The method to analysis the external environment of Malaysia fragrances market, we can use PESTEL. By using the PESTEL, the perfume firms will know what environment factors are affecting their organization. In the following is showing the 6 types of PESTEL may affect the perfume firms:

Political

Taxation Policy ( the abolished of import duties on the 300 goods which preferred by tourists and local)

In 15 October 2010, the government announce proposed to be abolished the import duties at 5 % to 30% on the 300 goods such as handbags, golf balls, perfumes to attract more tourist consume in Malaysia showed in the Malaysia Budget 2011.

That means in forecast, consumer will purchase more perfume due to the abolished of duties, demand of perfume will also rise, the equilibrium of price will decrease and the equilibrium of quantity will increase.

The Employees Provident Fund (EPF) dividends rate of 4.5% to 5.65% from 2008 to 2009 year. (Employees Provident Fund )

While the EPF dividends rate increase, the net salary of employees will reduce, the employees’ purchasing power will also decrease that will lead to the supply earn less profit.

Economic

Unemployment rate had been fluctuating decreased from 3.8% January 2009 to 3.3% July 2010 by Principal Statistics of Labour Force, Malaysia August 2010.

When the unemployment rates decrease 0.5%, that mean majority of people can find a job and earning money, thus they wouldn’t face the financial problems. In this situation, they will increase consumption of individual, increase in the quantity demand of luxury product and Malaysia fragrances market also will increase profit.

From January 2009 to July 2010, there were downward trend, from 3.9% to 1.9%, in the inflation rate .( Trading economics.com; Department of Statistics Malaysia)

Due to that situation the price of product will fall, the luxury goods and services for consumption will increase hence an increase in the money supply.

In Malaysia the Interest Rate from January to November 2010 is 2.00% to 2.75%. (Bank Negara Malaysia)

When increase the rate of interest would attract more people to save money into the bank, thus people will spend less consumption of luxury product such as perfume, luxury watch, and so on. In that situation, it will affect the profit of supply become less.

Social

Population demographics in January 2008- July 2010 increase 2.58% from 27.54 million to 28.25 million ( Malaysia, Economic Planning Unit)

In July 2010 the total population of male is more than women that will affect the sales of the Malaysia fragrances market. When male are more than women, the demands of perfume reduce because the majority of buyer is women.

Lifestyle changes

According to the human way of life began to change the way people shopping mentality will also change. For example, in previous times, people like to buy dolls and clothes to friends or relative on festival but nowadays people will prefer to buy perfume and luxury product as a gift give to other because of this the sales of fragrances increased in recently.