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Problem 1

THE CONSERVATIVE OKB

This problem covers the following topics:

Strategic Entrepreneurship (Chapter 13)

Strategic Management (Chapter 1)

The Eternal Environment (Chapter !)

The "nternal Environment (Chapter 3)

The #usiness $evel Strateg% (Chapter &)

Orang Kampong Sdn Bhd: The story for an entrepreneur

This case is about an entrepreneur who is rather apprehensive of innovation and

expansion.

Tra'itional Me'icine has been in the 'eclining stage of the Pro'uct $ife C%cle since the late

eighties but is now maing a fast comebac Mala%sian consumers are now ver% health

conscious an' are ver% nowle'geable about the t%pe of me'icine that the% choose to consume

This is because of several health campaigns organi*e' b% both government + non,governmental

bo'ies The internet is also a ma-or source of nowle'ge an' can also be sai' to be the catal%st

for consumers. choice for purchases The information generate' through the internet can either

entice or repel consumers. choices The recent h%pe about the 'anger of chemicals has opene'

'oors for the floo'ing of tra'itional me'icine into the countr% Me'ical care via the more holistic

tra'itional metho's have been regaining importance as an alternative to /estern0Mo'ern

me'icine as more an' more clinical reports from the /est support the value of tra'itional

me'icine

The Tra'itional Mala% Me'icine (TMM) is also gaining momentum in this in'ustr% ive reputable

chain retailers an' hun're's of famil% businesses have been in operation for at least a 2uarter of

a centur% in the TMM in Mala%sia mong the reputable chain retailers is the 4rang 5ampong

S'n #h' (45#) which competes on cost lea'ership business strateg% "t has remaine' the most

renowne' TMM provi'er since the 1678s an' is the maret lea'er for TMM The other smaller

pla%ers in this maret are ma'e up of hun're's of small famil% businesses operating single

outlets in the villages (9ampong.) an' along the streets of the wet marets in the smaller cities

This phenomenon is about to change with the entrant of hun're's of health foo' supplements

an' vitamins in the supermarets neighborhoo' pharmacies an' also through 'irect selling

Therefore the bargaining power of the bu%ers has soare' tremen'ousl% over the %ears as the%

are spoilt for choices

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45#.s me'icinal pro'ucts tae long hours of preparation before the

bu%ers can consume the me'icine The me'icines are in the form of raw

herbs an' roots in their natural state which nee' to be boile' for hours

using authentic cla% pots for effective results The taste of the me'icine is

ver% bitter as no flavoring is a''e' Thus bu%ers have to prepare the

me'icine themselves which ma% be cumbersome for most bu%ers

45# gets its raw materials from a supplier ar Enterprise who gets the herbs an' roots from

the forests of Pera ar Enterprise en-o%s monopol% since it is the sole supplier of raw materials

for all the tra'itional me'icine pro'ucers in the countr% ar Enterprise hol's a strong bargaining

power of suppl% as it 'ominates the supplies of raw materials The supplies of the raw materials

are becoming etinct as most forests are cleare' for resi'ential 'evelopment while some forests

have been ga*ette' as orest ;eserves The cost of supplies from ar Enterprise has increase'

b% three,fol's over a two,%ear perio' The cost of supplies will increase to another &8< if 45#gets its supplies from neighboring countries lie "n'onesia

The 45#.s recipe for the me'icinal pro'uct is a well,guar'e' famil% secret 45# 'oes not tae a

particular interest in pro'uct pacaging an' a'vertisement since the 45# pro'uct is alrea'% a

househol' name among the Mala%sian bu%ers The herbs an' roots are wrappe' in transparent

plastic an' each plastic pacage bears tin% printe' 45# label which 'oes not state the

ingre'ients or the epir% 'ate 45#.s pro'uct pacaging 'oes not have 9pro'uct,appeal.

compare' to some of its competitors whose pro'ucts are attractivel% pacage' Even with these

setbacs from the latest maret surve%s con'ucte' b% Ministr% of =ealth 45# is still the first

choice of TMM among Mala%sian consumers since users claim that it helps prevent the infection

of the =1>1

45# is happ% about this surve% an' further believes that the me'icine must be sol' in its original0

natural state an' therefore there is no nee' to further process the herbs an' roots ccor'ing to

the Tukang Ubatfrom 45# the herbs an' roots will lose its me'icinal effectiveness if the% are

processe' further

The robust an' often turbulent economic situation the march towar's globali*ation an' the

competitive environment have brought about the increasing hectic lifest%les of the Mala%sians

The bus% Mala%sian consumers cannot affor' the time for 9the length% preparation. of the TMM

4rang 5ampong S'n #h' reali*es this but is not willing to change its pro'uct feature afrai' that

b% changing its pro'uct feature it ma% lose its famous pro'uct image of being tra'itional an'

9pure. The management claims that the% believe the me'icine the% sell 'oes not have to be

ostentatious in nature ?The simplicit% of the 45# pro'uct has taen us to where we are now So

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wh% 'o we nee' to change@ "t is this simplistic trait of the me'icine which is our competitive

a'vantage urthermore our vision is to be recogni*e' b% our customers as the lea'er in

Tra'itional Mala% Me'icine an' which ever%one can affor' urthermore b% -ust 'oing what we

'o best that is pro'ucing herbs an' roots wrappe' in transparent plastic we have alrea'%

achieve' our goal as T=E >AM#E;@ So wh% woul' we nee' to reinvent the wheelB

The contente' 45# management 'oes not believe in un'ertaing environment anal%sis since

the% are alrea'% a maret lea'er "n fact the management of 45# is ver% self,containe' an'

the% have little concern for the staehol'ers be it the capital maret pro'uct maret or

organi*ational staehol'ers an' even eisting competitors an' potential new entrants

;ecentl% The Duar'ian a well,nown pharmac% approache' 45# an'

woul' lie 45# to suppl% its me'icinal pro'ucts to them =owever

Duar'ian woul' lie 45# to revamp its pro'uct image into three 'istinctpro'uct,mi of pills capsules an' li2ui',compoun' forms that is eas% to

consume an' carr% The% also insiste' that 45# must pacage their

pro'ucts in attractive boes Duar'ian is willing to a'vise them in

;esearch an' evelopment an' also pro'uction because the% have the

epertise Duar'ian wants 45# to strategi*e on a focuse' 'ifferentiation

business level strateg% an' not on the cost lea'ership strateg% which is

45#.s strength Duar'ian will not be responsible for the pacaging an'

mareting an' therefore it is up to 45# to carr% out its own mareting

an' sales tactics if the% agree to sell their pro'ucts through the Duar'ian

outlets The news of Duar'ian.s offer sprea' lie wil'fire an' upon

hearing this /atson.s which is Duar'ian.s 'irect competitor is offering to

bu% (in other wor's ac2uire) 45# at a price that is har' to resist

4ver the %ears since its inception 45#.s pro'uction process has alwa%s been carrie' out in small

huts in the villages where 6&< of the wor is carrie' out manuall% while the remainingF which is

the sealing of the pro'uct is mechani*e' The raw materials are washe' an' 'rie' out in the sun

(=owever these 'a%s with the unpre'ictable weather change an' housing 'evelopment in the

nearb% town 45# has problems of 'r%ing the herbs 'ue to floo's) 4nce 'rie' the herbs an'

roots are weighe' an' pace' in plastic bags an' then seale' The labor cost is cheap since the

9ampong fols. 'o not min' being pai' below average wage The labor force is ma'e up of 68