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Proceedings of the Asia Pacific Management Conference, 2001, 623-634

International Marketing Strategy for Bumiputera


Entrepreneurs in the Tourism Industry

Aida Idris

International tourism is currently one of the fastest growing and most lucrative service
industries in Malaysia. Bumiputera entrepreneurs, in particular, possess several unique strengths
that may give them a competitive advantage in the sector. However, designing an effective
global marketing strategy remains a task which they often overlook. It is suggested in the paper
that their sales from foreign tourists have occurred mainly because of macro-level policies and
programmes, and not due to their own marketing efforts. In view of this, the paper aims to
emphasise the importance of constructing a company’s own marketing strategy and present some
discussions on various aspects of marketing in international tourism for Bumiputera businesses.
It is essentially a conceptual study which derives its observations and conclusions from literature
review, environmental scanning and primary data analysis. Starting with a brief account of the
international tourism industry, the paper contains sections on challenges in internationalising
tourism, market targeting, market entry mode and a detailed marketing programme. In the
conclusion, it reiterates major findings and discusses some managerial implications.

Introduction
The economic crisis which hit Malaysia, and indeed most of Asia, in
1997 ought to have jolted many local businesses into searching for new
strategies to remain competitive. Alternative industries and markets should
be continually explored and more attractive marketing techniques designed to
cope with the ever increasing pressures of globalisation. One of the
industries which have been identified in the Eighth Malaysia Plan (RMK8) as
a significant international business sector is tourism. Backed by huge
government assistance – for instance, it has been allocated a budget of RM1
billion which is 40% more than what it received in the Seventh Malaysia
Plan – tourism is hoped to enable the government to improve its income from
foreign exchange.
The paper deals with the subject of international marketing of tourism
and aims to suggest a potential foreign target market, mode of market entry
and a detailed marketing plan at the end. This it does through a combination
of methodologies: literature review, environmental scanning and primary data
analysis. It begins with a brief account of the international tourism industry
and concludes with major findings and implications.

International Tourism
The post-war era has witnessed tourism developing from an activity of

Faculty of Business and Accountancy, University of Malaya, Kuala Lumpur.

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a select few into a commercialised global industry. From just 25 million in


1950, international tourist arrivals is believed to have chalked up to 600
million at the end of the 20th century (Baum, 1996). At the regional level,
statistics are even more impressive. For two decades until 1997, the East
Asia and Pacific Region (APR) recorded higher rates of annual increases in
international tourist arrivals than any of the world’s other five regions; it
doubled its share of worldwide tourism receipts from 8% in 1980 to 15.5% in
1992 (WTO, 1994). Even when the region was plagued by a series of
stochastic disasters (Leiper and Hing, 1998) in the late 1990s, the scale of
tourism on the whole was not significantly affected.
To date the APR’s leading destinations include Hong Kong, Singapore,
Thailand, Japan, Australia and South Korea, which receive between 4 to 10
million visitors a year1 (Leiper and Hing, 1998). Malaysia is also high on the
list, recording 10 million arrivals in the year 2000 (Utusan Malaysia, March
25, 2001). Growth has come from the expanding MICE (meetings,
incentives, conventions, exhibitions), business travel and leisure markets.

Challenges in the Internationalisation of Tourism


Tourism, being a service, faces the same challenges that all services do
which are entwined with their unique characteristics. These characteristics
namely intangibility, inseparability, variability and perishability and the
corresponding problems they pose to the internationalisation of small service
businesses have much been discussed in previous works (Boddewyn et al.,
1986; Buckley et al., 1992; Dahringer, 1991; Erramilli, 1990) which thereby
conclude that:
i. Direct exporting is a viable option only for a limited range of services,
which can be presented via some form of tangible good such as a video
casette or a book.
ii. Indirect exporting is more suitable for a wider range of services; however
it should be used only to initiate the internationalisation process. The
ultimate objective should always be to establish a local presence in the
foreign market.
It would be easy to sum that the second method is more appropriate to
tourism. However indirect exporting itself consists of several varieties such
as the ‘umbrella’ concept practised by Proton and its suppliers, ‘client
following’ or ‘piggybacking’ (Erramilli and Rao, 1990; Leonidou and
Katsikeas, 1996; Li and Guisinger, 1992; Sarathy and Terpstra, 2000), and
‘inward or outward internationalisation’ (Bjorkman and Kock, 1997; Welch
and Luostarinen, 1993). Furthermore in the existing literature discussions on

1
1997 figures.

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marketing strategies of the tourism industry have been conducted in a rather


general manner; in other words, no known study on the industry has thus far
attempted to design a detailed marketing plan. As stated earlier, the
determination of the most appropriate mode of entry and construction of a
detailed marketing plan are among the objectives which the paper aims to
achieve.

The Tourism Industry in Malaysia


Major expansion in the tourism industry has been observed since the
70s (Goldsmith and Mohd. Zahari, 1994). The significant impact of the
Pacific Area Travel Association (PATA) Conference in 1972 brought about
considerable government interest and the setting up of the Tourism
Development Corporation of Malaysia. As a result of its efforts, tourist
arrivals in Malaysia increased by more than twice from 2.8 million in 1984 to
7.5 million in 1990 (Malaysian Tourism Promotion Board, 1992).
Today the country is expected to receive more than 14 million (Berita
Harian, September 14, 2001) visitors by year end. Tourism is currently the
second largest contributor of foreign exchange, earning more than RM 17
billion in 2000. Its development has become a major government agenda
with the Ministry of Culture, Arts and Tourism playing a key role in
providing a conducive climate for growth. New and aggressive campaigns
have been carried out to position Malaysia as a haven for shoppers, eco-
tourists and leisure-seekers. These include events such as the Visit Malaysia
Year, Megasale, Formula 1 races, Langkawi International Maritime and
Aerospace exhibitions and the recent Merdeka Month.
Supporting the government is an assortment of private international and
local players. They provide goods and services in several sub-sectors
including hotels and restaurants, licensed clubs, shopping outlets, recreational
parks, cultural villages, transport and travel agents. Contrary to their larger
multinational counterparts, most of the local businesses, especially those
owned by Bumiputeras, are small and do not normally have their own
marketing strategy to attract international clientele. Sales to foreign
customers usually happen by chance and merely as a result of macro-level
plans. As the pressures of global competition push harder and deeper,
Bumiputera entrepreneurs must begin to realise that a day will come when
government assistance and special rights privileges no longer suffice.
Personal efforts must be stepped up including creating their own marketing
strategies and plans to capture new, and indeed foreign, markets. The
ensuing sections detail how such a strategy may be devised.

Analysis of the Present Business Environment


Environmental analysis is necessary to produce realistic business

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strategies. The objective is to examine all internal and external factors that
affect the issue at hand. For the present discussion, a quick scan2 will reveal
that the current business environment contains the following factors:
Externally, there are signs of decline in the US economy and emergence of
other new economies, as well as globalisation and trade liberalisation.
Internally, among the major elements are Malaysia’s road to recovery, its
government’s economic policies and objectives, and the Bumiputera
entrepreneurs themselves. Due to constraint in time and space only two most
outstanding factors are discussed here, as follows.
Decline in the US Economy and The Emergence of New Economies
Since the late 1990s, the US economy has recorded a steady decline in
growth (according to the World Development Report, 2000, from 4.4% in
1997 to 4.2% in 1999 and an estimated 3.2% in 2000). Simultaneously, its
current account deficit doubled from 1997 to 2000 and contribution to the
world’s GDP has progressively decreased (from 40% in the 1970s to 25% in
the late 1990s). The negative trend has been projected by some analysts
(Asian Wall Street Journal, June 27, 2001; Business Week, June 18, 2001) to
continue for several quarters yet. In Malaysia, from its status as the largest
foreign investor in the early 1990s the US has now slipped to the fifth
position (Economic Report, 2000), trailing behind Netherlands, Taiwan,
Japan and Singapore. Additionally, although it has remained as Malaysia’s
biggest trading partner, volume of trade in 2000 actually decreased by 1.7%
compared to the previous year.
Parallel to this development is the strengthening of new economies, in
particular China, India, Pakistan, South America and South Africa; these
countries have recorded a GDP growth of 5 to 8% (IMF World Economic
Outlook, Aug/Sept 2000) in recent years and are forecasted to maintain
similar rates in the near future. With the exception of India, all of them are
expected to record a substantial decrease in inflation rate and current account
deficit. In terms of trade with Malaysia, China specifically shows a lot of
promise, charting 40% (Economic Report, 2000) growth in volume of trade
in 2000.
Profile of Bumiputera Businesses in the Tourism Industry
Based on data provided by the Malaysian Malay Chamber of
Commerce (DPMM) and the Ministry of Entrepreneurial Development, a
brief profile of Bumiputera entrepreneurs in the tourism industry may be
constructed. The present study focuses on those operating in Kuala Lumpur

2
For a more detailed illustration of how environmental scanning may be used to view aspects of
uncertainty in the global business environment, read Olson et al (1994) and Jorge and Teare
(2000).

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and Selangor because these locations have the highest concentration of


economic activities in Malaysia.
Out of the total number of service providers registered with the DPMM,
less than 10% are in tourism-related industries. As shown in Figure 1,
approximately 10% of them are lodge owners, 30% restaurateurs, 30% travel
agents, 20% car rental operators and the remaining 10% are in other minor
related businesses such as souvenir shops. Additionally, although exact
figures are not readily available, it is generally observed and agreed
(Convention of Bumiputeras in the Retail Trade Sector, 2000) that
Bumiputera entrepreneurs in the service sector possess several common
weaknesses: low capital, small-sized, limited expertise and experience, and
located mainly in the outskirts of towns (due to their inability to meet high
rentals in town areas).
% Distribution 30
25

20

15

10

0
Travel agents

Restaurateurs

owners
Car rental

Others
operators

Lodge

Fig. 1 Distribution of Bumiputera Businesses in Tourism-related Sectors


On the other hand their strengths are rather unique. Bumiputeras have a
rich background in local landmarks, cultures and arts and relatively easy
access to government support3 in terms of finance, training and consultation.
The Malays are known, especially among other Muslim countries, as modern
and progressive but devout. Specific requirements by Muslim visitors such
as ‘halal’ food and prayer facilities are given great attention and amply
provided by the Malays in tourism-related businesses.

Marketing Strategy
At this point, based on the background analysis in previous sections, the

3
Further readings on the Bumiputeras and their status in Malaysia may be found in Sloane (1999)
and Khoo (1991).

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paper is finally ready to discuss its key issue. Designing an international


marketing strategy involves examining several aspects of business, the major
ones being the market, the mode of entry, and the specific marketing
programme (Kotler and Armstrong, 1997). Application of these concepts to
Bumiputera businesses in the international tourism industry is presented
below.
Selecting the Market
Some important deductions can be made from the environmental
scanning. With a marked decline in the US economy and the emergence of
new ones, Bumiputera entrepreneurs are advised to explore possibilities in
developing countries such as China and India. More significantly, because of
ties which are forged through religion and culture4, the Muslim communities
in these high growth countries may actually be the best market segment.
Consideration must also be given to trends in tourist arrivals. Studies
(Utusan Malaysia, March 25, 2001; ___, April 24, 2001) have shown that
even though ASEAN visitors remain as the largest group, a substantial
increase has been recorded in the number of Central and South American,
Indian and Scandinavian arrivals. Table 1 depicts these statistics.
Table 1 Growth in Tourist Arrivals by Home Country
1999 2000 ∆
Home Country
(000) (000) (%)
ASEAN 6,500 7,182 10
Japan 400 456 14
China 300 425 42
Taiwan 230 215 -6
India 46 132 187
Australia 200 237 18
Scandinavia 17 49 188
Central/South America 13 68 423
United Kingdom 210 238 13
United States 155 184 18
Selecting the Mode of Entry
Previous works (Erramilli, 1990, 1991, 1992; Erramilli and Rao, 1993)
have identified that the internationalisation of service firms has mostly been
done through foreign direct investment and contractual arrangements. This
paper notes that the above strategies, due to their complexity and financial
requirements, are suitable only for larger companies. It also proffers that
although obstacles faced by smaller enterprises such as lack of know-how,

4
Read Clark et al. (1996), Crotts and Erdmann (2000) and Knight (1999) on the importance of
culture to services and tourism marketing.

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experience and networks have been identified (Eshgi, 1992; Leonidou, 1995;
Luostarinen and Welch, 1993), there has been insufficient effort to find the
solutions. To this end, Bjorkmann and Kock (1997) offer some perspectives
to the internationalisation of small service businesses. In their study, they
find that although most preceding works have revolved around outward
internationalisation, the more effective mode of entry for smaller tourism-
related businesses is inward internationalisation. Another study (Hastings
and Perry, 2000) emphasises the importance of relationship marketing to
service industries, as opposed to the transactional approach. It discovers that
export growth in a particular service sector may be attributed to its ‘twinning’
strategy with certain goods exporters, instead of entering the foreign market
directly. This pattern can be viewed as consistent with the Internationalisation
Process Model (Johanson and Vahine, 1990) and ‘client following’ or
‘piggybacking’ strategy mentioned earlier.
The above findings have enabled the current study to suggest ‘inward-
piggybacking’ as the most appropriate mode of foreign market entry for
Bumiputera businesses in the tourism sector. It goes a step further by
recommending multinational corporations (MNCs) operating in Malaysia as
the ‘twin’ in this strategy, based on the following factors:
i. MNCs contribute a substantial portion towards international business; in
Malaysia, investment by MNCs make up 40% of total new investment
and 40% of total new employment in year 2000.
ii. MNCs have experience, branches and business networks in hundreds of
countries all over the world.
iii. Transactions with MNCs may involve foreign exchange, which itself is a
form of international business (Knight, 1999).
Applying the strategy to the previous section, the target market for
Bumiputera entrepreneurs should therefore be MNCs with branches located
in countries charting high growth in the third column of Table 1. Focus
should be given to those MNCs with branches in China and India due to a
high concentration of Muslim communities in these countries. Next the
paper illustrates how the strategy is further fine-tuned and adapted to suit a
particular sub-sector. The travel agent is used in the example due to a high
concentration of Bumiputera businesses in that sector.
Designing a Specific Marketing Programme
A travel agent may initiate the process by first securing contracts with
the MNCs’ Malaysian branches, followed by contracts with the MNCs’
branches outside Malaysia and later by direct marketing to other companies
abroad. In the more advanced stages, the travel agent may choose to set up
foreign sales offices either in the form of a joint venture or wholly-owned

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subsidiary. This general process, along with specific action plans adapted for
a travel agent may be explained more clearly through Figure 2. Note how the
travel agent, which normally designs marketing programmes targeted to
individual consumers, must now repackage its products as a business service.
This strategy is considered feasible based on an earlier-mentioned study
(Leiper and Hing, 1998) which finds that the MICE and business travel
markets have contributed significantly to the growth of international tourism.
Additionally, business services has also been identified (Idris, 2001) as
another high-growth service sub-sector in Malaysia.
General Concept Specific Action Plans

Contracts with Promote holiday packages to HR managers as:


MNCs in Malaysia i. company’s R&R activity.
ii. reward to specific employees for
increased productivity.

Develop contacts with HR managers at HQ


and other branches through recommendation
Contracts with of Malaysian branch.
MNCs’ branches Propose that best employees be awarded with
outside Malaysia. a holiday in Malaysia.
Consider getting sponsorship for a ‘sample’
holiday for selected employees.

Promote packages to MNCs’ business


networks in foreign market especially their
Direct selling to subsidiaries, suppliers and customers.
other companies in Propose alternative concept of business-
foreign market. holiday among networks as opposed to pure
R&R..

Approach individuals within pool of contacts


on the possibility of a joint venture.
Establish local Once it is set up, entrepreneur must move to
operation in foreign the foreign market (operation in Malaysia to
market. be left in capable hands). Use personal
presence in foreign market to master local
cultures and explore other opportunities.

Fig. 2 Piggyback Strategy for a Travel Agent


Note how relationship marketing, networking and smart partnerships
with other related businesses such as hotels, restaurants and airlines play a
crucial role in the programme. Finally in the latter stages of the programme,

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as direct marketing gradually replaces the use of ‘twins’ and ‘middlemen’,


understanding of the local cultures and practices in the foreign market also
becomes critical to its success.

Conclusion
In sum, it can be said that international tourism is one of the most viable
industries in Malaysia for Bumiputera entrepreneurs. Their rich background
in unique Malay landmarks, cultures and arts is a strength that can give them
a huge advantage in the industry. However the correct marketing strategy for
their products must be concocted to ensure competitiveness in the global
marketplace.
The paper suggests that Bumiputera businesses in international tourism
position their products as a business service and devise their marketing
strategies and programmes accordingly. It recommends the use of inward-
piggybacking as the market entry mode and emphasises the importance of
relationship marketing, networking as well as smart partnerships. Another
significant suggestion is to explore new markets such as China and India with
special attention given to the Muslim communities in those markets. The
paper also stresses that in-depth understanding of the cultures and practices
within the foreign market is crucial to the success of the marketing effort.
Other managerial implications must also be observed. As foreign direct
investment has been established as the best market entry mode in the long run,
Bumiputera entrepreneurs must realise that the need to uproot and move to
foreign places may eventually arise. If and when that happens, they must be
prepared in every sense of the word for the experience. Leaving behind
everything dear and going to a place where everyone is a stranger is surely
very taxing: emotionally, mentally, physically, financially. Worse still, the
new place is not one where they are going to be granted special rights and
privileges. Bumiputera entrepreneurs must start getting used to the idea of
‘making it alone’.
Last but not least is the need for all relevant parties including
government agencies, non-government organisations and the entrepreneurs
themselves to put in considerably more effort and resources towards
developing Bumiputeras as international business players in tourism.
Academic researches too must be stepped up as past works have been found
to be very insufficient. On a personal note, it is hoped that this paper will
spur greater research activities in the area of international tourism, especially
for Bumiputera businesses. Specific fields of research which have been
raised in the paper that are worth developing further are potential markets and
sub-sectors, barriers to small and medium businesses, marketing mix and
environmental diversity.

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