Environmental (PEST) Analysis

This chapter will focus on the analysis of the environmental factors that influence the business of TCM in general, and its effect on the Group business operation and strategies. An analysis of macro environments such as PEST analysis will help to identify and understand the current situation of a company according to the external factors and help formulate strategy for further development if any opportunities are apparent, or in contrary, if any threats arise. The analysis is done based on the external environment in Malaysia.

Get Help With Your Essay

If you need assistance with writing your essay, our professional essay writing service is here to help!

Find out more

Political Environment

Malaysia has a stable political environment despite the latest post-election effects which saw some states led by oppositions. Internal bickering within the ruling coalition certainly created an uncertain climate that is not conducive to private-sector investment. However, the situation is not as badly influential especially in regards to the healthcare industry.

In a budge to create an attractive environment of Malaysian market to investor, the government has announced some liberalisation measures. Around 27 services sub-sectors were fully liberalised to foreign investors on 2009, on the opinion that there is shortage in Malaysian expertise as well as investments by locals in many of these subsectors. Healthcare is among the sectors opened up. The requirement of having 30% Bumiputra equity in listed companies is also taken off. Thus restrictions for investments are no longer an issue.

On other note, rules and regulations in Malaysia might also have some share in regards to factors influencing foreign investments. The manufacture and marketing of healthcare products in Malaysia are heavily regulated. However, in terms of healthcare industry, the code of conduct is mainly similar in any country. Ministry of Health requires all medicines marketed in the country to be registered by the Drug Control Authority. Hence, all manufacturers, importers and wholesalers are required to the license. As this could be a setback to traditional medicine business, to some companies like Hai-O, it is also translated as an entry barrier which helps lower the intensity of competition. As a company that comply with the licenses and regulations by the government, Hai-O has a strong advantage to grow and continue to be the market dominant in the traditional medicine industry.

There are also a few other restraints that have always been the hiccups for the private sectors in the healthcare industry. One of it circles on the situation where the contracts for public hospitals being monopolized by one manufacturer to ensure the given standards are being well monitored. As a result, other local manufacturers are only left with the private market to compete in which most of the time is swarmed by multinational companies. Another is the ban on direct-to-consumer advertising that somehow limited the marketing channels for pharmaceutical participants. Medicine advertisements in Malaysia require prior approval by the Medicines Advertisement Board.

Although these political factors might have an effect on the traditional medicine business in one way or another, healthcare is always recognized as a defensive industry somehow, which will continue to spur business opportunities.

Economical Environment

In the Third Industrial Master Plan 2006-2020, Malaysia is focusing on becoming a regional centre for telecommunications, energy, financial, hotel & tourism, and health services. A lot of companies are taking advantage of this plan in every industry. Healthcare being one of it, has presents a lot of opportunities for a lot of business owners. Despite the recent economic slump, Malaysian healthcare market in 2009 placed a 3.4% year on year growth, which is valued RM 4.29 billion. With the economic upturn and growth in medical tourism, it is forecasted that the market will develop a compound annual growth rate of 7.30%, reaching the value of RM 6.10 billion in 2014.

In comparison to most of the Asia Pacific countries, our local economy is at the positive side. There is satisfactory support in monetary and fiscal which is contributed from resilient banking sector as well as optimistic balance payment from the oil export activity.

According to the recent budget, Malaysia’s 2010 health care spending has been projected up to 7%, an expenditure of RM 3.594 billion, from last year’s RM 2.6 billion (4.9%). This is reflected by the report from the National Health Accounts that Malaysian per capita expenditure on health grew at a steady pace from RM 381 in 1997 to RM 1268 in 2008. The steady rise is an indicator that healthcare industry will always present opportunities for business ventures due to the growing demand.

The traditional and herbal market in Malaysia is also growing at 15% to 20%. There are definitely rising demands from local and international users. Herbal market is a sector that fits Malaysia very well, giving the fact that our rainforest is rich with biological heritage. Because of the high potential of this market, development in this area is always getting supports by the government. Numerous incentives and grants are offered especially to local companies for their R&D activities.

Social Environment

Today we can see an obvious lifestyle shift among Malaysians towards the wellness and self-administered healthcare. This is the fact that is driven by active lifestyle at every age level. And with the easy access to information these days, people are becoming more aware on complement chronic illnesses and the fact that conventional medication is not a 100% solution for all illnesses. Due to this increasing awareness, people tend to move towards alternative medication and this provides growing opportunities for traditional and herbal market especially the local businesses. The trend today is more towards caring for health rather than treating sickness, thus creates more potential for developing vitamins and supplements using traditional herbs and plants.

Find out how UKEssays.com can help you!

Our academic experts are ready and waiting to assist with any writing project you may have. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs.

View our services

Reports have shown that 70% of Malaysia’s pharmaceutical products are imported, mainly because of the quality of the brands is more trusted by Malaysian. Major imports are lifestyle drugs which are mostly supplements for high cholesterol, anti-diabetics and a few others. For traditional and herbal sector, there are also high numbers of products that are being imported especially TCM products. Raw materials for TCM are being imported from China, while our own local herbs such as Tongkat Ali, Kacip Fatimah and Misai Kucing are being exported internationally. Our multicultural environment is an advantage for traditional medicine market. Various cultural traditional remedies help to promote the traditional medicine growth.

Besides, there are also rising concerns on the fact that synthetic drugs can cause side effects. These are one of the many reasons that Malaysians are choosy in regards to pharmaceutical brands. And as a result of only trusting imported brands, their healthcare costs are rising. Thriving from such setback, conventional medicines are giving way for significant opportunities for traditional medicine industry players.

The increasing demand for medical tourism is another factor that influences the growth of healthcare industry. It has lead to the establishment of Malaysia Healthcare Travel Council (“MHTC”) in 2009. There are increasing numbers of foreign patients seek medical treatment in the country because of the great facilities and the cost effective services. Traditional medicine practitioners could also take advantage of such increasing awareness on medical tourism giving the fact that Malaysia is rich in its cultural values. Having Chinese as part of the demographic is a plus for the country as it is able to better promote Malaysia as one of TCM destination.

Technological Environment

Malaysia is well known as a country with good infrastructure supported by cost-competitive market in comparison with other developing countries in the Asia Pacific region. The pharmaceutical manufacturers in Malaysia have the capability to produce medicines in all dosage forms, for example, tablets (coated & non-coated), capsules (hard and soft gelatine), liquids, creams, ointments, sterile eye drops, small volume injectables (ampoules and vials), large volume infusions, dry powders for reconstitution and active pharmaceutical ingredients. The government is also giving its full support with the financing schemes for R&D in technological development in this sector. Acute infrastructures available in Malaysia have helped in promoting the new trend of generic drugs. This trend of generic drugs is a result of the patent expiry of blockbuster drugs, aside from the government support as well as the rising costs of healthcare. The development in the R&D also allowed players in this sector to adopt new technologies such as the genetic technologies as well as molecular especially in the production of medical vaccines and curative drugs.

This high technology capacity in Malaysia has extended the biotechnology segment at a stimulating and rapid rate. The future’s key to excellent pharmaceutical and biotechnology industries is biodiversity. Malaysia also owns a biodiversity that seize huge prospect to produce biopharmaceutical. Researchers are able to extract bioactive composites from our native plants. These composites are usable for the treatment of a lot of diseases, namely cancer, hypertension and diabetes. It creates great opportunity for therapeutic biotechnology. In early this year, German CEVEC Pharmaceutical GmbH and our local Inno Biologics got into a licensing agreement, where the local company will use Germany’s innovative technology to produce biopharmaceutical products and develop cell lines. It proves that Malaysia holds the technology capability that creates huge opportunities for companies to compete in the healthcare industry. And companies like Hai-O, who owns its own pharmaceutical lab will be keen to follow the steps of Inno Biologics.

Summary of PEST Analysis

The lifestyle shift towards wellness and self-administered healthcare by Malaysian today has driven the growing interest in healthcare products. The healthcare spending of Malaysians at a growing pace of 13% a year indicates a shift in the direction of a healthy lifestyle and this unlock chances for Malaysia’s healthcare companies to meet the demands for healthcare products.

Regardless of the economic slump, the Malaysian healthcare market placed a significant year on year growth in 2009, at 3.4%, to reach the value of RM 4.29 billion at consumer prices. In line with economic recovery, and increases in medical tourism and healthcare modernization, the market is forecasted to be developed at a compound annual growth rate (CAGR) of 7.30%, to reach RM 6.10 billion in 2014. The strongest segment in prescription will be generic drugs while OTC products will receive market share at the cost of prescription drugs, as the healthcare regulations and economic situation become favorable to its development.

Malaysia boasts a strong local drug making industry, even though its production largely consists of basic generic drugs. As Malaysian medicinal products have obtained a sturdy status abroad, the market will continue reliant on imported products mainly for the supply of exclusive patented medicines. Rising demand in Asia and sustainable growth in the global economy will continue to drive the local export activity. As a result, the domestic industry will continue to increase its presence resulting in more awareness towards healthcare among Malaysian.


Leave a Comment