An-Nur Case Study

SYMPTOMS

1. The wetsuit industry was highly competitive and markets were complex, with rapid growth, fashion conscious customers and seasonal demand.
2. The manufacturing areas need to increase the capacity and maintain flexibility to meet the highly segmented and changing consumer demands.
3. The size of the Bentong production facility was not large enough to store the desired levels of inventory.
4. Three months’ lead-time was necessary for delivery because An-Nur purchased virtually all of its neoprene from Japan.
5. One local supplier lacked flexibility and quality.
6. The cost of inventory stock outs were greater than the inventory carrying costs, decided to stock more finished goods inventory.
7. Never prepared budgeting and just started to prepare.
8. Too optimistic in forecasting revenues.
9. No separation of power.
10. Budget performance not linked with any performance based incentives.

MAJOR ISSUE

        I have decided that the main issue of the case is lacking of efficiency in management process. It can be seen in three aspects of the company that are production, budgeting and compensation scheme. For the production, it can be seen that when the company cannot produce their products at constant rate because of the size of the Bentong production facility was not large enough to store the desired level of inventory for the company. An-Nur already uses the correct budgeting, which is bottom up budgeting process. However, Ryad not use the system properly, he not submit the annual budget to the board of directors and the budget was approved by himself. Instead of that, the annual budget was not revised formally unless the amount is too significant. For the compensation scheme, the budgeted related performance was not linked with any performance-based incentives because the managers will earned the bonus if there is remainder amount from the profit sharing monies. The profit sharing plan use for employees that employed more than two years.

ASSESSMENT OF AN-NUR’S CURRENT COMPETITIVE POSITION

        I decided to use Porter’s Five Forces of Competitive Position Analysis to asses of An-Nur’s current competitive position. It is a simple framework to assess and evaluate the competitive strength and position of business organisation. This theory is based on the concept of five forces that determine the competitive intensity and attractiveness of a market to understand the competitive current position of organisations and the strength that the organisation may look in to move in the market. Besides that, Porter’s Five Forces will identify the strength of the company, improve the weaknesses of the company and to avoid mistakes that could be happened. The five forces are supplier power, buyer power, competitive rivalry, threat of substitution and threat of new entry.

        Porter’s first force is the bargaining power of suppliers. Most companies in the developed world aims to reduce cost is flawed and they need to consider the quality. In An-Nur’s the competitive advantage came from its manufacturing quality and flexibility. Besides that, the design of the wetsuit satisfied the customer needs. That's why the company chooses Japan as the only one supplier to provide neoprene. Japan is top seven leading vendors in the global neoprene market report from 2016 to 2020, announced by Technavio. The top vendors are Denka, Tosoh, Mitsui and Showa Denko. An-Nur doesn’t want to get supplier from local company because they lacked flexibility and quality. However, it takes three months for the neoprene to deliver from Japan because it is far from the company’s residence. Because of An-Nur too dependable on Japan to produce neoprene, the supplier will attend to increase the price of neoprene. Japan will take this opportunity because Japan knows that An-Nur only have on supplier and might continue the agreement with Japan although the price is increasing. The bargaining power of suppliers for An-Nur’s is high.

        Porter’s second force is the bargaining power of buyers. As an malaysian consumer myself, i know that getting company to reduce all or certain price of the product would a success achievement, but the issue is how many of the consumers take to manage it. Based on the case, the switching costs involved in buying different wetsuits brand were low. An-Nur’s offer product those are very easy to duplicate at comparable prices by all the competitors. This situation can give the opportunity to Awani’s product because it is the largest company in wetsuit industry and had the reputation for producing high quality basic wetsuits. It will give impact to the consumers and buyers in terms of quality because most of the buyers of wetsuits were very image and quality or comfort conscious. The buyers and consumers believe that Awani’s will give better quality with the same price charged by An-Nur. Besides that, even though An-Nur sold its wetsuit in 1,500 retail stores in 33 countries but still Awani’s brand is no.1. One of the reasons An-Nur still cannot beat the Awani company because the company marketed itself as a wholesome “lifestyle” brand which also carried a line of Islamic products. Basically, it is hard to penetrate the world market. For example, if An-Nur wants to penetrate to Western, the company needs to consider several factors such as diverse locations, various cultural and lifestyle differences and varying degrees of Islamic religiosity. Because there are minority Islamic in Western country, it is hard to penetrate the country, An-Nur more to Islamic products. So the bargaining power of buyer is high.

        Porter’s third force is the competitive rivalry. The factor of competitive rivalry has significant impact on the competitive environment that a company operates with it. The company will compete based on price, advertising wars, and new products. Based on the case, the competition in wetsuit industry was fierce, because the firms sought to increase their market shares at the expense of their competitors. For example, one of the third largest firm in the industry that is Ruff Surf, focused on the surfing market. Besides that, the competitive rivalry is Awani. Awani is the largest company in the industry, with approximately a 50% market share and very good in producing high quality basic wetsuits. Besides that, the rival of An-Nur’s company is not focus on certain line products but An-Nur carried brand based on Islamic products. In addition, other company focuses on the quality and comfort conscious. With this the competitive rival is high.