Last Updated 10 Aug 2020

Analysis and assessment of the Malaysian Business Environment

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Business is very complex and thus before entering into any new venture evaluation has to be done on the various aspects affecting the locality intended for the venture. Malaysia has good economic attributes though of late the economy has been experiencing problems. Malaysia has a federal government headed by a king and a state government headed by a prime minister. These two governments make all legislatures governing the country. The country has various departments regulating trade, business and finance. Malaysians value culture and ethics.

The country has many resources that are necessary in business. The country is thus very potent for business ventures. Introduction Business is a very diverse and complex sector in any given region worldwide. A proper evaluation of business in a locality thus entails being able to assess all the different aspects and areas that can affect business, whether positively or negatively. In this essay, we shall assess Malaysia and all the aspects and factors that either facilitate or hinder business in the country.

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Assessing Malaysia’s Potential for Business The Malaysian profile Malaysia is a country in Asia that neighbors Indonesia, Philippines, Brunei, Thailand and Vietnam. Initially colonized by the British since 1786, Malaysia got independence on 31st August 1957, after which the country entered into a federation with Sabah and Sarawak (Barbara and Leonard 1984, p. 5). They continue to say that the country is divided into two sections by the South China Sea, and thus the country is largely surrounded by water and has a total area of 127,354 square miles.

Malaysia had an estimate population of 28,310,000 as of 2009, making it the 44th most populated country in the world, with the capital city of the country being placed in Kuala Lumpur, although the main administrative city of the country is Putrajava (The Malaysian MITI website 2010, p. 1). The Malaysian Economic attributes Economically, Malaysia has seen both tough as well as good times, with the main influences to the economy being trade, tourism, manufacturing, agriculture and mining (The Malaysian MITI website 2010, p. 1).

Malaysia has worked as a hub for oceanic trade since time immemorial due to the availability of porcelain and spices in the country. It was mainly due to these products that the country was incorporated in oceanic shipping routes. Malaysia was predominantly more engaged in agriculture and mining as the main influence to the economy but presently, manufacturing and tourism take a leading role in economic growth; manufacturing exports range from the vehicles to electronics and electrical products, while tourism is emphasized by the many beautiful beaches and tourist attractions in Malaysia’s rich geography (The Economy Watch website 2010, p.

9). The major indicator of Malaysia’s sustainable economic growth is the Petronas twin towers, one of the world’s tallest buildings. However, the economic growth rate values realized from assessment of the GDP rates for the country over the years indicate that recently the country has been struggling economically, with the GDP falling from an all-time high of 7. 10% in 2005 to as low as -2. 8% in 2010 (The Index Mundi website 2010, p. 1). Despite this problem the country has an official foreign exchange rate of $207.

4 billion with the Malaysian currency, the ringgit (MYR), doing fairly nice against major currencies like the US Dollar. The Malaysian Purchasing Power Parity has also been exceptional, with the latest values being $378. 9 billion, and the GDP rate per capita being $14,700 currently, a clear indicator of the potential that Malaysia has for business (The Index Mundi website 2010, p. 3). For a country with such a huge population, Malaysia has been near ideal in its employment capacity, with the unemployment rate coming just about 5% and inflation rates have been minimized from 5. 4% in 2008, to the meager levels of 0.

4% in 2010. Malaysia has also been very objective in promotion of trade both locally and internationally through its multi-lateral trade system as well as through entering into various agreements and setting of trade tariffs that promote business. One such agreements that Malaysia has entered into to facilitate trade is the Free Trade Area agreement that is made by the Association of South East Asia Nations, which Malaysia is part of, which allows member states free trading without import or export duties under the Common Effective Preferential Tariff scheme (The Malaysian MITI website 2010, p.

2). With regards to Australia and Malaysia, there is one trade agreement made with Malaysia individually and another with the ASEAN body. The ASEAN, Australia and New Zealand Free Trade Area provision agreement was aimed at creation of a Free Trade Area between Australia and ASEAN countries with an attempt to promote trade between ASEAN member countries and Australia in the aspects of investment, trading and financial services.

The Malaysia-Australia trade agreement for a bilateral Free Trade Area was aimed at addressing high product tariffs and non-tariff measures, establishment of mutual recognition arrangements on product standards, and facilitating two-way investment flows (The Malaysian MITI website 2010, p. 3). Politics and the Political System in Malaysia Malaysia houses different political cultures since it is a federal constitution elective monarchy headed by a King elected from the nine hereditary Sultans of the states in Malay every five years (123 Independence Day website 2010, p.

4). The country’s legislation is made jointly by the federal monarchs and the Parliament which is sub-divided into the House of Representatives and the Senate. The country’s executive powers are vested in the Prime Minister, who heads the cabinet of the country. The Malaysian constitution divides power between the executive judiciary and the legislature. Power separation occurs at both state and federal levels, and what the federal assembly enacts as laws affects the entire country (123 Independence Day website 2010, p.

4). However, the power to make laws is distributed between the federal and state governments via the federal, state and concurrent list; the federal list influences external affairs, internal security, defense, civil and criminal law, citizenship, commerce, finance, health and labor; the state list regulates agriculture, land, local government and religion; the concurrent list influences social welfare as well as town and country planning (123 Independence Day website 2010, p.

4). Factors affecting business in Malaysia: The Malaysian Business Environment Business environment evaluation is an important tool in prediction of the profitability of a business and thus it is important to run such an evaluation on Malaysia. Thus, we must assess the various environments that are of most influence to a business, in this case the legal and regulatory environment, as well as the socio-cultural environment. The Malaysian Legal and regulatory environment

Legal processes and petitions in Malaysia are done in various courts depending on their context. There are regional courts for settlement of domestic and criminal disputes, industrial courts to implement set industrial and labor laws, and the tribunal for consumer claims to deal with consumer issues. The Regional Center for Arbitration based in Kuala Lumpur can also be used for settling disputes. Local and international business in Malaysia is regulated by several government ministries in conjunction with each other.

These ministries are: the royal customs and excise department which regulates duties on goods, the Malaysian Central Bank which regulates exchange rates, the Malaysian Industrial Development Authority which regulates investment into the country, the Inland Revenue Board which regulates taxes on commodities, and the Malaysian Ministry of International Trade and Industry which regulates exportations and importations (Hauser Global website 2010, p. 7). The Socio-cultural environment of Malaysia

Malaysia is a country with an amalgamation of different cultures, languages and ethnic groups combined together. We have Bumiputeras making the larger composition, the Chinese taking the second-largest percentage composition, Indians making the third largest group of the population, and also the minority which comprises of foreigners and other ethnic peoples (Hauser Global website 2010, p. 7). The Malaya language is dominant and widely spoken throughout the country. Religious-wise, the country has a mix of Hinduism, Islamism, Buddhism and Animism.

Business in Malaysia is in a major sense based on trust and communication (Hauser Global website 2010, p. 7), and it is thus very necessary to build relationships with potential partners to ensure the success of a business. Most business dealings in Malaysia are guided by subjective feelings and religion-based inclinations rather than empirical evidence. Working practises in Malaysia are also very different from those observed in other world countries since religious aspects have to be incorporated in business processes.

Additionally, punctuality is valued in Malaysia and depending on whether business is being done with the government or other companies; correspondence with the government has to be done in Malay while other companies prefer English (The Geert Hofstede website 2010, p. 3). Protocol and respect for authority in Malaysia are also important factors to observe since vertical hierarchical power structures are used widely and also due to the fact that working relationships between superiors and subordinates is very official in the country and also from the fact that business relationships between colleagues are also based on mutual respect.

Consumer attitudes in Malaysia are guided in a very major way by how much a company or a brand impresses and therefore impression is very important (The CBS Interactive Business website 2010, p. 1). Availability of resources Malaysia is endowed with many human, natural and artificial resources. We can gather this from the fact that the country has a high skilled labor index, it is a major exporter of various agricultural products, and also from the fact that it is also a major player in industrial exports in Asia (The Malaysian MITI website 2010, p.

3). The country is also capable technologically and infrastructure-wise and it has a wide range of educational and social amenities at all levels. Due to the income generated from an economy that is doing well, Malaysia is generally financially adept and very promising in terms of business. Ethics and Social Responsibility aspects It is also very important to consider that Malaysia has very strict rules on ethics and responsibility especially when it comes to business.

This is to say that application of most western practices in business becomes a problem especially since religion has to be incorporated into the culture of most businesses (The Index Mundi website 2010, p. 4). Moreover, Malaysia business culture tends to emphasize that values drive businesses and thus responsibility and ethical practices are the core belief to good business dealings. Conclusion

In evaluation of Malaysia, we can realize that despite the few aspects of religion and culture that can be rather tricky to adopt in any business structure, an investment into the country could bring lots of income especially due to the fact that the country has an economy that generally does well, it has a free trade agreement with Australia and also due to the strength in infrastructure and resources, there would be minimal problems in doing business in the country. Thus, a venture into the country can be very profitable to any company investing there.

It is also advisable to maintain high standards of ethics and responsibility. Recommendations I would however recommend that agreements be reached with a Malaysian bank in the country on the exchange rate conversions of currencies on the income got as well as the cost of setting up the business in Malaysia. Additionally, a working culture that incorporates religion and the Malaysian values should be introduced in the new business. Finally, since impression is a very important in Malaysian business, it should be emphasized, with lots of effort being put in developing good relations with prospective partners and clients.

References 123 Independence Day website. 2010. Malaysia: Politics and political systems, pp. 4. <http://www. 123independenceday. com/malaysia/political-system. html> Barbara S. and Leonard V. 1984. The History of Malaysia: The journey since Independence. Basingstoke, Hampshire, United Kingdom: McMillan Publishing Press Ltd. , pp. 5. Hauser Global website. 2010. An overview of the Malaysian legal system, p. 7, <http://www. nyulawglobal. org/globalex/malaysia1. htm>. The American Central Intelligence Agency website.

2010. World Fact book: Malaysia, p. 37, <https://www. cia. gov/library/publications/the-world-factbook/geos/my. html>. The CBS Interactive Business Network website. 2010. Consumer perceptions on the consumerism issues and its influence on their purchasing behavior: a view from Malaysian food industry, p. 1, <http://findarticles. com/p/articles/mi_m1TOS/is_1_11/ai_n31140809/? tag=content;col1>. The Economy Watching website. 2010. Malaysia Economy Review: Trade, Exports and Imports, pp.

9-21, <http://www. economywatch. com/world_economy/malaysia/export-import. html>. The Geert Hofstede website. 2010. Malaysian Cultural dimensions, p. 3, <http://predicate. wordpress. com/2009/06/17/geert-hofstedes-cultural-dimensions-on-malaysia>. The Index Mundi website. 2010. Malaysian Economic Attributes, pp. 1-4, <http://www. indexmundi. com/malaysia>. The Malaysian Ministry of Trade and Industry website. 2010. Trade Information: Free Trade Agreements, pp. 1-3, <http://www. miti. gov. my/cms/index. jsp? whichSite=MITI>.

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