Malaysian Jewellery Industry Strategic Management

1. BACKGROUND OF JEWELLERY BUSINESS IN MALAYSIA

Malaysian jewellery industry is one of the jewellery business among the world to offer

the highest variety or blend of cultures that in favourable of every jewellery piece collector. Investors have made investment by becoming a part of Malaysia’s growth story that has attract investors’ income to ten fold. In all this jamboree of progress and development, the Malaysian jewellery industry which is known to be one of the oldest in the world has successfully survived the influences of the British, Dutch, Portuguese, Chinese, Indian and other cultures to come out a winner (The New Jeweller, 2014).

Simple designs in both fine jewellery and costume jewellery has become a highly popular

trend of jewellery in Malaysia. According to President of the Federation of Goldsmith and Jewellers’ Associations of Malaysia, Ermin Siow Der Ming said that locally designed and manufactured gold ornaments had become popular, thanks largely to their intrinsic beauty which, in turn, could be attributed to the country’s rich diverse ethnic culture which was reflected in the diverse likes of the Malay origin people who preferred floral designs while the Chinese liked geometrical background and the Indians had a weakness for intrinsic handy designs on the products. According to Siow, the pattern of jewellery was building up a reputation for the country worldwide (Mehta, 2014).

This fusion has attracted global buyers to Malaysia. Malaysian exports have risen year on

 year and success in making United Arab Emirates (UAE) its biggest export partner. Malaysian jewellery maker have evolved with the jewellers from the Middle-East country to take their products and services into international markets. The democratic trade friendly policies charted under the current regime is a true example of a successful autocracy rule under a stable democratic set up. To top it all Malaysia also holds two major exhibitions in the city of Kuala Lumpur and attracts international visitors and exhibitors from far and wide (The New Jeweller, 2014).

In addition, Malaysia has been working hard to join the other top jewellery exporting

nations which other competitors will look at Malaysia at a same level with them. For instance, Malaysia able to compete with well-known brand such as from China, India, Italy and Thailand which all famous for their cutting-edge branded jewellery. Nevertheless, some of the Malaysia’s gold jewellery suppliers have been betting themselves in the global markets with their stunning and world-class designs.

Malaysian gold ornaments also appeal to buyers, particularly, in India and China where

22-karat or 24-karat gold is appreciated. However, 80% of Malaysia’s exports are bound for Dubai from where the jewellery is re-distributed to other international markets. Some of Malaysia’s gold jewellery suppliers including Tomei Group, Niche Capital Emas Holding, DeGem and Habib Jewels have been asserting themselves in the global markets with their exquisite and world-class designs (Mehta, 2014).

1. SITUATION ANALYSIS

1. Demographic Segment

        The demographic segment includes the size of the population, gender structure, age structure, geographic distribution, ethnic structure and the distribution of income .        

        According to a press release by the Department of Statistics Malaysia, there are 31.7 million persons in Malaysia as of the year 2016.  The number of male individuals amount to 16.4 million whereas the number of female individuals is 15.3 million.  The Bumiputera community makes up the majority of the population with 68.6%, the Chinese population makes up 23.4%, the Indian makes up 7.0% and the Others are 1.0%.  

        The percentage of the population aged between 0 to 14 years is 24.5%, 69.4% for ages between 15 to 64 years and 6.0% for ages 65 and above.  The geographic distribution shows that the state of Selangor has the highest percentage of the population which is 19.9% while the Federal Territories of Labuan and Putrajaya each has the lowest population of about 0.3% (Department of Statistics Malaysia, 2016).  

        The median household income in Malaysia is RM4,585 while the mean household income in Malaysia is RM6,141 as of the year 2014.  Kuala Lumpur has the highest median and mean household income of RM7,620 and RM10,629 respectively (Department of Statistics Malaysia, 2015).  

        It is important for the jewelry companies to be aware and sensitive to the such demographics.  The taste and preference vary across different demographics and the jewelry would need to adjust their products, services, organizational values and the business approach to satisfy them.  According to Golan, expenditures on jewelries is most common among individuals who are in their mid-20s, mid-30s and the ages between 55-64 in the United States.  This is due to events that are age-specific such as marriages or peaks in earning power (Golan, pp. 7, 2014).  In Malaysia, the trend would be similar as it is common for couples to marry in their 20-s and 30-s and it is very likely that they will purchase precious accessories such as gold bracelets and diamond rings.  The jewelry business would need to focus on such demographics to exploit the opportunity and achieve above-average returns.  

1. Economic Segment

        The economic environment focuses on the condition, nature and trajectory of the economy where a firm competes (Hitt, Ireland & Hoskisson, pp. 45, 2011).        

        The year of 2016 marks a positive year for Malaysia as it recorded a trade surplus of RM87.3 billion (Department of Statistics Malaysia, 2016).  The gross domestic product of Malaysia during third quarter of the year 2016 amounts to about RM 281 billion.  According to Bank Negara Malaysia (2016), prices of goods and services in Malaysia recorded an inflation rate of 1.8%.  On the 13th of June, 2016, interest rates in Malaysia dropped to 3% after Bank Negara Malaysia reduced the Overnight Policy Rate (OPR) ("BNM cuts interest rate to 3%", 2016).  According to "The State of Households II" released by Khazanah Research Institute, the household savings rate in 2013 is 1.4%, which is considered to be very low as far as developing countries are concerned ("Malaysians are borrowing too much, not saving enough", 2016).  In terms of national budget, Prime Minister Najib Razak predicts a budget deficit of RM40.3 billion ringgit during the year of 2017.  The deficit amounts to 3 percent of national gross domestic product. ("Malaysia hopes for faster growth, lower budget deficit in 2017", 2016).