its own but is largely dependent on outsourcing its software which increases the cost of its products and sometimes delay in its latest products equipped with latest technology. The company should indeed try to build on its own Research & Development system to ensure better products at lower cost (Cohen, 2007). Samsung has been successful in targeting the middle income group customers however it has also done well in targeting the higher income group. It may also consider targeting the lower income group but proper care should be taken for the same as it may well hit on the brand image of the organisation. Further, in spite of targeting the lower income customer in most of its product portfolio. Samsung should try to target the lower income group in the segment of cell phones which shall also help the organisation to face competition against cheaper Chinese mobile phones flooded in the Asian markets and also help the company to increase its sales revenue and market share. Since, Malaysian market is flooded with tourists coming globally. Samsung should try to provide its products with international guarantee and warranty as applicable which shall definitely induce a sense of relief and comfort in the minds of its customers and help in enhancing the sales of its products. Opening of new service centres globally will further boost up the sales to a considerable extent as aftersales service plays an important role in electronic industry. Samsung should also try to enter the E-World market by entering into commission based selling with renowned online shopping websites as it shall further enhance its sales. The company should also promote and sponsor events in Malaysia to create brand image in the country and allocate funds for advertisements of its products in the country. 5.0 Conclusion The report thereby looks into the extternal analysis of Samsung in Malaysia and shows the different areas where they need to concentrate to improve their style of working. Recently Samsung has emerged as a global leader in cell phones and has successfully outperformed its competitors. Brand awareness of Samsung has been growing at a rapid pace and company has successfully launched its products globally targeting both higher and middle income group of customers in the customer pyramid. There is further a good scope for Samsung to tap the market of Malaysia and further increase its market share. 6.0 References Cohen, E. 2007. Leadership without borders: successful strategies from world-class leaders.John Wiley & Sons, Inc Gooderham, P. & Nordhaug, O. 2003. International Management Cross-Boundary Challenges.Blackwell Publishing Jeffrey S. 2003. Strategic Management of resources and relationships,John Wiley & Sons, Inc Peng, M. Luo, Y. 2000. Managerial Ties & Firm Performance in a transition economy. The nature of micro-macro link. Academy of Management Journal, 43 (3), 486-501 Mathews, A. 2003. Competitive Dynamics & Economic Learning: New Players in the 21st Century. Asia Pacific Journal of Management, 12 (1), 115-145 Mason A. and Gerard S. 2007. Strategic Management-A Dynamic Perspective, Pearson Witt, M. & Lewin, A. 2007. Outward Foreign Direct Investment as escape response to home country institutional constraints. Journal of International Business Studies, 38, 579-594 Zhang, F. & Pearce, R. 2006. The Growth & Strategic Orientation of Multinational R&D in Malaysia. Retrieved from Business Source Read More