Environmental Analysis: River Island's Malaysian Market Entry

This individual research report analyzes the external market opportunities in Malaysia for River Island, a UK-based fashion retail company. The report examines the suitability of the Malaysian market for River Island's products, considering the growing demand for fashionable garments and accessories. A PESTLE analysis assesses the political, economic, social, technological, legal, and environmental factors impacting business in Malaysia. The report highlights opportunities such as a stable government and a vibrant economy, alongside trends like the demand for fast fashion and challenges including environmental degradation and high competition. The report recommends a partnership strategy with local stores to understand customer needs and develop a strong business presence in Malaysia. The report concludes that River Island has significant growth opportunities in Malaysia if it can meet the demands of local customers and adapt to the cultural nuances of the market.

Running head: INDIVIDUAL RESEARCH REPORT
Environmental Analysis
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Executive Summary
The study analyses the external market opportunities in Malaysia for River Island, which is a
renowned fashion retail company in UK market. The company is conducting the extensive
market research to identify the product acceptability among the consumers across the country.
The stable political condition is quite opportune for River Island to establish the market in the
domestic market of Malaysia. The customers are quite fond of the fashionable segments with the
variations of the fashion garments and accessories. The growing demands for fast fashion brands
and various styles of fashionable clothes would be much beneficial in deriving more profits. On
the other hand, it has been observed that the stability of the government is also much helpful for
the foreign business marketers to invest a large capital amount. Adopting the ‘partnership’
strategy with the local store to understand the basic needs of the customer would be much helpful
in such context to develop the strengthened business entity in Malaysia.

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Table of Contents
Introduction......................................................................................................................................2
Identification of the Product in the Target Market..........................................................................2
PESTLE Analysis of Malaysia........................................................................................................4
Opportunities, Trends and Challenges.............................................................................................9
Recommendation...........................................................................................................................11
Conclusion.....................................................................................................................................12
References......................................................................................................................................13

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Introduction
The advancements in the current business world depict the significant changes in the
consumer demands and product specifications. The business marketers thus look forward to most
suitable strategic help that can ensure the higher profitability for the long run. Business
expansion is one of the fruitful strategies that have the considerable benefits for the business
marketers to get hold of the foreign markets. However, Zamberi Ahmad (2014) implied that
business marketers need to identify the most preferable market entry strategy and obtain the
adequate knowledge to establish the competitive position in a foreign market. The study would
thus concentrate on the business expansion in Malaysia for establishing the fashion retail product
of River Island. The company has the online presence in the country, but there is no store where
the customer can visit to select their clothes. Hence, the study would conduct the environmental
analysis to identify the suitability and acceptability of the products by the consumer in an Asian
market. The idea of the external opportunities, trends, and challenges would also be discussed in
this study.
Identification of the Product in the Target Market
River Island, the renowned fashion retail brand is looking forward to expand the business
market in Malaysian market. The company has almost 60 years of experience in the fashion
retailing sector (Riverisland.com, 2017). It has achieved the commendable position in the high
competitive market of UK. It is one of the most demanding clothing brands that produce high
quality clothes with an affordable pricing structure. Most of the fashion-prone customers are
quite attracted to the brand value and the diverse fashion segments offered by the company. The
customers are quite relied on the great going-out looks and the fashionable occasional wear

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available in the stores of River Island. After establishing the commendable position in the UK
market, the company is now looking forward to expand their business in Malaysian market. The
company already has the online presence in the country, but currently, the company needs to
open the shops in the supermarket areas of the Malaysian cities. It is thus necessary for the
company to identify the basic demands and requirements of the target consumers in order to
understand their fashion segments.
The fashion segment in Asian countries is quite different to other countries. Therefore,
while expanding the business, it is essential to conduct a complete market research to understand
the environmental impacts and market needs. It has been observed that the customers in the
Malaysian market are much fond of shoes, shoe care products, fashionable clothes, leather
goods, and accessories like scarves, hats, and gloves (Export.gov, 2017). The following statistics
would provide the insights of the fashion demands in Malaysia.

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Graph 1: Market Demand of Clothing in Malaysia
(Source: Statista.com, 2018)
The statistic report structured above highlights the market demands from the years of
2011 to 2013. It also forecasts the assumptions for 2018 as well to identify the possibility of
sustaining in the market. The extensive market research on the Malaysian clothing industry
highlights that if River Island can offer the fashion segments as per the demands of the local
customers in Malaysia, the company has the significant growth opportunity in the country. The
statistic data also highlights that the market demands of the Malaysian clothing sector has
reached up to 3.9 billion US dollar, which is quite opportune for the outside business marketers
(Statista.com, 2018). However, gathering the extensive knowledge about the environmental
effects would determine the possibility of business sustainability for a longer time.

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PESTLE Analysis of Malaysia
The PESTLE analytical tool describes the external market scenario for establishing any
new business. River Island is the UK based fashion retail company that is looking forward to
expand the business in Malaysia by offering the fashionable clothes to the local people. The
following description would provide the ideas about the impact of external market on business in
Malaysia.
PESTLE Analysis
Political Impact Malaysia is a democratic country with a high degree of stability. Barisan Nasional
Party has been ruling over the country from last 25 years. The stable political
condition is quite opportune for River Island to establish the market in the domestic
market of Malaysia.
On the contrary, it has been observed that the political scenario is highly corrupted
due to which it might become a considerable barrier for the foreign market as it may
increase the costs and cause problems (Crinis, 2017).
Economical
Impact
The vibrant economic structure of Malaysia is quite beneficial for the foreign
market. The economic growth has increased up to 7% yearly percentage in average
over the last 10 years (Leshkowich, 2016).
Moreover, the locations in Malaysia are quite ideal for the international trade since
the GDP rate is quite higher. In addition to this, the export business in Malaysia has
captured almost 37% of the overall GDP rate that has helped the country in
achieving a healthy surplus in the economic structure (Hassan et al., 2016).
This growing economic structure is much favorable for the foreign business like
River Island. The statistic result also showed increasing demands for the fashion
clothes that has the created the ways to gain profits in the Asian market.
Social Impact The population of Malaysia consists of three main groups, such as Chinese, Malay,

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and Indian. The involvement of these various cultures has made the country much
vibrant and rich culturally. It even created the racial harmony since the mixed
cultural populations exist peacefully in this country.
It has been observed that the people in the country have been maintaining the
Islamic religion (Fatimah & Hamid, 2015). The Malay Muslims are bound by the
Islamic laws whereas the rest of the people are allowed to preach any religion of
their choice. Therefore, it can be assumed that the people from diverse cultural
background would demand for the product differentiation as per their trends and
fashion choice.
River Island thus needs to keep the concentration on the product variations as per
the requirements of the customers. When the company can offer the preferable
products to the target market, it would be beneficial in developing the sustainable
position and earning more profitability as well.
Technological
Impact
Malaysia is still developing in the technological field. As compare to the
international country, it has been observed that Malaysia lacks the complete
advancements in the technicalities. The Multimedia Super Corridor was introduced
by the Malaysian Government in the year of 1996 (Jan & Abdullah, 2015).
This strip of land stretch from the central business district of Kuala Lumpur to the
outside location of Kuala Lumpur International Airport. This corridor is much
spacious and can host more than 360 multinational companies (Von Vorys, 2015).
It continued the expansion in the technological market to attract world-leading ICT
companies. The country is even moving forward to establish the advanced
educational system by establishing Cyberjaya. This Cyberjaya is a self-contained
intelligence city that has the greatest IT infrastructure.
This destination is quite favorable for providing the business support service and
creates the best outsourcing in the world (Kay, Youtie & Shapira, 2016). Therefore,

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River Island can avail the technological opportunities to derive the best profits from
the customers in Malaysia.
Legal Impact The Malaysian legal system is mainly following the British Common Law though
Islamic law is already applied to the Muslim population (Shamsul, 2015). The
investment of the firms is quite advantageous due to the encouraging British Law
element. The country is even familiar to such laws, which is an advantage for the
business marketers (Kumar, 2015).
However, in spite of imposing the British Law, some of the rules are also broken
that may create barriers for the foreign business marketers. It is thus necessary for
the company to maintain the legal aspects for fulfilling the business requirements.
Environmental
Impact
It has been observed that the continuous and frequent development occurred within
Malaysia came up with high costs. This negative externality is quite
disadvantageous for the business entities. In fact, the data extracted from UN
indicates that the deforestation rate in Malaysia has been increasing in a faster rate
in compare to the other tropical country (Abdullah, Jali & Ibrahim, 2017).
The country even has lost average of 140,200 hectares, which is 0.65%of its entire
forest area since the year of 2000 (Alam et al., 2015). Majority of the rainforest is
now stored for the production of palm oil. This palm oil is used for the source of
bio-fuel and processing food. Therefore, it would be quite challenging for River
Island in manufacturing clothes in Malaysia.
The company needs to consider the environmental welfare by reducing the waste.
Moreover, the company even needs to pay focus on developing the sound corporate
social responsibility to protect the environment from creating damage.
Table 1: PESTLE Analysis

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(Source: Kamaruddin & Kamaruddin, 2017)
The impact of the external environment is thus ensuring whether the company can
survive for the long term basis. Moreover, the growing economic opportunity is also indicating
that the customers in the Malaysian market can accept the fashion segments offered by River
Island if their requirements are met. In the further section of the study, the considerable
opportunities, trends and the threats would be analyzed to understand the probability of the
company in entering Malaysian market.
Opportunities, Trends and Challenges
The considerable opportunities, trends and threats are listed below:
Opportunities, Trends, and Challenges
1. Opportunities  Third position in GDP among ASEAN economies, which is
US$10,000 per capita.
 Emerging economies
 Stable government
 Support from capital city Kuala Lumpur
 Mix Culture
2. Trends  Demands for fashionable garments
 Influence of the Islamic wears
 Changing style in fashion segments
3. Challenges  Environmental Degradation
 Influence of Global uncertainties, such as Brexit, terrorism, and

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geopolitical instability
 Continuous changes in demands of the consumers
 High competition
Table 2: Opportunities, Trends and Challenges
(Source: Kay, Youtie & Shapira, 2016)
Malaysia is considered as the wealthiest emerging economies among all other countries
in Asia. In spite of the smaller population, the country has achieved the significant growth in
economic structure with the help of the industrial businesses. It has captured the third position in
GDP among ASEAN economies, which is US$10,000 per capita (Euromonitor.com, 2017). The
capital city Kuala Lumpur welcomes the foreign business investors to ensure growth in the
economic structure. The customers are quite fond of the fashionable segments with the variations
of the fashion garments and accessories. The growing demands for fast fashion brands and
various styles of fashionable clothes would be much beneficial in deriving more profits. On the
other hand, it has been observed that the stability of the government is also much helpful for the
foreign business marketers to invest a large capital amount (Yeon et al., 2016). Therefore, it can
be assumed that River Island has the growing opportunity for boosting up their sales on fashion
segment. However, it is still necessary to understand the basic requirements and choices of the
customers when they purchase the fashion accessories. The cultural mix is also much opportune
for the company to develop a strengthened base for a longer period.
There are some of the basic trends observed in Malaysian market. It is observed that the
market volatility is quite courageous for the business marketers. However, the continuous threats

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from the geopolitical instability, influence of Brexit, terrorism, and stalled trade deals are quite
challenging as well. These uncertainties have created barriers in the global economy. The
revenue in the fashion retail market is expected to reach up to almost US$5,485 by 2018
(Abdullah, Jali & Ibrahim, 2017). The gradual growth is foreseen, which is quite opportune for
the market entry. The ‘women’s and girl’s apparel’ has the higher scope of increasing revenue in
the fashion retail sector. The growth of almost 7.3% is quite favorable for the foreign marketers
to establish a fashion store in the country (Statista.com, 2018). However, in order to manufacture
the clothes, it is necessary to maintain the high level of corporate social responsibility. However,
the high competitive market is also quite threatening for the foreign fashion retail company. The
reports related to the environmental degradation in Malaysia are quite disadvantageous for the
foreign marketers. Therefore, it is necessary to develop the effective strategic decisions for
mitigating such challenge and prevent the environmental damages.
Recommendation
Obtaining ideas from the above analysis indicates that River Island needs to identify the
most suitable strategy to enter the Malaysian market by concentrating on the opportunities,
threats, and trends. The company has the online presence in the country, but there is no store
where the customer can visit to select their clothes. It can be specified that in order establish the
fashion retail segment in Malaysian market, the company can establish partnerships with the
local retailers. The local retailers are quite aware of the local government, requirements of the
consumers, and business ethics within the country. Hence, it can be implied that the company
can select the “partnership” strategy for entering the market of Malaysia.