HWA TAI INDUSTRY BHD 1.0 INTRODUCTION INT RODUCTION OF HWA TAI TAI INDUSTRY INDUS TRY BHD
1.1 Background Hwa Tai Industry Bhd has successfully established a strong presence in Malaysia and has built up a wide international market. Hwa Tai Tai Industry Bhd can be found locally from fro m small sundry shops to big hypermarkets, fast-food chains, airlines and other mass consumption industries. Hwa Tai Industry Bhd is to be a leading biscuits and confectionery manufacture in the region known for its product uality and !ariety. "ow, Hwa Tai is one of the fi!e ma#or biscuit manufacturers in the country. Hwa Tai Tai Industry Bhd plans to embark on aggressi!e promotional and marketing acti!ities, focusing f ocusing on selected products as it tries to e$pand sales in the domestic domestic market. %ll the products products are safety and hygiene for consumers use by using high technologies to produce the product. Hwa Tai Industry Bhd e$pected high standards from their staff to the pro!ision of the highest uality ser!ice in the business. There is &'( of the company)s production is e$ported internationally to countries like *hina, Taiwan, Hong +ong, ingapore and others. 1. trategic posture 1..1 *ompany ogo
1.. /b#ecti!es0 Hwa Tai is committed in producing best uality biscuit products for our customers all o!er the worlds and creating business opportunities for our partners. e ha!e more than 2' years of manu manufac factu turi ring ng e$pe e$perie rienc ncee and and the the abil ability ity to mana manage ge our our enti entire re !alu !aluee chai chain, n, from from procurement of raw materials to distribution of finished products. 3rom the company)s !ery first beginning, we ha!e recogni4ed that the skilled and dedicated people who work for use are critical to our success. e e$pect high standards that our staff which is a team totally committed to the pro!ision of the highest uality ser!ice in the business. 1..5 trategies0 Hwa Tai Industries ha!e a strong di!isional corporate structure. % strong di!isional corporate structure can lead the company more powerful to operate. They try their best to gather different idea and knowledge to come out creati!e and inno!ati!e idea to sol!e all problems or create a new product. The Board of 6irectors ha!e recogni4es its o!erall responsibility for maintai maintainin ning g the 7roup) 7roup)ss system system of Intern Internal al *ontro *ontroll and risk managem management ent to safegua safeguard rd shareholders) in!estment and the *ompany)s assets, as well as for re!iewing the adeuacy and integrity of the internal control system. "ot only that, Hwa Tai Industry Bhd is also doing 8esearch and 6e!elopment 98:6;. 8esearch and de!elopment 98:6; can help organi4ation 1
HWA TAI INDUSTRY BHD research target market and customer needs, thus de!eloping new and impro!ed products and ser!ices to fit these needs. 8esearch and 6e!elopment can lead to inno!ation and increased producti!ity and can boost our business
trategic Managers
1.5. 1.5.1 1
Boar Board d of 6ire 6irect ctor orss
a; Mr. Mr. oo oo Thie Thien n Ming Ming > oo oo Thie Thien n ee Mr. oo Thien Ming is a Malaysian. He is ?5 years old and he is the *hairman on the Board of the *ompany. He was appointed to the Board on ? %pril 1@@?. Mr. oo is a Barrister-%tawof incoln)sInn, ondon. He is an ad!ocate and solicitor by profession and has been in practice for 5? years. He is also a "otary =ublic and *ommissioner for /aths. He holds se!eral directorships in pri!ate companies in Malaysia and abroad. He is the *hairman of the "omination *ommittee and 8emuneration *ommittee. Mr. oo has a direct shareholding of 1,5A,?A ordinary shares of 8M1 in the *ompany as at 5' %pril '1'. He is deemed to ha!e an interest in the euity holdings held by the *ompany in its subsidiaries by !irtue of his controlling interest in the *ompany. *ompany. b; Mr. oo *hung ee Mr. oo *hung ee ee is a Malaysian. He is the 7roup *hief C$ecuti!e 6irector 6ir ector Mr. oo *hung ee is a non-independent e$ecuti!e director. He was appointed to the Board on 1?%ugust ''&. Mr. oo holds a Bachelor of %rts from the Dni!ersity of 6erby, Dnited +ingdom. He was awarded the %sia =acific Cntrepreneurship %ward 9Cmerging Cntrepreneur E Malaysia; in ''A and the F*I *reati!e oung Cntrepreneur %ward 9Funior *hamber International E Malaysia; in ''G. He also holds se!eral directorships in pri!ate companies in Malaysia and abroad. He is a member of the 8emuneration *ommittee. c; Cncik Mohamed Mohamed 8a4if 8a4if Bin Tan Tan ri %bdul %bdul %4i4 Cncik Mohamed 8a4if BinTan ri %bdul %4i4 is independent non-e$ecuti!e director. He is a Malaysian and appointed to the Board on ' March ''?. He is a Barrister-at-law from incoln)s Inn Dnited +ingdom. He was admitted as an %d!ocate and olicitor of the High *ourt *ourt of Malaya Malaya in 1@G2. 1@G2. He special specialist ist in corpor corporate, ate, financi financial al ser!ices ser!ices and con!in con!incing cing matters and has handled numerous housing pro#ects for ma#or de!elopers and a !ariety of corporate corporate as well as offshore offshore loan documentations. documentations. He also specialises in yariah yariah *orporate aw aw and and yari yariah ah *on! *on!in incin cing ge ecu curit rity y docu docume ment ntat atio ion. n. He is an ad!i ad!iso sorr for for inte intern rnal al disc discip ipli lina nary ry inu inuir iry y comm commit itte tees es of !ari !ariou ouss orga organi ni4a 4ati tion ons. s. He is also also in!o in!ol! l!ed ed in *ommercialisation of Biotechnology =roducts and er!ices and familiar with the Malaysian 2
HWA TAI INDUSTRY BHD research target market and customer needs, thus de!eloping new and impro!ed products and ser!ices to fit these needs. 8esearch and 6e!elopment can lead to inno!ation and increased producti!ity and can boost our business
trategic Managers
1.5. 1.5.1 1
Boar Board d of 6ire 6irect ctor orss
a; Mr. Mr. oo oo Thie Thien n Ming Ming > oo oo Thie Thien n ee Mr. oo Thien Ming is a Malaysian. He is ?5 years old and he is the *hairman on the Board of the *ompany. He was appointed to the Board on ? %pril 1@@?. Mr. oo is a Barrister-%tawof incoln)sInn, ondon. He is an ad!ocate and solicitor by profession and has been in practice for 5? years. He is also a "otary =ublic and *ommissioner for /aths. He holds se!eral directorships in pri!ate companies in Malaysia and abroad. He is the *hairman of the "omination *ommittee and 8emuneration *ommittee. Mr. oo has a direct shareholding of 1,5A,?A ordinary shares of 8M1 in the *ompany as at 5' %pril '1'. He is deemed to ha!e an interest in the euity holdings held by the *ompany in its subsidiaries by !irtue of his controlling interest in the *ompany. *ompany. b; Mr. oo *hung ee Mr. oo *hung ee ee is a Malaysian. He is the 7roup *hief C$ecuti!e 6irector 6ir ector Mr. oo *hung ee is a non-independent e$ecuti!e director. He was appointed to the Board on 1?%ugust ''&. Mr. oo holds a Bachelor of %rts from the Dni!ersity of 6erby, Dnited +ingdom. He was awarded the %sia =acific Cntrepreneurship %ward 9Cmerging Cntrepreneur E Malaysia; in ''A and the F*I *reati!e oung Cntrepreneur %ward 9Funior *hamber International E Malaysia; in ''G. He also holds se!eral directorships in pri!ate companies in Malaysia and abroad. He is a member of the 8emuneration *ommittee. c; Cncik Mohamed Mohamed 8a4if 8a4if Bin Tan Tan ri %bdul %bdul %4i4 Cncik Mohamed 8a4if BinTan ri %bdul %4i4 is independent non-e$ecuti!e director. He is a Malaysian and appointed to the Board on ' March ''?. He is a Barrister-at-law from incoln)s Inn Dnited +ingdom. He was admitted as an %d!ocate and olicitor of the High *ourt *ourt of Malaya Malaya in 1@G2. 1@G2. He special specialist ist in corpor corporate, ate, financi financial al ser!ices ser!ices and con!in con!incing cing matters and has handled numerous housing pro#ects for ma#or de!elopers and a !ariety of corporate corporate as well as offshore offshore loan documentations. documentations. He also specialises in yariah yariah *orporate aw aw and and yari yariah ah *on! *on!in incin cing ge ecu curit rity y docu docume ment ntat atio ion. n. He is an ad!i ad!iso sorr for for inte intern rnal al disc discip ipli lina nary ry inu inuir iry y comm commit itte tees es of !ari !ariou ouss orga organi ni4a 4ati tion ons. s. He is also also in!o in!ol! l!ed ed in *ommercialisation of Biotechnology =roducts and er!ices and familiar with the Malaysian 2
HWA TAI INDUSTRY BHD Intellectual =roperty laws. He is a committee member of the +uala umpur Malay *hamber of *ommerce and is the *hairman of the =rofessional *ommittee of the said *hamber. He is the 6eputy =resident of outhampton Dni!ersity Dnited +ingdom %lumni and a committee member of both the Malay *ollege /ld Boys %ssociation 9M*/B%; and incoln)s Inn %lumni. 1.& Internal Cn!ironment 1.&. 1.&.1 1
*orp *orpor orat atee tr truc uctu ture re
Hwa Tai Industries Bhd is a well-known company e!eryone knows what is selling by this company. 3or a company to be successful or not are based on the company)s corporate structu structure. re. Hwa Tai Indust Industries ries Bhd has a strong strong di!isi di!isiona onall corpor corporate ate structu structure re of their their company. The Board of 6irectors recogni4es its o!erall responsibility for maintaining the 7roup) 7roup)ss system system of Intern Internal al *ontro *ontroll and risk risk manage managemen mentt to safegua safeguard rd shareh sharehold olders) ers) in!estment and the *ompany)s assets, as well as for re!iewing the adeuacy and integrity of the internal control system. 6ue to limitations inherent in any system of internal control, it is important to note that the system is designed to manage rather than eliminate risk of failure to achie!e corporate ob#ecti!es. Therefore, the system can only pro!ide reasonable and not absolute assurance against material misstatement or loss. 1.&.
*orporate *ulture
hether hether written as a mission mission statement, statement, spoken or merely understood, understood, the corporate corporate culture must describe and go!erns the ways a company)s owners and employees think, feel and act. Therefore, corporate culture plays an important role in determining how well a business will do it. If anyone in the company feels not happy with the current culture, there should be changing the culture into more comfortable to each member. The culture must consist with the current ob#ecti!es, strategies and policies so that can achie!e the target of the company. The The 7rou 7roup) p)ss mana managem gement ent team team meet meetss regu regula larly rly to re!iew re!iew and and moni monito torr the the busin business ess de!elopment, discuss and resol!e key operational and management issues and re!iew the financial performance against the business plan and budget for each operating units within the 7roup. The Board of 6irectors and management ha!e ensured that safety and health regulations ha!e been considered and complied with. 1.2 *orporate 8esources 1.2.1 Marketing Hwa Tai has successfully established a strong presence in Malaysia and has built up a wide international market. The products can be found locally from small sundry shops to big hypermarket, fast-food chains, airlines and a nd other mass consumption industries. % total of &'( of these products is e$ported internationally to countries such as *hina, Taiwan, Hong +ong, ingapore, Brunei, D%, Mauritius, Middle Cast, =apua "ew 7uinea, Maldi!es, "igeria and 3
HWA TAI INDUSTRY BHD G other countries. Hwa Tai is still continuing to growth and support facilities are constantly being upgraded and continue their goal of producing the finest products ranges possible. 1.2.
3inancial
es, they are clearly stated or merely implied from performance or budget. es, the company)s financial ob#ecti!es, strategies and policies are consistent with the corporation)s mission, ob#ecti!es, strategies and policies and with the internal and e$ternal en!ironment. The company re!enue is decrease from 8M ?5.A2 million to 8M ?1.5' million. This is because of the company losing a certain /CM 9/riginal Cuipment Manufacturer; customer cake products and also lower sales from the international market. The lower re!enue had in part resulted in the deterioration of the 7roup)s results which recorded a net loss of 8M 1.G' million as compared to a net profit of 8M 5G2,''' in '1'. In addition, the decline in the results was also caused by higher spending on ad!ertising and promotional acti!ities to counter intense market competition and fluctuating market condition. 1.2. 5 Business en!ironment The global economy in the year '11 did not see any impro!ement as compared to the preceding year. % series of massi!e natural disaster which struck !arious parts of the world, the political unrest in the Middle Cast and the so!ereign debt crisis which hit the Curo Jone, all had attributed to the weakened economic en!ironment. 6espite the gloomy global economy, the Malaysian economy remained resilient in '11 with the 7o!ernment)s accommodati!e and supporti!e growth policies which had helped to keep domestic consumption healthy. 1.2.& 3oreign currency risk ensiti!ity analysis for foreign currency risk. % 1'( strengthening of the D6 and 76 against the 8M at the end of the financial year would ha!e increased 9decreased; profit or loss and euity. This analysis assumes that all other !ariable, in particular interest rates, remain constant. 1.? 8esearch and 6e!elopment 98:6; They aim to be a leading biscuits and confectionery manufacturer in the region known for its product uality and !ariety. es they are consistent with the corporation)s mission, ob#ecti!e, strategies, and policies and with the internal and e$ternal en!ironments. o for that they should ha!e a strong research and de!elopment department in their organi4ation to the de!elopment of new products, processes and ser!ice or to impro!ement of e$isting products, processes and ser!ice. Hwa Tai Industry BH6 had a strong strategy for research and de!elopment to impro!e their food industry. The technology also helps the organi4ation to impro!e their marketing strategy because they are updated the technology according to the trend so that they can manage the global marketing and competitor.
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HWA TAI INDUSTRY BHD Howe!er there is a limited presence in the organic food market. o for that the organi4ation should implement new product chain to compete the global market and local market. Because the competitor such as ondon Biscuit Berhad, Fulie)s Biscuit, Munchy)s and so on are ha!e a strong market in globally and locally. o the company should impro!e their recipes !ariety to attract the customer to stay loyal. 1.A /peration and ogistics 1.A.1 /perating The main ob#ecti!e of operating management of Hwa Tai Industry BH6 is for increasing the uality of food and working le!els of working process. This could reduce the number of errors, re#ects and damages of the products that produced by the company. This is also could reduce the cost of purchasing raw material and also cut cost the operating cost. o that the organi4ation should impro!e their operating system to produce uality product without wasting raw material and also can reduce the cost of operating. 1.A. ogistics Hwa Tai Industry BH6 has an effecti!e distribution network. ogistics is the management of the flow of resources between the point of origin and the point of consumption in order to fulfil some reuirements. The resources managed in logistics can include physical items, such as food, materials, euipment, liuids, and staff, as well as abstract items, such as time, information, particles, and energy. The logistics of physical items usually in!ol!e the integration of information flow, material handling, production, packaging, in!entory, transportation, warehousing, and often security. %s I mention there Hwa Tai Industry BH6 has an effecti!e distribution ser!ice. They offer a better transport ser!ice for their customer to make sure that the customer can obtain the product on the time. They also maintain the good transport ser!ice to their loyal customer. If they ha!e own transportation ser!ice they can reduce the cost by deli!er the product by itself and also on time. They also ha!e warehouse ser!ice with better condition. This means they emphasi4e cleanliness and safeness to make sure that their products are healthy to eat. 3inally, it)s more benefit if they ha!e own transportation ser!ice, warehousing and also maintains their operating system. Because if they make sure all those things are in better condition than the customer will prefer their products. 2.0 THE PRODUCT
The current direction of Hwa Tai Industry Bhd is to be a leading biscuits and confectionery manufacture in the region known for its product uality and !ariety. Biscuit maker Hwa Tai Industry Bhd wants to e$pand and strengthen its position in the country)s biscuit making industry. This is to ensure the company)s leading position in the competiti!e industry. "ow, Hwa Tai is one of the fi!e ma#or biscuit manufacturers in the country, with the rest comprising about ?' small and medium-si4ed companies. Today, Hwa Tai products can be 5
HWA TAI INDUSTRY BHD found at anywhere from small shops to hypermarkets, fast-food chains, airlines and other mass consumption industries. Besides, Hwa Tai Industry Bhd plans to embark on aggressi!e promotional and marketing acti!ities, focusing on selected products as it tries to e$pand sales in the domestic market. By using the high technologies to process the entire product, this is to make sure that all the products are safety and hygiene for consumers use. Hwa Tai has pro!ided se!eral types of products for consumer choices such as cracker, cookies cream sandwich and assorted biscuits. o, Hwa Tai biscuits are suitable for all members in a family, cakes, lu$ury,
/n the other hand, the commitment in in Hwa Tai Industry Bhd is producing the best uality biscuits for customers all o!er the world and creating business opportunities for partners. Hwa Tai has more than 2' years of manufacturing e$perience and the ability to manage the entire !alue chain from procurement of raw materials to distribution of finished products. 3rom the company
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HWA TAI INDUSTRY BHD 3.0 MOTIVES FOR GOING INTERNATIONAL
5.1 /!erarching 3actors %ffecting the 6ecision to 7o I nternational 5.1.1 =rimary Moti!es E 3or most pri!ate-sector businesses, profitability is of crucial importance. The opportunity to make profit by selling its products in a foreign market may therefore be attracti!e, especially if e$pansion in the home market is difficult because of slow market growth, market saturation, or regulatory obstacles. In some cases, significant business growth may only be possible through international e$pansion. International e$posure also enables a company to achie!e an international reputation, which may be important if it is to be regarded as an industry leader. =rofitability also depends on competiti!eness, so international e$pansion may be a way of reducing costs in a competiti!e international market. %ccess to international markets allows increased scale of production, leading to lower unit costs. Cconomies of scale are particularly important for a company like "estlK whose home market in wit4erland is relati!ely small. cale economies apply not only at the le!el of the production plant, but more especially at the le!el of the organi4ation as a whole. %ccess to international production allows international procurement of components and supplies, international relocation of production operations or outsourcing of business functions that can be undertaken at lower cost abroad 9known as Loffshoring); these include not only call-centre operations, for e$ample, but also many labour-intensi!e data-input tasks which are increasingly being outsourced to companies employing low-cost but highly skilled IT workers in countries like India 5.1. The *hanging International Cn!ironment E In broad terms, the main nat ions in!ol!ed in international business acti!ity ha!e e$perienced an unprecedented period of peace and stable international relations since 1@&2. 3rom time to time conflict in particular countries has disrupted trade flows, notably in commodities like oil during periods of turbulence in the Middle Cast, but the Dnited tates, estern Curope, and Fapan, which ha!e until recently been the ma#or trading nations, ha!e en#oyed generally cordial relations with each other. This has helped enormously to increase the !olume of world trade and in!estment, clearly ha!ing a positi!e influence on internationali4ation decisions. The historic opening up of *hina and Castern Curope since 1@AG and 1@G@ respecti!ely has also increased the opportunities for international trade and in!estment. The increase in international business acti!ity has contributed to significant growth in the world economy o!er the post-war period. This growth has also been sustained by a general reduction in trade barriers between countries, thanks to the work of 7%TT and the T/ 9see section &.1; and the gradual liberali4ation of national trade and in!estment policies. The increased rate of growth in international business acti!ity would not of course ha!e been possible without significant de!elopments in production and information technology and commensurate impro!ements in the uality of human capital. 5.1.5 *ountry-specific factors E hilst the general international en!ironment influences o!erall internationali4ation decisions, the decision to do business in a particular country is
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HWA TAI INDUSTRY BHD primarily affected by conditions in the country concerned. % wide range of factors may be important, as indicated for e$ample in the orld Cconomic 3orum global competiti!eness report. %mong the most important factors are political and economic stability, culture and institutions, and a country)s stock of Lcreated assets). The increase in economic acti!ity, including foreign direct in!estment that has occurred in "orthern Ireland 9and to some e$tent in the 8epublic of Ireland; after the signing of the 7ood 3riday %greement in 1@@G clearly indicates the importance of political stability. *reated assets, or what Michael =orter calls Lad!anced factors), are assets which a country has de!eloped through in!estment o!er a number of years. They include tangible assets such as the transport or communication infrastructure and intangible assets such as education and skills, technology and the capacity for inno!ation, intellectual property, and business networks. hen comparing alternati!e locations, either between or within countries, go!ernment policies such as ta$ rates or financial incenti!es may influence the decision to in!est for e$ample, the 8epublic of Ireland)s 1 per cent corporate ta$ rate 9formerly 1' per cent; has undoubtedly influenced inward in!estment decisions in Ireland in recent years. In more difficult national en!ironments, such as some of the former o!iet republics after the collapse of the o!iet Dnion in 1@@1, Lnuisance costs) ha!e had the opposite effect by deterring foreign in!estors these include bureaucratic obstacles, corruption, and mafia-style acti!ities. 5. 3irm-pecific 3actors %ffecting the 6ecision to 7o International 5..1 %ccess to markets E The lure of new markets either in large de!eloped economies or in emerging economies with growth potential is often irresistible to businesses with international ambitions. *ompanies like Microsoft, *oca *ola, or Toyota could not ha!e achie!ed global leadership positions in their respecti!e industries without selling their products in most of the world)s markets. The opening up of *hina has attracted fir ms seeking low-cost production, but this ad!antage will in the longer term be dwarfed by the country)s market potential as the wealth of *hina)s massi!e population rises. The establishment of production facilities within a regional economic grouping also allows access to the region)s entire market. Thus, for e$ample, "issan)s D+ in!estment allows the company to e$port around eighty per cent of its production to other CD countries. imilar e$planations can be found for foreign in!estment in atin %merica in recent years 9see =ractical Insight 1;. In some cases, early entry into an emerging economy brings first-mo!er ad!antages and the possibility of market dominance before ri!als ha!e the chance to establish themsel!es. Tesco has achie!ed this position in some of the former communist countries of *entral and Castern Curope. =arado$ically, howe!er, =epsi*o)s early ad!antage in the same region before the end of communism was swiftly displaced by *oca *ola)s aggressi!e e$pansion into the region after 1@G@. ometimes, it is simply necessary to follow the competition so as not to be left behind. 5.. %ccess to resources E Historically, a country)s deposits of coal, iron ore, copper, precious metals, or other natural resources were the main attraction for foreign in!estors. Indeed, this is still true today in the oil and mining industries, or where large uantities of 8
HWA TAI INDUSTRY BHD natural resources are consumed in the production process E though %ustralian or *olombian coal, for e$ample, can now be economically transported half way around the world. =erhaps a more generally important reason why a foreign in!estor may be attracted by resources is where a speciali4ed resource such as highly skilled labour is relati!ely immobile. /n the whole, resources ha!e become less important as a moti!e for internationali4ation in the modern world, as highly transferable knowledge and technology ha!e acuired greater importance than natural resources in many industries. 5..5 *ost 8eduction E It is not uncommon for a business to offshore some of its operations, obtain components and other supplies, or relocate a production facility to another country in order to reduce costs. 3or e$ample, a number of British banks and insurance companies ha!e outsourced their call centres to India and the British company, 6yson, has relocated its production plant to Malaysia, whilst keeping its research and design facility in the D+. ome companies ha!e in fact been critici4ed for e$ploiting low-cost labour in de!eloping countries where working conditions would be regarded as unacceptable in their home country. It should be remembered, howe!er, that cheap labour is not necessarily attracti!e to capital-intensi!e businesses where relati!ely small amounts of highly speciali4ed labour are needed E unless, of course, highly skilled labour is a!ailable at low wages, as has been the case in recent years with computer programmers in 8ussia or India. 4. 0 FOREIGN COUNTRY (CHINA)
"owadays, *hina has become one of the world)s most attracti!e locations and *hina)s rise carries enormous significant for the international business communities. *hina has a !ery good de!elopment in term of legal system, the si4e of the market, the low cost of labour and *hina)s growth potential together offer unprecedented business opportunities for foreign in!estor to do business in *hina. International business ha!e de!eloped !ery rapidly in *hina and today, *hina become increasingly integrated with other parts of the world and opened up to a whole range of cross- border economic acti!ities. Managing an international business in *hina is not an easy task and there are some challenges will be occurred. The prime challenge for those interested in doing business in *hina is achie!ing their strategic ob#ecti!es of cost reduction, local differentiation and the strengthening of core competencies in their specific functional areas and business acti!ities. *hina is the formal member of orld 9
HWA TAI INDUSTRY BHD Trade /rgani4ation 9T/; since ''1 and from the date, *hina en#oyed all the rights the T/ gi!es to other members and full participates in T/ acti!ities. *hina
*onstitutional ystem
*hina or =eople)s 8epublic of *hina adopts socialist system or communism in their political system in their decision-making processes in go!erning the country. The country)s sole political party in power is known as the *ommunist =arty of *hina. The go!ernment ha!e the sole power to control all acti!ities done by their citi4en as what ha!e been describe in how communism system worked in go!erning a country. In other words, the purposes of working in *hina are to contribute to the nation and also to the go!ernment as the go!ernment control on all acti!ities in the country. &.1.
tability of 7o!ernment
The stability of the *hina go!ernment is uite moderate and stable because the administration of the go!ernment are not publici4e to the public either through the press or on the internet. o, the degree of the citi4en in!ol!ement in the politics is low because of the hea!y restrictions impose by the go!ernment. Howe!er, the policies impose and the law regulations are uite effecti!e in terms of economy where *hina is one of the leading countries in the world. In the recent years 9''1;, *hina has #oined the orld Trade /rgani4ation and results rapid growth in industrial and manufacturing sectors because of the cheap labour in *hina. But still problems such as managing en!ironmental degradation, demographic pressure and the e$treme immigration from rural to urban area must be faced by the go!ernment. &.1.5
Business 3reedom
The business freedom in *hina is uite tight because of the regulation impose by the go!ernment where they restrict businesses from other countries coming in. But recently, *hina go!ernment open their gate to the outside world to set up business in their country. It takes 5A days to start anew business in *hina compared to the world a!erage 5G days. hile it takes 1.A years from the filling for insol!ency in court until the resolution of distressed assets. C$amples of business freedom in *hina are super marketi4ation and opening market to foreign multinationals company because of the entry of *hina into T/. uper 10
HWA TAI INDUSTRY BHD marketi4ation is where the go!ernment shuts down the traditional Owet marketP and transform them into supermarket. &.1.&
Trade 3reedom
In the past few decades, *hina loosens their trade policy to the outside world in their trading, e$port and import industry. *hina)s weighted a!erage tariff rate was 5.@ present in ''G based from the web 9heritage.org;. 3actors that affect the cost of trade freedoms are import and e$port bans and restrictions, import and e$port licensing, non-transparent tariff classifications, comple$ regulations and standards, subsidies, state trading in certain goods, ser!ices market restrictions, issues in!ol!ing the protection of intellectual property rights, and inconsistent and corruption-prone customs administration add to the cos t of trade. o, *hina)s trade freedom score to account for non-tariff barriers deducted about twenty points. &. Cconomic factors Cconomic factors influence a business directly, because they affect capital a!ailability, cost, and supply and demand. If demand is high, and the capital cost is low, which attract more in!estment on the company and produce more product to make profitable. Howe!er, during economy recession period, there is still chances for some small potential corporations accessing business market and competing with others. 8ecent years, *hina economic growth rapidly. /!erall, it can be reflect from industrial sectors. ince from late 1@AG, *hina becomes market oriented economy. *hina gains tremendous in production of agriculture. C!en though, there are more than half people rely on agriculture for li!ing, the agriculture sector has less influence for gross domestic product. %t the same time, labour input decreases in most of industries, due to labour producti!ity impro!ement and the migration from rural workers to urban areas. In the opposite, through the ad#ustment of secondary industry and tertiary industry, they become unrepeatable roles to 76=. 9+e-sha 7, ''1; It pro!ides acti!ities as knowledge, skills, as well as e$perience, entertainment to impro!e the uality of business. 9asaki H, ''@; 6ue to its foreign trade liberation and in!estment, the income has been dramatically rising after #oining the T/. Moreo!er, the demand for material and energy resource is also increasing. They import and process materials, then sell the final products. In addition, the Bank of *hina as central bank in china. It uses monetary policy to increase or decrease interest rates and control the amount of money in the economy to achie!e steady economic growth. "ormally, go!ernment will not lend money to business company directly, it has to deposit money from bank of china first. %lso, the central bank reduces lending to companies and indi!iduals, according to the increasing amount of money they put with central bank. Moreo!er, the central bank also guide country bank to increase more reser!es and its ratio, such as 1?.2( for big bank, 1&.2( for small bank, in case of any financial crisis or loan needs. %t the same time, bank of china will control conflict and surplus, as well as increase ta$ for import product. Because if they increase ta$, people would rather purchase and import product with those money, not sa!ing them into bank. 9Bradsher +, '1';
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HWA TAI INDUSTRY BHD 7o!ernment e$penditure is to purchase goods and ser!ice, allocate funds efficiently and in!est on doing domestic infrastructure for high technology inno!ation and education, as well as social security payments. Technically, increasing go!ernment spending can be met china)s economy de!elopment need. By '', the go!ernment spending has increased to 2.2( of 76=, which shows a good trend. 9Moinar M, ''?; 6uring inflation period, the economy is lack of in!estment, and e$ports will suffer from inflation, as inflation increase the price of e$ports and encourage imports. %lso, the most industriali4ed countries will be ad#usted to increase their interest rates, which will be pay back through loan in the markets, which demonstrate that go!ernment try hard to control foreign flow-in cash. &.5 ocial It is claimed by u and ittlefied 9''1; that *hina is an e$tremely high-conte$t country where people prefer to recei!e implied messages. 3or establishing a business in *hina, strong pri!ate-relationships with different stakeholders is the key to success. Howe!er, this is e$tremely time-consuming while the maintenance is also e$pensi!e. =otential conflicts in interest may easily erode it. /pportunities in the food market lie in *hina
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HWA TAI INDUSTRY BHD ource from http0globaledge.msu.educountrieschinastatistics *hina has an e$treme gap between the lowest '( and the highest '( after ?' years *hina change their system in their economy. &.5.
*hanges in lifestyles and trends
ifestyles and trends in *hina change in many ways such as the le!el of consumption, attitude towards new product especially from the west, changes in the uality of life, and also changing from uantity satisfaction to uality satisfaction. Besides that, changes in trends can be seen from the degree of fashion sense where citi4en tend to buy more colourful and striking colours compare dull- coloured clothes. &.5.5
Cducational le!els
The literacy rate for *hina is around @1.'( was able to read and write at a specified age. hile the a!erage years of schooling is 11. year. Cducation e$penditures in *hina are about 1.@( of the 76=. &.5.&
abour 3reedom 8anks
*hina)s labour regulations hinder o!erall employment and producti!ity growth. The nonsalary cost of employing a worker is high. 6ismissing an employee may reuire prior consultation with the local labour bureau and labour union. &.5.2
3reedom of corruption
*orruption is percei!ed as widespread. *hina ranks And out of 1A@ countries in Transparency International)s *orruption =erceptions Inde$ for ''G. *orruption affects banking, finance, go!ernment procurement, and construction most se!erely, and there is a lack of independent in!estigati!e bodies and courts. &.5.?
=roperty 8ights
*hina)s #udicial system is weak, and many companies resort to arbitration. ocal officials can ignore court decision with impunity. %ll land is state-owned, but indi!iduals and firms may own and transfer long-term leases 9sub#ect to many restrictions; as well as structures and personal property. Intellectual property rights are not enforced effecti!ely. *opyrights, patents, brand names, trademarks, and trade secrets are routinely stolen.
&.& Technological 3actors &.&.1
cience and Technology
Through the period, the achie!ement of science and technology in *hina are remarkable where they manage to achie!e many disco!eries in the science field. The ma#or achie!ements are the disco!ery of the 6aing /ilfield, building the first atomic reactor, successful testing 13
HWA TAI INDUSTRY BHD of atom and hydrogen bombs, synthesis of crystalline insulin, positron and negatron electronic collider, nuclear power stations, carrier rockets, and satellite launching technology. 8apid impro!ement in science and technology also create more #obs in the manufacturing industry and also make the uality of life better and easier. &.&.
8esearch and 6e!elopment
The go!ernment design many plans and strategies in de!eloping the 8:6 industry. Many programs to enhance 8:6 industry are launched such as the OTorch =rogramP and the O caling Heights =rogramP &.2 Cn!ironmental 3actors &.2.1 Cn!ironmental =rotection aws The go!ernment takes serious matter on protecting the en!ironment where they impose many regulations and laws in protecting, pre!enting and controlling industrial pollution and impro!ing urban en!ironment. The go!ernment also collaborate with many "7/)s in order to maintain the mother nature. &.? egal 3actors &.?.1 Cmployment 8egulations *hina)s labour regulations hinder o!erall employment and producti!ity growth. The nonsalary cost of employing a worker is high. 6ismissing an employee may reuire prior consultation with the local labour bureau and labour union. 5.0 ETERNAL ENVIRONMENT
2.1 =olitic and egal 2.1.1 Impending Clection The Impending election from the go!ernment ha!e gi!ing more offer and benefit for the people who is under their condition will freely gi!ing sub!entions to them purchase the necessary. Hwa Tai may will increase the sales during the impending election. 2.1. 3ree trade Hwa Tai is e$ported about 2' country around the worlds, which go!ernment is stated free trade with other country, Hwa Tai may be threaten and benefit by them. /ther industry from other country may import cheaper product to our country , people may will choosing the cheaper one, Hwa Tai sales profit may goes down while Hwa Tai can also e$port their product selling in other country easily to get more profit. 2.1 5 Halal *ertificated ystem
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HWA TAI INDUSTRY BHD %ccording to %bdula4i4, '1' says that Malaysia is made of different religions, races and cultures and this is important thing in the de!elopment of the Halal Malaysia certification. The word Lhalal) is not the sole property of Muslims but has e$panded internationally with trading communities embracing it. Hwa Tai step on apply the Halal certification to respect and gain more customer not only in Malaysia and also the Muslim country. 2.1. & Malaysia 3ood afety %ct Hwa Tai ha!e obtained the H%**= certification, a testament to its efforts in achie!ing the highest standards in food hygiene safety and uality. In order, customer will be more confident in purchasing Hwa Tai product. 2. Cconomic 2..1 Inflation The inflation of the industry, the flour price if it is growing up, the profit of Hwa Tai will goes down. If the profit will not turn up, Hwa Tai may increases the price goes up, while people may not willing to purchase the product. 2.. Ta$ation rate 7o!ernment claim that if company who is largely using technology in producing their product may reduce the ta$ that the y need to pay. Hwa Tai Bhd can using more technology in producing their own product which is benefit in paying less ta$ation by sa!ing more e$penses. 2..5 "ational Income e!el The 7ross 6omestic =roduct 976=; in Malaysia e$panded 2.' percent in the third uarter of '1 o!er the same uarter of the pre!ious year. "ational income le!el up and down will affect people ha!e the ability in purchasing power, when income le!el go up , Hwa Tai may also increase in profit they get and !ice !ersus. 2..& Dnemployment 8ate Dnemployment 8ate in Malaysia remained unchanged at 5.' percent in /ctober of '1 from 5.' percent in eptember of '1. hile unemployment problem making people don)t ha!e constantly income to purchase unnecessary confectionary like biscuit.
2.5 ocial 2.5.1 Health *onscious
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HWA TAI INDUSTRY BHD "owadays, people may getting more caring about their healthiness issue when choosing buying the healthy product. =eople may concern and wanted the material production of sugar, oil and carbohydrate le!el in using whether will affect their healthy or not. If Hwa Tai do not make any change it may decrease the customer interest on buying their product. Hwa Tai can make the oat meal and cereal inside the biscuit to make it healthier. 2.5. /rganic /rganic product is normally related to health, because it ha!e the standard co!er with the aspect of food product, animal welfare ,wildlife conser!ation, to food processing and packaging. *onsumer are more interest in purchase organic product when gi!ing the choice to them, Hwa Tai could making some impro!ement in changing some of their material to produce the organic biscuit. 2.5.5 /utgoing acti!ity =eople will likely to ha!e the product which is easy to purchase when their ha!ing some acti!ity, for e$ample the cinema could be selling some snack to bringing it when they watching and airline can also pro!ide the biscuit to the customer who is in long way #ourney. 2.& Technology 2.&.1 Transportation By using better technology can helping Hwa Tai in transporting order product from supplier be more efficiency and more accurately would easil y make any mistake. It helping reduce the unnecessary cost and risk if that is making the wrong order with other supplier. 2.&. %d!ertising %d!ance in using technology in ad!ertising can create a strong brand awareness and reputation for the company. Hwa Tai may use ad!ertise through media like TN, 8adio, Maga4ine and more to capture people)s sight and !ision. 2.&.5 Machinery euipment By using better uality of machinery euipment it can be producing product in faster way and sa!ing some unnecessary cost like labour cost. By using machinery euipment Hwa Tai can create a better looking packaging in order to attracti!e and get interest more customer to purchase our product.
2.2 Cn!ironment 2.2.1 7lobal arming
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HWA TAI INDUSTRY BHD The global warming issue looks serious day by day, people nowadays are ad!ocate recycle. If Hwa Tai are produce the product packaging if can be recycle or easily to be corrosion people are more willing to purchase it through the en!ironment issue. 2.2. =roduct reuse =eople are more liking in demand on the left o!er of the packaging can be reusing again, for e$ample the aluminium bo$ can use to storage something. It does not harmful and destroys the peaceful of the en!ironment. If Hwa Tai creating in new way in using better uality of packaging by educate them in reuse in new way from the product packaging will build the reputation of the company. 2.2.5 afety =roduction ay =eople are concern about the production is it produce the product in legal way , by discharge the waste water and gas in the legal and humane way do not harmful the en!ironment, Hwa Tai can educate about how they produce their product in building good impression on their brand. !.0 PORTER"S FIVE FORCE
?.1 The threat of new entrants O The threat of new entrants refers to the possibility that the profits of established firms in the industry may be eroded by new competitorsP97reenwald : +ahn ''2; . e cannot deny that fact that HTIB is the second best biscuit manufacturing company in Malaysia market9 Hwa Tai rationali4es BDI"C =8/*C ''@;. It has a stable position in the biscuit manufacturing industry and thus the threat of entry by newcomers is low. The newcomers like 7loria Biscuit faces with high entry barriers because HTIB which is their e$isting competitor has strong brand identification. *onsumers are loyal to HTIB)s products and its product differentiation has created a high barrier to entry to 7loria Biscuit. 7loria Biscuit has to spend a lot to defeat the e$isting customer loyalty on the products of HTIB. Therefore, it is not easy for the newcomers to entry the biscuit manufacturing industry and affect the position of HTIB. This is an opportunity to HTIB to own its market with fewer new entrants after ha!ing the /T analysis. HTIB will always be the strong biscuit manufacturer and last long in the market. ?. The bargaining power of buyers O Buyers can affect an industry through their ability to force down prices, bargain for higheruality or more ser!ices, and to play competitors off against each other.P 9Henry ''G;. The bargaining power of buyers of HTIB is high. There are many other biscuit manufacturing companies in the market and the products from the industry ha!e standard or undifferentiated. Buyers can easily get the alternati!e suppliers from the market such as Munchy, Hup eng, Fulie)s, hoon 3att, and so on. ince it is an ease to get standard products and ha!e alternati!e suppliers, buyers emphasi4e the prices of the products more than which biscuits taste better. The products of HTIB is not !ery e$pensi!e compared with others biscuits of other brands 17
HWA TAI INDUSTRY BHD and many buyers choose the products of HTIB now. This finally creates high bargaining power of buyers of HTIB. arge-!olume purchases by buyers are important to HTIB. The higher sales of HTIB enable it to gain higher profit margin. ?.5 The bargaining power of suppliers Oupplier can e$ert bargaining power o!er participants in an industry by threatening to raise prices or reduces the uality of purchased goods and ser!ices.P9 +etchen et al,''@;. HTIB has the low bargaining power of supplier. This is because the ingredients of manufacturing biscuits and cakes such as eggs, flour, sugars and others can be found e!erywhere from any suppliers. Many traders supply those ingredients in the market. Thus, HTIB can ha!e ingredients anytime without worrying lack of inputs. More importantly, the bargaining power of supplier is low because the switching cost to other suppliers is low. uppliers) products are !ery crucial to HTIB to ha!e effecti!e production to fulfill the demand of buyers and production of high uality products to the public. Besides raw materials, another important input to HTIB is the supply of labour. HTIB does not only own the domestic market but also own the international market. It e$ports its products to many foreign countries, hence, it needs a lot of labour to contribute to the high production of biscuits. ?.& The threat of substitute products and ser!ices 6ue to the technological ad!ancement nowadays, there are a lot of substitute products with different appearance but ha!e the same function to satisfy the same need as another product in the market. %ccording to =orter, O ubstitutes limit the potential returns of an industry by placing a ceiling on the prices firm in the industry can profitably charge.P9=orter 1@G';. The threat of substitute products is high because there are a lot of products which able to satisfy the need of consumers, too besides the products of HTIB. 3or instance, the +ellogg)s rice krispies cereal can be a substitute product for the biscuits by HTIB. *onsumers can ha!e the rice cereal as breakfast instead of HTIB) s biscuits. *onsumers can also eat instant noodles M%77I instead of eating cakes by HTIB, and e!en the 7ardenia bread can replace the biscuits and cakes by HTIB for meal. The prices of the substitute products bring effect to the products of HTIB and finally influence the return and profit of HTIB. This is the threat of HTIB as what the /T analysis shown. Technological ad!ancement is also one of the element of =CT analysis for general en!ironment which brings effect to HTIB itself. ?.2 The intensity of ri!alry among competitors in food processing industry 8i!alry among the firms occurs when ri!als sense the pressure or act on an opportunity to impro!e their position. HTIB faces intense ri!alry in the food processing industry. The ri!alry is !ery intense because there are numerous or eually balanced ri!als in the market. "estle, +ellogg)s, Hup eng, I+/ and others which are the direct ri!als compete with HTIB for the consumers. Cach of the companies manufactures biscuits ,cakes and snacks. uper, High 2, 7ardenia and so on are the indirect ri!als of HTIB. 6i!ersity of risk occurs since the ri!als compete with each other with different ideas to challenge the position of HTIB. It is clearly depicted when +ellogg)s and "estle ad!ertise their products through the media to introduce
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HWA TAI INDUSTRY BHD their products to the public to increase their sales. The intense ri!alry brings some impacts to HTIB as the ri!alry will erode its profitability and may decreasing its sales of A,1'?,''' in ''@ in the future. #.0 SWOT ANALYSIS
A.1 trength trengths are areas where the organi4ation e$cels in comparison with its competitors. HTIB has its own strengths in order to be the second best biscuit manufacturing company in Malaysia market. HTIB has strong research and de!elopment 9 8:6 ;focus. HTIB do 8:6 to produce better uality products. It can be said that HTIB has core competence of strategic capability. Ha!ing better and special products enable HTIB to achie!e competiti!e ad!antage. HTIB possesses tangible resources and intangible resources to compete more successfully. In term of tangible resources which include physical resources, HTIB has its own lab and professionals to conduct 8:6. HTIB has also intangible resources which is technological resource to reno!ate the e$isting products and as fast as what consumers e$pect. 7ood allocation of resources enables HTIB achie!e cost effecti!eness without waste. The effort of HTIB has dri!en it to ha!e high brand euity and e!entually gains a lot of awards for its biscuit products such as Malaysia =ower Brand %ward ''G by the %sia Cntrepreneur %lliance orldwide. A. eakness eakness are areas where the organi4ation may be at a comparati!e disad!antage. HTIB has its own weakness although it has been achie!ing success. HTIB has limited presence in organic food market. *onsumers more and more care about their healthy. They prefer organic food to normal food because they think that organic food is free from chemical. %mong the products of HTIB, only the biscuits with the brand name of O DQD8P almost fulfill the reuirement as organic food because they contain whole meal, wheat bran and others which consumers think that they are nutritious. Howe!er, the other products of HTIB still not be grouped as organic food. This may lead HTIB lost some market which lo!es organic food and their sales will not be as high as what HTIB targeted. A.5 /pportunities %fter analysing HTIB, there are opportunities that enable HTIB to gain profit and growth. HTIB has the opportunity to own the manufacturing agreement with ondon Biscuits Bhd 9Hwa Tai to market ondon Biscuits) wiss rolls ''A;. HTIB is in collaboration with ondon Biscuits Bhd and it really brings a lot of opportunities to HTIB because it gi!es HTIB instant e$panded production capacity and opportunities to create a new !ariety of cakes by the sharing of technology between them. HTIB is appointed to market and distribute the best-selling product, onbisco wiss rolls. HTIB is the key distributor to mini-markets, supermarket and hypermarket in =eninsular Malaysia. These opportunities ha!e widen HTIB)s market and it will definitely progress rapidly within few years.
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HWA TAI INDUSTRY BHD A.& Threats Threats are something from e$ternal en!ironment of the company that will deter the company from obtaining success. HTIB faces some threats that deter it from ha!ing smooth production. C$pensi!e raw materials is the main threat faced by HTIB. It contributes towards the increasing of cost of production of HTIB. %lthough HTIB has the opportunities to own manufacturing agreement with ondon Biscuits Bhd, high production cost is a burden to HTIB. HTIB has to prepare a lump sum of money from time to time in order to ha!e smooth production. 6ue to the high cost of production, HTIB is not able to increase the number of countries for its e$portation. uch situation is really a barrier to HTIB to enter the bigger market. $.0 STRATEGY FORMULATION
Cither the weaknesses or threats of HTIB are clearly depicted after analysing the company through /T analysis and =orter)s fi!e forces. trategy formulation should be conducted with the aid of the opportunities and strengths of HTIB to tackle its weaknesses and threats in order to accomplish sustainable competiti!e ad!antage within the food processing industry. G.1 Business le!el strategy O Business le!el strategy is a means of separating out and formulation a competiti!e strategy at the le!el of the indi!idual business unit.P9Henry, % ''G; There are fi!e generic competiti!e strategies which are generated by Michael =orter 91@G'; to achie!e the competiti!e ad!antage and only low cost strategy is the most suitable way to HTIB because he stated that low cost strategy and differentiation will be stuck in the middle if using both at the same time 9Henry ''G;. G.1.1 ow cost strategy ow cost strategy is used by the companies which produce their products and ser!ices at the lowest costs within an industry without sacrificing the products uality and market them at a broad market. This strategy is suitable to HTIB to tackle its threat of high cost of production. This strategy implies low o!erall costs in term of raw material, production, transportation and so on. HTIB can achie!e low cost strategy through economic of scale. OCconomic of scale arises when the cost per unit falls as output increasesP9Cconomic of scale ''G;. HTIB has low bargaining power related to its suppliers since it will order high uantities of raw materials at a cheaper price from any suppliers for its production and e!entually contribute towards cheap cost of production. Besides, HTIB has its strength of strong research and de!elopment 98:6;. It should utili4e its strong 8:6 to find out the better product designing for efficient production like easy-to-use manufacturing technologies so that costs can be reduced and increase uantities without affecting uality. orkers should be sent for training so that skilled workers a!ailable in the production and able to work in team effecti!ely and deli!er the lowest possible costs of production. HTIB should also signing contract with certain logistic company so that to get lower costs of transportation. This is win-win strategy
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HWA TAI INDUSTRY BHD since the logistic company gain profit from HTIB for longer duration whereas HTIB able to reduce its cost of transportation. The effort of HTIB in reducing o!erall costs enables HTIB to ha!e lower costs of production and lower selling price for its products than its competitors. 3or instance, cream sandwich biscuit of HTIB costs 8M.@@ a packet whereas e$us of Munchy)s costs 8M &.?' a packet, that is 52( cheaper than Munchy)s product. HTIB dri!es its cost-based competiti!e ad!antage into price ad!antage to the customers and gain high market share e!entually. HTIB can be price leadership finally because it can ad#ust the price as it like. Its price can act as the entry barrier to the new entrants, too since newcomers are not afford to set lower price for their products to compete with HTIB. HTIB will be able to o!ercome its threats after utili4ing low cost strategy because it enables HTIB to settle the threat of e$pensi!e raw material and enter bigger market. More importantly, HTIB able to reduce the threat of substitute products because buyers prefer to buy biscuits, cakes and snacks with high uality and cheaper prices. Ha!ing low costs strategy, HTIB will be able to compete with its competitors , 7eneral Mills which also conducting low costs strategy . ow costs strategy is really a better strategy for HTIB to settle its weakness and threats as well. G. *orporate le!el strategy O *orporate strategy is primarily about the choice of direction for a firm as a whole and the management of its business or product portfolio.P 9heelen : Hunger ''?,p.5;. 7rowth strategy from the directional strategy is the most suitable strategy for HTIB. O% directional strategy is any trading or in!estment strategy that entails taking a net long or short position in a market.P96irectional T8%6I"7 T8%TC7 ''2;. G..1 7rowth strategy There are many aspects that needed to be grow so that HTIB can become more competiti!e in the market. 7rowth in the aspects of sales, assets, profits, or some combinations are crucial to HTIB. %nsoff 91@?2; de!ised a matri$ to analyse the different strategic directions organi4ations can pursue . G..1.1 Market penetration Market penetration is the effort of increasing the market share in the e$isting market with the e$isting products. HTIB has been e$porting its products to foreign markets and domestic market. HTIB has a lot of consumers who eat its biscuits, cakes and snacks worldwide. Howe!er, HTIB should keep on its effort to increase its market share in the e$isting market by attracting more new consumers to BD IT e$isting products. HTIB should also make sure that the e$isting consumers to eat more its products. ith the capabilities and resources of HTIB, this strategy is not risky because HTIB do not need to do anything unless increase its products) uality to meet the consumers) needs and wants. Impro!ing its uality is not a problem to HTIB as it has professionals for 8:6. G..1. Market de!elopment 21
HWA TAI INDUSTRY BHD Market de!elopment is the entry of the new market with the e$isting products. HTIB should aim at other market segments and geographical areas as well. 3or instance, the products of HTIB are not O H%%P since HTIB not yet apply for that. Malays are not allowed to eat food without O H%%P and they are not dare to buy the biscuits of HTIB. HTIB should target at demographic segmentation in term of religion in order to de!elop new market for its e$isting products. HTIB should put their effort to work on it and apply for O H%%P so that Malays) market segment can be another new market for HTIB and increase its sales. Besides, HTIB should e$port its products to more foreign countries other than its e$isting international market. "ew geographical areas should be found so that its products can be distributed to more countries such as Malays countries to increase its sales. %lthough it is a risk to distribute products to new market or geographical areas due to unfamiliar with their habits and culture, HTIB is yet able to distribute its products to more Malays countries since HTIB which based in Malay country, Malaysia already know thoroughly about the culture of Malays. It becomes less risky if HTIB chooses the right market segment. G..1.5 6i!ersification 6i!ersification occurs when an organi4ation seeks to broaden its scope of acti!ities by mo!ing into new products and new markets. 6i!ersification is actually a suitable strategy for HTIB because it helps to spread risk by reducing reliance on any one market or product9+etchen''@;. 3or instance, HTIB should ha!e di!ersification by producing new products like organic food to new market especially health-conscious market. HTIB will face lesser competition if ha!ing new market. If one of the e$isting product is not in high sales, HTIB is still safe because consumers from other market may BD IT other products. The risk of low re!enue will be spread among different products. HTIB will be afford to implement di!ersification because it will earn a lot after implementing the low cost strategy. HTIB itself do not need to find more capital from other resources to sustain the di!ersification of products. %s the result of benchmarking, ha!ing di!ersification is crucial in order to own sustainable competiti!e ad!antage fore!er. G..1.& 8elated di!ersification HTIB has limited presence in the organic food market and this is the weakness of HTIB. It is suggested that HTIB should implement the related di!ersification because HTIB itself has the capabilities and resources of entering the organic food industry which there are some links with its own e$isting !alue chain. HTIB should di!ersify its products by manufacturing organic food to meet the needs of health-conscious consumers. Hori4ontal integration should be done by HTIB to take o!er its competitors and offer organic food as complementary products at the same stage within its !alue chain. If HTIB ables to do so, HTIB does not only has biscuits, cakes and snacks but also has organic food to new market. Its competitors like "estle and +ellogg)s do not ha!e organic food at all and HTIB will be able to take o!er them. G.5 trategy Implementation
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HWA TAI INDUSTRY BHD O trategy implementation is the sum total of the acti!ities and choices reuired for the e$ecution of a strategic plan.P9 heelen : Hunger ''?,p.5;. HTIB is trying to achie!e efficiency after achie!ing effecti!eness through strategy formulation. Ha!ing efficient implementation of strategies assist in building a capable HTIB in term of staffing, structuring and ha!ing core competencies and capabilities within the biscuit industry to achie!e its !ision of being the main players in biscuit industry with its uality products. G.& Management issue 9 di!ision restructuring and rightsi4ing; ince HTIB needs to implement market penetration, market de!elopment and di!ersification as well, it needs more capital to succeed them. Therefore, di!ision restructuring and rightsi4ing are better ways to gain more capital for those de!elopments and impro!e the producti!ity and efficiency of the management team. Both ways help in low-cost strategy by reducing the e$penses on tangible and intangible resources and salary. 3or instance, accounting department should combine with the financial department. This is because costs can be sa!ed in term of e$penses of stationery and office euipment and salary of employees because they can share resources when working together. Both departments deal with the same people for their range of works. Hence, the number of employees should be reduced by letting off the poor performers after combining both departments to reduce the e$penses on salary. Top =erformer =rofiling 9T==; should be implemented to #udge the employees according to their knowledge and e$perience, skills and abilities, and beha!iour and characteristics 9 rightsi4ing for profitability''@;. In doing so, the employees are laid off fairly without affecting their moti!ation to work. HTIB is able to minimi4e its input by reducing cost and able to let the talented employees to enact adaptable workforce planning. They will fully utili4e their talent on business needs to bring competiti!e ad!antage to HTIB 98ightsi4ing in challenging times ''G;. The capital sa!ed can be used for other purposes like market penetration , market de!elopment and di!ersification which help in ma$imi4ing the profit. %lthough di!ersification reuires some cost but the low cost strategy implemented by di!ision restructuring and rightsi4ing already sa!e lots of cost and the capital is enough for the implementation of di!ersification since HTIB is not a poor company. %.0 PRODUCT STANDARDI&ATION OR ADAPTATION POLICY
% firm that deals with international markets has a!ailable four alternati!es0 i. ii. iii. i!.
selling the product without changes on international markets. modifying products for different countries or regions. de!eloping new products for foreign markets. incorporation of any differences in a single product and introducing a global product.
There are different approaches for implementing these alternati!es. 3or e$ample, a firm can only identify target markets, where products may be sold without or with minor modifications. % company can ha!e its line of products for !arious markets global, regional
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HWA TAI INDUSTRY BHD and local products. ome of these products de!eloped for one market may be introduced later in other markets, including global market where the company originates. The selection of a standardi4ation or adaptation strategy depends on numerous factors0 S'*+*,-', /. *'', F'+ '' +6 F'+ '' +6 '*+*,-', *'', Cconomies of scale in production 6ifferent terms of use a!ings in research and de!elopment Influences and go!ernment regulations Marketing sa!ings 6ifferent consumption patterns Cconomic integration ocal competition 7lobal competition egislati!e factors Source: adapted from Sasu 2005, pp 144-147
*onsumer goods such Hwa Tai reuire more adaptations, being influenced by cultural differences and economic conditions of the target market. There are numerous e$amples of global companies that ha!e made certain ad#ustments to the specific products to foreign markets. Many companies may use a combination of standardi4ation and adaptation strategies. 3actors affecting decisions to adapt products are 0 F'+ 77',6 *,, ' *' +*' M+8' +'+,', 7o!ernment regulation "on- tariff barriers *haracteristics and preferences *onsumer models The le!el of economic de!elopment *ompetition *limate egal
P+*' +'+,', 3unctions, attributes 6urability , uality Methods of operation and use
C9: +'+,', =rofitability The cost of adaptation /rgani4ation
=ackaging Brand
8esources =olicies adopted
arranty ser!ice C$perience ife cycle *ountry of origin Source: Adapted from Sasu 2005, p. 148
@.1 Market *haracteristics @.1.1 7o!ernment regulations and nontariff barriers These regulations are one of the most important factors in!ol!ing product adaptation to destination markets. "ontariff barriers try to protect local products from foreign competition and include product standards, technical regulations and subsidies for local products. The amount of money spent by foreign firms to meet these reuirements is !ery high. 8euirements related to testing and certification of drugs on the %merican market has made difficult or e!en impossible the market entry of foreign firms. 8egulations on emission
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HWA TAI INDUSTRY BHD compliance standards has resulted in standards regarding engine e$haust emissions known as Curo &, Curo 2, Curo ?, etc.. @.1. *lients) characteristics and preferences =roducts sold on foreign markets are influenced by local beha!iour, tastes, attitudes and traditions on each market. @.1.5 The economic de!elopment le!el Buyers who come from de!eloped markets demand sophisticated products, while customers from less de!eloped markets are only sol!able for simplified !ersions of products due to low purchasing power and conditions of use. @.1.& *ompetition =roduct adaptation to specific foreign markets is often reuired by the strategies adopted by competitors and pressures e$ercised by them. The rules of the game !ary according to local business en!ironment, traditions and legislati!e practices and climate. @.1.2 *limate *limate can affect all components of a product, some products, being more !ulnerable to climatic conditions by their nature. C$perience has taught the local producers to adapt to difficult climate conditions. 3or foreign companies this learning process can be e$tended, leading to initial financial and market share loses. @. =roduct features This may reuire a standardi4ation or adaptation policy. 3oods are most sensiti!e to local tastes and habits. @..1 6urable *onsumer products are sub#ect to a more homogeneous demand and predictable ad#ustments, such as for e$ample, ad#ustments to the different technical systems for !ideo de!ices. Industrial products are the least e$posed to cultural differences. @.. Brand The brand of a product refers to a name, symbol, term or sign used to differentiate the firm
HWA TAI INDUSTRY BHD @..5 =ackaging The packaging of a product has the following functions0 product protection, promotion and ease of use. =ackaging will be different depending on the chosen mode of transport, duration of transport and transit conditions. 3or food producers, firms use more e$pensi!e packaging and faster means of transport. %esthetic packaging reuires careful choice of colour and form of packages. 8ed is often associated with death or magic. In many industriali4ed countries, black is used, and suggests uality, e$cellence and class. i4e of packages !aries depending on purchasing power and market conditions. % pack that includes eight beers cannot be used in some markets due to lack of refrigeration capacity in the household. %nother factor influencing adaptation to the specific market is the packaging regulations that e$ist on some markets regarding the use of en!ironmentally friendly packaging. @..& Methods of operation Methods of operation and use of products in different markets may encourage adaptation. 6acia ogan has suspensions ad#usted for hard roads. In plus, its design is uite minimal, !ery utilitarian. @..2 Ruality =roduct uality is increasingly supporting the competiti!e ad!antage for many companies. %n important aspect of uality impro!ement is the emphasis on design. ome countries, like ingapore and Taiwan pro!ide financial assistance to firms in order to impro!e product design. Howe!er, many companies o!erlook the importance of product uality when entering de!eloping markets. In certain de!eloping markets customers want to buy uality, e$pensi!e products, to signal their increasing consumption power. @..? "etwork ser!ice uality "etwork ser!ice uality can significantly influence product and company)s image. 3or e$ample, 7erman consumers are !ery demanding in terms of ser!ice acti!ities.. @..A *ountry origin The effect of country of origin has a considerable influence on the percei!ed uality of a particular product. ome products ha!e been successful in different markets, although the home were percei!ed negati!ely. 3or e$ample, tractors manufactured in 8omania ha!e been accepted by Curopean, %frican and %sian markets because of reasonable price and their rigidity. The effect of country of origin loses its importance as consumers become more informed and as manufacturing firms use multiple production bases.
@..G ife cycle of product
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HWA TAI INDUSTRY BHD The life cycle of product and marketing strategies related to the product mi$ are strongly correlated. % product in a mature stage can be in the market introduction phase on another market. @.5 *haracteristics of the firm Before launching a product in foreign markets the firm should take into account the organi4ational capabilities, of the nature and degree of adaptation necessarily different markets. The estimate of adaptation costs is important for business because it depends on the resources a!ailable to the company. The decision to adapt products should follow an e$tensi!e market research. 10.0 COMPETITOR ANALYSIS
1'.1. Master +ong Ting Hsin from Taiwan owns the famous brand Master+ong. %ccording to *MM, Master+ong was the most freuently consumed brands in ''2. /ne of the biggest ad!antages Ting Hsin has o!er its competitors is its e$tensi!e and efficient countrywide distribution network, which makes Master+ong a truly national brand. In recent years, Master+ong has embarked on a communication initiati!e that is youthful and edgy in personality. 3or e$ample, Master+ong)s sandwich biscuit product O5SP targets on youngsters. The posters of O5SP are widely placed in retail stores, especially in the stores closed to schools. Besides, to boost sales among youngsters, free samples of O5SP were distributed in schools and small-scale promotional acti!ities targeting the youngsters were often held in holidays. Together with other online promotional acti!ities, O5SP has become the priority choice of youngsters.
1'. "abisco "abisco is another prominent player in the sector, owning the brands 8it4, /reo, *hips %hoy, Trakinas and =remium. The *MM sur!ey shows that /reo was the second and 8it4 was the fourth most freuently consumed brands among the co!ered cities.
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HWA TAI INDUSTRY BHD
1'.5 6anone %nother big player, 6anone, positions itself as a mid-to premium brand and offers a wide !ariety of products. The product line of the company is e$tensi!e, ranging from mass to premium offerings. In an attempt to tap the large rural market, 6anone launched its first lowend biscuit products in early ''2 E 6anone Milk Fiagai Ringcui and 6anone Milk usong. /n the other hand, to strengthen its position at the premium end of the spectrum, 6anone launched its filled biscuit products in late ''&, called 6anone Tiki Tartlet, with a relati!ely high unit price. 6anone is also an acti!e player in fortified and functional biscuit products. 3or e$ample it has 6anone Milky *rispy Biscuits, 6anone Hi-*alcium Biscuit and 6anone unny Breakfast Biscuits. ith years of systematic and aggressi!e ad!ertising of its product, 6anone biscuits ha!e been associated with healthy life among Mainland consumers.
11.0 PARTICIPATION STRATEGY
Hwa Tai Industry choosing 36I participation strategy. 3oreign direct in!estment 936I; plays an e$traordinary and growing role in global business. It can pro!ide a firm with new markets and marketing channels, cheaper production facilities, access to new technology, products, skills and financing. 3or a host country or the foreign firm which recei!es the in!estment, it can pro!ide a source of new technologies, capital, processes, products, organi4ational technologies and management skills, and as such can pro!ide a strong impetus to economic de!elopment. 3oreign direct in!estment, in its classic definition, is defined as a company from one country making a physical in!estment into building a factory in another country. 11.1 %d!antages of 36I in *hina
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HWA TAI INDUSTRY BHD 11.1.1 The Immense i4e and 7rowth of the *hinese Cconomy and Nery Bright =rospects 3oreign companies which are market oriented, sets-up business !entures in order to ser!e the local market. Their goal is always directed towards ser!ing the une$ploited market. The market si4es, growth opportunities, purchasing power, degree of de!elopment in the host country are always the key factors for deciding the 36I destinations. The bottom line is that the country which possesses larger market, greater opportunities for growth, has the highest chance of economic de!elopment-and will definitely attract more and more 36I. *onsidering these factors *hina is without any doubt the best location for in!estors to put their money 9%ndrKosso-/)*allaghan : *assidy, ''5 Branstetter : 3eenstra, 1@@@;. *hina has a population of 1. billion, with a !ast potential for consumption. *ompanies consider the *hinese market as the largest one in the planet and in the last few years the purchasing power of the *hinese people also increased drastically. That makes it as the most suitable place for in!esting in the industries like chemicals, drinks, household electrical appliances, automobiles, electronics, and pharmaceutical industries and so on 9 *lifford : ebb, ''5 8a#an et al., ''G ardy, 1@@& Jhang, '';. 11.1. 8esource %!ailability and ow *ost of abour 3orce The degree of a!ailability of different sources including the land, labour and natural resources is always the key to attract more and more in!estors. /ne of the ma#or ad!antages of company)s get while they in!est in *hina is its a!ailabilit y of all kinds of resources. The most significant one is the human resources. *hina is the largest country in the world in terms of population and as conseuence of that it possesses rich source of labour in the globe. %long with that another ad!antage the companies get is the labour force is also a!ailable at relati!ely lower cost and it are also less than in Curope and the D by a great margin. The country is also !ery rich in energy resources. It has oil reser!e and it is the largest producer of coal in the world. %s with coal, *hina)s electric power supply is sufficient and uninterrupted. /ther ma#or natural resources such as land, iron and other minerals are economically a!ailable 9Head : 8ies, 1@@? Ta et al., ''' Jhang, '' *heng : +wan, ''';. 11.1.5 Immense 6e!elopment in 8ele!ant Infrastructure It is always the fact that a!ailability of physical infrastructure greatly influences the decision of in!estment particularly in a foreign land. It is a great ad!antage for a company to go for in!estment in a place and country which is !ery reach in infrastructural de!elopment. The more highways, railways and interior transport waterways are ad#usted according to the si4e of host pro!ince, the more 36I inflows. Telecommunications ser!ices also play a ma#or role. Cmpirical studies suggest that with these kinds of facilities are a!ailable a place will always be the perfect destination for foreign companies to go for 36I 9*heng : +wan, ''' 7rub et al., 1@@';. *onsidering the case and scenario in *hina it can be concluded that all kinds of infrastructural facilities are a!ailable there and it is also up to the mark. That ensures great ad!antages for foreign companies to in!est in *hina 9*heng : +wan, ''' 7rub et al., 1@@';.
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HWA TAI INDUSTRY BHD 11.1.& /penness to International Trade and Casy %ccess to International Markets *hina has adopted the Oe$port promotion de!elopment strategyP which was pro!en to be a remarkable step in attracting more 36I in the country. Together with e$port promotion policy, *hina has implemented economic reforms and open door policies and made efforts to promote trade by concluding se!eral bilateral trade arrangements and adopted unilateral actions. There has been substantial progress in reducing tariff barriers. %long with this the country also implemented a series of other policies to attract more international in!estments in the country. 3oreign in!estors always considers these issues as a ma#or one in deciding their in!estment locations and *hina is definitely on top of their list by gi!ing them abo!e mentioned ad!antages 9%ndresosso - /)*allagham et al., ''5 *heng : +wan, ''' Jhang, '';. 11.1.2 6e!elopment and %lteration of the 8egulatory 3ramework In the process of attracting more 36I *hina adopted a more transparent and suitable business en!ironment and regulatory framework. That pro!ides the in!estor a great deal of ad!antages and makes them feel secure to put their money in *hina. The process of making such en!ironment and regulatory framework includes amending a series of laws including the important ones for in!estors) likes regulations and pro!isions such as Cuity Foint-!enture aw and *ontract. %longside those the country also pro!ided some huge ad!antages to the in!estors by rela$ing some restraints. In addition *hina also restructures and reform the state owned enterprise and welcome the participation of foreign in!estors in that sector as well 9orld Bank, '' Jhang, ''1a Jhang, '';. 11.1.? In!estment =rotection and =romotion It is a remarkable fact that there has not been a single case of e$propriation of foreign in!estment since *hina opened up to the outside world in 1@A@. In is really astonishing considering the political scenario and historical outset of *hina. The real case is that the Foint Nenture aw was amended to hinder nationali4ation. This portrays the scenario of in!estment protection in *hina. In!estors are really feeling safe and foreign in!estors are getting immense mental as well as political ad!antages. %nother significant addition of in!estment protection was the O*ontract awP of 1@@@. It ensures legal rights of in!estors. It pro!ided the legal rights of all parties while allowing them to determine their own remedies for dispute resolution and breach of contract and to promote foreign in!estment. In!estors are also getting uite significance ad!antages due to some in!estment promotion campaign by *hina. It includes uniue ta$ incenti!es for the pecial Cconomic Jones of hen4hen, hantou, Jhuhai, Qiamen and Hainan, 1& coastal cities, do4ens of de!elopment 4ones and designated inland cities. The country also established a number of free ports and related economic 4ones. The incenti!es are also a!ailable in the areas of significant reductions in national and local income ta$es, land fees, import and e$port duties, and priority treatment in obtaining basic infrastructure ser!ices 9orld Bank, ''5 Qing, ''& ilson : =urushothamam, ''5 Jhang, '';.
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HWA TAI INDUSTRY BHD 12.0 MAR;ETING ISSUE OF HTIB
1.1 Market segmentation Marketing !ariables will influence the success or failure of strategy implementation of HTIB. It depends on how HTIB chooses the suitable market segmentation for its products. Market is being subdi!ided into distinct subsets of customers regarding to the needs and buying habits of consumers. Ha!ing appropriate market segmentation helps a lot in market de!elopment and market penetration as well. HTIB can spend wisely if allocate resources to the appropriate market segmentation. 3or instance, besides the market segmentation in term of religion as mentioned in strategy formulation, market segmentation in term of occupation has high possibility to bring high profit margin to HTIB. tudents and the office workers consume the products of HTIB more than the other people with other occupation. This is because biscuits and cakes of HTIB are packed con!eniently and easily brought e!erywhere. *akes and biscuits are sufficient to the students and office workers who use less energy for their work and daily school acti!ities. =roducts of HTIB are better choices for them because their prices are reasonable and not hea!y and fulfill their needs. If HTIB in!est in this market segment besides the Malay market segment, HTIB can earn a lot in the future. 1. Marketing mi$ 1..1 =rice Ha!ing the appropriate market segmentation, it is actually directly affecting the marketing mi$ !ariables too. Marketing mi$ consists of price, promotion, place and product. It is !ery acute that HTIB should pay more attention on fi$ing the selling price. ince it is suggested to conduct low cost strategy, HTIB affords to set lower selling price because of its low cost of production. 3or instance, HTIB should set reasonable price to the market because its main consumers are come from well-off family and not all from rich family. It is clearly depicted through the chart 9appendi$ no5;which shows that the earnings of HTIB increase from ''@ to '1' when its price of products decrease. This shows that lower selling prices assist in increasing profit margin of HTIB and HTIB should continue it by ha!ing lower prices for its products. HTIB should not set the higher price because its number of consumers may reduce especially the number of students who are not afford to buy e$pensi!e biscuits and cakes daily. In doing so, HTIB will be the price leader within the industry and able to compete with its main competitors like "estle and +ellogg)s. 1.. =romotion HTIB should promote its products to the market segment targeted so that the targeted consumers spend on its products. 3or e$ample, HTIB should promote its products through ad!ertising. %d!ertising may bring deeper impression to the market segments targeted especially the students. tudents can be said glued to the tele!ision screen more than loafing in supermarket. tudents will be e$posed to its products more if ad!ertise snacks and cakes through ad!ertisement.
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HWA TAI INDUSTRY BHD 1..5 =lace =lace is !ery crucial because it determines how easy the consumers to get HTIB)s products. 3ortunately, HTIB already distributed its products to all the supermarkets ranging from small grocery shops to large supermarket like 7iant and Fusco. Howe!er, it is suggested that HTIB should also distribute its products to the canteens of schools. In doing so, students will be able to BD IT products easily and this way helps in promotion indirectly because students will OpromoteP the biscuits among themsel!es. 1..& =roduct =roducts are the main output of HTIB. HTIB ensures its products which including biscuits, cakes and snacks are of high uality from time to time although they are produced in high uantity. Besides uality, HTIB is suggested to change its e$isting packaging 9appendi$ no1; to attract the consumers. ince one of its targeted markets is the students, attracti!e packaging is better because students are normally buy biscuits and cakes with nice packaging besides considering about their price. "ice packaging brings deep impression to the consumers. 1..2 eadership HTIB already has good leadership from Mr oo Thien Ming>oo Thien ee 9*C/; in leading the employees to the direction which already set for HTIB. Howe!er, it is suggested that HTIB should also implement Theory / as stated by BCC8 and "ohria 9'''; in order to achie!e the !ision and mission of HTIB. The leaders should adapt softer approach to o!ercome the change effecti!ely. eaders should affect the corporate culture by creating the culture of creati!e thinking and hardworking and the way the employees work. 3or e$ample, after implementing rightsi4ing, leaders should encourage the employees who are able to remain in HTIB to ha!e the creati!e thinking culture by organi4ing training and de!elopment, some internal competitions for the employees and others to them so that employees ha!e contributions more to the strategy of di!ersification.
13.0 FINANCIAL VIABILITY
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HWA TAI INDUSTRY BHD
14.0 CONCLUSION
In a conclusion, as well known, china is the fastest de!eloping country, which has many potential business opportunities. Howe!er, it is important to #udge and make sure the
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