Offshore Expansion of Harvey Norman in Malaysia and Ireland

The paper provided an explicit analysis of offshore expansion of Harvey Norman in developed nations like Malaysia and Ireland by shedding light on its environmental analysis. In addition to this, the paper evaluated the varied retail structure of Malaysia and Ireland as well as its trade implications and future developments.

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Executive Summary
Several companies in recent times have been investing and obtaining potential for
successfully creating extensive economies of scale. Businesses target expansion into
new domains by proficiently employing their potentials and creating considerable
sustainable revenue opportunities. In light of such an occurrence, there have been
witnessed diverse opportunities both in developed nations where there is extensive
larger as well as increasing demand. Thus a global expansion strategy constitutes
market entry approach which involves critical preferences in relation to fundamental
market focus along with drive of customer target customer as well as channel strategy.
The paper provided an explicit analysis of offshore expansion of Harvey Norman in
developed nations like Malaysia and Ireland by shedding light on its environmental
analysis. In addition to this, the paper evaluated the varied retail structure of Malaysia
and Ireland as well as its trade implications and future developments.

INTERNATIONAL AND GLOBAL BUSINESS
Table of Contents
Introduction........................................................................................................................4
Discussion..........................................................................................................................4
Harvey Norman overseas store expansion....................................................................5
Different structure of Ireland and Malaysian Retail Sector............................................6
PESTEL Analysis...........................................................................................................8
Trade implications........................................................................................................10
Future development.....................................................................................................11
Conclusion.......................................................................................................................11
References.......................................................................................................................13

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Introduction
All countries across the globe are part of the international marketplace. With the
rise of millennium wide ranging organizations are emerging into global domain. There
can be witnessed an elevating percentage of their overall sales and purchase which are
generated by other nations. Hartstein (2018) argued that there has been substantial
historical evolution of global markets. However in recent times it has been witnessed
those worldwide economic as well as managerial developments can create large
avenues, opportunities, challenges and barriers for managers in the international arena.
Global business has introduced set of changes and developments in the economic
performance of wide ranging companies across the world (Tabakoff 2018). One of the
major reasons of global trade and commerce is the rise of foreign investors and trade.
This development has further enforced foreign policy makers and entrepreneurs to
reinstate their efforts and perspective of new opportunities in the global business
domain. In recent times, there can be witnessed every nation and elevating number of
enterprises purchasers and sells goods and services in the international marketplace.
This emerging internationalization has created the rise of global investment and
commerce (Tabakoff 2018). However the major investments have been executed by
industrialized nations. Global business has opened new opportunities for local
enterprises by making collective ventures with international business organizations. It
further facilitates local enterprises to sell products and services in the local and
international markets and also aids foreign enterprises to efficiently acquire an
established markets and approved products as well as services (Tabakoff 2018). The
following paper will evaluate the background of Harvey Norman Holdings Limited and
further analyses the value of Malaysian and Ireland retail market for the company to
expand its business in these countries.
Discussion
Harvey Norman Holdings Limited Company Analysis
Harvey Norman Holdings Limited is recognized as a public enterprise that has
attained a position on Australian Securities Exchange Limited (ASX) whereby the
company’s fundamental activities chiefly comprise incorporated retail, franchise and,
goods as well as digital venture (Harvey Norman Holdings 2018). Harvey Norman

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Holdings approves licenses to autonomous business operators. Its franchisees however
trade products in wide ranging groupings which includes electrical merchandises,
furnishings, and small appliances along with kitchen appliances to broad customer base
across the world (Harvey Norman Australia 2018). The organization further comprises
around 200 franchised complexes in the Harvey Norman, Domayne along with Joyce
Mayne trade name in Australia along with 90 company-operated provisions under the
trademark of Harvey Norman brand in New Zealand, Northern Ireland and Slovenia as
well as Croatia. The business enterprise being one of the Australia’s mainly achievable
trade groups, further leveraging a realm of over 150 branch stores. Around the operated
outlets which put emphasis on computers and household appliances which are
controlled on a distinctive authorized model in which, Harvey Norman possesses and
well as leases the goods and possessions also compactly regulates the retail operations
further seeking licensing fees (Harvey Norman Australia 2018). Harvey Norman
executes its business operations under its major Harvey Norman store format that is
patterned after Ikea stores, Domayne that is an upgraded store as well as the rapid
growing Rebel sport chain attained in 2001.
The culture of Harvey Norman has been highly complex and challenging in order
to define due to the nature and attributes of the franchise system. Typically an
organization will prefer to take in aspects of the qualities at the top. The company’s
retail operations in overseas market varies from that of the Australian franchised
classification regarded as the retail complexes are company operated outlets trading
under the trademark of Harvey Norman (Harvey Norman Holdings 2018). The first
company-operated store in New Zealand which has commenced its process of trade
and commerce in the late 1990’s and currently comprises around 40 company-operated
stores in the New Zealand market. As per information provided in Harvey Norman
Global (2018), the company still continues to exploit from its prevailing product position
in New Zealand and further persists to detain market share. Reports reveal that New
Zealand retail sales have reached over $800 million and have been continuing to
dominate the market.
Harvey Norman overseas store expansion
Harvey Norman recently has revealed its strategies to expand its international

INTERNATIONAL AND GLOBAL BUSINESS
business by up to 50% for over 5 years due to its overseas division which delivered its
most-efficient trading outcome accounting for over 20% of revenues and incomes. The
current overseas stores count of over 85 stores which could further elevate by over 50%
that is primarily stimulated by development in South East Asian region with series of
stores in Malaysia exclusively rising from 16 company operated markets to over 50
stores in the next 5 years (Harvey Norman Global 2018). The business firm thus has
declared its business strategies to invest at substantial level in expanding its global
Harvey Norman store network and further anticipates introducing around 20 new stores
within 2020 and three in Singapore (Hartstein 2018). The three new stores are
strategized in Croatia along with 2 new company operated stores in Ireland as well as
one new outlet in New Zealand (Harvey Norman Holdings 2018).
Harvey Norman Ireland (2018) indicate that the business enterprises currently
operates over 500 franchise and over 195 franchised complexes which considerably
greater than its global business whereby a diminutive rate of around 90 offshore firms
which are currently functioning in seven international regions. The $120.18 million
revenues from company-operated offshore retail operations has reached over 15% from
its $100.75 million revenue estimated in the previous financial year and currently
signifies over 22% of the total combined incomes before tax (Hartstein 2018). The
business enterprise has further confirmed that such an over-seas expansion would
produce most-effective outcomes and the highest revenues rate since the international
business expansion has been instigated. However, with the global business operations,
the Singapore operations has increased by 6% million or over 32% to around $25
million (Morschett, Schramm-Klein and Zentes 2015). Financial Review (2018)noted
that Ireland as well as Northern Ireland has risen by over 4% after a significant decline
in 2017 while the foreign business in Croatia has elevated by $2.5 million to over $7.5
million.
Harvey Norman has confirmed that each offshore region has delivered its most-
efficient business outcome along with highest revenue rate both at individual and in
cumulative since the commencement of global business. As per the claims made by
Laakso (2016)Harvey Norman’s chairman Gerry Harvey the Harvey brand since its
inception has developed a strong international player with commendable results

INTERNATIONAL AND GLOBAL BUSINESS
attained by over 80 companies executed stores across 7 nations. This has led the
company to fully capitalize on its excellence performance in both international domain
and further strategize at a considerable degree in making expansion in their offshore
Harvey Norman store network specifically in South-East Asia (Collins et al. 2017).
Different structure of Ireland and Malaysian Retail Sector
Retailing value sales has continued to expand in Malaysia in 2017 that is
stimulated by growth in both store-operated as well as non-store retailing. Reports
reveal that in store-based retailing, non-grocery experts have been performing
constructively which perceive strong growth and expansion due to aggressive
development by major retailers namely IKEA, MR DIY and Courts (Jaafar et al. 2016). It
has been noted that for the initial quarter of 2016, Malaysia retail sector recorded a rise
of over 4.5% in retail sales in comparison to the growth rate recorded in 2015. Laakso
(2016) reveal that the retail sales performance at the phase of the initial phase of 2016
has been below the expected level whereby the employees engaged in Malaysian retail
sector received incentives and the distribution of BRIM 4.0. The Malaysian retail sector
continues to sustain its momentum and stability determined by economic and social
improvements. The major factors relevant to the growth of retail sector are robust
financial development which has grown at a CAGR of over 10% from 2014-2018. Both
local as well as global retailing brands tend to possess a strong value in fragmented
retail sector of Malaysia (Zakaria et al. 2014).

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Retail Sale Growth
Rates of
Malaysia from 2006-
2016
Source: (Fam et
al. 2017)
However retail
however has been
referred as one of the
major segments of the service sector and has been typically serving a non-exporting
role. Thus retail has been perceived as a vital wealth producing sector in the Irish
economy. The gross estimated sales of the retail sector of Ireland that is the current
prices had been over £ 37 billion in 2007 and elevated up to £ 43 billion in 2017 (Burke-
Kennedy 2018). Data revealed from the data of 2014 Zakaria et al. (2014) indicate that
the cumulative Irish retail sector as well as the wholesale sector has generated over £ 6
billion in taxes. However, in 2016, almost half section of investment expenses in Ireland
that is higher than € 1 million in valuation `has been in retail sector. Thus Harvey
Norman must consider the dominance and value of Dunne Stores, Tesco along with Lidl
and Aldi to make a significant expansion in the Irish retail market. Retail has been
recognized as a prominent sector for franchising sector whereby major proportion of
retail franchises have been accredited with the Irish Franchise Association (IFA) along
with several other franchises which are at present marketing with the Irish retail sector
(Meyer and Peng 2016).
PESTEL Analysis
The macro-environment determinants can further create impact on the
performance and growth of the company along with its overall revenue rate and
profitability rate of Malaysian retail sector.

INTERNATIONAL AND GLOBAL BUSINESS
Political factor- Political factors serve a critical role in determining the factors which
can affect the company’s sustainable profitability rate in Malaysia and Ireland retail
market (Jaafar et al. 2016). The company with its expansion in Malaysia and Ireland
will be exposed to various types of political environment as well as political system
threats of both of the nations. The strong economic as well as consistent political
environment will reinforce Harvey Norman’s level of confidence and will pertain to
attract its business strategy into the country. Furthermore, Tabakoff (2018) reveal that
Harvey Norman distinguished that Malaysian government’s pro-investor as well as pro-
business regulations. However, it has been observed that the Irish economy has been
recuperating strongly posting the highest growth levels in the European Union
(Retailireland.ie 2018). However, with an election looming in early 2016, the political
environment is highly indistinct resulting to reflect uncertainties specifically in Ireland.
Economic- FarmIreland.ie (2018) reveal that the Brexit deal has been relentlessly
creating contentious issues in Ireland retail market as the UK being the second largest
trading associate of the nation and comprise the exclusive land border with the former
member of the EU. Harvey Norman must take into consideration the data of 2014,
whereby the government initiated a taxation reform which has been anticipated to
initiate from 2020 to eliminate any form of tax optimization potentials for foreign
investors (Purdue, Huang and Economics 2015). However options which will be
removed will be reinstated by other tax optimization measures as Ireland expects to
maintain its level of competitiveness with international companies like Harvey Norman
Holdings. Furthermore, the Irish corporate tax that is one of the lowest in the world will
remain unchanged.
However, Collins et al. (2017) state that the Malaysian economy continues to
perform strongly with an elevated rate of over 5% in 2017 along with an expected
growth of 4.8% for 2018 and 2019. The growth is further determined by strong
international demand for electronic goods and products related to small appliances with
an improving labour market as well as a pro-cyclical budget and extensive intensive
infrastructure expenses. Jaafar et al. (2016) reveal that 2018 financial budget will persist
in the Malaysian government’s transformation strategies in order to create improved
opportunities for wealth generation by ascertaining Malaysia is prepared for the digital

INTERNATIONAL AND GLOBAL BUSINESS
economy.
Social factor- Harvey Norman possesses a distinct impact of both the Irish and
Malaysian society at the great extent as an employer as well as a contributor to
consumer merchandises. Malaysian’s respect for authority and influence has been
highly evident in majority of the business dealings. As the Malaysian populace
comprises of three vital groups namely Malay, Chinese as well as Indian, such an
amalgamation of diverse population offers the nation with enriched and vibrant culture
(Laakso 2016). Thus this type of ethnic harmony can pose impact of the business
operations of Harvey Norman as diverse population have been dominant in these years.
Thus Harvey Norman must embrace their services and products as well as business
practices in order to suit the demands of Malaysians (Burke-Kennedy 2018).
Technological factor- Malaysian retail sector involves innovations in technology which
may tend to affect the retail operations of the sector. Malaysia comprised over 20 million
internet consumers which claims that the ICT market tend to possess aggressive growth
essentials along with an advanced tech focused national growth plan (Zakaria et al.
2014).
Meanwhile as the Irish millennial generation is highly inclined towards e-
commerce services Harvey Norman must take into consideration these aspects while
expanding its trade operations in the Irish retail domain (FarmIreland.ie 2018).
Environmental- Malaysia constitutes one of the highest rates of deforestation because
of the extensive extraction of natural gases that tends to play a major role in its
economic development. On the other hand Ireland retail sector suspects factors of
sustainability as core determinant of its customers’ buying decisions (Zakaria et al.
2014). Thus the sector has been advancing in the direction of improving its productivity
as well as reduction of carbon footprint.
Legal- Malaysian legal system has considerably based on the British legal system as
well as the fundamentals of common law. Thus have adverse impact on the Malaysian
economy due to the rising concern of global investors like Harvey Norman. The Ireland
retail sector has been responsive to draft trade regulations consultation.
Trade implications
Burke-Kennedy (2018) indicate that retail purchase in Malaysia has grown

INTERNATIONAL AND GLOBAL BUSINESS
around 4% in 2016 determined in major proportion by a 6.1% rise in private
consumption regardless to the headwinds of a depreciating currency . The Malaysian
retail sector persistently has been growing regardless of low decline in cumulative
domestic Product growth as well as short term pressures of currency fluctuation as well
as inflation. Aggressive shifts are expected in the convenient segment by foreign
investors such as Harvey Norman which is prospective to multiple its number of stores
in Malaysia within the next few years. Furthermore, Meyer and Peng (2016) note that
the group in e-commerce sector along with the elevation in mobile phone adoption
across the country can act as a facilitator to contribute momentum to the retail sector
growth and further attract foreign investors. However the Malaysian government has
been consistently putting efforts to position the country as a primary hope for global e-
commerce business which will play a highly significant role in the growth of the
Malaysian retail sector (Jaafar et al. 2016).
Meanwhile Retailireland.ie (2018) indicate that the implication on Irish retail
sector signifies that although growth in the retail sector has being quite unsteady and
slow it still sustains as a vital determinant of the Irish economy. However the retail
industry primarily offers over €7 billion in tax revenues resulting to become one of the
major financial contributes to the Irish exchequer with around 25% of the total tax
receipts in Ireland (FarmIreland.ie 2018). Studies on financial status of Irish retail sector
claims that post the occurrence of Brexit importation expense for retailers engaged in
Ireland retail market will post rates by the exchange rate volatility (Lannoo 2017). Such
exchange rate volatility however possesses the potential to devalue the investment of
the Global investors. However importation along with the supply chain will change to be
affected in certain ways other than prices of products. This implies that there can be a
probability for product supply to face critical disruptions by Brexit further enforce
European Union customs regulation all regulatory disruptions between jurisdictions
which will add expenses for Irish retail traders (Purdue, Huang and Economics 2015).
Future development
Fam et al. (2017) have identified certain strategies through which the Irish Retail
Industry can increase its level of competitiveness and for the stimulate development to
embrace foreign investors like Harvey Norman Holdings to expand their business in an

INTERNATIONAL AND GLOBAL BUSINESS
wide ranging domain. The increasing government support in the Retail Industry of
Ireland through contributions of tax credits to elevate e-commerce domain capacity by
condensing the expense of regulatory compliance in the sector can contribute to these
foreign investors (Laakso 2016). Successful and effective training regenerating areas in
Ireland which have been disrupted by the events of recession can further aid foreign
investors to attend a position in the Ireland retail market and spur growth as well as
performance within the industry.
Recently Collins et al. (2017) investigated that the Retail Group Malaysia (RGM)
has projected a significant rise of Malaysia as retail Industry to grow up to 5% in 2018.
Such an assertive projection has been perceived as immensely optimistic by the
retailers Association of Malaysia who are willing to welcome foreign investors in the
market and is anticipating greater degree of Reliance on the economic growth as well
as consumer confidence level. After an extensive progress in the last year Malaysian
retailers have been positive towards their retail trade which is expected to reinstate by
2018 (Zakaria et al. 2014). It has been anticipated that an average growth rate of over
5.5% during the first quarter of 2018 has been possible due to the Chinese New Year
period (Purdue, Huang and Economics 2015).
Conclusion
Therefore from the above discussion it can be stated that Harvey Norman has
been relentlessly enforcing for offshore expansion to introduce goods to new customer
base in Malaysia and Ireland by mitigating individual market threats along with setting
overseas brand prominence.
Recommendations
 Thus Harvey Norman must refurbish its operation into two levels and establish as
a flagship superstore in these two nations.
 It must also introduce its digital platform whereby buyers can choose to purchase
online and deliver it to their convenient places (Burke-Kennedy 2018).
 Harvey Norman must further make product demonstrations in its company-
operated stores which would appeal potential purchasers from Malaysia and
Ireland.
 As Malaysia is recognized as an electrical segment, Harvey Norman must

INTERNATIONAL AND GLOBAL BUSINESS
consider its electrical space to make its small appliances as the best sellers
(Laakso 2016).


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