In the modern economy, every nation has recognized that China for a long time now has maintained to be one of the fastest growing countries economically around the globe. This high expansion rate has been facilitated by the numerous figures of intercontinental corporations that are enthusiastic to throw in investments into the nation. Nevertheless, China presently is not the lone nation in the Asian hemisphere that presents a range of economic prospects. Indonesia, Japan, India, South Korea, and Malaysia are amongst other countries that form a positive investment atmosphere to foreign and transnational companies. In relation to dynamic trade climate, complimentary trade policies, and diverse markets, governments, investors as well as corporations have for a time now been on the trade move so as to build worth for their respective business ideas.
Origin of the Idea
Starbucks Coffee Company is a transnational business group that focuses on the trade of coffee as well as coffee related products. The company has a big branch in Malaysia called Berjaya Starbucks Coffee Company. Due to massive recession and global financial crisis, the branch has been getting a sloping financial growth due to low market saturation and profit generation. Seemingly, even though the Malaysian trade market is not a good favor for the coffee industry, but again it is a prospective market for clothing and fashion design goods. Fashion products targeting the young generation as well as the middle class would find a superb market in the country since wealth and income is fairly distributed within those levels. Therefore, favorable variables and market dynamics ought to be examined in relation to the Berjaya Starbucks Coffee Company and their probable consequences on the feasibility study of this potentially advantageous opportunity.
Methodology Used To Evaluate the Idea and Rationale
Transnational Situation Analysis
Every culture has their purchasing tastes and preference, which is majorly based on their cultural beliefs and practices. For instance, the Africans are known to purchase everything so long as it is not expensive. On the other hand, the Americans will acquire anything so long as it is important to them despite the pricing exaggerations. The Europeans are known to first consider the cost and also search for alternatives prior to going ahead with a purchase. The Malayan people prefer preserving their culture and beliefs first before making a purchase in spite of its charge. Hence the Berjaya Starbucks Corporation ought to diversify or rather convert its operations into the fashion industry and be referred to as the Berjaya Starbucks Fashion since the opportunity at hand is quite promising in terms of returns.
The establishing of Berjaya Starbucks Fashion Company in Malaysia needs thorough background research on the form of beliefs and traditions, which can be sustained by fashion. This concern is fundamental since it avoids the position of the incorrect products in an existing market. The Asians are rich in custom and traditions; as a result, most of their operations and deeds aimed at conserving their culture and this make them avoid or ignore the aspects of westernization. With reference to Graph 1 in Appendix A, numerous economic features, which are facing the globe, are responsible for decreasing the quantity of customers in the Starbucks Company in Malaysia. Moreover, the financial crisis facing the country majorly limits the figure of active clientele; thus posing a sustainability test to the coffee company (Kotler, 1999).
The Wal-Mart company was making loads of profit when its operations were within the U.S. due to its strategic business arrangement. However, when it ventured into the China market, few people became interested in shopping with Wal-Mart since the company had not restructured its business strategies to capture the China market. Therefore the company had to revise its system of management by acquiring local staff and managers to run their operation (Baines, Fill & Page 2011). This move fixed the state of affairs and the Wal-Mart branch was back into profit making. In the same manner, the Berjaya Starbucks Fashion has to change its corporate strategies being used in the coffee business and install Malayan management system. Generally, this action would swell the figure of the employed Malayans in the company as well as in the country and also offer customers with services and products that replicates their tastes, preferences, and culture (United States Securities and Exchange Commission, 2008).
The country of Malaysia is developed and the majority of its citizens are employed by state and private owned organizations as well as in various industries. Most of business ventures thrive well in the urbanized regions due to income distribution and also a variety of socio-cultural trends which occur in the urbanized areas as a result of heavy existence foreign investors and tourists. The fashion market rarely put into consideration the common man when designing their products as their main target is the rich clique in the society. Therefore due to the high price of designer products, majority of the population is locked out of its bargaining influence (Rothschild & Stiglitz 1976). Unluckily for the low class populace who reside upcountry have no access to designer products as fashion houses have not yet established them in the rural areas (Silverstein, Michael & Neil, 2003).
The income allocation in Malaysia is fairly equable thus making the economic environment further encouraging and highly attractive to local and foreign investors as well as all the customers regardless of their strength bracket. In order to enter an already established market with giant companies who control it is a bit tricky and require a strong business strategy. For instance, the famous Christian Dior fashion designers might not drop in their market share subsequent to the entrance of a fresh fashion designer. Therefore, the Berjaya Starbucks Fashion ought to employ a unique criteria and strategy so as to secure new customers by reaching out to the unexploited customer base in the rural areas, which has for ages been ruled out by the other fashion dealers simply because of their low financial power (Silverstein, Michael & Neil 2003; pp.40-53).
The corporate approaches that lots of companies make use of are mental or rather emotional in nature. They use misleading products promotions and advertisements as well as lowering their products’ price so as to attract new customers. This is not the case in Malaysia since the people first consider to what level the product conform to their beliefs and culture. Thus the Asian business culture characterizes the Malaysian market and the Berjaya Starbucks Fashion Company ought to bear that while coming up with new corporate strategies (Silverstein, Michael & Neil 2003, pp.76-77).
Presently, the Berjaya Starbucks Coffee Company has more than 115 coffee stores across Malaysia and the amount of clients served yearly in each store surpasses the 1,700,000 mark, including even the returning customers. Nonetheless, such customer index will not be guaranteed in the new Berjaya Starbucks Fashion venture since fashion products carry a higher cost (Piezer 2005). Customer analysis ought to dwell on demographics and the income generation spectrum so that the company determines its target customers and their locality. At present, fashion designers target only the high-end clients who basically form about 5% of the Malaysian population. Moreover, many of fashion stores are located in only the wealthy cities but the national demographics aspect mainly on the distribution of income reveals that more citizens in the middle class reside in sub-class metropolitan areas where designer shops are not established (Harris & Ogbonna 1999).
Everyone in Malaysia has clothing, jewelry, and even shoes whether the products are fashion designed or not and whether they are original or fakes. In essence, Berjaya Starbucks Fashion will face stiff competition from boutiques, open air markets, supermarkets, and still charity programs enthusiastic to dress the underprivileged Malaysian population. All these businesses deprive majority of fashion designer companies the capacity to get hold of market saturation. Most people trust goods found in boutiques and supermarkets but these outlets obtain merchandise from various suppliers and stock quite a diverse collection of products and therefore customers have the chance to choose their preferred commodity (Stoner, Freeman & Gilbert 2003, pp.176-184).
The already established fashion designer companies hold an upper hand in terms of competitive advantage and thus Berjaya Starbucks Fashion will have a challenge of adaptableness. Both the suppliers as well as customers have to be convinced otherwise so as to crate trust in the new market player. The process of acquiring new customers is somehow easy as much as the target crowd is precisely laid down in the business strategy. On the other hand, most existing designer companies have already formed a cordial correlation with suppliers; thus, for them production is cheaper (Piezer, 2005). With the new entry of Berjaya Starbucks Fashion Company, it will come across difficulties of getting suppliers of raw materials (Mitussis, O’Malley & Patterson, 2006).
Berjaya Starbucks Fashion basically has the prospective of running successfully amid competition or even with no competition since the company has a broad scale of opportunities at its disposal. The Malaysia County is a heavily populated owing to the intense immigration of Chinese people who escape the one child rule in their country. These immigrants provide inexpensive labor to foreign and local companies in Malaysia (Dibb, 2001). Therefore cheap labor is a major opportunity that the company would experience. More so the company will tap the unexploited sector which is the lower and upper middle class population. Also 45% of the Malaysian citizens are middle class thus it will have a higher percentage of market share.
Investment relies entirely on the company’s strengths, and capabilities to handle operations pleasingly. The Berjaya Starbucks Coffee Company has attained an international recognition since the corporation is transnational and this forms a major strength that the new Berjaya Starbucks Fashion can possibly use to draw fashion customers. Rebranding might be challenging to its operations but the fashion designer company has the superior advantage in selling its products due to its former global acceptance and recognition. Moreover, the former coffee company branch has extensive market knowledge which saves the Berjaya Starbucks Fashion the cost of carrying out feasibility study of the market (Dibb, 2001).
Supplier considerations: majority of suppliers are unwilling to sign agreements with fresh market entrants due to uncertainties. Therefore they tend to charge dearly thus high cost reflected on the end product. Also the fashion design industry in Malaysia has had strong and well established companies since world war two and the clients have already connected and gotten trust from these giant designers.
The Malaysian government regulates all the operations of local and foreign companies and the policies hinder economies of scale and also diversification of business. In addition, the state approves free market therefore even though Berjaya Starbuck Fashion company might be the pioneers to target the middle lower/upper class: but the market is open to everyone thus threats of restraining the market share.
Recommendations Regarding Implementation
Before instantly embarking on the project, the company ought to carry out the PESTEL analysis since it helps in scanning and identifying the external environmental factors which might seemingly affect the vital market variables and this in turn could influence the company’s costs, and also demand and supply levels. Therefore PESTEL study would be a valuavle device for fully understanding the fashion industry market growth or even decline and also the direction, potential, and the position of the new business venture.
Democracy has been an issue in most developing countries and Malaysia is not an exception. Political parties hold office and new leaders come into power every general election and since most of them append to power with diverse priorities, this builds up political debt which puts the economic sector at greater risk. These risks include changing global relationships, unstable trade regulations, pending trade treaties as well as socio-cultural projects. Therefore the political setting in the country stipulates for a relatively flexible and dynamic business strategy that can prevail in any environment (Milgrom, 1981).
Environmental conservation is a global initiative that ought to be observed by everyone not forgetting local and foreign companies alike. So it is not the responsibility of Geneva Convention to fight for environmental conservation and hygiene therefore all industries and companies have to have preservation mechanisms to conserve the environment (Vink, 1996). Berjaya Starbucks Fashion ought to use recyclable materials in its production processes so as to preserve the atmosphere and also oblige the corporation towards achieving its environmental responsibilities (Milgrom 1981, p.97).
The public ought to be sensitized on taking up environmental responsibility and the Berjaya Starbucks Fashion company can take up this responsibility by printing educative disposal notes on the packaging units they use (Trompenaars& Woolliams, 2001). Moreover, the company can also carry out online campaign publications regarding disposal of waste matter as a corporate social responsibility initiative and this is a further means of sensitizing the general public on the significance of undertaking environmental conservation (Schelling 1984, p.46; Barth, Hacking & Ash, 1988).
Fashion has always been an overrated industry since the products they come up with most of the times don’t replicate comfortability, quality, and the production costs (Taylor 1998). For instance, diamond is a valuable metal which is extensively used in fashion designing but many customers complain a lot on how impure the product is after purchasing it. Therefore, affordability and quality are the major issues the Berjaya Starbucks Fashion plans to address.
The Malaysian country is still a developing but it enjoys quite a stable economy. Nevertheless, the country isn’t as technologically developed as Japan or the U.S. (Trompenaars & Hampden-Turner 2001). Thus investors in the fashion business are probable to experience mechanical inadequacies related with technology. Considering a total shift from full coffee production to fashion business requires buying of heavy-duty equipment. Outsourcing of technology from well established companies would be the first step and thereafter built a technological base in the company (White, 1964).
In every recommendations and strategic planning for that matter has limitations and how to maneuver through them becomes the challenge. For instance, the external environmental factors measured by the PESTEL analysis are subject to dynamism and therefore alter from time to time. In fact some of them change in a day, for instance a political coup. Therefore they may become complicated to predict. The process too is costly and time consuming since for the analysis to be effectively done there has to be massive collection of data from exterior agencies. Also, obtaining the latest data is quite a challenge. Since the updated information isn’t readily available, there might arise the issue of coming up with many assumptions and definitely analysis based on speculative assumptions is probable to direct to enormous planning disasters.
Starting a new business venture in a new environment is sometimes tricky majorly for the inexperienced companies. Multinational companies tend swim through properly across establishing of new businesses due to their massive experience in the field. However, feasibility of new markets doesn’t mainly lie on the experience part but also on other factors like consumer trends, political environment, socio-cultural aspects, competition, and also the internal environment within the company. Therefore the viability of Berjaya Starbucks Fashion opening new operations in Malaysia aren’t dependent on the company’s former business experience but the business strategies they would lay down among other factors