Porters National Competitive Advantage Diamond

Porters National Competitive Advantage DiamondFraser Neave holding Bhd. was incorporated at form 1883 when founders John Fraser and David Chalmers Neave formed a company named capital of Singapore Straits Aerated Water Company in Singapore. Few course of studys later, FN was consolidated and enter the aliment beverage effort. FN has its own vision to become the tether total beverage company in Malaysia and the region and their mission is to be a world-class multi guinea pig enterprise providing superior returns to their sh areholders, excellent value for their clients and a rewarding career for their employees.FN Company is sensation of the Malaysia tumefy k instantlyn beverage company which the famous return is the isotonic pledges 100plus delegateed at yr 1984. FN make grow massive verify of beverage that feces be classified as soft confuses, dairies, non-carbonated beverages as well as separate line of merchandise property. They were launching the sweetened conde nsed change milk in year 1973, and the acquisition of Nestls keep milk descent in Thailand and Malaysia in year 2007. Other than that FN high quality bumned milk was in like manner gain excellent reputation in Malaysia. This mathematical growth is largely use as beverage mixers in coffee tree, tea and chocolate drinks and now canned milk has successfully to export this product to to a greater extent than 20 countries around the world. In addition, the halal certification offers strong reassurance to Muslim customers in the festering Halal markets in the Middle East and Africa.FN Company was awarded The Readers Digest Trusted Brand from year 2005 to 2008, Media Magazine Top 1000 Asiatic Brands 2007 and so on. It proves that their customer was confident when using their products since they are concern about their health and safety quality. FN Company was continuously improve their quality and brands to challenges the marketplace and to become the leader.FN Company is as we ll well-known company that caring about the social environment and lap uping environment. They implemented and executed various environmental stewardship and launched numerous recycling campaigns in schools to teach good environmental habits among young people and thus, create awareness on the importance of recycling. FN Company similarly set-up a RM1.2 million funds named Chairmans Award to lift educational excellence and to recognize high-achievers among children of FN Groups employees. FN Company has achieved a safety record of zero accident (no loss time accident) accumulated from 1 February 2007 to 21 kinsfolk 2009 with a total 962 days or 2.3 million working(a) hours. In terms of its environmental compliance incident and achieved zero environmental compliance status. gadflyMission To be a world-class multinational enterprise providing superior returns to our plowshareholders, excellent value for our customers and a rewarding career for our employees.Vision To become the hint total beverage company in Malaysia and the region.Every company has their mission and vision rehearsal served as overall purpose of business. The mission and vision statement above are set by FN. There are foreign environmental issues have or provide affect FN to achieve their mission. These external environmental issues are being categorized according to PEST(EL) good example. 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 process prospect of Malaysia, Thailand and the region brings to a greater extent than income to FN as is signals frugality are in good condition and peoples are willing to spend hence will outgrowth sales in that particular region. The growth prospects include rising of Malaysia GDP in year 2010 that is approximately 10% compare to 4.5% in 2009 that rise from whatever study f cropor of man ufacturing industry production 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 profits. FN has built up positive consumer sentiment to their product. For example 100PLUS, isotonic drink that is specialise 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 some others drinks of FN to be well marketable. It is the consumer sentiment to the products compound the profitability factor of FN towards other competitor thus is at an reward in the market.PoliticalGovernment had put initiative to boost spending of consumer with fresh economic model (NEM), with this model being pursue, Malaysia economic boost as consumer purchasing magnate developments and are advised to spend. FN will get benefit by provide goods to be sold to the market hence b oosting sales.FN products are all Halal hence are entitled for Halal Hub Tax Incentive. The inducing offered had lessen FN some percentage of tax liability to the government. It made FN much than profitable compare to those companies which does non qualified for the incentive.Government has taken back some incentive in year 2009, the withdrawal of subsidy of fuel and colewort has put an jolt to FN as most of the FN core businesses requested large amount of sugar which is dairies and soft drink business. The withdrawal of sugar subsidy debase the overall profit of the FN although there is a large improve a sales but the profit doesnt show much improvement as the sugar price increases. Withdrawals of fuel did also impact on FN as the exist of their internal and external distribution cost increases thus constrains profit.TechnologicalIn the beginning of 2011, FN introduced newfangled product, Ice Mountain and it has faster share gain among bottler waters player which est ablish 5% market share in Malaysia.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, CEO of Fraser Neave belongingss Bhd. FN believes that Zesta is the illustration of growing trends for beverage enhanced soda. (Zesta 2011)EnvironmentalSichuan Earthquake of whitethorn 2008 has caused the raw strong cost increase and companys profit is affected. Natural disaster is beyond expectation and control of the company. Profit before interest and tax in 2008 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.Porters 5 give-up the ghostingnesssToday, 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 escort that management considers a wide range of potentiality impacts when devising strategy. They allow the segment of the work in environmental analysis and manufacture decision in time. Not only that, Porters five force also developing effective strategies to raise FN profitability, berth, and competitive federal agency in an industry. Porters five forces is divided into threat of entry, intensity of competitive rivalry, threat of substitute product, bargaining power of buyer and bargaining power of suppliers.Threat o f 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 response 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 are getting customer support and the new produces also have a higher(prenominal) demand from the buyer. Zesta sales would create other competitor have entered the soda market, it will make a threat for the FN affect the market sales. Therefore, FN should defensively competitor who are entered the soda market to creating barriers that new entrants to the market find tricky to overcome. This can en positive(predicate) the Zesta sales would not affect and ensure the maximize shareholders wealth. FN able to occupy in the Malaysia soda market a very important role.FN have 90% product are u sing sugar to produce, so that sugars fees occupy more of the material cost. Early government distribution sugar subsidy to sugar supplier that FN can use a inflict price to purchases sugar. This can save a lot of unnecessary expenses, so FN can use a lower price to sell them soft drink and dairy product. Government removes all sugar subsidies since year 2011 until now. The serious increase in sugar prices had a major impact, together with the ball-shaped merchandise cost increase, and led to an inevitable 25 per cent price increase of Sweetened Condensed milk. This change of government budget makes FN cladding a great crisis and bargaining power of supplier.Bargaining power of supplierBargaining power of suppliers definition with the stronger power of suppliers in an industry the more unwieldy 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 conducted. When government removes the sugar subsi dies, FN need to research and evaluation flow sugar supplier what price they giving and analysis the inflation whether FN can accepted. FN should do more research to find another sugar supplier who can provide lower cost to them. FN also facing sugar quality are not same compare with current supplier when choosing a lower cost provided from another supplier. This would make the customer not satisfaction with FN soft drink and dairy product. If FN continue purchase with the current supplier, they should spend more cost with sugar. Then FN would increase selling price to cover back the losses. FN customer would favour another substitute product.Bargaining power of buyerNext, bargaining power of buyer also is a serious problem facing by FN. Bargaining power of buyer sense of the powerful buyer can force price cuts and quality improvement. The government remove sugar subsidy, FN material cost will increase and affect the product selling price to increase. But FN need to minginess of buyer so they cannot random to adjust the selling prince. Buyer also has full information about the soft drink and dairy product market. They should know which company product cheaper, more health and best quality. FN need to hold the customer so they would always improve quality of product and riddance new product to attract customers attention. Measure FN is a best choice and original choice from customer. This threat is more difficult to control, because FN management need to concentration of buyer and also need to 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 similar 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 draw and Sterilised draw. The range of the customers is children and adult s. The Pasteurised Fresh draw 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 parallelism of nutrients for everyone in the family and it consists high in atomic number 20 and protein, low in fat and lactose and fortified with 9 essential vitamins to supplement healthier lifestyle. Marigold HL Milk is first choice for the customers who are caring health conscious. FN should innovation their milk product provide more well-grounded to attract or retain consumer choices. other competitor is Dutch Lady has provided a Dutch Lady Milk powder for satisfy customer needs who want mix it with other favorites coffee or tea and it has a rich and creamy taste and can mixes easily in hot or cold water. Furthermore, Dutch Lady also has provided different formulations t o cater to children of different ages to promote their brain development and healthy growth. Therefore, most of the mother 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 temporary hookup the Chrysanthemum and Grass Jelly provides healthier refreshment with less sugar let FN SEASONS become best quality and healthy drinks. However, they less 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 the customer to choice. Thence, consumers who are Sugarcane drink fan may change its option to YEOS products.Intensity of competitive rivalryIntensity of competitive rivalry among competitors in the industry try to strive the competitive advantage over the rivals and drive s the profit of the rivals firm to zero. The company can gains the competitive advantage by several ways, such as changing the pricing, improving the products differentiation with other and exploiting relationships with suppliers. If can gain more competitive advantage rather than other competitor can increase the profitability of the company.FN only have provided soft drink products and dairy products, appears less competitive advantage compare with others. Nowadays, 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. want the 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 represent probiotic cultures to help maintain a healthy digestive system. Probiotic cultures in VITAGEN can withstand bile and acidic stomach juices and reach the intestines alive to fight harmful bacteria in the intestines. Furthermore, the Yoghurt contains live and active cultureshelp 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 make full 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.This all is key reason outs 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 industries within nations are more competitive than others on a global scale. The argument is that the national home 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. reckon conditionsFirstly, discuss about factor conditions. Factor 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 costs RM350 million and will be completed within the second half(prenominal) o f 2011. The new plant promotes cutting edge green technology which would have huge gains in water, energy and environmental conservation. With existence of this plant, FN Dairies could be on the run list of worlds largest producers of canned milk.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.FN has the modish innovation and technology that bring advantage to them. With this latest technology, FN can enhance its operations by continuing 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 introduct ion of new sales forecasting tools helps in manufacturing, if sales forecast is low, the manufacturer will produce less stock.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 energy 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 make sure that the products are in acceptable quality and safety measures are enhanced in order the product would not harm people.Demand conditionsSecondly, the demand conditions state that if the local anaesthetic 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 ha s slightly increase 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.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.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. Furth ermore, it utilised advanced warehousing technology such as high selective racking, super flat flooring and Very nail Aisleway (VNA) trucks.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 carrousel 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 manner of 100PLUS.Firm strategy, struc ture and rivalryLastly, which are firm strategy, structure and rivalry. Structure 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 of infection 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.GE model3 portfolio businessPropertyDairy productSoft drinkGE business hyaloplasmIndustry Attractiveness- Market growth rateBusiness Strength-Brand StrengthHighMediumLowHighInvestment/ offshootSoft drinkSelective GrowthSelectivityMediumSelective GrowthDairy productSelectivityHarvest/DivestProperty businessLowSelectivityHarvest/DivestHarvest/DivestOur business has divided into 3 portfolio and that are Soft Drinks, Dairy crossway and Property. First of all we use the market growth rate as our industry engagingness factors and brand strength as our business factors.Soft DrinksOur main soft drinks business portfolio will be classified at the classes of selective growth. Our company soft drink like 100plus and Zesta was familiar in Malaysia our brand has already helped our company bring certain level of stable income. Our business from year 2007 until 2011 has seems growth constantly that at year 2007 increase 9%,2008 11%, 2009 11%,2010 19% and 2011 grow 12%. At year 2011 the growth has slow down it is because the subsidy of sugar had removed by the government. The impact on FN is their production cost is increase and cause their profitability turn. The attractive of the beverage market will crepuscle and potential competitor will have more consideration to decide whether to or not to enter into soft drink industry. Moreover, Sichuans earthquake causes the prices of the aluminum increase. That mean one of the main bear material has been affect again. Industry attractive will place at the medium due to the problem of sugar subsidy and the aluminum prices arise.Dairy ProductOur dairy product will classified at the classes of selectivity. Our company dairy products have included sweetened condensed milk, evaporated milk, pasteurised milk, UHT milk, juice and ice cream. In year 2007, our revenue on dairy products has significant increase by 102% compare with year 2006 and subsequent increase 38% in year 2008. In year 2009 the revenue of the dairy product decline by 6%, but increase 5% in year 2010. Revenue has constant in year 2011 compare with year 2010. Our dairy product has classified at selectivity, with medium level of attractiveness and medium business strength on the dairy product. Although the product Milo are popular in the Malaysia, but Milo is not own by our company, we just a franchise on it. This will reduce our business st rength due to our dairy product not a major player in the market. The dairy product will less attractive for investors consider investing because the deliberate the milk market will very costly. In addition, the cost of technical for hire staff and the cost of technology for produce the dairy product also costly for subsequent production cost. Moreover, the dairy product license also difficult to get approval by the government. hot entrant will find difficult to entry, because the market has been controlled and play by a few big competitor. These create barriers for the new entrant find difficult to entry.PropertyOur property business had generated more revenue in year 2007 compare with the year 2006 by 6%. Revenue for the year 2008 had decline by 24% compare to year 2007. In subsequent two year had increase by 65% and 20% in year 2009 and 2010, but decline again in year 2011. Our property business have classified at selectivity with high level of attractiveness and low business st rength. Our company more concentrate in the soft drink product and has no hard to promote our property to the public, not many people know that our business has already enter into it. Our property business has not like our beverage business seemed so successful and our business strength in this industry is low. The property business has high profitability in this industry will attract more investor to entry. Our government encourage removing the old building and build more new business park in order to make our country more prosperity. Moreover, our property business is at growth stage because just introduce into industry so do not have strong business strength on the property business.Ratio analysisRevenue 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 introduced New Economic Model 2010 helps to boost spending in Malaysia.Pr ofit before interest and tax growth rate also decline from 2010 to 2011, 31% to 14%. The result was affected because of particular division wasnt doing well in 2011.Soft DrinkSoft Drink division has current ratio of 1.77 and 1.99 for year 2010 and 2011. It indicated improvement in managing assets and liabilities.The growth momentum of soft drink division has continued. The division has been doing well over the years. It contributes the largest profit to FN. In 2010, the soft drink division was able to generate revenue 21% more compared to last year. Soft drink was delivering higher people especially during festive periods such as Chinese New Year. In addition, sales volume of 100Plus Seasons have grew more than 20% and reflected strong consumption and growing popularity of the brands. 100Plus generated over 88% of market share in isotonic category and Seasons generated 27% market share of Asian drink category. While Badminton competition Thomas Cup was around, 100PLUS Thomas Cup 1 Million Support Campaign was held for Malaysian to show their support for Malaysian badminton team. Apart from that, the division served as distributor of flushed Bull energy drinks in Malaysia and commenced from 1 April 2010. Soft drink volume was able to benefit from Red Bull which contributed 2.2% helps to improve the divisions beverage portfolio. (Annual Report 2010)Soft drink division grew only 16% from 2010 to 2011. The growth rate is eroded due to the reason of Malaysian government has withdrawn the subsidy of sugar and fuel. Therefore, raw material cost has increased and causes the profit margin diminished. Coca-Cola business exits the FN in September 2011 which also the reason of profit margin diminished. However, 100Plus and Seasons still generated volume growth 10% and 14% to benefits the division. 100Plus and Seasons are the leading brands in the division and continue to enhance the divisions beverage portfolio. 100Plus was being promoted continuously as 100PLUS New Th ematic Launch in July 2011. Beside, FN SEASONS Nourishing You Malaysia National Consumer Contest held between March and April 2011 to create consumers awareness that Season as healthy brand. The division also has introduced new product, Ice Mountain in Malaysia and it is able to establish 5% market share. The division has enhanced the market share of Red Bull in energy drinks from 40% to 46.8%. It is because RED BULL ENERGIZING MALAYSIA contest has conducted and grand prize is Proton Saga. In addition, division also has nonionic 1million Bottle Giveaway consumer promotion. (Annual 2011)Dairies MalaysiaDairies Malaysia division has current ratio 3.07 and 4.14 for year 2010 and 2011. The division has quite high current ratio for both years and year 2011 has higher current ratio because liabilities of division have been reduced.Overall sales volume has improved 7% from 2009 to 2010. The ongoing improvement on global economy had a positive impact on consumer sentiment and consumption. Profit before interest and tax of the division has improvement of 8.4% for the reason that division has enjoyed lower raw material cost during first half of the year. However, the positive effect is reversed by raw material cost was higher during second half of the year. Therefore, an increase in price of sweetened condensed and evaporated milk which causes demand diminished. Dairies Malaysia is having over 62% market share and condensed milk brand is able to strengthen its number 1 position with 24% market share. (Annual Report 2010)Dairies Malaysia doesnt doing well in 2011 because the sales volume has declined 15.2%. More than that, revenue and profit before interest tax also decline 6.6% and 45.8%. Malaysian Government has withdrawn subsidy of sugar which cause the price of sugar increased. Beside, global commodity costs have increased together with impact from sugar cost which cause price of Sweetened Condensed Milk increased by 25%. Price of Sweetened Condensed Milk created in flation pressures to consumers and caused the sales volume declined. Apart from that, the sugar subsidy withdrawn on selective basis by government and create unfair competitive environment to Sweetened Condensed Milk manufacturers. The division was still able to getting 60% market share for both Sweetened Condensed Milk and Evaporated Milk markets. (Annual Report 2011)Dairies ThailandCurrent ratio of division in year 2010 and 2011 are 3.35 and 2.87. The current ratio is considered relatively high but it has decreased because liabilities of division have increased.The sales volume of division has bighearted 10.6% but revenue only grew 6.6% in year 2010. However, profit before interest and tax has increased 16.6%. Rojana Industrial Estate was operated in December 2009, working as the biggest canned milk manufacturing plant in the region. In July 2010, Dairies Thailand relocated to its Rojana Warehouse Distribution total, placed 300 meters nearby to its Rojana dairy plant. Distributi on Centre is located to run into the present capacity requirement of the Rojana Plant. It is able to upkeep business growth and future expansion for operations. The division was generating substantial savings of pane cost. gillyflower and TEA POT brands continued to contribute excellent performance to canned milk portfolio. Carnation Sweetened Beverage Creamer (SBC) and Carnation Evaporated Milk (EVAP) have sales growth of over 20 per cent. Carnation Sweetened Beverage Creamer captured market share of 29 per cent while Carnation Evaporated Milk grew three percentage points to record 73 per cent market share. In addition, Bear Brand Sterilized Milk was market leader which captured 98% market share in sterilized milk segment. (Annual Report 2010)