Pinatex is eco-friendly and sustainable natural leather alternative fiber that is extracted from pineapple leaves. Pinatex was invented by Dr Carmen Hijosa, a Spanish woman. The idea of developing a sustainable natural fiber came into her mind while she was working as a leather goods consultant in Philippine. The extensive use of chemicals to rectify animal leather to make it usable leather shocked her because it was hazardous for environment. As an environment conscious woman, Hijosa strived to develop something that would be environment friendly as well as sustainable in nature. Her rigorous research on pineapple leaves fiber result in the development of a new type of substance or material, Pinatex. After the development of Pinatex, she started Ananus Anam to introduce Pinatex in the market. Pinatex is mixture of pineapple leaves, polylactic acid (PLA), and petroleum-based resin. It is stretchable and flexible and used to manufacture footwear, clothes, wallets etc. We have chosen Malaysia and Singapore because both are very much lucrative to do business. Each country has potential real GDP growth rate. Inflation rate is relatively low in both countries. Currency exchange rate is relatively stable in terms of US dollar. Per capital GDP is higher in both countries. People of Singapore are concerned about quality. So Ananas Anam can provide good quality product at a higher price at singapore. Malaysia has sufficient agricultural land. So Ananas Anam can produce raw material in Malaysia. Both countries invite foreign investors to do business in their country. And they provide numerous facilities to foreign investors like free port facility, low tax rate, 100% ownership etc.
Economic environment of Singapore:
Singapore is a developed country. It has well established and free market economy. Singapore is a member of WTO, APEC, IOR-ARC, and ASEAN. Price is stable here. Unemployment rate of Singapore is very low and it has high GDP level. Its nominal GDP was US $349.7 billion and US $554.9 billion in terms of PPP in 2018. GDP per capital (Nominal) is US $61″,766. It is in 37th and 39th position in terms of nominal GDP and ppp in the world. GDP growth rate was 7.96 % in 2018 from 2017. Per capital GDP of Singapore was US $ 55235.51 in 2017 which has 3.53% increased from 2016. If we divide economic sector of Singapore in three sectors then .03%, 23.21% and 70.44% of total GDP came from agricultural, industry and service sector gradually in 2017. Inflation rate is .5% in 2019 and was .7% in 2018. 1SGD was exchanged for US $.74 in 28th March, 2019 and US $.73 in 27th December, 2018. So SGD has been appreciated by 1.36% in terms of US dollar from 2018. We know when one country’s currency is appreciated then it emphasizes on import. It imported USD $311 billion products and services in 2017 and USD $277 billion in 2016. Singapore imports more and exports less. It is a very small country. Agricultural land is .93089% of total land of Singapore. Only 1% of total GDP comes from agricultural sector.CPI was 100.50 index points in February, 2019 and was 99.8 index points in March, 2018. Singapore charges 17% flat tax rate for all local and foreign investors. Singapore’s regulatory body gives level playing field facility for foreign investors. Singapore allows 100% ownership of foreign company. Singapore has highly skilled and knowledgeable workforce. Foreign company may set up their branch office in Singapore to conduct their business. But at first it has to be registered with accounting and corporate regulatory authority of Singapore as a business entity. Temperature exists between 25 and 30 degree centigrade in Singapore. And soil condition is also good for growing pineapple. Singapore is a free port for foreign investors and 99% imported goods enter in Singapore without paying any duty.
Critical rating of variables (Singapore):
1. Singapore has higher per capital nominal GDP(US $61766). 5 1. Amont of agricultural land is very low in Singapore, only .93089% of total land.
2. Singapore has Skilled labor force 3 2. Labor costs are high in Singapore. 4
3. Allows 100%ownership. 5
4. Inflation is very low, .5%. 5
5. level playing field facility exists in Singapore. 5
6. Government charges low tax rate. 5
Singapore has higher per capital nominal GDP(US $61766). So it can easily target upper class and upper middle class people including middle class people. Singapore has skilled labor force. It helps to reduce defection in production. Inflation is very low, .5%.so Ananas Anam will be able to predict exact future costs and prices. It will also help Ananas Anam to increase their investment. Government charges low tax rate. So Ananas Anam can enjoy high profit margin.
Regulatory body of Singapore ensures level playing field for foreign investor with the local companies. So Ananas Anam can easily compete with local companies.
Singaporer is a very small country. It’s total agricultural land amount is very low (.93089). So Ananas Anam has to import raw material from other countries and Labor costs are high in Singapore. So these will increase the total production costs of Ananas Anam.
That will ultimately increase production cost.
Economic environment of Malaysia:
Malaysia is a developing country. Malaysia is 4th largest economy in Southeast Asia and 38th largest economy in the world. It is a member of APEC, ASEAN, IOR-ARC, WTO, TPP. Malaysia has high skilled labor because it has lots of knowledge based industries. Malaysian people lead affluent lifestyle like upper middle income countries. For example, Brazil, Mexico, Turkey. This has become possible due to low national income tax, household necessities, low cost of food, fuel etc. The Economic growth of Malaysia is 4.6% in 2019 but it will be 4.8% in 2020 estimated by IMF and World Bank. Total nominal GDP of Malaysia was USD $347.29 bn in 2018 and USD $999.83 bn (adjusted with PPP) in 2018. Per capital nominal GDP was USD $10″,703 in 2018 and was USD $30″,815(Adjusted with PPP) in 2018. GDP growth rate was 4.7% in 2018. Total labor force was 15.03 million in June, 2017. Malaysia has robust and diversified emerging industrialized market economy. Basically it exports high-tech products. Malaysia’s total imports and exports were US $193″,855″,940.67 and US $216″,428″,429.22 in 2017. So total trade balance was US $22″,572″,488.55 in 2017. If we divide economic sector of Malaysia in three sectors then 11.1%, 36% and 53% of total GDP came from agricultural, industry and service sector gradually in 2017. Total Land area of Malaysia is 329″,847 square km and 33.3 % is being used for agricultural purpose. Weather and soil condition of Malaysia are good to cultivate crops. It has peat soil and temperature exists between 20to30 degree centigrade. Pineapple especially josapine pineapple grows better in this kind of soil and weather condition. Inflation rate has 3.8% increased in 2017 and real GDP has 5.9% increased in 2017. Inflation rate and real GDP growth rate were 2.1% and 4.2% respectively in 2016. Currency exchange rate of Malaysia in terms of dollar is relatively stable like 1MYR=.26 USD $ was in 1 April, 2018 and 1MYR=.24USD $ was in 31 March, 2019. Foreign direct invest is allowed in Malaysia. Malaysian government allows 100% ownership of property for foreign investor. Malaysia allows joint venture business. All partnerships have to be registered with company commission of Malaysia (CCM) under the registration of business audience 1956.The governor of Bank Negara of Malaysia acts as a controller of foreign exchange control under the exchange control act of 1953. There are no restrictions for foreign investors to purchase ringgit assets like landed property. Malaysia charges lowest tax rate on corporate sectors among the world. It wants to attract foreign investors to invest in Malaysia for developing its national economy. It provides tax incentives to the foreign company. It charges 24% standard tax rate. But sometimes foreign companies pay below this standard level.
Critical rating of variables(Malaysia):
opportunities Ratings Threats Ratings
1. Malaysia has highly skilled labor force. 3 1. Inflation rate in Malaysia is increasing.
2.Malaysia allows 100% ownership . 5 2. Bribery and corruption exists in Malaysia. 4
3. Provides tax incentives to foreign company. 5 3. No freedom of expression. 3
4.soil and weather condition of Malaysia is suitable for pineapple cultivation. 5
5. Growth rate of real GDP is higher than inflation rate. 3
Malaysia has highly skilled labor force that helps to do production effectively. Malaysia allows 100% ownership .So Ananas Anam can obtain 100% control on their business. Malaysian government Provides tax incentives to foreign company. It will help Ananas Anam to grow their rapidly. soil and weather condition of Malaysia is suitable for pineapple cultivation. It will help Ananas Anam to produce raw material in host country. Growth rate of real GDP is higher than inflation rate.
Inflation rate in Malaysia is increasing. So production cost of Ananas Anam will increase. Bribery and corruption exists in Malaysia. It will reduce profit of Ananas Anam. No freedom of expression. Most of the media agencies are government controlled. So they do not publish anything against government. So if Ananas Anam faces any problem due to government while conducting business in Malaysia then it will be in trouble.
Economic differences between Malaysia and Singapore:
Per capital nominal GDP(in 2018) US $10″,703 US $61″,766
Economic growth rate(in 2018) 4.7% 3.3%
Real GDP Growth rate(in 2017) 5.4% 2.5%
Inflation rate(in 2018&2019) 1%(in 2018)”,2.29%(in 2019) .7% (in 2018)”,.5%(in 2019)
Foreign exchange rate 1MYR=USD $.24 (in 31 March, 2019) 1SGD=.74(in 28 March, 2019)
Reserve of foreign exchange and gold USD $97.44 billion (in 31 December, 2017) USD $266.3 billion (in 31 December, 2017)
Stock of direct foreign investment at home USD $137.9 Billion(in 31 December, 2017) USD $1.158 trillion(in 31 December, 2017)
Prime lending rate of commercial bank 4.5%(in 31 December, 2017) 5.4%(in 31 December, 2017)
Gross national savings(in 2017) 28% of GDP 45% of GDP
Revenue and taxes 16.5 of GDP (in 2017) 17.54 of GDP(in 2017)
Import and export Import=US $163.4billion(in 2017)Export=US$188.2billion(in 2017) Import=US $309.7(in 2017)Export=US $396.4 billion(in 2017)
Labor force 14.94 million(in 2017) 3.668 million(Exclude non resendentials)
Poverty line 3.8%(2009) NA%
Industrial production growth 4.6%(in 2017) 3%(in 2017)
After discussing all the issues about economic environment we can say that Singapore is in good position than Malaysia regarding standard of living, per capital income, savings etc. Malaysia is also in good position regarding real GDP growth rate, labor force, and industrial production growth rate. Malaysia has sufficient land for cultivation. So Ananas Anam can produce their raw material in Malaysia which will reduce their production cost. So Ananas Anam can provide good quality at a low price to Malaysian people. The amount of agricultural land is very little in Singapore. So Singapore will have to import raw material from other country. Which ultimately increase the production cost. But per capital income of Singapore is very high. So they are not concerned about price but quality. So Ananas Anam can choose both Malaysia and Singapore.
Competition in Malaysia:
Competitors Competing Products
Timberland Footwear, leather goods
Aldo Footwear & accessories
Pestle and Mortar Fashion clothing
Dr Martens Footwear, leather bags, and accessories
Before entering into Malaysian market, Ananus Anam Ltd., requires thorough analysis of the existing market. Pinatex offers all sorts of alternative leather products. In Malaysia, top brands are already dominating. Peoples’ of Malaysia are trendy and fashionable. As a secular Muslim nation, Malaysian people prefer modest fashion style. Malaysian fashion is mainly influenced by the historical fusion of Malay, Chinese, Indian and various other indigenous cultures. (Forbes.com, 2018).
SI List of opportunity Ratings List of threats Ratings
1 Least competition with vegan/biodegradable leather 5 Already many established brands 5
2 Demand for fashionable products 4 Preference for original leather products 4
3 Flexible government business policies 3 Domination of cheap synthetic leather products 3
4 Availability of regional leather/synthetic products 2
The emerging vegan leather market has lots of prospects. It is estimated that by 2025 the global market value of vegan leather is $86 billion dollars (livekindly.co). Pinatex, which is extracted form pineapple, is natural and eco-friendly lather alternative. As an emerging market, Malaysia can be a good choice for pinatex because still vegan leather is almost untapped; so, it’s a great opportunity for Ananus Anam to start their business in Malaysian market though people still prefer authentic leather products over synthetic leather. People has natural inclination towards animal leather products because it represents social status. Moreover, Malaysian government offers flexible business policies, including liberal equity policy, attractive tax incentives etc. The flexible plan of the government has created opportunity to make available cheap products that can be anxious matter for pintex while entering into the market because pinatext has to offer lower price than existing competitor.
Competition in Singapore:
Competitor Competing Products
Charles & Keith Footwear, handbags, and fashion clothing
Pedro Footwear and accessories
Matt & Natt Vegan footwear, handbags, and accessories
Picard Leather goods & accessories
Dr Martens Footwear, leather bags, and accessories
Singapore is considered as a business hub for a long period of time; so, before entering into this potential market Ananus Anam needs rigorous research about their potential competitor. Per capita income in Singapore is high so that the buying power of the people is high. Luxury leather products have high demand in Singapore. (Euromonitor.com)
SI List of opportunity Ratings List of threats Ratings
1 Less competition with vegan/ biodegradable leather 5 Already many established brands 5
2 Free trade economy, Pro business policy 4 Domination of regional leather products 4
3 Increasing demand in fashionable products 3 Price of the products 3
4 Demand for innovative products 2 Inclination towards authentic leather products 2
Singapore offers bunch of opportunities to initiate business in its lucrative market. Surprisingly, this potential market has already familiar with vegan leather products. Already, a few renowned brands who are offering vegan leather products are doing business there; so, it is a bit difficult for Ananus Anam to penetrate the market. Singapore is known for its free trade economy so it provides opportunity to start business here, easily. By grasping this easy opportunity, Chinese and Indian leather products take control over the market (adb.org).
Competitive advantages between Malaysia and Singapore:
Company Name Product Business base
Charles & Keith Footwear, handbags, and fashion clothing Singapore
Pedro Footwear and accessories Singapore
Matt & Natt Vegan footwear, handbags, and accessories Canada
Dr Martens Footwear, leather bags, and accessories (offer some vegan leather shoes) UK
Zeve Footwear Malaysia
Regional products Synthetic leather/ Leather products China is the largest producer (marketresearchfuture.com)
Analysis shows that, South Asian market is very much competitive for Ananus Anam. Both Malaysia and Singapore are potential market but it is challenging as well. Leather products is available in these markets because world’s top most exporters are here to facilitate the producers. Already Chinese synthetic leather products are dominating these markets. So, if Ananus Anam wants to enter in Malaysian or Singaporean market, they need to consider many aspects like price, comfortability, durability, design etc. compare to leather products.