Question
Discuss about the Market feasibility for the Business Teo Seng Capital Berhad.
Formulation of the justified strategic value is the key to achieve the organisational success. The ideologies presented by the business owners are sometimes not enough to deal with the potential competitors in this globalised world. Therefore, it is necessary to bring the innovative ideas and structure the work functionalities strategically to secure the competitive edge of the organisation (Shabudin, Mohtar and Lazim 2014). However, it is also necessary to identify the market feasibility to operate any specific business. The recognition of the market potentiality helps in undertaking the business decisions more relevantly. The study is thus focused on establishing the strategic business plan for Teo Seng Capital Berhad, the Poultry Farming Company, located in Malaysia. The report would present the analysis of the external and internal market for understanding the market feasibility for the business. The capability analysis of the company would also be presented in this study to understand the business potentiality.
Teo Seng Capital Berhad has captured the leading position as the egg producers in Malaysian market. The company takes the hands-on approaches in utilizing the professional production concept and highly-advanced technologies for supplying secure and high quality eggs to the customers. The mission of the company is
The major objective of the company is to promote the sustainable development and concentrate on the opportunities of cost effectiveness (teoseng.com.my 2017). Observing the current market status, the company is completely focused on the advanced strategic approaches that are fruitful enough to ensure growth. Achieving such purposes would be much beneficial in sustaining the competitive position in this industry.
PESTLE Analysis
The external market has the strong influence on the business entity. Depending on the external market feasibility, the business functionalities are structured. PESTLE analysis provides the adequate knowledge regarding the macro-environmental factors that are often used for scanning the environmental factors related to strategic management. The influence of the environmental components on the industry is discussed further:
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PESTLE Analysis |
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Political |
It is notable that Malaysia is the multi-party democracy country. The Barisan Nasional Party has been ruling over 25 years that signifies stability in the political system. Such political stability is quite opportune for the business survivals. However, on the contrary, the existence of the political corruptions is quite harmful for the business (Baluch et al. 2017). Especially, such political corruptions are a threat to the foreign businesses since it adds to the firms’ costs. Malaysia has scored 47 out of 180 countries in international ground in the corruption perception index. Therefore, Teo Seng Capital Berhad may face the significant barriers to strengthen the competitive ground |
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Economic |
The vibrant economic structure is the major attraction for the Malaysian business organisations. The economic growth has averaged almost 7% per year over the last 10 years. Accordingly, the growth in the customers’ incomes and demands are also noticeable (Zainol et al. 2014). The business locations in Malaysia are the idea place for engaging the international trades. The export businesses of the country contribute to almost 37% of the total GDP rate. Such benefits would be profitable for Teo Seng Capital Berhad to earn more profits. The economic opportunities are quite feasible for securing the competitive edge of the company. |
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Social |
The population in Malaysia is categorized into three groups, such as Chinese (30%), Malay (60%), and Indian (10%). The cultural diversity and the racial harmony have been much peaceful for the people. The mixture of the different religions is giving rise to the different religious festivals (Ariffin, Mohtar and Baluch 2015). The racial diversification is the positive aspect of Malaysia. Hence, Teo Seng Capital Berhad has the considerable opportunity of growing the business. |
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Technological |
Malaysia is yet to develop the technologies for enabling the competition in the international markets. The evaluation of the ICT technologies is still under process. Teo Seng Capital Berhad needs to look forward to avail the opportunity of developing the technological aspects. However, it is important to mention that it is necessary to embrace the opportunities related to the technological development. |
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Legal |
The legal system in Malaysia is generally depending on the British Common Law. On the other side, the Islamic law is applied to the people who belong to the Islamic Group (Ketsarapong, and Ketsarapong 2016). The British Law is familiar to the international business that is the major advantage for the business growth. Teo Seng Capital Berhad can avail this opportunity to deal with the foreign businesses. The foreign investments become much fruitful for the firms in Malaysia. |
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Environmental |
The continuous development in Malaysia determines the higher environmental costs. The UN data reveals that the deforestation rate of Malaysia is comparatively increasing much significantly. The impact of deforestation has been affecting the businesses as well (Ismail, Abdullah and Serin 2013). The foreign companies sometimes become much careful about the environmental damage that may affect the business sustainability. Therefore, the environmental issues can be much threatening for Teo Seng Capital Berhad to sustain the competitive position. |
Table 1: PESTLE Analysis
(Source: Created by the Author)
Porter’s Five Forces
Porter’s five forces is an analytical framework that helps to analyze the level f competition within a particular industry and the developmental strategy of the business. The five forces in this framework are the Threat of new entrants in the market, Threat of substitution, Industry rivalries, bargaining power of the suppliers and lastly, the bargaining power of the buyers. In this section of the report, Teo Seng Capital Berhad’s business strategy and the level of competition within the industry is been analyzed (Roy, 2015).
Threat of new entrants (High): The continuous development in the country is attracting the foreign businesses. Therefore, the threat to new entrants is quite high. This is a major threat for the organization like Teo Seng Capital Berhad, as recently the organization is going through a rough patch as they are getting back footed by various matters like, legal, social and technological issues. They are seen to be reluctant in investing for the development of technological aspects. Capitalizing this issue some start up organizations are entering market with a huge back up from some business tycoons who are willing to invest a lot of money. Thus it is a major issue for the organization like Teo Seng capital Berhad, as they were a ruling organization in this sector and they are continuously losing their pride and reputation nowadays along with a huge decrease in productivity and profitability (Mohamed et al. 2013).
Threat of substitutes (Moderate): Current business operations have become much difficult due to the increasing number of market competition. Similarly, the rival organisations try to attract the customers by developing the innovative strategies (Khaled 2015). Therefore, these businesses bring the substitute products that are made from eggs. However, when people prefer the quality of the poultry products, they usually look for the reliable poultry firm with proper amount of egg fertilization. Hence, the threat of the substitute products in Malaysia is moderate for Teo Seng Capital Berhad. It can surely be said that, day by day this threat of substitute is affecting the level of confidence and the motivation of the workers too, bringing in a general downfall of the organization (Quaddus and Woodside 2015).
Industry rivalry (High): The foreign investors and foreign businesses are availing the opportunities derived from the Malaysian market. Therefore, the industry rivalry is significantly increasing. In the market of Malaysia, there are fierce rivalries between the organizations operating in the poultry industry. In today’s market there are various numbers of organizations who has a solid foundation of financial stability and they invest in technological advancement and can thrive in challenges which have negative influence on Teo Seng Capital Berhad. These new organizations and some old organizations having huge technological and financial advantage they have easily surpassed the profitability and productivity of Teo Seng Capital Berhad, so this industry rivalry can be seen as a huge threat for Teo Seng Capital Berhad (Fernando, Ng and Yusoff 2014).Moreover, the legal facilities are quite common for the overseas countries since it is associated with the British Common Law. Hence, the industry rivalry for the company is relatively higher.
Bargaining Power of the Suppliers (Moderate): In the market of Malaysia, there are fierce rivalries between the organizations operating in the poultry industry. In today’s market there are various numbers of organizations who has a solid foundation of financial stability and they invest in technological advancement and can thrive in challenges which have negative influence on Teo Seng Capital Berhad. These new organizations and some old organizations having huge technological and financial advantage they have easily surpassed the profitability and productivity of Teo Seng Capital Berhad, so this industry rivalry can be seen as a huge threat for Teo Seng Capital Berhad (Fernando, Ng and Yusoff 2014).
Bargaining power of the consumers (high): It is already established that in Malaysian market the demand of poultry products are on the higher side and there are some companies which are utilizing this situation and making huge profits by investing in technological aspects and by making effective business strategies. This is the ideal situation for the consumers to start bargaining for the products as there are ample demand for the products and there are huge number of organizations available, operating in the land of Malaysia, so it can surely be said that the consumers would surely tend towards bargaining and that also can serve as a potential threat to the Teo Seng Capital Berhad (Babatunde et al. 2014).
The above analysis presents the idea about the probable opportunities that can be effective enough in securing the competitive ground for the company. The political stability and huge economic opportunities are most preferred for increasing the business competitiveness. The company can adopt the advanced technicalities for making more profits in business. However, the majority of the threats are concerned due to the market entrants of the foreign rivals. Due to extensive opportunities and market attractiveness, the foreign businesses are much attracted towards the country for establishing the business entity (Roy, 2015). This establishment of the foreign countries is imposing greater challenges to the company by threatening the competitive ground and business sustainability. Depending on such identified opportunities and threats, the further analysis would be presented in this study.
Value Chain Analysis
The Malaysian Poultry Industry has transformed drastically in last few decades. The changes in the consumers’ demands persuaded the industry to develop the value chain process for acquiring more customer base. In today’s market Teo Seng Capital Berhad has taken some decisions regarding their strategic management. They realized the fact, that, in today’s market they need to look forward adopting the current trends by seeking technological help. They need to invest more for the technological advancements and with the help of new technologies they will be able to eliminate the diseases of the chickens. Technologies could help them to produce poultry products of much higher quality to satisfy the consumers, who have shown dissatisfaction with their products in recent times (Mohamed et al. 2013). Apart from that, the organization needs to understand that the present situation is quite challenging for them and to overcome the oddities they are revising their cost structure in order to cut costs for the company. Hence, there lies the fact, that, to cut some liabilities of the organization too they would be needing tools with higher technology to increase the productivity level of the organization. Creating value trough investing more on the technological development is quite effective for ensuring the secure competitive ground.
VRIO Framework
The VRIO Framework is usually used for measuring the competitive assessment for strengthening the organisational position. Teo Seng Capital Berhad requires measuring the resource capability to gain competitive advantage in this advanced business world. The components of the VRIO Framework are discussed further.
Figure 1: VRIO Framework
(Source: Quaddus and Woodside 2015)
Valuable
The first component of this framework suggests if the company possess the valuable resources for gaining competitive advantage. Teo Seng Capital Berhad is depending on the high quality poultry products. The company pays more attention towards involving the highly advanced technologies for bringing more improvements in the poultry fermentation (Fernando, Ng and Yusoff 2014). Hence, the technological assets are quite valuable for the company to ensure the strategic evaluation.
Rare
The company has the unique supply chain and fermentation process that are quite rarely seen in other companies. The continuous improvement in the poultry farming process is quite appreciable for the country to make progress in this industry.
Costly to Imitate
The highly advanced technologies are improving the quality parameter of the products. Purchasing these highly advanced technologies are much costly. Therefore, the process would be much costly to imitate.
Organized to Capture Value
The tangible and intangible resources are capturing values for securing the competitive edge in this advanced business market. The company is much fond of capturing the higher values to establish the strengthened entity by providing high quality products and services (Bahri, Mohtar and Ariffin 2016). Hence, properly organizing the resources would be helpful enough in determining the strategic evaluation.
TOWS Matrix
TOWS matrix is one of the dependable of SWOT analysis that set out the acronym for Threats, Opportunities, Weaknesses, and Strengths.
Strength: The organization Teo Seng Capita Berhad is a well established organization of Malaysia and they have many qualities those can be attributed as the points of strength. The organization has a huge general workforce and with cheap labor charges in the land of Malaysia and that can be attributed as a super strength of the organization in today’s market, as workers are the nucleus of any organization. They have a strong network of distributors and sales team. Apart from that, the company has a very high growth rate and they mostly operate in a domestic market where they have already earned a huge reputation and they are quite established and so they do not have faced any kinds of obstacle regarding the market entry. The journey of the organization has been very smooth before lately they have faced some issues regarding cost management (Baluch et al. 2017).
Weaknesses: A major weak point of Teo Seng Capital Berhad can be said their impractical cost structure and lack of investments in researching new technologies for the betterment of the organization. In today’s market, it is a fact that organizations need to update and upgrade their technical sides continuously in order to cope up with the ever changing market and the rival organizations that are operating in the same market. Not only that, the present cost structure of the organization has crumbled down to pieces, leaving the state of organization in the hands of fate, as it is a fact that the prices of the shares of the company has reduced massively, the liabilities of the organization has increased highly in the last few years and the pricing of the poultry products have gone low in a huge rate. Apart from that, the most dreadful thing happened in the last nine months period and that is, their net profit fell 48.45 % within the last nine month’s time span (Zainol et al. 2014).
Threats: The organization Teo Seng Capital Berhad is currently facing some huge factors of threat and those are the huge change in the pricing of their goods and some major technical problems (Husny et al. 2013). The organization should revise their cos structure in order to fight the rapid price changes happening in the market and in this case they will not face any major issues as they operate in a domestic market and their business strategists should be able to get the pulse of the market with ease and chalk out something for the best interest of the organization (Ariffin, Mohtar and Baluch 2015).
Opportunities: The exclusive legal and economic opportunities are concerned with this strategic establishment of the business. The favourable legal, political and economical conditions in Malaysia are signifying the huge market potentiality for acquiring competitive advantages. On the other hand, the organization should invest majorly for their technological advancements in order to survive in the changing market (Yee-Kuang 2017). Their competitors having better technologies in hand are increasing their productivity by huge percentages and the costing has become low for them in manufacturing products, and that is where the difference lies. The administrators of the organization should not rule out this matter of fact in order to regain the lost reputation of the organization in the land of Malaysia.
From all the analytical part discussed below, it can surely be said, that currently Teo Seng Capital Berhad is facing some serious issues in their own domestic market in Malaysia but those issues can be resolved by some practical futuristic planning (Ravichandran 2015). It would be highly advisable that the organization should stress on investing time and money for the technological advancements of the organization as in this era there are a lot of companies who are technologically a lot sounder than Teo Seng Capital Berhad and they have certainly high amount of capital for backing up the business in case they face some serious oddities in their area of operations (Khan, and Khalique 2014). On the other hand, Teo Seng Capital Berhad is facing a lot challenges in their profitability, as their profitability has dropped almost 48% in the last financial year and they are facing some serious trouble in many sectors, such as financial, technological, political and social problems too. It is a fact that the governing body of the organization should make some serious political contacts to solve the political issues, and to overcome the social obstacles they need to improve their company social responsibilities, so that they would get the brand value and the reputation of the organization would get higher and that would be immensely beneficial for the organization (Gabdo et al. 2015). It is a fact that without technological support, government’s favor and a good financial support, it would be impossible for the organization to sustain in this ever changing market of Malaysia. Teo Seng Capital Berhad is an established company, so to fix these issues would not be much a problem for them, but they must be aware of the fact that they need to revise their cost structure entirely to compete with the other gigantic rival organizations which are operating in the same market. Apart from that, it would be better, if they seek some legal help to eliminate the smuggling of the poultry goods from outside Malaysia in order to control the money making intentions of various suppliers (Ariffin, Mohtar and Baluch 2014). This supply chain is the heart of the poultry farm business, the food of the chickens, medicines these are the essential prerequisites for a poultry business to run, and if they face challenges in this sector, it would be more likely that they would get out of the business as they would not be able to produce enough meat and eggs to meet up the consumer demands. The organization must look into the matter that, the company needs to adopt the changes of the market in order to survive in this ever changing market. They should consider the fact that, the gigantic rival companies have nowadays more influence in the market, than ever and they are trying to replace the organization (Ariffin, Lamsali and Mohtar 2012). The main mission of the organization must be to satisfy the consumers, because from the last few years, they have been complaining regarding the qualitative issues of their poultry products. They have to understand that, it is the consumers who are making the whole industry operating, as if there would not be any customers, who would have bought their goods (Rezai, Mohamed and Shamsudin 2012). Apart from that, they must invest in the company social responsibilities, as they are using lands to develop their poultry firms, and eventually they are polluting the land with the odor, excess food of the chickens, excess medicines, chemicals used in the processing of the meat and eggs and many more. They should seek technological help, in order to develop farms without polluting the nature. They need to understand the fact that, they should invest in acquiring technologically advanced tools to run the business, as without technological help, they would not be able to determine the qualitative factors of their products, they would not be able to construct farms without polluting the nature, and over all they would not be able to limit their company liabilities and they should revise their cost structure in order to taste success once again in their domestic area of operation Ahmad (Shabudin 2014).
Conclusion
To conclude, it can be said that, Teo Seng Capital Berhad is an organization who has lost its reputation in last couple of years due to various reasons, like, failing to provide good quality products, decreased profitability and productivity too with a concerning weak cost structure of the organization. The organization needs to adopt a few changes in order to regain the lost reputation of the organization, be it financial structure, or technological structure or marketing strategies. The organization have a good chance in establishing themselves once more, as they already have a customer base in their domestic market, now all they need to do is winning back the trust of their customers and pledge to provide them with best possible poultry products they have ever received
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