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Changing Industries Boundaries

Essay by   •  April 20, 2011  •  Case Study  •  397 Words (2 Pages)  •  1,800 Views

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Changing Industries Boundaries

During the early years, the production of prawn crackers were manually produced using hand and their packaging was simple beforehand. The label was handwritten and copied used by photocopier machine to put inside the transparent packaging plastics and sealed with candle. This manual process cannot achieve as much as the processed machine operates nowadays. The owner realised good potentials of the processed machine that can achieve daily full capacity of the production without idle time and energy.

Porter's Five Forces Model

a. Risk of Entry by Potential Competitors

Potential competitors in this context referring to any individuals or established companies to compete in this industry as long they have capabilities. Individuals who have family authentic recipe and willing to set up homemade seafood cracker which has its competitive advantage in terms of Brunei taste bud. Supermarket chains such as Hua Ho can seek individuals that have authentic recipe and hire the person to take in charge of their own seafood crackers brand.

Seri Pekatan Sdn Bhd achieves its economies of scale over its potential competitors due to (1) cost reductions gained through mass-producing a standardized output; (2) obtain discounts on bulk purchases of raw materials inputs from Sabah, Sarawak, Vietnam and Indonesia; (3) gains advantages by spreading fixed costs over a large production volume, and (4) cost savings in advertisement (words of mouth is strong in the Brunei market and participated in local expo such International Halal Prodcuts Expo for four consecutive years from 2007-2010, Consumer Food Fairs and others)

Seri Pekatan Sdn Bhd has an absolute advantage relative to potential entrants due to (1) superior production operations and processes due to accumulated experience and secret processes; in 2004, the production was 6,449 kg, whereas in 2005, production saw an increase to 8996 kg. In 2006, production surged to a figure of 10,281 kg. In the year of 2007, the total production from January up until April was 3078 kg. The company produced more than 25000kg of local prawn crackers from 2004-2006 . (2) Control of particular inputs for production such foreign labour workforce that reduce low turnover, purchase raw materials in bulk and discounts, and past working experience.

In terms of customer switching costs can be high because as mentioned above there are several local seafood manufacturers because the distributors of Seri Pekatan Sdn Bhd crackers sells at different retail price with difference ranging from BND0.05

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