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International Business - Final Project

A full analysis of retail industry in Malaysia including the business environment and competitive landscape in the industry.

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International Business - Final Project

  1. 1. ENTERING THE RETAIL INDUSTRY IN MALAYSIA ANALYSIS PREPARED BY: KARIM KHAIDI YILIN LIU LIU YE JEFF LUI
  2. 2. PRESENTATION OVERVIEW Strategic Planning Environmental Analysis Competitor Analysis
  3. 3. PHYSICAL FACTOR: LOCATION
  4. 4. PHYSICAL FACTOR: EAST AND WEST MALAYSIA
  5. 5. PHYSICAL FACTOR:POPULATION DENSITY
  6. 6. PHYSICAL FACTOR: MARKET CONNECTIVITY
  7. 7. PHYSICAL FACTOR: MARKET CONNECTIVITY
  8. 8. PHYSICAL FACTOR: SUMMARY Market is well connected to major economies • Market is concentrated on specific region of the country Good logistics for business is possible • Fierce competition could exist since sellers and buyers are concentrated in the same area
  9. 9. SOCIO-CULTURAL FACTORS: RACIAL COMPOSITION 67.4 24.6 7.3 0.7 Malay Chinese Indians Others
  10. 10. SOCIO-CULTURAL FACTORS: RELIGION 61.3 19.8 9.2 6.3 1.7 0.7 1 Islam Buddhism Christianity Hinduism Others Atheist Unknown
  11. 11. SOCIOCULTURAL FACTOR: HOLIDAYS • Malaysia celebrates 10 different national holidays (Eid Celebration, Chinese New Year, Christmas, Diwali, etc.,) • Countless other states holiday • Holidays = Sales & Shopping
  12. 12. SOCIO-CULTURAL FACTORS: AGE DISTRIBUTION
  13. 13. SOCIO-CULTURAL FACTORS: SIGNIFICANCE Culturally diverse market –Firms needs to cater local needs and taste Various holidays and celebrations leads to event based sale – intense price war could occur Young population – potential to ecommerce is greater
  14. 14. FINANCIAL FACTOR: INTEREST RATE 3.25 0.25 4.92 3.25 6 5 4 3 2 1 0 Malaysia US Benchmark Lending Last Revised Lending Rate: Malaysia (2011) , USA (2012)
  15. 15. FINANCIAL FACTOR: PAYMENT SYSTEM • Streamlined interbank transfer via MEPS – Malaysia Electronics Payment System • MEPS controls every aspect of implementation and standard of electronic payment • Other relevant payment service providers are Visa and MasterCard
  16. 16. FINANCIAL FACTOR: SIGNIFICANCE • High lending rate and no capital gain tax could affect mode of financing • Reliable payment system eases transaction and leverage the potential for e-commerce
  17. 17. POLITICAL AND LEGAL FACTOR: FDI Stance of FDI: Aims at liberalizing the economy together with advancing local business. Therefore, all FDI related merger, acquisition, expansion and etc., must have permission from MDTCC
  18. 18. POLITICAL AND LEGAL FACTOR: FDI • Ownership: Malaysian must own 30% of stake for first 3 years of incorporation • Workforce: Should be reflective off all racial composition of Malaysians • Product Composition: 30% of the sale space must be occupied with local products. • No FDI in convenience store, mini market, provision shop and etc., with <3000sqm
  19. 19. POLITICAL AND LEGAL FACTOR: EMBARGO As leader of Organization of Islamic Countries (OIC), Malaysia does not do trades with Israel. Some of Israeli related firms face seasonal anti- Israel boycott.
  20. 20. POLITICAL AND LEGAL FACTOR: NATIONALISTIC SENTIMENT
  21. 21. POLITICAL AND LEGAL FACTOR: SIGNIFICANCE Rigid and political and legal requirements poses challenges to firms in several aspects such as supply chain, management & administration, funding and others.
  22. 22. MACROECONOMICS FACTOR: GNI • Income Level : Upper Middle Income
  23. 23. MACROECONOMIC FACTOR: GDP
  24. 24. MACROECONOMIC FACTOR: CONSUMER PRICE INFLATION
  25. 25. MACROECONOMIC FACTOR: CONSUMER CONFIDENCE
  26. 26. MACROECONOMIC FACTOR: CONSUMER SPENDING
  27. 27. MACROECONOMICS: TAX RATE Tax USA (%) Malaysia (%) Corporate 35 25 Sales 9.60* 6 Social Security – Employer** 7.65 13 Social Security – Employee** 7.65 11 Total 59.9 55 Capital Gain (Equity) 0 %– 20% 0% *National Average (Forbes,2012) **Including Medicare
  28. 28. MACROECONOMIC FACTORS: EASE OF DOING BUSINESS World Bank, 2014
  29. 29. MACROECONOMIC FACTOR: SIGNIFICANCE Overall, firms does not face too much challenge since the factors such as tax rate, inflation and economic growth remains stable.
  30. 30. OTHER FACTOR: TOURISM
  31. 31. OTHER FACTOR: TOURISM • Tourism contributed MYR 47B to GNI (2012) • Tourist arrival for 2012 was 25.03 M • Generated MYR 60.0 B in tourist receipts • Tourists contributed 30% of retail revenue
  32. 32. OTHER FACTOR: TOURISM November - January
  33. 33. OTHER FACTOR: TOURISM June – Sept
  34. 34. OTHER FACTOR: TOURISM
  35. 35. OTHER FACTOR: SIGNIFICANCE OF TOURISM • High tourism activities allows firms to make more profit • Also promotes competition and forces retailers to be more competitive and creative in terms of marketing, cost structure and others.
  36. 36. OTHER FACTOR: INTERNET PENETRATION
  37. 37. OTHER FACTOR: INTERNET PENETRATION
  38. 38. OTHER FACTOR: INTERNET PENETRATION
  39. 39. OTHER FACTOR: INTERNET PENETRATION
  40. 40. OTHER FACTOR: INTERNET PENETRATION • In Malaysia, only 0.8% of retail business was done online and it is expected to increase to 1.4% by 2016. “The MRCA does not see the emergence of the online shopping as a threat towards their brick and mortar businesses”. Nelson Kwok, President of Malaysian Retail Chain Association
  41. 41. OTHER FACTOR: SIGNIFICANCE OF HIGH INTERNET PENETRATION • High internet and mobile penetration, coupled with young population and good payment system, could boost the underdeveloped e-commerce segment.
  42. 42. COMPETITOR ANALYSIS: KEY PLAYERS Parent Company Subsidiaries Operation Style Tesco (UK) Tesco (M)** Hypermarkets Dairy Farm (HK) Giant Hypermarkets Cold Storage Supermarket Guardian Health and Beauty Aeon (JPN) Jusco Hypermarket Carrefour* Hypermarket Berjaya Corp (M) Parkson Department Store Econsave Hypermarket/ Supermarket 7-Eleven Convenience Stores Rocket Internet (GER) Zalora Online Fashion Store Mudah.my (M) Mudah.my Online Marketplace MYDIN (M) Mydin Wholesale Wholesale *Was originally a subsidiary of Carrefour (FRN) but bought by Aeon in 2012. ** Offer full online shopping
  43. 43. COMPETITOR STRATEGY: OWNS SHOPPING MALL
  44. 44. COMPETITOR STRATEGY: OWNS SHOPPING MALL
  45. 45. COMPETITOR STRATEGY: REBRANDING OF PRODUCT & BULK PACKAGING
  46. 46. COMPETITOR STRATEGY: REBRANDING OF PRODUCT & BULK PACKAGING
  47. 47. COMPETITOR STRATEGY: AGRESSIVE PRICING & EVENT BASED SALE
  48. 48. COMPETITOR STRATEGY: VOUCHER & MEMBERSHIP CARD
  49. 49. STRATEGIC PLANNING: OVERALL STRATEGY Strong nationalistic sentiment Legally required to include 30% local products Strong Culturally ? diverse market cultural sensitivity Various cultural and religion celebration
  50. 50. STRATEGIC PLANNING: OVERALL STRATEGY Strong nationalistic sentiment Legally required to include 30% local products Strong Culturally MULTIDOMESTIC diverse market cultural sensitivity Various cultural and religion celebration
  51. 51. STRATEGIC PLANNING: OVERALL STRATEGY Durian Fruit
  52. 52. STRATEGIC PLANNING: OVERALL STRATEGY Halal Logo
  53. 53. STRATEGIC PLANNING: ENTRY METHOD 30% of the product must be local product Culturally diverse market Fierce 30% citizen ? ownership competition in concentrated markets Steep learning curve
  54. 54. STRATEGIC PLANNING: ENTRY METHOD PARTNERSHIP & JOINT VENTURE 30% of the product must be local product 30% citizen ownership Culturally diverse market Fierce competition in concentrated markets Steep learning curve
  55. 55. STRATEGIC PLANNING: ENTRY METHOD
  56. 56. STRATEGIC PLANNING: FINANCING ? No capital gain tax for equity 30% stake must be owned by local citizens High lending rate - 4.92%
  57. 57. STRATEGIC PLANNING: FINANCING Equity Financing No capital gain tax for equity 30% stake must be owned by local citizens High lending rate - 4.92%
  58. 58. STRATEGIC PLANNING: FOCUS SEGMENT Online Marketplace and Online Store Young Population High Internet Penetration Good Payment System High Mobile Penetration Low Competition in Online Segment
  59. 59. Reference • Euromonitor • Asia Pacific Retail Handbook • World Bank • Department of Statistics Malaysia • Malaysian Communication and Multimedia Commission • E-commerce Milo • Bank Negara Malaysia (Central Bank of Malaysia) • Malaysia Retail Chain Association

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A full analysis of retail industry in Malaysia including the business environment and competitive landscape in the industry.

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