FACULTY ECONOMICS AND MUAMALAT STRATEGIC MANAGEMENT MGB 4013 GROUP AASIGNMENT: DUTCH LADY COMPANY PREPARED BY: TMC 2 MEMBERS: SITI ZAINAB BT MOHD ADAM
1121106
NUR SHAHIRA BT MOHAMAD NOR
1121112
SITI NOR NADIAH BT SHAHIMI
1121114
NURUL HAZERA BT MISRAN
1122333
NORFARHATI BT SATARNONG @ IBRAHIM
1122337
PREPARED FOR: LECTURER NAME: MADAM SITI NURULHUDA BT NORDIN DATE OF SUBMISSION: 8TH DECEMBER 2014
1
TABLE CONTENTS
NO 1 2 3 4 5
TABLE CONTENTS COMPANY PROFILE BACKGROUND OF DUTCH LADY TOWS ANALYSIS THE INTERNAL-EXTERNAL (IE) MATRIX INTERNAL FACTOR
PAGES 3-4 afiqah 5-7 nik 8-11 afiqah 12-13 14-15 afiqah
EVALUATION (IFE) MATRIX 6
EXTERNAL FACTOR
16-17
7
EVALUATION (EFE) MATRIX COMPETITIVE PROFILE MATRIX
8 9 10
OF DUTCH LADY SPACE MATRIX Product life cycle STRATEGIC PLANNING PROCESS
19-26 nik 27-32 nik
11
(PORTER’S FIVE FORCES MODEL) QUANTITATIVE STRATEGIC
33-35
12 13 14 15
PLANNING MATRIX (QSPM) BLUE OCEAN STRATEGY Sun tzu strategy CONCLUSION REFERENCES
36-38 zaty zaty 39 zaty 40
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1. COMPANY PROFILE Dutch Lady Milk Industries Berhad ("Dutch Lady Malaysia") is a leader in the quality branded dairy business in Malaysia. It was incorporated in 1963, and was the first milk company in Malaysia to be listed on Bursa Malaysia, the local Stock Exchange in 1968. Its holding company is Royal FrieslandCampina, a Dutch 2
multinational corporation and one of the largest milk companies in the world. Permodalan Nasional Berhad is the second largest shareholder in the Company. Dutch Lady Malaysia manufactures and sells a wide range of quality dairy products and fruit juices for the home and export market such as Infant Formula, Growing-up Milk, Powdered Milk, Condensed Milk, UHT Milk, Sterilised Milk, Pasteurised Milk, Cultured Milk, Yoghurt and Fruit Juice Drinks. The Company's dairy products have a strong consumer following and are represented by strong brands such as Dutch Lady, Frisolac, Friso, Completa, Omela and Joy. The Company believes in product innovation and is well supported by its holding company, Royal FrieslandCampina. The Company constantly strives to improve its processes in order to deliver nutritious products of high quality to its consumers. It was the first company in the world to introduce a growing up milk powder specifically formulated for children from ages one to three. These products are currently marketed in Malaysia as Dutch Lady 123 and Dutch Lady 456. Besides supporting local industries by using substantial amount of local ingredients in its products, Dutch Lady Malaysia is also the largest purchaser of local fresh milk from the Veterinary Services Department. This is done via the Company’s Dairy Development Programmed, carried out in collaboration with the DVS with the assistance of the Netherlands Embassy. The quality of the Company's products is paramount. Quality Control and Quality Assurance are prime considerations. In line with this, the Company has continually been accredited with ISO 9001 certification since 1995. Strong emphasis is also placed on food safety with HACCP (Hazard Analysis Critical Control Point) System covering all its plants. In addition, the Company also has in place ISO 14001 Environment Management System and OHSAS 18001 (Occupational Health and Safety Assessment Series). The Company’s products are all halal-certified. Dutch Lady Malaysia’s annual revenue in 2009 is RM692 million. The Company’s factory is located in Petaling Jaya and it employs 600 Malaysians. Currently, Dutch Lady Malaysia is the market leader in key milk categories such as UHT milk, Sterilised milk and Growing-Up Milk.
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2. BACKGROUND OF DUCTCH LADY 50’s 4
After World War II, sweetened condensed milk imported wholesale from its parent company in Holland via local importers and wholesalers. 1954 : A trading company Friesland 9malaya) Pte Ltd, based in Singapore, was formed to market Sweetened condensed milk imported from Holland in Malaysia and Singapore, among several brands was a certain Dutch Baby Brand.
60’s 1963: Pacific Milk Industries (Malaya) Sdn Bhd was interoperated in Malaysia with the commissioning of a sweetened condensed milk factory in Petaling Jaya. The present site is the first overseas production facility of the parent company. 1965:
The factory was operational and started to manufacture sweetened
condensed milk. 1968:
Pacific Milk Industry (Malaya) was converted into public company and
became the first milk company to be list on the stock Exchanges of Kuala Lumpur and Singapore.
70’s 1975: The name of the company was changed from Public Milk Industries (Malaya) Berhad to avoid confusion in the trade and marketplace surrounding the name of the Company and its main product: Dutch Lady Sweetened Condensed Milk. -
In line with the Company’s diversification programmed, the Company commissioned and builds an Ultra Heat Treated Milk Plant. Locally packed Dutch Baby Modified Baby Food was also introducing in the same year.
1979: A fruit ice drink under JOY brand name was introduced.
80’s 5
1983:
Manufacture of Sterilized Milk in plastic bottle commenced.
1984:
The brand was change from Dutch baby to Dutch Lady for product
positioning reasons. 1985:
A three-story building was built to house the powder Packing Plant, as
business grew. 1987: The Company underwent an equity restructuring exercise to comply with the Government’s New Economic Policy.
The share capital was enlarged to RM 16.0
million. 1988:
Dutch Lady Yoghurt and Growing up Milk were introduced.
1989:
In compliance with the Government ’s national policy to promote the Kuala
Lumpur Stock Exchange, the Company delisted its shares from the
Stock
Exchanged of Singapore.
90’s A new warehouse was built to accommodate the company ’s growing
1994:
business. Human capital started to expand in line with organizational needs. 1995: The Company obtained certification under the ISO 9001 standards. 1999:
Dutch Lady received the Reader’s Digest Super Brands Gold Award for
being voted the preferred brand of milk products in Malaysia. -The Dutch Lady UTH Plant received HACPP (Hazard Analysis Critical Control Point) certification from the Ministry of Health.
2000’s 2000
:
Dutch Lady received its second Reader’s Digest Super Brands Gold Award
for being voted the preferred brand of milk products in Malaysia.
6
-
The Company changed its name from Dutch Baby Milk Industries (Malaya) Berhad to Dutch Lady Milk Industries Berhad, to be in line with its main brand Dutch Lady with a new commitment “Goodness for Life”.
2001:
Dutch Lady received its third Reader’s Digest Super Brands Gold Award for
being voted the preferred brand of milk products in Malaysia. 2002: 2003:
Dutch Lady won the Brand Equity Dutch Lady received its ISO 9001 (Version 2000). Dutch Lady launched an updated range of products with DHA for infants
:
and children. :
Dutch Lady Milk Powder Factory certified to Standard Certificate HACCP
(Hazard Analysis and Critical Control Point) - System Hazard Analysis and Critical Control Point Dutch Lady awarded the Reader's Digest SuperBrand fifth Gold Award because selected as the preferred brand of dairy products in Malaysia.
2004 : Nutrition for intelligence. - Dutch Lady brand image and packaging change with the new corporate tagline "Get Ready for Life!" - Dutch Lady received the sixth Reader's Digest Super Brand Gold Award be selected as the preferred brand of dairy products in Malaysia. 2005 : Sweetened Condensed Milk Factory Dutch Lady received recognition HACCP Certificate (Hazard Analysis and Critical Control Point) : Systems Analysis Critical Control Point. : Dutch Lady received the award for the seventh Reader's Digest Gold Award Super Brand selected as the preferred brand of dairy products in Malaysia. : Dutch Lady Milk Industries Berhad is a Productivity Award winner in 2004, which was recognized by the National Productivity Corporation in category companies with a turnover of RM100 million and above. 2006 :
Dutch Lady has donated various products worth RM70, 000 Deputy Prime
Minister for flood victims in Johor. 2007 :
Dutch Lady Milk Industries has donated various products Dutch Lady
which the value is RM115, 000 through the Ministry of Health to flood victims in Johor. Dutch Lady has given the Chairman of the Education Excellence Award 31 children in its people. 7
:
Dutch Lady Malaysia forge one more brilliance on the system of certification
of Environmental Management ISO 14001: 2004 Health and Safety Management System OHSAS 18001: 1999 from SIRIM QAS International
3. TOWS ANALYSIS STRENGHT(S)
OPPORTUNITIES (O) Easy to existence in the market. High demand in the market. Expert in an innovation. High customer loyalty Get the awareness from customer Healthy campaign by the government. THREAT(T)
Market leader in the high quality branded dairy business in Malaysia. Have the highest market share. Good profit stability. Export widely. Deliver good nutritious product. All have halal certificate High quality of the milk Variety of flavors
WEAKNESSES(W) Dutch Lady just produces the milk from cow milk. Not produce milk for the old folks. Have high contain of sugar Rarely change their packaging. .
SO
Expand market to international level. Widen accessibility of products via online market. Variety style of products line.
ST
WO
Get another source of milk. Produce milk for the old folks also. Control the contain of sugar in the milk.
WT 8
Many existence competitors. Many product substitutions Rapidly change in tastes and preferences of customer. Competitors price Probability of cows attack by virus
Keep maintain the quality of the milk and maintain high quality branded dairy business. Make a new flavors of the milk
Make a difference of the milk and compete to other competitors Improve the packaging with latest design.
A SWOT analysis (alternatively SWOT matrix) is a structured planning method used to evaluate the strengths, weaknesses, opportunities and threats involved in a project or in a business venture. A SWOT analysis can be carried out for a product, place, industry or person. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective. Strengths: characteristics of the business or project that give it an advantage over others. Weaknesses: characteristics that place the business or project at a disadvantage relative to others. Opportunities: elements that the project could exploit to its advantage. Threats: elements in the environment that could cause trouble for the business or project. Identification of SWOTs is important because they can inform later steps in planning to achieve the objective. First, the company should consider whether the objective is attainable, given the SWOTs. If the objective is not attainable a different objective must be selected and the process repeated. Users of SWOT analysis need to ask and answer questions that generate meaningful information for each category (strengths, weaknesses, opportunities, and threats) to make the analysis useful and find their competitive advantage. For the Dutch Lady Company, there is important for having SWOT analysis. Their first strength is, market leader in the quality branded dairy business in 9
Malaysia.
Dutch
Lady Milk
Industries Berhad
(Dutch
Lady Malaysia)
is a
manufacturer of dairy products in Malaysia since the 1950s. Besides that, their also have the highest in market share. Basically, market leader and market share have a good related between each other. Good profit stability gives the meaning which their achievement of profit always increases in the ranking. Export widely. Dutch Lady Company produce their milk as a globally to the customer and also deliver good nutritious product. Besides, the milk is very healthy and suitable for the people. Dutch Lady Company also has halal certification. The milk is priorities, and also has a halal certificate. Consumer will using is confidently because of the halal labeling at the Dutch Lady packaging can showing clear n obviously. Last but not least, the Dutch Lady Strengths is high quality of the milk. That means, taste of the milk is a similar at each that produces. The milk is genuine from fresh cow’s milk. Dutch Lady Milk also has variety of flavors. For example of their flavors is chocolate, strawberry, low fat, full cream, coffees. Their also have for powder milk which is vanilla and honey that suitable for infants.
Weaknesses in Dutch Lady are first of all, they are just produce the milk from genuine cow milk. That means, Dutch Lady not take another source of milk, focus on cow milk. Not all people or customer can acceptance the cow milk as their drinking because nowadays, have many type of milk and so variety. Might be also, the cow milk is not suitable to certain customer that not flavor on it. Besides that, their also not produce the milk for old folks. So, it is difficult to their get a customer loyalty if they just focus on the ages for among children and adult also workers but not the old folks. Because mostly, that old folks need the milk suitable for them in their area of age to help them and give an extra energy and be health. Have high contain of sugar in Dutch Lady Milk. That can prove by the customer testimonial. Dutch Lady Company also rarely changes their packaging. Opportunities in Dutch Lady are to maintain in the market. It is because, Dutch Lady is already the market leader and the highest market shares in the market. Other than that, Dutch Lady Milk also gets high demand in the market. So the company will produce more the milk to fulfill the customer satisfaction. 10
Therefore, Dutch lady also experts do the innovation. Dutch Lady Company makes an innovation in term of the packaging and labeling. The last opportunity that Dutch Lady has which is high customer loyalty. Customer is already aware about the milk and makes them to be loyal to that milk. Besides, Dutch lady Company already gets the highest awareness from customers. They held its first election as a part of the celebration of World Milk Day. They also ran Dutch Lady Kid and Dutch Lady School campaign and involved in government program which is ‘’Program Susu 1Malaysia’’. For the threats, Dutch Lady Company are facing such have many existence competitor. That means, there are many of company that produce milk with the same like a Dutch Lady already produce. That’s can called as a copy right because in term of their variety of flavor and taste is homogenous. Probability for customer chooses another brand of milk also can be happened. Besides that, there are many product substitutions in the market. It is because of Dutch Lady Milk just produce milk from fresh cow milk and other’s company not produce milk from cow milk. For those who are not drink cow milk they must to buy milk. So, it does will be decreasing the Dutch Lady profit. Rapidly change in tastes and preferences of customer.
Usually customer easy to feel bored, so their will make the variety of taste and preferences based on want they want and like. Next threat is competitor’s price. As we know, there are many of milk is cheaper rather than Dutch Lady Brand. Last but not least, the threat for Dutch Lady Company is probabilities of cows attack by virus are very high. Nowadays, there are many viruses that usually attack not only at the people but also will be attack to the animal. It is very risk for the Dutch Lady if the cows are also attack by the virus. It is because, the cows is the main sources of the milk for the Dutch Lady Company.
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4. THE INTERNAL-EXTERNAL (IE) MATRIX Definition IE stands for Internal external as the name suggest that it’s based upon internal and external factors of the organization. The IE is an important strategic tool which comes under the portfolio management considered much similar to BCG Matrix. The IE matrix used to plot the organization divisions in nine cell diagram, each cell have some meaning associated which suggest strategies. The IE matrix is based on the following two criteria which are score from the EFE matrix and score from the IFE matrix. 12
Besides that, The EFE matrix score is plotted on the y-axis. While, the IFE matrix score is plotted on the x-axis.The IE matrix works in a way that you plot the total weighted score from the EFE matrix on the y axis and draw a horizontal line across the plane. Then you take the score calculated in the IFE matrix, plot it on the x axis, and draw a vertical line across the plane. The point where your horizontal line meets your vertical line is the determinant of your strategy. This point shows the strategy that company should follow. The IE matrix can be divided into three major regions that have different strategy implications. Firstly, the prescription for divisions that fall into cells I, II, and III suggest the grow and build strategy. This means intensive and aggressive tactical
strategies.
This
strategies
focus
on
market
penetration,
market
development, and product development. From the operational perspective, a backward integration, forward integration, and horizontal integration should also be considered. Secondly, divisions that fall into cells IV, V, and VI suggest the hold and maintain strategy. In this case, the tactical strategies more focus on market penetration and product development. Lastly, divisions that fall into cells VII, VIII, and IX are characterized with the harvest or exit strategy. This strategies focus on retrenchment, divestiture and liquidation If costs for rejuvenating the business are low, then it should be attempted to revitalize the business. In other cases, aggressive cost management is a way to play the end game.
Benefit using IE matrix 1. Easy to understand. The input factors have a clear meaning to everyone inside or outside the company. There’s no confusion over the terms used or the implications of the matrices. 2. Easy to use. The matrices do not require extensive expertise, many personnel or lots of time to build. 13
3. Focuses on the key internal and external factors. Unlike some other analyses (e.g. value chain analysis, which identifies all the activities in the company’s value chain, despite their importance), the IFE and EFE only highlight the key factors that are affecting a company or its strategy. 4. Multi-purpose. The tools can be used to build SWOT analysis, IE matrix, GEMcKinsey matrix or for benchmarking.
5. INTERNAL FACTOR EVALUATION (IFE) MATRIX Definition Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating major strengths and weaknesses in functional areas of a business. IFE matrix also provides a basis for identifying and evaluating 14
relationships among those areas. The Internal Factor Evaluation matrix or short IFE matrix is used in strategy formulation.The IFE Matrix together with the EFE matrix is a strategy-formulation tool that can be utilized to evaluate how a company is performing in regards to identified internal strengths and weaknesses of a company. The IFE matrix method conceptually relates to the Balanced Scorecard method in some aspects. IFE matrix can be constructed by following those five steps:(1) Construct a list of key factors, determining the success of the organisation's activities. Use 10~20 internal factors, separated between strengths and weaknesses. Be as specific as possible, using percentages, ratios and comparative figures.(2) For each factor, determine Weight in the numerical range, from 0 (not important) to 1 (very important). The sum of all weights must be 1! Weight marks the relative effect of each factor to influence the success or failure of the enterprise in the industry. (3) Assign for each factor a score. An important weakness is represented by 1, 2 for minor weakness, 3 for minor advantage, important advantages are represented by a score of 4. Notably, the score of advantage must be 4 or 3, the score of weakness must be 1 or 2. The score is specific to the company, while the weights are based on industry benchmarks.(4) Multiply the weight of each factor by its score, to obtain the weighted score of each factor.(5) Sum the weighted scores of all the factors, to get the total weighted score of enterprises. As the IFE matrix contains many factors, the total weighted score range is from the lowest 1 to the top 4, the average score being 2.5. Total weighted score significantly lower than the 2.5 of enterprise's signalls that the internal situation is weak, while the score much higher than 2.5 of the enterprise's internal situation is strong.
INTERNAL FACTOR EVALUATION (DUTCH LADY) (IFE) MATRIX 15
STRENGTHS
RATING (1-4)
WEIGHTE D
WEIGHTE D SCORE
3
0.09
0.27
4 3 3 3 4 3 2
0.1 0.08 0.08 0.08 0.1 0.08 0.07
0.4 0.24 0.24 0.24 0.4 0.24 0.14
WEAKNESSES
RATING
1) Dutch Lady just produces the milk from cow milk. 2) Not produce milk for the old folks. 3) Have high contain of sugar 4) Rarely change their packaging
3
WEIGHTE D 0.09
WEIGHTED SCORE 0.27
3 3 1
0.09 0.08 0.06
0.27 0.24 0.06
TOTAL
35
1.0
3.01
1) Market leader in the high quality branded dairy business in Malaysia. 2) Have the highest market share 3) Good profit stability. 4) Export widely. 5) Deliver good nutritious product. 6) All have halal certificate 7) High quality of the milk 8) Variety of flavors
EXPLANATION The diagram was show the internal factor evaluation, that the strengths are more higher than the weaknesses of the Dutch Lady Company. The highest scale that we put at the strengths is 4 which is Dutch Lady have the highest market share because Dutch Lady is the market leader. Second is the entire product of Dutch Lady having Halal certificate from JAKIM. The lowest scale which is 1 for weaknesses is rarely changing their packaging.
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6. EXTERNAL FACTOR EVALUATION (EFE) MATRIX Definition The External Factor Evaluation (EFE matrix) is the strategic tool used to evaluate firm existing strategies, EFE matrix can be defined as the strategic tool to evaluate external environment or macro environment of the firm include economic, social, technological, government, political, legal and competitive information.The EFE matrix is similar to IFE matrix the only difference is that IFE matrix evaluate the internal factors of the company and EFE matrix evaluate the external factors. The EFE matrix process uses the same five steps as the IFE matrix. The first step is to gather a list of external factors. Divide factors into two groups which is opportunities and threats. Opportunities are the chances exist in the external environment, it depends firm whether the firm is willing to exploit the opportunities or may be they ignore the opportunities due to lack of resources. While, threats are always evil for the firm, minimum no of threats in the external environment open many doors for the firm. Maximum number of threats for the firm reduce their power in the industry. The second step is assign a weight to each factor. The value of each weight should be between 0 and 1 (or alternatively between 10 and 100 if you use the 10 to 100 scale). Zero means the factor is not important. One or hundred means that the factor is the most influential and critical one. The total value of all weights together should equal 1 or 100. The third step is rate factors which is assign a rating to each factor. Rating should be between 1 and 4. Rating indicates how effective the firm’s current strategies respond to the factor. 1 = the response is poor. 2 = the response is below average. 3 = above average. 4 = superior. Weights are industry-specific. Ratings are company-specific. The fouth step is multiply weights by ratings. Multiply each factor weight with its rating. This will calculate the weighted score for each factor.lastly, total all weighted scores which is add all weighted scores for each factor. This will calculate the total weighted score for the company.
17
EXTERNAL FACTOR EVALUATION (DUTCH LADY) (EFE) MATRIX OPPORTUNITIES 1) Easy to maintain in the market. 2) 3) 4) 5)
High demand in the market. Expert in an innovation. High customer loyalty Get the highest awareness from customers 6) Healthy campaign by the government THREATS 1) Many existence competitors. 2) Many product substitutions 3) Rapidly change in tastes and preferences of customer. 4) Competitors price 5) Probability of cows attack by virus TOTAL
RATING (1-4) 4
WEIGTHE D 0.1
WEIGHTED SCORE 0.4
3 2 3 4
0.09 0.07 0.08 0.1
0.27 0.14 0.24 0.4
4
0.1
0.4
RATING (1-4) 4 3 2
WEIGHTE D 0.1 0.09 0.08
WEIGHTED SCORE 0.4 0.27 0.16
4 3 36
0.1 0.09 1.0
0.4 0.27 2.95
EXPLANATION The diagram was show the external factor evaluation, that the opportunities are more than the threats of the Dutch Lady Company. There are six opportunities that we state for the Dutch Lady. We put rate 4 which is the highest rate for the opportunities for the Dutch Lady is easy to maintain in the market because Dutch lady have high market share leader in the growing up of milk segment. Next, the opportunity is get the highest awareness from customers because Dutch Lady involve in government program.
At the same time, Dutch Lady Company also join
the Healthy campaign that implement by the government because the mission of Dutch Lady Malaysia is to help Malaysia move forward in life with a reliable dairy 18
nutrition. Besides, for the threat Dutch Lady Company, we put 4 scale rates for threat that Dutch Lady has many existence competitors because there are many of company that produce milk with the same like a Dutch Lady already produce. Next the highest rate scale threat is competitor’s price. As we know, there are many of milk is cheaper rather than Dutch Lady Brand
7. COMPETITIVE PROFILE MATRIX OF DUTCH LADY NESTLE Critical success factor
Weigh t
Advertising
DUTCH LADY
MARIGOLD
Rating
Score
Rating
Score
Rating
Score
0.1
4
0.4
3
0.3
1
0.1
0.1
4
0.4
4
0.4
3
0.3
0.1
4
0.4
4
0.4
4
0.4
Management
0.1
3
0.3
3
0.3
3
0.3
Financial position
0.2
4
0.8
3
0.6
2
0.4
Consumer Loyalty
0.2
4
0.8
3
0.6
2
0.4
Market Share
0.1
4
0.4
3
0.3
3
0.3
Total
1.00
27
3.5
23
2.50
18
22
Product Quality Prices competitiven ess
SCALE 1–Major Weakness 2-Minor Weakness 3-Minor Strength 4-Major Strength
19
8. SPACE MATRIK Definition The SPACE matrix is a management tool used to analyze a company. It is used to determine what type of a strategy a company should undertake. The Strategic Position & Action Evaluation matrix or short a SPACE matrix is a strategic management tool that focuses on strategy formulation especially as related to the competitive position of an organization. The SPACE matrix can be used as a basis for other analyses, such as the SWOT analysis, BCG matrix model, industry analysis, or assessing strategic alternatives (IE matrix). The SPACE matrix is just a little bit more complex than the SWOT analysis. The SPACE matrix evaluates different variables and assigns them a score considering how important they are for the situation of the company. It analyzes four different areas (two internal to the company and two external) that will represent four quadrants in a graphic. The SPACE matrix is broken down to four quadrants where each quadrant suggests a different type or a nature of a strategy which is aggressive, conservative, defensive or competitive. Besides that, the SPACE Matrix analysis functions upon two internal and two external strategic dimensions in order to determine the organization's strategic posture in the industry. The internal strategic dimensions represented by the financial strength (FS) and the competitive advantage (CA); and the external strategic dimensions represented by the environmental stability (ES) and the industry strength (IS). There are many SPACE matrix factors under the internal strategic dimension. These factors analyze a business internal strategic position. The financial strength factors often come from company accounting. These SPACE matrix factors can include for example return on investment, leverage, turnover, liquidity, working capital, cash flow, and others. Competitive advantage factors include for example the speed of 20
innovation by the company, market niche position, customer loyalty, product quality, market share, product life cycle, and others. Other than that, SPACE matrix factors related to business external strategic dimension are for example overall economic condition, GDP growth, inflation, price elasticity, technology, barriers to entry, competitive pressures, industry growth potential, and others. These factors can be well analyzed using the Michael Porter's Five Forces model. The SPACE matrix calculates the importance of each of these dimensions and places them on a Cartesian graph with X a coordinates.
Internal Strategic Dimensions Financial Position (FP) It includes everything that refers to the financials of the company. We can consider the Return on Investment (ROI), which is how much money is recovered from each unit of money invested, the liquidity of the company. It means that how easy a company can make cash all his assets and the cash flow. Each one of these variables is given a numeric value from 1 (worst) to 7 (best) according to our perception of how good the company is doing regarding that variable. Competitive Position (CP) This is the next variable considered in the internal strategic dimension. Market share, quality of the product, product life cycle, customer loyalty, the knowhow and the power of company over its suppliers and intermediaries are some of the variables to be considered. As in the other internal strategic dimension, each variable considered is given a numerical value, but in this case from -1 (being the best) to -7 (being the worst).
External strategic dimensions Industry Position (IP) It considers external forces that belong to the industry where the company develops its activities. Variables as growth potential, profit potential, financial 21
stability, resource utilization and productivity are considered. As well, in this dimension each of these variables is given a score that goes from 1 (worse) to 7 (best). Stability Position (ES) Last, ES is considered. It refers to how stable is the market where the company operates. Things like rate of technological change, inflation, demand variability, price range of competing products, risks of the industry and the barriers to enter or exit the market are considered. The more stable is the market; more favorable is for the company to operate in it. A score from -1 (best) to -7 (worst) is given to each of the variables considered.
The Space Matrix Analysis diagram:
22
SPACE MATRIX OF DUTCH LADY IFE final score 3.01
2
3
1
4
III
I 3 2.95 EFE final score
II
V IV
VI
2
VII
VII
IX
1
23
Based on the space matrix that is show in the diagram we can see that Dutch Lady Company is on the I, II, IV build and growth strategy. In this case, the Dutch Lady Company tactical strategies should focus on market penetration and product development. Base on the SWOT we conclude that the Dutch Lady Malaysia as the market share leader in the growing up milk segment. It can be proved with the Dutch Lady brand holding 40% of national market share. Dutch Lady was the first Malaysian dairy company to use Ultra-High Temperature (UHT) processing and packaging to produce and market milk in this country. Then the Company continued to progressively manufacture and introduce new products into the Malaysian market which is sterilized milk were locally produced and sold in plastic bottles in 1983. They also provide production of chilled milk products started in 1986, and fruit yoghurt and growing up milk were introduced into the market in 1988.
Dutch Lady Malaysia was the first company in the world to introduce growing up milk products for children up to six years old. Dutch Lady Malaysia already develops their product because they have different types of dairy products suitable for both children and adults. It started with the production of a single product which is sweetened condensed milk and has since expanded to a full range of dairy products locally manufactured in its factory. Its current products include products for infants, growing up milk, UHT milk, pasteurized milk, sterilized milk, family powdered milk, low fat and 0% fat drinking yoghurt, and low fat yoghurt.
24
SCALE: -7 (WORSE), 7(BEST) EXTERNAL POSITION STABILITY POSITION (SP) FEATURES
RATING
Technology changes
-1
Inflation
-3
Competitors Price
-6
Barriers to enter the market
-1
Barriers to exit the market
-3
Risk
-4
Total
-18
CALCULATION: -18/6: -3 INDUSTRIAL POSITION (IP) FEATURES
RATING
Growth potential
6
Profit potential
5
25
Financial Potential
4
Ease to enter market
7
Productivity
6
Capacity Utilization
4
Total
32
CALCULATION 32/6: 5.33
INTERNAL POSITION CP (COMPETITIVE POSITION) FEATURES
RATING
Market share
-2
Product quality
-1
Customer loyalty
-1
Control over supply and distributor
-2
Knows the later technology
-2
Product life cycle
-2
Total CALCULATION
-10
-10/6: -1.667
FS ( FINANCIAL POSITION) FEATURES
RATING
Return on Investment
5
Cash Flow
5
Inventory Turnover
4
Working Capital
6 26
Total
20
CALCULATION 20/4: 5
OVERALL CP+IP = (-1.667 +5.33) = 3.663
SP+FS = (-3+5) =2
EXPLANATION As we know, the aggressive quadrant lies in between the financial strength axis with that of the industrial attractiveness. Here, all the four dimensions of the axes are showing high scores. If readers are aware, high scores of both CA and IA 27
will push the average to the right of the x axis while high scores on both FS and ES will push the average of the y axis toward the top. With all the scores being positive then the company is supposed to be in a comfortable position and therefore, an aggressive strategy is appropriate. An aggressive strategy would treat growth and expansion of high priority. This will also the require the drive to get more market share and new markets. We can approve that Dutch Lady Company is suitable to be in the aggressive quadrant because they already have the highest market share and they have high opportunity to get more market share and new markets in the market. At the same time they are also in a comfortable position in the market. It is because, they already be the market leader and have many customer that are very loyal to them. Besides, customer also aware about their product because Dutch Lady Company is good in implement their advertising. For example, they have many type of advertising such as through the internet, television and also the newspaper.
9. STRATEGIC PLANNING PROCESS (THE EXTERNAL ENVIRONMENTAL ANALYSIS) Dutch Lady Milk Industries Berhad engages in the branded manufacturer and distribution of dairy industry milk product in Malaysia. Previously, Dutch Lady Berhad is a subsidiary company under Royal Friesland Foods’ that first production in Nertherlands, there are one of the world’s largest dairy companies.Dutch Lady Malaysia started as Pacific Milk Industries (Malaya) Sdn Bhd in 1963 where it was in Petaling Jaya factory. Five years later, Pacific Milk Industries (Malaya) became the first milk company in Malaysia that listed on the Stock Exchanges of Kuala Lumpur and Singapore. The company changed its name to Dutch Baby Milk Industries (Malaya) Berhad in 1975, and again in year 2000 now as Dutch Lady Milk Industries Berhad. The company have strong consumer following and well known for its dairy products and beverage brands such as Dutch Lady, Frisolac, Friso, Completa, Omela and Joy. The product line of the company include product for infants, growing-up
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milk formula, powdered milk, condensed milk, UHT milk, sterilised milk, Pasteurized Milk, Cultured Milk, Yogurt and also fruit juice drinks. The Five Forces Model of Michael Porter comprises and analysis or understanding the nature of the competitive environment. They can ensure that management considers a wide range of potential impacts when devising strategy. In addition, Porter’s five forces also help to develop effective strategies to raise profitability, power and competitive position in industry. Porter’s five forces is divided into threats posed by new entrants, bargaining power of suppliers, bargaining power of buyers, substitute products and intensity of rivalry among competitors. These are also one most widely used and best known conceptual framework to assess the nature of the industry environment. The strength of the five forces determines of profit potential of an industry by influencing the price, cost and required investments of business.
THREAT OF NEW ENTRANTS Threat of new entrant into market will bring extra adventure and intensify competition. The strength from new entrants will depends on barriers to entry and likely raise response of existing competition and substantially erode the existing firm’s to a new entrant. Moreover, some market for the industry is relatively untapped and considerable marketing opportunities. It is easy for new firms to enter into the industry because it has low- entry barriers. The main competitors of Dutch Lady Berhad are Nestle (M) Berhad and Marigold Brands (M) Sendirian Berhad. They were produce similar products and getting their customer support on higher demand from the buyer. Nestle (M) Berhad also became a threat when it tried to extend its production capacity by investing more money, and thus has a possibility of affecting Dutch Lady Berhad’s revenue.
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Apart from this, Marigold Sdn Bhd focused on the produce nutritious products. The company was trying to provide consumers with healthy products to enhance quality of life. Company threat is more difficult to control, because Dutch Lady Management need to concentrate on changing buyer’s preference and also maximize the shareholder’s wealth.
BARGAINING POWER OF SUPPLIERS Bargaining power of supplier’s is define with stronger power of suppliers in an industry were more difficult to firms make high profit. As we know important source supplier such as labor, parts and raw materials before produce goods and services. The suppliers will supply and sell directly to the firm’s by passing beyond their demand and need of production process. The most important material and ingredients that are contented in Dutch Lady Milk is the fresh and pure milk, because milk is essential for the production process making Dutch Lady Dairy milk. In addition, labor in factory, box of packaging, bottle of yogurt, plastic bags and packaging of paper are other things that Dutch Lady Company need. After all the raw material is ready, so the process were begin as soon as possible. So, raw material supply product is very important in industry because they need to help each other. Furthermore, Dutch Lady Malaysia supports local industries by putting substantial amount of local ingredients in its products. Because, Dutch Lady company Berhad is the largest buyer of local fresh milk from the Veterinary Services Department which is done under the Company’s Dairy Development Program. Unfortunately most of our competitors also search for new supplier and it may not easy to reduce cost as low as before.
BARGAINING POWER OF BUYERS OR CUSTOMER
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The bargaining power of buyer means of potential buyers or powerful buyer that can force price cuts, high demand on product and gain more consumers’ attention towards the main product of the company. Dutch Lady positions the product as though it was meant not only for babies but for another consumer as well. For example, Dutch Lady 123, Dutch Lady 456, and Dutch Lady 6 - plus. Buyers also have search full information about the dairy product in market. Because they need to evaluate and choose on healthy product, that are provide best quality product or if they can affordable to buy. Dutch Lady retains their customer by improving product quality and introduce new product such as dairy drinks, yogurts, desserts, cream, coffee creamers, baby milk and infant food and also cheese. Dutch Lady Berhad gets benefits from obtaining global procurement services and innovation activities. For example, Dutch Lady was the first Malaysian dairy company that used Ultra-High Temperature (UHT) processing and packaging to produce and market milk in the country. Moreover, Dutch Lady Malaysia produces, and also offers various flavors and size of product. Such as chocolate, strawberry, coffee and full cream and also low fat milk product. It will give more choice to customer make evaluation before make a decision to buy. Moreover, Dutch Lady Milk powder provided satisfy for customer needs that who want mix it with other flavor and it has a rich and creamy taste. Furthermore, Dutch Lady also has provided different formulations to cater to children of different ages that suitable to brain development and healthy growth. Therefore, most of the mother would choose Dutch Lady Milk products for their children rather than choose other products because they want the best for their children growth.
From bargaining power of buyers, products represent large expense for customers and improve in sales revenues. Customer could not switch to another product because they are actually loyal and satisfy on product when make purchase. As the company they would define of customer loyalty based on consumer database. In another ways is from average of the profit that always
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increases even though the price of product changes at the certain time or place. But it will not cause loyal customer to change mind and buy another product.
SUBSTITUTE PRODUCTS Porter’s five forces have include the threat of substitute product which is other firms has offers similar product with similar benefits for the customer. This threat may effects the competitive environment of the company and influence ability to achieve profitability. Buyers always have different choice for their beverage and dairy product. So, there is risk on switching cost for buyers. Potential buyer comes with different based on taste, customer behavior and preference. They would be change every day because they will purchase the product that they prefer to buy. In general substitute products come from one business then replaced with another product but still produce in product line market. Besides that, Dutch Lady Berhad was the first in the world company recommend a growing up milk formula powder specifically for children from ages one to three years old. These products are available now in Malaysia as Dutch Lady 123 and Dutch Lady 456 and Dutch Lady 6- plus. Dutch Lady Milk Industry Berhad always had an innovative approach towards their product portfolio. So, the company comes up with a new type product every four or five years. Whenever an opportunity is seen in the market, Dutch Lady Company were grab it and the management creates a product diversification. The Dutch Lady company continue progressively manufacture and introduce new product into Malaysian market for those who did not drink milk directly or allergic with fresh milk. So company tries to produce calcium snack for customer. It may help customer to take their nutrition and protein from milk. It were come with various type of flavor and size and also available for certain age. This is the fact that comparison usage with previous milk powder formulation.
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In addition, to make the product aware and known by consumer, some product were distributed surrounding in market or do advertisement awareness and make as a sponsorship for event or games. But, there are some opportunities that company take over which is they are distribute the milk product among the primary school, and the product are given to student every week. So people might know about the product and continue loyal with Dutch Lady Brand. The another way to make customer aware and realize about the Dutch Lady product is together bringing Malaysians to participate in the annual World Milk Day celebrations initiated by Food and Agriculture Organization of the United Nations. The objective of the celebration is to contribution the important to take care of healthy in the first step by citizens. Threat of substitute products is the existing problem in business, and the company solves with good solution make or produces some other product that can give same functions or same benefits. The product must be totally different and unique from the competitor product. A multinational produces with nutritious and high-quality dairy products, new taste flavor, health fresh milk, and convenience on Halal certificates and also hygiene milk and reliability are key of characteristic best product to customer. It will fulfill customer desire, needs, satisfaction and repeat purchase. The product range consists of consumer for example, milk in powder and concentrated form, dairy drinks, yogurts, desserts powder, cream, coffee creamers, baby milk and infant food, cheese and butter. However, Dutch Lady HL Milk is lowfat milk that has perfect balance of nutrients for everyone in family members and it consistent high calcium and protein. Dutch Lady is first choice for the customers who caring for their health conscious. The company trusts in product innovation and its holding company, Royal Friesland Campina supported this act. The company continuously improves its processes to provide high quality and nutritious products to its customers.
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RIVALRY AMONG COMPETITORS There many competitors in industry that produce similar or almost similar goods and services. Because our competitor will produce same product with same function and focus on same customer. Rivalry among competitors is strongest of the five competitive forces and can vary widely among industry. If the rivalry among competitors is weak, companies able to rise price and earn more profit. Intensity of competitive rivalry among competitors in industry strives companies to gain competitive advantages. The company gains the competitive advantage by several ways such as pricing policy, improving the products differentiation with other competitor and exploiting relationships with suppliers. If can gain more competitive advantages over competitors, it can increase company profitability. Apart from that, some competitors will display their product nearby company because they want to take customer aware about the product. For example, they are placing same type of product together and allowed buyers to search easily. Beside, degree of product differentiation is low, because customer may feel confused and think all brands are similar. It will make buyer difficult to define product or choose another product based on their preference and need. For example, main competitor of Dutch Lady is Nestle and Marigold Brands. They are rivalry because they produce the similar product in market. Such as milk in powder and concentrated form, dairy drinks, yogurts, coffee creamers, baby milk and infant food, cheese, butter. Same based on various type of flavor, target level age of consumption, promotional tools, and same supplier. Because of this situation, may occurs customer change or switch their like easily. Although there are many competitors in
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market but the Dutch Lady Company has done a lot of promotion and activities to gain more than half of the market share.
10.
QUANTITATIVE STRATEGIC PLANNING MATRIX
(QSPM) Key Factor
Weig ht
OpportunitIies
a) Make a new flavors of the milk
the old folks
0.1
3
Total Attractivene ss score 0.3
market. 2. High demand
0.09
3
0.27
3
0.27
in the market. 3. Expert in an
0.07
2
0.14
2
0.14
innovation. 4. High customer
0.08
3
0.24
3
0.24
0.1
3
0.3
3
0.3
0.1
4
0.4
4
0.4
1. Easy
Attractivene ss score
b) Produce milk for
to
Attractivene ss score 3
Total Attractivene ss score 0.3
maintain in the
loyalty 5. Get
the
highest awareness from customers 6. Healthy campaign
by
the government 35
Threats
Attractivene ss score
Total Attractivene ss score
Attractivene ss score
Total Attractivene ss score
0.1
3
0.3
4
0.4
competitors. 2. Many product
0.09
3
0.27
4
0.36
substitutions 3. Rapidly
0.08
3
0.24
-
-
0.1
4
0.4
4
0.4
0.09
3
0.27
3
0.27
Attractivene ss score
Total Attractivene ss score
Attractivene ss score
Total Attractivene ss score
1. Many existence
change tastes
in and
preferences of customer. 4. Competitors price 5. Probability of cows attack by virus Strengths
1. Market leader
0.09
-
-
0.1
-
-
share 3. Good profit
0.08
1
0.08
1
0.08
stability. 4. Export widely. 5. Get the
0.08 0.08
1 3
0.08 0.24
1 2
0.08 0.16
in the high quality branded dairy business in Malaysia. 2. Have
the
highest market
highest awareness from 36
customers 6. All have halal
0.1
4
0.4
4
0.4
certificate. 7. High quality of
0.08
3
0.24
3
0.24
the milk. 8. Variety
0.07
-
-
-
Attractivene ss score 3
Total Attractivene ss score 0.27
-
of
flavors Weaknesses
1. Dutch Lady
Attractivene ss score
Total Attractivene ss score 0.27
0.09
3
0.09
-
-
0.08
-
-
0.06
-
-
just produces the milk from cow milk. 2. Not produce milk for the old folks. 3. Have high contain of sugar. 4. Rarely change their packaging TOTAL
4.44
4.31
Based on the quantitative strategy planning matrix (QSPM) that is show in the diagram, we can see that ‘make new flavors of the milk’ get the highest for total attractiveness score which is 4.44
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11.
BLUE OCEAN STRATEGY
Definition The Blue Ocean Strategy is one of the most powerful innovation processes, aiming at creating profitable high-growth for companies. The objective is to create and capture new demand by focusing on unaddressed groups of customers (noncustomers), with a strategic offering that creates a leap in value for both the buyers and the company. Its describes the opportunities of vast, untapped market spaces, or "Blue Oceans," that can be developed by expanding market boundaries or launching new industries. The strategy is the simultaneous pursuit of differentiation and low cost, with the theory behind it not to out-perform the competition in the existing industry, but to create new market space or a "blue ocean," thereby making the competition irrelevant. In term of blue oceans, demand is created rather than fought over. There is ample opportunity for growth that is both profitable and rapid. Other than that, in blue oceans, competition is irrelevant because the rules of the game are waiting to be set. Blue ocean is an analogy to describe the wider, deeper potential of market 38
space that is not yet explored. Blue ocean strategy model highlights the principles and framework and tools that every company can use successfully to formulate and execute blue ocean strategy. The six principles are reconstruct market boundaries, focus on the big picture, reach beyond existing demand, get the strategic sequence right, overcome organizational hurdles and build execution into strategy.
BLUE OCEAN STRATEGY OF DUTCH LADY 1. ELIMINATE -
3. RAISE -
2. Reduce - Sugar content in drinks
Raise the size of yoghurt bottle
4. CREATE Capsule as the supplement or vitamin for those who are not interested to milk. - Produce chocolate bar
Reduce
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Dutch Lady should reduce the quantity of sugar found in milk content. As we know Dutch Lady Products for children. First of all, we need to understand that children growing need of energy resources to help them grow. The main source of energy is carbohydrates and fats. Carbohydrates are very important, because it is a major source of energy needed for healthy growth and development of the body and the brain, especially for growing children. Sugar is a type of carbohydrate. Milk is a natural product itself contains sugar called lactose. Sugar (lactose) that contain in milk is helping the child to grow up. Therefore, all of Growing up Milk will contain some form of sugar. Dutch Lady Growing up Milk is nutritionally designed using a combination of natural sugar in milk called lactose and also added so that the ratio of natural plant sugars naturally lactose in milk can be maintained. Based on years of research, we found that it is important for our Growing up Milk optimally formulated. Research conducted revealed that products that are not optimally formulated, for example with high lactose cannot be accepted by Malaysian
children.
Some
children
who take
high
lactose
milk
can
have
complications such as diarrhea, bloating (due to too much wind / gas) the impact of their body's inability to excessive metabolic lactose. Therefore, we suggest reducing sugar found in milk.
Raise Dutch Lady Products that available on the market only have in small sizes. It make troublesome to users who tend to eat much because they have to buy in a large quantities to enjoy the meal that much.
Create Nutritious milk means the liquid produced by the mammary glands of female mammals. It provides the primary source of nutrition for newborns before they are able to digest other foods. It is also can processed into dairy products such as cream, butter, yogurt, ice cream, gelato, cheese, casein, wheat protein, lactose, condensed milk, powdered milk, and many other types of extra-food and 40
manufactured products. So we are planning to create a chocolate bar which can be produced from cow's milk. Next company can plan to create cow's milk-based foods in capsule form. This is because it will help people who do not like to drink milk directly. This can help customer to get their vitamin or supplement easily. These capsules are creating suitable for all consumer. Dutch Lady Company just produces drink milk and powdered milk. Thus, company can create another product innovation such as produce chocolate bar.
12.
CONCLUSION
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13.
REFERENCES
Book Reference Zainal Abidin Mohammad, Ho Jo Ann, Wong Foong Yee (2014), Strategic Management Second Edition, Oxford University Press. Reference for website: 1. 2. 3. 4. 5.
http://www.halalexporter.com http://www.dutchlady.com.my http://www.studymode.com http://www.mida.gov.my https://www.scribd.com
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