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Question:

Discuss about the Market Situational Analysis ?
 
 

Answer :

Introduction

The report would essentially focus on the market trends for vegetable and flower sector in Malaysia along the period ranging from 2012 to 2016. Market trends for vegetable and flower sector would be analyzed based on conducting demand and supply analysis for the respective products. Further, a PEST Analysis would be conducted for both the vegetable and flower industry of Malaysia. Finally, the level of market competition inside the vegetable and flower sector would also be analyzed in the report.

Market Trend for the Vegetable Sector

An estimate carried out during 2013 reflects that the Department of Agriculture (DOA) in Malaysia stated that around 89 farms were operating in the region. The total number of farms occupied a total area of 1634 hectare area. Further estimates carried out during 2016 reflect that the level of organic producers generating organic vegetable products still accounts for a small percentage. The main suppliers of organic vegetable products in Malaysia are based along the Cameron Highlands. The development of large scale organic retailers along with other specialty shops accounts for the fragmentation of the supply of organic vegetable products in the region (Somasundram et al., 2016). Further, estimates highlight that around 70 percent of the organic vegetable products are distributed and supplied to the consumers through the incorporation of food stores and other supermarket chains specializing on the sales of organic foods. Other significant supply and distribution arms of organic vegetable products are brick-and-mortar retail shops, firms involved in making home deliveries and also wet markets. Despite the above positive outlook concerning the distribution potential of organic vegetable products in Malaysia it is inferred that the supply chain potential still fails in adequately meeting the demand for such. Apart from inconsistency reflected in the supply of organic vegetable products the consumers also face problems associated with lack of food variety. The above fact requires Malaysia to increasingly depend on foreign countries for imported products to meet consumer demand (Somasundram et al., 2016).

Demand of consumers regarding organic vegetable products in Malaysia also is observed to be significantly affected by the existence of high price structures for organic vegetable products as compared to other traditional products. Price differences between organic and traditional vegetable products are observed to range from 100 to 300 percent thereby making it quite difficult for the consumers to procure such organic products. The increased prices are generally associated with increasing production costs and also rise in labor costs. Despite such price increases the demand for organic vegetable products is observed to sustainably increase along the global scale. Consumers also fail to trust the ‘organic’ label attached to the organic vegetable products owing to which the demand for such products gets affected (Suhaimee et al., 2016).

Numbers of farms that have received the organic certification from the Malaysian government are observed to increase from 21 during 2012 to 23 during 2014. Till 9th June 2015, the numbers of farms received organic certification amounts to 9. The same is reflected in the following illustration.

 

Market Trend for the Flower Sector

The flower supplies are mostly generated by the Cameron Highlands based in Perak. Potential supplies of flowers are gained from local boutiques and wholesale firms that focus on meeting the demand for flowers of the regional consumers. The wholesalers also reflect that the demand for flowers in Malaysia have increased along the period ranging from 2012 to 2014 (Lee, 2014). The increase in the level of prices for fresh flower boutiques during 2014 required the consumers to shift their interests from fresh to plastic flower products and other items like teddy bears to gift to their valentine. The double increase in prices for the fresh flower products required the consumers to procure plastic flowers that range from RM 30 to RM 400 (Kili, 2014).

Political Impacts on Vegetable Sector

During 2011, the Malaysian government brought about new regulations and enforcement standards regarding the conducting of labeling and packaging activities for vegetable and fruit products. Further, the Health Ministry of Malaysia also directed the producers and sellers of vegetable and other fruit products to refrain from producing and marketing Genetically Modified Organism (GMO) based food products. Thus, only non-GMO and GMO Free labeling are considered to be acceptable by the Malaysian government. No type of modern biotechnology is allowed for the generation of vegetable products (Pin, 2011).

Economic Impacts on Vegetable Sector

The Malaysian government is strongly focusing on developing the agricultural sector through the incorporation of effective technologies and models that would contribute in the generation of effective quantity and quality of vegetable and fruit products. The focus on vegetable production is refocused by the Malaysian government owing to employment of large number of people. Large scale farms for development of fruits and vegetables are conceptualized and jointly planned by the Ministry of Regional and Rural Development and also other private sector firms. The Ministry is focusing on providing needed financial support for procurement of effective agricultural infrastructures and land resources. The same would actively contribute in fostering growth of premium quality fruits and vegetables. The government is also focusing to encouraging and attracting potential youths to work in the vegetable sector (Jala, 2013). The vegetable production on a state basis in Malaysia during 2012 is reflected in the following illustration.

During 2013, the agricultural sector contributed in around 23 percent of the total earnings associated with export of crops and vegetables and also around 7.2 percent of the country’s GDP (Ng, 2016).

 

Social Impacts on Vegetable Sector

The vegetable farming sector in Malaysia acts as a potential source of employment in the region. During 2016, the vegetable farming activity contributed in generating employment to around 1.6 million people. It is estimated that small farming communities in Malaysia contribute in meeting around 80 percent of the agricultural food demand by consumers located in developing economies. The above estimates clearly reflect that vegetable production and farming activities in Malaysia rightly help in meeting the food demands and economic development of the rural masses. The development of information technology resources and Smartphones also encourage the vegetable farmers in sharing their knowledge and experiences with other farming groups for enabling production of rich quality food crops (Ng, 2016).

Technological Impacts on Vegetable Sector

Different types of technologies like aeroponics, aquaponics, fertigation, hydroponics, vertical farming and rooftop are being used in Malaysia for the development of vegetable and other crops. The use of aeroponics is carried out for development of vegetables and crops in air without involving the use of soil. Techniques like aquaponics, fertigation and hydroponics ideally contribute in the generation of nutrients directly to the plants’ roots such that the same helps in reducing the emergence of diseases in the roots. In the rooftop approach, abandoned spaces along roofs are used for the cultivation of food crops like tomatoes and chilies. Further, the vertical farming technique is also used by farmers in Malaysia for growing vegetables in a vertical fashion. The same helps in reducing the use of space for farming (Muhammad & Rabu, 2015).

Political Impacts on Flower Sector

The National Agriculture Policy and the Seventh Malaysia Plan have together identified the cut flowers as a priority category crop that contributes in enhancing the revenue earning potential of its producers. The cut flowers are grown in adequate potential in Malaysia to meet both domestic and international demands. The policy undertaken by the government potentially focuses on enhancing the flower production relating to both the lowland and also the highland varieties. It also focuses on sustaining the supply of effective quality of planting materials. Similarly, government policies are also introduced for enhancing the research and development facilities for developing and enhancing flower varieties, reducing cost related to production technology and also in post handling of harvested products. Policies are also generated for enhancing export of cut flowers along several international markets (Jong et al., 2016).

 

Economic Impacts on Flower Sector

The Floricultural Industry in Malaysia recorded a growth by 23.3 percent within the period ranging from 2011 to 2015. In value terms the floriculture industry recorded a growth from $104.25 million to around $128.5 million within the stated period. Further, the exports made in by the floriculture industry is estimated to reach around 108 metric tons during the 2012 period but countered a decline during 2014. Malaysia tends to export its horticulture products to different economies like Japan, Australia and also in other Asian markets like Hong Kong (Masdek & Halim, 2016).

Social Impacts on Flower Sector

Consumer and social awareness is enhanced by the floriculture industry in Malaysia through encouraging the flower producers to participate in fests both along the domestic and international markets. The Malaysia Fest is an international fest that is held in Sydney that attracts large number of potential visitors and customers interested in procuring horticulture products. Demonstrations are made both of cut flowers and also of foliages for attracting the interests of the consumers to Malaysian flowers. Outcome of events like the Malaysia Fest contributed in the distribution of large number of Orchid samples and also by customers making query of different varieties of Malaysian orchids (Kementerian Pertanian & Industri Asas Tani Malaysia, 2011). 

Technological Impacts on Flower Sector

Different types of technologies like the collection of germplasm, focusing on production of new varieties of flowers, hybridization of orchids among other techniques like cyclic night lighting and generation of modified atmosphere for packing purposes are being continually developed and incorporated research and development wings in Floriculture sectors (FFTC Agricultural Policy Platform , 2016).

Competition in Vegetable Sector

The competition in the vegetable sector is mostly associated with the small and large scale agricultural farms. The large agricultural hectares focusing on vegetation production range from 2000 to 10,000 hectares. These large scale farming units are generally encompassed by large estate firms. The large agricultural farms focusing on vegetable production thus are amenable to gain the advantage of potential agricultural resources, infrastructures and also needed technological support for helping in the production of prime quality vegetables in significant quantities. Further, the large agricultural estates focusing on generation of effective vegetable products gain the benefits of government land schemes. On the other hand, the small scale holdings are observed to range from around 1-2 hectares only and are generally managed by small household groups and are essentially constituted by part-time workers. Further, the large scale agricultural estates are also encompassed by foreign staffs that contribute in the pooling of skills and needed knowledge resources for development of right quality of vegetable products. However, the staffs constituting the small scale sectors are generally provided by dealers that procure vegetable products from the small scale firms or units (Barlow, 2012).

Competition in Flower Sector

The flower sector in Malaysia earns potential competition from both regional and international players operating in the floricultural industry around the world. Significant competitors in the Malaysian floricultural industry are highlighted as the Floriculturist Association based in Cameron Highlands and also the Commercial Orchid Growers. These associations in Malaysia generally market their products in an individual fashion and not in a collective manner. Temperate type of flower producers in Malaysia are observed to have grouped in a collective fashion to essentially constitute trading companies that counter foreign competition generated by importers in the flower production and marketing (Jong et al., 2016).

 

Conclusions

The analysis of the market trend for the vegetable and flower industry reflects that the demands for the products are increasingly affected by rapid price increases pertaining to the organic vegetable products and fresh flowers respectively. The supply trend however reflects that both vegetables and flowers are generated in abundance owing to the existence of both regional players and also flow of imported products. The PEST Analysis for both the vegetables and flower industry based in Malaysia reflect positive outcomes. In terms of competition the vegetable sector in Malaysia reflect intense competition between large and small players while in the flower sector the competition is based between individual traders and trading associations.

 

References

Barlow, C., 2012. Agriculture in Malaysia’s economic and social transformation. [Online] Available at: https://www.newmandala.org/agriculture-in-malaysias-economic-and-social-transformation/ [Accessed 10 March 2017].

FFTC Agricultural Policy Platform , 2016. Malaysian Floriculture Industry Development Policy. [Online] Available at: https://ap.fftc.agnet.org/ap_db.php?id=679 [Accessed 10 March 2017].

Jala, I., 2013. Agriculture is a sector that is still important to Malaysia's economy. [Online] Available at: https://www.thestar.com.my/business/business-news/2013/09/30/agriculture-is-a-sector-that-is-still-important-to-malaysias-economy/ [Accessed 10 March 2017].

Jong, L.H., Saad, M.R.M. & Hamir, N.A., 2016. CUT FLOWER PRODUCTION IN MALAYSIA. [Online] Available at: https://www.fao.org/docrep/005/ac452e/ac452e06.htm [Accessed 10 March 2017].

Kementerian Pertanian & Industri Asas Tani Malaysia, 2011. Promotion of Malaysian Cut Flowers at Malaysia Fest 2011. [Online] Available at: https://www.moa.gov.my/c/document_library/get_file?uuid=a2ce5a4a-036c-47ee-a92b-a98cdc364575&groupId=41803 [Accessed 10 March 2017].

Kili, K.A., 2014. Demand for real flowers withers as prices soar. [Online] Available at: https://news.asiaone.com/news/malaysia/demand-real-flowers-withers-prices-soar [Accessed 10 March 2017].

Lee, J., 2014. Bulk suppliers of flowers also seeing upside in retail trade. [Online] Available at: https://www.thestar.com.my/business/sme/2014/01/25/wholesaling-of-blooms-flourishing-bulk-suppliers-of-flowers-also-seeing-upside-in-retail-trade/ [Accessed 10 March 2017].

Masdek, N.R.N.M. & Halim, N.A., 2016. Malaysian Floriculture Industry Development Policy. [Online] Available at: https://ap.fftc.agnet.org/ap_db.php?id=679&print=1 [Accessed 10 March 2017].

Muhammad, R.M. & Rabu, M.R., 2015. The Potential of Urban Farming Technology in Malaysia: Policy Intervention. [Online] Available at: https://ap.fftc.agnet.org/ap_db.php?id=534&print=1 [Accessed 10 March 2017].

Ng, C., 2016. What it means to be a farming smallholder in Malaysia. UTAR AGRICULTURE SCIENCE JOURNAL, 2(1), pp.40-48.

Pin, L.L., 2011. Food and Agricultural Import Regulations and Standards-Narrative. United States : GAIN.

Somasundram, C., Razali, Z. & Santhirasegaram, V., 2016. A Review on Organic Food Production in Malaysia. Horticulturae, 2(12), pp.1-5.

Suhaimee, S., Ibrahim, I.Z. & Wahab, M.A.M.A., 2016. Organic Agriculture in Malaysia. [Online] Available at: https://ap.fftc.agnet.org/ap_db.php?id=579&print=1 [Accessed 10 March 2017].

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