Strategic Leadership in A Changing World

Question: Write an essay about the strategic leadership in a changing world. Answer: 1.0 Introduction: The current study aims to identify one strategic issue faced by the Malaysia-based company, which is operating under fast moving consumer goods (FMCG) industry. The researcher has chosen AJ Food Industries (M) SDN BHD, a Malaysia-based mayonnaise manufacturing firm. The current strategic issue of the company has been discussed using models like PESTEL and SWOT, to identify the issue critically. A threat matrix and the policy options have been presented by the current researcher. Based on the analysis, the researcher has tried to put a recommendation considering the principle of RALES matrix. Finally, the researcher has placed a possible conclusion based on the current study analysis. 2.0 External analysis: 2.1 PESTEL analysis: 2.1.1 Political Environment As per the political environment of Malaysia, the country presents a clean and high trading policy towards the business giants. The open market nature and the government tax policy directly affect the sale of the products of FMCG firms. The government intervene helps the business organisations like AJ Food Industries (M) SDN BHD to increase the business growth in large extent. According to the opinion of ChandraSekhar (2012), the subsidy policies provided by the government assist the firm to grow at faster rates and reduce the amount of interest paid in favour of funds elevated from the outside. The trading policy of the country is mediocre to import and export the goods and services in a favourable situation. ChoiChangBeom (2011) stated that it becomes a barrier for the business organisation to face the problems due to the reason of corruption. Therefore, it could be inferred that the entire political environment of Malaysia is diversified in nature for AJ Food Industries (M) SDN BH D to expand the market share. 2.1.2 Economic Factors The rapid economic development of Malaysia provides the organisation a higher speed growth segment that would directly help the firm to calculate its net income in the target market area. Adding to this Conrad and Thompson (2013) mentioned that the rate of labour cost is extremely high in this country which makes a pressure on the business unit for investing high expenses for the workers. The spending patterns of the consumers entirely depend on the income. In the opinion of Kim and Lin (2012), the foreign exchange rate is a limitation for AJ Food Industries (M) SDN BHD to earn enough value for the concern of import and export. 2.1.2.1 Implication It has been observed that the consumer price in Malaysia rose 3.5% in 2016 (website). As per the opinion of Kim and Lin (2012), it is the highest inflation cost compared with the previous year which would increase all categories of products. As a consequence, the growth of AJ Food Industries (M) SDN BHD would be affected as the purchase rate of the customer group would be decreased in this period. Hence, it could be deduced that the current inflation figure of the country produces several risk factors to the market growth of AJ Food Industries (M) SDN BHD. 2.1.3 Social Factors The mixed population with three major communities like Malay, Chinese and Indian gives Malaysia a vibrant culture. The Islamic predominant culture of the country defines its nature towards the taste of food. The change in lifestyle is the primary restraint for AJ Food Industries (M) SDN BHD to distribute its products segment for increasing the purchasing power of the customers (Mosley, 2006). The customers of Malaysia want the range of different available products while buying the food products especially. Therefore, the mayonnaise products of this firm are not enough to attract the consumers. 2.1.4 Technological Factors Considering the opinion of Saroso and Murthy (2007), Malaysia needs more technological development to enable its competence in the international marketplace. The organisation, AJ Food Industries (M) SDN BHD needs more technological advancements for economising the scale of production to achieve the optimum level of profits. According to the opinion of Brexendorf and Daecke (2012), improvement in technology would lead its competitive force by discovering innovative products segment. Furthermore, the change in automation would reduce the labour costs by introducing automatic machines in the production plant. 2.1.5 Legal Factors The industry-specific regulations of Malaysia indicate that no industry can be established between the cities (Chimhundu and Hamlin, 2007). These specific legal norms restricted AJ Food Industries (M) SDN BHD to establish the production plants in the cities. The Consumer Protection Act has empowered the customers to file a case against the seller if the firm or the seller made any cheat through the products quality or price. Hence, these types of legal practices of the country provide a range of risk factors for the business of the organisation. 2.1.6 Environmental Factors As per the rule of the Government, no company cannot be dumped the waste material into the river. As AJ Food Industries (M) SDN BHD is a food production plant, it becomes a barrier while disposed of the raw materials. In this present scenario, Liu and Ko (2010) added that the small scale of land for the factories is one of the major obstruction to the development of the production plant of AJ Food Industries (M) SDN BHD. The firm would also need to adopt many remedies to avoid the global warming issues. 3.0 Internal analysis: The inner analysis of the firm AJ Food Industries (M) SDN BHD indicates that the Franchising mode of business is unique and provides higher competitiveness of the company. Additionally, the marketing strategy adopted by the enterprise is also considered potential enough to penetrate the target market in the Singaporean and UAE region as well. 3.1 Bases of competitive advantages: The tagline of the product Jasma Adventures in Taste is one of the significant marketing elements of the firm AJ Food Industries (M) SDN BHD, which builds a competitive advantage for the company. Also, Miller et al. (2013) stated that new factories established in Kimar also considered as another base of its brand competitiveness. In this context, Mohan (2012) indicated that clean and healthy food production offered by the firm constitutes the brand competitiveness among other rivals. On the other hand, the brand positioning in the hypermarket is also considered another competitive advantage for the current business. The integration of all these factors has helped the firm managing greater brand competitiveness, in its national and international brand operation. 4.0 SWOT Analysis: 4.1 Strength: Dynamic marketing strategy is one of the major strengths of the brand. Along with this, the 5S certification provided by SIRIM has been found significant strength regarding managing brand image on the global platform. Miller et al. (2013) supported and stated the fact that product rebranding strategies adopted by the firm are the strength of the business. Additionally, the brand receives significant support from the Malaysian government, which has enabled the company competing with its current rivals. The MeSTI Certification provided by the Ministry of Health Malaysian has created higher brand value in the Malaysian FMCG market, thereby maintaining its brand competitiveness successfully (www.jasmafood.com, 2016). 4.2 Weakness: The product quality issue has been identified as the major weakness of the current firm as compared to the competitors. In this context, Goyal (2011) stated that other mayonnaise manufacturing companies operating in the Malaysia offering signature tastes and 100% Halal products as well. Thus, the similar tastes and packaging of the products provides the monotonous layout to the product lines, which reduces its scope of wider accessibility amongst the potential prospects. The energy, protein, fat and carbohydrate content offered by Kewpie Malaysia is offering fresh food materials than AJ Food Industries (M) SDN BHD. Thus, the product quality is the primary weakness of the firm. 4.3 Opportunity: The company has joined the exhibition for promoting the brand offerings to the international customers. This type of brand promotion could be a greater opportunity in its Dubai operation as the country provides a culture of excellence and quality lifestyle to the firm. Thus, the global brand extension in UAE country could be a significant opportunity for AJ Food Industries (M) SDN BHD. Oraman et al. (2012) also mentioned that the brand is targeting different retail kiosk in the hypermarket and the brand distribution is enhancing its overall sustainability index as well. Hence, the brand extension through the distributed hypermarket could be considered a potential opportunity for the brand to increase the brand competitiveness and sustainability in the international business market. 4.4 Threats: The improved competitor in the Malaysian FMCG market is considered one of the biggest threats for the firm AJ Food Industries (M) SDN BHD. At the same time, being an SME, the company is failing to accumulate potential funds to improve the business sustainability in the Malaysian FMCG market. Abdi et al. (2013) stated that the Malaysian FMCG market has become somewhat flat now, and the increase of hypermarket and supermarket is reducing consumer spending habits in the stand-alone companies as well. Thus, the economic fluctuation could also be considered another significant threat to the current firm. However, since last quarter of 2014, the consumer confidence index started increasing (www.marketing-interactive.com, 2016). Thus, it could be considered as the nullifying factor for the reduced growth of the Malaysian FMCG industry. 5.0 Threat Matrix: Since the firm produces only mayonnaise, it could experience higher risks in the global operations. Emphasising on a single product segment can easily lead the brand towards the product saturation point. Hence, the existence of the fiercest competitors in the similar market can be a slaughter for AJ Food Industries (M) SDN BHD, to experience product stagnancy. High Impact 5 1 2 High 1 2 Low Impact 3 4 Medium 4 5 Low 3 Low probability High probability Table 1: Threat Matrix (Source: Created by author) Analysis: Evaluating the threat matrix, it can be stated that the production of mayonnaise is a greater risk to the brand, as the government is initiating health awareness campaigns to reduce the fat consumptions. Thus, the government support for the popular brand might not be sufficient enough to convince the prospective audience. The lesser product variety is a major risk for the favourite brand regarding managing the sustainability. On the other hand, the brand is targeting through its extension in the hypermarkets, where other competitors are selling diversified products as well. Soowoong and Byeongok (2008) also stated that as the brand recognition of the familiar name is lower, it would incur a high risk to surpass the brand loyalty created by the FMCG giants. The brand with great recognition would attain greater competency in the hypermarket in the mayonnaise segment. Thus, the overall threat matrix indicates that the current brand would undergo a risky situation in its international business operation. 6.0 Strategic options: The strategic options analysis would help the firm understanding the range of suitable options for its policy response in the global market. Chimhundu and Hamlin (2007) also mentioned that as the business lacks from the monetary resource, the policy options could generate transparency and greater accountability for its international investment decisions as well. Thus, the brand could be able to deliver the expected business benefits to the internal stakeholders. 6.1 Strategic options development and Analysis: Merge and Acquisition is a modern form of partnership that would help one company to take over another. As per the present situation of the AJ Food Industries (M) SDN BHD, the brand would adopt a new merger and acquisition policy with Kewpie for improving its performance in the international market. One of the disadvantages of this plan would be the firm would lose its identity and the customer position (Brexendorf and Daecke, 2012). The overall profitability would be divided between the two firms. Adding to this Chimhundu and Hamlin (2007) mentioned that the strategic alliances with Kewpie could be another supportive option to share the core strengths with each other. The disadvantage of this strategy would be the owner of AJ Food Industries (M) SDN BHD would lose control over the decision related to the business operations. Hence, these two strategic development options would be an intellectual option to enhance its manufacturing and distribution capabilities. 6.2 Strategic option weighted score: Advantages Score Disadvantages Score Performance improvement 3 Lose in own identity and customer position 2.5 Share core strengths with each other 4 Lack of control in decision making 2 Total advantage scores 7 Total disadvantage scores 4.5 Table 1: Strategic option weightage score (Source: Created by Author) As per the analysis of the weightage score it has been speculated that the firm could go for the two options for the future betterment of the brand. The results of the present analysis indicate that the strategic alliance could be the best choice as it attains a better score rather than the merge and acquisition program. The risk factors with this initiative would be low while adopting this agreement. 7.0 Recommendations: A per the current analysis of AJ Food Industries (M) SDN BHD it has been suggested that the brand would need to keep a focus on the diversified products segment for attaining the best customer attraction towards the brand. Supporting this ChandraSekhar (2012) added that consumption of mayonnaise is not good for health as it increases the fat in human body. Therefore, as per the government awareness program, the organisation would need to concentrate on the other product options apart from the mayonnaise. Furthermore, ChoiChangBeom (2007) mention that joint ventures with the leading FMCG firm in Malaysia would help the firm to increase its market growth. Further enhancement in food taste and more research and development would be beneficial for AJ Food Industries (M) SDN BHD to amplify its growth in the international marketplace. 7.1 RACE Matrix: According to the opinion of Conrad and Thompson (2013), 80% of the business organisation are currently planning to increase the digital marketing spend by adopting the RACE model. In the present situation of AJ Food Industries (M) SDN BHD, the RACE model would help the firm to estimate costs for acquiring a new customer base. The proper planning for the research and development plan would help the company to produce different products with the best quality to draw the excellent customers attraction (Liu and Ko, 2010). Adding to this, the model would be helpful for building the strategic approach to digital marketing. Hence, it could be inferred that the implication of RACE model would be highly beneficial for AJ Food Industries (M) SDN BHD to achieve a strategic market position in the international market. 8.0 Conclusion: Considering the current strategic management issue of the firm, it can be concluded that strategic alliance between two or more companies could be helpful for meeting the brand profitability. On the other hand, the merger and acquisition with the Kewpie could be fruitful to the contemporary brand managing its greater brand sustainability and profitability in the international business context. References: Abdi, A., Ashouri, M., Jamalpour, G. and Sandoosi, S. (2013). Overview SWOT Analysis Method and Its Application in Organizations. Singaporean Journal of Business , Economics and Management Studies, 1(12), pp.69-74 Brexendorf, T.O. and Daecke, N. 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