Global marketing opportunity

analysis for Sainsbury in

Malaysian Market









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1.0. Introduction...4
2.0. Macro Analysis of Malaysia.....................................................................................................4
2.1.PEST Analysis of Malaysia...5
2.1.1. Political Analysis.5
2.1.2. Socio Economic...6
2.1.3. Economic Analysis..7
2.1.4. Technological Analysis...7
3.0.Market Entry Modes.8
3.1.Exporting...8
3.2.Foreign Direct Investment.8
3.3.Licensing8
3.4.Strategic Alliances.9
3.5. Joint Venture.9
4.0.Market Entry Mode adopted by Sainsbury..10
4.1.Best Market Entry mode for Sainsbury...10
4.2.Justification..10









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Executive Summary


This study is focussing on the marketing opportunity in Malaysia for the foreign investors. PEST
analysis has been done to know the economic, political, socio economic conditions prevailing in
Malaysia. The analysis helps to analyse the situation in the country that whether it is favourable
for the foreign investment or not. PEST analysis of Malaysia indicates that it has stable
economic conditions and has a potential for the for foreign investors. The culture of the country
is rich as people across the globe form different countries are living in Malaysia and this makes
it more attractive for the foreign investors. Sainsbury is UK based company and is successfully
operating in UK. Its Grocery stores have always served the British people with diversity.
Malaysian Market is an ideal market for Sainsbury, and Direct Foreign Investment strategy
would be best strategy to enter in Malaysian Market.










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1.0. Introduction:
In 1869 John James Sainsbury and Mary Ann Sainsbury in London initiated Sainsbury. And later
on it became one the leading retailers of UK. The company has its own strong values and are
committed to provide excellence to the customers. They have five areas of focus such as
Growing space and enhancing the value, complimentary services, food and developing new
businesses, As having multiple business in the UK and having a large set up in UK, company is
now focussing towards International expansion and specifically in Asia. In Asia, most appealing
market for the company is Malaysia. As it becomes a commercial hub and trade terms are also
encouraging for the new entrants.
Malaysia has one of the most emerging economies in the region of South Asia. The country has
Made a tremendous growth since its independence in 1957, and has made a substantial success in
reducing poverty rate. The country has successfully maintained democratic system since its
independence. It is predicted that Malayan Economy will attain GDP of $34 billion by the year
2017, as it is experiencing 7% rate of growth annually. There are many factors, which have a bad
effect on the growth of Malayan economy, for instance, its low spending on Research and
Development, corruption and crime rate, poverty rate and ethnic groups in the country. One of
the driving factors of Malayan Economy is its skilled workers and export of diversified nature.
Malaysia has an aim to be the one of the high-income nation until the year 2020. In order to
achieve this there are several factors on which economy need to focus such as spending more on

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the Research and Development sectors and effective and efficient use of its Human Resource
(Nations, 2011).

2.0. Macro Analysis of Malaysia:

In order to invest and make strategic decisions about foreign investment in a country it is
essential to analyse it Political, environmental, social and technological conditions. This analysis
helps in making decisions about the investment in the country and helps to take better decision. It
is provided as a guide for the investors, distributors, suppliers and multinational companies that
might operate in the country.



2.1. PEST Analysis of Malaysia

2.1.1. Political Analysis:

Multi party system exists in Malaysia and it is parliamentary monarchy. Prime Minister of the
country is the head of the state. There is a constitutional system in the country and constitution
describes the rules, laws, regulations on which country runs. Political system of the country runs
on the constitutional basis. Political system of Malaysia is modelled more like British colonial
system. The cabinet has the executive powers and Prime minister leads it. The legislative branch
of Malaysia consists of Parliament on bicameral type. The powers of legislation are divided into
federal and state legislation. The laws of Malaysia are more like Indian Law. Base of the legal
system is English law. Major part of government is from the taxes. However there is an incentive
for the local companies and they have an exemption of tax on income earned from abroad. The
government regarding different industries such as agricultural, tourism and communication has
introduced multiple initiatives (Hashim, 2011).

Effect of Political system on Sainsbury Retailers:
Political conditions and environment in Malaysia is reasonable for investment. Laws are more
like English Common Law adopted from English Law. This will aid the business activities as

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law would be similar to UKs law. There are multiple initiatives from government in different
Industries and it help Sainsbury to establish a business.


2.1.2. Economic Analysis:

To understand the economic advancement and conditions in Malaysia , it is important to consider
the 22 year rule of Dr Mahatir Muhammad. As during his rule, a major shift in direction of the
economy was brought from Agriculture to Industrial. The GDP of the country remained constant
at 6% annually during the 16 years. His era made a substantial change in the prosperity of the
country. Inflation rate remains low despite of the global increase in petroleum prices (Anon.,
2011). Domestic sector expanded and became a driving force of the economy. Important
initiatives were taken such as promotion of foreign investment and relaxation of visas for the
foreigners. These steps increased demand of rental property and competition also increased due
to its Cost of living is low in Malaysia as compared to the western countries. There has been
tremendous growth in the real estate business of government and this is being done to promote
foreign investment. It is considered the best time for the foreign investors to enter into the market
of Malaysia. Availing the opportunities many foreign companies have invested in Malaysia and
have opened new ventures in the country. Due to the efforts of the government, there is a
competitive environment in the country. That promotes the economic competitiveness at the
national level. This environment is beneficial for the operation of the business of the foreign
companies. Increase in the Real Estate enhances the investments. Inflation is low in Malaysia
and Government make efforts to keep it low (Rashid, 2011).

Effect of Economic system on Sainsbury Retailers:
Economic conditions of Malaysia would be favourable for Sainsbury Retailers because the
economy is in stable condition. And above analysis is clearly showing the Government of
Malaysia welcomes the foreign Investment. There are opportunities available and investment
from foreign companies is appreciated. Inflation is also considerably low in the country. All
these conditions are favourable for the company to operate in Malaysia.


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2.1.3. Socio Economic Analysis of Malaysia:

Malaysia is a multicultural country and is composed of two regions. West Malaysia and East
Malaysia. It has approximately 24 million populations and which is growing at the rate of 1.9%
annually. There is a great diversity of cultures in Malaysia. The population consists of
multiethnic groups. There is a mix culture and people all around the world live in Malaysia. Due
to many ethnic groups living in the country multiple languages are spoken in the country.
However, the official language of the country is Malay. 58% of the different nationalities of
people live in Malaysia. Chinese are the second largest ethnic group and consist of 24% of the
population. They have an active participation in the business. A third largest ethnic group in
Malaysia are Hindus. The literacy rate is high in Malaysia as it is 88.9%in females and 92.4 % in
male. There is a strong concept of women equality in region and Government has introduced
laws movement to ensure active participation of women in the region (Ilyas, 2011).


Effect of Socio Economic Conditions on Sainsbury Retailers:
As Malaysia is a country with different ethnic groups living in the country. In addition, there are
people from all over the world living in the country, this makes the country culturally rich.
People have different choices and taste so Sainsbury will have many people to sell its business
and people with different tastes. This makes the investment easy, diversified and less risky in a
freight country.


2.1.4. Technology and telecommunication analysis of Malaysia

Malaysia has a strong technological infrastructure in the country. The government is making
policies in the country to ensure stronger infrastructure of IT in the country (La & Su-Fei, 2011).
The old analog system has been replaced by new fibre optic wire system and has improved the
telecommunication service in the country. Wireless phone market of the country has improved a
lot, is growing at the rate of 30%, and will reach about 2.3 % in coming years (Sala-i-Martin,
2011-2012).

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Effect of Technological Conditions on Sainsbury Retailers:
Malaysia is a country with strong infrastructure of telecommunication and networking is
operating. Old analog has been replaced by the fibre optic and all over the world, there is an
efficient telecommunication services available. This will help foreign investors like Sainsbury to
operate its functional activities successfully.




3.0. Market Entry Modes:

The most difficult question for the companies while entering the foreign Market is the choice of
right Entry mode in the foreign market. Entry mode is a term used to the way adopted by the
company, firm or organization to enter into a market. Firms choose those entry modes, which
have risk involve in it but also promising return on the investment.
Foreign market entry modes are Franchising, Joint Venture, Exporting, Licensing and Foreign
Direct investment
These foreign market entry modes are elaborated below:
3.1. Exporting
Exporting is a way of entering into foreign market when companies enter without investing in
large scale. Agarwal and Ramaswami (1992) said that exporting can be called as a low risk entry
mode and there is low sources commitment associated with it. Profit is also low in this mode of
entry. There are two approaches of exporting; Direct and Indirect. The difference between the
two approaches is that firms make the commitment to the foreign countries, itself in Direct
exporting whereas in the Indirect Exporting there is an agency in the homeland involved ,
handling all the process of exporting (Chung and Enderwick 2001).

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3.2. Foreign Direct Investment
This market entry mode allows the company or organization to control its activities by itself with
no involvement of any agency. Advantage of foreign direct investment is that there is more
profit in this entry mode compared to exporting. But there is more risk involved in it and it has a
complex structure of management (Chung and Enderwick 2001).
3.3. Licensing

When rights of production are given to the individual or organization through legal agreement or contract
it is known as licensing. A basic requirement of licensing is the fee or royalty paid to the licensor
(Business & Management Dictionary 2007). There are more market entry modes linked with the
licensing such as Turnkey Contracts, Franchising and Contract Manufacturing. Turnkey
contracts can be explained as when you hand over the plants and there are less skill available but
in this kind of contract plant once cannot be taken by the company for instance in Adapazzri
there is a Toyota car plant. In franchising company gives its management, expertise, concepts
etc. And there are many examples of it such as KFC, McDonalds and Domino Pizza. Licensing
is an entry mode when a firm receives a commission, fee or royalty for providing its production
rights to the company or organisation in the foreign land.
3.4. Strategic Alliances
Al Khattab A.S. (2012) state strategic alliances are not just formed to achieve goals collectively
but are more than that. Strategic Alliances these days are aimed to pursue big project, which
cannot be accomplished, on a smaller scale. Most positive aspects of the strategic Alliance is that
organization has authority and is independent. There are certain types of relationship formed
when firms opt for the Strategic Alliance such as marketing agreements between them,
arrangements of Research and Development, shared manufacturing and allowances made for
distribution.
3.5. Joint Ventures
According to Miguel (2012) joint ventures are formed on an equity basis and as the name
indicates it when a company is established and another company has a partnership in it. Agarwal
and Ramaswami (1990) and Miguel (2012) have suggested that there are various factors which

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have an impact on the choice of market entry mode. These are grouped into categories such as:
advantages of integrating transaction, advantage of Ownership to the firm and advantages of
Market location.
4.0. Market Entry Mode Adopted by Sainsbury:
Market entry Mode that should be adopted by the Sainsbury is Direct foreign Investment and
Strategic Alliance. These two methods will be very useful and appropriate for the Company as it
suits the economic and social condition of the company.


4.1. Best Market Entry Mode for the Company:
Out of these two Foreign Direct Investment is the most appropriate strategy for the company and
it is the best Market entry model for the company.
4.2. Justifications:
There are various justifications involved behind this decision such as
The company would be free in taking its decision; though risk in involved in it but ethnic
groups existing in the Malaysia would help it to stabilize its operation in the beginning.
The laws of both the countries are similar to each other this will help the company to
have eased at the time of adjustment.
In Malaysia, there is a competitive environment and foreign investment is appreciated.
There are no barriers to trade in the country. It is an easy market opportunity for foreign
investors.
Moreover there are easy terms for the rental property at commercial area for the foreign
investors. It would not be easy for the Sainsbury to acquire land.
Due to a multicultural population, Malaysia offers a land of the attractive business
market. They would easily accept Sainsbury grocery and clothing items.

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Economy of Malaysia has remained stable even during the times of crisis all over the
world and has maintained its GDP. People have better purchasing power and the inflation
rate is also less in the country. All these factors indicate that there is low risk associated
with this investment therefore among two Market entry Modes suggested to the company.
Foreign Direct Investment is the best Market Entry Mode for the country.

Conclusion
It can be concluded from the above study that Malaysia has a string economy and trade friendly
environment and for Sainsbury it will be a good opportunity conduct its business by using Direct
Foreign Investment approach.













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References:
1. Agarwal S. and Ramaswami N.S. (1990) Choice of foreign market entry mode :Impact of
ownership , location and Internationalization factors.
2. Al Khattab A.S. (2012).Marketing Strategic Alliances: The Hotel Sector in
Jordan.International Journal of Business and Management.Vol. 7, No. 9.

3. Business & Management Dictionary (2007) Bloomsbury Business Library.Pp. 4361-4361.

4. Chung E.L H. and Enderwick P. ( 2001). An Investigation of Market Entry Strategy Selection:
Exporting vs Foreign Direct Investment ModesA Home-host Country Scenario.Journal of
Management.Vol. 18, pp. 443460
5. Miguel A. M. (2012). Competitividad&Gobernabilidad. Vol. 6 , No. 1, pp. 23-35.
6. Anon., 2011. Malaysian Economy. Ministry Of Finance.
7. Hashim, T.S.A., 2011. Malaysian Productivity Report. Malaysian Productivity Report.
8. Ilyas, N.Z., 2011. Economic Research. Malaysian Rating Corporation Berhad.
9. La, M.-C. & Su-Fei, Y., 2011. Technology Development In MALAYSIA and The Newly
Industraized Economy. Asia-Pacific Development Journal, 11(2), pp.53-80.
10. Nations, U., 2011. Millenium Development Goals at 2010. United Nations.
11. Rashid, M.A.A., 2011. 2011 Malaysian Economic Outlook:Growth Assured Amid Headwinds.
Malaysian Rating Corporation Berhad.
12. Sala-i-Martin, X., 2011-2012. The Global Competitiveness Report. World Economic Forum.






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