DOING FDI IN

MALAYSIA

THIS DOCUMENTS includes the whole process of establishing a hotel in
Malaysia
Subject:
INTERNATIONAL
BUSINESS


1
TABLE OF CONTENTS
No. DESCRIPTION PAGE
NO
1 acknowledgment 3
2 Introduction of the business 4
3 Detail analysis 11
4 Objective setting 17
5 Implementation 22
6 Control and evaluation 22
7 Future of hotel industry 25
8 Conclusion 27
9 references 28



2


Introduction
to the
business,
products,
purpose,
country and
industry


3




Acknowledgement
We say thanks to ALLAH Almighty who bestowed us the opportunity, courage and
confidence to obtain more knowledge to complete this report, which will facilitate us greatly
in our intellectual development and skills capitalization.
We would like to submit our deepest gratitude to our parents, whose prayers always
supported in every task of our life.
We are also very thankful to Maam Anum Khan who teaches us endlessly.









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INTRODUCTION
International business is the transactions taking place across national borders for the purpose
of satisfying the needs of individuals and organizations. As the years are passing by getting
profits is becoming difficult in fact the survival of organizations is in danger. To cope up with
such a situation organizations of every type are consciously looking for opportunities all
around the globe to cater them and then earn profits. Our organization has also found out an
opportunity to go to Malaysia.
NAME OF HOTEL
HOTEL DELIGHT
MISSION STATEMENT
Our mission is to be the worlds leader in hospitality services and to achieve this
through our spirit to serve every culture possible
PRODUCT
We are basically providing both the food and accommodation facilities.
In case of cusine we are going to serve plain steam white rice, nasi lemak, congee, flat rice
noodles, golden wheat noodles, silver needle noodles, roti bakar, paratha, fried flat
bread(poori), sea food dishes, beef dishes, mutton dishes, veagetable dishes ( bean sprouts,
binjals, green beans, lady finger, pumpkin, cabbage sweet potatoes etc). and last but no least
pickles.
We are also having accommodation facilities with 15 rooms.
TARGET COUNTRY
We are going to target Malaysia for doing foreign direct investment in its hotel industry. A
brief information about Malaysia.
ADMINISTRATIVE CAPITAL: Putrajaya
COMMERCIAL CAPITAL: Kuala Lampur
GEOGRAPHY
Located in Southeast Asia, Malaysia is the 66th largest country by total land area. Bordering
with Indonesia and Brunei in East Malaysia and Thailand in West Malaysia with a land area
of 329,847 square kilo meters (127,355 sq. mi)


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DEMOGRAPHY
A population of close to 28.3 Million. Muslims account for about 60.4% of the
population.
CLIMATE
Hot and humid. An average temperature of 27 C(80.6 F) is throughout the year. In the
lowlands and in the Coasts have a similar temperature which range between 23 C (73.4 F)
and 32 C (89.6 F).
LANGUAGES SPOKEN
Malay is the official language. English and Chinese is widely used as well.
LOCAL TIME
GMT+8 hrs. throughout the year
BUSINESS HOURS
Government: 8:30 AM to 4:30 PM
General: 9 AM to 5 PM
CURRENCY
Malaysian Ringgit
A study has rated Malaysia as the worlds top-Muslim friendly holiday destination. It used
the criteria including the level of safety in a country, the ease of access to halal food and
prayer facilities, and whether hotels catered to the needs of Muslim guests. On a scale of 1 to
10 Malaysia rated on the top with a score of 8.3 among 50 nations surveyed.
ADVANTAGES OF GOING TO MALAYSIA
ECONOMIC STRENGTH
Malaysia is a country on the move. Often dubbed the "lucky country" because of its wealth of
mineral resources and fertile soils, Malaysia did not rest on its laurels but took decisive steps
to progress from an economy dependent on agriculture and primary commodities in the
sixties to a manufacturing-based, export-driven economy spurred on by high technology,
knowledge-based and capital-intensive industries. The structural transformation of Malaysia's
economy over the last 40 years has been spectacular.


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CONTINUOUS ECONOMIC GROWTH
Malaysia's pragmatic and flexible management approach has enabled the economy to raise its
competitiveness and enhance its resilience in facing challenging circumstances. Deliberate
measure has been taken to make the economy more diversified and broad-based to ensure
sustainable growth. Continuous efforts have been pursued to enhance the services sector,
accelerate value-added of the manufacturing sector as well as boost the agriculture and agro-
based sector as the third engine of growth. New sources of growth continue to be promoted
and developed such as biotechnology, information and communications technology, halal
products and Islamic finance. Indeed Malaysia is developing as a knowledge-based economy,
driven by human capital, innovation and ideas.
SUPPORTIVE GOVERNMENT POLICIES
Government policies that maintain a business environment with opportunities for growth and
profits have made Malaysia an attractive manufacturing and export base in the region. The
private sector in Malaysia has become partners with the public sector in achieving the
nation's development objectives.
A major factor that has attracted investors to Malaysia is the government's commitment to
maintain a business environment that provides companies with the opportunities for growth
and profits. This commitment is seen in the government's constant efforts to obtain feedback
from the business community through channels of consultation such as regular government-
private sector dialogues. These allow the various business communities to air their views and
to contribute towards the formulation of government policies which concern them.
LIBERAL EQUITY POLICY
Generally, foreign investors in Malaysia's manufacturing sector can hold 100% equity in
projects which export at least 80% of their production. However, effective from 17 June
2003, 100% foreign equity holding is allowed for all investments in new projects, as well as
investments in expansion/diversification projects by existing companies irrespective of their
level of exports.
ATTRACTIVE TAX INCENTIVES
Malaysia's company tax rate is attractive at 27% and is applicable to both resident and non-
resident companies. Malaysia also offers a wide range of tax incentives for manufacturing
projects under the Promotion of Investments Act 1986 and the Income Tax Act 1967.
EDUCATED WORKFORCE
Malaysia offers investors a young, educated and productive workforce at costs competitive
with other countries in Asia. Backed by the government's continued support of human


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resource development in all sectors, the quality of Malaysia's workforce is one of the best in
the region. Literacy levels are high at more than 94% and school leavers entering the job
market have at least 11 years of basic education. In addition, labour productivity has grown
steadily at more than 3.3% per annum over the last few years surpassing that of many
developed countries.
DEVELOPED INFRASTRUCTURE
Malaysia's persistent drive to develop and upgrade its infrastructure has resulted in one of the
well-developed infrastructure among the newly industrializing countries of Asia.
The greatest advantage to manufacturers in Malaysia has been the nation's persistent drive to
develop and upgrade its infrastructure. Over the years, these investments have paid off and
serious bottlenecks have been avoided. Today, Malaysia can boast of having one of the well-
developed infrastructures among the newly industrializing countries of Asia.
A landmark event was the completion of Malaysia's newest and biggest airport, the Kuala
Lumpur International Airport (KLIA), which opened for business in 1998.
Recently launched is Kuala Lumpur Sentral, a transportation hub integrating all major rail
transport networks, including the Express Rail Link to the KLIA and Putrajaya, the
government's new administrative center.
A network of well-maintained highways is a boon to industries. These highways link major
growth centers to seaports and airports throughout the peninsula and provide an efficient
means of transportation for goods.
International trade, especially seaborne trade, has traditionally been the lifeblood of Malaysia.
Today, 95% of the country's trade is by sea via Malaysia's seven international ports - Penang
Port, Port Klang, Johor Port, Port of Tanjung Pelepas, Kuantan Port and Kemaman Port in
Peninsular Malaysia and Bintulu Port in Sarawak.
A VIBRANT BUSINESS ENVIRONMENT
Malaysia's market-oriented economy, supportive government policies and a large local
business community that is ready to do business with international corporations have made
Malaysia a highly competitive manufacturing and export base.
In addition, Malaysia's rapid move towards the k-economy allows companies to do business
in an environment that is geared towards information technology.
One of Malaysia's major pull factors is its large pool of young, educated and trainable
workforce. Many of Malaysia's university graduates are trained overseas in fields such as
engineering, and accountancy, allowing them to adapt easily to an international corporate
environment.
English is widely used in Malaysia, especially in business thus facilitating the investor's


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communication with local personnel and suppliers. The country's legal and accounting
practices derived from the British system are familiar to most international companies.
CHAMBERS OF COMMERCE AND INDUSTRY
Newcomers to Malaysia's business scene will feel at home with the presence of the various
chambers of commerce and trade associations made up of corporations from different
countries. These organizations are invaluable sources for general business information,
advice and assistance, and complement the role of government agencies such as MIDA. The
major organizations are the Malaysian International Chamber of Commerce and Industry
(MICCI), Federation of Malaysian Manufacturers (FMM), the Japanese Chamber of Trade
and Industry (JACTIM), and American-Malaysian Chamber of Commerce (AMCHAM), as
well as several trade associations such as the Malaysian-American Electronics Industry
(MAEI) Group.
DEVELOPED FINANCIAL FACILITIES
A well-developed financial and banking sector has enhanced Malaysia's position as a
dynamic export base in Asia. Sophisticated financial facilities are available through domestic
and foreign commercial banks and their nationwide network of branches. There are also
representative offices of several foreign banks that wish to establish a presence in the region.
Besides the commercial banks, merchant banks, finance companies and industrial finance
institutions are major sources of credit to the industrial sector in Malaysia. Exporters in
Malaysia can also take advantage of the credit facilities offered by the Export-Import Bank of
Malaysia Berhad (Exim Bank), while another institution, Malaysia Export Credit Insurance
Berhad (MECIB), offers export insurance cover and guarantees.
MALAYSIAN HOTEL INDUSTRY
We have chosen the hotel industry because of its rapid growth as globalization is increasing
and number of people are travelling out for progressing career. Specifically we have targeted
the Malaysian hotel industry because of following reasons:
Religion
The Malaysian constitution guarantees freedom of religion while making Islam the state
religion. This is same as our religion. Religion shapes the culture and attitudes of people so
we can easily cater the demands of people.
Cuisine
Malaysia's cuisine reflects the multi-ethnic makeup of its population. Many cultures from
within the country and from surrounding regions have greatly influenced the cuisine. The
different states have varied dishes, and often the food in Malaysia is different from the


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original dishes.
Sometimes food not found in its original culture is assimilated into another; for example,
Chinese restaurants in Malaysia often serve Malay dishes. Food from one culture is
sometimes also cooked using styles taken from another culture; this means that although
much of Malaysian food can be traced back to a certain culture, they have their own identity.
Rice is popular in many dishes. Chili is commonly found in local cuisine, although this does
not necessarily make them spicy.
So, we can easily put our cuisine there.
TOURISM
Tourism is another reason of our going in this industry. As it is the most widely visited
country and earns from tourism after manufacturing. Where ever tourism is their hotel
industry also gets boosts due to it.

MALAYSIAPAKISTAN RELATIONS
Malaysia-Pakistan refers to bilateral foreign relations between the two countries, Malaysia
and Pakistan. Pakistan has its High Commission in Kuala Lumpur, and Malaysia has its High
Commission in Islamabad
DIPLOMATIC TIES
Pakistan has brotherly relations with Malaysia. Historically, Pakistan recognised Malaysia
and refused to accept the non-inclusion of Brunei and the leaving of Singapore from the
Federation of Malaysia, Pakistan only established relations with those countries when
Malaysia had done so. Both are members of Organization of Islamic Conference (O.I.C) and
the Commonwealth of Nations. There is a trade and cultural pact between the two countries,
under which the import and export of various goods is done on fairly large scale. The
President and the Prime Minister of Pakistan along with other high officials visited Malaysia
many times and Malaysian officials also paid a good will visit to Pakistan. Both the countries
enjoy close relations and links of mutual friendship and the cooperation has further
strengthened.
TRADE LINKS
Malaysia and Pakistan have signed a Free Trade Agreement known as Malaysia-Pakistan
Closer Economic Partnership Agreement (MPCEPA) in Jan 2008.
TRANSPORT LINKS
Pakistan and Malaysia are linked by Air Transport. Pakistan International Airlines operates
many flights from Karachi, Lahore and Peshawar to Kuala Lumpur.


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HOTEL INDUSTRY IN PAKISTAN
The hotel business has been present in Pakistan since its independence in 1947. In Pakistan
this industry contributes a large proportion to the countrys economy. The hotel industry
contributes to a large percentage of the countrys revenue. At first there were not many hotels
to begin with but as time passes, the country saw the gradual establishment of local and
international hotels. The Hotel Mehran is an example of an early local hotel. The Avari
Towers rose as a prominent hotel chain present in Karachi, Lahore, Islamabad and Dubai.
At the moment, there are four major five star hotels operating in the country: Pearl
Continental, Marriott, Avari Towers, and Sheraton Hotel. Up and coming hotels include
Serena Hotel and Carlton Hotel, which are relatively new compared to the previous four. The
greatest growth in the hotel industry was seen in the late 80s and then some in early 90s. The
number of hotels in the country increased from 845 in 1991 to 1150 in 1996, showing a
growth of more than 26% with the fastest growth in the number of hotels seen in 1993 which
tapered off to 2.4% in 1995 before picking up again in 1996.
However, the industry began to experience a downfall with time, mostly due to government
instability and terrorism. In August 2008, hotel occupancy rates fell, an alarming sign given
to Pakistani Hotels. By the beginning of fourth quarter 2008, the Pakistan THL sector
(Tourism, Hospitality and leisure) was starting to see major consequences of the economic
crisis in the form of negative indicators in the hotel industry, a slowdown in the gaming
sector and increased preference to quick service restaurants as opposed to dining ones.
MAIN PLAYERS OF HOTEL INDUSTRY
Top ten players worldwide are:
InterContinental Hotels Group
Hilton Worldwide
Marriot International
Wyndham Hotel Group
Accor
Choice Hotels International
Starwood Hotels & Resorts
Best Western
Home Inns
Carlson Rezidor Hotel Group


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Detail analysis
which includes
PESTEL
analysis of
host and home
country, SWOT
analysis of the
industry


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PEST ANALYSIS OF MALAYSIA
POLITICAL
The political stability in Malaysia is important to attract more foreign investors to the
country. There are three major races that can be found in Malaysia which are Malay, Chinese
and Indian community. In May 1969, there was a major racial conflict that has lead
Malaysians to live rather harmoniously with each other in order to prevent another racial riot
from happening again. Since then, races of different kinds can be seen working, helping,
joking together. The political power in Malaysia is mainly controlled by Malays which are
known as the Bumiputera. However the government parties such as United Malays National
Organization (UMNO), Malaysian Chinese Association (MCA) and Malaysian Indian
Congress (MIC) is formed as one government known as the Barisan Nasional (BN). With
these three parties, each race has their own representatives to resolve any racial conflicts and
thus giving the country a more harmonious community (Malaysia Truly Asia)
ECONOMIC
The economic trend is to provide a picture of the economic growth in Malaysia. The Gross
Domestic Product also known as the GDP is to measure the countrys total output. The
economy in Malaysia has been in a slowdown. However, in this year of 2010, Bank Negara
Malaysia has announced that the GDP is expected to exceed 6.0 per cent. The first half of the
economic growth was rebounded up to 9.5 per cent compare to previous year in 2009 that has
a negative of 5.1 per cent. According to the central bank governor Tan Sri Dr Zeti Akhtar
Aziz, there is a high possibility that the economy will continue to grow even though there is a
slowdown among their trading partners with other developing countries. Since the economy
is financially strong, it is expected that there would be a continuous steady inflow from FDI
(Business Times 2010).
The company tax rate that has been taxed since the year 2009 is at 25%. Any income
generated by local company which performs activities such as banking and insurance
business and sea and air transport undertakings has to pay the tax imposed, other than that
there is in no need of paying the tax as income is derived out of Malaysia is not taxable and it
will become a withholding tax in the other countries (MIDA 2010).
As for the inflation rate in Malaysia, it has been accelerating since the month of March 2010.
The latest inflation rate, which is in the month of July 2010 reached up to 1.90% compared to
the month in March 2010 which is 1.30% (Malaysian Inflation Rate 2010). According to
Bloomberg, the affected costs are the food and transport areas (Adam 2010).
Moreover, the current exchange rate, September 21st, 2010 for Malaysia against US Dollar is
at 3.1370. According to bank governor Tan Sri Dr Zeti Akhtar Aziz, the Malaysian Ringgit
has been appreciating over the past years almost up to 9% (Star Business News 2010).



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SOCIAL AND CULTURAL
Malaysia is multiracial countries that consist of the Malay, Chinese and Indians. Each culture
has their unique traditions. The Malays for example celebrates Hari Raya, the Chinese
celebrates Chinese New Year and the Indians, Depavali. Many religions can also be found in
Malaysia too. For instance, the major religion that is known in Malaysia is the Christianity,
Buddhism, and Islams. Each religion practices their prayers and celebrations in Malaysia
harmoniously (Dalat).
The various races and uniqueness of this country has attracted many foreign investors to
Malaysia. Such as investors that comes from China, India and Middle East. Foreign investors
from these countries find it easier to set up a corporation in Malaysia as they are able to
communicate easily with the locals. For examples, Chinese will be able to communicate with
investors from China, Indians to investors from India and Malay to Middle East. Although
there are differences in each race and culture, however the community stays together as one.
Malaysia itself has already welcomed investors from China, India and Middle East. The
Malaysian Industrial Development Authority (MIDA), gladly invites more Chinese investors
to explore, trade and invest in Malaysia. For instance China has set up a company known as
Wenzhou an enterprise that was set up in Malaysia has become a well-known company in
Malaysia. Even Indians from India can be found investing in Malaysia. According to MIDA,
Indias firm is set to invest in companies that involves in pharmaceuticals and biotechnology
in Malaysia. Not forgetting Investors from Middle East has also invested in Malaysia such as
setting up Islamic Banks (Business Times 2010).
TECHNOLOGY
Malaysia is one of the Asian countries that are moving into a technology-driven and high tech
production based showing that Malaysia has its potential to develop and invent new
technologies despite the financial crisis that were faced in 1997 (Mun Chow Lai 2004). There
are many technology companies in Malaysia and one of them is the Malaysia Technology
Development Corporation (MTDC). MTDC provides integrated ventures capital solutions for
new ideas and inventions (Malaysian Technology Development Corporation 2007).
The technology in Malaysia is slowly advancing that by the year 2020, The agriculture
National Key Economic Area known as the NKEA, expects that Malaysia will transform
the agriculture sector into an agribusiness, which will not only provide employment
opportunities for those in rural areas but also a boost in the countrys Gross National Income
(GNI). Furthermore, the health NKEA targets to develop more pharmaceuticals, health travel
and medical technology products that will boost the market in the economy (Bernama 2010).
Additionally, Malaysia has also shown a develop network of Highways. The highway such as
seaports and airports throughout the peninsula has provided efficiency to many industries.
Even the telecommunication with the latest digital and fire optics technology has made
Malaysias telecommunications to be an impressive expansion for the past few years (MIDA
2010).


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LABOUR
In Malaysia, investors benefits from getting more diligent, disciplined, educated and trainable
laborers. Every Malaysian youth in terms of education has to go through at least 11 years of
school education level, thus allowing investors to find it easier to train these in youth in new
skills. As the demand for technically trained workers increases, the government has taken the
initiatives to increase the number of much more learned and educated students in that field.
Besides that, the relationship of both employer and employee are much more harmonious.
The productiveness is relatively high even though the labor cost in Malaysia is quite low
(MIDA 2010). According the labor statistic recently, the labor force has been on the rise
since year 2003. Comparing to the year 2009, the labor force in Malaysia was at 11,090,000
but in the year of 2010, it has raised up to 11,290,000 (CIA World Fact book 2010).
PESTEL ANALYSIS OF PAKISTAN
POLITICAL
Since the day Pakistan got its independence, political condition of Pakistan is getting worse
day after day and minute after minute. This political instability has led to uncertain
environment in the country, which is a threat for any business. So the new investors are now
more reluctant to invest in Pakistan. This has also threatened foreign companies operating in
Pakistan and they have become more conscious about their future. The ultimate result is
decrease in investment by the potential investors. The rules and regulations are changed quite
frequently due to change in the successive government that affects the business flow.

ECONOMIC

Economic condition of Pakistan is not good for years. Inflation is at its highest, while the
interest rates are at their highest. This is due to low lending levels f or the overall purchasing
power of the consumer is weak.
Unemployment is rising regardless of the fact that labor supply is high and available at low
costs.
Distribution of wealth system continues to worsen year after year because the gap between
the rich and the poor continues to widen. Furthermore, the percentage of poor in the country
continues to rise while the percentage of the rich is gradually falling. Therefore, the
disposable income of the general public has decreased.
No significant economic changes are in sight. The government is in debt up to its neck with
heavy loans from financial institutions like IMF and The World Bank. This is apart from the
financial aid packages it continues to accept from countries like the United States of America
and other Friends of Democratic Pakistan. Pakistans integration with the global economy has
brought positive changes to its overall economy, including increase in GDP and decline in
import duties. Regardless of some positive changes,
Unemployment and poverty are on the rise. This is further troublesome because wages in the
private sector have been on an increase as per the demand to compete in the global market.


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SOCIO-CULTURAL

Health and Education sectors are the two most important sectors for any country, specially a
developing nation. It is the governments responsibility to provide the best possible health
care and educational facilities f or its people. Unfortunately, these are the two areas where the
government allocates the least amount in their annual budget.

TECHNOLOGICAL

Technological expertise is readily available in the country with overflow of IT professionals
in different industries. There has been an immense technological improvement in the
industrial sector and petrol and oil industry is no exception. Industrialization in the country is
fairly stagnant with international investors quite wary of entering this risky Pakistani market.
Therefore, latest manufacturing technology is significantly missing from the market. As a
result, the countries imports are higher than its exports. And the main exports are from the
agricultural sector and the textile industry.

SWOT ANALYSIS OF MALYSIAN HOTEL INDUSTRY
STENGTHS:
Rich cultural heritage
It has strength due to its modern and stable economy.
Labor productivity is higher as compared to other countries
Large percentage of young and growing population which leads to increase in
consumption and thus production of people.
Its products are perceived to be safe and of good quality due to Malaysian halal
certification
Diverse agricultural products availability due to which diverse range of dishes could
be provided at lower cost.
Capacity to meet demand
Tourism. Which attract a large number of people to be served.
WEAKNESSES:
Some suppliers are not consistent in supply of materials
Lack of seriousness of attitude of people
Effects of global economic crisis
OPPORTUNITIES:
High purchasing power of people.
Growth in related industries, like tourism which increase opportunities for growth.
Going online is another opportunity


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THREATS:
Increase in competition is a threat.
Any instability in the political environment would be a danger for tourism and thus
affecting hospitality industry.
SWOT ANALYSIS OF PAKISTANI HOTEL INDUSTRY
STRENGTHS
Our rich cultural heritage is the major strength of our country on which to some extent
our hotel industry depends for earing foreign exchange.
Beautiful and eye catching areas.
Rich cuisine.
WEAKNESSES
Not having many developed institutes of hotel management and also lack of
awareness among people.
Economic downfall is a weakness also because as economy goes down people dont
have that much purchasing power to use hotels.
Law and order of our country is also affecting our hotel industry badly.
Lack of productive labor.
Lack of infrastructure.
Unstable political situation of the country is also declining our industry.
OPPORTUNITIES
By promoting tourism our hotel industry can get a chance to grow and boost.
By improving security conditions another possibility is there to improve.
Technological advancement.
Giving importance to the role of designers in building hotels could also attract
customers.
THREATS
Terrorism is a continuous threat to our hotel industry.
Raising inflation and devaluation of the value of rupee is another threat.







17

















After the analysis
has been done
then we set our
objectives
regarding the new
business venture.
This includes
strategy,
competitors,
business
orientation,
porters generic
strategy, porters
5 forces model and
CSFS analysis.


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STRATEGY
Our strategy is National responsiveness. We will meet the local demands of Malaysian
people. We here also cater to the demands of Pakistani living there for the purposes of job
etc.
COMPETITORS
All 3 star hotels of Malaysia are our competitors. Especially those which are in the city of
Kuala Lampur.
In future we will try to compete with the leaders of the market.
BUSINESS ORIENTATION
Our business orientation is poly centric. We strive to meet the local demands of the people
rather than going with our host country practices. So our companys basic mission is public
acceptance by local product development based on local needs.
PORTERS GENERIC STRATEGY





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In this strategy we will adopt Cost Leadership Strategy because we are entering in new
market and we have to grasp high market share we will decrease our prices as compared to
other Hotels who are our competitors.
Cost leadership means having the lowest per-unit (i.e., average) cost in the industry
that is, lowest cost relative to your rivals.
This could mean having the lowest per-unit cost among rivals in highly competitive
industries, in which case returns or profits will be low but nonetheless higher than
competitors
Or, this could mean having lowest cost among a few rivals where each firm enjoys
pricing power and high profits.
Cost leadership is a defendable strategy because:
It defends the firm against powerful buyers. Buyers can drive price down only to the
level of the next most efficient producer.
It defends against powerful suppliers. Cost leadership provides flexibility to absorb an
increase in input costs, whereas competitors may not have this flexibility.
The factors that lead to cost leadership also provide entry barriers in many instances.
Economies of scale require potential rivals to enter the industry with substantial
capacity to produce, and this means the cost of entry may be prohibitive to many
potential competitors.
We can achieve this through:
The cheaper availability of raw materials because a number of agricultural products
are gown there.
As the purchasing power of people is high in Malaysia and also the percentage of
young and growing population is high so there would be sufficient people to serve to
achieve economies of scale.
We have to bear the cost in the short run of offering low cost products but in the long
run it would be profitable.
Process innovation developing cheaper ways to produce existing products.
Hiring the competent staff for the hotel
By having tight control of overhead

PORTERS FIVE FORCES MODEL


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COMPETITIVE RIVALRY WITHIN THE INDUSTRY (HIGH)

Rivalry among the hotel industry is high inside the country (Malaysia). There two groups
which are the big players in this market. They have been dominating the market for such a
long time with good business rivalry. Rivals are competitors within hotel industry. This force
describes the intensity of competition between existing players in an industry, Rivalry in the
hotel industry can be weak, with few competitors that do not compete very aggressively. On
the other hand, it can be intense, with many competitors struggling in a cut-throat
environment. The top competitors in hotel industry are having the same services like five star,
the healthy competition among the all players is helping to increase the hotel industry growth.

THREATS OF NEW ENTRANTS (LOW)
This could be due to a variety of reasons that include a need for capital, a need for brand
awareness, a need for economies of scale or the result of government regulations. The hotel
industries do require customers loyalty. People would not visit a hotel which is not well
known. This is why it is difficult for new entrants to come and join the market. Eventually the
business will be controlled by the big player. Regarding the threats of new entrants, it is
supposed to be low.
BARGAINING POWER OF SUPPLIER (LOW)
Many companies provide equipments to hotel as supplier. With the large number of
suppliers listed in Malaysia, the company has the power to bargain the price. If for instance,
supplier A provides slightly high price for the product X, the company can always search and
find the other supplier who can sell the item to them with lower price. The bargaining power
of supplier is low.
BARGAINING POWER OF BUYER (HIGH)


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Customers visiting the country are with different backgrounds such as other hotels from other
countries with other types and services and also hotel membership. Since there are a lot of
customers, and many hotels in Malaysia, customers have the right to choose which one they
prefer to stay in it. Overall for this quadrant the bargaining power of buyer is high.
Bargaining Power of customer means, how much control the customer have to drive down
products price, customer have more bargaining power when:
Fewer customers looking for too many goods.
Customer purchases in bulk quantities
Product is not differentiated
Customer cost of switching to a competitors product is low
Shopping cost is low
Customer are price sensitive
Credible Threat of integration
THREAT OF SUBSTITUTE PRODUCT (LOW)
There are low risks of substitute of product since tourist industry in Malaysia is growing.
Local and international tourists will eventually have to visit different types and levels of
hotels to attain their needs for occupancy. In overall, the threat of the substitute products is
still low.
INTERNATIONALIZATION PROCESS
We are going to do foreign direct investment in the hotel industry of Malaysia. In this our
level of involvement is highest but the risk is also high. Because loses also would be solely
ours.
CSA AND FSA
We will go for the First Quadrant where strong CSA and weak FSA. We will adopt
polycentric strategy means strategies of those countries in which we are operating. And we
will go for FDI and cost leadership strategy.
We have strong CSA in following ways:
The economy we are entering is stable as well as growing
Supportive governmental policies for business
Liberal equity policy, where one can have 100% ownership
Attractive tax incentives
Developed infrastructure which support every industry
Developed financial facilities which support the hotel industry
Geographic location of the country, as it is located where besides human efforts
naturally beautiful destinations are present.
We are having weak FSA in the following ways:


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Productive labor is available which gives us some advantage but
We do not have experience of that market and other factors which are reasons behind
weak FSA.
IMPLEMENTATION
Implementation is the process of attaining goals by using the organizational structure to
execute the strategy properly.
In this first decision is regarding the LOCATION. Which is Malaysia as a country and
within it is Hotel No. 10, Jalan Binjai, Off Jalan Ampang, Kuala Lumpur 50450,
Malaysia. This location is giving many advantages which have been discussed in the start of
the report. These are raw material availability, infrastructure, labor availability, tax
incentives; tourism spot etc. Kuala Lumpur is the commercial capital of the country so our
location is also having advantage in this sense as well. As business people will come in this
area which can be attracted. Tourist will also love to see the capital. Many wonderful and
eye catching attractions are there in this city.

Second is regarding the ownership we will own it fully. Malaysian government employs
liberal equity policy which gives everyone the opportunity to hold 100% of the ownership in
the investors hands.

CONTROL AND EVALUATION

When we have implemented our strategy now we have to evaluate it. For evaluating we have
to answer two questions. One is to answer how our organization has performed? And the
second is what actions should be taken for future?
For answering fist we have to establish measures to evaluate performance. Measuring
performance is important for investors, owners, and managers. Investors need to be able to
measure an individual hotels performance in relation to the industry as a whole for many
reasonsnot the least of which is financial viability. Owners need to know if the hotels in
their portfolio are performing up to expectations. Managers use hotel performance
measurements as a yardstick of their own professional ability.

Each of the groups of people interested in measuring performance will view the information
in different ways. The investors and owners may prefer to look at hard data (i.e.,
documented numbers). This is a quantifiable approach. Managers may look at other factors.
Good quantifiable data may be a goal for managers as well, but how they get there is less
quantifiable. The approach they use is qualifiable that is, an approach that leaves room for
interpretation. In the end, accurate measurement of hotels involves both quantifiable and
qualifiable analyses. There are two accepted forms of quantifiable analyses: rev-par and
market share. The qualifiable analyses are based on the goals of management. How will a
hotels management achieve reasonable results? Because a hotel derives most of its profit and


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revenue from room sales, the qualifiable approaches center on filling the sleeping rooms.
These managers are said to be either rate driven or occupancy driven.
QUANTIFIABLE ANALYSES
A method of comparing the room revenue from hotel to hotel is called rev-par.
Rev-par is defined as revenue per available room. This analysis allows hotels of different
sizes to compare the revenue generated by the sale of booked rooms. Rev-par divides the total
booked room revenue generated for a predetermined time frame by the total number of hotel
rooms. Rev-par goes beyond occupancy analysis because it factors in average daily rate.
Rev-par is unique to hospitality. Because of the differing sizes of hotels, the need to compare
performance on an even playing field arose. Factoring in the size of a hotel allows any hotel
in a specific market mix to compare itself to another. It will be helpful to review again the
common hotel-size classifications
COMMON HOTEL SIZE CLASSIFICATION
CLASSIFICATION NO. OF ROOMS BOOKED
Small 1 to 150
Medium 151 to 400
Large 401 to 1500
Mega 1501 and over

The hotel size classification is helpful in describing the relative size of a property.
Understanding that hotels of all sizes seek to compare quantifiable data, the need for rev-par
analysis becomes apparent.
Market Share
Rev-par is a useful quantifiable tool in measuring hotel performance. It uses both occupancy
and rate information in its calculation. In a competitive environment, sharing rate information
is frowned upon due to antitrust concerns.
Market share is defined as a hotels occupancy performance in relation to other hotels within
a predetermined competitive set.
The first step in determining market share is to determine which nearby hotels fall within the
competitive set. The competitive set should include hotels of similar product type, location
type, and service level.
The next step in determining a hotels market share is to determine its individual market
potential. The individual market potential is defined as the number of rooms a hotel has for
sale within a given time frame.
A hotel's rightful market share (or fair share) reveals how much of the total market potential
is made up by its own individual potential.


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Profit and loss analysis could be another way of measuring the performance of the hotel.
No of guests served is also a variable that can tell about the performance.
Customer feedback or comment cards is also a way to measure the performance of your cuisine and
service.






25


Future of
hotel
industry


26
There are some key drivers that will shape hospitality and expand the designers role
BRAND
Proprietors of both independent and chain hotels are increasingly seeking to create their point
of difference through branding and the ongoing refinement of branding. Service is
fundamental, but the aesthetics also create those memorable experiences that the guest takes
away and which make them want to return. The magic stems from that.
Theres been a counter movement away from the homogenous design adopted by some
corporate and brand hotels in the 1980s. The premise of providing the traveller the
reassurance and comfort of a known experience associated with a particular brand regardless
of location preceded the realization that impersonality, predictability and boredom can
create a negative guest experience.

As its now widely accepted that brand is sufficient
reassurance for the traveller, on the proviso that qualities and standards are consistent,
international chains are focusing on clear articulation of sub brands and hierarchies.
Understanding brand and positioning will become increasingly critical.
PLACE
Greater emphasis on the special qualities of place in hotel design emerged in the 2000s. Its a
trend set to continue and grow if the jury citation for the 2012 Pritzker Architecture Prize
Laureate, Wang Shu, is heeded. Wang Shus body of work, which has featured recycled roof
tiles and bricks, was described as responsible architecture arising from a sense of specific
culture and place.

Designers working remotely will spend more time trying to genuinely
understand the local culture and the quintessence of the local experience. Its celebrating and
augmenting the unique qualities of each location in the hotel design that will deliver a
genuine local experience for patrons. Demand for localization

is recognized by Hilton
Worldwide, which on its website promises one-of-a-kind experiences with sophisticated,
locally inspired surroundings. So, too, for Bulgari, which promises that each of its properties
features strong reference to the local culture.
Point of difference
There are alternative ways to provide guests with a unique, memorable experience and
emotional connection. Examples include artworks such as the seven sculptural timber balls
made out of chestnut by Korean artist Lee Jae-Hyo at Crown Metropol in Melbourne, and the
growth of spa amenities within hotels designed to appeal to the senses beyond sight.
Exploration of these concepts in other aspects of hotel amenity is likely to follow.
Signature restaurants can provide a legitimate wow and a genuine and attractive experience
to both guests and external patrons.
The hotel restaurant can no longer afford to be a soulless provider of three meals a day and a
buffet. Hoteliers will work more with designers to reap extra value from their investment.
Signature restaurants can provide a legitimate platform for appropriate insertion of wow
and a genuine and attractive experience to both guests and external patrons. Hotel food and


27
beverage in Australia has traditionally been more about convenience than the food on offer.
A name chef, an open kitchen and a street-front entry are ways of creating the perception of
an independent restaurant.
Environmental footprint
Designers will have a greater responsibility to specify sustainable materials and design
options for clients. For hotel operators, consideration of environmental impact is often
influenced by bottom line and operating costs. And just as it has become the norm for most
guest rooms to display signage that circumvents unnecessary washing of towels to minimize
water use, its likely that increased natural ventilation options and guest control of lighting,
temperature and operable windows will become mainstays of future hotel design to slash
energy use. The preference of guests for ethical and sustainable travel may create a shift
towards luxury without the associated guilt.
CONCLUSION

This step of internationalization will hopefully be giving us success. This industry is on the
boom in the future years but we have to do improvement to meet with the changing demands
of people and society. We will keep on finding opportunities for expansion and effectively
targeting them.



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References


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Wikipedia
Expedia.com
Slide share.net
Scribd
www.study mode.com
www.academia.edu
www.blogspot.com
www.ukessays.com
www.marketresearch.com
Salman-ali.wikispaces.com
www.breakingtravelnews.com
www.hmshotels.com
www.termpaperwarehouse.com