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Economic Factors

Discuss about the Developing Scales for Measuring Cultural Values.

Pyalong Pet Foods is one of the major Pet Food Company in Australia, which was established in the year of 1990. It was established by Dr Roberto Inaldo along with his daughter Sandra. She has completed her degree in the business from the Deakin University. The company was initiated in a country town, which is 100 km away from the north side of Melbourne. The area of operation of the company was limited to the backyards of the house of the founder.

The healthy business environment for the Pet Foods in Australia has helped the company to flourish in the new regions and therefore was able to expand. One of the main reasons for the success of the company is due to the strong principles, which has been followed. At present, it is one of the leading cat and dog food suppliers in all the veterinary shops of Australia. 

The company has currently aimed to expand their business in Malaysia and thus it is important for them to collect information related to the business environment of Malaysia

The net profit level of the company was reported to be $5.4 million dollar with the sales record of $37.3 million dollar in the last financial year. Over the last 15 years, the sales of the company have increased by 10.9%.  The company has encountered sales profit of 15%, which is consistent throughout the year. The level of competition of the pet food industry in Australia has increased in the recent time and hence, it is a challenging task for the company to deal with this competitive environment. This report analyses the external market condition, where Pyalong Pet Foods is operating their business, which includes the economic and political condition of the business. The future trends of the market are also discussed which will help the company to prepare for the entire future scenario.

The total value of the GDP of Malaysia is valued to be 1.62 trillion Malaysian dollar on 2015. The nation is one of the largest mixed economic markets of the world and it is the 12thlargest national economy of the world. The GDP of the nation accounts for 1.7% of the total economy of the globe. The nation is also the 19th largest importer and exporter of the world (Sirat 2015). The economy of the nation is dominated by the service sector of the as it comprises 68% of the GDP. According to Mustapha (2016), the growth the economic sector of Malaysia is dependent on services like mining and agriculture as the products of this sector largely got exported in the Asian countries. 

Political Factors

At present, the GDP of Malaysia is higher than major nations of the globe like Germany, UK and France. In terms of per capita income the country of the nation is considered to be 5th largest in the world with $51,000. The high rate of GDP is thus one of the prime factors, which has helped Pyalong Pet Foods to expand their business and improve the profit margin. The pet foods are considered to be one of the luxurious needs for the people. However, with high level of income within the people, it is possible for the people to easily buy of the luxurious products. However, during the time of recession, the rate of unemployment with in the nation increased to 10.8% from the value of 3.4% and the value of GDP has also fallen due to its effect (Mustapha 2016).

The level of consumer price also rose during the time from the third quarter of 2016 to 1.3% as a result the business of various products had suffered due to poor sales record. From the time of 1951 to 2016, the average value of inflation is 5.1%. The occasional high rate of inflation in the economy of Malaysia is one of the biggest challenges, which is faced by the Pyalong Pet Food.

The service trade is one of the significant parts of the economy of the nation. China is the biggest trade partner of Malaysia. Japan is another important trading partner, which exports coal, iron ore and beef. Other trading partners include United States, Korea and Singapore. The free trade agreements, which is passed by the government of Malaysia has helped to encourage the trade pathways.

Malaysia is considered to be one of the most politically stable nations of the world, which is safe place for making all types of business investments. The political system of Malaysia consists of federal parliamentary system, where the parliamentarians are elected using the policies of the federal principles (Barraclough and Morrow 2016). The country operates with the help of the two party political systems, which is selected by the system of voting. The prime minister of the country holds the highest position within the administration followed by the cabinet ministers of individual departments. The basis of the governance is based on the liberal democratic system, which consists of religious tolerance along with the freedom of speech and expression. The constitution of the nation provides the guidelines, which helps to decide the responsibilities of the government.

Legal Factors

The government of Malaysia takes important and implemented policies regarding the business polices. The taxation system has helped business organization like Pyalong Pet Foods to implement the marketing strategy of their choice, which will help them to promote the sales. The trade policies made by the government have also encouraged the companies to improve the trade business. The government of Malaysia has also maintained a healthy relation with the foreign nations like China, Japan and US, which has helped them to facilitate the trade process.

According to Blaikie (2016), one of the major political risks, which is faced by the government of Malaysia is due to the high level of debt. Hence, they may be forced to increase the level of business taxes. This budget, which is passed by the government, may also affect the business environment.

Blaikie (2016), have added that the high level of corruption, within the political system of Malaysia is also one of the reasons for concern, which will affect the business environment of the nation. The high level of corruption within the nation has resulted in low ranking of Malaysia in the international corruption index. Presently, Malaysia ranks 13 in the global ranking for corruption.

The stable political system in Malaysia has resulted in one of the most transparent legal system of the nation. As there is high level of corruption in the country, the government has to implement strict laws, which will help maintain a healthy business environment for companies like Pyalong Pet Foods. According to Ismail (2013), the legal system of Malaysia gives total independence to the judiciary system, which ensures that the fundamental rights of every citizen are protected and all the business organizations can safely implement the marketing policies. The constitution of Malaysia gives equal freedom to both Malaysians and non-Malaysians and therefore, it helps to improve the business relation with other foreign countries. In the federal structure of the government, the power is distributed equally between the government and state.

There are nine legal systems within Malaysia, which helps to improve the federal structure of the nation. The new laws are made by the parliament, and are executed by the executive government organization. It is the duty of the judiciary system to monitor, whether the acts are implemented in a proper manner.


The government of Malaysia has implemented four types of business structure namely sole traders, trust, companies and partnerships. This gives wide range of opportunity for the foreign investors to do their business in Malaysia. The foreign companies need to register using the business laws, which are implemented by the government. In order to obtain a premise for the business, it is important for the companies like Pyalong Pet Foods to make sure that they take the lease of land and also make legal contract with the owners.

Pyalong Pet Foods also need to employ the Workplace Regulation Act 1996 to ensure that rights of the owner and the employees are protected. There is also the Fair Work Act 2009, which helps to ensure that all the employees of the company get the right amount of salary for the labor they are providing. It is the duty of all the employers to ensure that the workers could work in a safe and healthy environment in the workplace (Ismail 2016).

With the favorable business environment, Malaysia is one of the favorite destinations for the foreign investors. The robust economy of the country along with the strategic location is capable enough to attract all the investors from the globe. The foreign investors have been able to utilize the entire infrastructure, which is present in the nation.   

Being one of the resource rich countries, Malaysia is highly dependent on the foreign investments for the last two centuries. With high rate of inflow of the foreign capital the people of Malaysia has enjoyed higher rate of growth. The FDI is considered to be one of the best forms investments as there is a high rate of cash flow within the society and there is also high of commitment from the investors. During the period of 1970s the flow of the foreign investment in Malaysia is regulated by the foreign exchange flow, which is controlled by the policies of the federal government. The policy of the foreign investment was regulated by the government during the time of and in the year of 1975 the government officially launched the formal policy of foreign investment. The government also encouraged the policy of foreign investment, which will help to deal with all the issues related to foreign investment. Agriculture, mining and forestry industry are the major places, where most of the foreign investment in Malaysia takes place. The equity operation is one of the major policies, which encouraged with the foreign flow of cash within Malaysia (Claessens, Ghosh and Mihet 2013).

During the period of 1960s and 1980s there was high level of restrictions within the foreign policy for the business investment, which was made in Malaysia. The restriction added with that of the barriers in the trade, has resulted in the misallocation of the funds, which was invested in the business. The rate of capital productivity dropped by 30% during this period and it lower the rate of economic growth of the country (Edrak et al. 2014).

The high level of protection in the trade policies during the time it has also resulted in economic wave of nationalism, which resulted in the loss of foreign acqucions and loss of jobs within the nations. After the period of 1980, the flow of the foreign investment policy changed significantly, this also improved the rise of the rate of GDP. During the period of 1980-2006, the level of foreign investment rose from 30% to 150%. In the GDP of Malaysia, the contribution of the foreign direct investment had grown from 15% to 35% (Edrak et al. 2014).

Three of the major nations, which have contributed to most of the foreign cash flow in Malaysia, include US, UK and Japan. As per the report of 2013, these three counties have contributed to nearly 55% of the total foreign investment that is done Malaysia. The flow of foreign cash from these countries increased significantly during the period of 1980 to 2013.

On the other hand, the investment made by the Malaysian companies in the foreign countries includes include New Zealand, UK and US. These are top three destinations for foreign investment made by Malaysia. The outflow of the foreign cash, which is made by Malaysia rose significantly during the time of 1980 to 2013 from 43.4% to 49.5%. In the year of 1983 UK accounted for just 3.9% of the total foreign cash outflow from Malaysia. By 1998, the amount rose to 20%, which was contributed by the high rate of the foreign policies implemented by the government of Malaysia (Goh and Tham 2016).


It is duty of the Malaysian government, to ensure that outflow and the inflow of the foreign cash is monitored, which will ensure that there is no mal-practice, which is being implemented by the foreign investors. The government body regulates the national security, taxation policies and other legal aspects related to the business, which is needed to access the information related to that of the foreign cash and investments. It is also the duty of the foreign investors to ensure that they access the information related to that of foreign policies of Malaysia. The Banking Act 1959 and the Financial Sector Act 1998 was implemented to encourage the foreign investments in the banking and financial sectors. There is also the Airports Act 1996, which encouraged the foreign ownership within the Airports of Malaysia. The shipping regulation act of 1981 has helped the foreign companies to regulate the ship operation (Nordin and Ghani 2015).

The government of Malaysia also allows the export market development grants in order to ensure that the all the Malaysian companies can invest and perform trade with all the other nations. The Malaysian business organizations, which have individual or partnership in a company are all eligible for the export grants. However, this grant is mainly for the small and the medium scale industries and hence, the companies having income level of more than $50 million are not eligible for this grant (Leong 2014). For a company like the Pyalong Pet Foods the grant will help to ensure that they are able to expand their business in new countries of the world. Moreover, the high level of investment that is received by Malaysia will also allow the company to expand by attracting foreign investors. Under the policy of the Export Market Development Grant, the Pyalong Pet Foods can also access the right to receive more foreign cash and thereby expand the sales market in the new nations of the world. All the products made in Malaysia are eligible for this grant as it helps to improve the record of sales and also improve the financial status of the company.

On the other hand with high rate of foreign cash inflow within Malaysia, the small and the medium scale companies within the nations has to face tough level of competition from the cheaper foreign products, which is being sold within the consumer markets. The major international rivals from the pet food companies have posed tough competition. Pyalong Pet Foods need to implement effective marketing strategy to make sure that they are able to gain competitive advantage over the rivals. As the company is planning to expand their business in Malaysia, it is essential for them to collect necessary information related to the foreign investment, which is made in Malaysia.

It is essential for Pyalong Pet Foods to understand the importance of the financial system to that of Malaysia. The principle system of banking in Malaysia is aimed to promote the business environment and also promote foreign investments. There are three main types of banks, which are available in Malaysia. The central bank, which comprises of the monetary institution, non-monetary institutions that includes all the insurance and the credit card companies and foreign banks that has its base on the foreign countries, are the three major types of banking system in Malaysia (Oladimeji, Aziz and Khairi 2016).

To determine the market for pet food in Malaysia and expand the business to West Malaysia, it is necessary to have an understanding of the key values and traditions of the country. The culture of Malaysia reflects a mixed culture dominated by Malay, Chinese, Indian and Eurasian culture (Shamsul 2016). All are living unified in the country and the mixed Malaysian culture means a positive growth of business for the Pyalong Pet food company.

The culture of Malaysia and Australia can be compared through the hofstede dimension which determines the difference in culture of both countries. In terms of power distance index, the score for Malaysia is high indicating that the country accepts hierarchal order (Geert-hofstede.com 2017).  On the contrary this score is low for Australia which means here superiors are always accessible. As Malaysia is a collectivist society, its  individualism score is 26 which means collectivist culture dominates countries laws and regulations and Australia has a highly individualist culture (Jano et al. 2015). The masculinity score for Malaysia is 50 while the same score for Australia is 61. It reflects that Malaysia has a high quality of life and caring culture, while Australian resolves conflicts on individual level. Malaysia has low long-term orientation due to normative culture and the same is for Australia too. Apart from this, Malaysia has a culture of indulgence which might favor the expansion of Pyalong’s Company business (Abdollah et al. 2016).

The knowledge of linguistic affinity of the country is also important and Malay is the main language spoken in the country. As this is an Australian language spoken mostly in Philippines, Thailand and Island in Australia, grasping this language might be easier for Pyalong Pet Company’s staff. However, English is the main language of business and it has lead to rapid industrialization of business. Secondary to linguistic knowledge is the knowledge of the business communication style in Malaysia. To keep up with the interest of business agents in Malaysia, the main business communication style in Malaysia is related to maintaining politeness and diplomacy during interaction. The manager of Pyalong needs to interact in a way that develops a sense of harmony with new contacts in the country (Bakar et al. 2014).

Conclusion

It is thus important for Pyalong Pet Foods to use the necessary information relevant to the business environment of Malaysia to ensure that they are able to make significant profit from the nation.

It is important that they use the policies of foreign investment of Malaysia to ensure that no unfair means are used in the business polices. This will also help them to gain competitive advantage over other pet food companies of Malaysia. Moreover, the stable political and economic condition along with the business friendly policies of the government will also provide good opportunity for the business to expand in the nation. 

Reference

Abdollah, I.I., Abdullah, F. and Voon, B.H., 2016. Developing Scales for Measuring Cultural Values in the Context of Consumer Research. Procedia-Social and Behavioral Sciences, 224, pp.421-428.

Bakar, H.A., Walters, T. and Halim, H., 2014. Measuring communication styles in the Malaysian workplace: Instrument development and validation. Journal of Intercultural Communication Research, 43(2), pp.87-112.

Barraclough, S. and Morrow, M., 2016. Tobacco and the Malays: ethnicity, health and the political economy of tobacco in Malaysia. Ethnicity & Health, pp.1-15.

Blaikie, P., 2016. The political economy of soil erosion in developing countries. Routledge.

Claessens, S., Ghosh, S.R. and Mihet, R., 2013. Macro-prudential policies to mitigate financial system vulnerabilities. Journal of International Money and Finance, 39, pp.153-185.

Edrak, B.B., Gharleghi, B., Fah, B.C.Y. and Tan, M., 2014. Critical Success Factors Affecting Malaysia'SMEs through Inward FDI: Case of Service Sector. Asian Social Science, 10(16), p.131.

Goh, S.K. and Tham, S.Y., 2013. Trade linkages of inward and outward FDI: Evidence from Malaysia. Economic Modelling, 35, pp.224-230.

Ismail, S., 2013. Critical success factors of public private partnership (PPP) implementation in Malaysia. Asia-Pacific Journal of Business Administration, 5(1), pp.6-19.

Jano, Z., Noor, S.M., Ahmad, R., Saad, M.S.M., Saadan, R., Bokhari, M. and Abdullah, A.N., 2015. Website Usability and Cultural Dimensions in Malaysian and Australian Universities. Asian Social Science, 11(9), p.1.

Leong, Y.S., 2014. Relationship between incoterms choices, selection factors and export performance: A case of manufacturing companies in Malaysia (Doctoral dissertation, Universiti Utara Malaysia).

Mustapha, R., 2016. Transforming Education toward K-Economy in Malaysia. Educare, 6(1).

Nordin, S. and Ghani, G.B.M., 2015. Trade Liberalization and Foreign Direct Investment in Malaysia. Information Management and Business Review, 7(6), pp.11-23.

Oladimeji, M.A., Aziz, M.R.A. and Khairi, K.F., 2016. Regulatory Requirements for Establishment and Operation of Islamic Banking System: A Proposed Model with Primary Requirements. Journal of Islamic Legal Studies, 2(1), pp.40-54.

Shamsul, A.B., 2016. Review: Museums, History, and Culture in Malaysia by Abu Talib Ahmad.

Sirat, M., 2015. The Humanities, General Education and the Push Towards Knowledge-based Economy in Malaysia, 9(2), pp.377-396.

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