Intensity Of Competitive Rivalry Marketing Essay

Intensity Of Competitive Rivalry selling EssayFraser Neave Holding Bhd has 3 business portfolios which be light inebriety, dairies point of intersection and place. The soft discombobulate piece has developed its own brands such as 100Plus and Seasons. Dairies product di trance is producing seraphic condensed draw, evaporated draw, pasteurised milk, UHT milk, juice and ice cream. FN properties is to unlock the prize of land acquired and held by the club.There argon external purlieual figures will affect the company to achieve their perpetration which catogorized under PEST section. An economic factor affected the company harvest-tide which subsidy of sugar is being removed(p) by government.Porters 5 forces used to evaluate the industry competitive environment. There are little terror of impudently entrants, threat of substitute products, bar elaborationing power of purchasers, bargaining power of suppliers and Rivalry among real firm. 100Plus has developed stro ng brand and gain 88% of merchandise share which posted entry barrier to newborn entrant. Soft drink and Dairies products are very less degree of differentiation with competitors. Therefore, buyers are al menialed to liken product especially price is factor buyers considered the most. Those suppliers who sleek over getting sugar subsidy have immenseer power because many companies are looking for reject sugar price. In addition, there are few big players in boozing and dairy farm farm product in the industry, the intensity of competition is very strong.GE exemplar was applied to evaluate collectiveness of different business portfolios. Economic was used as industry attractiveness factor and brand strength as business strength. FN properties doesnt have strong brand among the property industry. But the company has strong brand such as 100Plus, Season and likewise sweetened condensed milk in Malaysia. However, the economic factor wasnt always favourable to all division.Eff iciency and Effectiveness in utilizing liabilities in funding cogitate assets of business portfolio is evaluated by symmetry psychoanalysis. The company portfolios have graduate(prenominal) current ratio because the liabilities have reduced. And 100Plus has gain over 88% of market share in the isotonic drink segment. entranceFraser Neave holding Bhd. (FN) was in corporald at year 1883 when founders John Fraser and David Chalmers Neave formed a company named Singapore Straits Aerated Water Company in Singapore. a couple of(prenominal) years later, FN was consolidated and enter the food beverage industry. FN has its own vision to become the leading total beverage company in Malaysia and the region and their mission is to be a world-class multinational enterprise providing superior returns to their shareholders, small value for their guests and a rewarding career for their employees.FN Company is one of the Malaysia well know beverage company which the famous product is the iso tonic drinks 100plus launched at year 1984. FN produce wide take off of beverage that can be classified as soft drinks, dairies, non-carbonated beverages as well as separate business property. They were launching the sweetened condensed filled milk in year 1973, and the acquisition of Nestls keep milk business in Thailand and Malaysia in year 2007. Other than that FN high quality canned milk was also gain excellent reputation in Malaysia. This product is mammothly use as beverage mixers in coffee, tea and chocolate drinks and now canned milk has successfully to export this product to more than than than than than 20 countries around the world. In addition, the halal certification passings strong reassurance to Muslim customers in the growing Halal markets in the Middle East and Africa.FN Company was awarded The Readers last Trusted Brand from year 2005 to 2008, Media Magazine Top 1000 Asian Brands 2007 and so on. It proves that their customer was confident when victimisat ion their products since they are concern about their wellness and safety quality. FN Company was continuously improve their quality and brands to challenges the marketplace and to become the leader.FN Company is also well-known company that caring about the social environment and working environment. They implemented and executed various environmental stewardship and launched numerous recycling campaigns in schools to inculcate trustworthy environmental habits among young people and thus, create sensation on the importance of recycling. FN Company also set-up a RM1.2 trillion funds named Chairmans Award to encourage educational excellence and to identify high-achievers among children of FN Groups employees. FN Company has accomplished a safety record of zero accident (no loss time accident) accumulated from 1 February 2007 to 21 September 2009 with a total 962 days or 2.3 million working hours. Zero environmental compliance status has achieved.FN Company has three main businesse s which are soft drinks, dairy products and property.(Fn.com.my, About us)Soft DrinkFN Beverages Marketing Sdn Bhd represent Malaysias largest soft drinks manufacturer and distributor. There are four manufacturing plants nationwide, including its state of the art facility at its headquarters in Shah Alam, Selangor. Their products are 100PLUS, FN Fun Flavours, FN Originals, SEASONS, crosspatch kitty and Fruit Tree.The company operated in 1936 when FN Ltd wined the franchise of Coca-Cola in Singapore and Malaysia. Later that FN Coca-Cola (M) Sdn Bhd (FNCC) was born and license agreement would end in September 2011, the company renamed as FNBM. In Malaysia, 100PLUS is a outstanding local anesthetic success story, cover 90 perpenny share of the isotonic drinks market and also the No.1 ready to drink (RTD) brand in Malaysia. For non-carbonated portfolio, SEASONS is currently No.2 in Asian drinks category while Fruit Tree continue to grow within the juice segment.The soft drinks divis ion perform well during the festive periods and continue to pursue world class excellence in distribution so that the products are readily available with decoct on market execution. Over the years, FNBM has used few strategic measures that emphasize on its brand presence by invested in advertising and promotions, product availableness and operational efficiency. In April 2010, FNBM was selected to become distributor of Red Bull energy drinks in Malaysia and has improved FNBMs beverage portfolio. (Fn.com.my, Soft drink)Dairies ProductsFN Dairies (Malaysia) Sdn Bhd has produced variety of products such as sweetened condensed milk, evaporated milk, pasteurised milk, UHT milk, juice and ice cream.In 1959, FNs dairy business had constructed Southeast Asias first sweetened condensed milk plant in Petaling Jaya while joint venture with Beautrice Foods of Chicago, USA. The stock Company from US joined the participatorship in 1965 to form Premier Milk as the manufacturing arm.The Group co ntinually pursues product innovation and invention, more products adding into portfolio and subsequently that the Group had a successful journey into ice cream business. In 1989, the Group purchased the interests of Beatrice Foods and re scoreingd its dairy operations under FN Dairies (Malaysia) Sdn Bhd. It was expanded further with the acquisition of Magnolia in 1995. In 1998, the Group started its pasteurised business.Today, FNs dairies division has a vision of being Malaysias leading dairy and food marketer with world class products, standards and capabilities forming part and part of its offerings. In 2011, FN Dairies (Malaysia) disposed off its entire ice cream business to FN Creameries (M) Sdn Bhd. (Fn.com.my, Dairies Product)PropertyFN Properties is one of business unit of Fraser Neave Holdings Berhad, the purpose is to further add in value of land acquired and held by the company by developing into real estate property. The very first property developed at Jalan Foss by FN is the causality FN factory land that has been developed into for commercial use which called Fraser pipeline Park. The development is leaded by FNs underlying philosophy which is being socially responsible corporate citizen. The key value of the business unit lies within the emphasizing of creating advance(a) design with high class application towards the development, leaving its occupant a musical note of the modern and future alike features.FN Properties is expected to launch more properties in the future as its properties units are being recognized to be fill with innovative design and product development that particularly focus on FN brand name feature. In the far future, the division will focus on redeveloping of experienceing Premier Milk plant into a landmark in Petaling Jaya.(Fn.com.my, Property)PESTMission To be a world-class multinational enterprise providing superior returns to our shareholders, excellent value for our customers and a rewarding career for our emp loyees.Vision To become the leading total beverage company in Malaysia and the region.Every company has their mission and vision statement served as overall purpose of business. The mission and vision statement above are set by FN. There are external environmental issues have or will affect FN to achieve their mission. These external environmental issues are being categorized according to PEST(EL) model. PEST(EL) model is to analyze the external environment issues of company. It categorized environment issues into political, economic, social, technological, ecological and legal influences.EconomicImproving growth prospect of Malaysia, Thailand and the region brings more income to FN as is signals economy are in good condition and peoples are willing to spend hence will increase gross revenue in that particular region. The growth prospects include rising of Malaysia GDP in year 2010 that is approximately 10% analyze to 4.5% in 2009 that rise from some major factor of manufacturing i ndustry yield with a double digit growth of 16.9% in year 2010. ASEAN countries are growing quick in their economy thus putting FN a favourable factor in growing of improvements.(Annual field 2009 pg 013) FN has built up positive consumer sentiment to their product. For example 100PLUS, isotonic drink that is specialized for sportsmen to retain the metabolism. It is a concept well-built that it is voted number 1 isotonic drinks in Malaysia since its introduction in 1983. That well-built positive sentiment brings others drinks of FN to be well marketable. It is the consumer sentiment to the products intensifyd the get ahead world power factor of FN towards other competitor thus is at an wages in the market. (Annual Report 2010 pg 043 044)PoliticalGovernment had put initiative to get on spending of consumer with new economic model (NEM), with this model being pursue, Malaysia economic boost as consumer purchasing power increases and are advised to spend. FN will get benefit by provide goods to be sold to the market hence boosting sales.FN products are all Halal hence are entitled for Halal Hub Tax Incentive. The incentive offered had decreased FN some percentage of tax li ability to the government. It made FN more profitable compare to those companies which does not qualified for the incentive. (Annual Report 2011 pg 028)Government has removed subsidy of fuel and sugar has put an cushion to FN as most of the FN spunk businesses needed large amount of sugar which is dairies and soft drink business. The withdrawal of sugar subsidy lower the overall profit of the FN although there is a large improve a sales but the profit doesnt show much improvement as the sugar equal increases. Withdrawals of fuel subsidy did also impact on FN as the appeal of their internal and external distribution cost increases thus reduces profit. (Annual Report 2011 pg 037)TechnologicalIn the beginning of 2011, FN introduced new product, Ice Mountain and it has faster share gain among bottler waters player which schematic 5% market share in Malaysia. (Annual Report 2011 pg 035)FN launched new beverage Zesta across Malaysia in October 2011.Zesta has remarkably great tasting berry soda flavored soda. It contents the Guarana tropical berries that originate from Amazon, South America. In addition, Guarana tropical berries invigorate the body and mind. Zesta is an extension of our already large array of FN beverages, a beverage that was initiated to complement our existing range of FN brands, creating a transition vehicle for our growing band of consumers, said Dato Ng Jui Sia, chief executive officer of Fraser Neave Holdings Bhd. FN believes that Zesta is the illustration of growing trends for beverage enhanced soda. (Zesta 2011)EnvironmentalSichuan Earthquake of May 2008 has caused the raw material cost increase and companys profit is affected. subjective disaster is beyond expectation and control of the company. improvement before interest and tax in 200 8 grew only 5%. This environmental factor has affected company to achieve their mission. Natural disaster would serve as obstacle that FN provide superior returns to shareholders. (Annual Report 2008 pg 052)Porters 5 forcesToday, Fraser Neave Holdings Bhd (FN) has extended business at more than 20 countries worldwide and established itself as a regional player. So that, FN need use Porters five forces model to analysis and understanding the nature of the competitive environment. FN has a lot of benefits from using Porters five forces model. They can ensure that management considers a wide range of potential impacts when devising strategy. They allow the division of the work in environmental analysis and make decision in time. In addition, Porters five forces also help to develop effective strategies to raise FN profitability, power, and competitive position in an industry. Porters five forces is divided up into threat of entry, intensity of competitive rivalry, threat of substitut e product, bargaining power of buyer and bargaining power of suppliers.Threat of entryThreat of entry is new entrants into market will bring extra capacity and intensify competition. The strength of the threat from new entrants will depend upon the strength of the barriers to entry and the likely repartee of existing competition to a new entrant. FN produce two new soft drink FN Clearly Citrus and Zesta were launched in soft drink market at year 2011. Zesta and FN Clearly Citrus was getting customer support and the new produces also have a higher(prenominal) demand from the buyer. Zesta sales would attract other competitors enter into tsoda market, it will be posted a threat on FN market sales. (Zesta 2011)Bargaining power of supplierBargaining power of suppliers rendering with the stronger power of suppliers in an industry the more difficult it is for firms within that sector to make a profit. It is because suppliers can determine the terms and conditions on which business is con ducted. near of the products are contented sugar, sugar is essential for output. Malaysian Government has removed sugar subsidies on selective basis and subsidy for Dairies Malaysia was removed. Increased of sugar cost and global commodity cost forced price of Sweetened Condensed Milk increased by 25%. However, sugar subsidy was removed on selective basis which means FN can look for suppliers whose sugar subsidies werent removed. In addition, competitors will also await for new suppliers and it whitethorn not easy to reduce cost as low as before.Apart from that, FN may have to concern about any switching cost for current suppliers.Bargaining power of buyerBargaining power of buyer sense of the powerful buyer can force price cuts and quality improvement. The government removed sugar subsidy, FN material cost increased and affected the product selling price increased. In 2011, Sweetened Condensed Milk has increased 25% of the price which cause the demand reduced. Revenue and profit was decline during the year. Buyers also have full information about the soft drink and dairy product market. They should know which company product cheaper, more health and outstrip quality. FN need to retain the customer by improving product quality and introduce new product. Buyers always have different choice for their beverage and dairy product. Apart from that, same type of competitors product will be display nearby companys products. For example, Jusco will be placing same type of products together which allowed buyers to search easily. There is low switching cost for buyers. Beside, degree of product differentiation is low which customer may feel all brands are similar. This threat is more difficult to control, because FN management need to concentrate on changing buyers preference and also maximize the shareholders wealth.Threat of substitute productPorters 5 forces have indicated that the threat of substitute product is the other firms within the industry has offers simi lar product with similar benefits for the customer. This threat may affects the competitive environment of the company and influence our ability to achieve profitability.On FN Magnolia have offers Pasteurised Milk and Sterilised Milk. The range of the customers is children and adults. The Pasteurised Fresh Milk can be enjoyed chilled or warm, plain or mixed with other foods or beverages and they innovate into Lo-Fat Hi-Cal Milk provide less fat and more healthier of the Fresh Milk for our body. However, Marigold has offers HL Milk is low-fat milk No.1 in Malaysia. HL Milk has perfect balance of nutrients for everyone in the family and it consists high in calcium and protein, low in fat and lactose and fortified with 9 essential vitamins to appendix healthier lifestyle. Marigold HL Milk is first choice for the customers who are caring health conscious. FN should innovation their milk product provide more healthy to attract or retain consumer choices.Another competitor is Dutch Lady has provided a Dutch Lady Milk powder for satisfy customer needs who want mix it with other coffee or tea favour and it has a rich and creamy taste and allowed to dilute in piquant or cold water easily. Furthermore, Dutch Lady also has provided different formulations to cater to children of different ages to promote their brain development and healthy growth. Therefore, most of the spawn would choose Dutch Lady Milk products of their children rather than choose FN milk products.FN SEASONS offers soft drink products are leaders in countrys most comprehensive range of consumer, catering to every occasion. The Soya range provides protein nourishment while the Chrysanthemum and Grass Jelly provides healthier refreshment with less sugar let FN SEASONS become best quality and healthy drinks. However, they are having lesser favors for the customer choose. YEOS have more favors, such as Lychee drink, Sugarcane drink, Bandung Rose drink, coconut juice, soursop drink and guava drink for th e customer to choice. Hence, consumers who are Sugarcane drink lover may change its option to YEOS products.Although there are many competitors for isotonic drink, 100Plus still able to gain over 88% of the market share. Company has done a lot promotion for 100Plus which the reason 100Plus is successfully gain more than half of the market share. (Annual Report 2010 pg 036)Intensity of competitive rivalryIntensity of competitive rivalry among competitors in the industry strives to companies to gain competitive advantage over the rivals and drives the profit of the rivals firm to zero. The company can gains the competitive advantage by several ways, such as pricing policy, improving the products differentiation with other and exploiting relationships with suppliers. If can gain more competitive advantage over competitors can increase the profitability of the company.FN only provided soft drink products and dairy products, appears less competitive advantage compare with others. Nowada ys, people more have health conscious when they buying products may choice to buy the products which consists more nutrition. In food and beverage industry also have many company has provide more diet product to satisfied the requirements of the different customers.Dutch Lady Low Fat Yoghurt is a healthy snack and it will enhance the absorption of nutrients, ensuring digestive system stays healthy. It contains Vitamin A, C and E, calcium and Active Live Cultures.In Addition, the Marigold have offer the Yogurt and cultured milk Vitagen which have consists nutrition products for the body. The Vitagen has billions of live probiotic cultures to helps maintain a healthy digestive system. Probiotic cultures in VITAGEN can withstand bile and blistering stomach juices and reach the intestines alive to fight harmful bacteria in the intestines. Furthermore, the Yoghurt contains live and active cultures help digestion and promote a healthy digestive system and calcium for the development of strong bones and teeth. Marigold also has offers Jelly is a great-tasting double-layered jelly that is filled with fresh fruits. Its cool and refreshing taste makes it great for everyone in the family and contains no preservatives and is a healthy alternative to fruits after a hearty meal. This makes Marigold become Malaysias first and only pasteurised Jelly.Beside, sugar subsidy was removed on selective basis which posted unfair competitive environment to FN. And it also created very intense pricing war for soft drink and dairy product. In order to protect the revenue while still retain consumer loyalty, the price of sweetened condensed milk increase 25%.This all is key reasons that the consumer may change favors to this type of products. To gain competitive advantage, FN should provide more nutrition products for the customers have more choose.Porters national competitive advantage diamondPorters diamond model suggests that there are inherent reasons why some nations and industrie s within nations are more competitive than others on a global scale. The argument is that the national lieu base of an organisation provides organisations with specific factors which will potentially create competitive advantages on a global scale. (Michael Porter 1990)Porters diamond model consist of four conditions of national advantage which are factor conditions, demand conditions, related and supporting industries and firm strategy, structure and rivalry.Factor conditionsFactor condition is about important elements that exist in a company which lead to national competitive advantage. It can be country specific or industry specific.FN Dairies had constructed plant in Pulau Indah cost RM350 million and will be completed within the second half of 2011. The new plant promotes cutting edge green technology which would have big gains in water, energy and environmental conservation. With existence of this plant, FN Dairies could be on the top list of worlds largest producers of cann ed milk. (Annual Report 2011 pg 41)An increase in production line is an advantage of the company. FN had launched a new RM45 million polyethylene terephthalate (PET) monoblock production line which is the first in Asia Pacific. This able to done all the things in only one production line, for example blow bottles, fill and pack all carbonate soft drinks products. (Annual Report 2010 pg 32)FN has the latest innovation and technology that bring advantages to them. With this latest technology, FN can enhance its operations by keep improve production lines. FN can produce more products in effective and efficient way. In addition, the new machineries increase as the production lines increases. The warehouse management system has implemented to make operation work run smoothly. Besides, the introduction of new sales forecasting tools helps in manufacturing, if sales forecast is low, the manufacturer will produce less stock. (Annual Report 2010 pg 36)Supply chain act as an important role in a business. Without supply, production would not be carried out. Improvement in supply chain lead to high efficiency of production and logistic by upgrade the systems. FN introduce higher level of operational automation and inventory management to ensure the manufacturing process has no error. Besides, the product quality management has to make sure that the products are in acceptable quality and safety measures are enhanced in order the product would not harm people. (Annual Report 2010 pg 36)Demand conditionsSecondly, the demand conditions state that if the local market for a product is larger and more demanding at home than in foreign markets, local firms potentially put more emphasis on improvements than foreign companies. This will potentially increase the global competitiveness of local exporting companies.FN non-carbonated portfolio has slightly increased from 25.4 per cent to 28 per cent in soft drinks business. This represent there is a growing demand for drinks. During the year, FN included fruit teas and juices to its range of soft drinks, and launch new drink called Zesta recently catering consumers of this segment. The ability to innovate, differentiate and manufacture new product lines will bring advantages such as gain more market share. (Zesta 2011)FN Fruit Tree released five new flavours in bottle form which are orange, apple, lychee, blackcurrant and mango. As the demand increases, Fruit Tree has becoming one of the fastest growing categories in Malaysia. The new flavours are the extension to the Fruit Tree cans range and the research shows that consumer preference toward these flavours compared to other brand in the market. (Annual Report 2010 pg 36)FN Holding Berhad has built a new warehouse in Kuching which triple larger than previous warehouse capacity to improve the quality of service and make sure delivery to customers is on time. Furthermore, it utilised progress warehousing technology such as high selective racking, super flat flo oring and Very Narrow Aisleway (VNA) trucks. (Annual Report 2009 pg 38)Related and supporting industriesThirdly, the related and supporting industries mean that when local supporting industries and suppliers are competitive, home country companies will potentially get more cost efficient and receive more innovative products.In February 2010, 100PLUS signed a partnership agreement with AirAsia Berhad, officially sell 100PLUS on AirAsia flights which depart from Malaysia. AirAsia Berhad is a Malaysia top airlines company, being a partner of AirAsia Berhad has a real competitive advantage for FN. This agreement is a big step for division to extend business offshore. Passenger dehydration happened frequently in air travel, with 100PLUS the passenger can get over the dehydration. Support from AirAsia is like an advertisement effect, whenever there is a flight, there is an appearance of 100PLUS. (Annual Report 2010 pg 038)Firm strategy, structure and rivalryStructure and management system can affect competitiveness. FN is running beverage and dairies business in addition to food business too. FN buy 23.08 per cent share in Cocoaland Holdings Berhad. Cocoaland is a major snack food manufacturer in Malaysia. FN is diversifying the business risk to various subsidiaries. FN develop the food business to supplement beverage and dairies business. As the Malaysia grow into high income economy country, the consumption of middle income will increase and food business will be benefited. (Annual Report 2010 pg 9)GE model3 portfolio businessPropertyDairy productSoft drinkGE business matrixIndustry Attractiveness- Economic FactorBusiness Strength-Brand StrengthHighMediumLowHighInvestment/ GrowthSoft drinkSelective GrowthSelectivityMediumDairy productSelective GrowthSelectivityHarvest/ forayLowSelectivityProperty businessHarvest/DivestHarvest/DivestFNs business has divided into 3 portfolio and that are Soft Drinks, Dairy Products and Properties. First of all, we will use the envir onmental factor and brand strength as the industry attractiveness factors and business factors benchmark.Soft DrinksFNs pump soft drinks business portfolio will be classified at the classes of selective growth. The company soft drinks 100plus and Zesta are favourite in Malaysia and have helped the company in bringing certain level of stable income.100plus as the companys core product have promoting an active lifestyle and healthy living to consumer. Many events have been run to promote 100plus as it is isotonic drink of choice at major sporting events. 100plus is present at top sports events such as Piala Malaysia Final 2011 100plus Tunku Abdul Razak Cup, KL Marathon 2011 and so on to continue building prestigious images of 100plus to consumers. Profit of division has been growing from year 2007 to 2011. However, sugar subsidy withdrawn by Malaysian Government has major impact on price of sugar. The division has lesser growth rate for year 2011. In addition, global commodity cost has increased which is unfavorable economic factor. Soft Drink division has very high brand strength but economic factors are not really favourable to the division.Dairy ProductsFNs dairy products will be classified at the classes of selectivity. Companys dairy products have included sweetened condensed milk, evaporated milk, pasteurised milk, UHT milk, juices and ice cream. Dairy Products also suffered from withdrawal of sugar subsidy and global commodity price increased in 2011. FNs dairy products business has classified at selectivity, with medium level of attractiveness and medium business strength on the dairy products.Although the product Milo is popular in Malaysia, Milo is not owned by FN, it was franchised. This product reduces business strength as it is not the only major player in the market. The dairy products will seem less attractive to the investors to consider investing because the deliberate of the milk market is very costly. In addition, the cost for hire workers a nd the cost to obtain technology for producing the dairy products are costly for subsequent production of dairy products. Moreover, the dairy products license also difficult to be approved by the government. mod entrant will find difficult to entry, because the market has been controlled and played by a few major competitors. New entrant will find obstacle to enter to the market as these factors created entry barriers.PropertiesFNs property business is unlocking the value of land holding by the company. The economic factor of the company placed at medium level because volatile commodity and financial market. The company is more concentrated in the soft drink products and has no initiative to promote companys property to the public, not many people knows that FN has already entered into properties. FNs property business is non-comparable with beverage business that seems to be so successful and FNs property business strength is low in this industry. The property business that has h igh profitability in the industry will attract more investors to invest. The government encourage removing of old building and build more new business park in order to bring in more prosperity to our country. Moreover, our property business is at growth breaker point because it is newly introduced into the industry, hence it does not have strong business strength on the property business.Ratio analysis and Key performance IndicatorsRevenue of continuing operation continues to grow from 2009 to 2010 by 11.2% and 2010 to 2011 7.6%. In 2010, the revenue is able to grow better than 2011 due to improved economic conditions. Malaysia Government has