UNIVERSITI PUTRA MALAYSIA AN ANALYSIS OF GLOBAL MARKETING STRATEGY FOR THE MALAYSIAN WOODEN FURNITURE INDUSTRY YEAP TEIK BU FEP 1999 6
UNIVERSITI PUTRA MALAYSIA
AN ANALYSIS OF GLOBAL MARKETING STRATEGY FOR THE MALAYSIAN WOODEN FURNITURE INDUSTRY
YEAP TEIK BU
FEP 1999 6
AN ANALYSIS OF GLOBAL MARKETING STRATEGY FOR THE MALAYSIAN
WOODEN FURNITURE INDUSTRY
YEAP TEIKBU
MASTER OF SCIENCE UNIVERSITI P UTRA MALAYSIA
1999
AN ANALYSIS OF GLOBAL MARKETING STRATEGY FOR THE MALAYSIAN
WOODEN FURNITURE INDUSTRY
By
YEAP TEIKBU
Thesis Submitted in Partial Fulfilment of Requirements for the Degree of Master of Science in
the Faculty of Economics and Management Universiti Putra Malaysia
April 1999
ACKNOWLEDGEMENTS
I am deeply indebted to my supervisors Professor Madya Dr. Mohd.
Shahwahid Haji Othman, Dr. Jamil Bojei and Encik Alias Radam for their
invaluable advice, guidance and encouragement throughout my thesis writing.
They helped me greatly by giving suggestions for my analytical framework,
creating the model and offering provocative and insightful comments which
greatly improved the thesis.
My heartfelt thanks to my colleagues and friends, Miss Elaine Tan Lae
Imm, Miss Syarisa Yanti Abubakar, Miss Ong Gaik Ean, Mr. Bernard Tai Khiun
Mein, Mr. Nesathurai Arunagiri and Puan Musalmah lohan who provided editorial
and assistance and valuable suggestions and information.
My thanks to the staff of the Malaysian Furniture Industry Council,
(MFIC) especially to the Honorary Secretary General, Mr. Paul Wang Kia 100, for
his assistance in providing me with members' contact and insightful comments.
Thanks to my parents, my brothers and sister, my wife, Lim Chew Suan,
and my ex-landlord whose constant love and encouragement inspired me over the
past three years of my studies.
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TABLE OF CONTENTS
Page
ACKNOWLEDGEMENTS .... ........................................................ ..................... ii LIST OF TABLES ..... ................................ ..... ................................................... vii LIST OF FIGURES . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .ix LIST OF ABBREVIATIONS ...... ........................... . ............................................ xi ABSTRACT ....................................................................................................... xiii ABSTRAK ........................................................................................................... xvi
CHAPTER
I A REVIEW OF THE WOODEN FURNITURE INDUSTRY ............... 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Current Industrial Profile . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Common Industrial Features . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . 2 States' Contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 The Exporting Firms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . 5
Export Profile of The Wooden Furniture Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The International Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Wooden Furniture Export Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 The Types of Wooden Furniture Export . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Factors Leading to the Outstanding Performance of the Wooden Furniture Sector ............................ ................................. .......... 8
Government's Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 The Contributions of Foreign Direct Investments (FDls) . . . . . . . . . . . . . . 12 Local Entrepreneurs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 The Comparative Advantages of the Wooden Furniture Industry . 1 8
Opportunities, Threats and Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 9 Objectives of the Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 The Framework of the Study ....... . ......... . .... ....... . ........................................ 22
II LITERATURE REVIEW .................................................................... . ... 24
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 The Global Marketing Concept of A Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
What is Global Marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . . . ... 25 Reasons for A Firm's Involvement in the Global Markets . . . . . . . . . . . . 25 The Importance of a Global Marketing Strategy . . . . . . .. . . . ... . . . . . . . . . . . . . . 26
The Studies and Modelling Related to a Firm's in Decision on Exporting26 The Choices in Global Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Low-Price Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 Product-Differentiation Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
iii
Market-Focusing Strategy .............................................................. 36 The Concepts of OEM, ODM and OBN Strategies ................................... 37
How A Latecomer Firm Overcomes Human Resource, Technology and Marketing Constraints .......................................... 38 The OEM Strategy ................................. ........................ ................. 40 The OOM Strategy ......................................................................... 41 The OBN Strategy ............ ...... .... ............................................. ..... .. 42
The Industrial Master Plan ( 1996-2005) Value-added Chain Concept. .... .43 Summary .................................................................................................... 44
III MODELLING AND RESEARCH DESIGN ...... ................................... 46
Introduction ................................................................................................ 46 Key Factors for Objective One .............................................. ..................... 46
External Factors ..................... .................................................... ..... 47 Internal Factors .............. ................................................................. 48
Key Factors for Objective Two .......................................... ..... ................... 50 The Development of The Hypothesis ........................................ ................ 52
The Hypothesis for Objective One . ... ....................... .................. .... 52 The Hypothesis for Objective Two ................................................ 53
Research Design ......................................................................................... 54 Design of Questionnaire ................................. ..................... ........... 54 Pilot Test ................. .................... .... ............................................... 57 Population and Sample Size ........................................................... 58 Analysis of Testing - Factor Analysis ................ ....... ............. ........ 59
IV DATA ANALYSIS AND RESEARCH FINDINGS .............................. 60
Introduction ................................................................................................ 60 Questionnaire Received ..................................... .... ........ ............................ 60 Company Profiles ....................................................................................... 62
Ownership Structure ............................. ...... .................................... 62 !.-egal Entity of Firms ...................................................................... 62 Employment Structure . . .. .......... ................ ...................................... 63 Capital Structure ............................................................................. 63 Annual Production ................................................. ........ .......... ....... 64 Export Experience of Firms ............. .............................................. 65 Number of countries Firms Export ................................................. 66 Export Contribution to Total Sales Revenue ................................. 66 Global Marketing Strategy Used by Firms ........ .......................... ... 67
Decision-Makers' Perception Toward Global Marketing Strategy ............. 68 Firms' Competitiveness Against Their Local Rivals .............. . ....... 69 Firms' Competitiveness Against Their Foreign Rivals ................... 70 Barriers to Entry ......................................................................... .... 7 1 Incentive for firms to Engage in Export Activities ................. ....... 72 The Importance of Government Incentive Package ....... ..... ........... 73
iv
The Activities that Could Improve Firms Global Marketing Strategy . .. . . . . . . . .. . . . . . . . . . . . . .. . . . . . . . . . . . . . ...... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 External Domestic Factor Could Improve Firms' Global Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . 75
The Mathematical Concept of the Factor Analysis Technique . . . . . . . . . . . . . . . . . . 76 Principal Components Analysis ..... ... ...................... .... . ...... ........... . 77 Varimax Normalise ..... . . . .. . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . 78
Research Findings for Hypothesis One ...... . . . .......... . .... . ...... . . . ..... ....... . . ... ... 78 External Factors .................. ........... ... ....... ....... ..... .... .... . ........... .... ... 8 1 Internal Factor .. . .. . .. . . . . ... . . . . . . . . . . . . . . . . ... . . . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Research Findings for Hypothesis Two . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84 Firm's Selection of The OEM Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 Finn's Selection of The ODM Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Firm's Selection of The OBN Strategy ..................... ................... .. 88
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . .. . . . . . . . . . . . 89
V CONCLUSION . .. . ... . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Introduction ................................. ............... . ................... . . .. ........................ 90 The Importance of Customer Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 1 The Global Competitions and Industry Positioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 The Outlooks and The Global Marketing Strategy of The Wooden Furniture Industry ........................................ . .. ... ... ................... ...... .. ... ....... . 95 Recommendation 1 : Finn's Preparations for Global Marketing Strategies .................................................................................................... 96
Identify the Firm's Strength . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 Strategy Formulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 The Choices of Global Marketing Strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Recommendation 2: The Role of the Government.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99 Research and Development (R&D) ...... .............. ...... .......... . . ........ 100 Human Resource Development.. .................. ......... . ......... .. . ... .. ... .. 100 Marketing and Information Gathering ............................ .......... ... . 10 1 Infrastructural Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 1 Raw Material Procurement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
BIBLIOGRAPHy . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103
APPENDICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 Appendix A Types of Subcontracting Activities in the
Furniture Industry .... ... . .. . . ........ . .. . . .. . . . . . ......... ....... ... .. . .... . . . 1 10 Appendix B Questionnaire Survey for Wooden Furniture
Manufacturer Who Involve In Exports . . . . . . . . . . . . . . ... . . . . . . . . . . . 1 14 Appendix C The Results of Analysis for Hypothesis One-
What Factors Stimulate A Wooden Furniture Manufacturer to Adopt A Global Marketing Strategy . . . . . . 1 23
Appendix D The Results of Analysis for Hypothesis two - firm's selection of the OEM Strategy ........... .... . . ...... . .... ... ......... 1 28
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Appendix E The Results of Analysis for Hypothesis two - firm's selection of the ObM Strategy ........................................ 131
Appendix F The Results of Analysis for Hypothesis two - firm's selection of the anN Strategy ......................................... 134
BIOGRAPHICAL SKETCH ............................................................................ 1 37
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LIST OF TABLES
Table
Table 1.1: Number of Establishment, Gross Output, Value-added, Employment and Fixed Asset Value of the Wood-based
Page
Sector for the Year 1993 ................................... . . .................................. 2
Table 1.2: Productivity and Capital Intensity of the Wood-based ClUster For the Year of 1993 ............................................................................. 3
Table 1.3: Number of Establishments, Output, Value-added, Employment, and Fixed Assets of the Furniture and Fixture Manufacturers According to States in 1993 .................................................................. 4
Table 1.4: Number of Export-Oriented Wooden Furniture Factories in Peninsular Malaysia ................................................................................................ 5
Table 1.5: The Ten Major Net-Export# Countries of Furniture (US$ million) ...... 6
Table 1.6: Malaysia's Wooden Furniture Export By Destination in 1995 ............. 7
Table 1.7: Malaysia's Exports of Wooden Furniture in 1995 (RM million) according to HS Codes ......................................................................... 8
Table 1.8: Export and Import of Furniture and Wooden Furniture ...................... 1 0
Table 1.9: Approved Projects with Local and Foreign Participation in Furniture and Fixtures Industry ...................................................... 12
Table 1.10; The Stages of Evolving of Local Firms in Subcontracting Systems ... 15
Table 1.11: The Major Furniture Importers of the United States .......................... 16
Table 1.12: The Major Furniture Importers of Japan (billion yen) ........................ 16
Table 1.13: Production of Sawlog and Rubberlog in Malaysia (mil m3) .............. 19
Table 2.1; Stages and Factors Influencing A Firm's to Export .......................... 28
Table 3.1: Outlines of the Subvariables to Represent the Key Factors Provided in the Hypothesis 1 ............................................................ 55
Table 3.2: Outlines of the Sub-variables to Represent the Key Factors Provided in the Hypothesis 2 ............................................................ 56
Table 3.3: Number of Samples Sent According to State ..................................... 58
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Table 4.1: Number of Valid Samples and Rejected Samples Received According to States ............................................................................. 61
Table 4.2: Results of the Hypothesis One � What Factors Stimulate a Wooden Furniture Manufacturer to Adopt a Global Marketing Strategy ......................................... ..................... 80
Table 4.3: Results of Hypothesis Two - "What Factors Induce a Firm to Opt for the OEM Strategy" .... ..... ..................................... ............... 87
Table 4.4: Results of Hypothesis Two - "What Factors Induce a Finn to Opt for the ODM Strategy" ....... .... ............... .................................. 88
Table 4.5 : Results of Hypothesis Two - "What Factors Induce a Finn to Opt for the OBN Strategy" ........ .............. ...................................... . 89
viii
LIST OF FIGURES
Figure Page
Figure 1.1: The Technology Transferred from Foreign Firms to Local Finns ....... 13
Figure 1.2 The Product Life Cycle of the Wooden Furniture Industry . ... . . . . . . . . . . . . . . 20
Figure 1.3 Summarises of the Research Framework of the Study . . . ... ..... .. . .. ... . . ... . 23
Figure 2. 1 : Model of the Finn's Export Behaviour by Wiedershiem-Paul, Olson and Welch ( 1978) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . ... . . ... . . . . 29
Figure 2.2: A Model of the Incremental Intemationalisation Processes of a Firm ............................................................................................... 3 1
Figure 2.3: Theoretical Model of Export Decision Developed by Jatusripitak ...... 32
Figure 2.4: Goodnow's Model of Gauge for International Market Strategies ........ 33
Figure 2.5: The Value-added Chain of A Firm ......... . . ...... .... ......................... ........ 37
Figure 2.6: The Value Chain of the Industrial Master Plan ( 1 996-2005) .. ........... . 44
Figure 4. 1 : Percentage and Number of Finns Responded to the Questionnaire According to States ........ .................... .. ............ ..... ... .... ......... ............. .. 6 1
Figure 4.2: Ownership Structure of Respondents .. ........... . .......................... .. ........ 62
Figure 4.3: Legal Entity of Respondents ........... ........... .... ...... ..... ........ ................. .. 62
Figure 4.4: Employment Structure of Respondents ............. ......... ... ..... ... ......... ... .. 63
Figure 4.5: The Size of Paid-up Capital of Respondents ..... ............. .......... ........... 64
Figure 4.6: Annual Production of Finns According to Size ...... ................ ... . . ........ 65
Figure 4.7: Finn Export Experience of Finns According to Size ............. ............. 65
Figure 4.8: Number of Countries Finns Export According to Size ......... ... ........ ... 66
Figure 4.9: Firms' Export Contribution to Total Sales Revenue According to Size .... ....................... ...... ............................................... . 67
Figure 4. 1 0: Global Marketing Strategy that Finns Practised According to Size .. 68
Figure 4. 1 1 : Finn's Competitiveness Against Their Local Rivals According to Size................................................. .. . . . . . . . . . . . . . . . . . ... . . . ..... . . . .. . . 69
ix
Figure 4.12: Firm1s Competitiveness Against Their Foreign Rivals According to Size ................................................................................................... 70
Figure 4.13: Decision-makers' Expectation Toward Export Risk .......................... 7 1
Figure 4.14: Incentives for Firms to Engage in Export Activities According to Size ................................................................................................... 12
Figure 4.15: The Importance of Govemment Incentive Package ........................... 14
Figure 4. 1 6: Firms' Activities that could Improve a Global Marketing Strategy ... 75
Figure 4.17: External Domestic Factors InflUence Firms' Global Marketing Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Figure 4.18: Global Marketing Strategies adopted by the Wooden Furniture Manufacturers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ... . . . . . . . . . . . . . . . . 85
Figure 5.1 The Concept of Marketing and Customer Value .................................. 9 1
Figure 5.2: Porter's Five-Competitive Forces of Entries Model.. .......................... 93
Figure 5.3: The Evolution of the Wooden Furniture Industry'S Outlooks According to Stages of Intemationalisation ............................. ............ 95
Figure 5.4: Global Marketing Strategy for the Wooden Furniture Manufacturers ...................................... . .. ........... ................................... 97
x
Csil
DOS
ECR
ECIGS
EU
FDI
HRD
IMF
IMP
ITAF
ITM
MFIC
MIER
MIDA
MITI
MTIB
NAFTA
OEM
ODM
OBN
R&D
SMI
UPM
LIST OF ABBREVIATIONS
Centre for Industrial Studies Italy
Department of Statistics
Export Credit Refinancing
Export Credit Indurance and Guarantee Schemes
European Union
Foreign direct investment
Human resource development
International Monetary Fund
Industrial Master Plan
Industrial Technical Assistance Fund
Institut Teknologi MARA
Malaysian Furniture Industry Council
Malaysian Institute of Economic Research
Malaysian Industrial Development Authority
Ministry of International Trade and Industry
Malaysia Timber Industrial Board
North American Free Trade Agreement
Original Equipment Manufacturing
Original Design Manufacturing
Own Brand Name
Research and development
Small-and-medium-scale industry
Universiti Putra Malaysia
xi
Abstract of thesis presented to the Senate of Universiti Putra Malaysia in partial fulfihnent of the requirements for the degree of Master of Science
AN ANALYSIS OF GLOBAL MARKETING STRATEGY FOR THE MALAYSIAN WOODEN FURNITURE INDUSTRY
B y
YEAPTEIKBU
April 1999
Chairman: Associate Professor Dr. Mohd. Shahwahid Haji Othman, Ph.D.
Faculty: Economics and Management
The wooden furniture industry has shown a remarkable achievement over
the last decade, especially its export performances. This industry like other natural
evolving clusters is characterised by small-and-medium-scale industries (SMIs),
labour intensive and less specialise production technology. The turning point of
the industry began with the launching of the first Industrial Master Plan ( 1986-
1995) (IMP), whereby the government provided consistent and user-friendly
policy measures to allow healthy competition among the manufacturers and
entrepreneurship development. The influx of foreign investments spurred the
technology transfer process in the furniture industry by introducing the private
subcontracting system which is a global marketing strategy especially the
Original Equipment Manufacturing (OEM), to local entrepreneurs. The resource
advantage and cheap unskilled labour allowed local entrepreneurs to have
sufficient time to nurture and to penetrate new markets.
xiii
New opportunities and threats to the industry were unveiled when the
Second Industrial Master Plan underwent a revision in its objectives owing to the
changes of the internal and external factors of the industry. Malaysia has already
placed a firm economic foundation by establishing intra- and inter- linkages,
which to a certain extent provides better opportunities to adopt other global
marketing strategies. These strategies may even ensure a more sustainable growth
to the industry and is able to reap a price premium. On the other hand, the
Malaysian wooden furniture industry needs to deal with more uncertainties as its
close rivals; Thailand, Indonesia and China, as well as other emerging economies
such as Latin America, and East European countries, acquire similar marketing
strategy. The formation of the regional groupings such as the European Union and
North American Free Trade Agreement provide more uncertainties in the world
economy.
The objectives of the study are derived from feedbcks of the
manufacturers' point of view and the issues they put forwarded:
a) to analyse factors contributing to their global marketing strategy; and
b) to examine the factors leading to different global marketing strategies
adopted in the wooden furniture industry.
A comprehensive literature review highlighting a firm's decision maker in
exporting, the choice of competition on global marketing strategies, value chain
concept, as well as the Industrial Master Plan ( 1996-2005) have assisted the
formulation of the hypotheses. Hypothesis One proposes that the firm's decision
on a global marketing strategy for wooden furniture industry is influenced by the
XIV
external and internal factors. The external factors include the government's
domestic incentives and the risk factors. The internal factors are the
competitiveness of the domestic and foreign rivals, the decision maker's previous
experiences and decision maker's attitude or expectation towards exporting.
Meanwhile, Hypothesis Two suggests that size of the finn's, the firm's
experiences in exporting, the decision maker's attitude, current global marketing
strategy and the firms establishment can affect the firm's choice in global
marketing strategy.
Through factors analysis, the findings confirm the government's primary
incentives, political environment risk factor, business risk factors, pioneer status,
firm's competitiveness over domestic rivals, firm's competitiveness over foreign
rivals and the decision maker's expectation of exporting are the key factors
explaining 79.7 percent of the hypothesis. Firm's characteristics and the decision
maker' s attitude towards exports are significant to Hypothesis Two.
The findings draw the attention to the manufacturers as well as the policy
makers that customers value and Porter's five-competitive forces of entries model
are important factors to consider in formulating both a business strategy and the
government policies. The policies that will bring about a strategy shift include
research and development, human resources development (HRD) , marketing and
information gathering, infrastructure, financial assistant and raw material
procurement.
xv
Abstrak tesis yang diketnukakan kepada Senat Univesiti Putra Malaysia sebagai tnemetluhi sebahagian daripada keperluan Ijazah Master Saills
ANALISIS STRATEGI PEMASARAN GLOBAL BAGIINOUSTRI PERABOT KA YU 01 MALAYSIA
Oleh
YEAP TEIKBU
April 1999
Pengerusi: Professor Madya Dr. Mohd. Shahwahid Haji Othman, Ph.D.
Fakulti: Ekonomi dan Pengurusan
Industri Perabot Malaysia telah menunjukkan pencapaian yang
memberangsangkan dalam masa satu dekad yang lalu terutamanya dari segi
persembahan eksportnya. Industri ini memiliki ciri-ciri biasa seperti mana yang
dimiliki oleh "natural evolving cluster" lain yang selalunya dikuasai oleh Industri
kecil dan sederhana, berintensitkan buruh dan kurang mengkhusus dalam bidang
kemahiran and teknologi. Walau bagaimanapun, lembaran industri ini mula
menampakkan perubahan sejak pelancaran Pel an Induk Industri Malaysia Pertama
(1986-1995), di mana kerajaan telah melaksanakan dasar-dasar yang konsisten
untuk menwujudkan persaingan yang sihat di dalam industri dan dapat
mengembangkan daya keusahawanan. Aliran pelaburan asing telah
mempercepatkan pemindahan teknologi ke dalam industri perabot kayu dengan
pengenalan system sub-kontrak swasta. Ia juga telah memperkenalkan strategi
pemasaran global terutamanya strategi Alat Pembuatan AsH (OEM strategy)
kepada usahawan tempatan. Kelebihan dari segi faktor sumber semulajadi dan
xvi
tenaga bumh kurang mahir yang murab telab memudabkan pelabur tempatan
dalam mengharungi arus perdagangan yang bam.
Peluang serta ancaman kepada industri ini telab ditemui dengan mengkaji
semula objektif-objektif baru di bawah Pelan Induk Perindustrian Kedua dan juga
meninjau perubahan faktor-faktor dalaman and luaran. Kerajaan Malaysia
telabpun menyediakan asas ekonomi yang kukuh dengan mengadakan rangkaian
inter and intra di antara industri. la telah sedikit sebanyak menyediakan peluang
yang baik kepada pelabur yang ingin mengharungi strategi pemasaran global.
Strategi ini juga dikatakan akan dapat memastikan pembangunan yang kekal
kepada industri perabot. Walau bagaimanapun, industri perabot kayu Malaysia
perlu bersedia menghadapi cabaran-cabaran daripada pesaing-pesaingnya seperti
Thailand, Indonesia, China dan juga lain-lain negara membangun seperti negara
Latin Amerika dan negara-negara Eropa Timur yang menggunakan strategi yang
sama. Ini ditambah pula dengan penubuhan kerjasama ekonomi seperti Kesatuan
Eropah (EU) dan Perjanjian Perdangan Bebas Amerika Utara (NAFfA) telah
menambahkan ketidak pastian dalam arus ekonomi dunia.
Objektif kajian ini adalah untuk mengenalpasti keperluan dan isu-isu yang
diutamakan oleh pengeluar-pengeluar di dalam industri perabot kayu Malaysia
dengan:
a) menganalisis faktor-faktor yang menyumbang kepada strategi pemasaran
global pengeluar-pengeluar perabot; dan
b) mengkaji faktor-faktor yang menyumbang kepada penggunaan strategi
pemasaran yang berbeza di dalam industri perabot kayu.
xvii
Ulasan-ulasan kajian yang menyeluruh telah dipersembahkan dalam
mengetahui keputusan firma dalam mengeksport dan juga pernilihan dalam
strategi pemasaran global, serta konsep rangkaian penarnbahan nHaL Malah kajian
Pelan Induk Perindustrian ( 1996-2005) juga telah rnembantu dalam pernbentukkan
hipotesis kajian ini. Hipotesis pertarna rnencadangkan bahawa keputusan strategi
pernasaran global industri ini dipengaruhi oleh faktor luar dan dalarnan. Faktor
luaran termasuklah insentif-insentif kerajaan dan juga faktor-faktor risiko.
Manakala faktor-factor dalarnan pula adalah tahap persaingan di antara firma
temp at an dengan persaingan firma di antara firma asing, pengalarnan terdahulu
pernbuat keputusan di luar negeri dan juga harapan atau sikap pembuat keputusan
terhadap eksport. Hipotesis kedua pula mengemukakan saiz firma, harapan atau
sikap pembuat keputusan terhadap eksport, pandangan pembuat keputusan
terhadap eksport, strategi pernasaran global yang sedia ada dan kedudukan firma
memberi kesan kepada pemilihan strategi pemasaran global firma.
Melalui penganalisaan faktor-faktor (factors analysis), hasil kajian
menunjukkan bahawa insentif-insentif kerajaan, risiko keadaan politik, risiko
faktor perniagaan, taraf printis, tahap persaingan firma berbanding dengan
pesaingnya tempatan, persaingan firma berbanding dengan firma asing dan
harapan pembuat keputusan terhadap rnengeksport mempengaruhi 79.7 peratus
daripada Hipotesis Pertama. Hasil kajian juga rnenyokong pandangan bahawa sifat
firma dan harapan firma terhadap eksport adalah signifikan kepada Hipotesis
Kedua.
xviii
HasH kajian ini jelas menampakkan kepada para pengeluar dan perancang
dasar bahawa nilai pengguna, and model lima pengaruh persaingan Porter
(Porter's five-competitive forces model) merupakan faktor-faktor penting dalam
pembentukan strategi pemiagaan dan dasar kerajaan. Dasar-dasar kerajaan yang
boleh mengakibatkan peralihan strategi merangkumi pengkajian dan pembanguan
teknologi, pembangunan sumber manusia, pemasaran dan pengumpulan
maklumat, pembangunan infrastruktur, bantuan kewangan dan perolehan bahan
asIi.
xix
CHAPTER I
A REVmW OF THE WOODEN FURNITURE INDUSTRY
Introduction
The Malaysian furniture industry has shown a remarkable achievement for
the last decade, especially in its export performance. The turning point of the
industry began with the launching of the first Industrial Master Plan (IMP) in
1986. While exports of furniture were negligible in 1986, in 1995, the Malaysian
made furniture export ranked the world's sixth largest, amounting to RM2 billion.
Besides the implementation of correct policies, the foreign direct investments
(FDIs) also played a role in facilitating technology transfer to local entrepreneurs,
and the resources advantage factor enabled firms which also included the small
and-medium-scale industry (SMI) to grow.
This chapter describes the current industrial profile of the wooden
furniture industry, the export profile of the wooden furniture industry,
distinguishes the factors leading to the industrial success, evaluates the
opportunities, threats and issues, stresses on the objective of the study, and
explains the framework of the study.
1
2
Current Industrial Pr()Ble
Common Industrhl1 Features
the wooden fumiture industry contributes the smallest amount of the total
output� value-added and fIXed assets among the wood-based sector (Table 1.1).
The industry also has distinct features compared to the pulp and paper products
and wood and cork industry. The furniture industry is mainly SMI-dotninated, and
labour-intensive as these ftnns, particularly SMls, employ a low level of
automation (Table 1.2). However, larger fIrms with greater fInancial capabilities,
adopt a higher level of technology in their operations (Chee, 1990, and Shahwahid,
1994: 7). It was estimated that there are more than three thousand furniture
manufacturers, of which SMIs make up of more than 90% of the total.
Table 1.1 : Number of Establishment, Gross Output, Value-added, Employment and Fixed Asset Value of the Wood-based Sector for the Year
1993
Industry MICCode No. of Gross Value- Employment Salaries Fixed Firms Output added & wages Assets
RM(mil) RM(mil) RM(mil) RM(mil)
Wood & cork 331 893 9,761 3,172 130,482 1,009 4,309 exe. furniture* 57% 74% 73% 72% 69% 57%
Furniture 332 504 1,497 517 32,054 233 599 &.fixtures 32% 11% 12% 18% 16% 8%
Pulp and paper 341 171 1,958 649 19,091 217 2,665 products** 11% 15% 15% 1l% 15% 35%
Wood·based 331+332+ 1,568 13,216 4,338 181,627 1,459 7,573 sector 341 100% 100% 100% 100% 100% 100% * The MIC 331 "Wood & cork except furniture" include: 33111 sawmills; 33112 plywood,
hardboard and particleboard mills; 33113 planing mills, window and door mills and joinery works; 33114 pre-fabricated wooden houses; 33119 other wood products; 33120 wooden and can containers and small can ware; and 33190 wood and cork products.
** The MIC 341 "Pulp and paper products" include: 34110 pulp, paper and paperboard; 34120 containers and boxes of paper and paperboard; and 34190 pulp, paper and paperboard articles.
a. The percentage figures have been rounded-up. Source: Department of Statistics, 1993 Census of Manufacturing Industries, 1995.
Table 1.2: Productivity and Capital Intensity of the Wood-based Cluster for the Year of 1993
Activity Labour capital Capital Productivity* Productivity** Intensity *** (RM/Labour) (RMILabour)
Wood & wood cork exc. furniture 24,307 0.74 33,020
Furniture 16,140 0.86 18,689
Paper & paper products 34,016 0.24 139,599
Wood-based Sectltr 23,887 0.51 41,693
Total Manufacturing Base 36,426 0.62 58,602
* Labour productivity ratio is calculated as total value-added over total labour employed.
** Capital productivity ratio is calculated as total value added over total value of fixed assets.
***Capital intensity index is calculated as total value of fixed assets over total employment.
Source: Adopted from Department of Statistics, Census of Manufacturing Industries: 1993. Published in 1995.
States' Contributions
3
Most of the furniture industries' activities are carried out in the west coast
of Peninsular Malaysia This is because it is equipped with a more advanced
infrastructure such as ports, transportation systems and other supporting facilities,
a large domestic market, and the availability of skilled labour. In terms of state
contributions, lohor and Selangor are the most prominent states for the wooden
furniture manufacturing. These two states make up 45% of the total number of
establishments, and contribute 73% of the total industrial furniture output, 72% of
the total value-added output, 66% of the total employment and 7 1 % of the total
4
ftxed assets in 1993. However, East Malaysia has the greatest potential to be
developed as there are an abundance of resources (Table 1.3).
Table 1.3: Number of Establishments; Output, Value-added, Employment, and Fixed Assets or the Furniture and Fixture Manufacturers According to
States in 1993
State No. of output Value-added Employment Fixed Assets Establishment (RM'OOO) (RM'OOO) (RM'OOO)
Kedah & Pedis 12 42,217 13,444 1,073 27,650 Penang 12 22,939 8,651 438 3,682 Petak 19 48,960 18,244 1,411 15,356 Selangor & KL 102 481,531 162,868 8,924 173,275 N. Sembilan 21 54,921 19,718 1,419 35,071 Melacca 24 78.114 27,006 1.925 34,005 Jobor 126 602,813 207,632 12,156 250,216 WestCodst 316 1,331,507 457,623 27,352 539,255 Percentage 62.7 89.0 88.5 85.3 90.0
Kelantan 11 9,456 2,806 296 2,598 Terengganu 5 3,648 1,729 186 551 Pahang 9 81,951 28.131 1,385 29,360 East Coast 25 95,055 32,666 1,867 32,509 Percentage 5.0 6.4 6.3 5.8 5.4
P. Malaysia 341 1,426,562 490,289 29,219 571,764 Percentage 67.7 9$.3 94.8 91.2 95.4
Sabah 94 37,709 15,793 1,619 13,386 Sarawak 69 32,333 11,275 1,216 13,905 East Malaysia 163 70,042 27,068 2,835 21,291 Percentage 32.3 4.7 5.2 8.8 4.6
Malaysia 504 1,496,604 517,357 32;054 599,055 Percentage 100.0 100.0 100.0 100.0 100.0
Source: Adopted from Department of Statistic (DOS), 1993 Census of Manufacturing Industries, 1995.
5
The Exporting Firms
There were as many as 485 export-oriented furniture manufacturers located
in Peninsular Malaysia in 1995, which is estimated to be about one-sixth of the
total furniture manufacturers (Table 1 .4). The majority of the exporting firms are
Malaysian-ownedl . However, more firms are expected to be involved in export as
an increasing number of firms are actively looking for markets abroad.
Table 1.4: Number of Export .. Orientation Wooden Furniture Factories in Peninsular Malaysia
Year No. of Establishments
1 980 55 1 985 90 1 987 45 1 988 150 1 989 178 1 990 224 1 99 1 283 1992 300 1 993 427 1 994 446 1995 485 1 996 530
Source: Statistics on Commodities, Ministry of Primary Industries Malaysia, various issues.
I This statement was testified by the Secretary General of Malaysian Furniture Industrial Council (MFIC) through the interview.