Market Analysis for TNA Pty - Report Example

INTERNATIONAL ENGINEERING MANAGEMENT Name Institution Instructor Date Contents Introduction 2 2 The content of this report includes preliminary analysis of the Malaysian and the Vietnamese markets. The analysis is important for TNA Pty. Ltd. (TNA) and its management in decision-making process concerning the suitability of either of the two selected markets for investment. Further, the report identifies the necessary actions in improving sales and marketing for the company’s venture into the theses new markets. The information obtained from market analysis and risk assessments are important since they assist in recommending the most suitable country for TNA to make a new entry. 2 Preliminary analysis of the Malaysian market potential 2 Market Value Chain 2 Market trends and opportunities 3 Market Entry 5 Relative advantages and disadvantages in terms of market profit potential 6 Preliminary analysis of the Vietnamese market potential 6 Market overview 6 Market Entry 7 Relative advantages and disadvantages in terms of market profit potential 9 Main risks associated with these two potential markets 9 Conclusion and Recommendation Actions 10 References 11 Introduction The content of this report includes preliminary analysis of the Malaysian and the Vietnamese markets. The analysis is important for TNA Pty. Ltd. (TNA) and its management in decision-making process concerning the suitability of either of the two selected markets for investment. Further, the report identifies the necessary actions in improving sales and marketing for the company’s venture into the theses new markets. The information obtained from market analysis and risk assessments are important since they assist in recommending the most suitable country for TNA to make a new entry. Preliminary analysis of the Malaysian market potential Market Value Chain The market value chain in relation to the Malaysian market is involved in the provision of various services, which include turnkey solutions, network employment, infrastructure management, operation and maintenance of networks as well as design and optimization among others. The main end-users for such and similar service comprise companies that are dealers in Information and Communications Technology (ICT) such as telecommunications operators or carriers as well as food manufacturing and processing companies. Considering that Malaysia is currently a country in the category of upper middle-income and has substantive levels of wage for workers, the government is involved in the promotion of foreign investments. This promotion takes place in businesses with high value addition such as service and manufacturing industries. According to Yusuf and Nabeshima (2009), the sectors that are concerned with construction and manufacturing services are considered to be prime movers for SMEs and assisted in booting the Malaysian GDP by a considerable margin. The business services industry in Malaysia is one of the major economic pillars identified in the country’s Transformation Program. This program has been on the frontline in determining the government’s policies and priorities that are necessary its market to the top of the global value chain. Mansor and Alias (2013) observe that the authorities in Malaysia have identified various high-potential business opportunities under the Transformation Program. Such business opportunities would certainly come in hand for TNA and its service provision in the food processing and packaging industry as well as supply of turnkey solutions. Further these business opportunities have the potential to enable TNA Pty. Ltd to go through a proactive development by a range of policies and initiatives. About 90 per cent of companies that are operational in Malaysia and are listed in the stock exchange are medium and large enterprises. Most of the services that are necessary in supporting such companies are expected to continue to grow. Market trends and opportunities The transformation of the Malaysian market into an economy based on business and manufacturing services is a critical component in analysing the potential of the market. Despite having several economic activities, the Malaysian market is involved in the business service sector, which is the highest contributing factor to the country’s GDP. The sector for business and manufacturing services covers a large number of professions and industries, which includes processing industries among others. The Malaysian market also requires professional designers and other professionals who are specialists in handling machines used in processing and packaging industries. Additionally, there is a growing need in this market for information technology services and expertise in relation to outsourcing and future growth in processing and packaging services (Mansor and Alias, 2013). Malaysia has the ability to provide global investor such as TNA Pty. Ltd with an educated, disciplined and trainable labour force. The young people in Malaysia who gain entry into the labour market are people who have undergone a minimum eleven years of school education and training up to tertiary school level. This level of education allows them to be easily trained in order to acquirer new skills that may be relevant in processing and packaging industry as well as supply of turnkey solutions for TNA Pty. Ltd. To cater to the growing interest of investors in the country, the authorities in Malaysia have taken initiative to raise the number of technician, engineers and other skilled workers who graduate every year from local and foreign colleges, universities, as well as industrial and technical training institutions. Isa and Chan (2010) indicate that in addition to this, the Malaysia labour market is competitive and free with a harmonious and cordial relationship between employers and employees. Further, they observe that the cost of labour in Malaysia relatively low while the levels of productivity are high compared to industrialised countries. There are variations in the rates of basic wages for labourers in accordance with the industrial sector and the location. Supplementary benefits, which include sick leave, such as public holidays, free uniforms, maternity leave, annual leave, maternity leave, compassionate leave, subsidised or free transport, shift allowance, performance incentives among other benefits, vary from one company to another. Fringe and salaries benefits offered to executive personnel and management also vary depending on the nature employment policies of the company and the industry. Market Entry Global companies such as TNA Pty. Ltd. with an interest in the exploration of opportunities in the Malaysian market have the advantage cooperation from local organisations and local authorities where appropriate. Collaborating with organisations at the local level in view of due diligence and extensive research presents international companies such as TNA Pty. Ltd. with a competitive edge to leverage off international and local knowledge expertise and knowledge. TNA Pty. Ltd. director and management team must be prepared make a visit to Malaysia on a regular basis and make follow ups on previous visits to be conversant with cultural and local issues in relation to their processing and packaging services among others products that they intend to offer to this market. Such visits will allow the company to create information packs that are beneficial and crucial in profiling the company together with their products and services. Global and international investors and companies such as TNA Pty. Ltd. who are interested in venturing into the Malaysian market to distribute their services and products are expected enjoy the relevant support from the local service. There are effective consultancy routes, joint ventures and partnerships in the Malaysian market, which make the distribution channels to be efficient and maximize profits (Yusuf and Nabeshima, 2009). Relative advantages and disadvantages in terms of market profit potential The other advantage in terms of the profit potential in the Malaysian market is the presence of close working association amongst companies. This close working association has made significant contributions to the existence of strategies and networks for the distribution of products and services. Poor designs and low quality equipment and infrastructure is another disadvantage that TNA who are among the new investors are expected to tackle. In this case, domestic equipment and infrastructure are only sufficient and effective for small-scale processing factories and their services supplier. Medium and large food processing and packaging plants and enterprises that are involved in the production of high quality products are forced to rely on imported equipment and technology (Isa and Chan, 2010). Preliminary analysis of the Vietnamese market potential Market overview The Vietnamese food packaging and processing industry market appears to be lucrative and promising for domestic and international investors like TNA Pty. Ltd. That is the case since the Vietnamese market is a huge market, which is yet to be exploited fully as its potential is so huge yet not fully exploited. The present food processing and packaging sector, which would be expected to be the major consumers of complete turnkey solutions from TNA is still a growing industry in the Vietnamese market. However, the industry represents a market that has great potential for foreign investors and companies (Vương, 2010). There are considerable opportunities for investments in the food processing and packaging sector including supplying turnkey solutions to the industries in this sector. Statistics and information obtained from the Planning and Investment ministry have indicated that new projects for foreign investors are established every year in the food processing and packaging industry. These projects include those that fisheries and agro-forest products. Presently, Vietnam has more than 250 plants that are involved in the processing of seafood. About 200 of those plants are reserved for the processing operations involving frozen products whose production capacity is approximated at 250,000 tons per year. Others include slaughterhouses and meat processing plants, beverage manufacturing plants, fruits processing and packaging plants and vegetable processing plants among others. Even though the demand for equipment and technological advancement in the food and processing industry is considerable, the available equipment and technology have not been able to meet the domestic demand (Tan and Robinson, 2014). Market Entry The process of market entry into the Vietnamese market is simples and does not take a long time to be completed. The market entry process is also concerned with the recognition of successful projects as well as specific analysis and research. The fast expanding Vietnam market provides new investors with several attributes that would make investing in attractive and profitable. One of these attributes the stability of the Vietnamese market, which makes it one of the fastest expanding economies in the world. According to Leung (2009), the stability of this market arises from its history of social and political stability. The other attribute is the increasing integration where the market is involved in the implementation of legal reforms and the provision of a comprehensive plan for economic prosperity. Unlimited Upside is also an attribute, which indicates that there is sufficient, educates and motivated workforce in Vietnam. Competition Landscape The market share in the food packaging and processing industry as well as supply of turnkey solutions in Vietnam is dominated by the domestic entities at 65-75 % compared to 25-35% which represents international entities (Hung Securities Report 2014).T Figure: food packaging and processing industry market share 2014 (Hung Securities Report 2014) The domestic players in food packaging and processing sector are known to target low-income customers who have a relatively limited budget. This trend leaves a potentially profitable market as an opportunity for international investors including TNA Pty. Ltd. (TNA). Concerning the domestic players in this market, they are faced with insufficient machinery and the relevant technology. The food processing and packaging sector in the Vietnamese market is forecast to be maintained at an average rate of growth of 20 to 25 per cent per year. Packaging industries represent close to 10 per cent of the GDP in Vietnam’s economy. This is because there are more than 900 packaging plants of all sizes in Vietnam (Tan and Robinson, 2014). Relative advantages and disadvantages in terms of market profit potential Despite several advantages that are associated with the potential to make profit by new investors, the Vietnamese market also experiences some disadvantages. One of the disadvantages associated with the Vietnamese market in terms of market potential and profit is that it lags behind in comparison with other markets in the region. In this case, the lagging behind can be attributed to the existing technological advancement gap between Vietnam industries and the others in the region. The other disadvantage is that the association and interaction among the international investors is fierce and involves a very stiff competition. TNA as an international player in this industry with the intention to make new entry into the Vietnamese market will be in a better position to overcome the obstacles related to machinery and technology. This is because TNA has structured its operations in other countries in a manner that incorporates technology to make its services affordable to its clients (United Nations, 2003). Main risks associated with these two potential markets Several risks are associated with venturing into both Malaysian and Vietnamese markets. However, the main risks are the ones that are used in characterising the levels of risk in Vietnam facing TNA who are interested in doing business. One of the risks is that of making loses in investing in the provision of complete turnkey solutions and services for the food processing and packaging sector in Vietnamese market. This is due to the stiff competition that would be faced from numerous companies from Europe and Asia that are likely to join the market once TNA makes an entry. There are other companies from the United States, which have a high likelihood of showing interest in the supply of turnkey services to the foods processing industry. Other risks are those related to unpredictable economic conditions in both the Malaysian and Vietnamese markets. Such conditions might include future economic slowdowns or recessions in the markets. This would result in the negative influence on the affordability products and services offered by TNA thus leading to a decline in consumer demand for the complete turnkey solutions and other services offered by TNA (Hill, 2014). Conclusion and Recommendation Actions Several actions would be applicable towards the improvement of sales and marketing in the Malaysian and Vietnamese in relation to the supply of turnkey solutions and other services by TNA. It is recommended that TNA should achieve this by enhancing the efficiency of its services. This should involve focussing on raising the efficiencies in relation to the sale process in the markets. In this case, the management of TNA is expected come up with appropriate sales strategies in line with the existing market conditions. It is also important for the company to consider streamlining and improving the process of sales for their services and products. This could be achieved by TNA ensuring that its policies allow for the spending of resources effectively. The growing number of players in this industry requires a significant improvement in the quality of processing and packaging quality design and services. For this reason, it is recommended that TNA should consider venturing into the Vietnamese market as a new investor and provider of complete turnkey solutions to the food packaging and processing industry among other services (Tan and Robinson, 2014). While considering investing in this new market, it is advisable for TNA to recognize that there are certain concerns that affect the entire Vietnam’s economy. Such concerns include the inferior infrastructure and technology that is used in food processing and packaging for some plants within the industry, which cause some of the products to be less competitive in the international market. Further, it is important for TNA and its management to be informed and understand that there is an urgent need for appropriate investment and upgrading of the food processing and packaging sector in Vietnam in terms of machinery and technology (Mansor and Alias, 2013). This kind of upgrading would make it convenient and appropriate for the complete turnkey solutions and other services provided by TNA to be found useful with an increased demand. The other critical area that is worth taked into consideration by TNA as new investors who are interested in making entry into the Vietnamese market is the need for the existing industries to upgrade their transportation and storage facilities. Further, the Vietnamese market is currently experiencing the emergence of the food chain infrastructure, which is expected to lay a significant role towards the development of food processing and packaging industry. References Chin, A. (2006). Economic management and transition towards a market economy: an Asian perspective. Singapore, World Scientific. Hill, J. S. (2014). World business: globalization, analysis and strategy. Mason, Ohio [u.a.], Thomson/South-Western. Isa, M. M., & Chan, Y. W. (2010). Investment analysis in the Malaysian securities market. Kuala Lumpur, Research Institute of Investment Analysts Malaysia. Leung, S. (2009). Vietnam assessment: creating a sound investment climate. Darby, Pa, Diane Pub. Mansor, I., & Alias, R. (2013). Competitiveness of the Malaysian food processing industry. Serdang, Universiti Putra Malaysia Press. Tan, C., & Robinson, T. R. (2014). Asian financial statement analysis: detecting financial irregularities. United Nations. (2001). Directory of trade and investment related organizations of developing countries and areas in Asia and the Pacific. New York, United Nations. United Nations. (2003). Directory of trade and investment-related organizations of developing countries and areas in Asia and the Pacific. New York, United Nations. Vương, Q. H. (2010). Financial markets in Vietnam's transition economy: facts, insights, implications. Saarbrücken, VDM Verlag Dr. Müller. Yusuf, S., & Nabeshima, K. (2009). Tiger economies under threat: a comparative analysis of Malaysia's industrial prospects and policy options. Washington, D.C., World Bank. Read More