PEST analysis (Political, Economic, Social and
Technological analysis) describes a framework of
macro-environmental factors used in the environmental
scanning components of strategic management.
The assumption is that if the country is able to audit its
current environment and assess potential changes, it
will be better placed than its competitors to respond to
Malaysia (Political analysis)
Malaysia is a multi-party democracy country.
The ruling Barisan Nasional party has been in power
over 25 years. (This fact provided the country with a
high degree of stability, which is important factor for
businesses investing in the country.)
Corruption does exist in the country. (This fact may
become a barrier to foreign businesses as it adds to
firms costs and can cause problems).
Transparency International ranks Malaysia 47th of 180
countries in its Corruption Perceptions Index.
Malaysia (Economic analysis)
Malaysia’s main attraction as a location for business is its
Over the last 10 years, economic growth has averaged 7%
This rate of growth has lead to a large increase in consumer
incomes and therefore demand, which has attracted
retailers such as IKEA, Tesco and Carrefour.
Malaysian location makes it ideally placed to engage in
Exports account for 37% of Malaysia’s GDP and the country
achieves a healthy current account surplus.
Malaysia (Social analysis)
The Malaysian population consists of three main groups:
Malay (60%), Chinese (30%) and Indian (10%).
This mix of populations gives Malaysia a rich and vibrant
culture, and the country is seen as an example of racial
harmony as the different populations have existed peacefully
together for years.
The country is predominately Islamic in its religion but it’s
only the Malay muslims who are bound by Islamic laws; the
rest of the population are free to practise their own religions.
Malaysia (Social analysis)
The mixture of religions in the country gives rise to a
large number of religious celebrations - Malaysia has
more public holidays than any other country.
The cultural differences mean that businesses entering
the country will have to adapt their products and
business practices to suit the needs of the population.
The Malaysia is still need to develop its technology to enable
it to compete in international markets.
In 1996, the govt. initiated the ‘Multimedia Super Corridor’
(MSC), which is a strip of land stretching from the central
business district of Kuala Lumpur to the out-of-town Kuala
Lumpur International Airport.
This corridor hosts more than 360 multinationals, including
foreign-owned and home-growth Malaysian companies, all
focused on multimedia and communications products.
It continue to expand and attract world-leading ICT
The high levels of investment in training and education,
including the creation of a number of ‘Smart Schools’, and
an excellent infrastructure, including a brand new town
Cyberjaya is a ‘self-contained intelligent city with world-class
It’s this level of technological support that makes Malaysia
an attractive place for foreign firms to do business.
In fact, Cyberjaya is considered one of the top three
destinations for business support services and outsourcing
in the world.
Malaysia (Legal analysis)
The Malaysian legal system is based on British common
law, although Islamic law is applied to the Muslim
The British law element can be seen as an advantage to
firms investing in the country as the law will be familiar to
However, although the legal basis of the system is
British, many of the punishments for those who break the
law are far harsher - the death penalty and flogging are still
Therefore, investing in a foreign country need to be familiar
with the laws there and confident that they will be applied
The rapid development of Malaysia has come with high
environmental costs (negative externalities).
According to a data from the UN, Malaysia’s deforestation
rate is increasing at a faster rate than other tropical country.
Since 2000, the country has lost an average of 140,200
hectares – 0.65% of its forest area – per year.
Much of the country’s land that was once rainforest is now
given over to the production of palm oil, which is used for
the processing food we eat and as a source of biofuel.
Malaysian environmental impact has been criticised by
environmental groups as it has a devastating effect on
the habitats of some rare wildlife.
Malaysians, and particularly the govt. have little time for
these criticisms and see them as evidence of Western
hypocrisy over environmental issues.
However, Western companies need to be careful that
they aren’t seen to be participating in this
environmental damage as they may face
demonstrations and protests from pressure groups
such as Greenpeace and the World Wildlife Fund.
The article ‘ Emerging markets’ The case for Malaysia.
Peter Imeson analysed Malaysia as a destination for
foreign direct investment using PESTLE analysis.