PART A: PESTEL analysis on the external business environment of Malaysia based whisky industry. Political factors
According to International Trade and Industry Minister Datuk Mustapa Mohamed (2010), there will be no tariff reduction on the export of alcohol from Malaysia. This will become a threat to the whisky industry in Malaysia as the price of the whisky will remain high in global market and thus they will lose the competitive advantage on it. The demand of their products will drop as the selling price is high compared to others.
Based on the Budget 2011, Prime Minister Datuk Seri Najib Tun Razak (2010) said that the government will not further increase the excise duty on the alcoholic beverages for the coming year. This will not further exert the pressure to the whisky industry and also consumers especially in this economic downturn. When the excise duty is not increased, the price for the whisky will not be further raised and therefore the industry is expected to have growth in sales and profits.
As stated in Budget 2011, the government will increase the service tax from 5% to 6% starting on 1 of January 2011. The advertising expenditure of the alcoholic beverages is expected to be dropped as government proposed to impose service tax on paid television broadcast services. The increase in service tax will definitely cause the fall in the will of whisky manufacturer and seller to advertise through the powerful media, television. As a result, the demand of consumers on whisky will decrease as they will not be aware of the latest news and promotions on whisky.
In the official statistics by Department of Statistics Malaysia, the Consumer price index (CPI) for alcoholic beverages has increased 4% in September of 2010(134.3) compared to the same month in 2009(130.3) in which the base year is in 2005(100). The increase of 4% in CPI for alcoholic beverages indicates that the price for whisky has increased by 4% in a year and this will further decrease the purchasing power of consumers for whisky. In other words, Malaysians need to pay more money for the same amount of whisky they consume. This is a threat to whisky industry as this will further decrease the demand. The consumers will switch their taste to other beverages instead of whisky and therefore the industry is expected to have a loss in profit.
According to Trading Economics, the unemployment rate in Malaysia was reported as 3.20% in the third quarter of 2010 and this has decreased by 0.4% as compared to same quarter in the last year. This brings a good sign and opportunity to the whisky industry as the workers in Malaysia are increasing. a)
More people are getting their job and contributing their skills and knowledge to the economy of Malaysia. With the workers available in Malaysia, whisky industry can expand its market by developing new products through research and development to attract more consumers. The whisky industry is also able to supply more by employing more workers in the market. Besides that, the geographical area of whisky industry can be improved and widened by opening more shops for sales so that the consumers can buy the whisky anytime and anywhere when they want it. In fact, workers are the basic element and component in the work of expanding the whisky industry. b)
From the point of demand, the decrease in unemployment rate will also increase the demand for whisky as more people are working and they have more ability to purchase whisky for better enjoyment of life.
2011 per capita income is expected to go up by 6.1% to RM28, 000, while income in terms of purchasing power parity will hit US$16,000 (Malaysia Budget 2011). When the income of Malaysians increases, the consumers will be more able and willing to purchase whisky, the luxury good to increase their quality of social life. This will then result in an increase of demand for whisky and boost up the sales of whisky. Whisky industry is...
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