in Malaysia Foreign Entry Strategy | BA 175/ Prof.

Tubianosa


Team Kamiseta : Aguinalde. Custodio. Payno. Santos. Versoza

1
1. MARKET RESEARCH OBJECTIVES
To understand TMs buying behavior on clothes
To understand TMs clothing preferences
To test acceptability of Kamiseta.

By interviewing a few respondents given the objectives stated above, the group has come up with the following
conclusions:

(1) Kamiseta should open up branches in malls.

Consumers like to shop in places where there is a wide variety of products. They have better chances in finding what
they want whether it is something that offers good value for price or something stylish regardless of the cost. The
presence of many strong competitors though must force Kamiseta to differentiate itself from others and attract
consumers to the brand.

(2) Kamiseta should have dressing rooms.

Buyers tend to buy for themselves because of size and style issues. They dont like buying for others because the
clothing may end up not being worn at all; it may be too small or maybe just not the recipients style at all. Two
attributes, style and size, are important to consumers and having dressing rooms is the best way to test these attributes.

(3) Kamiseta should organize its merchandise.

Buyers like being able to identify what a store offers even before they enter a store. This makes sense given that there
are many brands to choose from most of the time. Organized merchandise will help them identify whether certain types
or styles are offered in the store and will make it easier for them to find what they want.

(4) Kamiseta will be profitable in Malaysia.

The different product categories that Kamiseta offer cater to the different activities of the Malaysians. Some would use
Kamiseta items for school, some for parties, or some for job interviews. There are various segments the brand caters to,
increasing potential markets and increasing chances for success.

2. FOREIGN ENTRY STRATEGY

Franchising
Goal: The initial goal for the foreign market entry expansion of Kamiseta is to establish first a concise foreign presence
which in turn would be able to establish awareness of the brand among Malaysians, without jeopardizing the identity of
the brand in Malaysia, to be able to do this it is necessary to establish not only the product but the brand.

Benefits of Franchising
o Higher Control over the Brand
o Transference of Brand Identity Effective/ Stronger Brand Control
o Higher Profit Margin due to Royalties and other right-purchasing fee, Higher Purchasing Power
o Reduce in Direct-Management Demand

in Malaysia Foreign Entry Strategy | BA 175/ Prof. Tubianosa


Team Kamiseta : Aguinalde. Custodio. Payno. Santos. Versoza

2
Franchising is an appropriate strategy because it can be replicated quit easily and does not require much highly skill
levels, just good business instinct and trust. Most of Kamisetas time will be spend with nurturing the growth Franchise
business. Franchising is very relational therefore, the long-term benefits is something look forward to.

3. DECISION CRITERA & SUPPORT TO FOREIGN ENTRY STRATEGY
Strategically and Operationally Sound Environment
Malaysia is and will be a stable environment to conduct business. With this, Kamiseta can execute their plans and
strategies smoothly with no or minimal external factors affecting their operations. Moreover, the countrys
infrastructures are competitive compared to other Asian countries which can support the daily operations of the
business.
Shipping is the Way In
It is more convenient to ship the finished product to the franchises (clothes) to Malaysia rather than to manufacture
since tariffs are reduced and cost of export is the cheapest in the region. Kamiseta would incur higher costs if they will
manufacture in Malaysia due to expensive labor costs, will have difficulties in acquiring licenses and registrations and
suffer with increasing prices of raw materials; making it difficult to acquire and attract local partnerships/ franchisees.
4. FRANCHISING OPERATIONS

First and foremost it is imperative and required by the Franchise Act of 1998 that Kamiseta be registered with the
Registrar of Franchise.

Aid/Solution in Franchising Barriers/Challenges

Promoting and Affiliation Local Support to Franchising in Malaysia
Aid in operations and promotions of Kamisetas Franchising endeavor, it is proposed that it affiliates itself with
the Malaysian Franchise Association (MFA),upon joining Kamiseta will be entitled to certain privileges. (Consult
Appendix Part IV). Such affiliation is a government policy.

Screening the Franchisee
Taking into consideration the formalities and government requisites to operate a franchising business, we now then
dwell into the franchisee profile that should be properly screened by Kamiseta when franchising it to potential
franchisee is Malaysia. It is important do so due to the fact that should a Franchisee turn out to be bad on it will damage
the brand and at the same have a domino effect on other franchisees. Kamiseta will retain its current franchising
screening procedures. (Consult Appendix Part V), The Franchise Offer will be publicized on Franchise trades shows and
other venues to be able to reach potential franchisees, said trade shows are offered by the MFA.

Franchisee Support Efforts
Rather than just being transactional relationship (collecting royalties) Franchisee keeping the income, Kamiseta will
execute support efforts to them by creating operating system to aid in starting up the business, conduct training on to
familiarize how business is conducted, providing marketing materials and creating ad campaigns, all for done for the
success and proliferation of the Kamiseta Brand in Malaysia.
in Malaysia Foreign Entry Strategy | BA 175/ Prof. Tubianosa


Team Kamiseta : Aguinalde. Custodio. Payno. Santos. Versoza

3
Appendix

I Environmental Scan

Politicla Risk - risk of a change in government policy that would adversely impact a companys ability to operate
effectively and profitably. Lower political risk means higher investments from outside companies.

Stable economy and economic growth
The economy's rebound will slow in 2011 when real GDP is expected to grow by 5.5% after gains of 7.2% in 2010. In
addition, the effectiveness of governments performance has been increasing through the years which have a good
impact on their policy-making and implementation.

Continuity of policies
Since gaining independence, Malaysia has enjoyed political stability under the rule of the UMNO party and its alliances.
The party-led ruling alliance, the Barisan Nasional (BN), won a five-year term in office in the 2008 elections, its twelfth
election win to date. The coalition favors Malay nationalism, Islamism and capitalism. The dominance of this alliance in
the Malaysian political landscape has ensured the continuity of policies throughout the history of the independent nation.
The countrys impressive performance is also reflected on the parameter of government effectiveness, as given by the
World Banks governance indicators. Malaysias performance in terms of government effectiveness has improved from a
percentile rank of 78.7 in 2005 to 83.9 in 2008. The BN-led alliance has been successful in establishing a sound
governance system and continuity of policies has been well maintained, as no change has taken place in the political
order since the countrys independence.

Forward-looking policies of the government

The current government have already laid out their long-term plans for Malaysia. In 2010, the incumbent government
outlined several policy initiatives which are aimed at meeting the long-term goal of becoming a high-income nation by
2020. Firstly, the government targets to reach an income level of $15,00020,000 per capita, from the current $7,000 (as
of July 2010). Secondly, the government plans to launch a Government Transformation Program which aims to raise the
quality of human capital and improve basic rural infrastructure, among other things. The Tenth Malaysia Plan (10MP), a
spending plan covering 201115, will promote 12 national key economic areas, including tourism, palm oil and private
healthcare. These initiatives are expected to have significant potential to boost overall economic growth and help
transform Malaysia into a progressive nation.

Lowered corporate taxes

With effect from assessment year 2009, Malaysia's corporate income tax rate was reduced from 26.0% to 25.0%. Small
and medium sized enterprise (SME) companies are subject to more favourable tax rates at 20.0% for the first RM500,000
(US$142,857) taxable income and 25.0% for the rest. To encourage investment, Malaysia offers several tax breaks to
companies such as tax exemption for tour operators which meet certain requirements and a ten-year tax exemption for
venture capital companies. Average tax rates compared to other Asian countries.

Country Infrastructure - Countrys infrastructure be sufficiently developed to support a manufacturing operation.
Malaysia has good infrastructure and high innovation capacity - Malaysia's economy continued to be competitive on a
global basis owing to its good infrastructure and high innovation capacity. The country ranked 24th out of 133 countries
in the World Economic Forum's global competitive index in 2009-2010, ranking higher than Thailand (36th) but lower
than Taiwan (12th).
in Malaysia Foreign Entry Strategy | BA 175/ Prof. Tubianosa


Team Kamiseta : Aguinalde. Custodio. Payno. Santos. Versoza

4


Factor costs and conditions
Increasing Prices of Raw Materials
In 2010, cotton saw a surge in demand from developing countries and coupled with the monsoon
season in China and floods in Pakistan affecting the harvest, prices of raw cotton soared to record highs.
Cotton remained the most common raw material used in the apparel industry and the biggest
production cost for clothing manufacturers in Malaysia. There is only so much increase in costs that a
manufacturer can absorb before having to pass it down to consumers.

According to trade press Malaysian Mirror, Malaysian Textile Manufacturers Association chief executive
officer Andrew Hong said that local manufacturers had to absorb the higher manufacturing costs and
cope with surging raw material prices during Q4 2010. However, local manufacturers such as Cheetah
Holdings Berhad eventually had to look at increasing their retail prices in December 2010.

II. Interview Findings:

(1) The important attributes when buying clothes are the
o organization of merchandise,
o price and quality
o style and design.

(2) A typical top-bottom outfit is said to be comprised of Tshirt, Jeans, Tops and Pleated Skirts.
o T-shirt and Jeans
o Jeans and Tops
o Pleated skirt and T-shirt

(3) The Malaysians perceives clothing as:
o For covering
o For accessorizing
o An expression of self

(4) The Malaysians perceives casual clothing as:
o Something thats Worn all the time
o Comfortable
o T-shirt and jeans

(5) The Malaysians perceives cool clothing as:
o Relate-able
o Trendy
o Rocker-Style
o Makes you stand out
o Makes you feel great


in Malaysia Foreign Entry Strategy | BA 175/ Prof. Tubianosa


Team Kamiseta : Aguinalde. Custodio. Payno. Santos. Versoza

5

(6) The Malaysians perceives classic clothing as:
o Classy - formal but chill
o Evening dress
o Vintage
o Little black dress
o Elegant and poised

(7) On the Likelihood of for the Malaysians on wearing the Brand it would be:
o Highly likely
o Not very likely

III. Current Environmental challenges
Despite economic liberalization, governmental policies favoring racial preferences to promote the acquisition of
economic assets by ethnic Malays and other indigenous groups (Bumiputera), have posed a significant impediment to
investments.

While such policies are sometimes explicit, there are several occasions when such requirements are ambiguous. Along
with such policies, government restrictions hamper foreign involvement in several areas, such as, government
procurement contracts, financial, business, and professional services, and telecommunications. As a result of such
restrictions, foreign investors are forced to have a local partner in order to compete in the market.

IV. MFA Privileges
1.Recognized as a member of the reputable franchise association in the region.
2.Entitled to utilize all facilities of MFA and its corporate logo for promotional and business advertising purposes (only
applicable for ordinary members).
3.Promotion through our intensive marketing and promotional programme i.e. international franchise expo, trade
missions, road shows, website, newsletter, training and education programme.
4.Obtain an excellent networking platform within the industry, government agencies and supporting institutions as well
as other international players.
5.Enjoy various incentives provided by the government and supporting institutions i.e. participation in international
trade missions and study missions, road shows and financial assistance.
6.Receive discounts in all events organized by MFA i.e. Franchise International Malaysia, Malaysian Franchise Award,
trainings and seminars, media related events, etc.
7.Develop business prospects via matchmaking programme.
8.Professional consultancy and assistance in dispute resolution through our franchise clinic.
9.Benefit from the outcome of Research &Development concerning franchise industry.
10.Channel your voice on franchise issues through our forums.
11.Receive regular newsletter on updated franchise news and franchise opportunities.

V. KAMISETA FRANCHISE APPLICATION REQUIREMENTS
If you are interested to own a Kamiseta franchise,
you are required to submit the following:
1. Letter of Intent
2. Location Plan of the Proposed Site
3. Details of the Proposed Space
4. Your Company Profile