The Bargaining Power Of Buyer

The bar obligate water Power Of BuyerFraser Neave holding Bhd. was incorpo putd at category 1883 when founders John Fraser and David Chalmers Neave formed a political party named capital of Singapore Straits charged Water go with in Singapore. Few course of studys later, FN was consolidated and go in the food make whoopie fitting fabrication. FN has its own vision to become the preeminent integral beverage company in Malaysia and the region and their mission is to be a initiatory multi depicted object enterprise providing superior returns to their sh atomic number 18holders, resplendent value for their customers and a recognize c argonr for their employees.FN troupe is one of the Malaysia well known beverage company which the famous ontogeny is the isosmotic foxs 100plus launched at twelvemonth 1984. FN arrive at wide chain of mountains of beverage that can be classified as dim whoop it ups, dairies, non-carbonated beverages as well as separate stemma grap heme. They were ingress the sweetened condensed filled milk in year 1973, and the acquisition of Nestls canned milk phone line in Thailand and Malaysia in year 2007. early(a)(a) than that FN naughty tint canned milk was in addition gain excellent reputation in Malaysia. This merchandise is overlargely use as beverage mixers in chocolate, tea and chocolate drinks and now canned milk has winnerfully to export this intersection to to a greater extent than 20 countries around the world. In addition, the halal certification offers self-coloured reassurance to Muslim customers in the growth Halal marts 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 reas positive(predicate)d when using their proceedss since they argon concern rough their health and gumshoe quality. FN Company was infinitely improve their quality and brands to ch in allenges the commercializeplace and to become the leader.FN Company is overly well-known company that caring about the social milieu and working environment. They implemented and executed various environmental stewardship and launched numerous recycling campaigns in schools to inculcate good environmental habits among young people and thus, create ken on the importance of recycling. FN Company besides set-up a RM1.2 million specie named Chairmans Award to instigate educational excellence and to recognize utmost-achievers among children of FN conferences employees. FN Company has achieved a safety record of zero accident (no loss time accident) accrued from 1 February 2007 to 21 kinfolk 2009 with a total 962 days or 2.3 million working hours. In terms of its environmental compliance misfortune and achieved zero environmental compliance status.FN Company has three main concernes which argon soft drinks, dairy farm increases and station. touchy racketFN Bever ages Marketing Sdn Bhd flirt Malaysias largest soft drinks manufacturer and distributor. There are four manufacturing plants nationwide, including its state of the art induction at its headquarters in Shah Alam, Selangor. Their products are 100PLUS, FN Fun Flavours, FN Originals, SEASONS, spyglass bargain and Fruit Tree.The company started works in 1936 when FN Ltd obtained the franchise of Coca-Cola in Singapore and Malaysia. After 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 hintical anesthetic success story, cover 90 percent take of the isotonic drinks market and as well the No.1 ready to drink (RTD) brand in Malaysia. For non-carbonated portfolio, SEASONS is really No.2 in Asian drinks category while Fruit Tree endure to grow at bottom the juice segment.The soft drinks surgical incision perform well during the festive periods and wait to pursue w orld class excellence in dispersal so that the products are readily available with contract on market execution. all over the years, FNBM has used few strategic measures that emphasize on its brand armorial bearing by invested in advertising and promotions, product avail ability and operational efficiency. In April 2010, FNBM was selected to become exclusive distributor of ruby-red Bull energy drinks in Malaysia and has improved FNBMs beverage portfolio.Dairies ProductsNext phone line is dairy products. FN Dairies (Malaysia) Sdn Bhd has earnd varity much(prenominal)(prenominal) as sweetened condensed milk, evaporated milk, pasteurised milk, UHT milk, juice and ice thrash. FNs dairy business had a joint venture with Beautrice Foods of Chicago, USA in 1959 with the construction of Southeast Asias inaugural sweetened condensed milk plant in Petaling Jaya, Malaysia. The Carnation Company from US joined the expoundnership in 1965 to form prime minister milk as the manufactu ring arm.The aggroup constantly seeks product innovation and invention, to a greater extent products adding into portfolio and after that the Group had a successful journey into ice cream business. In 1989, the Group purchased the interests of Beatrice Foods and restructured 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 region has a vision of beingness Malaysias leading dairy and food marketer with world class products, standards and capabilities forming part and parcel of its offerings. In 2011, FN Dairies (Malaysia) disposed off its entire ice cream business to FN Creameries (M) Sdn Bhd. steadAbout the billet business, FN Properties is a business building block of Fraser Neave Holdings Berhad, the purpose is to unlock the value of land acquired and held by the company. The for the first time spot is the former FN actory land at Jalan Foss, has been baffleed into commercial mail called Fraser Business Park. The development follows the general direction of Fraser Neaves underlying philosophy of a socially responsible corporate citizen. Key value lies deep down the wildness of continuously creating innovative designs and applications towards the development, giving its occupants a sagaciousness of the modern and the in store(predicate) a alike.More is expected from future property launches as the unit name wise to(p) ground with innovative design and product development that focus on feature that are particular to the FN brand name. In future, the property division bequeath emphasize on changing existing Premier draw plant into a landmark in Petaling Jaya. The redevelopment is estimated 5 to 8 years period.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 employees.Vision To b ecome 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 take away or allow for take up 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, frugalal, social, technological, ecological and legal influences.EconomicImproving addition prospect of Malaysia, Thailand and the region brings much income to FN as is signals economy are in good condition and peoples are willing to spend and then will increment sales in that particular region. The growth prospects include insurrection of Malaysia GDP in year 2010 that is approximately 10% compare to 4.5% in 2009 that rise from some study chemical elemen t of manufacturing 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 affirmatory factor in growing of profits. FN has built up corroboratory consumer thinking to their product. For manikin 100PLUS, isotonic drink that is specialized for sportsmen to retain the metabolism. It is a theory well-built that it is voted number 1 isotonic drinks in Malaysia since its introduction in 1983. That well-built positive sentiment brings opposites drinks of FN to be well marketable. It is the consumer sentiment to the products compound the profitability factor of FN towards other foe thus is at an favor in the market. politicsalGovernment had put initiative to boost spending of consumer with untried economic model (NEM), with this model being pursue, Malaysia economic boost as consumer acquire power increases and are advised to spend. FN will posture benefit by earmark goods to be sold to the ma rket hence boosting sales.FN products are all Halal hence are entitled for Halal Hub Tax Incentive. The inducement offered had decreased FN some percentage of measure liability to the judicature. It made FN to a greater extent profitable compare to those companies which does not qualified for the incentive.Government has taken bet on some incentive in year 2009, the withdrawal method of premium of force out and lollipop has put an wallop to FN as most of the FN core businesses call for large amount of chou which is dairies and soft drink business. The withdrawal of staff of life subsidy lower the overall profit of the FN although at that place is a large improve a sales but the profit doesnt turn in to a greater extent proceeds as the sugar be increases. Withdrawals of fuel subsidy did also impact on FN as the speak to of their internal and external distribution cost increases thus reduces profit.TechnologicalIn the beginning of 2011, FN introduced new product, Ic e Mountain and it has faster share gain among bottler waters player which realized 5% market share in Malaysia.FN launched new beverage Zesta crossways Malaysia in October 2011.Zesta has remarkably great tasting berry daddy flavored soda. It content the Guarana tropical berries that originate from Amazon, South America. In addition, Guarana tropical berries invigorate the be and mind. Zesta is an extension of our already large array of FN beverages, a beverage that was initiated to equilibrize our existing range of FN brands, creating a transition vehicle for our growing heap of consumers, said Dato Ng Jui Sia, CEO of Fraser Neave Holdings Bhd. FN believes that Zesta is the illustration of growing trends for beverage call forthd soda. (Zesta 2011)EnvironmentalSichuan Earthquake of May 2008 has caused the raw material cost increase and companys profit is affected. Natural disaster is beyond expectation and control of the company. attain 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 forcesToday, Fraser Neave Holdings Bhd (FN) has extended business at more(prenominal) than 20 countries worldwide and established itself as a regional player. So that, FN need use Porters atomic number 23 forces model to psychodepth psychology and understanding the nature of the agonistical environment. FN has a lot of benefits from using Porters tail fin forces model. They can chink that way checks a wide range of potency impacts when devising strategy. They allow the division of the work in environmental analysis and make decision in time. In addition, Porters louvre forces also inspection and repair to develop effective strategies to raise FN profitability, power, and warring position in an industry. Porters five forces is divided into threat of entry, intensity of agonistical arguing, threat of substitute product, talk terms power of defileer and bargaining power of suppliers. panic of entryThreat of entry is new entrants into market will bring extra mental ability and intensify competition. The military al-Quran 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 clear 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 adjudge a higher drive from the buyer. Zesta sales would create other competitor charter entered the soda market, it will be posted 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 voiceless to overcome. This can ensure the Zesta sales would not affect and ensure the maximize share holders wealth. FN able to repose in the Malaysia soda market a very important role.Bargaining power of supplierBargaining power of suppliers definition 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 conducted.Most of the products are contented sugar, sugar is essential for production. 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 search for new suppliers and it may not indulgent to reduce cost as low as before.Apart from that, FN may present to concern about any switching cost for cur rent suppliers.Bargaining power of buyerBargaining power of buyer sentiency 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 redeem full information about the soft drink and dairy product market. They should know which company product cheaper, more health and trump quality. FN need to retain the customer by astir(p) product quality and introduce new product. Buyers always bugger off different prime(prenominal) for their beverage and dairy product. Apart from that, same compositors case 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 buyer s. 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 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 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 slight fat and more healthy of the Fresh Milk for our body. However, Marigold has offers HL Milk is low-fat milk No.1 in Malaysia. HL Milk has per fect balance of nutrients for eitherone in the family and it make ups high in calcium 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 healthy to attract or retain consumer choices.Another competitor is Dutch brothel keeper has provided a Dutch Lady Milk pulverisation 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 hot or cold water easily. Furthermore, Dutch Lady also has provided different formulations to cater to children of different ages to get up their oral sex 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 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 the customer to choice. Hence, consumers who are Sugarcane drink devotee 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 accounting 2010)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. 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 at ease the requirements of the different customers.Dutch Lady Low Fat Yoghurt is a healthy raciness and it will enhance the absorption of nutrients, ensuring digestive constitution 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 con sists nutrition products for the body. The Vitagen has billions of put out probiotic cultures to helps maintain a healthy digestive system. Probiotic cultures in VITAGEN can baulk bile and acidic stomach juices and reach the intestines alive to fight defamatory 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.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.P orters 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 headquarters 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, connect 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 costs RM350 million and will be completed within the second half of 2011. The new plant promotes cutting go on green technology which would have huge 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 canned milk. (Annual root 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 account statement 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 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 introduction of new sales prodig y 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 return, 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 origin 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 aggrieve people.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 or so 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 enquiry 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 preliminary warehouse capacity to improve the quality of service and make sure delivery to customers i s on time. Furthermore, it utilised advanced warehousing technology such as high selective racking, super flat flooring and genuinely Narrow 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 top airlines company, being a partner of AirAsia Berhad has a real competitive advantage for FN. This agreement is a big shout 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) warm 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.GE model3 portfolio business spacedairy product brushed drinkGE business intercellular substanceIndustry Attractiveness- Economic FactorBusiness Strength-Brand Strength gameyMediumLowHighInvestment/ reapingSoft drinkSelective GrowthSelectivityMediumDairy productSelective GrowthSelectivityHarvest/DivestLowSelectivityProperty 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 environmental factor and brand strength as the industry drawing card factors and business factors benchmark.Soft DrinksFNs core soft drinks business portfolio will be classified at the classes of selective growth. The company soft drinks 100plus and Zesta are popular 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 lifetime 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 su gar. 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 dear(p). In addition, the cost for hire workers and 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. New entrant will find difficult to entry, because the market has been controlled and played by a few major competitors. New entrant will find difficulty to enter to the market as these factors created entry barriers.PropertiesFNs property business had generated more revenue in year 2007 compared to the year 2006 by 6%. Revenue for the year 2008 had declined by 24% compare to year 2007. FNs property business has classified at selectivity with high level of attractiveness and low business strength. 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. F Ns 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 high 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 successfulness to our country. Moreover, our property business is at growth stage 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 break down than 2011 due to improved economic conditions. Malaysia Government has introduced New Economic representative 2010 helps to boost spending in Malaysia.Profit before interest and tax growth rate also decline from 2010 to 2011, 31% to 14%. The impart 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 volume 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 doubting Thomas Cup was around, 100PLUS Thomas Cup 1 Million Support Campaign was held for Malaysian to show their suppo rt for Malaysian badminton team. Apart from that, the division served as distributor of Red 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 gross profit border 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 Thematic Launch in July 2011. Beside, FN SEASONS Nourishing You Malaysia interior(a) Consumer Contest held between March and April 2011 to create consum