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MINISO external environment analysis (PESTEL)

In this case, Malaysia is selected as environment analysis model

Political environment

Malaysia’s current political situation bring impact towards MINISO in retail business. First and foremost, Malaysia’s government policies will affect MINISO business operation, such as Malaysia imposed GST and withholding tax toward business companies. Amarjeet Singh from Ernst and Young spoke about that businesses in Malaysia facing heavy tax burden. As example, the withholding tax enforced which companies must pay a tax on services rendered by foreign consultants even when the service was not performed in Malaysia. MINISO as a foreign company will be charged tax since the company origin from Japan rather than Malaysia (IDEAS 2018). The Senior Fellow of IDEAS, Dr. Carmelo Ferlito spoke that Malaysia’s tax system and incentive scheme with reasonable method, combined with political stability environment with good infrastructure of the country made Malaysia become a favorable place for business operation (The Star 2018). However, the alarming growth of regulation and government role also one of the potential threat towards business companies. MINISO favors operate their business in Malaysia, however these taxes imposed by government and intervention of government affect MINISO business in Malaysia negatively. Moreover, due to government less control on bribery issues, bribe become a popular issue in Malaysia business world. Businesses tend to give bribes to regulators rather than jump through hoops to navigate a complex and bureaucratic regulatory system which create huge different of MINISO corporate culture between Malaysia and Japan. In the other hand, Tun Mahathir, Malaysia Prime Minister had revised “Look East” policy which encourage business operator learn from Japanese corporate culture bring a great opportunity towards MINISO as a Japan company. “Look east” policy use to build Malaysia’s economy that able to reach the heights of more advanced Asian neighbors (Nikkei 2018). Last but not least, there are less complex and more friendly regulations for establishment of retail businesses such as MINISO retail store for the aim of faster the significant reformation progress of Malaysia and improving well-being of citizens. For ensuring sustainability of retail business, regulations set by Ministry of Domestic Trade, Co-operatives and Consumerism need to be obeyed and used as reference when conducting business (Official Portal Ministry of Domestic Trade, Co-operatives and Consumerism 2018).

Economic Environment

Economic healthy of a country always determine by the Gross-Domestic Product (GDP). Malaysia having Annual GDP $314,500 Million USD during 2017 which grew 5.9% compare to 2016. According to the GDP statistics state Malaysia as healthy country economy (Country Economy 2017). While Malaysia population which only 32 Million brings total $9,828 USD as GDP per capita which indicate Malaysian purchasing power relatively higher than low middle-income country such as Bangladesh. Purchasing power higher influence total revenue, sales and business of MINISO, the higher purchasing power, the higher revenue earns annually. Moreover, change of government party in Malaysia also leads to change of policies and zero-rated Goods and Services Tax (GST) that effective from 1 June 2018 is one of the new policies that delight various business owners and business investors. This can aid to reduce MINISO business expenditure which can pass the cost saving advantage to customers in retail industry. Retailer initial fear that sales would drop as people anticipate the zero-rated GST implemented on June 1, thus some retailer starting “Great Sales Today” campaign in order to remain sales during 18 May until 31 May 2018 before officially reduce GST become 0% (Malaysia Digest 2018). Domestic Trade, Consumerism and Cooper¬a¬tives Ministry enforcement director Datuk Roslan Mahyuddin given time to retail industry retag their goods price fol¬¬lowing re¬¬quests for a grace period (The Star 2018). Mr. Hong Chee Meng (Sundry Goods Merchants Asso¬ciation president) said the abolition of GST augured well for the retail industry and able to increase retailers’ sales during “Tax holiday” started from 1 June until 1 September 2018 due to re-introduce of Sales & Services Taxes (SST) with 10% on certain products which confirmed by Finance Ministry of Malaysia (The Star 2018). In conclusion, factors above create great opportunity for MINISO as retail business in Malaysia.

Socio-culture Environment

According to Worldometers (Worldometers, 2018), the latest population in Malaysia is 32,042,458 (Appendix 1). Nationality is Malaysian. Malaysia is a multi-cultural and multi-racial country which is well known for social integration and cultural incorporation (Malaysiaexplorer 2018). Malaysia is rich in varied social and geographical history mean that its culture has been influenced by a wide range of individual beliefs. Malaysia is the motherland for many racial groups such as Malays, Chinese, Indians, indigenous groups and other Asian groups. All Malaysian Malays are Muslim, almost 60% of Malays are in the Malaysian Population (ExpatFocus 2018). Islam is the official religion in Malaysia and Bahasa Melayu is the official language. Muslims made up of the largest sector in Malaysia population. The next larger racial group is Chinese people who lives in Malaysia, majority of them are Buddhists. Not forgetting Indian sector, they are also countless of Hindus included in Malaysia population. In retail industry, there are also different races in it that will also speak their own language but all of them will know the basic language which is Bahasa Melayu. Malaysians have their own religious festivals. For instant, Muslims they celebrate Hari Raya Adilfitri, Indians celebrate Deepavali and Thaipusam. Deepavali is also known as festival of light and Thaipusam celebrates at Batu Caves. As for the Chinese, they celebrate Chinese New Year which will be held within January or February annually. Christians they will celebrate Christmas every year end which is in December. MINISO as for the retail industry, workers will also celebrate those festival according to their religion. They will return to their hometown once the festival arrives because population in Malaysia is very respectful. Salaries must pay up to double-rated during festival as compensation for workers who work during holiday. Besides, retailer in Kedah, Kelantan, Johor and Terengganu state, their business operating hours working days are slightly different from Kuala Lumpur. These area retailers operating day are from Sunday to Thursday, while Friday and Saturday are the weekends for these states in Malaysia following by Islamic calender.

Technology Environment

Technology become important for retail industry in Malaysia as the advance of digital technology indirectly develop more e-retail New technology such as AI, cognitive intelligence, Internet of Technology (IoT) and distributed intelligence try to change retail landscape for the future (cheshnotes 2017). First and foremost, smartphone play significant role in retail business today. According to statistics, smartphone is going to maintain 1% annually for coming year, 14.5 million smartphone users in year 2015 and expected grow to 20 million above in 2020 (Appendix 2). However, 45% smartphone users made purchases using smartphone while 10% using digital wallets. (statista 2018). All these smartphones use by Malaysian installed various social media platforms and these platforms help retail company to spread and make things viral. For example, MINISO had just launch the new plush toy “The Bare Bear” incorporate with the respective company (Appendix 3). This message spread and viral among youngster and increase sales of MINISO within short period due to the viral marketing effect on social media by using smartphone. In addition, development of online e-commerce for retail sales affected by Internet penetration and increasing online shopping site. B2C e-commerce market in year 2018 shows that growth rate projections for online retail above 20% for next 2 years and the mobile accounted become 50% for Internet traffic(Appendix 4). However, MINISO doesn’t own any E-commerce store online in worldwide. MINISO should operate own online e-commerce store to give customers convenience and increase availability 24/7 anytime and anywhere. Customers now more rely purchase online through online shopping application and delivery to the doorstep rather than visit to physical store. Thus, online store is essential for MINISO in this technology advance global environment. Besides, Information Technology play a significant role to overcome the complex retail operation by controlling the information and data in order get competitive advantages in retail industry. The Multimedia Super Corridor Malaysia was established in year 1996 with the purpose of create a competitive cluster of local ICT companies and a persisted ICT industry. It allows Malaysia registered businesses with 1.1million into high demand of new economy. Point of sale system (POS) to help MINISO run the business operation and offer a range of method to enter into purchases which is manage customer or order from a single dashboard (capterra 2018). This is because when customer select a product then decides to make payment at counter, the cashier will scan the barcode of the goods then the amount of price will be come out on the screen that the customer is going to pay such amount of money. (expertmarket 2007). However, it able to reduce customer waiting during payment and ensure that cashier wouldn’t make mistake plus easy to process additional transaction. The efficient of barcode for supply chain enable 21% shorter lead time for warehouses operator, 42% lower costs for distribution centre while 32% fewer out of stock for retailer. (retailtechnology 2015).

Legal Environment

Legal environment in Malaysia also one of the important factor that will bring impact towards MINISO business operation in Malaysia. Contract Act 1950 is one of the important Acts toward whole retail industry. Contract Act 1950 is related to the responsibility and the rights of the business company (Easy law 2016). MINISO as a foreign company require to understand well about this act to prevent involve in any lawsuit. In addition, Trade Marks Act 1976 also essential to the Retail Industry Company (Myipo 2011). MINISO need register their company trade mark logo from Registrar of Trade Marks in Malaysia to prevent any infringement issues. Thus, if any other people use the MINISO company’s trade mark with consent from the company, MINISO will have the rights to sue them. Furthermore, Sale of Good Act 1957 also is one of the significant elements in the legal environment towards the MINISO company (Agc 2012). Sales of Good Act 1957 (SOGA) is the act to protect the seller transfer the ownership of the goods to buyer with a fair price. Sales of Good Act 1957 is quick vital to the Retail Industry Company. Products from the wholesaler and manufacturer and sell to the retailer, the process of transfer the ownership of goods govern under SOGA 1957 in Malaysia. Majority of the business process of MINISO are related to the Sales of Good Act 1957. Last but not least, Malaysia also have Price Control and Anti Profiteering Regulation 2016 (Deloitte 2016). These regulations set a price ceiling of some products as the highest price of the products seller can be sell. MINISO must obey to the Act by setting all related products under price ceiling in order to compliance with this regulation in Malaysia.

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