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Name: Thi My Ngoc Tram Ngo Student Number: n10613323

BSD119 GLOBAL BUSINESS

ASSESSMENT ITEM TWO COUNTRY ANALYSIS REPORT

Submission Date: 30 August 2020 Tutor: Maralyn McDowell Tutorial Time and Day: 10am on Wednesday Word Count: 1565 words

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TABLE OF CONTENT 1.0 Introduction………………………………………………………………...3 2.0 Economic environment…………………………………………………….3 2.1 Economic Performance……………………………………………...3 2.2 Economic Stability………………………………………………….4 2.3 Conclusion…………………………………………………………..4 3.0 Political environment……………………………………………………....5 3.1 Governance………………………………………………………….5 3.2 Political risk…………………………………………………………6 3.3 Conclusion…………………………………………………………..6 4.0 Business environment……………………………………………………...7 4.1 Free Trade Agreement………………………………………………7 4.2 Market potential……………………………………………………..7 4.3 Conclusion…………………………………………………………..8 5.0 Recommendation…………………………………………………………...8 References ……………………………………………………………………....9

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1.0 Introduction Perfect Potion is a privately owned Australian manufacturer and is launched on 1991 by two founder aromatherapists: Salvatore Battaglia and Carolyn Stubbin (Perfect Potion, 2020). The company has a success producing and selling organic skincare and aromatherapy products. This report will analyze market potential of Singapore and Malaysia through examining and comparing the economic, political and business environment of the two countries to consider which of them would be suitable for exporting products. 2.0 Economic environment 2.1 Economic Performance

figure 1: The GDP growth rate Source: EIU Country Data Figure 1 displays that both Singapore and Malaysia have experienced a decline in the growth GDP from 2017-2020 and it is expected to growth return from 2021-2026 after a sharp decline in 2020 due to the COVID-19 outbreak. However, the growth rate of Malaysia is consistently upward trend than Singapore which the rate is forecasted to be steady around 4.0%, while there is a slight fluctuation in the economy’s Singapore in period 2021-2026. Although Singapore is expected to witness strong growth rate of 3.9% by 2021, during the period 2022-2026 the economy is predicted to be unstable, decrease gradually and peak decline to 1.7% by 2026. However, there is still a bright spot in 2021 when witnessing the outstanding a dramatic increase in growth of rate by 3.9% which almost on par with the highest growth rate GDP in 2017.

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That proves that the Singapore’ economy works well when rebound success after disruption economy in 2020. Alternatively, the Malaysia economy has remained a consistent performer with growth rate from 1.9% to 3.5% by 2026. Malaysia’s economy has been on an upward growth trend and is expected to achieve its transition from an upper middle-income economy to a high-income economy by 2024 (WorldBank, 2019). A steady growth indicates that the country operates a wellbeing economy which provides a high level of investments from the public and private sectors, improved for exports, including manufactures goods, robust domestic demand (MarketLine, 2019). 2.2 Economic Stability Compared to the economic development, an economy stability focusses more on the stable of current economic which indicate minor fluctuations in employment levels and a growing economy with stable prices (Hill et al, 2019).

Figure 2: Unemployment Rate Source: EIU Country Data In looking at these lines, Singapore’s unemployment rate has always been lower than Malaysia. Malaysia’ s unemployment rate stood at an average of 3.3% during the period 2017-2019. It is expected to decline slightly to 4.3% in 2021 and remain to 3.6% in 2024. Although the unemployment rate is forecasted to decline during period 2021-2024, the rate of decline is still quite high. By comparison, Singapore’s unemployment rate is not only significantly low, but also stability in a range of 2-3%. A low unemployment rate indicates a strong economy which allow more consumer employed, there is more instance of consumer spending (Hill et al, 2019).

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Figure 3: The inflation rate Source: EIU Country Data In addition, when considering undertaking business in a foreign country, inflation is an important indicator to can see insight as to the level of prices for goods and services in an economy (Hill et al, 2019). As shown in figure 3, both of countries in most years has adopted a price stability target which maintain within the range of 1-3 percent on average over the medium term. However, Singapore shows greater market stability with a low inflation rate. It is predicted to decrease from 1.3% to 0.9% during 2021-2026. The higher inflation indicates more expensive import and export in the depreciation of a country’s value (Hill et al, 2019). 2.3 Conclusion In term of individual part, Singapore has a better rate than Malaysia, however the rate of unemployment and inflation of Malaysia is still stability in nature rate. It indicates that Malaysia is a stable economy and a potential market with the high GDP growth rate. Therefore, Perfect Potion company can consider decision export product to Malaysia 3.0 Political environment 3.1 Governance Table 1: Governance Indicators in 2018 Indicator percentile rank Voice and accountability Political Stability and

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Singapore 41.9 98.6

Malaysia 41.4 54.3

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Absence of Violence/Terrorism Government 100.0 81.3 Effectiveness Regulatory quality 99.5 74.0 Rule of Law 97.1 74.5 Control of Corruption 99.0 63.9 Source: WorldBank, 2020 Singapore is globally renowned for its stable political environment which was ranked in the 100.0 percentile for government effectiveness in 2018. As shown in table 1, Singapore has been a destination country for export product when all the indicators have extremely high percentile rank and be better than Malaysia. It means that the government has created strong economic fundamentals which can develop competitive advantages in several areas (MarketLine, 2020, p.18). Moreover, according to Transparency International, 2019 Singapore ranked 3th position in the Corruption Perceptions Index 2018 with scored 85, whereas Malaysia ranked 61 and scored similar to 47. Therefore, Malaysia is more corrupted than Singapore. 3.2 Political risk According to PRS Country Data, 2020 the political risk rating in Singapore is 79.5 in July 2020, while Malaysia is higher risk with low of rating 70.0. Although Singapore and Malaysia have strong quality governance, both of countries have trouble with the political risk about racial polarization. Be a multiracial society, Singapore is faced the risk of tensions between Chinese descent and other population: Malays ethics and India heritage in taking control of government (MarketLine, 2020). It could be affected business in the country and damage Singapore’s international reputation (MarketLine, 2020). Likewise, Chinese are dominant within the economic and social in Malaysia that becomes a high concern for adjust suitable policies from government to maintain political stability. However, the currently policies of government is not effective to address this problem, the citizens argues that it makes increasing the benefit for foreign Chinese investors (MarketLine, 2019). This may result in a slowdown in some of country’s economic segments and could prove detrimental to political stability. 3.3 Conclusion

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Malaysia and Singapore have own strengths and challenges in political environment. Despite Malaysia have potential agreements for exporting, it still has many political instabilities. Therefore, Perfect Potion can consider choosing Singapore for export their product which may result in less risk with higher stability political environment. 4.0 Business environment 4.1 Free Trade Agreements The Singapore-Australia Free Trade Agreement (SAFTA) is signed in July 2003 (DFAT, 2019). It has been a huge boost to both Singapore and Australia export, helping to diversify export markets and commodities for Australian exporters. SAFTA has provided greater opportunities in goods and services to Australian exporters through eliminates Singapore’s tariffs and provides cheaper inputs for Australian business on a range of product (Austrade). The Australia-Malaysia economic relationship is underpinned through two high-quality free trade agreements which are the Malaysia-Australia FTA (MAFTA) and the ASEAN-Australia-New Zealand FTA (AANZFTA) (DFTA, 2019). MAFTA provides tariff-free treatment to 99 per cent of Malaysia average imports from Australia by 2017 (Austrade) that makes it easier for Australian goods exporters to enter the Malaysian market. 4.2 Market potential Singapore Beauty and Personal Care market reaches amounts to US$1,040m in 2020 and is expected to grow annually by 2.7% (CAGR 2020-2023) (Statista, 2019). Skin care is expected to increase at a 6% current value CAGR to reach SGD 971 million in 2024 (Euromonitor International, 2020). As a high demand is predicted, it will be opportunities for Perfect Potion to be able to export to meet the supply of the Singapore market. Furthermore, natural skin care has already been an increasingly visible trend in recent times in Singapore (Euromonitor International, 2020). An increase interest uses skincare product with no ingredients harmful to skin which is totally suitable with the Perfect Potion’s product orientation. Singaporeans also known as enjoy novelties that will continue to position Singapore as a good test for international brands (Euromonitor International, 2020). However, that can be seen as a challenge to Perfect Potion for performing well brand loyalty when consumers always pursuit new interested things. In comparison, Malaysia has a huge demand as revenue in the personal care segment is projected to reach US$365m in 2020

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(Statista, 2019). In term of skin care, it records 9% current value growth in 2019 to reach MYR3.5 billion (Euromonitor International, 2020). According to Euromonitor International, 2020 mass brands is predicted continue to dominate skincare market which urging premium players to enter this segment to expand their consumers reach that can be seen as a good sign for demonstrating new product enter international market of Perfect Potion company. 4.3 Conclusion Through Free Trade Agreements, both countries has provided benefits about tariff for exporting products. As Perfect Potion focuses on suppling natural product, they could target Singapore’s niche natural skincare market. 5.0 Recommendation Singapore and Malaysia present a lot of unique opportunities and challenges to Perfect Potion as an export market. While Malaysia indicates potential GDP growth in the future, Singapore is more stable in political environment, the governance effectives, and a huge demand consume. High rate stability may result in less risk for Perfect Potion when they would like the certainty in an important decision as exporting products. Moreover, an increasing organic product consumption trend in Singapore would be matching with the orientation of Perfect Potion’ product and provides a great opportunity for entering easily into market. Therefore, Singapore is more suitable country for exporting than Malaysia. Perfect Potion company can consider exporting in 2021-is expected rapidly growth.

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REFERENCES Austrade. Five Benefits of MAFTA. Retrieved from https://www.dfat.gov.au/trade/agreements/inforce/mafta/Pages/five-benefits-of-mafta Austrade. Free Trade Agreement: Singapore-Australia Free Trade Agreements (SAFTA). Retrieved from https://www.austrade.gov.au/Australian/Export/Free-TradeAgreements/SAFTA DFAT. Malaysia-Australia FTA. Retrieved from https://www.dfat.gov.au/trade/agreements/inforce/mafta/Pages/malaysia-australia-fta DFAT. Singapore-Australia FTA. Retrieved from https://www.dfat.gov.au/trade/agreements/inforce/safta/Pages/singapore-australia-fta EIU (2017). Singapore and Malaysia: Selected series 2017 to 2026. Retrieved from https://eiu-bvdinfo-com.ezp01.library.qut.edu.au/version2020526/eiucountrydata/1/Series/Search/By/Selection?loginfromcontex t=ipaddress Euromonitor International (2020). Skin Care in Malaysia Country Report. Retrieved from https://www-portal-euromonitorcom.ezp01.library.qut.edu.au/portal/analysis/tab Euromonitor International (2020). Skin care in Singapore Country Report. Retrieved from https://www-portal-euromonitorcom.ezp01.library.qut.edu.au/portal/analysis/tab Hill, C., Hult, T., Wickramasekera, R., MacKenzie, K., & Liesch, P. (2019). Global business today : Asia-Pacific perspective (Fifth edition.). McGraw-Hill Education Australia.

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MarketLine. (2019).Country Analysis Report: Malaysia. In-depth PESTLE Insights. Retrieved from https://advantage-marketlinecom.ezp01.library.qut.edu.au/Analysis/details/country-analysis-reportmalaysia-in-depth-pestle-insights-25836 MarketLine. (2020).Country Analysis Report: Singapore. In-depth PESTLE Insights. Retrieved from https://advantage-marketlinecom.ezp01.library.qut.edu.au/Analysis/details/country-analysis-reportsingapore-in-depth-pestle-insights-25845 Perfect Potion (2020). About us. Retrieved from https://www.perfectpotion.com.au/about-us Statista (2019). Beauty and Personal Care in Singapore. Retrieved from https://www.statista.com/outlook/70000000/124/beautypersonal-care/singapore Statista (2019). Personal Care in Malaysia. Retrieved from https://www.statista.com/outlook/254/122/personalcare/malaysia The World Bank (2020). Worldwide Governance Indicator. Retrieved from https://info.worldbank.org/governance/wgi/Home/Reports Transparency International. Corruption Perceptions Index 2018. Retrieved from https://www.transparency.org/files/content/pages/2018_CPI_Exec utive_Summary.pdf

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