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School Of Architecture, Building & Design
Foundation In Natural & Built Environment
Presentation Title :
A Tale Of Two Businesses (Chinese Herbal Medicine Shop)
Group Members :
NAME STUDENT ID
SEET TIONG HONG 0320438
NGIENG TIEN YUNG 0320221
TERENCE TAN 0320275
LING SUE ER 0321683
OOI YIN JI 0319962
TAN MING HOWE 0320199
DANIEL SONG 0320155
LILLIAN TAN AI JUN 0320087
Principles of Economics [ECN30205]
Lecturer : Chang Jau Ho
Submission Date : 22 May 2015
Table of Contents
No. Title Page Number
1. Cover Page 1
2. Table of Contents 2
3. Summary 3
4. Research Report
A. Brief Bio Of The Businesses
B. Comparative Analysis
5. Conclusion 15 16
6. Recommendations 17 21
7. Appendices 22 37
8. References 38 39
This report is a comparative analysis of two Chinese medical herb businesses in
different geographical locations. The chosen industry is known to have an
uninterrupted history of development dating back to thousands of years, in
China and other parts of the Far East. The selected Chinese medical halls are
Poh Aun Tong Medical Hall in Georgetown, Penang and Huah Shan Medical
Hall in Klang Valley, Selangor. Interviews have been conducted in each of the
respective medical halls in order to obtain further information from both
businesses. The collected information has been analyzed, and the analyses have
been justified through research carried out with reliable sources in reference. It
is concluded that Huah Shan Medical Hall is more commercially successful
than Poh Aun Tong Medical Hall due to a greater annual revenue, a higher
number of customers and also, a wider variety of goods provided.
BRIEF BIO OF BUSINESSES
A) Poh Aun Tong Medical Hall
Poh Aun Tong Medical Hall is located at 125, Campbell Street, 10100,
Georgetown, Pulau Pinang, and is a smallscale family business. They are a
traditional chinese pharmacy selling traditional chinese herbs besides providing
healthcare consultation services. The pharmacy was founded in 1945 by Mr.
Chan Swee Foo and was operated singlehandedly by himself. Ms. Chan Soo
Sum, his only daughter, started helping him at the age of 19 and managed to
learn most of the herbologybased knowledge from him. Ms. Chan officially
took over the business in 1990 and has been running the shop since then. She
does not have any employees to help her as she’s able to cope with the
workload, and because employees would need certain traditional Chinese
medicine (TCM) licenses in order to work in the hall.
Poh Aun Tong provides services that most of the pharmacies seem to be lacking
in which chinese herbs could be predecocted or decocted by Ms. Chan so that
customers are able to get the most out of the herbs as she understands that her
customers might be very busy or lacking in knowledge on the decocting of
herbs. The majority of her customer are customers who have patronised this
business for many years. According to Ms. Chan, there will be no more than 10
customers visiting her shop daily and that most of her customers are adults and
senior citizens. She believes that sooner or later, TCM will be substituted by
Western medicine. Furthermore, there has been no changes or developments in
her family business as she thinks that she will have to retire in few years time
and her only intention is to provide her services to the residents of Georgetown.
B) Huah Shan Medical Hall
Huah Shan is currently located at No.33, Jalan USJ 10/1E, 47620 Subang Jaya,
Selangor Darul Ehsan. They are a modern chinese pharmacy which provides
healthcare consultation services and also sells traditional chinese herbs. Huah
Shan’s main branch is located in Taman Megah, SS 2 where Mr. Lee worked at
for 8 years. The main branch was founded in year 1985 by Mr. Lee Lap Man
and was operated single handedly by himself. Since young, Mr. Lee desired to
become a chinese physician mainly due to his strong TCM background and his
father’s influence, who was also a Chinese physician. Today, there are a total of
ten employees being employed to help him manage two of the shops. He runs
his business in such a way that he will diagnose patients and delegate that his
employees prepare the medicines or herbs to the patients based on the
prescriptions issued by him.
Moreover, Huah Shan provides services such as acupuncture and cupping
therapy. Unlike the other modern chinese pharmacies whose business models
are moneydriven as they are more focused on processed and packaged
products. Surprisingly, their best selling products are herbal soup packs and dry
herbs such as Bai Qu Cai. Besides that, utensils meant for decocting chinese
medicine are being sold here. The price range of their products is as low as RM
1 up till RM 3000. According to Mr. Lee, the minimum capital needed to start
this TCM business amounts to RM 200,000. An average of 20 customers are
expected daily and 30 customers during peak seasons such as durian harvest
seasons. Most of his customers are adults and senior citizens. Mr. Lee believes
that TCM will not be substituted by Western medicine in the future as TCM has
centuries of historic culture and believes that every genre of medicine has its
Similarities & Differences Of Both Business
Poh Aun Tong
Similarities Huah Shan Medical Hall
Shortsighted Future Plan Shortsighted
Targeted Market Local Customer
Poh Aun Tong Medical
Differences Huah Shan Medical Hall
Mr. Chan Swee
Took over by Ms.
Founder & History Founder
Mr. Lee Lap Man
First shop in SS2
helping the poor
Location No.33, Jalan USJ
Jaya Selangor Darul
Current Branches 1
Types of Products Sold
10 am to 7.30 pm
Business Hour Monday Saturday
9 am to 8 pm
Second generation is
currently operating the
Business Operation Owner is an experienced
Around 10 Number of customers Around 20
Shop Layout &
Around RM 180,000 Annual Revenue Around RM 400,000
Comparative Analysis Between Poh Aun Tong
Medical Hall & Huah Shan Medical Hall
I Number of Competitors
Poh Aun Tong Medical Hall, which is located at George Town, Penang has only
2 top competitors which are Cheng Woh Medical Hall and Kean Aun Hoe
Medical Hall. On the other hand, Huah Shan Medical Hall has 3 top competitors
which is Hai O, Eu Yan Sang and Herbs and Food.
II Brief Description Of Competitors
Poh Aun Tong Medical Hall, Penang
Although there are many Chinese medical halls in Penang, Ms. Chan Soo Sum
knows very well who her competitors are. In the fore, Cheng Ho Medical Hall
is the strongest competitor among all, as they have been established for more
than 80 years and has built longterm client relationships. They provide over
500 different formulas of herbal soup, desserts and teas recipes. Their best
selling products are bird’s nest, packaged antiaging supplements and traditional
Chinese herbs. Cheng Ho Medical Hall believes that people respond to
incentives, hence improves customers’ demand on products as they offer free
delivery service for customers who purchase products worth RM100 and above.
To stay in the game, they also has their own official website to gain a bigger
market share as the website provides convenience to the customers.
Secondly, Kean Aun Hoe Medical Hall was established in year 1956. They are a
family business committed to providing friendly and trustworthy service to their
customers. Their main products are packaged ‘Penang Bak Ku Teh’ and
Cordyceps Flower Soup Base. Both of the products have received many
positive feedbacks from local and international customers.
Huah Shan Medical Hall, Selangor
On the flip side, it’s much tougher to operate a Chinese medicine hall in
Selangor as the competitors are more aggressive in terms of marketing and
expansion of businesses. Based on Mr. Lee, Huah Shan Medical Hall has three
top competitors around the area. Firstly, HaiO Enterprise Berhad which was
established in 1975, and owns over 70 branches nationwide. They offer a wide
variety of complementary medicine, healthcare products and much more. They
employ professional herbalists in every branch to advise their customers on
herbs. Besides, HaiO Enterprise Berhad also has their own inhouse brands
which are recognized internationally. They only import patented products that
are approved by the Ministry of Health.
Secondly, Eu Yan Sang which started as a small Chinese medicine hall was
established in 1879 and has built an empire of over 300 retail outlets globally.
Eu Yan Sang provides more than 1000 types of quality traditional Chinese
medicines, health foods, packaged antiaging supplements and much more.
They offer over 300 varieties of products under their brand, Eu Yan Sang. In
order to increase customers’ demand, they also offers several kinds of special
promotion for members. Furthermore, they intentionally increase their brand
awareness by organizing many events locally and internationally such as the
wellreceived Parenting Sharing Sessions, Natural Organic Party, Thank You
Teacher Campaign and many more.
Thirdly, Herbs and Food Sdn.Bhd was established in 1981. It is a modern
Chinese medicine hall dealing with chinese herbs, grocery, wines and packaged
herbs. Its main products are bird’s nest, homemade Chinese herbal jelly and
wines. They believe that in order to improve their products’ demand, incentive
is a must for their customers as exemplified in their free member only monthly
wine tasting sessions. Moreover, they also apply promotions on their groceries
weekly as an incentive to potential customers.
III Competition Strategies
A) Poh Aun Tong Medical Hall, Penang
In order to increase the brand awareness of the business, Ms. Chan has been
accepting interviews in order to feature in newspaper articles and blogs and
both mediums have been receiving positive responses.
With their excellent services, Poh Aun Tong Medical Hall attracts many
customers by word of mouth. Ms. Chan who is a Chinese physician gives
prescriptions based on results from the measurement of her patients’ pulses.
Moreover, Ms Chan also decocts herbs for those patients who are too busy with
their jobs to do this on their own. She has a good understanding of her patients’
health and needs.
All of the products are priced reasonably in accord to the market price. In order
to increase profit, she keeps the operating expenses low by reducing the utility
expenses and by employing no personnel.
B) Huah Shan Medical Hall, Selangor
Mr Lee has established close relationships with his customers by providing
trustworthy services .He provides diagnosis based on pulsemeasurement,
acupuncture services, and cupping therapy. Nowadays, most of the Chinese
pharmacies do not provide these services as their business models are
The price of a product is an obstacle for potential customers who wish to
purchase products. If the price of the product decreases, the quantity demand
will be increased. Mr.Lee sets a slightly cheaper price compared to his
competitors in order to take advantage of this principle.
IV Obstacles Faced By the New Firms
A) Poh Aun Tong Medical Hall explains :
There are some obstacles faced by new firms. For example, Poh Aun Tong
Medical Hall claims that chinese herbs will eventually be replaced by modern
medicine because the younger generations believe that modern Western
medicine is more effective and reliable as compared to traditional Chinese
medicine. Besides, there are more and more modern pharmacies emerging in the
market, which leads to increase in competition. Based on the principle of
economics in a monopolistic competitive firm, they are known that a greater
number of competitors leads to a weaker pricing power. Moreover, new firms
would face difficulties in the process of getting licenses in terms of time
required as every type of herb has its own license. Furthermore, Ms. Chan
suggests that an
experienced individual is needed in order to start the TCM business. Nowadays,
new firms are required to install aircondition and tempered glass at the entrance
due to hygiene reasons.
B) Huah Shan Medical Hall explains :
Huah Shan Medical Hall indicates that it is difficult to hire experienced
individuals who have basic knowledge about TCM these days as most of
people are looking for jobs that pay high salary with lesser working hours.
In order to start a new TCM shop, it also requires huge startup capital as
compared to decades ago. Besides that, Mr. Lee said that nowadays owners of
new firms do not have sufficient knowledge and experience to operate the
business successfully. Based on the principle of economics, the meaning of
economies of scale is the firm’s ability to produce its goods at gradually lower
cost over the long run. As such, new firms require some time to compete with
such prices. As established businesses already have some amount of customer
loyalty, it’s very hard to attract customers to go for other medicine halls.
V Nature Of The Market
The nature of the market for Poh Aun Tong Medical Hall and Huah Shan
Medical Hall is monopolistic competition as both businesses are operating in a
market structure full of competitors selling similar but not identical products.
The barrier to entry is relatively weak because new firms can enter and exit the
market easily. Besides that, pricing power of monopolistic competition is weak
as the firms cannot influence the prices of their products strongly because there
are still many competitors who also hold influence on the pricing. If one firm
were to independently manipulate product prices, customers would swarm to
other firms who have not altered their prices. In order to maximize their profits,
these business strive to differentiate their product from that of their competitors.
Moreover, it is very hard for competitors to attract customers who have strong
tendencies towards their preferred pharmacies.
Comparative Analysis Summary Table
Competitive Traits Poh Aun Tong Medical Hall Huah Shan Medical Hall
1. Number of
5 to 10 within the immediate
10 to 15 within the immediate
2. Barrier to Entry Weak Barrier to Entry
Firms easily enter and exit
Legal barriers which are
regulated by the
government, such as
No firm control on
majority of raw materials
needed to produce a
Weak Barrier to Entry
Without any strategic
moves because they do
not actively advertise
Not able to produce its
goods at gradually low
costs over the long run
3. Differentiated or
Rare traditional chinese
4. Pricing Power Price taker
Weak pricing power
Causes the business have
no ability to charge the
price higher than the
customers will turn to
Weak pricing power
Constrained to follow
the market price
determined by supply
6. Verdict Monopolistic Competition Monopolistic Competition
Based on the comparative analysis, it has been concluded that Huah Shan
Medical Hall in Klang Valley is more commercially successful as compared to
Poh Aun Tong Medical Hall in Georgetown, Penang. This statement has been
supported by evidences obtained through throrough research and critical
analysis based on economics principles.
Firstly, Huah Shan Medical Hall has two outlets, with their main outlet is
located at Taman Megah, Petaling Jaya and the second outlet being located in
Subang Jaya, Klang Valley. As for Poh Aun Tong Medical Hall, the business
has continued to operate within a single outlet for a period of more than 70
years. Hence, with 2 outlets with each operating at different locations, the
amount of income and the business’s annual revenue figure of Huah Shan
Medical Hall is reported to be higher as compared to that of Poh Aun Tong
Medical Hall. In addition, the average number of customers who visits the
outlet daily for Poh Aun Tong Medical Hall is estimated to be approximately 10
customers per day, whereas Huah Shan Medical Hall has twice the amount of
customers as compared to that. Ultimately, a greater number of customers leads
to an increase in the revenues and therefore, the amount of profit generated
annually tends to be higher for Huah Shan Medical Hall, resulting in a more
successful commercialized business within the industry in comparison to Poh
Aun Tong Medical Hall.
Secondly, besides having Chinese herbs as the mainselling products in both
businesses, Huah Shan Medical Hall also provides a wide variety of goods such
as packaged herbal soup recipe, organic food supplement, medical ointment, dry
goods, snacks and more. On the contrary, Poh Aun Tong Medical Hall has
shown a lack in variety of goods and products sold as the business adheres
firmly to their own principles and traditions such that Chinese medical herbs
and ointment remain as their main and only focus in the market. As a result of
product variation in Huah Shan Medical Hall, consumers are provided with a
wide range of choices and are able to purchase according to their preferences
instead of being bounded by limitation with only a single or two options. Hence,
it is concluded that more customers can be drawn to the firm, thereby creating
more business opportunities to take place in Huah Shan medical store as
compared to Poh Aun Tong Medical Hall.
In conclusion, Huah Shan Medical Store is more commercially successful than
Poh Aun Tong Medical Hall due to the supporting reasons as stated above
which includes a greater amount of income and business’s annual revenue,
higher average number of customers visited daily and last but not least, a wider
variety of goods provided.
After the study was completed, it was determined that the businesses were
lacking in specific areas, which hinders their ability to compete to their full
potential in the market. The following, is a set of recommendations which can
be undertaken in order to improve their competitive edge.
Poh Aun Tong Medical Hall
A1 Area Of Focus & Current Diagnosis :
Location & Accessibility
The business currently only owns one outlet, which is located in the heart of
Georgetown, where vehicular circulation is poorly organised. As such,
customers may find reaching the outlet difficult. Also, given its position in the
heart of the sprawl of the city, it can be difficult to find its specific location.
People who are unfamiliar with the outlet will find it hard to reach. This can
seriously hamper the potential the business has to expand in its market and
A2 Recommendation(s) Of Improvement :
Relocate The Outlet
The option to relocate the only existing outlet is viable in the sense that moving
it to a more accessible and navigable area would allow the current pool of
potential customers to be expanded. Perhaps a more accessible, suburban area
like Gelugor would be a good alternative.
Open Multiple Outlets
This option would allow for the authenticity and novelty of the original outlet to
be retained, while allowing for the business to become more accessible to
existing and potential customers.
B1 Area Of Focus & Current Diagnosis:
Brand Awareness & Distinctivity
Generally, with medical halls as antiquated as the one we studied, brand
awareness is almost totally reliant on word of mouth and brand loyalty. As
observed, Poh Aun Tong is almost unknown to those who do not use its
services, or buy its products. The closest this business is in the way of
advertising is a customised tote bag it distributes to those who buy products
from its outlet. The outlet is also indistinct from other shops in the vicinity, let
alone other medicine halls.
B2 Recommendation(s) Of Improvement:
Engage in Advertising
This manner of improvement involves the use of flyers, advertisements on
billboards, newspapers, or any other form of mass media. This will raise
awareness of the business, which will attract customers, driving profits higher
while giving this business the edge over competitors who have not caught on.
Distinctive Outlet Identity
The business needs to ensure that the outlet is pronounced, and well defined
amidst its surroundings, even among other medicine halls. This can be done
through the use of noticeable signage, and a recognisable exterior
C1 Area Of Focus & Current Diagnosis:
Cost of Operations & Profit
Aforementioned facts have stated that the Poh Aun Tong Medical Hall is a
small business, which has been established for a long time. Due to the
obligation to tradition, as well as the desire to preserve the original identity of
the business, cost of operations has not been decreased in the areas of
technological improvement, and stagnant business size.
C2 Recommendation(s) Of Improvement:
Utilise Modern Technology
Through the use of modern technology, this business can provide services, and
produce medicines in a much more efficient manner, driving up profits
indirectly. For example, through use of modern scales and weights, and
industrial grade centrifuges
Grow the Size of the Firm
This measure will allow the medicine hall to gain bargaining power, as
suppliers are more obligated to provide better prices for larger firms. This in
turn, decreases the cost of operations the business incurs. This is especially
important in the purchase of supplies and raw materials, which this business
engages in often.
Huah Shan Medical Hall
A1 Area Of Focus & Current Diagnosis:
Product Variation & Distinctivity
As of now, the reach of Hua Shan in terms of customers and market share may
be limited, due to the fact that the products which are sold in Huah Shan are not
distinct or varied from the products which are sold in other medicine halls, in
the surrounding area. This reduces the ability of this business to perform at its
full potential, as it has to constantly compete with the other medicine halls
which are located at such proximity due to the fact that they all sell similar
A2 Recommendation(s) Of Improvement:
Variation of Products & Sales of Unique Commodities
This measure involves acquiring different products, which are not available in
the other medicine halls in the vicinity. This can be done by seeking different
suppliers, who can provide rarer products for the outlet to sell. This will drive
customers to Huah Shan, as it has a variety of products, which is not available
elsewhere. This in turn, greatly increases the firm’s competitive edge.
B1 Area Of Focus & Current Diagnosis:
Skilled Labour & Trained Medical Personnel
Huah Shan is not simply a shop where traditional Chinese medicine is
distributed, but also serves as a clinic of sorts, where one receives diagnosis and
treatment for specific ailments. However, as stated. Huah Shan operates with
the expenditure of very few staff and personnel. This causes certain problems,
especially considering that Huah Shan cannot hire any applicant who wishes to
work in the firm, but must carefully select staff who are knowledgeable in the
area of traditional Chinese medicine. During peak seasons, they are
understaffed, especially in the clinic, as only one practitioner is available for
consultation and service. This can decrease the productivity of the firm.
B2 Recommendation(s) Of Improvement:
Hire More Personnel
The firm could remedy the situation aforementioned, through the employment
of more trained personnel. This can be achieved by sourcing talent from training
centers which specialise in traditional Chinese medicine, or colleges which offer
such sources. This way, the firm is able to greatly increase productivity. For
example, with the addition of more skilled staff, shop assistants can be replaced
by knowledgeable staff who are able to advise customers on medication, or
treatment, driving up the brand reputation and sales revenue. Also, by hiring
more practitioners of traditional Chinese medicine, more patients can be treated
as the workload is now spreaded out between more doctors.
C1 Area Of Focus & Current Diagnosis:
Location & Outlet Size
The current outlet is the only existing outlet that the firm owns and operates.
The location of the outlet is not conducive for business, as there are at least
three other traditional medicinal halls in the immediate vicinity, and countless
more pharmacies. Besides that, Huah Shan has the ability and capacity to
expand the business, and can take this measure in order to develop it. Finally,
the outlet size may not be conducive in the short run if Huah Shan does grow, as
the principle of scale constraint applies, where it becomes inefficient to expand
the business within the constraints of the current outlet.
C2 Recommendation(s) Of Improvement:
Open Multiple Outlets
By opening more outlets and medical halls, Huah Shan stands to gain
tremendously. This is understood in a threefold manner. First of all, by opening
multiple outlets, the business will be able to gain more revenue as the sales
potential increases due to the expansion of the reachable market. Besides that,
by opening more outlets, Huah Shan does not need to directly compete with the
many medicine halls in the direct vicinity of the existing outlet. It will be able to
compete better. Finally, Huah Shan will be able to solve the problem of scale
constraint if it does choose to expand.
This is a compilation of interview notes, documents and photos of both Chinese
herbal medicine halls, as well as the background details of their competitors that
were recorded in the process of investigating and comparing both businesses.
A) Poh Aun Tong Medical Hall, Penang.
I. Details of the business
Trademark of the business. Front view of the shop.
Interior view of the shop.
II. Details of the owner
Current owner, Miss Chan.
Name card of Miss Chan.
Certificate of Miss Chan as a valid Chinese Physician.
Founder of the business, Mr. Chan Swee Foo (left) and his wife.
The books that were used by Miss Chan as references.
III. Products or services sold
Main products sold: Chinese medical herbs
Poh Aun Tong sells herbs which are rarely seen as well.
There are also packaged products such as traditional chinese medicine and chinese ointment.
Services provided: Prescription for the patients and herb decocting.
IV. Strategies of promotional advertising
Articles taken from both English and Chinese newspapers which promote the rare products
and services provided by Poh Aun Tong.
Media report by China Press.com on 29 May 2013.
V. Top Competitors
I. Cheng Woh Medical Hall, Penang.
Exterior and interior view of Cheng Woh.
Products sold by Cheng Woh Medical Hall include soups, teas, desserts and chinese herbs.
II. Kean Aun Hoe Medical Hall, Penang.
Front view of Kean Aun Hoe.
They sell soups that were made by their secret recipes. The special Kean Aun Hoe recipe
Penang Bak Ku Teh (left) and special Ginseng Soup Base (right).
Kean Aun Hoe Medical Hall sells valuable bird nests and herbs as well.
Printed interview questions.
Handwritten notes which were recorded during the interview process.
B. Huah Shan Medical Hall, Subang Jaya.
I. Details of the business
Front view of the shop.
Closer view of the shop.
II. Details of the owner.
The founder and current owner, Mr. Lee.
Above are license of Mr. Lee to run his business (left) and name card of Mr. Lee (right).
Mr. Lee refers to books to widen his knowledge about chinese medicine.
III. Products or services provided.
Packaged herbal soup bases are the main products of Huah Shan.
Chrysanthemum is one of the main products as well.
Variety of chinese herbs available at Huah Shan Medical Hall.
They sell other products such as chinese ointment, chinese herbal jelly and snacks as well.
They provide services such as cupping therapy and acupuncture.
Mr Lee uses these to provide a better understanding of the sickness to his patient.
IV. Top Competitors
I. HaiO Enterprise Berhad.
Front view of HaiO.
They sell various products which are traditional as well as modern one such as traditional
chinese pills (left) and Bamboo salt drink (right).
II. Eu Yan Sang.
Front view of Eu Yan Sang (left) and surrounding area of the shop (right).
Chicken Essence and Bird Nest are the main products of Eu Yan Sang. They promote their
main products by combining them into gift hampers (right) which are in a lower price.
Above are promotion advertisements of Mother’s day and Father’s day. They have very strong
promotion strategies especially during the festival such as Chinese New Year.
III. Herbs N Food Sdn Bhd.
Exterior view of the shop.
Packaged herbs are the main products of Herbs N Food.
They sell special products such as homemade honey drink, homemade chinese herbal jelly
(left) and bird nest, snacks (right).
Handwritten interview notes that the transcriber used to document the interview process.
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