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Malaysian consumers are now very health conscious and are very knowledgeable bout the type of medicine that they choose to consume. This is because of several health campaigns organized by both government & non-governmental bodies. The internet is also a major source of knowledge and can also be said to be the catalyst for consumers’ choice for purchases. The information generated through the internet can either entice or repel consumers’ choices. The recent hype about the danger of chemicals has opened doors for the flooding of traditional medicine into the country.
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Medical care via the more holistic traditional methods have been regaining importance as an alternative to Western/Modern medicine as more and more clinical reports from the West support the value of traditional medicine. The Traditional Malay Medicine (TM) is also gaining momentum in this industry. Five reputable chain retailers and hundreds of family businesses have been in operation for at least a quarter of a century in the TM in Malaysia. Among the reputable chain retailers is the Orange Camping Sad Bad (JOB) which competes on cost leadership business strategy.
It has remained the most renowned TM provider since the sass and is the market leader for TM. The other smaller players in this market are made up of hundreds of small family businesses operating single outlets in the villages (gammon’) and along the streets of the wet markets in the smaller cities. This phenomenon is about to change with the entrant of hundreds of health food supplements and vitamins in the supermarkets, neighborhood pharmacies and also through direct selling.
Therefore, the bargaining power of the buyers has soared tremendously over the years, as they are spoilt for choices. Sob’s medicinal products take long hours of preparation before the buyers can consume the medicine. The medicines are in the form of raw herbs and roots in their natural state, which need to be boiled for hours using authentic clay pots for effective results. The taste of the medicine is very bitter as no flavoring is added. Thus buyers buyers. JOB gets its raw materials from a supplier, Kara Enterprise, who gets the herbs and roots from the forests of Opera.
Kara Enterprise enjoys monopoly since it is the sole supplier of raw materials for all the traditional medicine producers in the country. Kara Enterprise holds a strong bargaining power of supply as it dominates the supplies of raw materials. The supplies of the raw materials are becoming extinct, as most forests are cleared for residential development while some forests have been gazettes as Forest Reserves. The cost of supplies from Kara Enterprise has increased by three-folds over a two-year period.
The cost of supplies will increase to another 50% if JOB gets its supplies from neighboring countries like Indonesia. The Sob’s recipe for the medicinal product is a well-guarded family secret. JOB does not take a particular interest in product packaging and advertisement since the JOB product is already a household name among the Malaysian buyers. The herbs and roots are wrapped in transparent plastic and each plastic package bears tiny printed JOB label, which does not state the ingredients or the expiry date.
Sob’s product packaging does not have ‘product-appeal’ compared to some of its competitors whose products are attractively packaged. Even with these setbacks, from the latest market surveys conducted by Ministry of Health, JOB is still the first choice of TM among Malaysian consumers since users claim that it helps prevent the infection of the HI IN. JOB is happy about this survey and further believes that the medicine must e sold in its original/ natural state and therefore there is no need to further process the herbs and roots.
According to the ‘Taking Bat’ from JOB the herbs and roots will lose its medicinal effectiveness if they are processed further. The robust and often turbulent economic situation, the march towards globalization and the competitive environment have brought about the increasing hectic lifestyles of the Malaysian. The busy Malaysian consumers cannot afford the time for the lengthy preparation’ of the TM. Orange Camping Sad Bad realizes this but is not willing to change its product feature, afraid that by changing its product feature it ay lose its famous product image of being traditional and ‘pure’.
The management claims that they believe the medicine they sell does not have to be ostentatious in nature, “The simplicity of the JOB product has taken us to where we are now. So why do we need to change! It is this simplistic trait of the medicine which is our competitive advantage. Furthermore our vision is to be recognized by our customers as the leader in Traditional Malay Medicine and which everyone can afford. Furthermore, by Just doing what we do best that is, producing herbs and roots wrapped in transparent plastic we have already achieved our goal as THE NUMBER!
So why would we need to reinvent the wheel? ” The contented JOB management does not believe in undertaking environment analysis since they are already a market leader. In fact the management of JOB is very self-contained and they have little concern for the stakeholders be it the capital and potential new entrants. Recently, The Guardian, a well-known pharmacy, approached JOB and would like JOB to supply its medicinal products to them. However, Guardian would like JOB to revamp its product image into three distinct product-mix of pills, capsules and liquid- compound forms that is easy to consume and carry.
They also insisted that JOB must package their products in attractive boxes. Guardian is willing to advise them in Research and Development and also production because they have the expertise. Guardian wants JOB to strategies on a focused differentiation business level strategy and not on the cost leadership strategy, which is Sob’s strength. Guardian will not be responsible for the packaging and marketing and therefore, it is up to JOB to carry out its own marketing and sales tactics if they agree to sell their products through the Guardian outlets.
The news of Guardian’s offer spread like wildfire and upon earning this Watson which is Guardian’s direct competitor is offering to buy (in other words acquire) JOB at a price that is hard to resist. Over the years since its inception Sob’s production process has always been carried out in small huts in the villages where 95% of the work is carried out manually while the remaining; which is the sealing of the product is mechanized. The raw materials are washed and dried out in the sun. (However, these days with the unpredictable weather change and housing development in the nearby town, JOB has problems of drying the herbs due to floods.
Once dried the herbs and roots are weighed and packed in plastic bags and then sealed. The labor cost is cheap since the ‘camping folks’ do not mind being paid below average wage. The labor force is made up of 90% women folks while the other 10% are school dropouts. Sob’s simple low cost value chain lends credence to its cost leadership business level strategy. Dating Timid, wife of Data Penguin Camping Mega, the CEO of the cash-rich JOB is in a dilemma. She is very conservative and holds strong to family values. She is contemplating about the offer from Guardian and Watson.
She does not believe in vamping traditional medicine into modern pills and capsules, because according to her the purity of the traditional medicine will be contaminated with the toxic- chemicals’. Further more, she does not want to change the product image that has been Sob’s trademark for many generations. She is not willing to sell off her family business to Watson, more for emotional than economic reasons. Dating Titman’s children who are university graduates claim that Sob’s conservative management style and lack of a clear vision into future business opportunities are weaknesses that may cause their family business to go to the dogs!
They want to see the 1/0 Model and the Resource-Based Model put in place to help JOB form its vision and use them in pursuit of strategic competitiveness and above average returns. They also feel that the management of the JOB is too complacent in its comfort zone and they fear that this business would be eaten up by the more daring and innovative Chinese Traditional Medicine. They want JOB to scan, monitor, forecast There are numerous new terms Be curious: Be a CAT! In the case above. Read the case once more & identify the new terms. Then identify the specific chapters that would help you learn about those terms.