Discuss about the Understand And Analyze The Strategic Management Approach Taken By An Australian Organisation To The South-East Asian Country.
Globalization has made trade and commerce in between two countries easy and hassle free. Companies want to improve their market by reaching out to potential customer beyond the geographical horizon of the home country on the other hand, governments of the countries want to improve their exports and in turn uplift the economic condition of the country. Thus, it can be said that globalization has provided the opportunity both for business organisations as well as countries to grow and expand. International marketing is the process by which a company can distribute their product or services to another country. The process includes a number of factors that directly impact the failure or success of the strategy for example: pricing strategy, expansion process etc. with technology and lifestyle advancement, companies can easily reach out to a wider target market beyond the geographic boundaries of the country. This assignment follows the purpose of establishing strategies and factors that impact the decisions of an organisation with respect to international marketing. An iconic Australian product has been chosen to conduct the study: Vegemite and the country that is selected is Malaysia.
The organisation is a company that has quickly gained popularity in the Australian market owing to the superior quality of the products that the company offers. The company manufactures hair care products which are completely Australian made. The company boasts of its Australian grown ingredients like botanicals and essential oils. The company is driven by values and principles and assures that their products are free of sulfates or parabens. Also the organisation has gained authorization from PETA making the products free form animal testing. The product line of Mr Simth contains of styling and hair care products which are of high quality organic and vegan brand. In a small period of time the company has gained a lot of prominence in the fashion and beauty industry (Mr-smith.com.au, 2018).
Motto of the company
Style, substance and simplicity
Vision of the company
To create exceptional, Australian made hair care products, meticulously crafted from a selection of Australian botanicals and essential oils (Mr-smith.com.au, 2018).
Product to be marketed:
The range of products are low as the company is fairly new, the most popular product duo that are chosen to market in Malaysia are the shampoo and conditioner duo. Many critics and beauty and hair experts have approved of the quality of the product as well as the effect regular usage of the items have on the hair quality. The packaging is minimalistic and the simplicity of the product along with the positive attributes that are associated with the brand will help the company to expand in the new international market with the product. The products of the company are price in the medium to high range it cannot be deemed to be a luxury item but the company explains that the price strategy is kept in a medium to high level as the ingredients that are used by the company are premium and chemical free (Mr-smith.com.au, 2018).
With the help of Walvoord (1980) model the assignment is going to be studied, this is a framework that provides suggestions for companies to select the foreign markets.
Any business organisation has to analyze the macro environment conditions so that the company can mitigate any unforeseen circumstances as well as recognize the scope of the business. In order to understand the industry and the opportunities in the Malaysian market the PESTEL analysis tool is used. This will help in determining the scope of expansion of the product in the Malaysian market. The country is one of the most geographically blessed countries and the government uses this location as an opportunity for foreign investment and trade. The beauty industry in Malaysian is booming as the people of the country have a high standard of living ensuring that they spent money on hair and skin care.
Political factor: The country enjoys a Federal state with constitutional elective monarchy. There is fair amount of decentralization in the country in 13 states. The political condition in the country is stable and the government looks ahead to improve the economy therefore encouraging trade and commerce in the country. The ruling party has been in the position for the last 25 years making the scenario politically stable and attractive for foreign investors as there are fewer chances of the government falling and the trade policies changing. One of the major drawbacks of the country’s political aspect is the corruption that is prevalent in the country. The country is also featured with strong current account surplus and high foreign reserves making the market attractive for the foreign investors. The company has a well-established legal framework, and the political infrastructure of the company also allows foreign investors facility to market their products in the country. Furthermore: there is Malaysia-Australia Free Trade Agreement (MAFTA) which facilitates business in the country; Malaysia is Australia’s 10th largest trading partner, with two-way trade worth A$19.2 billion in the 2015 calendar year (Dfat.gov.au, 2018).
Following are the major benefits of the agreement:
Economic factors: The country stands as the 4th largest economy in Southeast-Asia making the country one of the most lucrative in terms of investment. The economic condition of the country has been growing and the trend has been on the rising end. Though the country has been going through major ups and downs due to the global market trends but he average rise in the economic growth has been around 7 percent (Dfat.gov.au, 2018). Exports in Malaysian economy contribute to a major chunk of the economy. Furthermore the economic aspects such as inflation rate, exchange rate and taxes are favorable to foreign investors encouraging them to invest and market their products in the country (Thestar.com.my, 2017). The GDP of Malaysia is around 296.54 billion US dollars in 2016. According to the predictions of World Bank the country is going to become one of the high-income countries by 2020. In 2017, Malaysia’s average GNI per capita is estimated to stand at US$9,660 (RM39,407.97), just short of US$2,576 (RM10,508.79) of the defined threshold level (Thestar.com.my, 2017). Therefore it can be concluded that the above aspects of the Malaysian makes it lucrative for the foreign investors.
Social: There is an issue with unemployment in the society that has recently risen in the economy apart from this society is liberal outlook regarding lifestyle and fashion and has secular approaches towards religion. As the per capita income of the people in the country is high and the economy is on the rising trend it can be said that the standard of living among the population is high. Therefore, a product like Mr Smith’s shampoo and conditioner which is on the medium to higher end price will be welcomed by the target market (Khan et al., 2013). The population of the country is also diverse in nature and can be widely segmented as 60 percent Malay, 30 percent Chinese and 10 percent Indian therefore the culture and the traditions in the country is vibrant and diverse in nature (Jomo, 2016). The people like to lead and adapt to new and advanced standard of living therefore this impacts the buying behavior of the people as well. The main consumer of the product or services prevalent in the country is slowly moving to the e-commerce sector owing to the advances in technology and the adaptability of the people (Jomo, 2016). The product has prospects in the country as the people of the country like to pamper themselves with skin care and beauty. The make-up and skin-care product category have the largest market share in the cosmetics and personal care market (Yüksel, 2012).
Technological: The usage and adaptability of technology has improved in the country. There are approximately 20.6 million internet users in the country and the information and communication technology is significant in the industry. The country is expected to generate 6.2 billion in the e-commerce industry. Therefore, it can be said that the country is technologically ahead and has a possibility of improvement in the future as the government also acknowledges the power of technology and has invested in providing the population with connectivity and upgraded technology. The research and development in the country is also backed up by the support of the government and the infrastructure of the country (Lucas & Verry, 2016).
Legal: The legal framework that the country follows is inspired form the constitution of Britain. But the country also follows the religious laws for example the Islamic legal enforcement is applied on the Muslim population of the country. The labour laws in the country are strict and the labour is expensive compared to other Southeast Asian countries. There is a minimum wage cap for the employers below which they cannot pay for the services of an employee (1000 Rm) (Lucas & Verry, 2016). Any foreign investor in the country is expected to know the legal proceedings and follow the law strictly. In case of this product as the company claims to be vegan, organic, and paraben free the company has to be certified with the countries authorizing bodies for the company to make such claims in the country refer to appendix 1 for import duties.
Environmental: The country is impacted with issues in the environmental front like deforestation and pollution this due to infrastructural development and urbanization. According to FAO deforestation rate has escalated by 86% from 1990 to 2005. Despite of having rain forest protection policies the country has suffered adverse effects of the issues mentioned. Borneo in Malaysia has suffered huge deforestation by loggers. The head land of Malaysia experienced mining at the cost of deforestation and pollution (Bekhet, 2013).
One of the major issues in the pollution is air pollution as there are toxic gases from vehicles and industries to escalate the process and it is on a growing trend. The country has been listed 4th in the world for emitting most amounts of green house gases per capita.
Growth prospect
The product that is selected operates in the personal care and cosmetic industry. The market value of the Asia Pacific has increased to more than US$70 billion, which is the second highest market after the Western European market. People of the country are influenced with the help of heavy advertising, marketing and popularity among the international market. Therefore the population is interested in brands like Mr Smith, as it is acclaimed by many critics and is approved by several international magazines and hair care experts (Bekhet & Mugableh, 2013). Competitive strategies are used by the local cosmetics and personal care companies in Malaysia with promotional strategies in sales promotion. The industry in Malaysia is crowded with competition and the trends of the industry are rising. The revenue of the country in the “Personal Care” industry amounts to US$58m in 2018 and is expected to generate an annual growth rate (CAGR 2018-2022) of 9.4% resulting in a market volume of US$83m in 2022 (Statista.com, 2018).
Cultural Acceptance
The products from the company that has been chosen are two basic items which are non-controversial in any form. The Shampoo and conditioner duo of Mr Smith is the star product of the range and internationally several bloggers and magazines have raved about the products. The acceptance of the product in terms of its ingredients is also not a problem as the company assures with authoritative support that the products are organic and vegan. Apart from that it is free of any sulfates or parabens. More and more people are now being aware of the harmful effects of these chemicals thus making the product more attractive in the Malaysian market. Appendix 1 reflects the import duties of the products.
Stage for market development
The company can take the e-commerce route to launch the product as it is evident from the above discussion that the people of the country are tech savvy and has welcomed e-commerce as an important aspect of the buying behavior in the past five years. The company can launch the products with popular e-commerce websites and with the prospects of the business and the sales projection can choose to launch rest of the products in the market. As the price of the item is on the higher end the target market of the company are people who are looking forward to spend a little more than what they are used to in order to avail a premium quality product.
Legal and tax issues
As discussed above as the product is an Australian made item and the company is Australian, they will enjoy certain trade benefits owing to the trade agreements in between the two countries. This will reduce the cost of the product and will be made available to people at any corner of the country.
Competition in the chosen market
For a product in the personal care industry in Malaysia there is intense competition both form the local as well as form the international market. The target markets of the product are people who like to splurge on having a “good hair day”. According to a popular online website that specializes in beauty and personal care, the three biggest competitions in the industry for Mr Smith Shampoo and conditioner are: Mise En Scene, L’Oreal, Nature Republic, MagicBoo. One of the biggest potential competitions in the international market is the Brioego products. Like Mr Smith the company has been praised and recommended by several critics and beauty bloggers. This is an American company and since Malyasia and US ties in trade are lucrative the competition is significant.
Ease of market entry
The market entry is not difficult for an established brand if the perfect way of channelizing and distribution of the product is strategized. Companies have their own strategies to expand their market they either choose to partner with another firm or get in a joint venture, they can either choose to fully expand by themselves or just distribute the product in the new market. Depending on the scale of business and the resource and capability of the company they will choose their strategies of expansion (Statista.com, 2018). The ease of market entry is high as the industry is lucrative and Malaysian market has the right kind of population to enjoy a high end product like Mr Smith. Furthermore, the trade policies in the country are liberal making the Malaysian market even more attractive to the investors. The information available regarding the industry is reliable as there are government documents that show the previous year’s sales and the prospect of the industry. Refer to appendix 2
Sales projections
The Asia-Pacific regions make up the largest share of sale in the beauty and personal care industry. The cosmetic market of this region amounted to approximately 98.5 billion U.S. dollars in 2015 and is forecast to reach around 126.86 billion U.S. dollars by 2020 (Statista.com, 2018). Refer to appendix 3
Cost of entry
The company will undertake the strategy of distribution of the product in the market rather than establishing the brand at once. In order to distribute the product the company will list the Product with some of the popular health and wellness websites of Malaysia. This will also reduce the cost of entry in the market; the company will incur cost in stocking the product and listing it with the e-commerce website.
Probable product acceptance and profit potential
As the product that the company is offering is both ethically produced and is of premium quality therefore there is high probability of the market acceptance. The Malaysian market is keen on using new and improved formulas of organic as well as high end personal care products therefore there is profit potential for the company as well.
Target market analysis
Demographic: the age group that the company is targeting is in between 18-45 and the income group from medium to high. The price of the product is 29 AUD, makes the item on the higher price range.
Geographic: The product is available in Australia and is also available in some parts of US. The expansion in Malaysia will be a gateway to the larger Asian market.
Psychographic: the company is targeting people who enjoy a spa treatment and understand that the price that they are paying is for the ingredients and the chemical free formula.
Behavioral: People should love to take care of themselves and should not compromise with the quality of the personal care products. They must be aware of the international trends and must be tech savvy and updated with the fashion and beauty industry (Weinstein & Cahill, 2014).
The company will undertake the e-commerce route to enter the market it has been discussed that the country has a large number of internet and technology users therefore this will be the most fitting opportunity for the company to enter the market. The websites is where the products will be listed are: LUXOLA, HISHOP and SHINS. These three websites are chosen out of many that specialize in beauty and skin care as these website list a number of international brand and the company will get a good platform due to the popularity of these websites.
Conclusion
It can be concluded form the above discussion that Mr Smith can be easily marketed to the Malaysian Market with the help of the e-commerce platform. Three most popular websites has been chosen to launch the item and with the prospect and profitability of this product the rest of the range will be launched earlier next year.
References
Bekhet, H. A. (2013). Assessing structural changes in the Malaysian economy: I–O approach. Economic Modelling, 30, 126-135.
Bekhet, H. A., & Mugableh, M. I. (2013). Examining the equilibrium relationships between foreign direct investment inflows and employment in manufacturing and services sectors: evidence from Malaysia. Journal of Social and Development Sciences, 4(1), 32-38.
Build.export.gov. (2018). Country Guide: Malaysia Personal Care & Cosmetics Products. build.export.gov. Retrieved 30 April 2018, from https://build.export.gov/build/idcplg?IdcService=DOWNLOAD_PUBLIC…
Dfat.gov.au. (2018). Malaysia-Australia FTA. Dfat.gov.au. Retrieved 30 April 2018, from https://dfat.gov.au/trade/agreements/in-force/mafta/Pages/malaysia-australia-fta.aspx
Jomo, K. S. (2016). Growth and structural change in the Malaysian economy. Springer.
Khan, R. A., Liew, M. S., & Ghazali, Z. B. (2014). Malaysian construction sector and Malaysia vision 2020: Developed nation status. Procedia-social and behavioral sciences, 109, 507-513.
Lucas, R. E., & Verry, D. (2016). Restructuring the Malaysian economy: Development and human resources. Springer.
Mr-smith.com.au. (2018). About Us. mr-smith.com.au. Retrieved 30 April 2018, from https://mr-smith.com.au/about/
Statista.com (2018). Personal Care: Highlights Malaysia. [online] statista.com. Retrieved 30 April 2018, from https://www.statista.com/outlook/254/122/personal-care/malaysia#
Statista.com. (2018). Size of the cosmetic market in Asia-Pacific from 2015 to 2020 (in billion U.S. dollars). statista.com. Retrieved 30 April 2018, from https://www.statista.com/statistics/550547/cosmetic-market-size-asia-pacific/
Thestar.com.my. (2017). World Bank: Malaysia to achieve high-income nation status as early as 2020. thestar.com.my. Retrieved 30 April 2018, from https://www.thestar.com.my/news/nation/2017/12/16/world-bank-malaysia-high-income-status-by-2020/
Yüksel, ?. (2012). Developing a multi-criteria decision making model for PESTEL analysis. International Journal of Business and Management, 7(24), 52.
Weinstein, A., & Cahill, D. J. (2014). Lifestyle market segmentation. Routledge.
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