Malaysia Market Entry Strategy - Case Study Example

Report: Market Entry Strategy Name: Institution: Date: Country Profile: Malaysia Malaysia is a country located in the southeastern part of Asia and it has two sections on either side of the South China Sea; that is, East Malaysia and West Malaysia commonly referred to as Peninsular Malaysia. Peninsular Malaysia is made up of around 40 percent of the total country’s land housing forested mountains and coastal plains. The most common religions in Malaysia are Buddhism and Hinduism having been influenced by the interaction between China and India in the past centuries. Around the 7th century, Islamic was also introduced in Malaysia. As indicated earlier, Malaysia is divided into two lands – Malaysian Borneo and Peninsular Malaysia. Peninsular Malaysia has terrains that include Titiwangsa Mountains running fromnorth to south. Most of this area is covered with tropical forests. The other mountains in this area are the Crocker Mountains which contain the highest point in Malaysia referred to as Mount Kinabalu standing at an elevation of 13,436 feet (4,095 meters) (Maps of the World, 2016). One of the most important points of interests in Malaysia is Kinabalu National Part located in Malaysian Borneo representing a very ideal area for outdoor recreation activities such as climbing and hiking. This national park has been designated as one of the UNESCO World Heritage Sites. Malaysia’s form of government is Federal Constitutional Elective Monarchy and Federal Parliamentary Democracy (Maps of the World, 2016). PESTEL Analysis: Malaysia Economic Before the 1970s, Malaysia was just a producer of raw materials. However, after the 1970, the country has transformed itself into an emerging multi-sector economy. Malaysia’s attempts include achieving a high income status by the year 2020 incorporating value-added production by attracting investors in the area of high technology industry, Islamic banking, pharmaceutical, and medical technology. The government of Malaysia is engaging itself in efforts of boosting the country’s domestic demand in order to move away from export dependence. Malaysia is one of the major gas and oil explorers in the world thus profiting much from high world oil and gas prices. Nevertheless, strained government finances are forcing Kuala Lumpur to reduce government subsidies. The major state oil producer is Petronas and the government depends on it for revenue getting 40 percent of its revenue from this producer. To attract more investments, the government has conducted several revisions on its economic and social preferences which the New Economic Policy of 1970 accords to ethnic Malays. However, the government has faced great opposition, especially from the citizens. In 2009, the government liberalized 27 services sub-sectors through an abolishment of 30 percent bumiputera requirement. This move was made by the government in order to increase investments especially in the services sector. The government has also indicated that it intends to liberalize many other sectors of the economy. Political Factors As indicated earlier, Malaysia has the federal constitutional monarchy form of government with Yang di-Pertuan Agong taking the position of the head of state while the Prime Minister takes the role of the head of government. The federal government holds the executive power and 13 state governments. The federal parliament and the 13 state assemblies exercise the federal legislative power. The judiciary is an independent body and is not influenced in any way by the legislature or executive arms of government. The Malaysian system of government is founded on the Westminster system while the Constitution is codified. Since the first elections were held in 1955, Malaysia has practiced a multi-party system. However, the ruling party since then has been the Alliance Party coalition. Due to increased media coverage, there has been increased transparency such that politics are more transparent to the citizens because the national media is both controlled the government and the political parties. The government, however, sorely controls the print media. In the past one decade, the opposition has been calling for increased fairness in elections. Technological Factors The Malaysian Ministry of Science, Technology, and Innovation is the regulatory body regulating science policy. There are other government ministries which have science departments, including the ministry of Agriculture. Since the 1970s and 1980s, there has been increased focus to increase training in scientific fields. Environmental Factors Malaysia is a country rich in flora and fauna which are found in various regions in the country (US Commercial Service 2010). There are extensive tropical rainforests which occupy almost 70 percent of the total Malaysian land. Malaysia is also considered to be the world’s fifth country with the largest mangrove area amounting to over 1.2 million acres. Human activities are causing significant threat to the environment of Malaysia. Some of the human activities contributing to this destruction include urbanization, agriculture, and forestry. There is significant destruction of environment resulting from air pollution and greenhouse gases. The environment falls under the control of the Ministry of Natural Resources and Environment. On the other hand, the preservation of flora and fauna falls under the Department of Wildlife and National Parks of Malaysia. Some of the most destructive factors to the environment include industrial and vehicular emissions. Malaysia ranks position 42 globally in terms of car ownership. This translates into 273 in every 1000 people who have vehicles. The available transport systems including the road network system and railway systems are contributing to the destruction of the environment. In 2000, UNEP ranked Malaysia at position 4 in the world in terms of countries with the highest rates of greenhouse gas emissions. Social Factors In social status, Malaysia is multi-cultural with the main ethnic groups being the native Malays, the Chinese, and the Indians (US Commercial Service 2010). Different ethnicities have their own customs, religions, and ways of life. Despite having different ethnic practices, there is commonality in language and cultural language. In terms of social stratification, people have classes depending on the combination of specialized skills, political connections, family businesses and money, and specialized skills. The Malaysian middle class is significantly increasing thus slowly bridging the gap between the high and the low class. Malaysian society is highly mobile making ones vehicle a mark of his/her class position compared to the mark one gets from his/her house. Most Malaysians use scooters as their mode of transport. The number of vehicles in Kualar Lumpur is very high. The Product The product that will be introduced in Malaysia includes different models of mountain bikes. M-Trek intends to become the world leader in the manufacture and supply of mountain bikes. These mountain bikes will be technologically advanced. Each of M-Trek’s models will be manufactured with details and features that will make any ride on any trail. The categories that will be introduced include fat bikes, trail mountain bikes, cross country mountain bikes, dual sport bikes, electric mountain bikes, downhill mountain bikes, performance road bikes, and recreation bikes. Other factors that will be considered include the purpose for use, including mountain climbing, commuting in the city, road ride and road race, and fat bikes. Other factors include gender, such as bikes for men, bikes for women, bikes for boys and girls. Finally, the venture will consider the price factor, frame material, wheel size, brake type, and suspension among other features. Benefits of the Product A mountain bike represents a type of bicycle meant for off-road cycling. Riders often follow single track trails, logging roads, fire roads, and other unpaved routes. Cycling is associated with numerous benefits, including improving people’s health, reducing environmental pollution, and reducing congestion among other benefits. One report assessed the economic benefits of cycling and concluded that cycling contributes to addressing some of the major challenges being faced by the society, including the overweight and obesity burden (SQW 2007). Over the past few decades, there have been increased concerns over the high rate and rapid rise in the levels of obesity especially in the Asian countries. The report by SQW (2007) indicated if the trend of inactivity continues especially among the children, the current generation of children will not live for as long as they should have lived. The report further observed that obesity reduces not only the longevity but also the quality of life of an individual (Elumalai, Chandramohan, Sankaravel, Salimin and Shahril 2015). Concerns have even been raised that obesity will lead to even greater problems in the future. These problems have been attributed to reduced inactivity. Cycling to school and work, and cycling for fun and recreation offers people some of the best opportunities to improve their physical activity. It provides exercise that helps individuals fit because it encourages skeletal and muscular development. Despite these benefits, the number of people cycling has reduced significantly due to the increased use of other transportation means such as buses, personal cars, and trains and this has also led to the problem of congestion and pollution which leads to other health problems as lung cancer due to the inhalation of harmful gases. The level of inactivity has risen both in children and adults with adults increasing the ownership of cars. The cost of inactivity is weighing heavily on families in terms of medical costs. Adults can use cycling as one of their best forms of exercise during their regular commuting journeys, during their leisure time, and for short trips to shop (SQW 2007). Another advantage of cycling is that it reduces the present problem of global warming and environmental pollution. Again, cycling significantly improves users’ travel times especially during peak times. Therefore, cycling reduces the time people spend in traffic. Most governments are continually improving their public transport systems to offer people flexibility in personal travel (SQW 2016). Major cities have major challenges as a result of congestion. Cycling offers one of the best ways of reducing this congestion. The products will be manufactured in different colors such that each customer will select the product according to his taste. As stated by Holt (2004) an organization achieves success when the brand it presents to the market performs identity myths that address the anxieties of the community. A product that ends these tensions will achieve success. Examples of tensions that people have include environmental concerns, including heart and lung disease, health concerns, and unpredictable gas prices. Entry Strategy For many years, Malaysia has enjoyed the benefits of being located at a crossroads of trade between the East and West. This tradition has been carried into the 21st century (US Commercial Service 2010). Geographically, the area is very idea for the type of business venture proposed because of its landscape and the state of the citizens. The product that M-Trek intends to introduce to the market is different models of mountain bikes. As a result, Malaysia has been capitalizing on this advantage attracting numerous numbers of investors. The economy of Malaysia has continued to grow despite having been slightly affected by the 2007 economic crisis. In 2007, the economy of Malaysia grew by 6.3 percent compared to 2006; in 2008, the economy grew by 4.6 percent; however, in 2009, there was a drop in growth where the economic growth declined by -1.70 percent as a result of the effects of economic crises (US Commercial Service 2010). Market Challenges There are several significant challenges that M-Trek is likely to encounter during its entry into the Malaysian market. There are certain restriction that the government has put in place that hampers the entry of foreign investment, especially in the areas of business, financial, telecommunications, and government procurement contracts (). Most of the time, a foreign entrant has to have a local partner (host), commonly referred to as a bumiputra, to effectively compete in Malaysia. Malaysia has recently improved its IPR laws and enforcement; however, there are great concerns as to how effective Malaysia is in protection of IPR. Being unable to sufficiently protect IPR may interfere with Malaysian intention to increase the foreign investment in the most important areas of the economy. Market Opportunities Malaysia’s per capita income represents one of the highest per capita incomes in Asia as it is evident considering its strong consumer market. The government of Malaysia is engaging itself in efforts of boosting the country’s domestic demand in order to move away from export dependence. Malaysia is one of the major gas and oil explorers in the world thus profiting much from high world oil and gas prices (US Commercial Service, 2010). Due to the high number of obese individuals in Malaysia, the possibility of finding a selling point for mountain bikes is very ideal. As discussed earlier in the report, cycling contributes to the reduction of body weight and other health benefits. As indicated earlier, cycling to school and work, and cycling for fun and recreation offers people some of the best opportunities to improve their physical activity. It provides exercise that helps individuals fit because it encourages skeletal and muscular development. Despite these benefits, the number of people cycling has reduced significantly due to the increased use of other transportation means such as buses, personal cars, and trains and this has also led to the problem of congestion and pollution which leads to other health problems as lung cancer due to the inhalation of harmful gases. The level of inactivity has risen both in children and adults with adults increasing the ownership of cars. Educating the target markets about the benefits of these products will help increase the market opportunities for the company. Cycling is associated with numerous benefits, including improving people’s health, reducing environmental pollution, and reducing congestion among other benefits. Other selling points include the fact that the product helps reduce the present problem of global warming and environmental pollution. Again, cycling significantly improves users’ travel times especially during peak times. Therefore, cycling reduces the time people spend in traffic. As indicated earlier, the Malaysian society is highly mobile; therefore, M-Trek is likely to increasingly continue purchasing mountain bikes for leisure, fun, sports, and movement from one place to the other to supply or purchase products and services. Competition Mountain bikes are products which are friendly to the environment because they do not produce CO2 gases into the air. This product efficiently converts human force into proposed force without having harmful effects to the environment. Most governments, including the government of Malaysia support manufacture of eco-friendly products; therefore, any producer who produces such products is likely to find it advantageous to operate in many parts of the world and is likely to receive support from the governments. As a new entrant, M-Trek is likely to encounter significant challenges. The company is likely to encounter stiff competition from already established companies. To overcome these challenges, M-Trek has to improve its branding and marketing strategies in order to secure a place in a highly competitive market. To achieve this M-Trek will invest in promotion and advertising initiatives. The most convenient way to advertise will be to employ online channels. Market Entry Strategy The most used first step in entering the Malaysian market is to find a local distributor (US Commercial Service 2010). The main role of the local distributor is to handle custom clearance, deal with established competitors, conduct direct marketing to major organizations, and handle after-sales services. Also, direct involvement of a foreign company is likely to be received with hesitation thus demonstration of long-term commitment to the local market is essential to be able to gain market share. Therefore, the company will consider looking for a local distributor so as to increase its chances of success in Malaysia. References Elumalai, G., Chandramohan, D., Sankaravel, M., Salimin, N. and Shahril, I. 2015. The Obesity Level and Abdominal Fat among a Rural Tamil School Students in Malaysia. International Journal of Humanities, Arts, Medicine and Sciences, Vol. 3, No. 8, pp. 15-20. Maps of the World. 2016. Available at http://www.mapsofworld.com/malaysia/ SQW. 2007. Valuing the Benefits of Cycling: A Report of Cycling England. Available at http://webarchive.nationalarchives.gov.uk/20110407094607/http:/www.dft.gov.uk/cyclingengland/site/wp-content/uploads/2008/08/valuing-the-benefits-of-cycling-full.pdf US Commercial Service. 2010. Doing Business in Malaysia: 2010 Country Commercial Guide for U.S. Companies. Available at http://www.franchise.org/sites/default/files/ek-pdfs/html_page/Malaysia_2010-CCG_1.pdf Read More