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Tesco Malaysia Essay

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1.1 Purpose

The purpose of this report is to provide an introduction about Tesco Malaysia. It identifies Tesco Malaysia’s mission, objectives and responsibilities of within its environment. This report also investigates the economic, social and global environment in which Tesco Malaysia operates.

1.2 Scope

The limitation of this that the information provided by Tesco Malaysia.

1.3 Method

The secondary information used in this report includes, information collected from Internet, textbook and article.

1.4 Background

Tesco Malaysia is a UK based multinational organization in Malaysia.

Tesco plc is a UK-based international grocery and general merchandising retail chain. It is the largest British retailer by both global sales and domestic market share, with profits exceeding £3 billion. It is currently the third largest global retailer based on revenue, behind Wal-Mart and France’s Carrefour, but second largest based on profit, ahead of Carrefour. Originally specialising in food and drink, it has diversified into areas such as clothing, consumer electronics, financial services, telecoms, home, health and car insurance, dental plans, retailing and renting DVDs,[4] CDs, music downloads, Internet services and software.

Tesco opened its first store in Malaysia in May 2002. Tesco Malaysia currently operates 30 Tesco and Tesco Extra stores. Tesco partnered with local conglomerate Sime Darby Berhad which holds 30% of the shares. Tesco also acquired Makro, a local wholesaler which was rebranded Tesco Extra and provides products for local retailers. Tesco Malaysia offers a value range, own branded range, electronic goods, the loyalty clubcard and clothing. Tesco Malaysia’s clubcard introduced Green ClubCard Points in 2007 making Tesco Malaysia to be the first Tesco international business to introduce the scheme Green ClubCard Points (Wikipedia, 2009).

2. Findings

2.2 Three Stakeholders Objectives that Tesco Achieves

Stakeholder is a person, group, or organization that has direct or indirect stake in an organization because it can affect or be affected by the organization’s actions, objectives, and policies. Key stakeholders in a business organization include creditors, customers, directors, employees, government (and its agencies), owners (shareholders), suppliers, unions, and the community from which the business draws its resources. Although stake-holding is usually self-legitimizing (those who judge themselves to be stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled to different considerations. For example, a firm’s customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm’s employees (BusinessDictionary, 2009).

2.4 Report

Economic System

Economic system means organized way in which a state or nation allocates its resources and apportions goods and services in the national community.

Malaysia became a country in 1957, and did not exist as an independent entity until then. The economy is a mixed export market economy, with electronics having the largest share. Due to their disengagement from the U.S. dollar, the economy has struggled over the past few years, and because of the worldwide slump in the IT industry. The economy remains dependent on continued growth in the US, China, and Japan – top export destinations and key sources of foreign investment.

Malaysia is a growing and relatively open state-oriented market economy. The state plays a significant but declining role in guiding economic activity through macroeconomic plans. In 2007, the economy of Malaysia was the 29th largest economy in the world by purchasing power parity with gross domestic product for 2007 was estimated to be $357.9 billion with a growth rate of 5% to 7% since 2007 The Southeast Asian nation experienced an economic boom and underwent rapid development during the late 20th century and has a GDP per capita of $14,400, being considered a newly industrialized country.

On the income distribution, there are 5.8 million households in 2007. Of that, 8.6% have an monthly income below RM1,000, 29.4% had between RM1,000 and RM2,000, while 19.8% earned between RM2,001 and RM3,000; 12.9% of the households earned between RM3,001 and RM4,000 and 8.6% between RM4,001 and RM5,000. Finally, around 15.8% of the households have an income of between RM5,001 and RM10,000 and 4.9% have an income of RM10,000 and above.

As one of three countries that control the Strait of Malacca, international trade plays a large role in its economy. At one time, it was the largest producer of tin, rubber and palm oil in the world. Manufacturing has a large influence in the country’s economy.

According to World Bank, Malaysia ranks 24th in Ease of doing business. Malaysia’s strengths in the rank includes getting credit (rank 3rd), protecting investor (ranked 4th) and doing trade across borders (ranked 21st). Weaknesses include dealing with licenses (ranked 105th). The study ranks 178 countries in all aspect of doing business. In the investor protection category of the survey, Malaysia had scored a perfect 10 for the extent of disclosure, nine for director liability and seven for shareholder suits. Malaysia is behind Singapore, Hong Kong and New Zealand in investor protection category of the survey.

The government is moving towards a more business friendly environment by setting up a special task force to facilitate business called PEMUDAH, which means “simplifier” in Malay. Highlights includes easing restrictions and requirement to hire expatriates, shorten time to do land transfers and increasing the limit of sugar storage (a controlled item in Malaysia) for companies. The Government aims to be in the top 10 in the Ease of doing business survey before 2010 in order to attract even more foreign investors.

The efforts of PEMUDAH is beginning to show fruits as their ranking improved to number 20 in 2009, with marked improvement in four areas: getting credit; dealing with construction permits; paying taxes; and enforcing contracts.

Event though now the whole world having economic crisis but still Tesco successfully providing all kind of goods, household things, fast moving goods, electronic goods and so on. Tesco also providing Malaysia made products. Tesco is allocated in right place for customers to reach(Wikipedia, 2009).

Social Welfare

Provident and Pension Funds are a group of financial schemes designed to provide members and their dependents with a measure of social security in the form of retirement, medical, death or disability benefits. The major funds in Malaysia comprise the Employees Provident Fund, the Social Security Organisation (SOCSO), the Armed Forces Fund and the Teachers Provident Funds. The funds serve as long term savings in the economy for rechanelling into both the public and private sectors to finance long-term investment. The PPFs are the second largest group of financial institutions in the country in terms of aggregate assets, next to banking institutions.

The Social Security Organisation (or PERKESO) was formed in 1971 with the objective of providing comprehensive social security protection for Malaysians and to ensure the timely and adequate provision of benefits in a socially just manner. SOCSO also monitors and promotes occupational health and safety within the work environment.

The principle of Social Insurance are: To provide speedy, quality and efficient services using the most cost-effective methods while utilising advanced technology and ensuring human resource development. To review the benefit structure periodically as well as the benefit disbursement system. As far as possible without increasing the contribution rate to secure and strengthen SOCSO’s funds through prudent financial and investment management. To promote and encourage work safety and health of workers and employers alike.

In Malaysia, employers and employees both contribute a monthly submission to SOCSO as their obligations to fulfill their coverage under this social security scheme and the employer makes this payment every month on behalf of the employee (Apcdproject, 2009).

Industrial policy

Industrial Policies in Malaysia

There are major four types of industrial policy in Malaysia, each characterized by the different objectives are: Wealth redistribution industrial policy – that is aimed at ensuring a fair distribution of wealth amongst the different races in the country. Export promotion industrial policy – that is aimed at promoting the development of manufacturing industries serving foreign markets. Import substitution industrial policy – that is aimed at promoting the development of manufacturing industries serving domestic markets. Response to globalization industrial policy – that is aimed at coping with new competition from large foreign firms in the domestic (primarily services) markets.

Wealth Redistribution Industrial Policy

Malaysia experienced racial riots in 1969. In response to this event, the Malaysian government implemented the New Economic Policy (NEP) in 1970 with the objective of eradicating poverty and rectifying the unequal distributing of wealth among the different races. Even though NEP originally covered a twenty year period, it has since been renewed under successive policies. Today, affirmative action-type policies continue to affect current economic policies such as ownership control (e.g. under Industrial Coordination Act 1975) and government-related contracts.

1 The purpose of the Act was to ensure that firms complied with NEP guidelines on ownership and employment. In implementing this type of industrial policy, the government accord preferences to businesses (e.g. in government procurement) based on criteria other than market competition. As such, it is perceived to be in conflict with competition policy. One may argue that such practices affect only business dealings involving the government; that private sector ventures would not be affected. However, this argument may not be valid because firms may gain competitive advantages initially via government-related dealings.

Export Promotion Industrial Policy

Malaysia has implemented export promotion industrial policies extensively for more than 40 years. This has assumed the form of the granting of tax incentives and holidays, the establishment of export processing zones and industrial areas. One could argue that competition policy is chiefly about competition in domestic markets. If this view is correct, export promoting industrial policy would be consistent with competition policy and policy makers should not worry about any possible conflicts between these two types of policies.

Import Substitution Industrial Policy

Malaysia has implemented at least two waves of import substitution policies. The first wave in the 1960s targeted at encouraging the development of light industries such as paint, food and clothing. In the second wave, which began in the early 1980s, the focus was on the development of heavy industries such as the steel and car industries. The two big projects related to this are – Proton (car) and Perwaja (steel). This type of industrial policy is being implemented via targeted government investments accompanied by tariff protection (e.g. import duties), import restrictions and sometimes government procurement favouring locally produced products.

The second wave of import substitution, which is still on-going, does lessen competition in Under ICA 1975, manufacturing firms with RM2.5 million or more shareholder funds or with 75 or more employees are required to apply for operating license from the Ministry of International Trade and Industry. the affected sectors. For example, imported cars incur import duties and excise duties while Proton gets a large rebate on excise duties. Given the substantial public investments in projects under the present import substitution policy, it is unlikely that the Malaysian government will abandon the policy overnight.

Recent developments (such as changes in ownership structure and the search for joint-ventures with foreign partners) indicate a gradual withdrawal from the policy. The implication of his development for competition policy is that any competition policy that will be introduced should allow for such restructuring processes. Otherwise, the competition policy itself might not be implemented at all. This indicates the importance of time- bound exemptions in Malaysia’s future competition policy.

Response to Globalization Industrial Policy

The opening of domestic markets to foreign entry and competition, particularly the services sector, has been a major area of concern for policy makers in recent years. Some of these developments are related to Malaysia’s commitment under the WTO e.g. the financial sector. One salient response to these developments has been the government’s encouragement of industry consolidation. In 2000, Bank Negara Malaysia, the central bank, announced a consolidation plan for the financial sector that would reduce the number of financial institutions from 56 to just 10 ‘anchor banks’. The decision affected 23 commercial banks, 16 merchant banks and 17 finance companies.

The main objective was to enhance the competitiveness of locally owned financial institutions in anticipation of increased competition from foreign-owned financial institutions; under its WTO commitments, Malaysia had agreed to liberalize the sector by 2003. Such policies have significant impact on competition. It is imperative that Malaysia implements a competition policy that will monitor this industry that has become very concentrated. Furthermore it is not the function of a central bank to monitor and ensure competition in the banking sector (Lee, 2005).

Impact of macro economic

Macroeconomics (from prefix “macr(o)-” meaning “large” + “economics”) is a branch of economics that deals with the performance, structure, and behavior of a national or regional economy as a whole.[1] Along with microeconomics, macroeconomics is one of the two most general fields in economics. It is the study of the behavior and decision-making of entire economies.[2] Macroeconomists study aggregated indicators such as GDP, unemployment rates, and price indices to understand how the whole economy functions.

Macroeconomists develop models that explain the relationship between such factors as national income, output, consumption, unemployment, inflation, savings, investment, international trade and international finance. In contrast, microeconomics is primarily focused on the actions of individual agents, such as firms and consumers, and how their behavior determines prices and quantities in specific markets.

While macroeconomics is a broad field of study, there are two areas of research that are emblematic of the discipline: the attempt to understand the causes and consequences of short-run fluctuations in national income (the business cycle), and the attempt to understand the determinants of long-run economic growth (increases in national income).

Macroeconomic models and their forecasts are used by both governments and large corporations to assist in the development and evaluation of economic policy and business strategy.

Macroeconomic policies

In order to try to avoid major economic shocks, such as The Great Depression, governments make adjustments through policy changes which they hope will succeed in stabilizing the economy. Governments believe that the success of these adjustments is necessary to maintain stability and continue growth. This economic management is achieved through two types of strategies such as fiscal policy and monetary policy (Answers, 2009).

Macro economiy of Tesco

This study identified and assessed the overall macro-economic impact of Tesco Ireland and the wider Tesco Group on the Irish economy. The key findings from this element of the study are highlighted below.

The economy-wide impacts of Tesco on the Irish economy take into account the following elements:

Tesco Ireland domestic expenditures on Irish-produced food and other products for re-sale through its store network,

Tesco Ireland domestic expenditures on wages & salaries of its staff,

Tesco Ireland domestic expenditures on Irish-produced business inputs and capital investment,

The value of expenditures on Irish-produced exports into the Tesco Group internationally facilitated by Tesco Ireland;

The inter-sectoral and multiplier impacts of the above expenditures across the Irish economy.

Overall economic impact

The overall economy-wide output impact of the Tesco Group on the Irish economy amounts to €2.5 billion in annual terms in 2006. This comprises total expenditures by the Tesco Group on Irish-produced goods & services amounting to €1.94 billion and the additional inter-sectoral demand amounting to €558 million created across the Irish economy resulting from these expenditures .

It’s slower and therefore increases the risk of a deflationary psychology setting in – people being reluctant to spend because they think prices will be lower next year. That will prolong the recession.

Tesco’s performance is forecast to be much more muted, with growth of around 2.5% expected in the UK, despite a boost to its international sales from a weaker pound. Dresdner Kleinwort analyst James Grzinic said: “We expect Tesco to confirm challenging demand conditions in a number of overseas markets – Ireland, Turkey and Korea above all others. “The UK macro-economic challenges are obvious and we anticipate a more proactive approach to market share protection by Tesco.” . Tesco has fought back in the last fortnight with £200 million in price cuts and promotions on more than 3,000 products and an advertising campaign comparing average shopping baskets with rivals to stress its value.

3. Conclusion

This report shows many information about Tesco Malaysia such as the mission, values objectives of organization within its environment and the economic system. It also discusses about the impact of social welfare and industrial policies. It evaluates the impact of macro economic too.

In conclusion, Tesco well published organization, people trust the products provided there. As a sign Tosco’s growth, Tesco has bought all the Macro hypermarket and renamed as Tesco Extra. It also shows reliability to it’s stakeholders.

Reference List

Apcdproject, (2009), “Malaysia”, [Internet] Available from http://www.apcdproject.org/countryprofile/malaysia/ [Accessed on 07 September 2009]

Awnswers, (2009), “Macro Economics” [Internet] Available from http://www.answers.com/topic/macroeconomics [Accessed on 07 September 2009]

BusinessDictionary, (2009), “Stakeholders” [Internet] Available from http://www.businessdictionary.com/definition/stakeholder.html [Accessed on 07 September 2009]

Euforic, (2009) “Assessing the Influence and “Importance” of Stakeholders”. [Internet] Available from http://www.euforic.org/gb/stake1.htm#assess [Accessed on 07 September 2009]

LearningPremium, (2009), “Stakeholder groups”, [Internet] Available from http://www.learnpremium.co.uk/CIMA/lesson3/page1.aspx [Accessed on 07 September 2009]

Lee, C., (2009) “Industrial Policies in Malaysia”. [Internet] Available from www.jftc.go.jp/eacpf/05/AOTS/malaysia_cassey.pdf [Accessed on 07 September 2009]

S-Cool, (2009), “Stakeholders”, [Internet] Available from
http://www.s-cool.co.uk/alevel/business-studies-as–a2-level/business-objectives-and-strategy/stakeholders.html [Accessed on 07 September 2009]

Tesco, (2009), “Benefits”, [Internet] Available from http://www.tesco.ie/careers/benefits.html [Accessed on 07 September 2009]

Tesco, (2009), “Corporate Info”, [Internet] Available from http://www.tesco.com.my/html/corporate_info.aspxID=8&PID=33&LID=1&Name=Our%20Value&Repost=True [Accessed on 07 September 2009]

Tutor2u, (2009), “Stakeholder Theory”, [Internet] Available from http://tutor2u.net/business/accounts/stakeholder_theory.htm [Accessed on 07 September 2009]

Wikipedia, (2009), “Economy of Malaysia”, [Internet] Available from http://en.wikipedia.org/wiki/Economy_of_Malaysia [Accessed on 07 September 2009]

Wikipedia, (2009), “Tesco”, [Internet] Available from http://en.wikipedia.org/wiki/Tesco [Accessed on 07 September 2009]

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