Harvest box is one of the leading healthy snacks manufacturers of Australia. The Company sells variety of food products categorised in snacks. The company has been focused on expanding their customer base in the foreign countries. In this context the report would examine the feasibility of exporting the snacks products of Harvest Box in the either market of Malaysia and Philippines. The current report will analysis the economic, political and business environment to recommend the most suitable business market for Harvest Box.
The products of Harvest Box are much acceptable among the consumers of Australia because of the variety and the quality of the product that the company offers. The Company has annual revenue of A$70 million (Harvest-box.com.au, 2017). Harvest box offers its products in the major regions of Australia and the Company has plans to operate in the international market as well. This study shall propose two major markets for this Company where it can operate.
The Company offers different sizes of boxes to the consumers. This way they provide opportunity for various groups of consumers to pick from. Thus, the target consumers belong to different sectors. Any person can select from a wide range of products offered by the Company. The Company offers fresh and organic products and claims that the consumers receive products right from their farms (Harvestfields.farm, 2017). The products are all certified with no exception and the products are sold in a fair price to the consumers. In fact, there are varieties in the sizes of the boxes that the Company offers to the consumers.
Malaysia is regarded as one of the middle-income country of the world. Since the year 1970, the nation has witnessed rapid and fast economic growth. The country is one of the major oil and gas exporters of the world that has helped to boost the economic status (Yigitcanlar&Sarimin, 2016).
Figure 1: Growing Economies in South East Asia
(Source: Singh & Mahmood, 2014)
With the help of the ongoing economic reforms, it is possible to create a healthy competitive environment within the consumer market. The GDP of the nation is calculated to be $815.6 billion. The per capita income of the nation is of $26,300 (Yasmeen & Viswanathan, 2016). The annual growth of the nation is calculated to be 5.0%. One of the major drawbacks of the Malaysian economy is that in recent times the rate of unemployment of the nation has increased to 2.9% (Mahmood & Hanafi, 2013). It ranks 44th in the nation in the scale of GDP.
On the other hand, the GDP of Philippines is calculated to be $36.35 billion and it ranks 58th in the global GDP (Yigitcanlar, & Sarimin, 2015). The growth rate of GDP of Philippines is 2.3%, which is half the rate of that of Malaysia (Raquiza, 2013).
The economic reform of the year 2010 has resulted in the growth rate of the nation and has also helped to boost the economic and also minimized the effect of great financial depression of the world (Dressler et al., 2016). Hence, it has been a favorable condition for the business of Harvest Box to expand their business in the consumer market of Philippines.
On the other hand, higher per capita income in the economy of Malaysia has resulted in the better external condition of business. In the long run of business process, it is possible to make better use of the business environment in the Malaysia rather than that of Malaysia.
Figure 2: Per Capita Income in South East Asian countries
(Source: Yasmeen & Viswanathan, 2016)
In both the nation, the government has taken effective efforts to improve business tax policies and also result and that has resulted in encourage the management of Harvest Box to expand the business in both the nation and thereby market share in the global economy. Moreover, the fast growing economy of both the nation will help the nation will help the business to increase their level of profits. This is the biggest economic opportunity that the company can gain both the nations. On the other hand, the increased rate of unemployment is regarded the biggest threat to the business (Segawa, 2013).
Figure 3: Prosperity of South East Asian countries
(Source: Yigitcanlar & Sarimin, 2015)
The political framework of the Philippines is an organised representative, presidential and democratic republic. The president is considered as head of the government as well as head of the state within a pluriformmulti-party system (Tomsa, 2013). The major challenges in front of the present government are the low production due to the underdevelopment of agricultural as well as rural areas of the country. On the other hand, the political framework of Malaysia is organized as federal representative democratic constitutional monarchy. Currently Yang di-PertuanAgong is the head of the state where as the head of the government is Prime Minister of Malaysia. The major challenges in front of Malaysian political framework are religious and ethnic polarisation and thereby political instability within the multiracial coalition government (Chao, 2015).
It has been observed that Malaysian government has put greater emphasis on the economic free zone, which will be most beneficial for Harvest Box. The economic free zone would be most effective for Harvest Box to expand its product with relative ease (Mendoza & Olfindo, 2016). At the same time, the government is also focused on ensuring multiracial unity within the nation. The initiation would be most effective for maintaining peace and political stability in the country. It will be again a greater support to conduct highly smooth business operation in Malaysia. On contrary, the Philippine government is highly focused on re-establishing law and order along with inclusive growth within the nation. Though, the Philippines government focusing on growth and stability, no way they can provide similar level of business opportunity compared to Malaysia (Segawa, 2013).
Australia has significant economic ties with Philippines for a long time. The robust agreement and partnership enables Australia to provide 95% of its products to Philippines with duty free. In the similar manner, 97% of the Philippines product can enter Australia with duty free (Ngeow, Ling & Fan, 2014).In the same context, it has been also identified that Australia is ranked 9thin the list of largest trading partners of Malaysia. Two nation enjoys A$17.7 billion of business in a two-way trade policy. The free trade agreement between Australia and Malaysia has been also able to boost the trade relation between both countries (Stauth, 2015). Therefore, it can be considered that the both of the Philippines and Malaysia market is convenient for the Australian company as far as trade relation is considered.
Malaysia has a population of 28.96 million where 63.8% of the population resides in the urban areas. The Malaysian society is multi ethnic consisting of Malays and Chinese people. The GNP of the country is 3,311 USD and the GDP is 218 USD (Meiners, Ringleb & Edwards, 2014). Malaysia is ranked 29th on the index of Global Economic Freedom. This is because of the on-going drastic changes that the government has been implementing on the business environment.
Figure 4: Global services location index 2016
(Source: Mahmood & Hanafi, 2013)
In the view point of Mahmood and Hanafi, (2013), Malaysia is the most promising emerging market economies in Southeast Asia. The major reasons that support business in this country are the low cost alternatives in terms of running a business. The recurrent business expenditure and the overhead charges are low compared to other Southeast Asian countries. The government of Malaysia is also in charge of promoting trade and investment in Malaysia (Ngeow, Ling & Fan, 2014). In fact, MIDA is also responsible for providing incentives to the investors in terms of loans or grants from the government of Malaysia. Foreign businesses are not restricted to enter into Malaysia (Singh & Mahmood, 2014). In addition to this, offshore companies also eased with investors also have the ease to incorporate their business in the Malaysian territory.
Figure 5: Percentage real change in GDP for Malaysia and Philippines for 2012-2022
(Source: Economist Intelligence Unit, 2017)
The business environment of Philippines offers an ease of doing business in the jurisdiction as a decisive factor for the investors. The Global Competitive Index has put Philippines in the 47th position out of 140 countries. This clearly indicates the perils of the business environment even in the positive development business scenario (Hampel-Milagrosa, Loewe &Reeg, 2015). The country still faces challenges in terms of encouraging new entrepreneur to carry out their business in this country. However, it has to be said that in spite of the increasing challenges the country has improved in terms of its economic condition.
Figure 6: Ease of doing business in Philippines
(Source: Meiners, Ringleb & Edwards, 2014)
The business environment is not competitive as well and this is the reason that major companies do not consider the importance of being transparent in the business operation. This automatically creates a negative impact in the business environment. The Philippines’ legislation also has a fair area of trade and competition (Meiners, Ringleb & Edwards, 2014). The prevailing domination of the economic and national competitive policies has prevented unduly competition. The government is still in the operation of forming unruly institutional reforms to improve the business environment of the country (Raquiza, 2013).
|
Variable |
Weighting |
Philippines |
Malaysia |
||
|
Score |
Adjusted Score |
Score |
Adjusted Score |
||
|
Market Potential |
35% |
8 |
3.3 |
9 |
3.5 |
|
Economic Growth |
15% |
7 |
0.7 |
9 |
0.9 |
|
Ease of doing business |
15% |
6.6 |
2.2 |
9 |
2.7 |
|
Political stability |
20% |
4 |
0.86 |
7.6 |
1.736 |
|
Income distribution |
15% |
7 |
1 |
8.6 |
1.236 |
|
Total |
100% |
8.06 |
10.072 |
With the detailed weighted analysis from the above table, it can be easily said that Malaysia is the best possible option for the Company. As it has been observed that the opportunities of entering in the market of Malaysia is more than entering in Philippines in terms of the legal and governmental approach, it is recommended that Harvest Box would enter in the market of Malaysia and not Philippines. The country has good population and support in terms of legal perspective as well. Thus, it is expected that Harvest Box would find better opportunity in the market of Malaysia and not in Philippines.
Conclusion:
From the above assessment report it can be easily concluded that Harvest Box should export their snacks products in the Malaysian market. The weighted index has been able to provide detailed understanding regarding the attractiveness of Malaysian market in the context of exporting the snacks products. It has been also identified that although the Philippines is involved with Australia in a robust trade relation, the economic, political as well as business environment of Malaysia is much more attractive in comparison with Philippines market.
References:
Chao, Y., (2015). The Philippines’ Strategic shift of South China Sea and its American factors Around the US-Philippines Enhanced Defense Cooperation Agreement.Around Southeast Asia, 6, p.008.
Dressler, W., de Koning, J., Montefrio, M. &Firn, J., (2016).Land sharing not sparing in the “green economy”: The role of livelihood bricolage in conservation and development in the Philippines.Geoforum, 76, pp.75-89.
Economist Intelligence Unit. (2017). Malaysia and Philippines: Selected series 2012 to 2022 [Data file]. Retrieved from EIU Country Data, https://eiu-bvdep-com./version-2016811/cgi//template.dll?product=101&user=ipaddress&dummy_forcinglogininisapi=1 [Accessed on: 2-5-2017]
Hampel-Milagrosa, A., Loewe, M., & Reeg, C. (2015). The entrepreneur makes a difference: Evidence on MSE upgrading factors from Egypt, India, and the Philippines. World Development, 66, 118-130.
Harvest-box.com.au(2017) About us Retrieved from: https:// harvest-box.com.au/about us[Accessed on: 2-5-2017]
Mahmood, R., &Hanafi, N. (2013). Entrepreneurial orientation and business performance of women-owned small and medium enterprises in malaysia: competitive advantage as a mediator. International Journal of Business and Social Science, 4(1).
Meiners, R. E., Ringleb, A. H., & Edwards, F. L. (2014). The legal environment of business.Cengage Lea
Mendoza, R.U. &Olfindo, R., (2016). Politics and Conditional Cash Transfer Programs: Lessons from the Philippines.
Ngeow, C.B., Ling, T.S. &Fan, P.S., (2014). Pursuing Chinese Studies Amidst Identity Politics in Malaysia. East Asia, 31(2), pp.103-122.
Raquiza, A., (2013). State structure, policy formation, and economic development in Southeast Asia: The political economy of Thailand and the Philippines (Vol. 108). Routledge.
Segawa, N., (2013). Ethnic politics in Malaysia: Prospects for national integration. Nationalism and Ethnic Politics, 19(2), pp.210-232.
Singh, H., &Mahmood, R. (2014). Manufacturing strategy and export performance of small and medium enterprises in Malaysia: moderating role of external environment. International Journal of Business and Commerce, 3(5), 37-52.
Stauth, G., (2015). Politics and cultures of Islamization in Southeast Asia: Indonesia and Malaysia in the Nineteen-nineties. transcriptVerlag.
Tomsa, D., (2013). Party politics in Southeast Asia: clientelism and electoral competition in Indonesia, Thailand and the Philippines (Vol. 55). Routledge.
Yasmeen, K. &Viswanathan, K., (2016). Entry Mode of Firms in an Emerging Economy: Evidence from Malaysia. International Journal of Economics and Financial Issues, 6(2).
Yigitcanlar, T. &Sarimin, M., (2015). Multimedia Super Corridor, Malaysia: knowledge-based urban development lessons from an emerging economy. VINE, 45(1), pp.126-147.
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