Exporting Toyota Hybrid Prius 1.5- Liter

To : Mr. Fong, Board Of Directors.

From : Mr. Lim, International Marketing Manager.

Subject : Exporting Toyota Hybrid Prius 1.5- liter to Malaysia Automotive Market.

Reference : PP/KC.

Date : 19 December 2004

1.0 Introduction

1.1 Objective

With the advancement of technology, traditional gasoline car has been slowly replaced by the new and trendy hybrid car.

Toyota Prius is the leading hybrid car in the world as 100,000 units have been sold in the United States of America in year 2004 and Toyota Motor has set a target of selling 300,000 units of hybrid cars in year 2006., with the convincing and positive image that Toyota has in Malaysia market, Toyota Motor Corporation needs to strengthen the market share as well as sales in Malaysia by exporting and introducing Toyota Hybrid Prius in Malaysia.

2.0 Up- To- Date Examination of PEST Environment

2.1 Malaysia Political Environment

- The Foreign Investors Encouragement Act 1986 offers various incentives favours foreign investors in Malaysia, This would be an advantage for Toyota Hybrid Prius to invest heavily in Malaysia in long run.

- The Liberal Equity Policy encourages foreign investors in Malaysia's manufacturing sector to hold 100% equity in projects, whereby this will favour Toyota Prius to be manufactured in Malaysia in near future.

- Promotion of Investments Act 1986 and the Income Tax Act 1967 offered a wide range of tax incentives for manufacturing projects. Attractive company tax rate at 28% to both resident and non-resident companies.

- The Asean Free Trade Area (AFTA) which implemented on year 2005 will encourage consumers to purchase imported vehicles from AFTA members as a large amount of import duty 50% (below 1800 CC) has to be reduced.

2.2 Malaysia Economic Environment

Malaysia is a good place for business purposes because the national economy has performing very well.

- A backdrop of low inflation but strong reserves has proven the stability in the economy in Malaysia.

- The strong growth of 7.6% in the economy in year 2004 serves as an indicator for Toyota Prius to penetrate into Malaysian market as Malaysia is the world’s 18th leading exporter and 20th leading importer.

- To export hybrid Prius to Malaysia is the correct decision as the car sales has an increase of 16.2% in year 2004. This has indicated the power of purchasing cars in Malaysia market has increased due to good economic situation.

2.3 Malaysia Social and Cultural Environment

- The lifestyle for Malaysian has been lifted as the demand for imported goods has increased. Toyota has 10.1 % of market share in Malaysia as the leading foreign car maker in Malaysia; this will definitely be beneficial for Toyota Prius to be exported to Malaysia.

- The hybrid technology for Prius will be an advantage as Malaysians are moving towards the era of smart gadget technology; this can be judged through 6 million of Malaysian internet users by 2005.

- The enthusiasm of green environment by both Malaysian and the government will serves as an advantage for Toyota Prius because it is a car which protect the pollution of environment.

- Malaysians prefer vehicles with better mileage but lesser petrol consumption, as the petrol price has been increased regularly. The electric and petrol car will certainly be an ultimate solution for Malaysian consumers.

2.4 Malaysia Technology Environment.

- Cyberjaya, Malaysia's first intelligent city and the nucleus of the country's Multimedia Super Corridor (MSC), complete with a multimedia university to provide a pool of knowledge workers for industries International Trade.

- Kuala Lumpur International Airport (KLIA) with high-tech infrastructure allows goods to be delivered via cargo planes in a faster time, whereby Toyota can export Prius’s accessories or parts to Malaysia on time if there is urgency.

- Exporting Toyota Prius via sea in the best solution due to high transportation cost, two of the seaports are among Asia’s top ten best seaports and top ten best container terminal operators, 95% of the country's trade is by sea via Malaysia’s seven international ports.

- The latest digital and fiber optics technology is being used to provide high quality telecommunication services at competitive prices. Therefore, purchasing orders and enquiries about Prius can be made easily.

3.0 Further Research Requirement

The research was conducted through secondary data collected from Toyota official website and Malaysian Investment Guidelines website, The Star newspaper provides latest news about hybrid cars and up-to-date car sales in recent years were used as references to support the facts in this report.

In order for this proposal to be executed with 100% success rate, research on the following by A.C Nielsen Malaysia has to be done:

- Detail government regulations and policies on foreign entry for commercial purpose.

- Up-to-date consumer purchasing power.

- Supplier bargaining power.

- Social risks.

4.0 Assessment of Risk

Evaluation of assessment risk from entry into Malaysia has to be done. There were several factors that had to be considered in this assessment whereby the most prominent risk would be government policy risk, psychology risk, currency risk and competition.

4.1 Government Policy Risk

The AFTA policy which has to be implemented by Malaysian government by year 2005 will certainly benefits the consumers to purchase imported cars, but the government might implement other extra charges. For instance, increase the price for imported car insurance policy or the road tax for imported vehicles in order to protect its own national car industries Proton and Perodua.