Business Economics Assignment : MUI group

BUSINESS ECONOMICS

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
MAIN BODY..................................................................................................................................2
Justification of company chosen..................................................................................................2
Supply and demand graph...........................................................................................................4
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Malayan United Industries Berhad is MUI group is operating as conglomerate and is
Malaysia based company that is having its business within various sectors like that of retailing,
hospitality, financial and real estate as well. MUI group is having its presence in many countries
like that of China, Thailand, Australia, UAE, Japan, Canada, USA, Singapore Hong Kong, UK
and Europe. The group is having many major companies which are having their investments
within organisation like that of Laura Ashley PLC, Network Food, Metrojaya Berhad and Corus
Hotel. But they are not investing or operating in South Africa as the country at present is having
prospect of growing and developing in global market. So, if Malayan United Industry is
investing within country of South Africa then there are high chances of its growth and
development. Economy of South Africa is the second largest after Nigeria in African continent
and it is also regarded by World Bank as upper middle income economy. South Africa is very
much popular for its travel and tourism industry as it is having many tourist destinations.
Figure 1: MUI group and South Africa
Other than this, economy of country is also growing at a faster GDP rate in 2011 was
about $400 billion highest at its all-time South Africa is having one of the strongest banking
financial sector. So, South Africa will be the best choice for MUI group to invest as it is growing
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faster as an economy could be helpful for company to get their opportunity to grow in
international market as well.
MAIN BODY
Justification of company chosen
MUI group which is publicly traded company and having many subsidiaries like that of
real estate, hospitality, retailing and financial industry business. This would be making company
to grow and develop IN international and global environment with its investment into South
Africa. MUI in 1991 company purchased Heritage USA and Fort Mill in USA which were both
bankrupted and then it sold it to Caroline Corporation in 2000 (Deen and Leonard, 2015). The
company is amongst most profitable and growing companies of Malaysia which is helping in
development of country. This company would be economically important for South Africa as it
will be helping economy to sustain in future market with their investments in an African country.
As there are very less chance for any developing country to compete with others in world so,
they should be having basic concept of product and its core importance. South Africa is been
developing across world and emerging as the famous tourist destination which is popular among
tourist. Its cities like that of Johannesburg, Cape Town and Durban which are emerging tourist
destination of country. So, if company is been investing into any of the above mentioned cities,
they could be having chance of opening or launching new hotel or any kind of theme park. This
will be regarded to as beneficial for both MUI group and for South Africa as well as.
The decision of which product or service to be chosen will be very important part of
strategy of company and so, they need to decide that how and what product they will select. As
South Africa is having many opportunities which others could identifying and then attaining it
majorly will be that related to tourism industry. There are many opportunities that are needed to
be identified by MUI group which thus would be helping in improvement of tourism industry of
South Africa. Company needs to include survey and market research within country which is
helping them to know more about market and industrial conditions. Thus, managing them to
interpret that whether they must be investing within South Africa or not could be concluded after
the time when market research could be conducted. The most common factor which they need to
consider is demand and supply of products in South African market so that it will become easy
for MUI group to start new venture into market.
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Other than this, there are also many factors which company must be taking into
consideration in order to survive in the market These will be including like that of consumer
mobility and economies of scale in production and marketing as without having these facilities it
becomes impossible for MUI group to survive (Greenberg and Rogerson, 2015). MUI should be
having knowledge of which type of resources are available in country like labour market of
South Africa is very cheap but they are having lack of knowledge and skill which is leading to
high unemployment rates within economy. Factor like this type must be in information of MUI
group so that it will be easy for company to invest, grow, expand and sustain in market of South
Africa. As it becomes important for firm to get proper amount of investments into company
which will be enabling them to generate specified amount of customers and profits.
If MUI is investing into country like that of South Africa then it will be good and
profitable option for them. The company is also generating higher amount of profit for current
time which is thus forming part to make them grow. MUI group is very rich in terms of its assets
as it is having strong base of assets but still there is no specified profits that are been included
within company. MUI has lowered down its borrowings during the past years as management is
decreasing the higher expenses of firm at a faster speed. The main focus for group is to provide
growth of retailing companies as they are the largest contributor of profit and revenue for group.
As it is also having tough competitors into almost all sectors or segments within which they are
operating still their growth is higher than that of others (Molose and Ezeuduji, 2015). Within the
clothing and retailing sector Laura Ashley PLC that is been listed on stock exchange of UK is
having about 35% of total stake within group.
MUI group is also planning to expand their retailing outlets and Hotels with in market
that too in name of Laura Ashley PLC only. So when company is trying to start their business in
South Africa group should be making their investment within this Laura Ashley PLC only which
is planning to open their hotels as well. MUI group is also having opportunity of converting
some known and profitable hotels into Laura Ashley’s into South Africa so that they are been
helping company in formulating planning and achieving in targets of firm.
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Supply and demand graph
Figure 2: Malayan United Industries Bhd (MUIB.KL)
(Source: Atkinson, 2016)
South Africa is generating more and higher number of local, regional and international
investors within country as they are taking many political and economic events. Other than this,
country is also going through phase of currency shifting and changes in demand and supply in
tourism industry. There are both chance of bring out increased amount of risk with rewards like
that of growth for firm in market of South Africa. The Hospitality and Tourism Industry
Specialist (HTI) which is any consultancy firm included in 2017 who were the top 5 most
effective performers in this industry among 14 cities of Africa. This data which was provided by
company was based on analysis, marketplace and benchmarking of all of them so that best could
be selected.
During the time of 2017 both downward and upward trend within country was been able
to notice within this tourism industry of South Africa. There are more positive conditions with
this part of continent as there are higher occupancy rates within South Africa.
Demand will be the willingness or ability of customer to buy or make decision to
purchase a particular product over specified time stated that they are having limited income.
While, on the other hand, supply will be ability and willingness of producer to produce and sell
particular products and service which are been demanded by customers. Both supply and demand
of products and service are been interrelated with each other like if demand increases supply will
decrease and vice versa (Rogerson, 2015). But at the time when there is equilibrium between this
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supply and demand of products and service then this would be causing that goods at this stage is
sufficient for quantity demanded. Thus, at this equilibrium point, the economic condition of firm
or that of customer is equal to the goods which customers are demanding within economy. While
there will also be disequilibrium between both goods demanded and supplies into economy
which will be at two major situation. If demand is excess of supply this will be at that point at
which price of product or that of service is lower than that of equilibrium point. The price of
products and service is very much low and customers are having higher demand of that
commodity but producers are not been able to producing too much which could be handling
demand.
But at point when supply is excess to that of demand of products at this stage price of
products is very high. The supply which is been there into market or economy will be very much
excess and it is not been creating any demand. With the hospitality industry of South Africa
occupancy rate which is about 60% in 2016 which is considered to as very low. This rate of
occupancy will be linked to number of investors who are not having any clear idea of new
governmental policy and also limiting the business which is that of travelling of city. Other this it
will also be depending upon the number of direct flights which is part of main tourism
destinations of South Africa.
Figure 3: Supply and demand
(Source: Ismail and Rogerson, 2016)
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From the above diagram which is including change in trend of both demand and supply
of hotels room within South Africa, it could be concluded that in 2012, both were low and
occupancy was about 74.9%. While in recent year that of 2018, it showed decreased as compared
to last year and occupancy rate in 2017 was 79.7% and that of 2018 it was 78.6%.
There are also various other factors which would be affecting demand and supply of
hospitality industry one of which is increased in qualified and skilled labour and their demand
into sector (Hoogendoorn, Grant and Fitchett, 2015). Average daily rates which is that rate at
which on an average how many customers are been included or visiting that country. This will be
mostly affecting MUI group as if they are planning to set up a hotel into South Africa which was
low in year 2016. The strengthening of South Africa currency in respect with US Dollar is one of
the major reasons as to why company is planning to start their business with this particular
country. There could be analysed that South Africa is growing and developing in terms of its
economy which is enabling many investors around the world to invest within country.
In the 2010 FIFA World Cup which was held in South Africa during that time there was
global financial crises then also this created a positive site. There was increased in demand of
tourist at that time which created many opportunities for investors around the world to get their
investments within country. But it was seen that in 2011, there was losing up of trend of
travelling within South Africa and this was hitting the hospitality industry of country. So, at that
time, there was very less opportunities within South Africa that related to expansion but at this
present time, it is higher. It was noticed that there was very high supply into hospitality industry
but then also environment or climatic conditions of country was not allowing them to grow and
creating more challenge for company. There was rise in number of hotel room in year 2015-2016
to about 2000 and then this increased to about 60000 in year 2016-2017.
Other than this there was also increase in number of visitors per year that was about 3.5
million annually. There were many central authorities which identified that environment or
climatic conditions could be regarded to as biggest issues that are been faced. So they included
that hospitality industry need to follow and adopt new and modified strategies which are
regulating the real aspect of industry and that of country as well (Gomez, Padmanabhan and
Fisal, 2017). So, this could be done with the help of offering good deal in accommodation and
thus, creating good amount of segmentation within increasing domestic travellers. There was
very much oversupply within the market of hospitality industry and thus, creating rates of market
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very much high and competitive. There were many multinationals which started coming to South
Africa and this was changing the face of competitive segment. This lead to lower down rates of
multinational corporations who all are operating as five star hotels. There was made an
estimation that occupancy 58.4% which then will be leading to total revenue per room to be as
28.7 billion and this will be compounding or increasing at 10.7% on at annual rate from 2013.
The occupancy rate in 2018 was ruled out to increase from 58.9% in 2013 and 71.1% in
2018 and among them top category was that of guest farms and bush lodges only. This average
room rate increased in year 2013 to about 8.4% and at the same time inflation rate in country was
5.9% which is certainly high. There was also increase in total number of foreign overnight
visitors or tourists which was in 2012 to about 10.2% and rose from 3.9% in 2013 so this
included that number of foreign tourist is been increasing (Fung, Gul and Radhakrishnan, 2015).
It was very much clear from National Development Plan that tourism is the most important
element within country like that of South Africa as it could be increasing employment and
economic growth rate as well. Thus this would be leading to rise in accommodation industry
which will be growing for coming 5 years as well.
The accommodation which is measured in amount of money which is been spent at every
category of hotel room within South Africa. This in year 2013 was increased to about 14%
amounted 17.3 billion but then also the night stay within hotels increase to about 8.4% per in
average rate of room. This stay unit in night within hotels was rose to 4.8% but that of guest
house decreased to 4.5%. This will be showing that there is very higher demand within the
market of South Africa in terms of supply which is comparatively low to demand. So it will be
required for company like that of MUI to grab the opportunity into South Africa to build up
market that of hospitality sector only.
There is greater amount of revenue which is there within country and leading to good
profits which will be as per the targets of firm. MUI group should firstly be analysing market of
South Africa so that it becomes easy for them to analyse what is current trend and future growth
rate in markets. After they have analysed it they should be getting in touch with those group of
hotels which are operating within country at present and into them investments could be made. If
they are able to find out a good and profitable hotel then this will be easy for MUI group to get
through into market of South Africa. Then they should be knowing that which mode of entry
could be chosen for them in order to get specified amount of profits.
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This mode of entry will be deciding how and when to enter into market and is only
possible if company is able to identify what is the political and legal condition of South Africa.
Mode of entry which is selected must be giving them high amount of profit with lower down risk
of loss or less investment in terms of money. After this mode is decided, MUI group will be
making plan related to whole marketing, financial, legal and operation function. This will be
regulated with amount or budget which MUI is planning to invest into South Africa so that it
becomes easy for them to rule out the market of hospitality industry (Greenberg and Rogerson,
2015). MUI group will also be requiring more qualified and skilled labour force who are able to
operate and generate profits out of amount that is been invested. First all this planning part is
completed they will need to implement it so that results are generated within this specified
project which is been launched into South Africa. The project implementation part needs to be
monitored and controlled by management which will be leading to generate results later on.
CONCLUSION
From the above report on business economies, it can be concluded that MUI group which
is ready to launch one of its hotels so South Africa will be the best choice. There are many
growth opportunities that are regulated within hospitality industry of South Africa which needs
to be considered by company. The supply of hotels is low in South Africa as compared to its
demand within country which is leading to greater opportunities within market.
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REFERENCES
Books and Journals
Deen, A.N.I.S.A.H. and Leonard, L.L.E.W.E.L.L.Y.N., 2015. Exploring potential challenges of
first year student retention and success rates: A case of the school of tourism and
hospitality, University of Johannesburg, South Africa. African Journal for Physical
Health Education, Recreation and Dance, 21(Supplement 2), pp.233-241.
Molose, M.T. and Ezeuduji, I.O., 2015. Knowledge sharing, team culture, and service innovation
in the hospitality sector: the case of South Africa. African Journal of Hospitality, Tourism
and Leisure, 4(1).
Atkinson, D., 2016. Is South Africa's Great Karoo region becoming a tourism
destination?. Journal of Arid Environments, 127, pp.199-210.
Rogerson, C.M., 2015. Unpacking business tourism mobilities in sub-Saharan Africa. Current
Issues in Tourism, 18(1), pp.44-56.
Ismail, S. and Rogerson, J.M., 2016. Retrofitting hotels: evidence from the Protea Hospitality
Group of hotels within Gauteng, South Africa.
Hoogendoorn, G., Grant, B. and Fitchett, J., 2015. Towards green guest houses in South Africa:
the case of Gauteng and KwaZulu-Natal. South African Geographical Journal, 97(2),
pp.123-138.
Gomez, E.T., Padmanabhan, T., and Fisal, F., 2017. Minister of Finance Incorporated:
Ownership and Control of Corporate Malaysia. Springer.
Fung, S.Y., Gul, F.A. and Radhakrishnan, S., 2015. Corporate political connections and the 2008
Malaysian election. Accounting, Organizations and Society, 43, pp.67-86.
Greenberg, D. and Rogerson, J.M., 2015, December. The serviced apartment industry of South
Africa: A new phenomenon in urban tourism. In Urban Forum (Vol. 26, No. 4, pp. 467-
482). Springer Netherlands.
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