The organizations in the developed countries are facing quite tough competitions from the local and other global companies in the market as a consequence of globalization. Due to this reason most of the companies decide to expand their business globally and enter the international market. The international market expansion needs to be done with a careful consideration of several significant factors such as the socio economic status of the consumer base and cultural acceptance of the service (Wild, Wild and Han 2014). The internationalized approach of any business primarily results from the storing desire of building a business in a different market quickly and the learning about a new culture and their market, although it comes with a factor of maximizing the risk in business. Over the past decade the companies from the developed countries have expanded their business in different countries. As the retail industry has many promising scopes in the market of Malaysia, several international companies are trying to expand their business in this market. This opportunity will get them to exploit several new prospects and build a world class business to give their rivals a good run. Before entering any market it is significant for any company to critically evaluate the market and the trends of the consumers (Cavusgil et al. 2014). If the Australian poultry food producer Ingham’s Enterprise wishes to enter the retail market in Malaysia with their frozen poultry and turkey products, it needs to critically examine the market trends before entering the market. The company is planning to enter the market with their frozen food products, where they can face the most challenge as there might be several cultural aspects which can have huge impact on the business. This essay will try to critically evaluate the retail industry trend, especially the food habits in Malaysia and examine the macro environmental factors to assess how the company should proceed in the new market in future with their frozen food products.
Ingham’s Enterprises, which is popularly known as Inghams, is a supplier of the poultry goods. The company has claimed to be the biggest producer of the turkey and chicken products in Australia. There are around nine thousand employees in approximately hundred locations in both New Zealand and Australia. Due to the rising competitions in the domestic market, the company is now planning to move to the international market. In Malaysia the company plans to enter the retail sector with their food services both in offline stores and online services (Hood and Birkinshaw 2016). Due to the rising competition in the market the company has a lower turnover in last few years. Therefore, the management of the company decided to enter the international market this year, and the rising retail market of Malaysia seems to be great for this project; however the frozen foods may face several challenges because of the Muslim population and their religious aspect of consuming only halal products. This is not only limited in the chicken products rather is applicable for other frozen food products as well.
The frozen food products of Ingham’s Enterprise can be sold through the retail outlets in Malaysia. Therefore the company needs to have a detailed review on the retail sector as well as the competitors in the online and offline selling of the frozen goods. The frozen food sector of Malaysia experiences an unnatural development in the past few years. The average growth rate of the Malaysian food industry had increased by 2% in the year 2015 and 4% in 2016 (Chamhuri and Batt 2013). According to several reports and market researches, the frozen food market will get revenue of around $306 billion by the year 2020, which shows a CAGR of 4.1% within 2020 (Aliyu et al. 2016). The prepared meal sector will encompass the highest sales valuing around $112.7 billion by 2020. Researches also show that the Asia Pacific region, will account for 35% global sale of frozen good sales by 2020 (Chamhuri and Batt 2013). It was shown in the reports that the retail market in these sectors will grow more in the coming years, as there will be a huge increase in the adoption of the semi cooked and cooked food products, desserts and bakery products. The sector has also experienced a growth rate over 2016 and 2017 because of introducing the Goods and Services tax that the Government had introduced in 2015 with the external headwinds that will weigh up the domestic demand (Warner 2014). It is expected that the newly implemented policies will result in a constructive market dynamics and healthy income development over the years.
Malaysia is a country with average upper middle class income. The food industry had continued to maintain its pace with being driven by the social and economic developments and the growth of the population. The primary factors of the growth of the cooked and semi cooked food sector are the rising population, growth of the youth section of the society, changing the trends of the consumers, also the increasing purchasing power and the penetration of the international brands in the market. Several frozen food suppliers are entering the Malaysian market because of the constrained growth rate of the industry, just like Ingham’s Enterprise. The Malaysian food market had done their business of around $15 billion in 2012, where around $9 billion food items had been imported (Ali et al. 2015). The entire food industry is driven by the increasing net worth of individuals and the disposable income of the population. The meat market of Malaysia had become stronger after the increasing Muslim population in the country. During the time 2016-2020 most of the market researchers have forecasted that there will be a steady increase at the average rate of 8.4% per year which will finally reach the figure of $25 billion.
For the last few years, the frozen food products of Malaysia have developed in a prominent way due to the entry of the overseas franchises in the market. The developing opportunities of the emerging foreign franchises in Asia had lead them to the rapidly spawn the food service industry throughout Malaysia (Ghasemi et al. 2015). In Australia, Ingham’s Enterprise is one of the largest suppliers of poultry and turkey products that control its business over all the states of Australia and New Zealand. The consumer’s value proposition is the entire bundle of the pre perceived benefits of the consumers that are received from purchasing the products and services that is relative to the paid price (Nassirtoussi et al. 2014). It is important to recognize the exact voice of the consumers in the industry so that the new foreign companies can identify the market trend.
The food service sector has maintained a constructive performance rate in 2016 despite alleviating the economic conditions during last two years. This trend has reduced the trend of spending of the lower income group however the higher income consumers has appeared to be unaffected with the phenomenon as many of them have continued purchasing the ready to cook products. As expected, most of the major retailers have speed up the expansion of their new outlets across the country and several foreign retails started coming in (Ho 2017). However there are many companies which are quite aggressive with their marketing strategies for stimulating the customer demand. As food is a primary necessity, most of the governments make efforts to make the business in the food industry easier. The market of Malaysia has also experienced purchasing through internet that has been a significant development in the market scenario. The consumers who are living in the rural areas could improve their daily life style through the internet retailing because most of the stores are far away from their houses. As the internet purchasing of food has seemed to be more convenient for the rural and urban both consumers, a huge numbers of consumers have switched to purchasing g products via their smart phones and computers. The entry of more global manufacturers in the frozen food sector in Malaysia has used aggressive advertizing campaigns which have been aired in the social media and television and other media. These advertisements have initiated the market to be highly competitive in Malaysia. The increasing urbanization in Malaysia has boosted the frozen food industry further and the consumer base has been developing in the urge of trying out new kinds of food products from the other parts of the world (Chamhuri and Batt 2013). In the last few years, Malaysia has witnessed a noteworthy growth in the sales of frozen food products which have grew around 2% in the sales of the processed chilled food items and dried food items. However, there are several domestic food processing companies in Malaysia. Even if most of the Malaysian companies are small or medium sized, there are big ones as well like F&N, Yeo Hiap Seng, and Nestle. Mostly Malaysia is seen to import most of the frozen food products than it has exported due to the shortage of raw materials, research and insufficient development in the technology. Another issue that comes in front is the influence of younger generation on the consumption of the frozen food products. It seems that they are most inclined towards the processed convenient food or meals, which, in fact, considered being unhealthy by the old population in the country. It can be seen in most of the Malaysian households that cereals are gradually replacing the conventional bread and cakes which indicates the fast changing food habits of the population. However, fresh food products are always preferred but the existence of fridges and microwaves have encouraged the usage of the frozen and pre cooked products with the women working in their respective offices. Therefore, it can be said that the processed and frozen food industry has reached its matured phase in Malaysia that indicates a healthy growth in the sales. However, it is also possible to achieve more sales growth with the launch of more global brands in the market. In the 1990s several global retails entered the Malaysian market with their food products such as Tesco, Jusco, and Dairy Farm International. Most of the supermarket chains in Malaysia sell the imported frozen foods.
Macro environmental factors
There are several factors that play crucial role in the development of any sector of a country, especially for trading purposes. Macro environmental factors are those which influence the performance, strategies and decision making of the organizations in an industry. It comprises of political, economic, socio cultural, technological, environmental and legal factors. In the next segment, this essay will evaluate and examine the macro environmental factors affecting the retail industry of Malaysia as Ingham’s Enterprise is about to enter the market, therefore it is necessary to examine the risk factors along with the several others.
The political risks are going higher in Malaysia each day. After its independence around fifty nine years ago, the country has been dominated by the same ruling party. This alliance had brought several political parties together that represent different interest groups or races across Malaysia. However, over the past years, the opposition voices are growing louder leading to the growing political risks in the trading scenario. For the last few years, the prime minister has been much pressurized for stepping down and crack downs are quite frequent on the civil society. As the political risk and tension are increasing in the country, it has a huge impact on the market confidence of the stability of the government (Najib Razali et al. 2014). However, several market analysts expressed the view that there were always growing political risks in the Malaysian business scenario, but the market has the tendency of pricing it ahead. In addition to that, the press freedom is heavily restricted and regulated in Malaysia. At the same time, it can also be said that if the Malaysian business market is compared to the other Asian countries, the political risks are less and it seems comparatively stable than the others. The ASEAN Australian Free Trade Agreement that has been implemented in 200, had reduced the importing tariff restriction on the products, therefore it has reduced the food tariffs as well (Jeston and Nelis 2014). The Malaysian Government has stipulated several restrictions over the labeling and packaging of frozen foods and they have maintained strict instructions in accordance with the religious sentiments that control the import sector.
Since Malaysia is one of the largest exporters of oil in the Asia pacific region, the global fall of oil prices have contributed to the passive growth of the country. The GDP of Malaysia was rising until the fall of the global oil prices and it in reality contributed in having a lower growth than the expected ones. If looked at the statistical data of the average compound annual growth rate, it was around 7.1% in the time period of 2005 to 2014, which is most importantly higher than the growth rate of the Malaysian economy that is 4.9%. As a result to that, the SME contribution became 35.9% in 2014, compared to 29.6% in 2005 (Adnan, Nordin and Rahman 2017). The SME Master Plan was launched in 2012, for monitoring the development of the industry as the country has aimed to become one of the high income countries by the year 2020. It has also been reported that the country has taken means in diversifying the construction, tourism and technology sectors, which in fact, can be profitable for the retail sector as tourism attracts several potential buyers (Adnan, Nordin and Rahman 2017). However, the continuous growth had been hampered by the shortage of labor and the dependence on the foreign workers. The rising costs of the products also contribute to it. These factors should not be overlooked by an overseas company before entering the market.
Malaysia has always been known to be a multi-lingual, multi-religious and a multi- racial country. Like several other eastern societies, the older generations hold the conventional family values strongly while the younger generations are seen to be more accustomed with the western culture and values. The social construct of Malaysia is mostly dominated by the Malays, who are the largest ethnic group in the country. The rest of the population is a combination of Indian, Chinese, native Bumiputras, and other migrant groups who have been settled in the country for hundreds of years. Malaysia has a sense of accepting the incomers in the country (Adnan, Nordin and Rahman 2017). The multi lingual population of the country is mostly bilingual who speaks both the language the national language Malay and English. A huge section of the population also speaks Tamil, Mandarin and various other dialects. Therefore the business practices in Malaysia put a lot of importance on the politeness and subtlety regarding the language. It is a favorable way to bond with the consumers if the outlets have employees who speak their own language. In addition to that another way can be constructive to bond with the potential consumers through offering drinks and food which is popular way of greeting in Malaysia. As Ingham’s Enterprise is supposed to enter the food service industry in Malaysia, the different choices of food should be evaluated first. The multicultural country has different religion and each religion has own boundaries in their food habit. Therefore the company should examine those factors first.
The statistical data shows that the broadband connectivity is more than 70% in Malaysia; however Malaysia is still lagging behind in terms of internet connectivity. However the government and private sectors both have taken quite significant efforts in creating the IT start ups. Due to these efforts there are several new IT start ups and young entrepreneurs have been trying to make fortune in this genre. As a result to that, eB2C models and e-commerce are flourishing in the country (Goi 2015). There are also strong IT infrastructures that have encouraged the multinational organizations to set their business up in Malaysia. The government has also complemented the budding efforts and invested huge amounts in order to promote the country. These efforts can be very much useful for the food service industry because more technological advancements have made the regular life of Malaysians easier and online shopping has taken the large section of the shopping habits if them. The technological advancements will anyway enhance the business opportunities of Ingham’s Enterprise in Malaysia.
Identification of the cultural factor regarding the food service
Malaysia is one of the most ethnically diverse countries around the world which can be an instance of peaceful staying of different parties. The Malays are the largest ethnic group in the country with a 50.4% population. The rest is the Chinese group with 23.7% population, the Indigenous groups with 11% population, and the Indian communities occupying only the 7.1% of the population. All the ethnic groups are equally distributed across the country while the Malay groups stay on the east coast. The Malays are mostly believers of Islamic religion however they are known to be tolerant, submissive, peace lover and cooperating with the authority (Asiah et al. 2013). The religion also accepts the traditional Malay practices of funerals and the wedding festivals. It has been observed that in Malaysia, the religious belief plays a meaningful role while the consumers decide to purchase the services and products.
Several business relationships have now involved people from diverse cultural heritage. Everyone comes with different assumptions and their hierarchical structures. Therefore, the organizations coming in Malaysia should create an assumption about the strong ethnic network. The Chinese people follow the orthodox Confucianism with a touch of Taoism. This indicates that the Chinese people respect the dignity and prestige values especially in the business environment. They are also like Malays who believe in the traditional setting at the family and allow the elders making crucial decisions. The Chinese customers are generally seen to spend more time in search of superior products and services. As the Chinese population believes in hierarchy among the individuals in their ethnic group, they might take an idea of hierarchy among the services and the products with the changing quality. Therefore it would be easier for the brand to attract Chinese consumers as they may want to try the global brands that Ingham’s Enterprise will offer (Tih and Lee 2013). The Indian consumers are generally seen to have a high value orientation, which makes them the most concerned consumers around the world. Even the biggest international brands have to design the pricing strategy before entering the Indian market. This orientation exists due to their family orientation as well and they are mostly well connected with care, affection and parenting (Chamhuri and Batt 2013). For instance McDonald had faced few cultural issues when they entered this market because they did not follow the interests and cultural beliefs of different ethnic group residing in the country. After a long struggle McDonalds could realize the cultural issue and they went backwards for blending with the local culture.
In conclusion it can be said that before entering the market Ingham’s Enterprise should explore all the cross cultural factors which can be influencing to be accepted in the domestic market. There are several factors that can have a huge impact on the brands, especially for the retailers. For instance, due to the religious aspect, Muslims only consume the halal meat products. Therefore the organizations with food products require selling the halal food products in the market. Therefore the international brands like Ingham’s Enterprise, who do not have much experience of the domestic cultural factors, are recommended to examine and evaluate all the factors before exploring the Malaysian market.
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