Malaysias Microeconomic And Macroeconomic Environment Marketing Essay

This chapter will discuss Malaysia’s microeconomic and macroeconomic environment to help the proponents know how much market potential they could have as they launch their product in the country. This chapter includes the country’s economic conditions, business environment and the consumer expenditure of Malaysians. In addition, this chapter also discusses the market segment that the proponents would like to target to fit as the users of the product. An analysis for the industry and the competitors are also discussed to determine the probabilities of success of the product.

Malaysia practices a federal parliamentary democracy with a constitutional monarchy in which the monarch is elected every five years from among the tribal elders of peninsular Malaysia. Malaysia has three branches of government including the Executive, Legislative and Judiciary. These authorities serve as the separation of powers for a division of tasks to be performed in the country. The Executive branch consists of the Head of State and referred to as the King for having ceremonial duties. The Legislative branch consists of the bicameral parliament which comprises the House of Representatives. The member-parties of the National Front coalition form the government. The Lower House is composed of 222 members elected for five years from single member districts. 70 members of the Senate serve 3-year terms, with 26 of them elected by the state legislatures and 44 of them being appointed by the monarch or the King in the Prime Minister’s recommendation. The Judicial branch consists of the Federal Court, Court of Appeals and high courts.

Source: http://www.malaysia.gov.my and Euromonitor International

Malaysia’s subdivisions comprise of 13 states and three federal territories including Kuala Lumpur, Labuan Island and Putrajaya. A chief minister heads each state for having its own assembly and government. Nine out the states have hereditary rulers titled sultans and four states have governors in counterpart positions.

Source: http://www.state.gov/r/pa/ei/bgn/2777.htm

The Constitution of Malaysia was established on the 31st of August in the year 1957, which commenced on the date of the nation’s independence. The Federal Constitution of Malaysia has its basis from the Constitution of the Federation of Malaya. This will serve as a way to protect the country in having laws as basis to follow, connected to the authorities of the branches of the government.

Source: http://www.malaysia.gov.my

The king of Malaysia is Sultan Mizan Zainal Abidin who has been the Head of State starting December 2006. 140 seats were won by the National Front while 31 seats went to The People’s Justice Party. 28 seats were won by the Democratic Action Party and 23 seats by the Islamic Party. Najib Abdul Razak has been Malaysia’s Prime Minister since April 2009.

Source: Euromonitor International

Economic

The economy of Malaysia according to Global Market Information Database is in a strong condition and expected to have faster progress where the officials are hoping for its performance boost when it comes to developments in manufacturing activities with a 60% target by 2020 in Gross Domestic Products for services.

Economic Prospects

According to Global Market Information Database, real GDP is expected to increase 6.7% in 2010, showing its fastest growth yet in several years for the first half of the year but the growth is expected to remain above 5.0% as domestic demand grows stronger to continue recovery. This increase got its support from stronger exports, particularly to China. The demand domestically will increase sooner due to better market conditions when it comes to labor, thus having an effect to increase the spending of the private consumers.

Malaysia, just like in the Philippines, is known for their workers providing labor services. The country’s unemployment rate decreased to 3.4% in 2010 from 3.6% in 2009. Most of the workforces are sent in manufacturing division. However, the performance for workforce is poorly trained but workers from Indonesia and Vietnam are cheaper if to be compared, making the government work on this for improvement. In this case, the government has been investing heavily to improve income disparities in several regions. This activity will be continued until 2025. The progress for the projects during period of economic weakness may be slowed due to prioritizing of activities.

Government Finance and Market Potential

According to Global Market Information Database, government deficit rose to 7.5% of GDP due to programs they implement. In return, their spending with the help of fiscal consolidation will work together to lessen then 2010 deficit. Public debt will have its tendency to rise during the next several years, jumping from 52.5% in 2009 to 41.5% in 2008, equivalent to RM 354,266 million in 2009. However, interest rates would ease and found to be manageable. To withstand all the expenses, the government has the oil and gas industry of the country to support almost half of the revenues of the government. They also invest to achieve developments when it comes to manufacturing by having higher value added activities, encouraging service sector expansion.

As an overview, Malaysia’s economic performance is impressive due to private investment recovery and offsetting expenses of the government. However, Total trade (exports plus imports) exceeded GDP, leaving the country especially vulnerable to the effects of the global recession. To boost economic growth and to attain stock market stabilization, the government acts by having two stimulus programs implemented and the funds will be used to help credit-starved firms, boost spending, support equity investment and fund off-budget projects.

The indicators of business environment shows Malaysia’s rank when it comes to ease of doing business, together with different information relevant and needed to be considered when opening a business in the country. From the table, it shows time or duration estimates as you open or closes a business, duration for permits and taxes, importing and exporting and tax rates. These estimates may vary from time to time for these factors are considered to be uncontrollable and are changeable, depending on the government of Malaysia’s decisions.

From the table, it shows an increase and a decrease of percentage throughout the years in Malaysia’s economic performance. If the inflation rate rises, this means that prices of goods are subject to change and rise, resulting as a factor to lower expenditure or consumption of consumers. Between years 2007 to 2008, there is an abrupt change in the percentage with a difference of 3.4%, resulting to change of high prices. But for the last two years for 2010 to 2011, there is an increase in percentage but not as bad as the performance over the former years to ease better consumption of the consumers.

The table above shows Malaysia’s GDP performance. Malaysia’s GDP rose starting from 2009 to 2011 which is a great value if to compare to the value from former years. Higher GDP connotes a good performance in monetary value of all the goods and services being produced in the country. In this case, Malaysian citizens have the ability to procure or spend goods as the government takes its toll to improve and develop the country’s overall performance in goods and services.

Malaysia’s Gross National Income performance in the latest years managed to increase except for the year 2009 where it decreased. GNI is the wealth in terms of monetary value of a country that it earned from all its economic activities, either products or services, throughout the world. In this case, even if it decreased in 2009, it managed to recover as it increased in 2010 which is even greater than the year before it stumbled down. This shows that the economy of Malaysia managed to do well not only covering the country alone itself but also with its transactions all over the world.

The data above shows the consumption expenditure of Malaysians and the expenditure by resident households that can serve as a basis and information for La Me Sa. The consumption expenditure of Malaysian citizens increased consistently, which means that as years go by, they still have the ability to spend goods for either their needs or wants.

La Me Sa is categorized as a furniture yet it has a function which supports high technology electronic gadgets specifically desktop and portable computers used at home. The data above shows the consumer expenditure of Malaysians in household goods and services where home furniture enters in this category. The way Malaysians spend for home furnishings increased consistently as well which shows a good demand indicator for La Me Sa. Since the product is connected to computers, possessions of computers by households shown in Table 2.11 shows that it also increased consistently due to changes in high technology which make life easier, faster and more productive.

Investment

According to GMID, Malaysia’s performance shows a low level when it comes to investments. The government then suggests having a remedy for such deficiencies for the investment division by thinking of other roles for public companies in order to compete with private sectors and to fit to investment climate. However, the foreign investment in manufacturing began to recover in 2010 as manufacturing covers 28.2% of GDP and employs 7.7% of the workforce and US$2 billion is expected to be committed in the next two years, including nearly US$300 million in retail investment. 

To encourage investment, the government has granted a ten-year exemption on venture capital and introduced investment incentives in certain regions. This was followed in 2009 by the elimination of local-equity requirements for investors in various parts of the service sector.

Foreign Trade

According to GMID, Exporters struggled as a result of the global slowdown, particularly due to its effects on the world’s electronic markets. Total exports contracted in 2009 for the first time in eight years. Policy makers are working to boost domestic demand and wean the economy off its dependence on exports.

Exports of machinery and transport equipment accounted for 46.5% of total exports in 2009. Singapore, the USA and EU-27 are Malaysia’s largest export markets, making up 14.0%, 11.0% and 10.9% respectively in 2009.

The current account surplus in 2010 will be 14.7% of GDP and slip to 13.8% in 2011.

Demographics

According to Global Market Information Database, the population of Malaysia grew at an average rate of 2.3% per year and reached 28.6 million in 2010. This is an increase of 10.5 million in two decades. The median age is gradually rising in between ages 24-26 while the mean age is also gradually rising in between ages 27-28.

According to United Nations Department of Economic and Social Affairs, The rank of Malaysia is 43 when categorized in the number of population of countries in the world. Its rank among ASEAN countries is 6. Over the review period, the country’s population increased by more than 31% with solid growth recorded in all age groups, and that growth is expected to continue over the forecast period. By 2015, the projected population of Malaysia’s will reach more than 30.7 million.

A lot of factors can affect a country’s population. These factors include the net migration of people from a country into another country and even the birth and death rate of the country. Aside from these, the lifestyles of people living in a country changes rapidly as well due to changes of preferences may it be about healthy living or the environment itself that they live in to.

From the data above about the changes in population, there is a great shift in number of deaths in between years 2006 to 2011 for increasing consistently. However, in live births, numbers are both increasingly and decreasingly changing as well as in net migration. Live births decreased due to the decision of the people when it comes to marriage where they decide to marry in their later years and have just enough or fewer children.

According to Global Market Information Database, Malaysia’s population continued to undergo an aging process during the review period. From the data above about the population of Malaysia by age, the number of people with ages 80 and above also grew. One of the reasons for a longer life expectancy is because of the improvement about the health care system in the country. There has been an increase in awareness in the country when it comes to healthier products and healthier lifestyle. The government also makes great efforts to ensure that they know the medical resources and alternatives available to them. In this case of increasing numbers in old age, consumer behavior also changes and the products entering the market change to fit for what the old-aged people would need. Obviously, products differ through ages. Middle-aged people would be into fashion, portable consumer electronic products due to rapid changes when it comes to technology and fast food. This just means that every age category has different preferences in which the market should offer something to consumers to fit their needs and wants

The ratio for the population of males and females remains substantially the same. The population for males is increasing consistently, as well as for the females. Even though the population for both genders increases throughout the years, the number doesn’t really change too much when it comes to differences.

Men and women have totally different buying behavior due to needs and wants but changes have been occurring because most marketers and manufacturers are now seeking to sell products that would fit for both genders such as gadgets and other electronic products.

The population for urban area is increasing consistently from 2006 up to 2011 while the population for rural area is decreasing consistently starting 2007 up to 2011. This is because of a lot of job opportunities booming in the cities of Malaysia especially urban areas where different industries are starting to get expansions.

Just like any other countries, the population is undergoing urbanization rapidly. If a place has a lot of people and a lot of businesses are opening in a place in different industry types, these just mean that the place will have much more to offer for the people residing in the place. These people could either be in need of jobs or will serve as consumers who will choose in a wide range of varieties offered in the market. In this case, there are lots of differences between urban and rural areas, and the people living in the areas. Moreover, people residing in urban areas are most likely to influence and give exposure to the people residing in rural areas.

After showing the demographics of Malaysia in general and totality as categorized by age, gender, urban and rural areas and key factors that affect changes of population, the data above shows the number of households in Malaysia and followed by percentages of households that possess computers that would fit as the possible users of the La Me Sa. It shows that the rates are consistently increasing throughout the years because of abrupt changes and upgrades when it comes to technology. This contributes as a great factor for the benefits and usage of La Me Sa.

In Malaysia, the cultures present are adapted from different cultures from other countries including Malay, Chinese, Indian, Eurasian and even groups from North Borneo. In effect, a unified Malaysian culture is emerging in the country and the celebrations come together such as Chinese New Year, Moon Cake Festival and Hari Raya Puasa.

Just like in the Philippines, they also celebrate Christmas but their celebration is only celebrated in a small scale due to a lesser number in populations who are Christians. Christmas is still treated as a public holiday as they also perk up their homes and business establishments with colorful decorations to experience the holiday atmosphere.

Source: http://www.worldtravel4indians.com/malaysia/festivals-in-malaysia.html http://allmalaysia.info/msiaknow/festivals/christmas.asp

Since a lot of cultures influenced the culture in totality of Malaysia, Malaysia’s cuisines are blended from different classes. Meals such as rice and noodles are the popular dishes in the country. However, since there are different religions, Muslims in particular are forbidden to eat pork but are a favorite dish for the Chinese and Buddhists are mostly vegetarian. Just like in the Philippines, Malaysians are also known for their hospitality with their guests as they offer food as a welcome. The usual drink offered is tea or coffee with small snacks.

Religions

Almost all the religions present in the world are present in Malaysia including Islam, Christianity, Hinduism and Buddhism. Each religion shows different presence in the society, having strong sense in terms of practices, making it easier for the people to identify having the same religion. In Malaysia, the government is concerned with Muslim practices for having Islam as the highest percentage of all the religions in the country with 60%. Muslim’s holy place is called the National Mosque located in Kuala Lumpur in the year 1965. For the Christians who cover 10% in percentage, there are churches built for prayers, built as their holy place while temples are also built especially for Buddhists.

Source: Culture of Malaysia – history, people, clothing, traditions, women, beliefs, food, customs, family http://www.everyculture.com/Ja-Ma/Malaysia.html#ixzz1DjTxtna0

Technology as a Culture

According to Global Market Information Database, the Malaysian government has been active with the updates about high technology, specifically computers and the internet for bringing these to schools, businesses and government agencies as tools to be used to introduce them to modern information age. Usage of internet is also sorted for either public use or just home connectivity, since most of the households have their computers with enabled internet services. This caused the increase in computer and internet users and business establishments offering services that would cater the needs of the consumers. These services include internet service providers, wireless services and developed broadband services.

Because technology is now a part of the culture of the country just like in any other countries, La Me Sa would fit well as a product to be used together with these updating technology and in demand use for gadgets and computers, may it be for school, for business or even government purposes.

Technological

When it comes to technology, Malaysia makes it sure to be updated with the latest updates when it comes to gadgets and other electronic products. According to Global Market Information Database, Malaysia’s consumer expenditure when it comes to communications, televisions, media, telephones, computers, the internet and electronic gadgets increased in percentages.

One of the fastest growing mobile telecommunications market in Southeast Asia belongs to Malaysia for reaching 71.2% in 2008 when it comes to total telecom revenues compared to 51% in 2003. Communications is an important role for a country especially to fill in business relationships in different industries. Through high technology services, it will be easier to do business transactions for faster services and results. Aside from the normal calls and sending SMS to other subscribers, telecommunications companies now offer mobile internet to easily communicate for either personal or business purposes. In this case, a person’s work would be more productive for saving time to do something more important. Expenses for this category in totality have increased but for individual benefits, each of the users gets to save money, especially when it comes to habitual communications and international uses.

Aside from telecommunications, the use of computers and the internet increased abruptly as well just like in any other countries in today’s generation. The number of computer and internet users in Malaysia grew from nearly 5 million users in 2000 to more than 12 million users in 2007. This growth is about 144% and is consistently increasing throughout the years.

Aside from the computers and the internet, more high technology electronic products are being in demand in the country such as portable electronic products, laptops and different kinds of on the go gadgets and easy keep gadgets due to wireless, portability and convenience features offered by service providers where competition in the said industry is starting to grow.

Just like what the proponents discussed about technology being a part of the culture of the Malaysian, La Me Sa is a good choice of product to introduce in the market of Malaysia featuring technology and furniture industries.

Target Market Profiling

Description of Target Market

The proponents would like to focus on households, residing a 25-34 year old male or female in Kuala Lumpur with a disposable income above $15,000 as their target market segment for La Me Sa.

The proponents will not base or focus their target market to students. The students may be some of the end users of the product but the age range preferred are the people who are able to buy the product. Furthermore, businessmen or businesswomen, people with jobs such us for office works are also fit as users and are capable of buying the product.

The population of Kuala Lumpur in Malaysia consistently increases. The proponents choose Kuala Lumpur as the target market city not only because of the consistently increasing number of population or being the highest in terms of population, but also because it is the city where most business opportunities are present. If a lot of business establishments are present in Kuala Lumpur, this just means that there will be a lot of jobs to be offered for the Malaysian citizens, making them earn money to be able to spend for their needs and wants.

Given the population for Malaysia and Kuala Lumpur, the proponents used the data to get the percentage of Kuala Lumpur in the country. Since the population for different age ranges in Malaysia is also given, the proponents used the percentage of Kuala Lumpur to multiply it with the population by age to set apart the data only for the city.

Even though the percentage of Kuala Lumpur as a whole is decreasing, the population for the age range chosen by the proponents as target market is increasing consistently. The data for the population density in Malaysia or the population per unit area is also shown where throughout the years, it boosts constantly in terms of number of people in an area.

Consistently increasing number of population could mean greater possibility or chance to have more consumers fit for the product. Connected with this factor, a greater impact would be present if these people in the given age range are earning money for having jobs. The technology nowadays, based on everyday experiences and lifestyles are seen to be a necessity already and according to Global Market Information Database, middle-aged consumers are mostly to spend their money in high technology gadgets and products.

The proponents will focus on households with annual disposal income of over $15,000 and above. Due to lack of data where the disposable income corresponds to specific ages, the proponents considered the data for Malaysia in totality as a basis. It shows that households with the chosen disposable income are not increasing consistently. Between years 2008 and 2009, the disposable income of Malaysians dropped abruptly but managed to increase for the year 2010. The good thing about the given data is that the performance in terms of income got better because it will increase well for the present year which is 2011. This means that it is getting more progressive if to be compared with the past years, making them able to spend more of what they need and want.

Psychographic and Behavior

25-34 year olds in Malaysia are increasing in number not only for the whole Malaysia but for Kuala Lumpur itself, which is what the proponents have chosen. It is forecasted to increase and would cover 25% in total population by 2015. From the Euromonitor International’s report in their Population and Homes category for Malaysia, it has been mentioned that the said age range would increase further in the future. Another report under categories of Technology, Communications and Media and Consumer Trends and Lifestyles, there is a significant increase in number of middle aged consumers together with their disposable income. They served as a positive influence when it comes to sale of products including in-home consumer electronic products in particular.

Being bachelors or bachelorettes and having a job while living in the city, middle aged consumers are also those people who tend to spend time with their families or deciding to start a family. Because of these behaviors and lifestyles, the middle aged consumers are known to be investing well when it comes to household durables, appliances and different home-related and home-improvement products and services.

Middle-aged Malaysians are already far more conservative in their spending habits than younger consumers, and the thought that new economic hard times are on the horizon could prompt many to curtail their spending even more. To connect this with the product of the proponents, La Me Sa will serve as a furniture that is good for lesser space but has a lot of features and benefits and would fit to users as they wish for high technology gadgets even more because of the fast-paced lifestyle nowadays, together with other communication industries such providing internet, specifically wireless, to be used with the gadgets are starting to grow and the “smaller but more powerful, much better” thought counts.

The table above shows market shares of companies in home furnishings industry in Malaysia. It shows that there are a lot of companies competing with each other in the same industry. However, the IKEA leads the market share together with the next three companies. The rest of the companies mentioned are far from the shares the company leaders have.

For the Philippines, there are no companies indicated in Global Market Information Database but it shows an article about Cebu as a pre-recession furniture manufacturing center and is dependent on exports to US by exporting well-designed middle to high-end furniture. Cebu has been producing some of the finest furniture on the market, and manufacturers there introduced many of the industry’s most celebrated very Filipino designs innovations, including the use of indigenous Cebu raw materials like rattan, buri, stone craft (using Cebu limestone), cane and iron and, most recently, abaca. Furniture made in Cebu was highly prized, and for many years manufacturers reaped the benefits associated with the booming US housing market.

However, looking to meet demand in their fast-growing domestic market, players in the Middle East have now built new manufacturing facilities in Saudi Arabia, Qatar and Dubai and have lured away many of Cebu’s out-of-work finishers/polishers, craftsmen and other highly skilled workers.

Home Furnishing Companies in Malaysia

IKEA Malaysia

Strategic Direction

Grand Teak is planning to improve its sales, competitiveness and increase its brand image among consumers by aggressively promoting new products and introducing new trends and innovative ideas with better functions from its range of products to suit every customer’s needs.

Capabilities

The company specializes in producing innovative and quality house ware and home furnishings, targeting every consumer with low prices.

Production

The company has no production facilities in Malaysia and most of the products are imported to cater the demands of the Malaysian consumers.

Competitive Positioning

The company has a wide product portfolio specializing and innovating unique ideas in house ware and home furnishings. It maintains a well-established worldwide distribution network with expertise to constantly listen and understand consumers’ requirements and demands. The company is expected to increase its sales and improve its performance by introducing and retailing better varieties of products in its stores.

Market Segmentation

As a manufacturer and a retailer, Grand Teak positions itself in the middle and lower segments of the market for both house ware and home furnishings.

Market Share

Grand Teak is the market leader in home furnishings in Malaysia with a share of 6% and is expected to grow steadily due to its unique and innovative designs, ideas and the affordable prices of its products. Its current rank in home furnishings in Malaysia is number 1.

Source: Euromonitor International

Macy Home Furnishings

Strategic Direction

Macy Home Furnishings is expected to display better sales and demand due to its brand name and its establishment in Malaysia as one of the pioneer brands in home furnishings and retailing by seeking to capture a bigger share of the market as it improves further its brand name and expand its range of products offered to consumers.

IKEA is Macy Home Furnishing’s main competitor which retails similar products. The company is now introducing better varieties and lower prices with promotions for its products

Capabilities

Beside fabrics, the company also offers a comprehensive range of home furnishings accessories and provides services including interior consultancy, expert advice and practical guides to professional tailoring.

Production

As an importer and retailer company, the company mostly imports its products from neighboring countries to minimize costs. The company distributes imports and retails various home furnishing products throughout Malaysia from its outlets and does not produce any products of its own in Malaysia.

Competitive Positioning

The company not only specializes in home furnishing products but it also has other interests. It is also involved in providing new trends, home decoration ideas and solutions for interior decoration in order to cater to a wider range of consumers with its products and services.

Market Share

The company currently ranks second in terms of home furnishings shares in Malaysia with an overall 5.8% share. Its share has been growing due to high demand and the success of its strategic ideas in boosting its overall sales.

Source: Euromonitor International

Lumbermart

Strategic Direction

The company has its reputation as a renowned quality floor specialist for homes. The company’s objective is to establish itself as the leader in providing quality floor boards and floor furnishings made from quality wood for both commercial and non-commercial use.

Capabilities

The company is exclusively tied to the Swedish company Bona, and can access to the latest equipment and technology in floor materials and maintenance and continuous R&D and international training.

Production

The company has manufacturing facilities located in Selangor in Malaysia. The primary function of the manufacturing plants is to manufacture high quality wooden floor and materials for the residential and commercial building sectors.

Competitive Positioning

The company is the only one that deals with wooden flooring at all stages and has customized installation and precision manufacturing facilities that