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Venture into the Global Muslim Market

Venture into the Global Muslim Market

LEE Dong-Hun

Nov. 25, 2010

Transcript

Welcome to our video program. I’m Dong-Hun Lee, Research Fellow from the Management Strategy department.

The Islamic world has long been veiled to outsiders, but it is now emerging as a massive market. Although the world’s 1.6 billion Muslims live on multiple continents, together they form a massive market based on their religious unity. The attraction of the Islamic market can be found both in its distinctive qualities and its quantitative appeal.

The quantitative appeal of the market lies in the Islamic world’s sizeable and rapidly growing population. The fast population growth can be explained by three factors: Islamic culture values family and children, allowing polygamy in some cases. Many people are converting to the religion, and indeed the Muslim population is increasing fast in the West. As their number rises in Europe, the term “Eurabia” was coined, combining Europe and Arabia.

Professor Hans Blezinger at Universitat Munchen predicts Muslims will be 10% of the population of Europe by 2025.

From the quality aspect, the market includes many emerging economies which have abundant natural resources. The Middle East, Indonesia, Malaysia, and Russia are home to a large Muslim population.

Even better, they are generous spenders. Although Muslims are widely thought to practice an austere way of life, they do not necessarily live up to these preconceptions when it comes to spending money, because of their religious principle that they have the right to enjoy everything Allah has created.

Aside from basic necessities, Muslims do not hesitate to buy upscale mansions, fancy cars, or wedding items. It is easy to spread a trend by leveraging wasta.Arabic for connections.and group consciousness. Muslims tend to care about how they are viewed by others because they value social relationships and reputation. They also love to chat and men form social clubs called diwaniya to share ideas.

Muslim’s spending power is well reflected during Ramadan, which has become the biggest shopping season. Ramadan is a time for Muslims to fast and pray while the sun is out and to have meals and conversations with families and friends after sunset. But it has also become a period when companies can expect their biggest earnings thanks to the evening shopping spree.

So far, the Muslim market has had a high entrance barrier for overseas companies because of the religion’s unique features that distinguish the market from others. On the other hand, any companies that make the first move can capture vast business opportunities ahead of others. To do this, a detailed strategy is necessary since religion is a part of many aspects of life in Muslim society.

Then, here’s what you should know about the market.

First, fashion and clothing.

Traditionally, Muslim women have worn the hijab to represent religious identity, purity, and piety. Today, styles and colors of the veil have become more diverse and fashion- forward. Various makeup methods for the eyes, which are not covered by the hijab, are also popular among women.

There are other things you need to know.

Idol worship is forbidden in the Muslim culture, so depiction of a living creature is not allowed. This should be a major consideration in product design, packaging and advertisements. Instead of such depictions, geometric shapes and Arabic letters are used.

Green, white, red, black and gold are favored and represent Islam. Blue is not favored because it is the color of Israel. Extra caution is also advised for product displays using mannequins.

When launching its service in the Middle East in 2009, GALA Lab, a Korean online game developer company, changed character design, background music and deleted crosses and stars from its game content. As a result, the game ranks third in the local market.

Next is the beverages and food market.

In the Islamic market, it is essential to have a halal mark on the package, which means it is permissible to eat for Muslims. Since Islam considers food as something that enables the body to keep going in order to pray to Allah, halal and haram, or permitted and forbidden foods are strictly distinguished from each other.

Halal foods include beef, lamb, deer, camel and chicken that are slaughtered in the dhabiha way. Some sea foods, fruits, and vegetables are also allowed. In contrast, haram foods include non-dhabiha meat, pork, blood and alcoholic beverages. Since alcohol is prohibited, a rich coffee and tea culture has grown. As such, if you want to export to the Muslim market, you need to earn halal certification for the production factory as well as its ingredients.

Recognizing the potential of the Muslim market, Nestle has focused on the market to become a global leader in halal food. The company sees the AOA zone (Asia, Auceania and Africa) as the core market for its future growth, noticing that 30% of the population in the region is Muslim. Japanese fermented milk drink maker Yakult has also expanded into 11 Muslim countries by receiving Halal certification from Malaysia and Indonesia.

The strict standards for beverages and foods are also applied to medicine and cosmetics. Catering to the latest green consumption trend, the halal cosmetics market is growing as eco activists and vegetarians support the products.

Last but not least, finance.

Since Islamic law bans interest from lending, financing in the Islam culture must come through cash transactions. Islamic finance achieved relatively sound performance during the global financial crisis, capturing the eyes of the non-Islamic world. So far, Islamic finance has been focused on the Middle East and Malaysia, but is expanding into North Africa, Asia, Europe and North America.

In particular, Malaysia is emerging as an Islamic finance hub on the support of the government. In the West, the UK has a keen interest in nurturing Islamic finance. For instance HSBC Amanah, which provides exclusive services for Muslims, was named the best international Islamic bank by Euromoney magazine in February 2010. The bank provides exclusive financial services that are consistent with Muslim customers’ religious belief.

So far, we have looked at the vast opportunities provided by the Muslim market. Korean companies have not been actively engaged in business here due to cultural and physical distance. But they need to go for the market. Korean companies can begin by laying a foundation in Muslim South East Asia, since they already have a big presence there, and then venture further into the broader Muslim market.

Here’s one more tip. I think social media will have quite a strong influence in spreading brand image or product reviews throughout the younger population, particularly in Islamic culture, where night outs or entertainment activities are relatively rare, and people mostly spend their free time chatting with friends and families.

Thank you for watching. I’m Dong-Hun Lee.

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