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HWA TAI INDUSTRY BHD

1.0 INTRODUCTION OF HWA TAI INDUSTRY 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 Industry Bhd can be found locally from 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 quality and variety. Now, Hwa Tai is one of the five major
biscuit manufacturers in the country. Hwa Tai Industry Bhd plans to embark on aggressive
promotional and marketing activities, focusing on selected products as it tries to expand sales
in the domestic market. All the products are safety and hygiene for consumers use by using
high technologies to produce the product. Hwa Tai Industry Bhd expected high standards
from their staff to the provision of the highest quality service in the business. There is 40% of
the companys production is exported internationally to countries like China, Taiwan, Hong
Kong, Singapore and others.
1.2 Strategic posture
1.2.1 Company Logo

1.2.2 Objectives:
Hwa Tai is committed in producing best quality biscuit products for our customers all over
the worlds and creating business opportunities for our partners. We have more than 50 years
of manufacturing experience and the ability to manage our entire value chain, from
procurement of raw materials to distribution of finished products. From the companys very
first beginning, we have recognized that the skilled and dedicated people who work for use
are critical to our success. We expect high standards that our staff which is a team totally
committed to the provision of the highest quality service in the business.
1.2.3 Strategies:
Hwa Tai Industries have a strong divisional corporate structure. A strong divisional corporate
structure can lead the company more powerful to operate. They try their best to gather
different idea and knowledge to come out creative and innovative idea to solve all problems
or create a new product. The Board of Directors have recognizes its overall responsibility for
maintaining the Groups system of Internal Control and risk management to safeguard
shareholders investment and the Companys assets, as well as for reviewing the adequacy
and integrity of the internal control system. Not only that, Hwa Tai Industry Bhd is also doing
Research and Development (R&D). Research and development (R&D) can help organization
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research target market and customer needs, thus developing new and improved products and
services to fit these needs. Research and Development can lead to innovation and increased
productivity and can boost our business's competitive advantage.
1.2.4 Policies:
Hwa Tai Industry Bhd hopes that they can provide better service to their customers in order to
fulfil customers need and can maximum company profit. Hwa Tai Industry Bhd expected
high standards from their staff to the provision of the highest quality service in the business.
1.3

Strategic Managers

1.3.1

Board of Directors

a) Mr. Soo Thien Ming @ Soo Thien See


Mr. Soo Thien Ming is a Malaysian. He is 63 years old and he is the Chairman on the Board
of the Company. He was appointed to the Board on 26 April 1996. Mr. Soo is a Barrister-AtLawof LincolnsInn, London. He is an advocate and solicitor by profession and has been in
practice for 36 years. He is also a Notary Public and Commissioner for Oaths. He holds
several directorships in private companies in Malaysia and abroad. He is the Chairman of the
Nomination Committee and Remuneration Committee. Mr. Soo has a direct shareholding of
12,372,627 ordinary shares of RM1 in the Company as at 30 April 2010. He is deemed to
have an interest in the equity holdings held by the Company in its subsidiaries by virtue of his
controlling interest in the Company.
b) Mr. Soo Chung Yee
Mr. Soo Chung Yee is a Malaysian. He is the Group Chief Executive Director Mr. Soo Chung
Yee is a non-independent executive director. He was appointed to the Board on 16August
2004. Mr. Soo holds a Bachelor of Arts from the University of Derby, United Kingdom. He
was awarded the Asia Pacific Entrepreneurship Award (Emerging Entrepreneur Malaysia)
in 2007 and the JCI Creative Young Entrepreneur Award (Junior Chamber International
Malaysia) in 2008. He also holds several directorships in private companies in Malaysia and
abroad. He is a member of the Remuneration Committee.
c) Encik Mohamed Razif Bin Tan Sri Abdul Aziz
Encik Mohamed Razif BinTan Sri Abdul Aziz is independent non-executive director. He is a
Malaysian and appointed to the Board on 20 March 2006. He is a Barrister-at-law from
Lincolns Inn United Kingdom. He was admitted as an Advocate and Solicitor of the High
Court of Malaya in 1985. He specialist in corporate, financial services and convincing
matters and has handled numerous housing projects for major developers and a variety of
corporate as well as offshore loan documentations. He also specialises in Syariah Corporate
Law and Syariah Convincing/Security documentation. He is an advisor for internal
disciplinary inquiry committees of various organizations. He is also involved in
Commercialisation of Biotechnology Products and Services and familiar with the Malaysian
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Intellectual Property laws. He is a committee member of the Kuala Lumpur Malay Chamber
of Commerce and is the Chairman of the Professional Committee of the said Chamber. He is
the Deputy President of Southampton University United Kingdom Alumni and a committee
member of both the Malay College Old Boys Association (MCOBA) and Lincolns Inn
Alumni.
1.4 Internal Environment
1.4.1

Corporate Structure

Hwa Tai Industries Bhd is a well-known company; everyone knows what is selling by this
company. For a company to be successful or not are based on the companys corporate
structure. Hwa Tai Industries Bhd has a strong divisional corporate structure of their
company. The Board of Directors recognizes its overall responsibility for maintaining the
Groups system of Internal Control and risk management to safeguard shareholders
investment and the Companys assets, as well as for reviewing the adequacy and integrity of
the internal control system. Due 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
achieve corporate objectives. Therefore, the system can only provide reasonable and not
absolute assurance against material misstatement or loss.
1.4.2

Corporate Culture

Whether written as a mission statement, spoken or merely understood, the corporate culture
must describe and governs the ways a companys 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
objectives, strategies and policies so that can achieve the target of the company.
The Groups management team meets regularly to review and monitor the business
development, discuss and resolve key operational and management issues and review the
financial performance against the business plan and budget for each operating units within
the Group. The Board of Directors and management have ensured that safety and health
regulations have been considered and complied with.
1.5 Corporate Resources
1.5.1 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 other mass consumption industries. A total of 40%
of these products is exported internationally to countries such as China, Taiwan, Hong Kong,
Singapore, Brunei, USA, Mauritius, Middle East, Papua New Guinea, Maldives, Nigeria and
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28 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.
1.5.2

Financial

Yes, they are clearly stated or merely implied from performance or budget. Yes, the
companys financial objectives, strategies and policies are consistent with the corporations
mission, objectives, strategies and policies and with the internal and external environment.
The company revenue is decrease from RM 63.75 million to RM 61.30 million. This is
because of the company losing a certain OEM (Original Equipment Manufacturer) customer
cake products and also lower sales from the international market. The lower revenue had in
part resulted in the deterioration of the Groups results which recorded a net loss of RM 1.80
million as compared to a net profit of RM 385,000 in 2010. In addition, the decline in the
results was also caused by higher spending on advertising and promotional activities to
counter intense market competition and fluctuating market condition.
1.5. 3 Business environment
The global economy in the year 2011 did not see any improvement as compared to the
preceding year. A series of massive natural disaster which struck various parts of the world,
the political unrest in the Middle East and the sovereign debt crisis which hit the Euro Zone,
all had attributed to the weakened economic environment. Despite the gloomy global
economy, the Malaysian economy remained resilient in 2011 with the Governments
accommodative and supportive growth policies which had helped to keep domestic
consumption healthy.
1.5.4 Foreign currency risk
Sensitivity analysis for foreign currency risk. A 10% strengthening of the USD and SGD
against the RM at the end of the financial year would have increased/ (decreased) profit or
loss and equity. This analysis assumes that all other variable, in particular interest rates,
remain constant.
1.6 Research and Development (R&D)
They aim to be a leading biscuits and confectionery manufacturer in the region known for its
product quality and variety. Yes they are consistent with the corporations mission, objective,
strategies, and policies and with the internal and external environments. So for that they
should have a strong research and development department in their organization to the
development of new products, processes and service or to improvement of existing products,
processes and service.
Hwa Tai Industry BHD had a strong strategy for research and development to improve their
food industry. The technology also helps the organization to improve 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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However there is a limited presence in the organic food market. So for that the organization
should implement new product chain to compete the global market and local market. Because
the competitor such as London Biscuit Berhad, Julies Biscuit, Munchys and so on are have a
strong market in globally and locally. So the company should improve their recipes variety to
attract the customer to stay loyal.
1.7 Operation and Logistics
1.7.1 Operating
The main objective of operating management of Hwa Tai Industry BHD is for increasing the
quality of food and working levels of working process. This could reduce the number of
errors, rejects 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.
So that the organization should improve their operating system to produce quality product
without wasting raw material and also can reduce the cost of operating.
1.7.2 Logistics
Hwa Tai Industry BHD has an effective distribution network. Logistics is the management of
the flow of resources between the point of origin and the point of consumption in order to
fulfil some requirements. The resources managed in logistics can include physical items, such
as food, materials, equipment, liquids, and staff, as well as abstract items, such as time,
information, particles, and energy. The logistics of physical items usually involve the
integration of information flow, material handling, production, packaging, inventory,
transportation, warehousing, and often security.
As I mention there Hwa Tai Industry BHD has an effective distribution service. They offer a
better transport service for their customer to make sure that the customer can obtain the
product on the time. They also maintain the good transport service to their loyal customer. If
they have own transportation service they can reduce the cost by deliver the product by itself
and also on time. They also have warehouse service with better condition. This means they
emphasize cleanliness and safeness to make sure that their products are healthy to eat.
Finally, its more benefit if they have own transportation service, 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 quality and variety. Biscuit maker Hwa Tai
Industry Bhd wants to expand and strengthen its position in the countrys biscuit making
industry. This is to ensure the companys leading position in the competitive industry. Now,
Hwa Tai is one of the five major biscuit manufacturers in the country, with the rest
comprising about 60 small and medium-sized companies. Today, Hwa Tai products can be
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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 aggressive promotional and marketing
activities, focusing on selected products as it tries to expand 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 provided several types of
products for consumer choices such as cracker, cookies cream sandwich and assorted
biscuits. So, Hwa Tai biscuits are suitable for all members in a family, cakes, luxury,

On the other hand, the commitment in in Hwa Tai Industry Bhd is producing the best quality
biscuits for customers all over the world and creating business opportunities for partners.
Hwa Tai has more than 50 years of manufacturing experience and the ability to manage the
entire value chain from procurement of raw materials to distribution of finished products.
From the company's very first beginning, they have recognized that the skilled and dedicated
people who work for them are critical to their success. Moreover, they expect high standards
from their staff, it is a team totally committed to the provision of the highest quality service in
the business.

HWA TAI INDUSTRY BHD


3.0 MOTIVES FOR GOING INTERNATIONAL
3.1 Overarching Factors Affecting the Decision to Go International
3.1.1 Primary Motives For most private-sector businesses, profitability is of crucial
importance. The opportunity to make profit by selling its products in a foreign market may
therefore be attractive, especially if expansion 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 expansion. International exposure also
enables a company to achieve an international reputation, which may be important if it is to
be regarded as an industry leader.
Profitability also depends on competitiveness, so international expansion may be a way of
reducing costs in a competitive international market. Access to international markets allows
increased scale of production, leading to lower unit costs. Economies of scale are particularly
important for a company like Nestl whose home market in Switzerland is relatively small.
Scale economies apply not only at the level of the production plant, but more especially at the
level of the organization as a whole. Access 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 (known as
offshoring); these include not only call-centre operations, for example, but also many
labour-intensive data-input tasks which are increasingly being outsourced to companies
employing low-cost but highly skilled IT workers in countries like India
3.1.2 The Changing International Environment In broad terms, the main nations involved in
international business activity have experienced an unprecedented period of peace and stable
international relations since 1945. From time to time conflict in particular countries has
disrupted trade flows, notably in commodities like oil during periods of turbulence in the
Middle East, but the United States, Western Europe, and Japan, which have until recently
been the major trading nations, have enjoyed generally cordial relations with each other. This
has helped enormously to increase the volume of world trade and investment, clearly having
a positive influence on internationalization decisions.
The historic opening up of China and Eastern Europe since 1978 and 1989 respectively has
also increased the opportunities for international trade and investment. The increase in
international business activity has contributed to significant growth in the world economy
over the post-war period. This growth has also been sustained by a general reduction in trade
barriers between countries, thanks to the work of GATT and the WTO (see section 4.1) and
the gradual liberalization of national trade and investment policies. The increased rate of
growth in international business activity would not of course have been possible without
significant developments in production and information technology and commensurate
improvements in the quality of human capital.
3.1.3 Country-specific factors Whilst the general international environment influences
overall internationalization decisions, the decision to do business in a particular country is
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primarily affected by conditions in the country concerned. A wide range of factors may be
important, as indicated for example in the World Economic Forum global competitiveness
report. Among the most important factors are political and economic stability, culture and
institutions, and a countrys stock of created assets. The increase in economic activity,
including foreign direct investment that has occurred in Northern Ireland (and to some extent
in the Republic of Ireland) after the signing of the Good Friday Agreement in 1998 clearly
indicates the importance of political stability. Created assets, or what Michael Porter calls
advanced factors, are assets which a country has developed through investment over 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 innovation, intellectual property, and business networks.
When comparing alternative locations, either between or within countries, government
policies such as tax rates or financial incentives may influence the decision to invest; for
example, the Republic of Irelands 12 per cent corporate tax rate (formerly 10 per cent) has
undoubtedly influenced inward investment decisions in Ireland in recent years. In more
difficult national environments, such as some of the former Soviet republics after the collapse
of the Soviet Union in 1991, nuisance costs have had the opposite effect by deterring
foreign investors; these include bureaucratic obstacles, corruption, and mafia-style activities.
3.2 Firm-Specific Factors Affecting the Decision to Go International
3.2.1 Access to markets The lure of new markets either in large developed economies or in
emerging economies with growth potential is often irresistible to businesses with
international ambitions. Companies like Microsoft, Coca Cola, or Toyota could not have
achieved global leadership positions in their respective industries without selling their
products in most of the worlds markets. The opening up of China has attracted firms seeking
low-cost production, but this advantage will in the longer term be dwarfed by the countrys
market potential as the wealth of Chinas massive population rises. The establishment of
production facilities within a regional economic grouping also allows access to the regions
entire market. Thus, for example, Nissans UK investment allows the company to export
around eighty per cent of its production to other EU countries. Similar explanations can be
found for foreign investment in Latin America in recent years (see Practical Insight 1).
In some cases, early entry into an emerging economy brings first-mover advantages and the
possibility of market dominance before rivals have the chance to establish themselves. Tesco
has achieved this position in some of the former communist countries of Central and Eastern
Europe. Paradoxically, however, PepsiCos early advantage in the same region before the end
of communism was swiftly displaced by Coca Colas aggressive expansion into the region
after 1989. Sometimes, it is simply necessary to follow the competition so as not to be left
behind.
3.2.2 Access to resources Historically, a countrys deposits of coal, iron ore, copper,
precious metals, or other natural resources were the main attraction for foreign investors.
Indeed, this is still true today in the oil and mining industries, or where large quantities of
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natural resources are consumed in the production process though Australian or Colombian
coal, for example, can now be economically transported half way around the world. Perhaps a
more generally important reason why a foreign investor may be attracted by resources is
where a specialized resource such as highly skilled labour is relatively immobile. On the
whole, resources have become less important as a motive for internationalization in the
modern world, as highly transferable knowledge and technology have acquired greater
importance than natural resources in many industries.
3.2.3 Cost Reduction 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. For example, a number of British banks and insurance companies have
outsourced their call centres to India and the British company, Dyson, has relocated its
production plant to Malaysia, whilst keeping its research and design facility in the UK. Some
companies have in fact been criticized for exploiting low-cost labour in developing countries
where working conditions would be regarded as unacceptable in their home country. It should
be remembered, however, that cheap labour is not necessarily attractive to capital-intensive
businesses where relatively small amounts of highly specialized labour are needed unless,
of course, highly skilled labour is available at low wages, as has been the case in recent years
with computer programmers in Russia or India.
4. 0 FOREIGN COUNTRY (CHINA)

Nowadays, China has become one of the worlds most attractive locations and Chinas rise
carries enormous significant for the international business communities. China has a very
good development in term of legal system, the size of the market, the low cost of labour and
Chinas growth potential together offer unprecedented business opportunities for foreign
investor to do business in China. International business have developed very rapidly in China
and today, China become increasingly integrated with other parts of the world and opened up
to a whole range of cross- border economic activities. Managing an international business in
China is not an easy task and there are some challenges will be occurred. The prime
challenge for those interested in doing business in China is achieving their strategic
objectives of cost reduction, local differentiation and the strengthening of core competencies
in their specific functional areas and business activities. China is the formal member of World
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Trade Organization (WTO) since 2001 and from the date, China enjoyed all the rights the
WTO gives to other members and full participates in WTO activities. China's entry will
benefit its national economy, as well as encourage global economic growth and the
improvement of the multilateral trade system. WTO membership opens up Chinas market for
more international trade and INVESTMENT, and opens up the world economy for Chinas
exports. This report will cover the reason for doing business in China, defines and identify
the macro environment of China in term of political, economic, social and technology factors
in order to do business in China and the impact of China on joining WTO Chinas economy
has experienced a strong annual GDP growth rate of 10% during the last five years. It is
expected to continue its growth momentum and surpass the US in GDP by 2020. A high rate
of savings, abundant and increasingly skilled labour, healthy export business, and potential
urban growth is likely to drive the Chinese economy to sustained growth during 2012- 2017.
4.1 Political Factors
4.1.1

Constitutional System

China or Peoples Republic of China adopts socialist system or communism in their political
system in their decision-making processes in governing the country. The countrys sole
political party in power is known as the Communist Party of China. The government have the
sole power to control all activities done by their citizen as what have been describe in how
communism system worked in governing a country. In other words, the purposes of working
in China are to contribute to the nation and also to the government as the government control
on all activities in the country.
4.1.2

Stability of Government

The stability of the China government is quite moderate and stable because the administration
of the government are not publicize to the public either through the press or on the internet.
So, the degree of the citizen involvement in the politics is low because of the heavy
restrictions impose by the government. However, the policies impose and the law regulations
are quite effective in terms of economy where China is one of the leading countries in the
world. In the recent years (2001), China has joined the World Trade Organization and results
rapid growth in industrial and manufacturing sectors because of the cheap labour in China.
But still problems such as managing environmental degradation, demographic pressure and
the extreme immigration from rural to urban area must be faced by the government.
4.1.3

Business Freedom

The business freedom in China is quite tight because of the regulation impose by the
government where they restrict businesses from other countries coming in. But recently,
China government open their gate to the outside world to set up business in their country. It
takes 37 days to start anew business in China compared to the world average 38 days. While
it takes 1.7 years from the filling for insolvency in court until the resolution of distressed
assets. Examples of business freedom in China are super marketization and opening market to
foreign multinationals company because of the entry of China into WTO. Super
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marketization is where the government shuts down the traditional wet market and
transform them into supermarket.
4.1.4

Trade Freedom

In the past few decades, China loosens their trade policy to the outside world in their trading,
export and import industry. Chinas weighted average tariff rate was 3.9 present in 2008
based from the web (heritage.org). Factors that affect the cost of trade freedoms are import
and export bans and restrictions, import and export licensing, non-transparent tariff
classifications, complex regulations and standards, subsidies, state trading in certain goods,
services market restrictions, issues involving the protection of intellectual property rights, and
inconsistent and corruption-prone customs administration add to the cost of trade. So, Chinas
trade freedom score to account for non-tariff barriers deducted about twenty points.
4.2 Economic factors
Economic factors influence a business directly, because they affect capital availability, cost,
and supply and demand. If demand is high, and the capital cost is low, which attract more
investment on the company and produce more product to make profitable. However, during
economy recession period, there is still chances for some small potential corporations
accessing business market and competing with others.
Recent years, China economic growth rapidly. Overall, it can be reflect from industrial
sectors. Since from late 1978, China becomes market oriented economy. China gains
tremendous in production of agriculture. Even though, there are more than half people rely on
agriculture for living, the agriculture sector has less influence for gross domestic product. At
the same time, labour input decreases in most of industries, due to labour productivity
improvement and the migration from rural workers to urban areas. In the opposite, through
the adjustment of secondary industry and tertiary industry, they become unrepeatable roles to
GDP. (Ke-sha G, 2001) It provides activities as knowledge, skills, as well as experience,
entertainment to improve the quality of business. (Sasaki H, 2009) Due to its foreign trade
liberation and investment, the income has been dramatically rising after joining the WTO.
Moreover, 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 China 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 achieve steady
economic growth. Normally, government will not lend money to business company directly,
it has to deposit money from bank of china first. Also, the central bank reduces lending to
companies and individuals, according to the increasing amount of money they put with
central bank. Moreover, the central bank also guide country bank to increase more reserves
and its ratio, such as 16.5% for big bank, 14.5% for small bank, in case of any financial crisis
or loan needs. At the same time, bank of china will control conflict and surplus, as well as
increase tax for import product. Because if they increase tax, people would rather purchase
and import product with those money, not saving them into bank. (Bradsher K, 2010)
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Government expenditure is to purchase goods and service, allocate funds efficiently and
invest on doing domestic infrastructure; for high technology innovation and education, as
well as social security payments. Technically, increasing government spending can be met
chinas economy development need. By 2002, the government spending has increased to
5.5% of GDP, which shows a good trend. (Moinar M, 2006)
During inflation period, the economy is lack of investment, and exports will suffer from
inflation, as inflation increase the price of exports and encourage imports. Also, the most
industrialized countries will be adjusted to increase their interest rates, which will be pay
back through loan in the markets, which demonstrate that government try hard to control
foreign flow-in cash.
4.3 Social
It is claimed by Su and Littlefied (2001) that China is an extremely high-context country
where people prefer to receive implied messages. For establishing a business in China, strong
private-relationships with different stakeholders is the key to success. However, this is
extremely time-consuming while the maintenance is also expensive. Potential conflicts in
interest may easily erode it. Opportunities in the food market lie in China's urban centres
rather than rural areas.
First-tier cities: The first tier cities Beijing, Shanghai, Guangzhou, Shenzhen, and
increasingly Chongqing and Chengdu have seen the greatest exposure to imported food and
beverages. Multinational retail expansion has intensified competition in the richer coastal
areas, but opportunities still remain.
Second and third-tier cities: Incomes are growing rapidly in second and third-tier cities,
creating a new range of opportunities, but distribution and logistics remain under-developed
outside the largest urban centres, making distribution of imported products to interior cities
difficult.
4.3.1 Distribution of Wealth
Distribution of income or consumption by percentage share :
Lowest 10% :

1.80%

Lowest 20% :

4.66%

Second 20% :

9.00%

Third 20%

14.22%

Fourth 20%

22.13%

Highest 10% :

33.06%

Highest 20% :

49.99%
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Source from http://globaledge.msu.edu/countries/china/statistics/
China has an extreme gap between the lowest 20% and the highest 20% after 60 years China
change their system in their economy.
4.3.2

Changes in lifestyles and trends

Lifestyles and trends in China change in many ways such as the level of consumption,
attitude towards new product especially from the west, changes in the quality of life, and also
changing from quantity satisfaction to quality satisfaction. Besides that, changes in trends can
be seen from the degree of fashion sense where citizen tend to buy more colourful and
striking colours compare dull- coloured clothes.
4.3.3

Educational levels

The literacy rate for China is around 91.0% was able to read and write at a specified age.
While the average years of schooling is 11.2 year. Education expenditures in China are about
1.9% of the GDP.
4.3.4

Labour Freedom Ranks

Chinas labour regulations hinder overall employment and productivity growth. The nonsalary cost of employing a worker is high. Dismissing an employee may require prior
consultation with the local labour bureau and labour union.
4.3.5

Freedom of corruption

Corruption is perceived as widespread. China ranks 72nd out of 179 countries in


Transparency Internationals Corruption Perceptions Index for 2008. Corruption affects
banking, finance, government procurement, and construction most severely, and there is a
lack of independent investigative bodies and courts.
4.3.6

Property Rights

Chinas judicial system is weak, and many companies resort to arbitration. Local officials can
ignore court decision with impunity. All land is state-owned, but individuals and firms may
own and transfer long-term leases (subject to many restrictions) as well as structures and
personal property. Intellectual property rights are not enforced effectively. Copyrights,
patents, brand names, trademarks, and trade secrets are routinely stolen.

4.4 Technological Factors


4.4.1

Science and Technology

Through the period, the achievement of science and technology in China are remarkable
where they manage to achieve many discoveries in the science field. The major achievements
are the discovery of the Daqing Oilfield, building the first atomic reactor, successful testing
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of atom and hydrogen bombs, synthesis of crystalline insulin, positron and negatron
electronic collider, nuclear power stations, carrier rockets, and satellite launching technology.
Rapid improvement in science and technology also create more jobs in the manufacturing
industry and also make the quality of life better and easier.
4.4.2

Research and Development

The government design many plans and strategies in developing the R&D industry. Many
programs to enhance R&D industry are launched such as the Torch Program and the
Scaling Heights Program
4.5 Environmental Factors
4.5.1 Environmental Protection Laws
The government takes serious matter on protecting the environment where they impose many
regulations and laws in protecting, preventing and controlling industrial pollution and
improving urban environment. The government also collaborate with many NGOs in order
to maintain the mother nature.
4.6 Legal Factors
4.6.1 Employment Regulations
Chinas labour regulations hinder overall employment and productivity growth. The nonsalary cost of employing a worker is high. Dismissing an employee may require prior
consultation with the local labour bureau and labour union.
5.0 EXTERNAL ENVIRONMENT
5.1 Politic and Legal
5.1.1 Impending Election
The Impending election from the government have giving more offer and benefit for the
people who is under their condition will freely giving subventions to them purchase the
necessary. Hwa Tai may will increase the sales during the impending election.
5.1.2 Free trade
Hwa Tai is exported about 50 country around the worlds, which government is stated free
trade with other country, Hwa Tai may be threaten and benefit by them. Other 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 export their
product selling in other country easily to get more profit.
5.1 3 Halal Certificated System

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According to Abdulaziz, 2010 says that Malaysia is made of different religions, races and
cultures and this is important thing in the development of the Halal Malaysia certification.
The word halal is not the sole property of Muslims but has expanded 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.
5.1. 4 Malaysia Food Safety Act
Hwa Tai have obtained the HACCP certification, a testament to its efforts in achieving the
highest standards in food hygiene safety and quality. In order, customer will be more
confident in purchasing Hwa Tai product.
5.2 Economic
5.2.1 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.
5.2.2 Taxation rate
Government claim that if company who is largely using technology in producing their
product may reduce the tax that they need to pay. Hwa Tai Bhd can using more technology in
producing their own product which is benefit in paying less taxation by saving more
expenses.
5.2.3 National Income Level
The Gross Domestic Product (GDP) in Malaysia expanded 5.20 percent in the third quarter of
2012 over the same quarter of the previous year. National income level up and down will
affect people have the ability in purchasing power, when income level go up , Hwa Tai may
also increase in profit they get and vice versus.
5.2.4 Unemployment Rate
Unemployment Rate in Malaysia remained unchanged at 3.20 percent in October of 2012
from 3.20 percent in September of 2012. While unemployment problem making people dont
have constantly income to purchase unnecessary confectionary like biscuit.

5.3 Social
5.3.1 Health Conscious

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Nowadays, people may getting more caring about their healthiness issue when choosing
buying the healthy product. People may concern and wanted the material production of sugar,
oil and carbohydrate level 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.
5.3.2 Organic
Organic product is normally related to health, because it have the standard cover with the
aspect of food product, animal welfare ,wildlife conservation, to food processing and
packaging. Consumer are more interest in purchase organic product when giving the choice
to them, Hwa Tai could making some improvement in changing some of their material to
produce the organic biscuit.
5.3.3 Outgoing activity
People will likely to have the product which is easy to purchase when their having some
activity, for example the cinema could be selling some snack to bringing it when they
watching and airline can also provide the biscuit to the customer who is in long way journey.
5.4 Technology
5.4.1 Transportation
By using better technology can helping Hwa Tai in transporting order product from supplier
be more efficiency and more accurately would easily make any mistake. It helping reduce the
unnecessary cost and risk if that is making the wrong order with other supplier.
5.4.2 Advertising
Advance in using technology in advertising can create a strong brand awareness and
reputation for the company. Hwa Tai may use advertise through media like TV, Radio,
Magazine and more to capture peoples sight and vision.
5.4.3 Machinery equipment
By using better quality of machinery equipment it can be producing product in faster way and
saving some unnecessary cost like labour cost. By using machinery equipment Hwa Tai can
create a better looking packaging in order to attractive and get interest more customer to
purchase our product.

5.5 Environment
5.5.1 Global Warming

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The global warming issue looks serious day by day, people nowadays are advocate 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 environment issue.
5.5.2 Product reuse
People are more liking in demand on the left over of the packaging can be reusing again, for
example the aluminium box can use to storage something. It does not harmful and destroys
the peaceful of the environment. If Hwa Tai creating in new way in using better quality of
packaging by educate them in reuse in new way from the product packaging will build the
reputation of the company.
5.5.3 Safety Production Way
People 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 environment, Hwa
Tai can educate about how they produce their product in building good impression on their
brand.
6.0 PORTERS FIVE FORCE
6.1 The threat of new entrants
The threat of new entrants refers to the possibility that the profits of established firms in the
industry may be eroded by new competitors(Greenwald & Kahn 2005) . We cannot deny
that fact that HTIB is the second best biscuit manufacturing company in Malaysia
market( Hwa Tai rationalizes BUSINESS PROCESS 2009). It has a stable position in the
biscuit manufacturing industry and thus the threat of entry by newcomers is low. The
newcomers like Gloria Biscuit faces with high entry barriers because HTIB which is their
existing competitor has strong brand identification. Consumers are loyal to HTIBs products
and its product differentiation has created a high barrier to entry to Gloria Biscuit. Gloria
Biscuit has to spend a lot to defeat the existing 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 having the SWOT analysis. HTIB will always be the strong biscuit
manufacturer and last long in the market.
6.2 The bargaining power of buyers
Buyers can affect an industry through their ability to force down prices, bargain for higherquality or more services, and to play competitors off against each other. (Henry 2008). 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 have standard or undifferentiated.
Buyers can easily get the alternative suppliers from the market such as Munchy, Hup Seng,
Julies, Shoon Fatt, and so on. Since it is an ease to get standard products and have alternative
suppliers, buyers emphasize the prices of the products more than which biscuits taste better.
The products of HTIB is not very expensive compared with others biscuits of other brands
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and many buyers choose the products of HTIB now. This finally creates high bargaining
power of buyers of HTIB. Large-volume purchases by buyers are important to HTIB. The
higher sales of HTIB enable it to gain higher profit margin.
6.3 The bargaining power of suppliers
Supplier can exert bargaining power over participants in an industry by threatening to raise
prices or reduces the quality of purchased goods and services.( Ketchen et al,2009). 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 everywhere from any
suppliers. Many traders supply those ingredients in the market. Thus, HTIB can have
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. Suppliers products are
very crucial to HTIB to have effective production to fulfill the demand of buyers and
production of high quality 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 exports its products to many foreign countries, hence, it
needs a lot of labour to contribute to the high production of biscuits.
6.4 The threat of substitute products and services
Due to the technological advancement nowadays, there are a lot of substitute products with
different appearance but have the same function to satisfy the same need as another product
in the market. According to Porter, Substitutes limit the potential returns of an industry by
placing a ceiling on the prices firm in the industry can profitably charge.(Porter 1980). 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. For instance, the Kelloggs rice
krispies cereal can be a substitute product for the biscuits by HTIB. Consumers can have the
rice cereal as breakfast instead of HTIB s biscuits. Consumers can also eat instant noodles
MAGGI instead of eating cakes by HTIB, and even the Gardenia 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 SWOT analysis shown. Technological advancement is also one of the
element of PEST analysis for general environment which brings effect to HTIB itself.
6.5 The intensity of rivalry among competitors in food processing industry
Rivalry among the firms occurs when rivals sense the pressure or act on an opportunity to
improve their position. HTIB faces intense rivalry in the food processing industry. The rivalry
is very intense because there are numerous or equally balanced rivals in the market. Nestle,
Kelloggs, Hup Seng, IKO and others which are the direct rivals compete with HTIB for the
consumers. Each of the companies manufactures biscuits ,cakes and snacks. Super, High 5,
Gardenia and so on are the indirect rivals of HTIB. Diversity of risk occurs since the rivals
compete with each other with different ideas to challenge the position of HTIB. It is clearly
depicted when Kelloggs and Nestle advertise their products through the media to introduce
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their products to the public to increase their sales. The intense rivalry brings some impacts to
HTIB as the rivalry will erode its profitability and may decreasing its sales of 72,106,000 in
2009 in the future.
7.0 SWOT ANALYSIS
7.1 Strength
Strengths are areas where the organization excels 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 development ( R&D )focus. HTIB do R&D
to produce better quality products. It can be said that HTIB has core competence of strategic
capability. Having better and special products enable HTIB to achieve competitive advantage.
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 R&D. HTIB has also intangible resources which is technological
resource to renovate the existing products and as fast as what consumers expect. Good
allocation of resources enables HTIB achieve cost effectiveness without waste. The effort of
HTIB has driven it to have high brand equity and eventually gains a lot of awards for its
biscuit products such as Malaysia Power Brand Award 2008 by the Asia Entrepreneur
Alliance Worldwide.
7.2 Weakness
Weakness are areas where the organization may be at a comparative disadvantage. HTIB has
its own weakness although it has been achieving success. HTIB has limited presence in
organic food market. Consumers more and more care about their healthy. They prefer organic
food to normal food because they think that organic food is free from chemical. Among the
products of HTIB, only the biscuits with the brand name of LUXURY almost fulfill the
requirement as organic food because they contain whole meal, wheat bran and others which
consumers think that they are nutritious. However, the other products of HTIB still not be
grouped as organic food. This may lead HTIB lost some market which loves organic food and
their sales will not be as high as what HTIB targeted.
7.3 Opportunities
After analysing HTIB, there are opportunities that enable HTIB to gain profit and growth.
HTIB has the opportunity to own the manufacturing agreement with London Biscuits Bhd
(Hwa Tai to market London Biscuits Swiss rolls 2007). HTIB is in collaboration with
London Biscuits Bhd and it really brings a lot of opportunities to HTIB because it gives
HTIB instant expanded production capacity and opportunities to create a new variety of cakes
by the sharing of technology between them. HTIB is appointed to market and distribute the
best-selling product, Lonbisco Swiss rolls. HTIB is the key distributor to mini-markets,
supermarket and hypermarket in Peninsular Malaysia. These opportunities have widen
HTIBs market and it will definitely progress rapidly within few years.

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7.4 Threats
Threats are something from external environment of the company that will deter the company
from obtaining success. HTIB faces some threats that deter it from having smooth
production. Expensive raw materials is the main threat faced by HTIB. It contributes towards
the increasing of cost of production of HTIB. Although HTIB has the opportunities to own
manufacturing agreement with London 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 have smooth
production. Due to the high cost of production, HTIB is not able to increase the number of
countries for its exportation. Such situation is really a barrier to HTIB to enter the bigger
market.
8.0 STRATEGY FORMULATION
Either the weaknesses or threats of HTIB are clearly depicted after analysing the company
through SWOT analysis and Porters five forces. Strategy 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 competitive advantage within the food processing industry.
8.1 Business level strategy
Business level strategy is a means of separating out and formulation a competitive strategy
at the level of the individual business unit.(Henry, A 2008) There are five generic
competitive strategies which are generated by Michael Porter (1980) to achieve the
competitive advantage 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 (Henry 2008).
8.1.1 Low cost strategy
Low cost strategy is used by the companies which produce their products and services at the
lowest costs within an industry without sacrificing the products quality 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 overall costs in term of raw material, production, transportation and
so on. HTIB can achieve low cost strategy through economic of scale. Economic of scale
arises when the cost per unit falls as output increases(Economic of scale 2008). HTIB has
low bargaining power related to its suppliers since it will order high quantities of raw
materials at a cheaper price from any suppliers for its production and eventually contribute
towards cheap cost of production. Besides, HTIB has its strength of strong research and
development (R&D). It should utilize its strong R&D to find out the better product designing
for efficient production like easy-to-use manufacturing technologies so that costs can be
reduced and increase quantities without affecting quality. Workers should be sent for training
so that skilled workers available in the production and able to work in team effectively and
deliver 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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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 overall costs enables HTIB to have lower costs of production
and lower selling price for its products than its competitors. For instance, cream sandwich
biscuit of HTIB costs RM2.99 a packet whereas Lexus of Munchys costs RM 4.60 a packet,
that is 35% cheaper than Munchys product. HTIB drives its cost-based competitive
advantage into price advantage to the customers and gain high market share eventually. HTIB
can be price leadership finally because it can adjust 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 overcome its threats after utilizing
low cost strategy because it enables HTIB to settle the threat of expensive 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 quality and cheaper prices.
Having low costs strategy, HTIB will be able to compete with its competitors , General Mills
which also conducting low costs strategy . Low costs strategy is really a better strategy for
HTIB to settle its weakness and threats as well.
8.2 Corporate level strategy
Corporate strategy is primarily about the choice of direction for a firm as a whole and the
management of its business or product portfolio. (Wheelen & Hunger 2006,p.3). Growth
strategy from the directional strategy is the most suitable strategy for HTIB. A directional
strategy is any trading or investment strategy that entails taking a net long or short position in
a market.(Directional TRADING STRATEGY 2005).
8.2.1 Growth strategy
There are many aspects that needed to be grow so that HTIB can become more competitive in
the market. Growth in the aspects of sales, assets, profits, or some combinations are crucial to
HTIB. Ansoff (1965) devised a matrix to analyse the different strategic directions
organizations can pursue .
8.2.1.1 Market penetration
Market penetration is the effort of increasing the market share in the existing market with the
existing products. HTIB has been exporting its products to foreign markets and domestic
market. HTIB has a lot of consumers who eat its biscuits, cakes and snacks worldwide.
However, HTIB should keep on its effort to increase its market share in the existing market
by attracting more new consumers to BUY ITS existing products. HTIB should also make
sure that the existing consumers to eat more its products. With the capabilities and resources
of HTIB, this strategy is not risky because HTIB do not need to do anything unless increase
its products quality to meet the consumers needs and wants. Improving its quality is not a
problem to HTIB as it has professionals for R&D.
8.2.1.2 Market development
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Market development is the entry of the new market with the existing products. HTIB should
aim at other market segments and geographical areas as well. For instance, the products of
HTIB are not HALAL since HTIB not yet apply for that. Malays are not allowed to eat
food without HALAL and they are not dare to buy the biscuits of HTIB. HTIB should
target at demographic segmentation in term of religion in order to develop new market for its
existing products. HTIB should put their effort to work on it and apply for HALAL so that
Malays market segment can be another new market for HTIB and increase its sales. Besides,
HTIB should export its products to more foreign countries other than its existing international
market. New geographical areas should be found so that its products can be distributed to
more countries such as Malays countries to increase its sales. Although 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.
8.2.1.3 Diversification
Diversification occurs when an organization seeks to broaden its scope of activities by
moving into new products and new markets. Diversification is actually a suitable strategy for
HTIB because it helps to spread risk by reducing reliance on any one market or
product(Ketchen2009). For instance, HTIB should have diversification by producing new
products like organic food to new market especially health-conscious market. HTIB will face
lesser competition if having new market. If one of the existing product is not in high sales,
HTIB is still safe because consumers from other market may BUY ITS other products. The
risk of low revenue will be spread among different products. HTIB will be afford to
implement diversification 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
diversification of products. As the result of benchmarking, having diversification is crucial in
order to own sustainable competitive advantage forever.
8.2.1.4 Related diversification
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 diversification because HTIB itself has the
capabilities and resources of entering the organic food industry which there are some links
with its own existing value chain. HTIB should diversify its products by manufacturing
organic food to meet the needs of health-conscious consumers. Horizontal integration should
be done by HTIB to take over its competitors and offer organic food as complementary
products at the same stage within its value 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
Nestle and Kelloggs do not have organic food at all and HTIB will be able to take over them.
8.3 Strategy Implementation

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Strategy implementation is the sum total of the activities and choices required for the
execution of a strategic plan.( Wheelen & Hunger 2006,p.3). HTIB is trying to achieve
efficiency after achieving effectiveness through strategy formulation. Having efficient
implementation of strategies assist in building a capable HTIB in term of staffing, structuring
and having core competencies and capabilities within the biscuit industry to achieve its vision
of being the main players in biscuit industry with its quality products.
8.4 Management issue ( division restructuring and rightsizing)
Since HTIB needs to implement market penetration, market development and diversification
as well, it needs more capital to succeed them. Therefore, division restructuring and
rightsizing are better ways to gain more capital for those developments and improve the
productivity and efficiency of the management team. Both ways help in low-cost strategy by
reducing the expenses on tangible and intangible resources and salary. For instance,
accounting department should combine with the financial department. This is because costs
can be saved in term of expenses of stationery and office equipment 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 expenses on
salary. Top Performer Profiling (TPP) should be implemented to judge the employees
according to their knowledge and experience, skills and abilities, and behaviour and
characteristics ( rightsizing for profitability2009). In doing so, the employees are laid off
fairly without affecting their motivation to work.
HTIB is able to minimize its input by reducing cost and able to let the talented employees to
enact adaptable workforce planning. They will fully utilize their talent on business needs to
bring competitive advantage to HTIB (Rightsizing in challenging times 2008). The capital
saved can be used for other purposes like market penetration , market development and
diversification which help in maximizing the profit. Although diversification requires some
cost but the low cost strategy implemented by division restructuring and rightsizing already
save lots of cost and the capital is enough for the implementation of diversification since
HTIB is not a poor company.
9.0 PRODUCT STANDARDIZATION OR ADAPTATION POLICY
A firm that deals with international markets has available four alternatives:
i.
ii.
iii.
iv.

selling the product without changes on international markets.


modifying products for different countries or regions.
developing 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 alternatives. For example, a firm can
only identify target markets, where products may be sold without or with minor
modifications. A company can have its line of products for various markets global, regional

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and local products. Some of these products developed for one market may be introduced later
in other markets, including global market where the company originates.
The selection of a standardization or adaptation strategy depends on numerous factors:
Standardization vs. adaptation
Factors that encourage
Factors that encourage
standardization
adaptation
Economies of scale in production
Different terms of use
Savings in research and development
Influences and government regulations
Marketing savings
Different consumption patterns
Economic integration
Local competition
Global competition
Legislative factors
Source: adapted from Sasu 2005, pp 144-147
Consumer goods such Hwa Tai require more adaptations, being influenced by cultural
differences and economic conditions of the target market. There are numerous examples of
global companies that have made certain adjustments to the specific products to foreign
markets. Many companies may use a combination of standardization and adaptation
strategies. Factors affecting decisions to adapt products are :
Factors affecting decisions to adapt products
Market characteristics
Government regulation
Non- tariff barriers
Characteristics and
preferences
Consumer models
The level of economic
development
Competition
Climate
Legal

Product characteristics
Functions, attributes
Durability , quality
Methods of operation and use

Company characteristics
Profitability
The cost of adaptation
Organization

Packaging
Brand

Resources
Policies adopted

Warranty service
Experience
Life cycle
Country of origin
Source: Adapted from Sasu 2005, p. 148

9.1 Market Characteristics


9.1.1 Government regulations and nontariff barriers
These regulations are one of the most important factors involving product adaptation to
destination markets. Nontariff 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 requirements is very high.
Requirements related to testing and certification of drugs on the American market has made
difficult or even impossible the market entry of foreign firms. Regulations on emission

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compliance standards has resulted in standards regarding engine exhaust emissions known as
Euro 4, Euro 5, Euro 6, etc..
9.1.2 Clients characteristics and preferences
Products sold on foreign markets are influenced by local behaviour, tastes, attitudes and
traditions on each market.
9.1.3 The economic development level
Buyers who come from developed markets demand sophisticated products, while customers
from less developed markets are only solvable for simplified versions of products due to low
purchasing power and conditions of use.
9.1.4 Competition
Product adaptation to specific foreign markets is often required by the strategies adopted by
competitors and pressures exercised by them. The rules of the game vary according to local
business environment, traditions and legislative practices and climate.
9.1.5 Climate
Climate can affect all components of a product, some products, being more vulnerable to
climatic conditions by their nature. Experience has taught the local producers to adapt to
difficult climate conditions. For foreign companies this learning process can be extended,
leading to initial financial and market share loses.
9.2 Product features
This may require a standardization or adaptation policy. Foods are most sensitive to local
tastes and habits.
9.2.1 Durable
Consumer products are subject to a more homogeneous demand and predictable adjustments,
such as for example, adjustments to the different technical systems for video devices.
Industrial products are the least exposed to cultural differences.
9.2.2 Brand
The brand of a product refers to a name, symbol, term or sign used to differentiate the firm's
offer from the competitors. To a deeper level, the brand is the totality of connections between
a product or a company and its clients. The brand is one of the elements that can be easily
standardized and permit standardization of other elements of marketing, such as promotion.
An international company has several options when choosing a brand strategy. Brands may
be local, regional and global. Using local brands often is required to adapt these products to
specific markets or the impossibility of using regional or global brands due to negative
connotations.
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9.2.3 Packaging
The packaging of a product has the following functions: product protection, promotion and
ease of use. Packaging will be different depending on the chosen mode of transport, duration
of transport and transit conditions. For food producers, firms use more expensive packaging
and faster means of transport. Aesthetic packaging requires careful choice of colour and form
of packages. Red is often associated with death or magic. In many industrialized countries,
black is used, and suggests quality, excellence and class. Size of packages varies depending
on purchasing power and market conditions. A pack that includes eight beers cannot be used
in some markets due to lack of refrigeration capacity in the household. Another factor
influencing adaptation to the specific market is the packaging regulations that exist on some
markets regarding the use of environmentally friendly packaging.
9.2.4 Methods of operation
Methods of operation and use of products in different markets may encourage adaptation.
Dacia Logan has suspensions adjusted for hard roads. In plus, its design is quite minimal,
very utilitarian.
9.2.5 Quality
Product quality is increasingly supporting the competitive advantage for many companies. An
important aspect of quality improvement is the emphasis on design. Some countries, like
Singapore and Taiwan provide financial assistance to firms in order to improve product
design. However, many companies overlook the importance of product quality when entering
developing markets. In certain developing markets customers want to buy quality, expensive
products, to signal their increasing consumption power.
9.2.6 Network service quality
Network service quality can significantly influence product and companys image. For
example, German consumers are very demanding in terms of service activities..
9.2.7 Country origin
The effect of country of origin has a considerable influence on the perceived quality of a
particular product. Some products have been successful in different markets, although the
home were perceived negatively. For example, tractors manufactured in Romania have been
accepted by European, African and Asian 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.

9.2.8 Life cycle of product

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The life cycle of product and marketing strategies related to the product mix are strongly
correlated. A product in a mature stage can be in the market introduction phase on another
market.
9.3 Characteristics of the firm
Before launching a product in foreign markets the firm should take into account the
organizational 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 available to the company. The decision to adapt products should follow an
extensive market research.
10.0 COMPETITOR ANALYSIS
10.1. Master Kong
Ting Hsin from Taiwan owns the famous brand MasterKong. According to CMMS,
MasterKong was the most frequently consumed brands in 2005. One of the biggest
advantages Ting Hsin has over its competitors is its extensive and efficient countrywide
distribution network, which makes MasterKong a truly national brand. In recent years,
MasterKong has embarked on a communication initiative that is youthful and edgy in
personality. For example, MasterKongs sandwich biscuit product 3+2 targets on
youngsters. The posters of 3+2 are widely placed in retail stores, especially in the stores
closed to schools. Besides, to boost sales among youngsters, free samples of 3+2 were
distributed in schools and small-scale promotional activities targeting the youngsters were
often held in holidays. Together with other online promotional activities, 3+2 has become
the priority choice of youngsters.

10.2 Nabisco
Nabisco is another prominent player in the sector, owning the brands Ritz, Oreo, Chips
Ahoy!, Trakinas and Premium. The CMMS survey shows that Oreo was the second and Ritz
was the fourth most frequently consumed brands among the covered cities.

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10.3 Danone
Another big player, Danone, positions itself as a mid-to premium brand and offers a wide
variety of products. The product line of the company is extensive, ranging from mass to
premium offerings. In an attempt to tap the large rural market, Danone launched its first lowend biscuit products in early 2005 Danone Milk Jiagai Qingcui and Danone Milk Susong.
On the other hand, to strengthen its position at the premium end of the spectrum, Danone
launched its filled biscuit products in late 2004, called Danone Tiki Tartlet, with a relatively
high unit price. Danone is also an active player in fortified and functional biscuit products.
For example it has Danone Milky Crispy Biscuits, Danone Hi-Calcium Biscuit and Danone
Sunny Breakfast Biscuits. With years of systematic and aggressive advertising of its product,
Danone biscuits have been associated with healthy life among Mainland consumers.

11.0 PARTICIPATION STRATEGY


Hwa Tai Industry choosing FDI participation strategy. Foreign direct investment (FDI) plays
an extraordinary and growing role in global business. It can provide a firm with new markets
and marketing channels, cheaper production facilities, access to new technology, products,
skills and financing. For a host country or the foreign firm which receives the investment, it
can provide a source of new technologies, capital, processes, products, organizational
technologies and management skills, and as such can provide a strong impetus to economic
development. Foreign direct investment, in its classic definition, is defined as a company
from one country making a physical investment into building a factory in another country.
11.1 Advantages of FDI in China

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11.1.1 The Immense Size and Growth of the Chinese Economy and Very Bright Prospects
Foreign companies which are market oriented, sets-up business ventures in order to serve the
local market. Their goal is always directed towards serving the unexploited market. The
market sizes, growth opportunities, purchasing power, degree of development in the host
country are always the key factors for deciding the FDI destinations. The bottom line is that
the country which possesses larger market, greater opportunities for growth, has the highest
chance of economic development-and will definitely attract more and more FDI. Considering
these factors China is without any doubt the best location for investors to put their money
(Androsso-OCallaghan & Cassidy, 2003; Branstetter & Feenstra, 1999). China has a
population of 1.2 billion, with a vast potential for consumption. Companies consider the
Chinese market as the largest one in the planet and in the last few years the purchasing power
of the Chinese people also increased drastically. That makes it as the most suitable place for
investing in the industries like chemicals, drinks, household electrical appliances,
automobiles, electronics, and pharmaceutical industries and so on ( Clifford & Webb, 2003;
Rajan et al., 2008; Lardy, 1994; Zhang, 2002).
11.1.2 Resource Availability and Low Cost of Labour Force
The degree of availability of different sources including the land, labour and natural resources
is always the key to attract more and more investors. One of the major advantages of
companys get while they invest in China is its availability of all kinds of resources. The most
significant one is the human resources. China is the largest country in the world in terms of
population and as consequence of that it possesses rich source of labour in the globe. Along
with that another advantage the companies get is the labour force is also available at
relatively lower cost and it are also less than in Europe and the US by a great margin. The
country is also very rich in energy resources. It has oil reserve and it is the largest producer of
coal in the world. As with coal, Chinas electric power supply is sufficient and uninterrupted.
Other major natural resources such as land, iron and other minerals are economically
available (Head & Ries, 1996; Ta et al., 2000; Zhang, 2002; Cheng & Kwan, 2000).
11.1.3 Immense Development in Relevant Infrastructure
It is always the fact that availability of physical infrastructure greatly influences the decision
of investment particularly in a foreign land. It is a great advantage for a company to go for
investment in a place and country which is very reach in infrastructural development. The
more highways, railways and interior transport waterways are adjusted according to the size
of host province, the more FDI inflows. Telecommunications services also play a major role.
Empirical studies suggest that with these kinds of facilities are available a place will always
be the perfect destination for foreign companies to go for FDI (Cheng & Kwan, 2000; Grub
et al., 1990). Considering the case and scenario in China it can be concluded that all kinds of
infrastructural facilities are available there and it is also up to the mark. That ensures great
advantages for foreign companies to invest in China (Cheng & Kwan, 2000; Grub et al.,
1990).

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11.1.4 Openness to International Trade and Easy Access to International Markets
China has adopted the export promotion development strategy which was proven to be a
remarkable step in attracting more FDI in the country. Together with export promotion policy,
China has implemented economic reforms and open door policies and made efforts to
promote trade by concluding several bilateral trade arrangements and adopted unilateral
actions. There has been substantial progress in reducing tariff barriers. Along with this the
country also implemented a series of other policies to attract more international investments
in the country. Foreign investors always considers these issues as a major one in deciding
their investment locations and China is definitely on top of their list by giving them above
mentioned advantages (Andresosso - OCallagham et al., 2003; Cheng & Kwan, 2000;
Zhang, 2002).
11.1.5 Development and Alteration of the Regulatory Framework
In the process of attracting more FDI China adopted a more transparent and suitable business
environment and regulatory framework. That provides the investor a great deal of advantages
and makes them feel secure to put their money in China. The process of making such
environment and regulatory framework includes amending a series of laws including the
important ones for investors likes regulations and provisions such as Equity Joint-venture
Law and Contract. Alongside those the country also provided some huge advantages to the
investors by relaxing some restraints. In addition China also restructures and reform the state
owned enterprise and welcome the participation of foreign investors in that sector as well
(World Bank, 2002; Zhang, 2001a; Zhang, 2002).
11.1.6 Investment Protection and Promotion
It is a remarkable fact that there has not been a single case of expropriation of foreign
investment since China opened up to the outside world in 1979. In is really astonishing
considering the political scenario and historical outset of China. The real case is that the Joint
Venture Law was amended to hinder nationalization. This portrays the scenario of investment
protection in China. Investors are really feeling safe and foreign investors are getting
immense mental as well as political advantages. Another significant addition of investment
protection was the Contract Law of 1999. It ensures legal rights of investors. It provided
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 investment. Investors are also
getting quite significance advantages due to some investment promotion campaign by China.
It includes unique tax incentives for the Special Economic Zones of Shenzhen, Shantou,
Zhuhai, Xiamen and Hainan, 14 coastal cities, dozens of development zones and designated
inland cities. The country also established a number of free ports and related economic zones.
The incentives are also available in the areas of significant reductions in national and local
income taxes, land fees, import and export duties, and priority treatment in obtaining basic
infrastructure services (World Bank, 2003; Xing, 2004; Wilson & Purushothamam, 2003;
Zhang, 2002).

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12.0 MARKETING ISSUE OF HTIB
12.1 Market segmentation
Marketing variables 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 subdivided into distinct subsets of customers regarding to the needs and buying habits
of consumers. Having appropriate market segmentation helps a lot in market development
and market penetration as well. HTIB can spend wisely if allocate resources to the
appropriate market segmentation. For 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. Students 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 conveniently and easily brought everywhere.
Cakes and biscuits are sufficient to the students and office workers who use less energy for
their work and daily school activities. Products of HTIB are better choices for them because
their prices are reasonable and not heavy and fulfill their needs. If HTIB invest in this market
segment besides the Malay market segment, HTIB can earn a lot in the future.
12.2 Marketing mix
12.2.1 Price
Having the appropriate market segmentation, it is actually directly affecting the marketing
mix variables too. Marketing mix consists of price, promotion, place and product. It is very
acute that HTIB should pay more attention on fixing the selling price. Since it is suggested to
conduct low cost strategy, HTIB affords to set lower selling price because of its low cost of
production. For 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 (appendix no3)which shows that the earnings of HTIB increase from 2009
to 2010 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 having 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 expensive 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 Nestle and Kelloggs.
12.2.2 Promotion
HTIB should promote its products to the market segment targeted so that the targeted
consumers spend on its products. For example, HTIB should promote its products through
advertising. Advertising may bring deeper impression to the market segments targeted
especially the students. Students can be said glued to the television screen more than loafing
in supermarket. Students will be exposed to its products more if advertise snacks and cakes
through advertisement.

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12.2.3 Place
Place is very crucial because it determines how easy the consumers to get HTIBs products.
Fortunately, HTIB already distributed its products to all the supermarkets ranging from small
grocery shops to large supermarket like Giant and Jusco. However, it is suggested that HTIB
should also distribute its products to the canteens of schools. In doing so, students will be
able to BUY ITS products easily and this way helps in promotion indirectly because students
will promote the biscuits among themselves.
12.2.4 Product
Products are the main output of HTIB. HTIB ensures its products which including biscuits,
cakes and snacks are of high quality from time to time although they are produced in high
quantity. Besides quality, HTIB is suggested to change its existing packaging (appendix no1)
to attract the consumers. Since one of its targeted markets is the students, attractive packaging
is better because students are normally buy biscuits and cakes with nice packaging besides
considering about their price. Nice packaging brings deep impression to the consumers.
12.2.5 Leadership
HTIB already has good leadership from Mr Soo Thien Ming@Soo Thien See (CEO) in
leading the employees to the direction which already set for HTIB. However, it is suggested
that HTIB should also implement Theory O as stated by BEER and Nohria (2000) in order to
achieve the vision and mission of HTIB. The leaders should adapt softer approach to
overcome the change effectively. Leaders should affect the corporate culture by creating the
culture of creative thinking and hardworking and the way the employees work. For example,
after implementing rightsizing, leaders should encourage the employees who are able to
remain in HTIB to have the creative thinking culture by organizing training and development,
some internal competitions for the employees and others to them so that employees have
contributions more to the strategy of diversification.

13.0 FINANCIAL VIABILITY

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14.0 CONCLUSION
In a conclusion, as well known, china is the fastest developing country, which has many
potential business opportunities. However, it is important to judge and make sure the
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investment environment before running a business in china. PEST strategy as showed above
analyse the external business environment to give a general picture of the operated business
environment. So Hwa Tai Company can take advantage of the appropriate opportunities and
minimize the threats. If company can make correct strategic planning, it will offer a stable
and solid environment for a company to grow into the future. HTIB should continue its effort
on improving its sales and revenue. Analysing its internal and external environment is crucial
to aware of its resources and capabilities as well as its competitors in order to find out better
strategies to achieve its vision and mission. Good allocation of resources and fully utilization
of capabilities is important to HTIB so that to achieve efficiency when implementing any
strategies and meeting effectiveness as required. HTIB should evaluate and control itself from
times to time so that it always competitive in the biscuits manufacturing industry forever.

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