Political, Economic, Socio-Cultural, Technological and Legal Environment of Malaysia - Case Study Example

A Business Report Name Course Date Introduction In Operations Management in the Travel Industry, Peter Robinson argues that “a strengths, weaknesses, threats and opportunities (SWOT) analysis is a way of auditing the internal marketing environment. As a key determiner of marketing activity, it is a useful tool for identifying the capabilities and possibilities within an organization and enables informed and appropriate allocation of resources.”1 It is important to note that the opportunities and threats in an organization are inclined towards the results of a peripheral review or assessment. For instance evaluating and examining the political, economic, socio-cultural, technological and legal environment (PESTL) of an organization aids in recognizing and making out of various dynamics and issues that controls and manipulates selling, advertising, and promotion choices. Peter Robinson further asserts that “through carrying out a thorough audit of opportunities and threats arising out of the external audits, potential gaps in the market can be identified.”2 Identifying the potency and limitations helps in the identification of the precise interior operational potential and ability of the organization. Samsung Group is a South Korean multinational conglomerate company headquartered in Seoul. The company comprises numerous subsidies and is currently considering expanding the Samsung Electronics subsidiary by setting up a manufacturing plant in Kuala Lumpur, Malaysia. This paper elucidates the political, economic, socio-cultural, technological and legal environment (PESTL) of Malaysia. The political environment of Malaysia According to Ibp in the Malaysia Country Study Guide, “The Malaysian political environment is strongly favorable to international and domestic business development.” (pg 26)3. The country is run by a government with the most powerful individual being the prime minister. He is also the leader and chief of the United Malays National Organization, which is the primary and most important entity in the administrating federation. The country also has an emperor, Yang Di Pertuan Agong, in charge of nine of the thirteen regions in Malaysia.4 Since time immemorial, Malaysian population comprises of individuals from different ethnic backgrounds. The most notable ones are the Malay, Chinese, and the Indians. It is of utmost importance to note that this country has experienced tribal pressures and tensions though these have been assuaged by fast financial, trade, and industry development and expansion over the recent past.5 Analysis of the Political Environment in Malaysia Malaysia has been known to have mutual associations and relationships with a number of countries such as the United States of America. For instance, the country sent their forces to join the U.N attack in Bosnia and Cambodia. It is also an affiliate and constituent of the Association of Southeast Asian Nations established in alliance and partnership with Indonesia, Philippines, Singapore, Thailand, and Brunei in 1967. Over the recent past, some other countries such as Vietnam, Laos, and Burma have joined the association. The U.S works hand in hand with these countries through this organization. This organization has been involved in the establishment of a gratis business operational region which will ensure a sole and distinct place of business for the whole region’s population. Malaysia is an affiliate of Asia-Pacific Economic Cooperation which is an organization that was established together with other countries of the pacific perimeter including the U.S, China, and Japan. 6 The Malaysian political environment is strongly favorable to international and domestic business development hence it presents an opportunity for new businesses. A few decades ago, there was political instability in Malaysia. New businesses and companies must formulate new strategies that will allow them succeed in times like these as a result of a change in political workforce. 7 The Technological environment of Malaysia The Malaysian administration as also is demonstrated in other administrations in emerging countries understands the significance of determining the country’s ICT growth and expansion by adapting a range of procedures and trials to make certain and guarantee that ICTs takes part in a fundamental function in its civilization and fiscal settings. One of Malaysia’s precedence is the requirement to advance and promote community service delivery structures. This is substantiated in the development and implementation of the Ninth Plan (9MP) 2006-2010 where ICT will be influenced and controlled in order to augment admission to and delivery of government services.8 Analysis of ICT in Malaysia Malaysia introduced a more advanced ICT system. This is attributed to the establishment of the Multimedia Super Corridor (MSC) IN 1996 that has horded many Malaysian corporations and businesses dealing with computer programs, software, and hardware; as well as investigative studies and advancements in ICT. The institution of this exclusive and exceptional corridor has enabled Malaysia to go on with pulling important ICT corporations and businesses into this corridor and subsequently embark on investigations and studies aimed at building up and expanding novel inventions and merchandise and sell them to other countries. This ICT center in Malaysia offers a perfect development setting and atmosphere for other ICT petite, intermediate, and big projects and ventures to convert their endeavors into global corporations. Malaysia has also been known to allow other countries and big corporations to utilize and exploit their exceedingly sophisticated infrastructural amenities as testing grounds for novel ICT innovations; and also use its ICT capacity as a platform for regional functions; therefore, this is an opportunity for opening up new businesses.9 Socio-Cultural environment in Malaysia The socio-cultural issues of a country comprise collective information and awareness, principles, moral standards, and universal methods and approaches and opinions between individuals of a community. These factors are considered more confounding as compared to political and economic issues when operating in an alien nation. The socio-cultural environment in Malaysia is very different as compared to other countries in Asia. Islam is the bureaucrat faith or religious conviction in Malaysia. The women folk are obligated to wrap their hair and skin when going out. Men are allowed to have more than one wife, with most of them having a maximum of four wives as allowed by Islam.10 Analysis of Socio-Cultural Environment This country is considered underprivileged and has petite communal mobility. Individuals from other religious convictions, who are ofcourse the marginalized, involve themselves with consumerist activities and actions due to lack of other opportunities. It is evident that interference by the administration sometimes holds back or restrains free enterprise instead of heartening it. This may be a threat keeping in mind some businesses may be against the Islamic faith.10 A tabular representation of Malaysian population 11 Indigenous tribes 0.7 % of the population Indigenous tribes consist of 19 ethnic groups which are mainly farmers. Malays 50 % of the population The Malays are all Muslims; their language is the official language. Ethnic Chinese 33 % of the population Most of them are Buddhists hence perform ancestor worship and customary and conventional rituals that are considered nonreligious in nature. Ethnic Indians 7% of the population Most of them are Hindus and Sikhs. The economic environment in Malaysia The country was hit by a currency crisis in 1997 and this was countered by the government by adopting shrewd and calculated capital controls in 1998. Putting into practice these capital control strategies showed progressive economic growth in the years following the currency crisis. It is important to posit that the crisis was caused by lofty developments in the economy from 1991, which was ahead of the national economic growth potential. Due to the quick credit extensions by banks, there were high interest rates on loans. The ringgit, the Malaysian currency, exchange rate at the time of the currency crisis was 2.48 against the dollar. This was March 1997. This exchange rate went up to 2.57 in July. The current exchange rate of the Ringgit is 0.33 against the dollar. The currency has been stable after the crisis with slight appreciations and depreciations against the dollar12. According to Richard “the turnaround in economic performance can mainly be attributed to Keynesian counter-cyclical fiscal measures. Both the Malaysian and South Korean economies recovered due to such reflationary macroeconomic policies and the pre-Y2K electronics boom.” (pg 4) Analysis of Economic Environment in Malaysia The economic report of Malaysia in 2000 posited that the predicted the financial condition to be good and encouraging in future. This can be attributed to the fact that economic growth in the country has been higher than predicted as seen in 2000 when growth was 7.5% higher than projected. Malaysian government will maintain its support through issuing monetary incentives, offering novel foundations for development, and offering means of reinforcing the country’s aggressiveness and pliability, hence this is an opportunity for opening new businesses.13 The Legal environment in Malaysia Over the recent past, the Malaysian administration heartens and supports unswerving investments from overseas particularly in ICT. Applications and plans of action aimed at acquiring permits for operation and accreditation in the manufacturing businesses are scrutinized by a body known as Malaysian Industrial Development Authority. This is done to ascertain if these applications meet qualification as laid down by the Second Industrial Master Plan as well as administrative calculated and tactical collective guidelines and courses of action. Other applications are scrutinized by the appropriate supervisory bodies. Major directives in venture in business are precise with the Investment Act established in 1986, as well as the Industrial Coordination Act of 1975. When the amalgamation and occupation is attained, the directives and laws in regard to the Malaysian Code of conduct are applied by the Foreign Investment Committee. 14 Universal rules and guidelines restrict fairness and impartiality in ownership to a marginal thirty percent of shares. However, full ownership is legally permitted to foreign investors in some industries dealing with exportation of products. Some ventures owned by foreign investors within the Multimedia Super Corridor are also allowed to have full ownership.15 Business law in Malaysia allows the investment of assets by the cultural communities such as Malays in both domestic and foreign companies up to a thirty percent stake. Foreign companies are also asked to employ a certain percentage of individuals from the ethnic communities. In encouraging foreign investors, Malaysia presents or tenders a range of financial inducements and cuts in accordance their accomplishments.16 Analysis of the Legal Environment in Malaysia The support of foreign investments depends largely on the magnitude of the venture, proportion of ownership by local communities, the nature of financing, the proportion of assets as compared to workforce, the capability of available and premeditated communication systems put into place to sustain the venture, and the availability of local and foreign souk for the inventions. The criterion used for giving licenses is done in an unbiased and fair method excluding in exceptional and uncommon occasions where a Malaysian firm and a foreign firm proposition matching ventures.17 According to Ibp, “Foreign direct investors established in Malaysia are generally accorded national treatment in all but equity limits. Foreign portfolio investors are permitted to trade freely in both equity and debt on the local exchange and to purchase available stock in newly privatized firms during an initial public offering.” (pg 139) Conclusion Opportunities and threats in an organization are lean towards the results of a peripheral review or assessment. Identifying the strengths and weaknesses of a foreign country with an aim of expanding business helps in the identification of the precise interior operational potential and ability of the organization. Malaysia is a legitimate empire comprising a parliamentary structure of administration. The most powerful individual in the Malaysian government is the prime minister. Malaysian population comprises of people from different ethnic backgrounds, the most distinguished ones are the Malay, Chinese, and the Indians. Malaysia has been known to have mutual associations and relationships with the United States of America, and is also an affiliate and constituent of the Association of Southeast Asian Nations established in alliance and partnership with Indonesia, Philippines, Singapore, Thailand, and Brunei in 1967. This country has ensured the advancement and promotion of community service delivery structures substantiated in the development and implementation of the Ninth Plan (9MP) 2006-2010 where ICT will be influenced and controlled in order to augment admission to and delivery of government services.18 Islam is the legitimate form of religious conviction in Malaysia. This religion requires women folk to wrap their hair and skin when going out. Men are, on the other hand, allowed to have more than one wife, with most of them having a maximum of four wives as allowed by Islam. This country is underprivileged and has petite communal mobility. The licensure of foreign investments depends solely on the magnitude of the venture, proportion of ownership by local communities, the nature of financing, the proportion of assets as compared to workforce, the capability of available and premeditated communication systems put into place to sustain the venture, as well as the availability of local and foreign souk for the inventions. Applications for acquisition of permits and accreditation of operation in the manufacturing field are scrutinized by a body known as Malaysian Industrial Development Authority. This is done to ascertain if these applications meet qualification as laid down by the Second Industrial Master Plan as well as administrative calculated and tactical collective guidelines and courses of action.19 Bibliography Daft, Richard. Management. Mason, OH: Cengage Learning, 2011. Hooker, Virginia and Othman Norani. Malaysia: Islam, Society and Politics. Singapore: Institute of Southeast Asian Studies, 2003. Ibp Usa and USA International Business Publications. Malaysia Country Study Guide. Washington, DC: International Business Publications, 2007. International Council for Small Business. Journal of Small Business and Entrepreneurship. Toronto, Canada: Ryerson Polytechnical Institute Press, 1987. Linda, Lim and Pang Fong. Foreign Direct Investment and Industrialization in Malaysia. Paris, France: OECD, 1991. Oxford Business Group Malaysia. The Report: Malaysia 2010 Oxford Business Group. USA: Oxford University Press, 2010. Peter, Robinson. Operations management in the Travel Industry. Cambridge, UK: Cambridge University Press, 2009. Remenyi, Dan. Proceedings of the 4th International Conference on E-government: ICEG 2008. UK: Academic Publishing Limited, 2008. Sundaram, Jomo and Wong Sau. Law, Institutions and Malaysian Economic Development. Singapore: National University of Singapore, 2008. Tsamenyi, Mathew. Corporate Governance in Less Developed and Emerging Economies. Bingley, UK: Emerald Group Publishing Limited, 2008. Read More