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Executive Summary Table:

Executive Summary Content Remark

Target Market / Country France Royal Selangor

Production Site Setapak and Medan (Indonesia)

Export Price Strategy Price skimming

Export Price Policy Price higher than domestic price

Export Price Incoterms Group F, Free on board

Export Product Strategy Standardization

Export Payment Arrangement Open Account

Total Word 2,998

• Royal Selangor export to France.

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Table of Content

Introduction ................................................................................................................................ 3
1. SWOT analysis of Royal Selangor in pewter industry. ...................................................... 5
2. PEST Analysis .................................................................................................................... 7
3. The production site ............................................................................................................. 9
4. Distribution Channel......................................................................................................... 10
5. Export Price Decision ....................................................................................................... 12
6. Export Product Decision ................................................................................................... 13
7. Export Payment Transaction ............................................................................................ 14
8. Summary........................................................................................................................... 15
Appendices ............................................................................................................................... 18
References: ............................................................................................................................... 19

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List of Table
Table Page

1 Country Risk and Business Risk Assessment of France .......................................15

2 Corruption Perception Index of France ................................................................15

3 France Corporate Tax Rate .................................................................................16

4 Malaysia Corporate Tax Rate ...............................................................................16

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Introduction

Royal Selangor (RS) was founded in 1885, where it is known for the world’s foremost
name in pewter (Malaysia.travel, 2018). This company started in just a small mining village,
and now it has grown to be the largest pewter maker in the world and also a major export
market for pewter. Currently, Royal Selangor is a brand recognised by the people around the
world as it stands as the biggest producer of pewter worldwide with various stores located in
several counties (Ng, 2018). However, they offer over a thousand different kinds of designs
with high quality. Through it all, its main factory is based in Setapak where it is also a home
to an award-winning Visitor Centre, which attracts over 200,000 of visitors a year from all
around the world (Ng,2018).

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1. SWOT analysis of Royal Selangor in pewter industry.

Strengths
Royal Selangor is an established company with a strong brand name which indicates
its strength by operating as the largest pewter manufacturer in the world. This is because, it
gives Royal Selangor the ability to charge their products at a higher price as customers place
additional value towards the brand. For instance, when Royal Selangor exports their pewter
to Europe, customers will prefer to purchase them compared to other pewter companies as
Royal Selangor has built a strong brand name which is known by people around the world.
Even though other pewter companies have also ventured into export markets, yet consumers
will possibly purchase pewter from Royal Selangor as they are more reputable with a strong
brand image. Thus, it will benefit Royal Selangor to grow rapidly and also gain a higher
profit compared to other pewter companies.

Weakness
The weakness that Royal Selangor will be facing is the world economy. This is
because, as the products sold by Royal Selangor is consider luxury products, the world
economy will determine the purchase of those goods. For instance, if the world economy is in
the downfall, the purchasing power of consumers will decrease as consumers tend to spend
lesser on purchasing goods. As a result, the quantity of potential buyers will decrease and it
might affect the sales of Royal Selangor.

Opportunity
Government’s initiative can benefit Royal Selangor on attracting more customers. For
example, when government launched a programme called ‘Visit Malaysia Year’ to increase
the quantity of tourist in Malaysia which could give an opportunity to Royal Selangor on
increasing their sales. With the increase quantity of tourism in the country, the demand for
pewter would increase as tourist would be attracted to the various designs which could be
treated as souvenirs or handicraft of Malaysia. Thus, though this programme, it results a great
opportunity for Royal Selangor to increase their profits by targeting a wider range of
consumers.

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Threat
The threat that Royal Selangor facing is competitor’s activities. Even though Royal
Selangor has grown rapidly for several years and has become the world leading pewter
company, their competitors will still be able to compete against them. This is because, as the
other pewter companies produces similar products as Royal Selangor, they are seen as a niche
company and are well-known among the people in Malaysia as they have built their own
market locally. However, they have also ventured into the export market international by
selling pewter on their own brands, which result a threat towards Royal Selangor.

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2. PEST Analysis

Political
Political factors are related to government regulations or legal issues which could
affect company’s ability to increase their profit (Post, 2018). For instance, government
provides tax benefits such as tax allowances for pewter companies as these pewter industries
are classified as development industries under the Malaysia Industrial Master Plan. However,
for companies who targets a wider range of consumers by promoting their products overseas,
they are applicable to receive additional incentives such as tax deductions. This is because,
with the incentives given, it will increase the demand of pewter products in foreign countries,
and therefore boost Malaysia pewter industries to expand worldwide.

Economic
In economic factor, it works closely with goods and money. For example, when the
economy in France is rising due to the quantity of tourists visits, the purchasing power of
goods will rise and will result an increase in potential customers in the market which could
create an opportunity for the business to grow. However, as currently the economy in France
are constantly increasing, Royal Selangor will also able to get benefits from that as the value
of Ringgit Malaysia is decreasing today, which means that people from France are willing to
exchange more Ringgit Malaysia using their higher currency in order to purchase items here
(France Tourist Arrivals, 2018). Thus, Royal Selangor will also benefit from that as they are
able to gain more profits.

Social
The social factor indicates the business environment of Royal Selangor which may
affect the company’s profitability. This is because, according to a statistic analysis in The
New York Times, majority of French are in the middle range income class where their
monthly salary are increasing gradually (Doughery & Bennhold, 2017). However, Royal
Selangor has the opportunity on improving an expanding their product mix to satisfy their
customers, and also increase the range of target market. As Royal Selangor is a well-known
brand, customers will have high expectation or even look for something extraordinary. Thus,
the creation of various types of pewter design would able to target a more diverse market and
also satisfy their customers.

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Technological
Royal Selangor is all about luxury goods of home decoration objects, jewelleries,
liquors, and gifts item. However, with the advancement in technology, Royal Selangor will
be able to target buyers from all around the world. For example, Royal Selangor has
improved their technology by operating in a modern factory whereby more than 500 highly
skilled workers are employed in performing specific tasks. This is because, if Royal Selangor
exports their pewter to France, the pewter should be done with high quality as France is an
advance country where consumers will have high expectation towards the products. With the
improvement of technology used by Royal Selangor, they will be able to satisfy their
customers’ expectations.

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3. The production sites

Production site refers to a land at a distinct geographic location where the products are
made. However, Royal Selangor was firstly started in a small mining village in Kuala
Lumpur and today it has grown to be the top global pewter company. Having established a
good brand internationally, Royal Selangor has often been categories as a role model for
Malaysia brand venturing globally. They operate in a modern factory located in Setapak, yet
the traditional methods of manufacturing pewters are still retained. This is because, the land
is Setapak is huge compared to the land in the city, and thus Royal Selangor will be able to
hire a higher number of skilled workers to perform specific tasks. Not only that, with the high
demand of pewter, Royal Selangor has also established another production site in Medan,
Indonesia. It is a great decision to expand their production site there as it will give advantage
to them by able to employ cheap and skilled labour. As compared to the other pewter
companies, Royal Selangor has a better advantage as they has more production sites and are
more well operates. Thus, with the factories operates by Royal Selangor, they will be able to
increase profit and also produce pewter with high quality.

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4. Distribution Channel

Whole channel concept can be understood as the imploded system between the
manufacturers and buyers which undergo 3 elements: headquarters’ organization (HQO),
channels between nations and channels within nations (Appendix 1). HQO refers to the
HQ of distribution channels, the production side where the products are made. Channels
between nations can be explain as the connections between home-country and the foreign
country. From the case study, Royal Selangor (RS) has its home-country production in
Malaysia and made their product in home-country, then export the products to overseas
market places such as Japan, Australia, U.S, etc. There are around 15% of products
indirectly export to foreign countries through tourism, 60% of RS products directly
exported to 20 countries.
Distribution channel can be known as the starting from manufacture to the
intermediaries such as wholesaler, agent and end with end users.
From the case study, Royal Selangor (RS) uses direct export to expand their
market and export their products towards overseas. Direct export is selling from the
manufacturer directly to the consumers or importers (Albaum, Duerr, & Josiassen, 2016).
RS expands their market through home-country-based department, which are separate
department, export sale subsidiary, and built-in department. For example, RS using
foreign sales brunch which mostly used by direct sales companies to export their
products overseas (Albaum, Duerr & Josiassen, 2016). RS has established its own outlets
and offices in foreign countries such as Japan, Singapore, Hong Kong, etc. Foreign sales
branch mainly provide services, control and have dedicated employees for the products.
Branches such as outlets that are located in different countries are focusing on the
marketing part, use to boost-up sales in that country. The side effect is it cost higher
when there are more branches setting up in foreign country which turns out to increase
their risks and thus, the spread out of export cost cause the growing volume every unit
cost decrease (Albaum, Duerr, & Josiassen, 2016). Foreign-based distributor and
representative plays a role in the organization to sell the products. In the case study, RS
has around 2500 distributors and agents are working with RS pewter in overseas. This
method brings RS the least expensive and easiest way to develop the potential
development (Albaum, Duerr, & Josiassen, 2016).
Next, for the channel of producer  wholesaler  retailer  consumer, Royal
Selangor provides high-end gift for companies and for personal due to the high demand

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needed in Malaysia for high-end gift items (Appendix 2). Most of the Malaysian choose
to purchase pewter products as a gift because pewter shows auspicious meaning (Cock-
Starkey, 2017). This process includes wholesaler and retailer because there are too many
retailers in the market and thus, RS will then sell their products to wholesaler and then
towards consumers.
Besides that, producer  retailer  consumers can be explained by using tourists
from the case (Appendix 2). It is explained as international business visitors and tourists.
Manufacturer will sell the products to retailer and then towards consumers. Retailer is
included in this segment because most of the tourist will immediately purchase the product
after visit the place. Eventually, tourist will purchase at the outlet on the spot instead of
making an order at the manufacturer. RS owned the organisations and thus wholesaler does
not appear in this scenario.

Lastly, as for the manufacture  consumers, there are several segments that consist of
pewter market in Malaysia (Appendix 2). RS uses corporate purchasers that include
government agencies, sports and recreation clubs, non-profit organizations, etc, to rewards
their employees. This only occur towards manufacturer and consumers because most
corporate purchasers will order pewters directly from Royal Selangor as they may need large
amount of similar pewter such as trophies to be given as a reward.

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5. Export Price Decision

We would recommend RS to use skimming for their export pricing strategy to enter
France market. RS could start with a high price at the beginning and lower down the price
when small market at top is exhausted. RS can repeat these steps to increase their market
shares, maximise revenue and achieve their objectives if this strategy they use it effectively
and efficiently. As from the case study, RS employed designers to create new design of
pewter for them to not sell obsolete product to their customers and thus, they developed 4
new product lines each year which shows the pricing strategy is suitable for them to create
mass market for their new product.

RS can use the export prices higher than domestic price policy for their export pricing
policy. Based on the Appendix 3 (Mfcci.com, 2018), RS is able to take the additional cost
such as transportation cost, documentation and import duty to ensure that the foreign market
is willing to accept their product and buy their pewter products. From the case study, RS is
the leader in pewter market industry which their competitors need to follow the pricing of RS
in order to sustain in the market. This shows that this export pricing policy does not affect
much towards RS.

There are four groups of export incoterms such as group “E”, “F”, “C” and “D”.
Export incoterms can be explained as pricing quotation during transportation. From “E” to
“D”, exporters cost increases, importer risk and cost reduces. From the case study, RS should
choose free-on-board (FOB)for their export incoterms because there are research shows that
FOB is the oldest term and commonly used incoterms (Albaum, Duerr, & Josiassen, 2016).
Throughout the FOB, RS has to take all the risk and cost until the products are loaded on the
board which buyer will then take the risk and cost of the products from that point onwards.
The transportation for RS would be recommended using sea transportation because it is
cheaper that air freight. Rail transportation is not included because of the distance between
countries.

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6. Export Product Decision

Royal Selangor can use product standardization. Product standardization is defined as


selling the same products with the same pricing in the international market (Gupta and
Randhawa, 2008).
Royal Selangor should adopt product standardization is because it creates a consistent
global company image (Haron, 2016). From the start of the business, the company created a
brand image that selling high-end and artistic craftsmanship pewter products for corporate
purchasers, tourists and gift market (Malaysia Tatler, 2015). Tourists from different
countries are coming to Malaysia for the nice and quality pewter from Royal Selangor. Since
product standardization uses the constant product attributes, consumers from France can
expect the same standards from Royal Selangor’s products in their country. Hence, it reduces
the uncertainty among consumers when purchasing new products and supports positive
recognition for products. Besides, as the world’s largest pewter manufacturer, Royal
Selangor keeps improving their design but remaining on their heritage of craftsmanship,
hence uses standardized approach benefits the company to have favourable word-of-mouth
around the globe, and this can increase the brand identity and reputation of the company in
France.
Moreover, standardized product allows Royal Selangor to have economies of scale
(Haron, 2016). Since pewter products by Royal Selangor serve as the common purpose of
luxury decorations and gifts, there is no need for the company to use more resources to
launch products match with France’s cultures. Instead, they can focus on a specific single
product and enhancing on the design and quality.
Intellectual rights (IP) need to be aware when exporting to France as IP rights are not
covered in an overseas market if registered in Malaysia. Royal Selangor will need to do
trademark registration in France to export their products and do advertisement in France. A
trademark protects Royal Selangor from other traders to use their brand name and sell bad
quality products, otherwise this will lower down the company reputation. To protect the
inventions of the company, Royal Selangor can design and produce the goods in Malaysia
and export them directly to France (WIPO, 2015). This approach can cut down other
company that try to produce and sell the same product in France without the authorization of
Royal Selangor.

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7. Export Payment Transaction

We would recommend to use open account between Royal Selangor and the France
importer. An open account export payment transaction is a sale where products are
transported and conveyed before payment is due, and the payment term is usually within 90
days, and it’s preferably when both parties are from the same organizations. Before
exporting products to France, Royal Selangor will need to find one trustable dealer which
will be subsidiary of Royal Selangor to sell and responsible for the operations of the business
in France. After shipping the products, the dealer will need to make the payment within 90
days before starting to sell the goods, otherwise termination of dealership will be imposed to
the dealer.
Using open account transaction can increase the export efficiency, as it does not need
to go through complex procedures between companies and banks like method of Letter of
credit. According to Coface, France scored an A2 in country risk assessment and A1 in the
business climate in 2017 (Coface, 2017). Country risk assessment identify the easiness to
transfer currency for foreign payments, while business risk assessment shows the difficulty of
debt collection. From the report, France has a stable political context, while their businesses
are exceedingly reliable and good in debt payment. Besides, the Corruption Perception Index
(CPI) of 2017 analysed that France was ranked in 23 and with the score of 70 out of 100
rd

(Transparency International, 2017). From data, France is a country with lesser corruption,
hence it will be a good country to do export as lower corruption will reduce the uncertainty of
trading such as extra costs for bribery everytime importing products from home country
(Meessen, 1995). Transfer price is the setting of price for products sold between countries
within an organization, and Royal Selangor can enjoy tax advantages from this pricing
method (Agarwal, 2016). Corporate tax rate in host country (France) is 33.33% while the it
is lower in home country (Malaysia) which is 24% (Trading Economics, 2018). Therefore, it
is recommended to charge a higher transfer price so Royal Selangor can gain higher profit
and pay lesser tax in host country.

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Table 1: Country Risk Assessment and business environment of France

Table 2: Corruption Perception Index of France

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Table 3: France Corporate Tax Rate

Table 4: Malaysia Corporate Tax Rate

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8. Summary

Royal Selangor is a top pewter manufacturer in the world and has their production site
in Setapak, Malaysia and Medan, Indonesia. In this report, we would recommend Royal
Selangor to export their Pewter products to France. France is a country with low corruption
and stable business environment, it will be a good market for Royal Selangor to do exporting.
In this report, we suggest Royal Selangor to use open account payment method and charge
higher transfer price to France as France has the higher corporate tax than Malaysia. Product
standardization is recommended as it reduces uncertainty for France consumers and expect
same quality from Royal Selangor. Besides, we suggest Royal Selangor to use sliding down
the demand curve export product strategy and three distribution channels are stated in this
report. With the strengths Royal Selangor has, we would recommend Royal Selangor to do
more exporting as this will expand their business into international.

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Appendices

Appendix 1: Whole Distribution Channel Concept

Appendix 2:
Three distribution channels use by Royal Selangor

Appendix 3: Export Pricing Policy by Royal Selangor

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References:

Agarwal, S. (2016) Transfer pricing: meaning, examples, risks and benefits. Available
from:https://www.linkedin.com/pulse/transfer-pricing-meaning-examples-risks-
benefits-shivangi-agarwal [Accessed 7th November 2018]

Coface (2017) Country risk assessment and business assessment of France, Coface database
[online]. Available from: https://www.coface.com/Economic-Studies-and-Country-
Risks/France [Accessed 7th November 2018]

Dougherty, C., & Bennhold, K. (2017). For Europe’s Middle-Class, Stagnant Wages Stunt
Lifestyle. Retrieved from
https://www.nytimes.com/2008/05/01/business/worldbusiness/01middle.html
[Accessed 7th November 2018]

Gupta, S. and Randhawa, G. (2008). Retail Management. India: Atlantic Publishers and
Distributors

Haron, J. (2016) Standardized versus localized strategy: The role of cultural patterns in society
on consumption and market research. Journal of Accounting & Marketing. 5(1), pp.
139-145.

Malaysia Travel (2018). Royal Selangor Visitor Centre | Tourism Malaysia. Available at:
http://www.malaysia.travel/en/hk/places/states-of- malaysia/kuala-lumpur/royal-
selangor-visitor-centre [Accessed 7 Nov. 2018].

Malaysia Tatler (2015) How Royal Selangor became the largest pewter maker in the world.
Available from https://my.asiatatler.com/life/royal-selangor-130-years-history
[Accesssed 6 November 2018]
th

Meessen, M. (1995) Fighting corruption across the border. Fordham International Law
Journal, 18(5), pp. 1647-1652

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Ng, K. (2018). How Royal Selangor became the largest pewter maker in the world.
Retrieved from https://my.asiatatler.com/life/royal-selangor-130-years-history
[Accessed 7 November 2018]
th

Post, J. (2018). What Is a PEST Analysis? [online] Business News Daily. Available
at: https://www.businessnewsdaily.com/5512-pest-analysis-definition-
examples- templates.html [Accessed 8 Nov. 2018].

Trading Economics (2018) Malaysia Corporate Tax Rate, Trading Economics


database [online]. Available from:
https://tradingeconomics.com/malaysia/corporate-tax-rate [Accessed 7th November
2018]

Trading Economics (2018) France Corporate Tax Rate, Trading Economics database [online].
Available from: https://tradingeconomics.com/france/corporate-tax-rate [Accessed
7th November 2018]

Trading Economics (2018) France Tourist Arrivals from 2003 to 2018, Trading Economics
Database [online]. Available from: https://tradingeconomics.com/france/tourist-
arrivals [Accessed 7th November 2018]

Transparency International (2017) Corruption Perception Index 2017 of France, Transparency


International database [online]. Available from:
https://www.transparency.org/news/feature/corruption_perceptions_index_2017
[Accessed 7th November 2018]

WIPO (2015) Exporting your patented products. Available from:


http://www.wipo.int/sme/en/ip_business/export/patented_products.htm [Accessed 6 th

November 2018]

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