Executive Summary
The purpose of this report is to critically analyze an export strategy for an International company to Malaysia.
I’m going to assume that the International Company is located in a neighbor country (Australia), “Kangaroo International” an Australian soy product producer. It was chosen for this task, because of Malaysia’s increasing demand for westernized but healthy products.
Table of Contents
1. Introduction
2. Overview of Product
3. Country Study- Malaysia
3.1 Malaysia’s environment
3.1.1 Geography
3.1.2 Demographics
3.1.3 Implications of Malaysia’s national culture
3.1.4 Infrastructure
3.1.5 Technology
3.2 Political/legal forces
3.2.1 Political forces
3.2.2 Legal forces
3.3 Economic and financial environment
3.3.1 Economic overview
3.3.2 Economic performance
3.3.3 Financial performance
3.4 Competitive environment
3.4.1 Intensity of competition
3.4.2 Bargaining power of consumers
3.4.3 Threat of substitute products
3.4.4 Threats of new entrants
4. Marketing Strategy
4.1 Market Based Planning
4.2 Competitive Advantage
4.3 Positioning strategies
5. Market Entry Strategy
6. Marketing Mix
6.1 Product
6.2 Pricing strategies
6.3 Promotion
6.3.1 Contextual Factors affecting promotional campaign
6.3.2 Promotional strategies for Kangaroo International in Malaysia
6.4 Distribution
7. Conclusion
8. References
Appendix A- Hofstedes Cultural Dimensions
Appendix B -Summary of Cultural Differences
Appendix C -SWOT – Analysis
Appendix D – Contextual Factors explained
1. Introduction
The purpose of this report is to outline the strategies necessary for Kangaroo International to successfully export Soy Cheese to the Malaysian market. To achieve this, a thorough analysis of the Malaysian business environment was conducted, identifying the key variables that need to taken into account when modifying the product to suit the Malaysian market. This involved researching the external environmental factors, as well as the Malaysian culture and the specific needs and wants of the target consumers. This provided the foundation for the strategic marketing plan and objectives. This involved creating a marketing mix and market entry strategies that most effectively suited the Malaysian market, while at the same time ensuring the success and profitability of Kangaroo International.
2. Overview of Firm and Product
Kangaroo International is an Australian Soy Food manufacturer. Established in 1987 and is based in Brisbane, Queensland. Most products are certified Halal and Kosher and all of them contain Australian grown organic, non-GM soybeans as the main ingredient. Of Kangaroo International’s vast range of products, Organic Soy Cream Cheese and Soy Cheese were selected for this assignment.
3. Country Study- Malaysia
3.1 Malaysia’s environment
No matter where a company operates, external forces have an indirect impact on the organization. The key influencing factors have therefore to be analyzed before entering a new market.
This country study intends to give an overview of Malaysia. Table 1 is summarizing the main facts.
Table 1 Column1
Malaysia
Land area 330,434 sq. Km
Population 24 million (2004 estimate)
Capital Kuala Lumpur
Type of government Federated parliamentary democracy with constitutional monarch
Head of State Syed Sirajuddin Syed Putra Jamalulai
Prime Minister Datuk Seri Abdullah Ahmad Badawi
Next election By March 2009
Currency used Ringgit (RM
Source: Institute of Southeast Asian Studies, 2005
.
3.1.1 Geography
Malaysia is located just north of the equator, with a hot climate (up to 34°C) and humid conditions between 2 to 4 metres of rain annually (Austrade, 2006). The country is easily accessed by air and sea offering many avenues for distribution of the product throughout the country.
3.1.2 Demographics
Malaysia has a population of 23.37 million according to the 2000 census, with a growth rate of 1.8 percent. The major ethnic group of Malaysia are the Malays and indigenous people (65.1 percent), this group is predominantly of Muslim religion. The other ethnic groups include the Chinese (26 percent) and Indians (7.7 percent) (Austrade, 2006.). Malaysia has five major religions; these include Muslim, by far the most prevalent at 52%, Buddhism (17%), Taoism (8%), Christian (8%) and Hinduism at 8% (Austrade, 2006). The main language spoken is Bahasa Melayu; however English is also widely spoken and accepted in business practices.
3.1.3 Implications of Malaysia’s national culture
An exact definition of culture is difficult to attain, however there are two main characteristics, which have developed over time, one it is learned and secondly it is shared. Culture influences all facets of society, including what behaviors are acceptable and unacceptable within a society. Fletcher (1979) defines culture as the total way of life within a society. Understanding culture is therefore critical to the success of an international organization. The role of marketing to satisfy the needs and wants of potential customers is highly dependant on the way culture conditions these needs and wants, as well as its influence on how marketing messages are received and interpreted. Culture influences all elements of the marketing mix.
One of the most comprehensive studies of the differences between cultures was performed by Hofstede, in which he developed five main dimensions of culture. These included power distance, uncertainty avoidance, individualism verse collectivism, masculine verse feminine and long-term or short-term orientation. Using Hofstedes dimensions, It can be noticed that Malaysia has a very high score in the power distance index, meaning that Malaysian society accepts inequality and secondly in can be noticed that Malaysia is strongly collectivist, defined as placing more emphasis on the welfare of the group and collective achievement. For more information refer to Appendix A
As Malaysia has a complex mixture of non-homogonous ethnic groups and religions, it is critical to determine the target market, in which the product has the greatest competitive advantage as well as potential profitability. As shown in the demographics of Malaysia, the major religion is Muslim at 52%. This has major implications for international firms in Malaysia, as Islamic beliefs have a significant influence on all aspects of a person’s life. The two major aspects marketers have to address in the processed food industry include the requirement of food to be Halal, permitted by Islamic law (Austrade, 2006) and the need for the promotional campaign to be sensitive to religious beliefs. For further information on Malaysia’s culture refer to Appendix B.
3.1.4 Infrastructure
Infrastructure is critical in determining the suitability of expanding a business into a foreign country. Infrastructure refers to all the services and facilities that are vital to the efficient functioning of the economy; these include energy supplies, transport, and communications as well as commercial and financial services. Malaysia has one of the most developed infrastructures in the newly industrialized countries of Asia. The area of communication is pivotal in fostering effective communication with the target market, Malaysia has a made significant gains in this area with 10.9 million people having radios (1999), 10.8 million people owning televisions (1999) as well as 5.7 million people who have access to the internet (2002) and 5 million people owning mobile phones (Malaysian Profile, 2006). This provides the marketer with many types of media in which to reach the target market. Malaysia also offers sufficient transportation facilities, such as highways, railways, 114 airports and efficient seaports in which 95% of Malaysia’s total trade is conducted via the seven international ports (Malaysian Industrial Development Authority, 2006). Malaysia’s infrastructure offers businesses an environment suitable for the successful implementation of international expansion.
3.1.5 Technology
“Technology is still the most dramatic force transforming the international environment”. As ‘science parks’ all over the world develop, Malaysia takes a leading position with the nation’s Kulim Hi-Tech Park which is designed for high technology and R&D companies who want to operate in the Asian-Pacific region (Kulim Technology Park Corporation in Yeoh, 2002). The Kuala Lumpur Stock Exchange (KLSE) offers not only the most advanced technologies, but also a very good infrastructure. In combination with well trained human recourses the KLSE will be consistently efficient, modern and cost-effective (Hashim in Yeoh, 2002). TV, radio, phone lines, internet, although of technical nature are key aspects of infrastructure, as a result technology cannot be separated from infrastructure in modern business. From Malaysia’s overview of infrastructure it can be taken that Malaysia’s government is conscious of the importance of well developed infrastructure. But Malaysia is also aware that technology alone is not the key to success, it is only an enabler. Therefore, next to the very well developed and applied technologies, much emphasis is set on the human resource development (Moggie in Yeaoh, 2002).
3.2 Political/legal forces
3.2.1 Political forces
The political environment in Malaysia provides a stable and safe country in which to operate a business internationally. Malaysia is a parliamentary democracy in which Abdullah Badawi is the Prime Minister, who took over from Mahathir Mohammad after 22 years in office on the 21st of March (Austrade, 2006). The next general election is scheduled for 2009.
3.2.2 Legal forces
There are a number of tariffs, regulations and requirements businesses must conform to in order operate in Malaysia. The government is progressively liberalizing its tariff regime, however, some products that are in competition with locally manufactured products are still highly protected. In the processed food sector imported foodstuffs are subject to inspection and need to comply with labeling laws introduced in March 2004 (Austrade, 2006). Australia and Malaysia currently have a diverse bilateral agreement, however in April 2005 it was decided to move onto to free trade negotiations, this has wide reaching ramifications when exporting to Malaysia and will have to followed closely in order manage the dramatic influences this may have on the business environment (Austrade, 2006).
3.3 Economic and financial environment
3.3.1 Economic overview
Malaysia is rich in natural resources and has developed therefore already as a British colony to a worldwide producer of rubber and tin. Although the colonial rule of the British let to a good legal system and an efficient administration, some of the economical drawbacks were that Malaysia’s products were not differentiated enough and they depended on North America and Europe. The immense exports caused a workforce-demand increase which led to a large Chinese and Indian immigration. 1957 Malaysia changed from a British colony to independency (Austin, 2004).
In 1967 Malaysia formed with Thailand, Indonesia, Singapore and the Philippines the Association of Southeast Asian Nations (ASEAN) . Although the foundation was originally political, ASEAN now plays a significant role in the present world economy. Economically ASEAN targets a common market, including a free trade area. Even though Australia is geographically very close, it had not been an important export market. Australian imports consist mainly of food products (Tan, 2003).
Today Malaysia is a high middle-income export orientated economy and one of the world’s largest producers of electronic and electrical products (Austrade, 2006).
3.3.2 Economic performance
For years Malaysia was an ideal developing country. The climate for investors had been very stable with an average annual growth rate of almost 9 percent and basically full employment (Tan, 2003).
But the Asian crisis damaged this picture. The consequence was a deep cut into the GPN of 7,4 percent in 1998. The Malaysian government worked against this crisis with an expansive economic policy and was able to stabilize the economy relatively quickly (Tan, 2003).
Ever since Malaysia has consistently maintained its position of 18th largest global exporter, with economic growth averaged at 5.5% in the four-year period between December 2001 and January 2006 (WTO report, December 2005). Also the consistently low levels of unemployment have been maintained while the living standards are good with a life expectancy of 72.5 years, and literacy rates of 89% (Malaysian Profile, 2006). Unfortunately the income distribution is fairly unequally and quite complicated because of three different major racial groups in Malaysia (Tan, 2003).
3.3.3 Financial performance
The high annual growth rate in the nineties was connected to a very low inflation rate. Even the Asian crisis didn’t increase the prices in an enormous way. The Malaysian government used a very uncommon way to get out of the crisis: Instead of using the help of the International Monetary Fund (IMF), it chose to limit its flows of capital dramatically which was not appreciated by most international investors. After the crisis was handled successfully, the limitations were loosened up again (Tan, 2003).
The increased terrorism development in recent years has had significant impacts on Malaysia’s economical and financial performance. Especially declines of foreign investments. Also less tourism has caused a slower economical growth in the mid term (Tan, 2003). But Malaysia has still managed to increase the measurement of per capita income in the latest four year period, and has received a strong average growth of 8.9 percent. The total public debt although is relatively high, hovering around 69% of GDP, however is expected to drop to 46% of GDP by 2009 due to the implementation of fiscal consolidation strategies by the federal government (IMF report, Article IV 2005).
3.4 Competitive environment
Next to the external environmental forces, the competition in which the company competes has to be considered. This is done from two perspectives: In macro- (overseas industry’s competitive structure) and micro- point of view (firms) (Grigoriou, 2004). Kangaroo International’s competitors are both domestic producers and distributors in Malaysia and international companies.
3.4.1 Intensity of competition
The Australian Government clearly states the food and agribusiness as one of the key opportunity areas in Malaysia. More specifically organic food, health snacks, cream cheese, and soy pudding and yoghurt are mentioned as current opportunities. As a result, increased (international) competition can be expected in Malaysia (Austrade). Some large international companies (see Table 2) have been present since centuries and have been able to gain local knowledge and train their staff accordingly. Especially the large companies have very strong brands, are experienced and have next to large financial resources a very well developed distribution network (US & Foreign Commercial Service, 2003).
Table 2:
Large Dairy, Soy or Health Food Companies in Malaysia
Name Year Products Country of origin
Cold storage 1968 Dairy and meat Malaysia
Dutch Baby 1963 Milk Holland
Nestlé 1912 Milk, cereals, noodles Switzerland
Yeo Hiap Seng 1900 Marketing & sale of food, beverages & dairy products Malaysia
Contra Enterprises 1969 Dairy Malaysia
F&N Foods Dairy, soft drinks Malaysia
Radiant Whole Food new Organic & health food Switzerland
Tong Garden Snacks Singapore
Pikzern 90’s Importing and distributing: Dairy, Confectionary, Beverages, Snacks, Sea foods, Vegetarian Food, Seasonal Products Malaysia
Source: Adapted from: Kuala Lumpur Stock Exchange (1994) cited in Muthaly, Ratnatunga & Schroder, 1999, p. 116); http://www.mycen.com.my/search/food_beverage.html
Next to the large multinational and local firms, there are thousands of small, family oriented businesses (Muthaly, Ratnatunga & Schroder, 1999). There is also a quite strong presence of Australian and New Zealand dairy product companies. The competition in the organic soy product section is not as tough yet, but all the mentioned factors together create fairly high entry barriers for new importers.
3.4.2 Bargaining power of consumers
In general the disposable income of Malaysian customer is either fairly high or quite low (Austrade, 2006). But either way, they are very price sensitive and will definitely look for the best value (which doesn’t necessarily have to be the cheapest). Therefore the bargaining power of the buyers is rather high, especially because this market is attractive and gives the consumer a wider choice and lower switching costs (Fletcher & Brown, 2005).
3.4.3 Threat of substitute products
On a micro level, competitors for Kangaroo International are not only producers of the same product, but also companies who offer substitutes such as dairy products, and health food or organic snacks. On the contrary wine, pizza dough, nachos, pasta, (in general Western style food), dips and crackers are seen as complementarities. Because health food in general is very popular in Malaysia, normal cheese has to be seen as a competitor, but it is believed that with an organic product, Kangaroo International has a good chance to penetrate a niche market. It has to be noted however that switching costs for consumers are fairly low if there is a choice of different organic products available.
On a macro perspective competitors to the health food industry are producers with the same product which are not organically certified (normal cheese vs. organic cheese) and which are most often offered to a cheaper price. The food industry in general may see for example the leisure industry as a competitor as well as complementarities industry. They are an opponent if the industries have to compete over a limited budget in which the consumer will have to decide wherever the money will be spent on some more (healthy) snacks or if for example a visit to a botanical garden would be a better alternative. This is mainly because cheese is not an elementary food group. On the other hand the leisure industry can also be a driver, because a pick-nick trip to enjoy the nature may include some healthy food choices.
3.4.4 Threats of new entrants
As mentioned in ‘intensity of competition’, the threat of new entrants is presently rather high because of the market opportunities. It is believed although that with the right niche-market a sufficient market share should be achievable. However, if the trend stays as it is, the market will, like the dairy market, eventually be saturated.
4. Marketing Strategy
In order to develop a marketing strategy a SWOT-Analysis for Kangaroo International in Malaysia needs to be made. The SWOT-Analysis is a necessary tool to understand where the organization is positioned, what the competitive advantages are and where the improvements have to be undertaken. The Analysis for Kangaroo International and the objectives for the first export period can be found in Appendix C.
4.1 Market Based Planning
Market based planning is an approach which starts with an analysis of consumer needs, in order to determine how modify the existing product to satisfy these needs (Fletcher & Brown, 2005). This is the most appropriate approach for Kangaroo International, when adapting an existing domestic product to suit an international market, in this case Malaysia. The product will still be the same core product, however packaging and labeling will be modified in order to comply with Malaysian legislation and taste.
4.2 Competitive Advantage
Kangaroo International will implement a basic competitive positioning strategy of differentiation. This involves concentrating on producing a highly differentiated product, supported by a marketing campaign that focuses on positioning the product as a class leader (Fletcher & Brown, 2005). As Table 3 below shows, Kangaroo International will use segmentation to divide the market by geographic, psychographic and behavioral variables to create a significant competitive advantage (Kotler et al, 2004).
Table 3
King International’s Market Segmentation
Step Geographic Segmentation Goal Market share
1st target on consumers in urban areas (large cities) – large supermarkets Until product is well established AUS $0.3 million in first year
2nd target on consumers in urban areas – smaller intermediaries Until product creates a good customer awareness AUS $3 million in first three years
3rd target on rural areas – smaller intermediaries Market leader in organic soy cheese and soy cream cheese
Psychographic segmentation Consumer who value healthy lifestyle
Behavioral segmentation Benefits sought
4.3 Positioning strategies
Product positioning is defined as;
“The way the product is defined by consumers on important attributes; the place the product occupies in the consumers’ minds relative to competing products” (Kotler et al, 2004).
To achieve product positioning in a favorable manner, Kangaroo International can implement a number of strategies. These are outlined below
Product Positioning Strategies
* They can position their products on specific product attributes
* Products can be positioned on the needs they fill or on the benefits they offer
* Products can be positioned according to usage occasions
* Product is positioned for certain classes of users
* Product can be positioned directly against a competitor
* Product can be positioned for different product classes
Kangaroo International will focus on two main strategies of both product attributes and the benefits offered. Firstly the product attributes to be reinforced will include that Kangaroo Soy Cheese is Australian made, particularly important in Asian cultures where it is perceived that higher levels of status are associated with Western products. Other critical product attributes are the non-GM, organic grown soy used, a critical attribute to the success in the Malaysian market. Secondly, it will be stressed that Kangaroo International Soy Products offer the major benefit of increased health. Research shows that soy can help lower cholesterol and reduce the risk of heart disease, osteoporosis, cancer and diabetic, kidney disease (Soyfood, 2003). These factors coupled with a focus on product quality will allow Kangaroo international to attain a favorable position in the consumers mind relative to competitors.
5. Market Entry Strategy
Once a market has been identified as profitable, the mode of entry has to be chosen. Evaluation of market entry modes involves a trade off between degree of control and commitment of resources (Fletcher & Brown, 2005).
For Kangaroo International a direct exporting mode in a combination with strategic alliances has been chosen. The products will not be sold directly to the end user but distributed through supermarket chains. Without ever been active in Malaysia, Kangaroo International will definitely need local partners who have the know-how to run the daily business. Strategic alliances are non-equity contractual relationships (Fletcher & Brown) and will be building with the Malaysian International Chamber of Commerce and Industry (MICCI), the Federation of Malaysian Manufacturers (FMM), and the supermarket chains. The MICCI is Malaysia’s oldest chamber of commerce. The FMM is Malaysia’s economic organization, representing over 2000 manufacturing and industrial service companies (FMM, 2006 ). Advantages and disadvantages of direct export and strategic alliances can be listed as follows:-
Advantages of a direct export
• Minimizes risk and investment.
• Speed of entry
• Maximizes scale; uses existing facilities.
Disadvantages of a direct export
• Trade barriers & tariffs add to costs.
• Transport costs
• Limits access to local information
• Company viewed as an outsider
Advantages of a Strategic Alliance
• Increased leverage
Strategic alliances allow you to gain greater results from your company’s core strengths
• Risk sharing
A strategic alliance with an international company will help to offset your market exposure and allow you to jointly exploit new opportunities.
• Opportunities for growth
Strategic alliances can create the means by which small companies can grow. By “marrying” your company’s product to somebody else’s distribution, or your R&D to a partner’s production skills, you may be able to expand your business overseas more quickly and more cheaply than by other means.
• Greater responsiveness
By allowing you to focus on developing your core strengths, strategic alliances provide the ability to respond more quickly to change and opportunity.
Disadvantages of a Strategic Alliance
• High commitment – time, money, people
• Difficulty of identifying a compatible partner
• Potential for conflict
• A small company risks being subsumed by a larger partner
• Strategic priorities change over time
• Payment difficulties
• Political risk in the country where the strategic alliance is based
• If the relationship breaks down, the cost/ownership of market information, market intelligence and jointly developed products can be an issue.
It is also considered to hire a local consulting firm for the Malaysian marketing and promotion. The marketing wouldn’t be outsourced because Kangaroo International has chosen with its direct export mode to keep as much control as possible. Williamson’s transaction cost approach suggests “that control is the most important determinant of risk and return and that high-control entry modes increase return … and risk” (Fletcher & Brown). Williamson’s theory is outlined below
Williamson’s transaction cost approach
Chosen entry mode should provide control, based on the following functions:
* Transaction specific assets including specialized physical or human investments such as proprietary processes or products at an early stage of the product life cycle.
* External uncertainty reflecting unpredictability in the chosen overseas market due to economic and political factors.
* Internal uncertainty related to difficulties in exercising control over the agent in the overseas market due to lack of experience, culture and linguistic knowledge and familiarity with business customs and practices.
* Free riding potential, which refers to an agent’s ability to exploit the relationship for personal advantage such as by degrading the brand name or by taking on the line to neutralize its competitive impact.
Source: Fletcher & Brown
In Kangaroo International’s case the company possesses transaction specific assets, which are the production knowledge of the organic soy cheese, and the uncertainty about the new market is high. Therefore a high control mode seems to be the most appropriate entry mode.
6 Marketing Mix
6.1 Product
Kangaroo Soy Cheese is a tangible, consumer-orientated product incorporating the company’s cheese making core competencies. The product has been adapted to suit market requirements of Malaysia on the strategy of market based planning. This will include modifying products packaging and labeling to meet local labeling laws, which were modified in 2004. Most notably changes will be made to the label contents and language. Also some marketing research will be undertaken to analyze the taste of Malaysians in terms of product size and packaging style like colors etc. The packaging size of products in general is smaller in Malaysia (Nestlé, 2006) mainly because like this it is cheaper to buy one unit, and the product can be consumed more quickly.
6.2 Pricing strategies
Malaysian consumer behavior is continually changing, with increased urbanization and concentration of wealth in cities, coupled with a more westernized culture, consumers are more discreet in their spending and will shop around for cheaper alternatives (Austrade, 2006). This has many implications for Kangaroo International when determining a pricing strategy. These changes in consumer behavior have resulted in higher levels of price sensitivity, requiring greater levels of competitive advantage in order to attract sales.
Kangaroo International is faced with an inverse demand curve in the Malaysian market, meaning as the price of the product increases the amount of the product demanded decreases.
The channels of distribution have a dramatic impact on the price charged to the end user in an international market, as each intermediary adds their own mark-up (Fletcher & Brown, 2005). As such Kangaroo International has taken care to employ only those intermediaries that are critical to distribution of Kangaroo Soy Cheese in an attempt to reduce international price escalation (Fletcher & Brown, 2005).
Kangaroo International will implement market differentiated pricing, in which pricing is determined by market conditions of Malaysia, in relation to affordability of the product, nature of competition and strategic objectives of the firm (Fletcher & Brown, 2005). The pricing strategy adopted by Kangaroo international in Malaysia will be based on a combination of Cost-Plus pricing and Marketplace pricing. This entails adding a specified mark-up percentage to the total cost of the product, while at the same time considering what are considered competitive prices in the local market (Fletcher & Brown, 2005). This mark-up can manipulated accordingly with changes in environmental variables such as level of competition and demand as well as internal factors such a business expansion and increased supply costs (Fletcher & Brown, 2005).
6.3 Promotion
6.3.1 Contextual Factors affecting promotional campaign
During the process of developing the promotional campaign for an international product it is critical to evaluate how it will be influenced by contextual factors. These include culture, language, education, economic development, media infrastructure and government regulation (Fletcher & Brown, 2005). These environmental factors act as interference between the successful encoding and decoding of a marketing communications.
The implications of these factors are explained in Appendix D.
6.3.2 Promotional strategies for Kangaroo International in Malaysia
Kangaroo International will implement a promotional campaign that will predominantly focus on pull strategies, however push strategies will be utilized. A pull strategy targets the end user through a variety of advertising, publicity and public relations in order to stimulate demand (Fletcher & Brown, 2005). This will be complemented by the main push strategy medium of sales promotion, in particular trade shows. The advertising strategy undertaken by Kangaroo International will target opinion leaders, in order to generate positive word of mouth amongst consumers. This strategy relies on the fact that word of mouth is generally the most important means of promoting a product, as it more respected and easier for the consumer to believe (Gremler, Gwinner & Brown 2001). This is of particular importance when appealing to the collectivist culture of Malaysia, where loyalty and trust are of the upmost importance (Patterson, Smith, 2001).
The advertising campaign of Kangaroo International will initially focus on the mediums of newspapers, magazines, internet and radio due to limited resources, however as the business becomes more profitable, higher cost mediums such as television will be implemented to further increase market share. Magazines offer a selective way of reaching the target market, in this case, important opinion leaders (Fletcher & Brown, 2005). The magazines of focus are trendy lifestyle magazines, such as CLEO Malaysia’s fastest growing lifestyle magazine and health magazines such as Health and Fitness and Buletin CME, which is monthly. The newspapers selected to advertise through are chosen due to the higher levels of trust by consumers and because they cover local entertainment and culture. These titles are Barita Harian and Vanakkam Malaysia. Radio offers the advantage of low cost and high levels of reach (Fletcher & Brown, 2005). Market research identified National FM as the most appropriate station for Kangaroo International promotional campaign.
In order to build consumer trust and brand awareness, Kangaroo International will use Public relations heavily. This will include sponsoring local health initiatives as well as important sporting events in Malaysia, to achieve strong associations between our product and a healthy, popular lifestyle.
6.4 Distribution
Using direct exporting, Kangaroo International will deliver its products to Malaysian supermarket chains. The alliance with MICCI and FMM will help in this process. Malaysia’s retail sector is highly fragmented with many small to medium-sized markets. Of course the use of retailers (supermarkets) will lead to some loss of control. For example Kangaroo International will not be able to state exactly where the product will be placed on the shelve. The good experiences in Australia lead to the conclusion that this will still be the best way to bring the product to the consumer. A direct distribution would be too expensive. However, an internet based distribution may be considered in a later state.
There are around 500 supermarkets and hypermarkets, approximately 120 convenience stores and a rather large amount of traditional food stores (90’0000 nationwide). Table 4 shows the percentage of sales that goes through these retail outlets.
Table 4
Percentage of Sales in specific retail outlet
Retail Sector Sales by Type of Business* (2000) Sales (%)
Department stores, supermarkets, and hypermarkets 20
Grocery stores and similar outlets 20.5
Convenience stores 9.3
Household, personal goods, and other stores** 50.2
*: Excludes wet market, morning market, night market and other non-permanent retail facilities.
**: These establishments were not involved in the sale of food and beverage products.
Source: http://www.exporthotline.com/upload/731A3377-74C5-4191-88F1-31A9489495E8.html
An increasing number of middle to upper-income Malaysians are shopping in the modern supermarkets which are mainly located in urban areas. Some more growth of the major supermarket chains is forecasted (US & Foreign Commercial Service). Since Kangaroo International’s target group is focused on health aware consumers in the middle and upper income group, this seems to be the right distribution channel.
The traditional grocery stores sell all sorts of products and are located in urban and rural areas (US & Foreign Commercial Service). This is where the majority of Malaysians shop and in the beginning the grocery stores in larger cities should be targeted as well. Rural areas will not be a target market until the company is well established in Malaysia, customer awareness has been created and a reasonable market share has been reached.
7. Conclusion
Kangaroo International is an Australian Soy food manufacturer, which is currently in the process of looking to become an international firm, by exporting products to Malaysia. This report outlines the strategies and objectives put into place in order to successfully export Kangaroo Soy Cheese to Malaysia. This is achieved by first conducting a detailed analysis of the environmental factors within Malaysia, this includes identifying the aspects which need to be considered when modifying the product to suit the Malaysian consumer. The analysis revealed that Malaysia has a stable government, with positive economic performance expected to continue into the future. The infrastructure and technology environment provide substantial opportunities for an international business to prosper. The Malaysian culture is of a very collectivist nature and places high priority on trust and respect, there is also a high proportion of the population being Muslim, this has such implications as providing Halal certified products. Once these environmental factors were taken into account a marketing strategy was developed, modifying the marketing mix to most effectively fit with the Malaysian business environment. It is believed that these strategies implemented by Kangaroo International will allow the business to gain a significant competitive advantage and prosper in the Malaysian market.
References:
Anonymous 2003, ‘Health benefits of Soy food’, Soyfood, USA, Vol. 6, Iss. 1
Austin, IP, GK, 2004, Goh Keng Swee and Southeast Asian Governance, Marshall Cvendish International, Singapore.
Austrade, Processed Food to Malaysia, viewed 26 April 2006,
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FMM, 2006, viewed 5 May 2006,
Gremler, D., Gwinner, K. & Brown, S 2001; ‘Generating positive word-of-mouth communication through customer-employee relationships’, International Journal of Service Industry Management, Vol. 12, Iss. 1; pg. 44.
Info Please Encyclopaedia, Malaysian Country Profile, viewed 24th April 2006,
Kangaroo International, Homepage, viewed 25 April 2006,
Kotler P, Brown L, Adam S & Armstrong G 2004, Marketing 6th Edition, Pearson Education Australia, Frenchs Forest NSW
Nestlé, 2006, viewed 5 May 2006, < http://www.nestle.com.my/>
Patterson, P. & Smith, T 2001; ‘Relationship benefits in service industries: a replication in a Southeast Asian context’, The Journal of Services Marketing, Vol. 15, Iss. 6/7; pg. 425, 19 pgs
Royal Malaysian Customs, Importer/Exporter, viewed 26 April 2006,
< http://www.customs.gov.my/html/eng/pelabur.asp?id=130&category=>.
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Appendix A- Hofstedes Cultural Dimensions
Power Distance Index (PDI) focuses on the degree of equality, or inequality, between people in the country’s society. A High Power Distance ranking indicates that inequalities of power and wealth have been allowed to grow within the society. These societies are more likely to follow a caste system that does not allow significant upward mobility of its citizens. A Low Power Distance ranking indicates the society de-emphasizes the differences between citizen’s power and wealth. In these societies equality and opportunity for everyone is stressed.
Individualism (IDV) focuses on the degree the society reinforces individual or collective achievement and interpersonal relationships. A High Individualism ranking indicates that individuality and individual rights are paramount within the society. Individuals in these societies may tend to form a larger number of looser relationships. A Low Individualism ranking typifies societies of a more collectivist nature with close ties between individuals. These cultures reinforce extended families and collectives where everyone takes responsibility for fellow members of their group.
Masculinity (MAS) focuses on the degree the society reinforces, or does not reinforce, the traditional masculine work role model of male achievement, control, and power. A High Masculinity ranking indicates the country experiences a high degree of gender differentiation. In these cultures, males dominate a significant portion of the society and power structure, with females being controlled by male domination. A Low Masculinity ranking indicates the country has a low level of differentiation and discrimination between genders. In these cultures, females are treated equally to males in all aspects of the society.
Uncertainty Avoidance Index (UAI) focuses on the level of tolerance for uncertainty and ambiguity within the society – i.e. unstructured situations. A High Uncertainty Avoidance ranking indicates the country has a low tolerance for uncertainty and ambiguity. This creates a rule-oriented society that institutes laws, rules, regulations, and controls in order to reduce the amount of uncertainty. A Low Uncertainty Avoidance ranking indicates the country has less concern about ambiguity and uncertainty and has more tolerance for a variety of opinions. This is reflected in a society that is less rule-oriented, more readily accepts change, and takes more and greater risks.
Long-Term Orientation (LTO) focuses on the degree the society embraces, or does not embrace long-term devotion to traditional, forward thinking values. High Long-Term Orientation ranking indicates the country prescribes to the values of long-term commitments and respect for tradition. This is thought to support a strong work ethic where long-term rewards are expected as a result of today’s hard work. However, business may take longer to develop in this society, particularly for an “outsider”. A Low Long-Term Orientation ranking indicates the country does not reinforce the concept of long-term, traditional orientation. In this culture, change can occur more rapidly as long-term traditions and commitments do not become impediments to change.
Appendix B -Summary of Cultural Differences
As stated earlier if an international firm is to be successful it must understand how cultures differ, these differences can be identified in a number of key concepts. First cultures differ in their attitudes towards time. Assumptions about time are very deep seated in cultures (Fletcher & Brown, 2005). In general it is necessary to allow longer periods of time for business transactions in Asian countries than that of Western countries, this is particularly evident in the Malaysian business environment. This is due to Asian countries adopting a polychronic view of time in which time is cyclic and everything in life must be dealt with in terms of its own time (Fletcher & Brown, 2005). This Contrasts the Western countries approach of a monochronic view, in which time is linear having a beginning and an end, with a focus on schedules and time is money (Fletcher & Brown, 2005).
The second concept is space; this can be both physical and abstract. Physical space refers to both location and size of offices and personal proximity (Fletcher & Brown, 2005). This is demonstrated in western societies where office size and location define status, this is not the case in all cultures. Secondly personal space differs between cultures.
Third, the concept of familiarity is important to understanding the speed in which friendships are formed, level of superficiality, obligations of friendship (Fletcher & Brown, 2005). This is of particular importance when operating in Malaysia as trust and respect are integral parts of the culture. The fourth difference is in consumption patterns, these are reflected in varied views of material possessions and dress. In some cultures, Western for example, power is symbolized by material possessions.
Appendix C -SWOT – Analysis
Internal view
Strength
– excellent products
* Organic
* Halal (and Kosher) conform
* Non-GM
* Soy – product counts as healthy food (lowers cholesterol)
* Soy-cheese will be better for Asian people who have in general problems when they digest diary products. They will be able to enjoy cheese without the side effects
* Wide product range (next to soy cheese and soy cream cheese many more soy products such as yoghurt, milk, and butter are produced)
* Australian products stand for guaranteed high quality
* Product can be accepted as alternative to local products and because soy based can fit in with local culture
– focus on building export markets
– successful in Australian market
– knowledgeable in different soy product production and handling
– technical alibility to adapt production efficiently to meet buyers needs
– Long tradition, established in 1987
– Loyal, well trained (Australian) staff
– May use existing staff to manage export
– Company’s name is already indicating international marketing opportunities (Kangaroo International).
– brand recognition by Australian target consumer (within Australia, but Australians will also recognize the product if they go overseas)
– support (knowledge) form Australian government if the company wants to enter Malaysia
– English is spoken in Malaysia
– Geographically close
– Australia has good connections to Malaysia
– Strategic Plan
Weaknesses
– No previous experience with Malaysia
– Fresh products are preferred by locals
– Locals prefer low-priced, known products
– Alliances might not work
– Excessive capital needed
– Current premises may not meet export standards
– Product design might use some alteration
– Homepage only in English, not in Malay; not ready for internet sale
– Regular visits of Management costly and too time consuming
External view
Opportunities
– Trend to ‘westernization’ in Asian countries
– Relatively large customer segment in Malaysia
– Possible Free Trade agreement between Australia and Malaysia
– Malaysia is political stable
– ‘Wawassa 2020’ (vision 2020). Malaysia has plans to achieve 1st world status (Madrid, 2004)
– Malaysia is a rapidly developing 2nd world economy
– Kuala Lumpur Stock Exchange (KLSE)
– Domestic Mutual funds
o Traditional equity
o Fixed income
o Islamic funds: money market and fixed income (Madrid, 2004)
– Overseas Mutual funds which target Malaysia
Threats
– Supply of some of the products are subject to seasonal changes
– Fairly high entry barriers through well established dairy products
– Cultural differences
– Emerging market risks
– Domestic Mutual funds
o Fixed income: risk analogous to US bond funds
– Legacies of ‘assertive’ policies of 1998
– Malaysia has liquidity problems (Madrid, 2004)
Critical Success Factors
1. A country knowledge has to be established and management will have to visit Malaysia frequently
2. Financial Recourses and Human capital has to be guaranteed at all time
3. Products must be continuously deliverable
Objectives
Following objectives would like to be reached in the first exporting period.
1. Establish a market for Kangaroo Soy Cheese and Cream Cheese in Malaysia
a. AUS $0.3 million in year one
b. AUS $3.0 million in year three
2. Establish customer awareness
3. Establish well founded business connections and reliable networking
Appendix D – Contextual Factors explained
As mentioned earlier in the paper culture plays a pivotal role in determining whether or not a product will be successful in an international market. As a result it is critical to understand the manner in which culture influences the target consumers’ perceptions of the marketing campaign of Kangaroo Soy Cheese in Malaysia. To address this issue the variety of promotional tools implemented throughout the marketing campaign will highlight that Kangaroo Soy Cheese is Halal certified and sensitive to the Muslim religion in order to avoid offending or disrespecting the local culture of Malaysia. Cultures also vary in the way the context of verbal and non-verbal messages are interpreted. As a result cultures fall onto a continuum between low and high context cultures (Fletcher & Brown, 2005). A high context culture is one in which what is said conveys a limited amount of the message meaning, instead greater emphasis of interpretation is placed on how and where it is being said, as well as the status and body language of the speaker. Malaysia falls into the category of a high context culture, a characteristic that has a significant impact on the correct approach to deliver the desired message. Consequently the promotional campaign will use opinion leaders of high social status to endorse the product, while ensuring that the appropriate emphasis is placed on non-verbal cues.
The second factor which must be accounted for in order effectively communicate with the target market is language. Languages differ in the way they convey meaning, the precision of this message, the degree to which things are implied as opposed to specified and the extent to which messages are conveyed through verbal or non verbal cues (Fletcher & Brown, 2005). As a result just translating one language into another seldom conveys the message accurately. While English is spoken in Malaysia and may be suitable in business situations, to effectively reach the target consumers it is considered vital to ensure that promotional mediums are communicated in Bahasa Melayu the native language of Malaysia. Care will be taken to correctly translate the message from English to Bahasa Melayu in order to accurately portray the desired message. These strategies will foster greater levels of communication reach and acceptance amongst the target consumers.
The final factor of importance, to Kangaroo International’s marketing communications within Malaysia, is government regulation. Strict censorship laws exist within Malaysia and must be complied with at all times (Austrade, 2006). Consequently all marketing communications will be thoroughly checked before public release to ensure compliance with current government regulations. Once these environmental factors that inhibit effective communication with the target market are overcome, strategies for the international promotion can be developed.