MBSA 2223 SEMINAR IN GLOBAL BUSINESS STRATEGY

Individual Assignment

Title: iRobot Bravaa 380t robotic Floor Sweeping and Mopping import
from U.S to Malaysia

Submit to

Dr. Amir Raslan Abu Bakar

Submission Date

6th June 2018

Submit by

Tamil Selvi K Ganesan MBS 161144

 Table of Contents

1.0 INTRODUCTION..............................................................................................................1

2. 0 BACKGROUND OF CASE.............................................................................................2

2.1 Company Profile..................................................................................................2

2.2 Industry Profile.....................................................................................................3

3.0 FINDING OF CASE..........................................................................................................4

3.1 GDP OF MALAYSIA..........................................................................................4

3.2 FDI, Malaysia’s Policy (Home Country).............................................................5

3.2.1 The motives (Malaysia).................................................................................5

3.3 Malaysia’s FDI Policy as Host (for import).........................................................6

3.3.1 Promotion......................................................................................................6

3.3.2 Restriction.....................................................................................................7

3.4 FDI activity iRobot in Malaysia policy as host country......................................7

3.4.1 Motive...........................................................................................................7

3.5 U.S. FDI policy as Home (For export).................................................................8

3.5.1 Promotional...................................................................................................8

3.5.2 Restriction.....................................................................................................8

3.6 Pestle Analysis.....................................................................................................9

3.7 Competitive Analysis.........................................................................................12

3.7.1 Porter Five Forces.......................................................................................12

3.7.2 BCG Matrix.................................................................................................13

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 3.7.3 Direct competitor Analysis (iLife V7 Pro)..................................................14

3.7.4 List of opportunities and threats of the host country (Malaysia)................16

3.8 External Factor Evaluation Matrix (EFE)..........................................................17

3.9 SWOT Analysis..................................................................................................19

3.10 Internal Factor Evaluation (IFE Matrix)..........................................................21

3.11 Internal-External Analysis................................................................................22

3.12 TOWS Matrix...................................................................................................23

4.0 ANALYSIS OF CASE......................................................................................................26

4.1 Financial consideration......................................................................................26

4.1.1 Forecasting of currency rate (PPP).............................................................26

4.1.2 Pro-forma income statement.......................................................................27

4.1.3 IRR and ROI...............................................................................................28

4.1.4 NPV.............................................................................................................29

5.0 RECOMMENDATION...................................................................................................30

5.1 Types of importing.............................................................................................30

5.2 Contractual entry mode......................................................................................30

5.3 Investment entry mode.......................................................................................31

5.4 Import financing.................................................................................................31

5.5 FTA of Home and Host Country........................................................................32

6.0 CONCLUSION..................................................................................................................32

REFERENCE.........................................................................................................................33

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 List of Tables

Table 1 Shows Company Profile...............................................................................................2

Table 2 Shows Pestle analysis Home country-United States.....................................................9

Table 3 Shows Pestle Analysis Home country-Malaysia..........................................................9

Table 4 Shows Direct Competitor Analysis.............................................................................14

Table 5 Shows List of Opportunities and Threat.....................................................................16

Table 6 Shows EFE Matrix......................................................................................................17

Table 7 Shows SWOT Analysis for iRobot Bravaa 380t.........................................................19

Table 8 Shows IFE Matrix.......................................................................................................21

Table 9 Shows TOWS Matrix..................................................................................................23

Table 10 Shows Calculation for Income Statement.................................................................27

Table 11 Shows Calculation for IRR and ROI.........................................................................28

Table 12 Shows Calculation for NPV......................................................................................29

List of Figures

Figure 1 Shows Market volume growth of electric household appliances and

housewares in Malaysia from 2011 to 2018...............................................................................3

Figure 2 Shows Porter’s Five Forces.......................................................................................12

Figure 3 Shows BCG Matrix For iRobot Bravaa 380t............................................................13

Figure 4 Shows IE Matrix.......................................................................................................22

iv
1.0 INTRODUCTION

International trade is business transaction that take place in two different countries,
which can be in terms of products, services or even capital. The benefits of international trade
such as job creation, improving standard of living and ultimately boost country economics.
For company level, international trade happens with the aim in increasing a company’s sales
and profit, gain more market share locally and globally and also extend current portfolio of a
company to capture segment of customers.

This paper focusing on importation of iRobot Bravaa 380t robotic sweeping and
mopping cleaner into Malaysia with Tuan Hoe Electrical (M) Sdn. Bhd as joint venture
partner in Malaysia. The trade theory applied for this activity is based on absolute advantage
principle. It is refer to the ability of a party such as firm or country to produce a greater
quantity of a goods, products or service than competitors using the same amount of resources.
iRobot corporation which is located in United States producing robotic sweeping and
mopping cleaner system very efficienct than Malaysia.

In this case, iRobot corporation should decide to specialize in producing robotic

cleaner and selling to Malaysia. Since, Tuan Hoe Sdn.Bhd does not have any expertise on that
particular technology, so it is wise for Tuan Hoe Sdn, Bhd to import the product from United
States into Malaysia market who already established and good quality robotic vacuum and
sweeping cleaner. In fact, it will be an inefficient and risky investment for Tuan Hoe if the
firm were to produce the products in Malaysia.

1
2. 0 BACKGROUND OF CASE

2.1 Company Profile

iRobot corporation is the leading global consumer robot company, design and builds
robots with innovative technology. iRobot products including the award winning Roomba and
bravaa family of sweeping and mopping. The company sold more than 200 million robots
worldwide
Table 1 Shows Company Profile

Company name Distributor company in Malaysia

iRobot Corporation Tuan Hoe Electrical (M) Sdn. Bhd

Year of Was founded in 1990 by Massachusetts Established 1966

establish Institute of Technology robotics.

Vision iRobot is dedicated to designing and We strive to be the top retailer of home
appliances in Melaka with range of
producing robot solutions with market-
finest products and good service as well
leading as optimal managing the organization

Key Person Colin Angle Mr. Tan Yit Yin

Alison Dean
Melaka
Headquarter Bedford, Massachusetts US
Branches: Seremban and Johor

Products Domestic Home appliances

Military
Philips
Brand Bravaa Electrolux
Dyson
Robotic floor sweeping and mopping Panasonic
(jet 240 and 380t)

Tuan Hoe Electrical (M) Sdn. Bhd selling home appliance brand under its
distribution. The increasing the demand of hassle-free products to ease the work of house due
to the changes of lifestyle in city. As busy mother and women’s are affordable use Bravaa
380t. To take this opportunity, Tuan Hoe Electrical would suggested to import and be the sole
distributor of iRobot Bravaa 380t robotic floor sweeping and mopping in Malaysia market.

2
2.2 Industry Profile

Home sweeping and mopping falls under the category of home electric appliances.
Home robotic sweeping and mopping is very new in Malaysia due the other brand mostly
sold robotic vacuum cleaner. It is not commonly used by Malaysians but other countries like
Japan, Korea, US and Europe widely develop their markets and peoples there are
continuously using in order to make their daily routine easier.

Electrolux is the first company introduced robotic technology into market. The
company develop robotic vacuum cleaner as the first products followed by mopping. After
that, in 2001 the British technology company Dyson built and demonstrate a robot vacuum as
the DC06. However, due to its high price, it was never released to the market. After the
success of robotic technology other companies also started to produce and develop their
robotic. An example, the Canadian bObsweep robotic that both mops and vacuum. Not only
that, well known company such as Infinuva, Rollibot, OEM, Philips has started to add in
robotic technology into their product line. Malaysia market slowly accepted robotic as
electric household appliances and houseware.

Figure 1 Shows Market volume growth of electric household appliances and housewares in
Malaysia from 2011 to 2018

The graph above displays the market demand growth of electric household appliances
and housewares in Malaysia from 2011 to 2013, with a forecast up to 2018. In 2013, market
demand of electric household appliances in Malaysia had increased by approximately 9.9% in
2018. The demand for electric household appliances remain constant among Malaysia
consumers.

3
3.0 FINDING OF CASE

3.1 GDP OF MALAYSIA

Gross domestic product know as GDP is the monetary value of all the finished goods
and services produced within a country in a specific time period. This is the best way to
measure a country’s economy. The final user of goods and services are divided into three
main groups which is household, business and the government. Below shows the formula to
calculate GDP:

GDP = C + I + G + (X – M)

C = Consumption, I = Investment, G = Government, X = Exports, I = Imports

We assume every component in GDP is constant. The import of Bravaa into Malaysia
will give good contribution to GDP. With the import of Bravaa 380t robotic floor sweeping
and mopping (dual cleaner system) product the net import will increase but the increase is not
very significant.

As joint venture business, this is will reflect good direct investment from Bravaa in
order to build a partnership with Malaysia. Because of this, the investment (I) show slightly
rise positive impact on GDP.

Besides that, choose and set right marketing and pricing strategy for Bravaa 380t, we
believe that this newly product would widely accept by the Malaysia customers especially
growing of busy working women’ who feel that they want to save time for sweeping and
moping home. It is predicted that customers spending consumption (C) will be stabilize the
GDP of Malaysia.

Since Bravaa robotic is new product and do not have any substantial amount of
demand yet. But there is still have potential for Bravaa to set up production plan in Malaysia
is the demand is increase. Not only that, there is have chances to serve the Asia Pacific region
in future, which is can provide more job opportunity in Malaysia.

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 Therefore, importing Bravaa 380t robotic floor sweeping and mop into Malaysia
market will lead to increase in C (consumption) and I (investment). The investment will rise
when important as many Bravaa robotic into Malaysia market.

3.2 FDI, Malaysia’s Policy (Home Country)

3.2.1 The motives (Malaysia)

According to International Federation of Robotic survey, the number of industrial

robots develop worldwide and it will increase to around 2.6 million units by 2019.
Domestic’s robots such as sweeping, mopping, vacuum cleaner, lawn mower reach 25 million
units and it also will be the top of the future shopping list of private customers.

I. Market factor

Increasing working women in Malaysia they managing work life balance. Based on
star news, number of working women’s keep increasing compare than in 2016 and 2015.
According departments of statistics Malaysia shows the workforce women’s are increase
54.3% in 2016. This is lead to more women’s willing to invest in order to use innovative
technology to reduce burden in managing house chores. There is number of robotic vacuum
has been market into Malaysia but robotic floor sweeping and mopping simply known as dual
cleaner system products is relatively very new in Malaysia market. This is best opportunity to
introduce an affordable brand to this segment of customer and penetrate the market.

Furthermore, monthly household consumption expenditure in Malaysia has improve

and increase from RM 3567 in 2014 to RM 4033 in 2016 which is grew at 6%. While,
household income have higher median to RM 5,228 in 2016 compare to RM 4,585 in 2014
with a growth rate 6.6%, in the urban are increased 6.4% from RM 5,156 in 2016
(Departmental of statistics Malaysia, 2016). It is also reported Malaysia consumer spending
expected to recover in year 2018. This statement shows the stabilization of consumer
household consumption expenditure.

5
 II. Economic factor

In term of economic motive which to increase investment by import the products into
Malaysia market from other countries. Bank Negara Malaysia has raised its forecast for
Malaysia’s economic growth in 2018 to 5.5%-6.0% from 5.0%-5.5% previous year. This is
show Malaysia economic continues to perform strongly. The domestic demand will continue
to drive growth of the economy. Continuous income and employment growth will sustain
sustainable household spending. Among the component of domestic demand, private
consumption will continue to be the biggest contributor and expected to sustain 5.6% despite
inflation. As we look at ringgit strengthening, we can see that Malaysia currency is now
getting performing well at RM4.08 against the US dollar compared with 1998 when it was at
RM 4.88. On the other hand, inflow of foreign direct investment (FDI) and trade activities are
also expected to improve in coming year.

3.3 Malaysia’s FDI Policy as Host (for import)

3.3.1 Promotion

Malaysia’s import and export policy is to encourage free trade, most of the
import/export goods does not require special approved licensed. Bilateral ties between the
United States and Malaysia have been both highly cooperative and publicly contentious.
Malaysia is a strong partner in many U.S. security and economic initiatives but domestic
Malaysia sensitivities. Malaysia and U.S. relationship to a comprehensive partnership
announces by former president Obama on April 2014 visit in Malaysia.

Moreover, our former Malaysia Prime Minister Najib Razak has spoken frequently
about building stronger relations with the United States. Former president Barack Obama has
been promote bilateral corporation in several areas and sttrong bilateral ties with major
economies between both countries. Multi-regional economic such as regional comprehensive
economic partnership and the comprehensive and progressive agreement for the Trans Pacific
Partnership are further expected to boost foreign investment in the country.

Malaysia former Prime Minister Datuk Seri Najib Razak has signed 9 Business to
Business (B2B) memorandum of understanding in various sector including construction,
agricultural, financial market, infrastructure and investment worth US$22.7 Billion (RM 31.2
Billion in Malaysia currency).

6
 U.S goods export to Malaysia grew 2% while services exports grew 94%. U.S goods
import to Malaysia in 2016 were $11.9 billion with the top import categories while the stock
United States was $1.3 billion in 2015. In 2016, Malaysia was 18th largest overall trading
partner. The United States is Malaysia’s third largest goods trading partner after China and
Singapore.

This showing Malaysia acceptance towards U.S products and investment are highly
welcomed after China and Singapore. As decided to joint venture business as a mode of entry,
Malaysia can be more accept and welcome iRobot Bravaa.

3.3.2 Restriction

There is no restriction by Malaysia government on company in the robotic home

appliance manufacturing to invest in Malaysia but as for joint venture. But Malaysia
government has announce recently there is strict restriction for automotive importation.
Government allows foreigner to hold up to 70% of the equity in a Malaysian company. The
remaining balance around 30% has to be allocated to Bumiputra (Malaysia of indigenous
origins).

3.4 FDI activity iRobot in Malaysia policy as host country

3.4.1 Motive

Market factor is one of the motive for iRobot Bravaa robotic sweeping and mopping
to import from U.S. into Malaysia market. According to the Malaysia investment
development authority (Mida), Malaysia has been approval were investment worth about
RM80 billion for 2018. Meanwhile, according to International Trade and Industry Minister
Datuk Seri Mustapa Mohamed during press conference, he said that Malaysia will contribute
in direct investment because our country economics fundamental are strong enough. This is
shows good sign to FDI import Bravaa floor sweeping and mopping in Malaysia since the
climate of economic is strong compare than previous years.

Furthermore, Due to increasing the working women in Malaysia climbed to 54.1%

from 46.8% in 2010 and their income is keep increasing. The changes of working women
lifestyle turn into busy and this scenario make cleaning become a time consuming and
exhausting work especially large home. Most of them would expect to save their time from

7
home chore. It will help to increase import Bravaa into Malaysia and it is also increase
demand for Bravaa 380t.

3.5 U.S. FDI policy as Home (For export)

3.5.1 Promotional

As mention previously, U.S-Malaysia has strong bilateral relationship has encourage

trading between one another to support economic growth. The stock of U.S. foreign direct
investment (FDI) in Malaysia was $140.0 billion in 2015. The relationship is further
strengthened when U.S initiated with comprehensive partnership after announce by former
president Barack Obama. Moreover, American government encourage the export of
American-made goods and expand it widely.

On the export side, the United States does not have an exercise tax or tariff on goods
sold to foreign customers. But, U.S businesses do pay income taxes on their exports through
multinational companies have means to mitigate those taxes.

Sales of robotics in the United States are increasing a result of the recovery of the
U.S. economy. Importing robots account to over 50% of industrial and home electrical
appliance robotics.

3.5.2 Restriction

In order to export, United States use U.S Customs and Border Protection (CBP) with
CBP policies and procedures prior to exporting the goods to other countries. The U.S CBP is
responsible for ensuring that goods existing the United States do so in accordance with all
applicable U.S law and regulation. Exports the products especially home appliance and
electrics goods may require a shipper’s export declaration (SED). Depending on the
investment amount and the type of industry, the authority of approval will be different
between U.S and Malaysia.

8
3.6 Pestle Analysis

Table 2 Shows Pestle analysis Home country-United States

Political Factor
Opportunity Threat

People
United States does not have an exercise
tax or tariff on goods sold to foreign
customers

United States use U.S Customs and

Border Protection (CBP) with the policies
and procedures prior to exporting the
goods to other countries
USA withdraw from TPP

Technology

Table 3 Shows Pestle Analysis Home country-Malaysia

Political Factor
Opportunity Threat

People
Process Fiscal policy-Malaysia’s import and export
policy is to encourage free trade, most of the
import/export goods does not require special
approved licensed

Has strong bilateral relationship has encourage

trading between one another
Technology

9
 Economic Factor
Opportunity Threat

People
Process Bank Negara Malaysia has raised its forecast for
Malaysia’s economic growth in 2018 to 5.5%-
6.0% from 5.0%-5.5% previous year

Increasing working women’s (wives and parents

mother) have better household income and
increase

Malaysia target raise per capita income to at least

US$15,000 by 2020, 2016 USD9,096 (The star
online)

Malaysia currency is now getting performing well

at RM4.08 against the US dollar compared with
1998 when it was at RM 4.88

Consumer Sentiments Index (CSI) improving

however still below 100-points optimism
threshold, consumer still cautious with spending
(MIER)
Technology

Social Factor
Opportunity Threat

People Malaysia population is projected to increase to

41.5 million by 2014 (Department of Statistics
Malaysia)

Process
Malaysia shows the workforce women’s are
increase 54.1% in 2018

Changes of lifestyle into busy lifestyle

Consumers are getting more demanding, hence

expectation towards product against pricing is
crucial

10
Technology More families especially women’s are willing to
invest in easy to use technology to reduce their
burden in managing house chore
Technology Factor
Opportunity Threat

People
Process

Technology The navigation technology use robotic make

peoples work easier

Lack of technology in Malaysia to manufacturing

robotic

Legal Factor

Opportunity Threat

People

Process Products will be tested by SIRIM for safety, label

will be issued upon test approval and approved
electrical appliances or equipment are required to
be affixed with safety labels before being sold in
market to peoples
Any implementation or manufacturing of
electrical appliances or equipment required to
have Certificate of Approval from Malaysia
Energy Commission
Technology

Environmental Factor

Opportunity Threat

People

Process Malaysia increase focusing on ecological or

environmentally friendly products
Technology

11
3.7 Competitive Analysis

3.7.1 Porter Five Forces

Figure 2 Shows Porter’s Five Forces

Barrier to entry Low

Substitute High
Buyer power High
Competitive rivalry High
Supplier power High

12
3.7.2 BCG Matrix

High

M
a IROBOT BRAVAA 380t
r
k
e
t
g
r
o
w
t
h

Low

High Low
Market share

Figure 3 Shows BCG Matrix For iRobot Bravaa 380t

The diagram above shows market structure of iRobot Bravaa 380t floor sweeping and
mopping. The position of Bravaa 380t located in the star quadrant which is high market
growth and high market share. The market structure of Brava 380t is oligopoly. Since iRobot
Bravaa 380t fall under oligopoly need to constantly produce innovative products. Even
though there is few key player but the industry have to fight with direct competitors.

13
3.7.3 Direct competitor Analysis (iLife V7 Pro)

The close and direct competitor for iRobot Bravaa 380t is iLife V7 pro from China. Both robotic companies produce similar products but with
different functions. Table below shows the strength and weakness of the iLIFE V7 pro.

Table 4 Shows Direct Competitor Analysis

Strength Weakness

People People

Process Process
o Leading in market specially in Malaysia o Many customers did not recognize the brand
market
o iLife V7 pro has average above 6 to 7 o The robot does not as efficient as Xiaomi Mi robot,
customer rating in most of online shopping Roborock and iRobot Bravaa 380t
such as Lazada and Amozon.com o Does not have enough marketing communication
o The robot has enough power to sweep a strategy to reach the brand to customers
carpet and can make bare floor clean with
the mopping function

Technology Technology
o Success in launching dual function such as o Mopping navigation has not improved over the iLife
sweep and mop V7 pro

14
 Capacity Strategy

People People

Process Process
o Set up iLife Malaysia online shop o Heavy promotional method
o To participate in Home Fair in Malaysia (e.g. Home
Living, HomeDeco, Perfect Living) to display and
promote iLife

o Invest in TV advertisement, and advertisement via

social media such as Facebook, YouTube etc
Technology Technology
o Dust box capacity is 0.3L, slightly bigger o Update to date the technology frequently

o Uses silent technology that limits noise

until 55 decibles

15
3.7.4 List of opportunities and threats of the host country (Malaysia)

Table 5 Shows List of Opportunities and Threat

External Analysis Opportunities Threats

Political factor 2 0

Economy Factor 4 1

Social 4 1

Technology factor 1 1

Legal factor 0 2

Environment factor 1 0

TOTAL 12 5

Based on table 5, totally there are 12 opportunities and 5 threats were identify from
external environment. iRobot should take opportunities to penetrate their market into
Malaysia.

16
 Opportunities Weight Rating Weighted
Score
1 Fiscal policy-Malaysia’s import and export policy is to 0.07 3 0.21
encourage free trade, most of the import/export goods
does not require special approved licensed

2 has strong bilateral relationship has encourage trading 0.08 2 0.16

between one another

3 Bank Negara Malaysia has raised its forecast for 0.08 3 0.24
Malaysia’s economic growth in 2018 to 5.5%-6.0% from
5.0%-5.5% previous year

4 Increasing working women’s (wives and parents mother) 0.10 4 0.44

have better household income and increase

5 Malaysia target raise per capita income to at least 0.08 3 0.24

US$15,000 by 2020, 2016 USD9,096 (The star online)

6 Malaysia currency is now getting performing well at 0.08 3 0.24

RM4.08 against the US dollar compared with 1998 when
it was at RM 4.88

7 More families especially women’s are willing to invest in 0.07 4 0.28

easy to use technology to reduce their burden in managing
house chore

8 Malaysia population is projected to increase to 41.5 0.04 3 0.12

million by 2014 (Department of Statistics Malaysia)

9 Malaysia shows the workforce women’s are increase 0.07 4 0.28

54.3% in 2018

10 Changes of lifestyle into busy lifestyle 0.07 4 0.28

11 The navigation technology use robotic make peoples work 0.06 4 0.24
easier

12 Malaysia increase focusing on ecological or 0.05 3 0.15

environmentally friendly products

3.8 External Factor Evaluation Matrix (EFE)

Table 6 Shows EFE Matrix

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No Threats Weight Rating Weighted
Score

1 Consumers are getting more demanding, hence 0.03 1 0.03

expectation towards product against pricing is crucial

2 Lack of technology in Malaysia to manufacturing 0.03 2 0.06

robotic

3 Products will be tested by SIRIM for safety, label will 0.04 2 0.08
be issued upon test approval and approved electrical
appliances or equipment are required to be affixed with
safety labels before being sold in market to peoples

4 Any implementation or manufacturing of electrical 0.03 1 0.03

appliances or equipment required to have Certificate of
Approval from Malaysia Energy Commission

5 Consumer Sentiments Index (CSI) improving however 0.02 2 0.04

still below 100-points optimism threshold, consumer
still cautious with spending (MIER)

Total EFE Score 1.00 3.12

The table 6 above shows the external factor evaluation (EFE) for iRobot. The score
has shown as 3.12 which is means above average (midpoint) of 2.5. However, they need to
take more advantage from external opportunity and responses to those threat which make
them irrelevant in future.

18
 3.9 SWOT Analysis

Table 7 Shows SWOT Analysis for iRobot Bravaa 380t

Strength Weakness

People People
o Good consumers awareness

Process Process
o iRobot is the pioneer in the robotic o Appointed only 1 exclusive distributor in Malaysia
sweeping and mopping industry o Store location means not accessible to mass market
o iRobot especially Bravaa 380t is the best o lack of advertisement in Malaysia
well-known name in the robot sweeping and
mopping (dual cleaner system) market
o iRobot improve global retail merchandising
through retail environment and consumer
purchase experience
o More affordable robotic dual cleaning
process with navigation

Technology Technology
o iRobot bravaa 380t committed to fostering
invention, discovery and technological
exploration in the pursuit of product and
valuable robot product for the home
o iRobot as the leader through continuous
improvement and innovation on advanced
performance, connectivity and technology

Opportunity Threat
19
People People
o Consumer are adopted with busy working o Consumers are getting more demanding, hence
lifestyle expectation towards product against pricing is
crucial

Process Process
o Demand are getting increase as by increase o Any importation or manufacturing of electrical
working women’s in Malaysia appliances or equipment required to have Certificate
approximately 54% of Approval from Malaysia Energy Commission
o Increase consumer disposable income o Product will be tested by SIRIM for safety feature,
label will be issue upon test approval and approved
o Malaysia population is projected to increase electrical appliances or equipment required to be
to 41.5 million by 2014 (Department of affixed with safety labels before being sold to public
Statistics Malaysia) o Government pay attention immensely on
environmental friendly rule
o More families especially women’s are
willing to invest in easy to use technology o Consumer Sentiments Index (CSI) improving
to reduce their burden in managing house however still below 100-points optimism threshold,
chore consumer still cautious with spending (MIER)

Technology Technology
o Increase number of online user in
Malaysia

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3.10 Internal Factor Evaluation (IFE Matrix)

Table 8 Shows IFE Matrix

Strengths Weight Rating Weighted

Score
1 iRobot is the pioneer in the robotic sweeping and 0.10 4 0.40
mopping industry

2 iRobot especially Bravaa 380t is the best well-known 0.11 4 0.44

name in the robot sweeping and mopping (dual)
market

3 iRobot improve global retail merchandising through 0.12 3 0.36

retail environment and consumer purchase experience

4 iRobot bravaa 380t committed to fostering invention, 0.11 4 0.44

discovery and technological exploration in the pursuit
of product and valuable robot product for the home

5 iRobot as the leader through continuous improvement 0.13 4 0.52

and innovation on advanced performance,
connectivity and technology

6 Good consumer awareness 0.09 3 0.27

7 More affordable robotic dual cleaning process with 0.10 4 0.40
navigation

Weakness Weight Rating Weighted

Score
1 Appointed only 1 exclusive distributor in Malaysia 0.07 1 0.07

2 Store location means not accessible to mass market 0.09 2 0.18

3 lack of advertisement 0.08 2 0.16

Total IFE Score 1.00 3.24

The result of IFE matrix shows iRobot score was above average score which is 3.24.
There is definitely have room for improvement in their marketing, operation and capitalize on
their internal strength.

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3.11 Internal-External Analysis

IFE
4 3 2 1

Bravaa 380t
3
EFE

Figure 4 Shows IE Matrix

Growth & Build

- Market penetration AGGRESSIVE
- Market development
- Product development

Hold & Maintain

- Market penetration CONSERVATIVE
- Product development

Harvest or Divest
- Retrenchment DEFENSIVE
- Divestiture

Based on the Internal External Evaluation scores, iRobot bravaa is located at the
yellow quadrant, which should be managed best with the Growth & Build strategy- to bring
bravaa 380t to penetrate into Malaysia domestic market. It recommends iRobot Bravaa 380t
should implement intensive and integrative. Intensive strategies are product development,
market development and market penetration while integrative strategy is backwards,
horizontalintegration.

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3.12 TOWS Matrix

Table 9 Shows TOWS Matrix

Strengths Weaknesses
S1. iRobot is the pioneer in the W1. Appointed only 1
robotic sweeping and mopping exclusive distributor in
industry Malaysia

S2. iRobot especially Bravaa 380t W2. Store location means not
is the best well-known name in the accessible to mass market
robot sweeping and mopping
market simply known as dual
function

S3. iRobot improve global retail W3.Lack of advertisement in

merchandising through retail Malaysia
environment and consumer
purchase experience

S4. iRobot bravaa 380t committed

to fostering invention, discovery
and technological exploration in
the pursuit of product and valuable
robot product for the home

S5. iRobot as the leader through

continuous improvement and
innovation on advanced
performance, connectivity and
technology

S6. Good consumer awareness

S7. More affordable robotic dual

cleaning process with navigation

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Opportunities SO WO
O1. Consumer are adopted Product development Market development
with busy working lifestyle S7, O1, W1,W2,O2,O3

Navigation system will make iRobot can expand and sell

work more easily especially for their products in popular city
busy working women’s without especially Kuala Lumpur, Johor
assisted or control by themselves. or Penang in order to customer
easily grab bravaa 380t since
working women increase in
Malaysia approximately 54%

Marketing communication Marketing strategy

O2. Demand are getting S1,S2,O4 W3, O1
increase as by increase
working women’s in
Malaysia approximately Use online advertisement to The company should have
54% advertise bravaa 380t in order to heavy promotional strategy
reach the information to the right about bravaa 380t and persuade
customers regarding benefits of women’s to consume the
dual cleaner system since the products since they are
online user keep increase in adopted with busy lifestyle
Malaysia.

O3. Increase consumer

disposable income

O4. Increase number of

online user in Malaysia

O5. Malaysia population is

projected to increase to
41.5 million by 2014
(Department of Statistics
Malaysia)

O6. More families

especially women’s are
willing to invest in easy to
use technology to reduce
their burden in managing
house chore

24
Threats ST WT
T1. Consumers are getting Pricing Strategy Distribution channel
more demanding, hence W1,T3
expectation towards S3,S4,T3
product against pricing is
iRobot should appoint as many
crucial iRobot should give reasonable distributor in Malaysia and sell
pricing such as such best value with low price as consumers
price since the demanding for expectation
robotic dual cleaner system keep
increasing

Product Development Environmental Friendly

T2. Any importation or S5,T4 W3, T4
manufacturing of electrical
appliances or equipment
required to have Certificate iRobotic should give extra and Participate in Home Fair in
of Approval from Malaysia more attention on R&D peoples in Malaysia such as home living,
Energy Commission order to came out with new idea home deco, perfect living to
by protecting the environment display and promote bravaa
380t to let consumer get know
the products is friendly user
and importantly environmental
friendly products

T3. Product will be tested

by SIRIM for safety
feature, label will be issue
upon test approval and
approved electrical
appliances or equipment
required to be affixed with
safety labels before being
sold to public

T4. Government pay

attention immensely on
environmental friendly
method

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4.0 ANALYSIS OF CASE

4.1 Financial consideration

4.1.1 Forecasting of currency rate (PPP)

The concept of purchasing power parity (PPP) allows Malaysia Company to estimate
what is the exchange rate between two currencies (Dollar =U.S and MYR =Malaysia) where
the same product in different countries should have identical prices. By forecasting the PPP,
the suggested distributor Tuan Hoe Electrical (M) Sdn. Bhd is able to do a better pricing
strategy for the iRobot bravaa 380t to remain it competitiveness in the market.

The calculation for PPP is as below:

Expected Malaysia’s rate of inflation for the next 12 months = infMas = 3.1%

Expected U.S rate of inflation for the next 12 months = infU.S = 2.5%

The current spot rate for Ringgit Malaysia = RM 3.90

n= number of years

Then the spot pound 2 years from now is equal to:

PPP spot rate = Current Spot Rate × (1+infUS)n / (1+ infMas)n)

Spot rate in 2 years = RM 3.90 (1+ 0.025)² / (1+ 0.031)²

Spot rate in 2 years = RM 3.90 (0.9884)

Spot rate in 2 years = RM3.85

The PPP shows, after 2 years the future currency of Ringgit Malaysia is expected RM
3.85. The different in current spot rate indicate Ringgit is not much appreciated and future
currency rate is did not shows much differences and its only spotted differences with 0.05.
There is still have positive return for bravaa 380t robotic dual cleaning system import into
Malaysia after the changes in exchanges rate putting into consideration. However, it is will
little bit threat for Malaysia distributor for bravaa 380t as the price in Malaysia will increase
in current situation compare to future due to changes of exchange rate. Therefore, import
sales into Malaysia might affect. However, the distributor from Malaysia Tuan Hoe Electrical

26
Sdn Bhd is able to do a better pricing positioning in the local market and it is good
opportunity for Tuan Hoe to import bravaa 380t robotic sweeping and mopping from United
States.

4.1.2 Pro-forma income statement

Table 10 Shows Calculation for Income Statement

Year 1 (RM) Year 2 (RM)

Sales / Revenue 9,898,600 11,348,490

COGS 8,319,000 9,517,840

Gross revenue 1,576,600 1,830,650

(-) Royalty 179,872 204,888

Expenses

Advertising & Promotion 800,000 800,000

Admin Expenses 140,000 160,000

Warehouse 14,000 16,000

Net Profit 442,728 649,762

The proforma income statement for importing and selling bravaa 380t robotic
sweeping and mopping cleaner in Malaysia is conducted 2 years. The FOB price to
distributor in Malaysia (Tuan Hoe Electrical (M) Sdn. Bhd) is RM 1,980 for each unit and
targeted to sell 10,000 units and 12,450 units in the first and second year respectively via at
least 20 outlets. Cost of goods sold is RM 1,851 per unit. As the brand iRobot Bravaa 380t
relatively very new in Malaysia, advertising such as tradition and nontraditional method, ATL
& BLT marketing, promotions and roadshow are heavily invested with budgets at RM

27
800,000 respectively for the first two years. The other expenses is the admin expenses such as
office equipment, additional staffs hire for the handling of bravaa 380t. Besides that,
warehouse will be expected to store new stock. Tuan Hoe as distributor of bravaa 380 robotic
sweeping and mopping cleaner is estimated to enjoy the earning of RM 442,728 and RM
649,762 in the first and second year respectively.

4.1.3 IRR and ROI

Table 11Shows Calculation for IRR and ROI

IRR Calculation RM

Capital -1,200,000

Earning Year 1 442,728

Earning Year 2 649,762

IRR 1%

*Assumption: All earnings for the 2 years to be returned to

invested capital

The table above shows IRR and ROI assumptions. The initial capital is estimated at
RM 1,200,000 to cover the first year of expenses. Thus, forecast all earning to be returned 1%
from the invested capital within 2 years. Therefore, the importing bravaa 380t robotic
sweeping and mopping cleaner business is recommended.

28
4.1.4 NPV

Table 12 Shows Calculation for NPV

NPV Calculation RM

Capital -1,200,000

Earning Year 1 442,728

Earning Year 2 649,762

NPV -$ 342,219

*Rate of capital 12%

The net present value of importing bravaa is at RM 342,219 for the initial capital in
importing bravaa 380t at a capital rate of 12%. It indicates that the value of the revenue is
lesser than the value of the cost, where the import is expected to lose money. However, as
NPV relies heavily upon multiple assumptions and estimates, by just judging its value might
not be accurate. Based on the forecasted demand and positive IRR, NVP will gain positive in
third years and onwards.

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5.0 RECOMMENDATION

5.1 Types of importing

Direct importing bravaa 380t robotic sweeping and mopping cleaner into Malaysia is
most appropriate. As stated previously, Tuan Hoe Electrical (M) Sdn.Bhd will be direct
distributor to Malaysia consumers. Tuan Hoe can select direct importing as a mode of entry to
bring bravaa 380t robotic sweeping and mopping dual cleaner into Malaysia and will be the
sole distributor under the agreement with iRobot corporation U.S. This mode is chosen as it
gives Tuan Hoe as local distributor to have greater control over the distribution channel,
operation, marketing and sales of product into local market. Meanwhile, also being support
by iRobot in the technical aspect.

The reason chosen Tuan Hoe as direct importing into Malaysia due the firm has
experience in the home appliance field and has extensive network across Malaysia. This is
will give huge benefits and advantages if Tuan Hoe were to control the iRobot business
specifically bravaa 380t in Malaysia. Furthermore, since their extensive knowledge in the
local market will definitely provide positive impact to iRobot brand and its products.

Direct importation into Malaysia give more advantage due to add costs are lower
rather than choose import directly to manufacturing and importantly customer pay less.
Moreover local distributor has experience at both sales and marketing and understanding very
well how best to sell to the local customers. They also well-known about the tactic to convey
the message to the right customers at the right time.

5.2 Contractual entry mode

The contractual entry mode will through licensing method due to the technological
aspect involved in robotic sweeping and mopping cleaner system. iRobot corporation can
give licensing to Tuan Hoe as a sole distributor in Malaysia by granting the rights to use
iRobot property such trademark, brand name, logo and copyrights as an entry strategy. In
fact, licensing is a comparatively inexpensive way in order to gain presence in the market
without having to invest much in FDI. Furthermore, as sole distributor Tuan Hoe could pay
2% of royalty (covers trademarks, training and consultation) of revenue to iRobot. Through
this, Tuan Hoe will get right’s to promote iRobot products and learn know-how of robotic
cleaner for future plan to set up production plan to cater ASEAN region. In simple word,
quickly can expand without much risk and large capital investment. Furthermore, through

30
licensing method the distributor also obtain extra income for technical know-how and
services.

5.3 Investment entry mode

Whole owned investment with the both companies iRobot and Toe Hoe as sole
distributor setting up a new production plant is way too early and risky for companies.
Therefore, joint venture entry mode is most appropriate to pursue equity. Joint venture is an
effective as an entry mode because the common objective is technology sharing and joint
product development between U.S (Home County) and Malaysia (Host country). In this case,
iRobot corporation will contribute technology, product and training to Tuan Hoe as
distributor in Malaysia and in return Tuan Hoe contribute the use of its extensive distribution
network, capital, knowledge of the local culture and language and create synergy between the
two companies.

5.4 Import financing

In import business, it is crucial to decides on the financing method because receiving

payment in the international business can be complicated. In this case, the distributor in the
Malaysia can do finance trade through Letter of Credit (LC). Letter of credit is a letter issued
by a bank of seller (U.S Bank) and to another bank as buyer (Malaysia) to serve as a
guarantee for payments from the buyer to the seller upon shipment receipt. Letter of Credit is
more important and secure for Tuan Hoe since the firm deal with iRobot Corporation at the
first time because no payment obligation arises until the product has been shipped or
delivered at the designated Malaysia port as promised.

Tuan Hoe as distributor will sync and integrate iRobot ordering system to their current
system in order to ease ordering process and monitoring. The quotation and pro forma
invoice will not require since the price of bravaa 380t robotic sweeping and mopping cleaner
system will be predetermined in advance. For more secure placing order by Tuan Hoe, the
purchasing or marketing department have to request the appoint bank (Standard Charter) to
issue letter of credit to iRobot’s appoint bank (Standard Charter). Importantly, the Malaysia
distributor need to get Malaysia Energy Commission (MEC) Certificate of Approval and
SIRIM approval on the safety of the product. Distributor need to follow the rules and
regulation that set by Malaysia Government when import products from other countries and
sell into Malaysia market in order to avoid losses.

31
5.5 FTA of Home and Host Country

Bilateral ties between the United States and Malaysia long have been highly
cooperative and publicly contentious. According star online, Malaysia is committed towards
strengthening ad deepening bilateral trade relation with United States. The U.S is Malaysia’s
third largest investor trading partner as well as the country’s largest investor in the electrical
and electronical sector. U.S. goods exports to Malaysia in 2016 were $11.9 billion, with the
top export categories including electrical. It is good idea and worth import Bravaa 380t
robotic dual cleaner system into Malaysia since the expectation of electrical sector high.

6.0 CONCLUSION

This study focusing on iRobot Bravaa 380t robotic sweeping and mopping cleaner
import from United States into Malaysia. In the finding catch up the EFE and IFE are shows
above average which is 3.12 (EFE) and 3.24 (IFE). The SWOT analysis shows that iRobot
has strong internal strength to compete competitor’s and have room for improvement if adopt
current external environment opportunities. The TOWS matrix that have be done in analysis
section, proved that iRobot bravaa 380t can penetrate their market broadly by using
suggestion that suggested in TOWS matrix.

The analysis shows, the forecasting the financial consideration of iRobot bravaa 380t.
The current and future currency does not have much differences and it is only spot
differences approximately 0.05. There is positive return for iRobot bravaa 380t robotic dual
system cleaner export from U.S into Malaysia.

As recommendation for the importation iRobot Bravaa 380t from United States into
Malaysia, Tuan Hoe Electrical (M) Sdn. Bhd can be as sole distributor for Malaysia
consumers. The reason chosen Tuan Hoe as direct importing into Malaysia due the firm has
experience in the home appliance field and has extensive network across Malaysia. This is
will give huge benefits and advantage if Tuan Hoe were to control the iRobot business
specifically bravaa 380t. Furthermore, since their extensive knowledge in the local market
will definitely provide positive impact to iRobot brand and its products

32
 References

Departmental of statistics Malaysia, (2016). Retrieved from

https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=124&bul_id=
NHZ3QmE0cUhkcllqRlY4RXRpbWtIUT09&menu_id=U3VPMldoYUxzVzFaYmN
kWXZteGduZz09

United Stated Trade Representative. Retrieved from https://ustr.gov/countries-

regions/southeast-asia-pacific/malaysia

Zainal Abidin, I. S. (2017, December 29). New Strait Times. Retrieved from 2018 a good year
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https://www.nst.com.my/opinion/columnists/2017/12/319399/2018-good-year-
malaysian-economy

Malaysia: Background and U.S. Relations. (2018, May ). Retrieved from

https://www.everycrsreport.com/reports/R43505.html

Malaysia’s Investment Outlook for 2018. (2018, January 12). Retrieved from Malaysia
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outlook-2018.html

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