Professional Documents
Culture Documents
Ibp Project Final Exemplar
Ibp Project Final Exemplar
bVitra
NOMINATED MARKET: MALAYSIA
NOMINATED PRODUCT: ARTHRITIS CREAM
xxxxxx 11111111111111@student.westernsydney.edu.au
xxxxxx 11111111111111@student.westernsydney.edu.au
xxxxxx 11111111111111@student.westernsydney.edu.au
[Company address]
TABLE OF CONTENTS
Executive Summary 2
Marketing Analysis 6
Legal Considerations 14
Risk Analysis 16
Financial Support 17
Financial Analysis 18
Sustainability 22
Conclusion 24
References 25
Appendix 30
EXECUTIVE SUMMARY
This proposal examines Malaysia’s feasibility as an export market for bVitra’s arthritis
cream and presents key findings and potential recommendations.
A critical finding is that affordability is essential to bVitra’s ability to compete with local
competitors. Malaysia is an attractive market for bVitra due to widespread use of English,
the aging population as well as rising incomes. However, triple taxation and the diverse
range of cultures and languages spoken may present challenges to the company. There is
currently a downturn in Malaysia’s import market and the time it takes to protect the
product’s IP may be over two years. The prevalence of arthritis in Malaysia is not well-
researched, which presents issues determining potential market size.
Size
As of 2019, Malaysia’s population is 32.6 million with a declining growth rate
(Department of Statistics Malaysia (DOSM) 2019a). However, Malaysia’s aging population
will change the population structure. The percentage of people over 65 has risen from 6.5%
in 2018 to 6.7% in 2019 (DOSM 2019a). Figure 1 indicates that 14.5% of the population will
be over 65 by 2040 (DOSM 2016). It is estimated that 35% of the worldwide population
show signs of osteoarthritis, which suggests the prevalence of arthritis will rise in Malaysia
due to the aging population.
Figure 2 notes that Malaysia’s major ethnic groups are Malay, Chinese and Indian
(DOSM 2019a). English, Mandarin and Tamil are commonly spoken along with Malay. It is
common to see product packaging in Malaysia with several languages, if the target market is
not directed at one specific ethnic group (De Run and Chin 2006). It is recommended that
bVitra adopts this strategy because they are appealing to a wide market.
Infrastructure
Malaysia has a relatively well-developed infrastructure and transportation networks.
There are 40 seaports and 5 international airports across the countries. The country is
located in the central of Asia Pacific region which makes it an ideal gateway for bVitra to
enter ASEAN markets in the future.
Further, Malaysia is based on common law legal system with similar regulatory and
administrative standards to Australia.
Therefore, these positive results lead bVitra to create an arthritis cream in the
complementary therapeutic industry that can also be used for general pain. bVitra is
currently in the final stages of scientific testing by the National Institute of Complementary
Medicine and if proven successful it will gain a Therapeutic Goods Administration listing.
bVitra targets its arthritis cream to babies, elderly, active sports people and people with
arthritis pain. bVitra’s natural products are manufactured in Australia with ethically sourced
and certified organic ingredients.
Magnesium chloride flakes is the vital ingredient in the product which repairs bone and
muscle. bVitra wishes to grow its brand through the offering of corporate gifts at expos,
social media and blogs. bVitra has undertaken the B2B and B2C model within Australia in
order to gain broader sales channels. bVitra is awaiting testing from the manufacturer
purely for stability and shelf life due to its natural preservatives which shortens product
lifespan. The product price is often higher due to smaller orders, which limits advantages of
economies of scale.
MARKETING ANALYSIS
Product/Service Description
bVitra’s cream can be easily differentiated from others in the saturated therapeutic
goods industry because it aims to relieve pain, improve sleep and reduce anxiety. Further
differentiation includes its ethical, organic and natural ethos; which extends from sourcing
to packaging. This foundation is central to its marketability, as it appeals to its arthritis
cream’s primary customer segments.
In respecting this, bVitra’s elderly market segment has been interpreted at 1,000,000
people because 2.12 million people in Malaysia are over 65 and is also expected to grow
due to Malaysia’s aging population. Malaysia’s child market has been accordingly sized at
10,000, given that 1 in 1,000 children are affected by juvenile arthritis. Hospitals have been
established at 370, which is the total number of hospitals across Malaysia. This could also
expand to include other healthcare providers such as physiotherapy and chiropractic clinics.
pharmaceutical stores will ensure the brand’s physical presence and aid its online
positioning as an alternative channel of distribution. In maintaining this competitive
approach, bVitra’s Malaysian operations will remain stabilised against other established
arthritic brands.
Competitor Analysis
bVitra faces two main types of direct competitors in Australia: those brands which cater
strictly to osteoarthritis arthritis (OA) sufferers and those that produce solely for
rheumatoid arthritis (RA) patients (AIHW 2018). Osteoarthritis-focused brands, however,
make up the majority of the local market for non-steroidal anti-inflammatory drugs (NSAIDs)
aimed at these conditions. Topical NSAIDs for osteoarthritis are available over-the-counter
(OTC) and their accessibility and affordability is what drives their sales amongst consumers
(AIHW 2018). Presently, Dencorub Anti-inflammatory Gel and Voltaren Osteo Gel 12 Hourly
are dominating the domestic self-medication industry, as their value for money ($6.99 for
100g in regular strength and $27.99 per 150g in high strength respectively) sees that generic
OTC drugs for OA have no place in the market at all (Ackerman et al. 2016). bVitra’s product
will additionally be competing alongside other formulations that comprise of naturally
derived ingredients, specifically Elmore Oil Natural Pain Relief Cream, but considering the
reality that complementary medicine industry holds a smaller share in the pharmacological
management of arthritis, this makes such companies indirect competitors.
In the Malaysian sphere, direct competition is also made up of Dencorub and Voltaren
but it is of most importance to note that Malaysians are primarily sufferers of RA as
compared to OA, which means that whilst bVitra will be contending against the same
brands, it will face entirely different product formulations than those it will have seen in
Australia (Toh et al. 1973). Whilst these creams are not prescription-based drugs, GP
recommendation has seen Dencorub and Voltaren garnering control over the local Malay
market despite their relative high prices (Dencorub Arthritis Cream 100g retails for
RM52.82, which is equivalent to AUS18.63). This rate may be accepted in Australia but is still
slightly out of reach for sufferers of RA in Malaysia, whom are generally middle-class, in
older age bracket and retired (Shahrir et al. 2008). This clarifies the preference for
alternative and traditional remedies, with 15.5% of RA patients relying on products such as
Vietnam Snake Balm Painkiller Ointment 20g, which retails for RM25.00 (AUD8.82) (Shahrir
et al. 2008). Formulated with natural oils and wild herbs, the smaller quantity seems a more
affordable option, one that is more widely accessible as well in comparison to regular
NSAIDs.
As made apparent in the graph above, bVitra must consider price, quantity, strength and
accessibility if it is to successfully penetrate the Malaysian market for topical RA
medications.
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E-Marketing Strategies:
According to the Malaysia Digital Economy Corporation director of e-commerce, Wee
Huay Neo, Malaysia has the highest penetration of online shoppers among the ASEAN
countries (Jaya, 2017).
A recommendation for bVitra is to use the e-commerce platforms, such as eBay, Shoppe and
Lazada for marketing and distribution as it will increase company visibility in the Malaysian
domestic market. The Internet penetration in Malaysia is 85.7% in 2018, in comparison to
70% in 2015 (Alias, 2018). Facebook is the leading social media network in Malaysia.
Therefore, bVitra should utilise a Facebook official account to execute loyalty program,
assist customer relations and business connections.
Apart from online advertising, television advertising also allows the company to reach a
broad spectrum of consumers. It can be an effective means of vividly demonstrating product
attributes and persuasively explaining their corresponding consumer benefits. Moreover,
outdoor advertising, such as billboards, is popular in Asia. The traffic jams in cities, such as
Kuala Lumpur and Penang, suggest that there is a massive captive audience.
Another recommendation for bVitra in helping establish itself in the Malaysian market is
to give away free samples to hospitals and pharmacies. Consumers are more likely to
purchase the products if they know the product is effective and worth the price they are
paying for. This approach will allow bVitra to increase brand awareness and build trust in
your products and services.
In sum, bVitra needs to adopt a unique mix of marketing strategies to attract different
groups of the society. The company should also make sure that its packaging and marketing
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campaigns align with the language and culture likings of Malaysian consumers. As Malaysia
is a Muslim majority country, the business should pay extra caution when doing advertising
to prevent culturally offensive advertising and promotion.
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One main reason for manufacturing in Malaysia is that manufacturing costs are four times
cheaper than Australian manufacturing costs. This will enable bVitra to take advantage of
economies of scale, which solves its previous problem of experiencing high product costs
due to small quantity orders. This will ultimately provide bVitra with greater stability,
consistency and increased profit margins.
DuoPharma will be taking on board the manufacture and distribution of the arthritis cream
throughout Malaysia, the distribution of the cream is projected to start at a 2% market
share of the 370 hospitals throughout Malaysia contracted with 10 creams per annum. This
market share is projected to increase to 17.5% by the end of the third year of trading in
Malaysia. In conjunction with the distribution of the cream to hospitals there will also be
distribution via DuoPharma to chemists, physiotherapists and the like for the target markets
of babies and the elderly to be able to access the products without hospital visits. The end
user sales of this cream are quite conservative in the starting years, due to a lack of brand
awareness and limited stock available, however all sales are projected to increase over a 3-
year period as production is able to be increased.
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LEGAL CONSIDERATIONS
Trade Policy
Trade policy is governed by the Malaysia-Australia Free Trade Agreement (DFAT 2012).
The Schedule of Tariff Commitments in MAFTA indicates that salts, magnesium and
pharmaceuticals are subject to 0% tariffs. Australian exporters have to complete a
declaration of origin to claim tariff-free benefits under MAFTA. However, 40% of the good’s
value must originate from Malaysia or Australia. In terms of international trading, Malaysia
is ranked 48th out of 190 economies (World Bank Group 2019).
Registration of Company
To start a business in Malaysia, the necessary procedures can take approximately 7-12
days, which includes preparing company incorporation documents, filing documents with
the Companies Commission of Malaysia, opening a Malaysian bank account, and registering
for GST (World Bank Group 2019). Registering a company in Malaysia can be costly, with a
registration fee of RM1,010 ($356AU), which excludes professional service fees (World Bank
Group 2019).
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As the Australian Patent Office is a party to the Patent Cooperation Treaty, bVitra can
make a single international application and nominate countries in which it wishes to seek IP
protection (IP Australia 2017). The international search and filing fees are approximately
$4000AU; however, applicants have 30 months to decide whether they want to file a patent
application in each country (IP Australia 2019a). This allows flexibility in deciding whether
certain countries are feasible. If bVitra chooses to file a patent application in a specific
country, there are additional national filing fees (IP Australia 2019a).
bVitra can simultaneously apply for international trademark protection when making an
Australian application. To receive protection in Australia, it can take at least 7 ½ months
from when the first application is made (IP Australia 2016). As Malaysia has joined the
Madrid Protocol, bVitra can apply to the World Intellectual Property Organisation (WIPO
2019). This will be simpler than making a direct application in Malaysia. Estimated WIPO
application costs range from $2000-$3000 (WIPO 2019). This trademark protection will be
valid for ten years.
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RISK ANALYSIS
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FINANCIAL SUPPORT
Externally, bVitra can seek funding via the Export Market Development Grant scheme
from Austrade. The scheme provides applicants with grants of up to $150,000 and 50% of
eligible expenses are reimbursed (Austrade 2019). Eligibility requires businesses to have an
annual income less than $50m and have spent at least $15,000 on export promotional
activities (Austrade 2019). Whilst bVitra are currently ineligible, this could provide a
valuable cash injection once the required amount has been spent on export activities.
It is also recommended that bVitra seeks external equity funding from angel investors or
venture capitalists. Ideally, these investors will have international business experience and
become shareholders of the business to advise bVitra in areas in which they are lacking
expertise.
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FINANCIAL ANALYSIS
• Manufacturing Cost
Due to access to cheaper manufacturing, the cost of manufacturing per unit in Malaysia
is estimated at $AU7. It is also assumed the average retail price is $AU24.95. However,
these figures can vary among the four strengths of bVitra’s product.
• Samples
The estimated cost for 5g samples is $2 and the estimated number of patients per
hospital is 2750. The number of samples to be distributed has been estimated by
multiplying the average patient number by bVitra’s target market share of hospitals. The
cost of samples has been incorporated into promotion expenses.
• Taxes
To calculate taxes, the domestic Australian tax was estimated to be 25% and the
Malaysian corporate tax rate at 24%. The additional foreign investment tax for
expropriation of profit is 10%. The sales concessions rate given to DuoPharma is 2.5% of the
retail price per unit, which is an industry average.
• Shipping
The shipping costs comprise border compliance and customs clearance, which are
estimated at $AUD625 for a $50,000 shipment (World Bank Group, 2019). This figure was
used to calculate the cost of lower quantity shipments for essential raw materials from
Australia.
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• Sales
Figures 6 and 7 shows sales growth across all 3 key market segments, with emphasis on
hospitals/healthcare providers. This is due to the reliance of elderly and children market
segments on hospitals as primary means of accessing medication.
Figure 8 indicates that from year 1 to 2, there is a 46% growth for the elderly market,
70% for the hospital segment and babies/children market segment. From year 2 to 3, there
is 112% growth for elderly, 122% for hospital segment and 119% for babies/children. Figure
9 graphs the overall revenue growth and evidences bVitra’s strong growth potential. The
growth of bVitra’s market share is linked to the provision of samples to improve bVitra’s
brand awareness.
The income statement (Figure 10) shows that in the first two years of operation, bVitra’s
net income will be at a loss. However, in the third year of operation, bVitra will produce a
profit.
2. Cashflow Statement
Figure 11 indicates that over the entire 3-year period, bVitra has a positive cash flow,
demonstrating an efficient management of its international operating expenses.
Figure 12 shows that bVitra will breakeven during the 4th quarter of their 3rd year of
operation and will produce a 1.06% return on investment from the initial $50,000 sum.
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MANAGEMENT TEAM
AND STRUCTURE
bVitra is a start-up business and its main aim is to maximise revue, save money and grow
the company. bVitra as start-up business does not have significant disposable income as
well as any prior international experience. Therefore, it is essential to establish a formal and
organised team structure which will be more suitable for long-term growth, development
and company flourishment as the founder cannot undertake and handle all work activities
to their full potential due to different limitations of specialization and energy.
bVitra’s financial circumstance will require the business to seek for consultants who
would become investors and shareholders. The shareholders would be from various
different backgrounds of expertise that would implement knowledge they have acquired
within their field of work in order to ensure company growth which would not create any
additional expenses, but create more value for the company and most importantly maintain
the business budget.
bVitra would have to hand over and pay 49% of the company shares and profits to the
shareholders, while maintaining 51% of business shares in which case bVitra will still
maintain power and control of the company. Therefore, this opens up new views, avenues
and opportunism for bVitra’s business growth that can potentially grow and sustain the
business.
Therefore, building a firm team structure will require to fill the following rolls:
International Business Manager – An individual with a base salary of $27,184 AUD per
year. A business manager would have experience in pharmaceuticals and would represent
bVitra in the overseas market, speak the language of the country and be managing all the
business funds, operations and sales in Malaysia.
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Web Designer – The Web Designer has a base salary of $61,000 and would build brand
reputation, identity and create confidence in the brand through creative, clear and
functional design that would be able to deepen customer loyalty among new or existing
consumers through social media platforms such as Facebook, Instagram, LinkedIn and
Twitter that would reach a wider consumer base.
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Sustainability
Despite being highly regulated, the Malaysian pharmaceutical industry is not bound to
specific sustainability policies but nonetheless remains committed to organisational
sustainability as it works to enhance the well-being of the community whilst reducing its
environmental impact. Most Malay companies seek guidance from the Global Reporting
Initiative (GRI) Standards, which will hold to account bVitra too once it partners with
DuoPharma (Nur et. al 2015). As part of these benchmarks, bVitra must fulfil certain
sustainability obligations, the most significant of which is that its Malaysian pharmaceutical
procurement procedures be environmentally friendly, even more so than its Australian
ones. This necessitates that it remains committed to its biodegradable, recyclable and
reusable product packaging and that it extends this sustainability goal to DuoPharma who
will continue to carry it through ingredient sourcing, operations, manufacturing facilities etc
(DuoPharma 2018). bVitra and DuoPharma both must also routinely conduct, as per the GRI,
internal sustainability assessments against agreed targets to identify the environmental
consequences of their current and proposed actions; this so that they can control quality in
their value chain and avoid unnecessary risks to customers (Nur et al 2015). Operating in
this open, transparent and accountable manner will only solidify the commitment to quality,
safety and health and further aid in improving sustainability performance in the future.
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Timeline starts after the registration of the company in Malaysia or once JV contract is
signed
After all certifications are complete within Australia (estimated for late 2019), both
Australian and Malaysian patent should be applied to allow for processing times. During the
year trial period in Australia, it is recommended for bVitra to start application for Malaysian
trademark and patents as this is expected to take 12-18 months for approval. After the
second year of manufacture and sales has been completed and assessed within Malaysia,
Singapore is the next market that will be assessed for entry.
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CONCLUSION
The main recommendation for bVitra is to adopt a joint venture market entry approach
into Malaysia with manufacturing and distribution channel partner DuoPharma. This is the
recommended strategy because it provides significant financial and marketing
opportunities. This approach would enable bVitra to take advantage of significantly cheaper
manufacturing costs and DuoPharma’s established distribution networks within Malaysia
and across Asia.
High taxation contributes to the fact that bVitra’s projected ROI is quite low after the
initial three-year period. Thus, it is concluded that greater investment into bVitra is
necessary. This will not only stimulate business growth, but the rate of ROI will improve,
providing bVitra with a repayment of its $50,000 investment within a much shorter
timeframe. This investment will require bVitra to adopt a more decentralised policy and
hand over some management control to investors with international business expertise,
who can assist in improving bVitra’s presence in the Asia-Pacific region.
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APPENDIX
Figure 1: Changes in population age structure
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