1. Breaking into the Malaysian Wholesale and Retail Network as a Small SME Manufacturer: A Case Study Mohd. Murray Hunter School of Bioprocess Engineering Kolej Universiti Kejuruteraan Utara Malaysia

2. Underdeveloped Market Developing Market Developed Market

• Most Items Imported

• Fragmented with few large customers

• Heavy use of intermediaries

• No market segments

• Local production following international trends

• Cooperation with international firms

• Large customers developing although market still fragmented

• Beginning of market segmentation

• Open market to the world

• Own production with exports

• Markets adequately covered with products

• Full market segmentation

Hunter (1993)

3. Malaysia Underdeveloped Market Developing Market Developed Market Beginning to rely on imports again: Colgate, Unilever Aspect of market globalisation Market segmentation still weak; along ethnicity lines only Large customers developing bringing more market concentration Still undeveloped logistic systems Category management still in infancy Local firms exporting to the world Still many market gaps Global trends do not necessary follow Poor Innovation

4. Manufacturer National Distributors Wholesalers Consumers Hypermarkets Super- markets Sundry Stores Convenience Stores Chinese Medical Halls Malaysian Retail Market Channels & Structure

5. Hypermarkets

• Hypermarkets make up approximately 15% of the national market. Tesco (12), Carrefour (12) and Giant (20), dominate this sector. Makro (8) is a closed system for wholesalers and small business customers, although this policy varies from time to time. There are approximately 50 hypermarkets in Malaysia.

6. Supermarkets

• Supermarkets can be broken down into two categories. Those foreign owned and part of a chain like Jaya Jusco (7) and Giant (numbering around 65), locally owned groups like Fajar (16), Suiwah (6) and Econsave (16),(numbering around 100) and those locally owned independent supermarkets with no affiliations (numbering around 220). This is approximately 25% of the market.

7. Sundry Stores

• Approx. 80,000 in Malaysia in both urban and rural areas, majority independently owned small family businesses. Attempts have been made to franchise or develop chains like Felda and Pernama, but not so successful. This is about 30% of the market.

8. Convenience Stores

• These usually franchised stores are rapidly growing in numbers as both 7-Eleven & the petrol companies have seen opportunities to enter into the retail trade. Their market share is approximately 6% but rapidly rising.

9. Chinese Medical Halls

• Traditional Chinese medical halls are scattered across the country and often develop into a small supermarket or sundry store. They, together with pharmacies have around 14% market-share but this is losing out to the convenience stores and chain pharmacies. About 6,000.

10. Pharmacy

• Pharmacies primarily part of chains like giant, but still number of independents. They are specialist stores usually selling OTC and widening ranges to include herbs and nutraceuticals.

11. Other

• A specialist group that sells confectionary, OTC drugs and FMCG goods. Number around 200.

• Sell books, magazines, Newspapers, drinks, etc.

• An emporium group with 10 stores throughout Malaysia specialising in emporium items and some FMCG.

12. FMCG Market Fragmentation/Concentration Comparison Between Malaysia, Thailand, Hong Kong and Australia

13. Klang Valley & Central Region (N. Sembilan) 35% Southern Region (Johor & Melaka) 15% Perak 8% Penang 5% Kedah/Perlis 15% Pahang 8% Kelantan/Terengganu 8% East Malaysia 6% Approximate National Market Break-Up

14. Barriers to Entry

15. Market Fragmentation

16. Centralisation

17. Merchandising

18. The way of doing business

19. Guanxi

20. Financial Issues

21. Agadir Sdn. Bhd.

22. Start Up Strategies

23. Introduction Sales & Marketing Building Up Sales Skills Account Management Concept Sales Planning

24. Manufacturing Strategy

25. Growth Strategy

26. Product Strategy

27. Key Findings

• Malaysia is a much more complex market to achieve success in as a manufacturer even though it is still a developing market. Developed markets like Australia and New Zealand offer much more potential for Malaysian SMEs in terms of sales volumes, profits and positive cash-flow.

28. Key Findings

• The strategy of developing FMCG products specifically for the Malay market segment appears to pay off very well.

29. Key Findings

• Malaysian products can be of high enough standard in the FMCG category to be successful in developed markets.

30. Key Findings

• The Malaysian market does not at this point of time value innovation and innovative products from SMEs in the FMCG categories.

31. Key Findings

• It is possible by non-Chinese companies to break into the Chinese dominated retail market through the development of sales skills and adapting to their way of doing business .

32.

• There is a steep learning curve for the novice in the retail sales and distribution.

Key Findings

33. Key Findings

• Lack of ethics and bullying of large companies against small companies is common in the retail industry here in Malaysia.

34. Key Findings

• Supplier relationships are one of the most important factors in the success of an SME in Malaysia.

35. Key Findings

• SME manufacturers in the FMCG categories must work on margins of at least 100% to achieve positive cash-flows.

36. Key Findings

• High value items, rather than low value, high volume items will make it easier to achieve a positive cash-flow.

37. Key Findings

• Sales in the retail sector in Malaysia are not sustained sales and have to be continually pushed by the salesforce.

38. Key Findings

• It is possible to train inexperienced people into professional occupations such as sales, if you can build self-confidence, self-esteem with a supportive and like minded group around them.

39. Key Findings

• Fatigue is an important factor in sustainability in the FMCG industry if undertaking own distribution.

40. Key Findings

• The structure of the retail trade is rapidly changing, requiring a new approach to sales and marketing, which will provide opportunities for non-Chinese to enter into this currently Chinese dominated profession.

41. Success Examples

42. Thank You