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PESTLE analysis Malaysia

2. 2. PESTLE analysis PEST analysis (Political, Economic, Social and
Technological analysis) describes a framework of macro-environmental factors
used in the environmental scanning components of strategic management.
The assumption is that if the country is able to audit its current environment and
assess potential changes, it will be better placed than its competitors to respond
to changes.
3. 3. Malaysia (Political analysis) Malaysia is a multi-party democracy country.
The ruling Barisan Nasional party has been in power over 25 years. (This fact
provided the country with a high degree of stability, which is important factor for
businesses investing in the country.) Corruption does exist in the country. (This
fact may become a barrier to foreign businesses as it adds to firms costs and can
cause problems). Transparency International ranks Malaysia 47th of 180
countries in its Corruption Perceptions Index.
4. 4. Malaysia (Economic analysis) Malaysias main attraction as a location for
business is its vibrant economy. Over the last 10 years, economic growth has
averaged 7% per year. This rate of growth has lead to a large increase in
consumer incomes and therefore demand, which has attracted retailers such as
IKEA, Tesco and Carrefour. Malaysian location makes it ideally placed to
engage in international trade. Exports account for 37% of Malaysias GDP and
the country achieves a healthy current account surplus.
5. 5. Malaysia (Social analysis) The Malaysian population consists of three main
groups: Malay (60%), Chinese (30%) and Indian (10%). This mix of
populations gives Malaysia a rich and vibrant culture, and the country is seen as
an example of racial harmony as the different populations have existed peacefully
together for years. The country is predominately Islamic in its religion but its
only the Malay muslims who are bound by Islamic laws; the rest of the population
are free to practise their own religions.
6. 6. Malaysia (Social analysis) cont. The mixture of religions in the country gives
rise to a large number of religious celebrations - Malaysia has more public
holidays than any other country. The cultural differences mean that businesses
entering the country will have to adapt their products and business practices to
suit the needs of the population.
7. 7. Malaysia (Technological analysis) The Malaysia is still need to develop its
technology to enable it to compete in international markets. In 1996, the govt.
initiated the Multimedia Super Corridor (MSC), which is a strip of land stretching
from the central business district of Kuala Lumpur to the out-of-town Kuala
Lumpur International Airport. This corridor hosts more than 360 multinationals,
including foreign-owned and home-growth Malaysian companies, all focused on
multimedia and communications products. It continue to expand and attract
world-leading ICT companies.
8. 8. Malaysia (Technological analysis) cont. The high levels of investment in
training and education, including the creation of a number of Smart Schools, and
an excellent infrastructure, including a brand new town called Cyberjaya.
Cyberjaya is a self-contained intelligent city with world-class IT infrastructure.
Its this level of technological support that makes Malaysia an attractive place for

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foreign firms to do business. In fact, Cyberjaya is considered one of the top

three destinations for business support services and outsourcing in the world.
9. Malaysia (Legal analysis) The Malaysian legal system is based on British
common law, although Islamic law is applied to the Muslim population. The
British law element can be seen as an advantage to firms investing in the country
as the law will be familiar to them. However, although the legal basis of the
system is British, many of the punishments for those who break the law are far
harsher - the death penalty and flogging are still widely used. Therefore,
investing in a foreign country need to be familiar with the laws there and confident
that they will be applied fairly.
10. Malaysia (Environmental analysis) The rapid development of Malaysia has
come with high environmental costs (negative externalities). According to a
data from the UN, Malaysias deforestation rate is increasing at a faster rate than
other tropical country. Since 2000, the country has lost an average of 140,200
hectares 0.65% of its forest area per year. Much of the countrys land that
was once rainforest is now given over to the production of palm oil, which is used
for the processing food we eat and as a source of biofuel.
11. Malaysia (Environmental analysis) cont. Malaysian environmental impact
has been criticised by environmental groups as it has a devastating effect on the
habitats of some rare wildlife. Malaysians, and particularly the govt. have little
time for these criticisms and see them as evidence of Western hypocrisy over
environmental issues. However, Western companies need to be careful that
they arent seen to be participating in this environmental damage as they may
face demonstrations and protests from pressure groups such as Greenpeace and
the World Wildlife Fund.
12. Sources http://www.cipd.co.uk/hr-resources/factsheets/pestleanalysis.aspx
http://en.wikipedia.org/wiki/PEST_analysis The article Emerging markets
The case for Malaysia. Peter Imeson analysed Malaysia as a destination for
foreign direct investment using PESTLE analysis. September 2010.