Westexs Market Place Is Malaysia - Case Study Example

1 Marketing 1 of the market place For the purpose of this plan WestEx’s market place is Malaysia. However, at present the only that WestEx supply are SoonSoon Oil Mills (SSOM). Recent request for supply of Australian Premium Wheat (APW) from SSOM will be a base for WestEx to work with in establishing a more diversified export portfolio. SSOM produce flour for bread production with the wheat from WestEx. They also produce other products such as ………. Malaysia has shown economic growth of 7% in the year 2006/07. This economic growth is being attributed to an increase in domestic and international trade. Asian countries are also witnessing growth in the household sector, it is estimated that consumption will continue to grow at a moderate rate through out the year 2006/07. (Source?) Yellow Lupins You really do nned to provide an analysis of the possibility of yellow lupins. Ie price that might be paid versus total cost of marketing. Yellow lupins(YL) have been analysed and proven to be a better product for fish feed than soy in studies conducted by Brett Glencross. The large volume of soy and the intermittent supply of YL has led to SSOM cutting out contracts that were originally in place with WestEx in favour of cheaper continually available soy beans. A market for yellow lupins has therefore not been able to be continually established at this point. Input Punchy analysis here. The export of wheat is definitely the best market for WestEx in the short to middle term. If some of the profits from the supply of wheat were able to be channelled into lupin R+D there may be potential for the product. Yellow lupin supply has also been affected by the current drought. (King & Gilmour, 2007). Research will need to be conducted into areas including those outlined in the R+D section if a Yellow lupin market is to be established. 1.2 Description and quantification of market segments The new 3 monthly contracts starting in November 2007 between Westex and SSOM for an increasing supply of wheat will go some way to cement the relationship between the two companies. The supply of wheat may be able to be considered a “cash cow” for WestEx to enable them to further R+D and market development into other products to establish further differentiation of products. As outlined YL are a product that requires R+D and market development to establish it’s competitiveness in the market. SoonSoon Oil has requested a supply of APW from WestEx on a sliding scale starting at 500tpm and increasing by 500tpm to 12000tpm. The wheat is used by SoonSoon to mill into flour for on sale to their clients. The flour market in Malaysia is a significant one. WestEx as explained above focuses on wheat. The particular product seems to have an increasing demand within the Malaysian market. In accordance with a series of statistics published in 2007, the consumption of wheat in Malaysia presents an increasing trend (see Table 1). More specifically, in 2005 the total domestic consumption of wheat was 1,250 metric tons (the same amount with 2004) showing a significant increase if compared with the consumption of this product in the past (like in 2003 when 1,100 metric tons of wheat were consumed or 1998 when the consumption of wheat in Malaysia reached the 1,030 metric tons). The planning should be about the flour market in Malaysia, what it is, the products it is used for, what is happening to the demand, the scale of users, how a small miller like SSO can compter with the larger millers such as Salim/CBH and hence why a container trade may work. At 1200 tpm, it is a weekly shipment. This means Westex has higher holding costs than SSO compared to once a month. How much storage does SSO have? Cooperative Bulk Handling has a supply of wheat in Malaysia in the silos they own after their acquisition of Salim Group but it is not of the grade required by SoonSoon OIL Mills who requires specifically Australia Premium Wheat (APW) On the other hand, the size of SSO could be considered as inadequate if considering the size of its competitors in the particular market. In this context, one could wonder how a small firm like SSO can compete with the other firms operating in the milling industry. The following issues can explain the competitiveness of SSO’s towards its competitors: [a) SSO has a powerful brand name and an extensive customer database, b) the loyalty of the firm’s customers is strong, c) the prices of the firm’s products are competitive and c) SSO has a significant storage capacity that reaches the 500000t.] from file new-info-marketing plan with customer’s info Because of the above, the strong presence of SSO in its market despite the strong competition, it can be easily explained. 1.3 Competitor analysis WestEx do not want to compete for customers on price. The time to quote for supply to a potential customer when they are just looking for the best price is not viable according to WestEx’s management. The only customers WestEx want are ones that understand that WestEx will only add a small margin on market price. This customer relationship business structure may initially work with only a limited market segment as relationships need to be built but these authors see great potential for future development as WestEx’s ethical name is understood in the market. The AWB holds the single desk licence and CBH last year got a licence tfor a one off shipemtn. They have applied to get a similar licence for 2007/8 but as yet ist has not been granted. Have youn got any idea why or how SSo can survice as a small miller in Malaysia, what is its competitive advantage. The main competitive advantage of SSo is its relationship with its customers. As in the case of WestEx, SSo has a significant market share and a very good presence within the local community. If criticized using the criterion of ethical standards applied by both companies (WestEx and SSo) it could be stated that both companies have a powerful presence in the market and this could be their major advantage towards their competitors. 1.4 Competitive advantage WestEx do not consider themselves traders as previously outlined. They do not want to compete on price, rather they want to compete initially on grounds based on ethical relationships and further that in the future with product differentiation to customer requirements based on sound R+D. We will succeed by the continual supply and development of a uniform high quality product for export while maintaining high ethics and strong relations with our clients. 1.5 Demand – seasonality and trends It is expected that Soon Soon Oil Mills will require up to 12000 tonne per month (tpm) by mid 2009 and then a continuous similar amount from then on. Premium Grain Handlers (PGH) will be WestEx’s trading partner in this venture and will be sourcing the grain and all the associated processes involved with the movement of the grain. PGH have a capacity they can provide to WestEx of about 50000 tonnes. With current projections starting at 500tpm, increasing by 500tpm up to 12000tpm PGH will have adequate supply until mid 2009. From this point on PGH may be able to source more grain or WestEx may need to provide their contacts to PGH or source the grain themselves. In the event that WestEx is required to source grain PGH could still conduct the all the other transport storage and loading requirements. 1.6 The marketing plan As stated previously WestEx wish to avoid trading in grain. It is their wish to be supply chain managers for companies that understand and respect the highly ethical business practices bought to the table by WestEx. This wish to differentiate product based on business ethics and relationships does not fit into the typical commodity trading business model for businesses in this industry. It is however working. The plan for the future to invest in research based on the requirements of the client will cement the relationship by providing the client with a product benefit that is basically free of charge so will further cement the relationship and contracts. It is therefore the recommendation of the authors of this plan to work with this model but to keep it dynamic and open to change if required. A market expansion plan to increase SSOM’s client’s use of YL in fish and Chicken feed is also a recommendation of this plan. The basis of this recommendation would be to provide a small quantity of YL regularly to SSOM to allow them to supply their clients so research can be conducted of growth of fish and or chickens to try to establish product benefits over the currently used soy products. It can be seen from the financial analysis of this recommendation that it is a large cost but if it was successful in creating a market for the product a c=very financially viable option. 1.6.1 Marketing objectives The marketing activities conducted by WestEx at present are minimal, focusing mainly on relationship building. They should however be continued and expanded where required especially with new clients. New markets need to be sourced through either new or current clients. The recommendation to send YL for “field trials” with SSOM’s customers will need to have the results documented so that WestEx know that the feed is being used appropriately and that they receive results of the research so it can be documented for future use by WestEx. A time line of no more than two years is recommended for the free product to be sent before contracts are formed. This is an expensive exercise with each container costing WestEx about $7400 depending on current market value of lupins. If greater quantities are required for viable testing WestEx will need to liaise with SSOM to potentially share the cost. The other main objective recommended by the authors of this plan is to set a 3 - 4 year goal for wheat sale of 20% greater than the quantity required by SSOM. The idea behind this is to give WestEx the impetus to source and accept new clients. It has come to the attention of the authors of this plan that due to WestEx management’s wish to not be grain traders that they turn away many potential clients. This is understandable due to the large amount of work require for minimal gain when looking at lowest price trading. If the potential client is analysed and found to be a substantial business this initial time may be paid off in the long run with benefit to WestEx. 1.6.2 Marketing strategies To endeavour to establish a market for YL the outline strategy of sending one container of YL per four months to SSOM for processing into a meal that can be provided to their clients so the product can be tested and compared to soy meal. The other strategy recommended by this group is to accept 2 or more new clients each year to try to establish new markets. The potential new clients need to be analysed carefully as the long term aim is for WestEx to avoid trading and remain supply chain managers. In order for the marketing strategy of WestEx to be successful, the following policies should be followed by the firm (in accordance with the Porter’s model – Five forces): 1) Provision to the customers of options (variety related to products, methods of delivery and methods of payment). In this way the pressure made by customers to the firm (one ‘branch’ of Porter’s model) will be limited. 2) Development of relation with suppliers – possibly extension of supply chain would be also helpful towards the limitation of pressure from suppliers. 3) Design of appropriate strategies in order to face its competitors (indicatively: low prices, high quality of products, development of customer support and so on). In this way the pressure from competitors (next branch on Porter’s model (see Figure 1) would be limited. 4) Another issue that should be considered by WestEx is the existence of substitute products. As already stated above, the firm will supply the market with wheat (primarily) and lupins. Its involvement in the poultry industry has been also considered as possible especially in the long term. In all these sectors the products available are not of the same quality. In fact there could be products similar with the above mentioned and even in lower price but they are not going to be of the same quality. On the other hand, it should be noticed that the competitors of WestEx have a high volume of sales but the costs involved are low. Instead, the costs involved in the volume of products sold by WestEx are high while the volume is low. In any case the quality of the products sold by WestEx is very good. 1.6.3 Products The product is going to be purchased in a monthly passes. Basically, WestEx has a contract with SSO’s ever three month – once the contract is done and depending on their performance than SSO’s can decide to sign another contact for another three month – Westex is providing options to SSO’s and giving a price for three months not six months as other Australian competitors therefore SSO is happy to work with them and SSO know that WestEx can provide the desired quality. The current Wheat price is around 500$ 1.6.4 Price Need to get this from the spread sheet. The wheat price is being based on the Chicago Board of Trade(CBOT) minus $20 as recommended by Profarmer. The outlined costs from the spread sheet can be added here. 1.6.5 Promotion WestEx would rather prefer to cooperate only with SSO the specific period. They would rather avoid promoting their products, especially giving the limited amount that is going to be sent to SSO – as already stated above the amount sent to SSO will be initially approximately 500tpm. By 2009 this amount will be increased gradually reaching the 12000tpm. At that level, a promotion of the firm’s products could be profitable (if cost is deducted from the sales). For this reason, currently WestEx would rather keep SSO as its main customer, avoiding proceeding to expenses that may be difficult to be covered by sales. The only promotion used currently by WestEx is face-to-face communication with customers [from file marketing plan]. This method of promotion is considered to be the most appropriate (and less costly) for the particular period. 1.6.6 Place WestEx’s sales regarding especially wheat and poultry are expected be high. In fact it has been proved that the use of wheat in Malaysia is extensive. Wheat is used for the preparation of a wide range of food products. The consumption of wheat (in various forms) is at such level that the country has to import wheat in order to respond to its market’s demands. One of the countries exporting wheat to Malaysia is Canada. In accordance with a series of statistics of 2007 ‘in 2006, Canadas top exports to Malaysia included potassium chloride (18.5%), Soya beans (10%), and meslin and wheat (8.9%)’ (Agri-Food Trade Service Canada, 2006). On the other hand, the consumption of poultry is also high. More specifically, it has been found that Malaysia ‘has one of the highest per capita consumption rates in the world for chicken; per capita consumption of chicken is reported at 32.5 kg; the surge of quick-service-restaurants (QSR) such as Kentucky Fried Chicken (KFC), McDonald’s, A&W, Kenny Rogers Roasters, Taza Bar-B-Q Chicken, Nando’s Chickenland (a South-African based chain) have encouraged strong growth in chicken consumption’ (Global Agricultural Information Network, 2002) 1.6.7 Sales forecast As it has already stated above, the initial amount of product sold per month in SSO has been defined to 500 tpm. In accordance with the marketing plan, this amount is going to be increased gradually and until mid 2009 the monthly amount of product sold to SSO will be 12000tpm. 1.6.8 Assumptions Assumptions on sales forecast and on performance in accordance with competitors 1.6.9 Performance measures (Accordingly with the market objectives) References Porter, M. (1998) On Competition. Harvard Business School Press United States Department of Agriculture, October 2007, available at http://www.fas.usda.gov/grain/circular/2007/10-07/Wheat_txt.asp Malaysia - Wheat - Production, Consumption, Imports, & Exports at: http://www.indexmundi.com/malaysia/agriculture/ World Grain. 2001. Country Focus: Malaysia, [Online], available at http://www.world-grain.com/Feature_Stories.asp?ArticleID=44927 Global Agricultural Information Network (2002) Malaysia – poultry and products – annual, available at http://www.fas.usda.gov/gainfiles/200209/145783767.pdf Agri-Food Trade Service – Canada (2007) Agri Food, Past, Present and Future Report, Malaysia, available at http://ats.agr.gc.ca/asean/3665_e.htm Appendix Figure 1 – Porter’s Five Forces of Industry Competition (source: Porter, 1998, 22) Date Area Harvested (1000 HA) Beginning Stocks (1000 MT) Production (1000 MT) TOTAL Mkt. Yr. Imports (1000 MT) Jul-Jun Imports (1000 MT) Jul-Jun Import U.S. (1000 MT) TOTAL SUPPLY (1000 MT) TOTAL Mkt. Yr. Exports (1000 MT) Jul-Jun Exports (1000 MT) Feed Dom. Consumption (1000 MT) TOTAL Dom. Consumption (1000 MT) Ending Stocks (1000 MT) TOTAL DISTRIBUTION (1000 MT) 1998 0 150 0 1,263 1,263 37 1,413 233 233 50 1,030 150 1,413 1999 0 150 0 1,278 1,278 32 1,428 138 138 50 1,140 150 1,428 2000 0 150 0 1,265 1,265 97 1,415 140 140 50 1,125 150 1,415 2001 0 150 0 1,268 1,268 167 1,418 155 155 50 1,113 150 1,418 2002 0 150 0 1,195 1,195 153 1,345 169 169 50 1,026 150 1,345 2003 0 150 0 1,329 1,329 100 1,479 137 137 50 1,100 242 1,479 2004 0 242 0 1,412 1,412 137 1,654 107 107 50 1,250 297 1,654 2005 0 297 0 1,350 1,350 0 1,647 125 125 50 1,250 272 1,647 Table 1 - Wheat Production, Consumption, Imports and Exports (source: index mundi) Read More