1.

INTRODUCTION

a. Introduction – Porter towards FMCG Industry

Porter (2002) states that root of the problem lies in the lack of distinguishing between
operation effectiveness and strategy. The expedition for productivity, quality and speed
has resulted in management tools and techniques, total quality management
benchmarking, time based competition, outsourcing, partnering, reengineering, change
management.  In ‘Anakku” strategy management is the key to its success. The
babycare and health-care industry like “Anakku” is making news everywhere with not
only the traditional industries increasing their outlets but also in some major countries;
building up network in this corporate industries. “ Anakku” can be said one of the good
example for fast moving consumer goods (FMCG) in Malaysia.

Porter's Generic Strategies

Advantage

Target Scope
Product
Low Cost
Uniqueness

Cost
Broad Differentiation
(Industry Wide) Leadership
Strategy
Strategy

Focus Focus
Narrow
(Market Segment) Strategy Strategy
(low cost) (differentiation)

Table 1
b. Introduction – Anakku

Established in 1973, Anakku is today the largest public listed company of baby clothes
and babycare products in Malaysia, recognised as being the most experienced and
innovative manufacturer in its field. The Anakku name which has gained worldwide
acceptance for baby products of premium quality, safety and reliability. Among the
countries in the world where Anakku is a registered trademark include Malaysia,
Singapore, Australia, Britain, Brunei, China, Hong Kong, Ireland, New Zealand,
Philippines, Saudi Arabia, Taiwan and Vietnam. Anakku, the complete babycare brand
built on a strong, solid foundation of premium quality which babies will love around the
world. As a total babycare specialist, Anakku also offers services beyond
manufacturing. Services like marketing expertise and international networking;
designing and craftsmanship by a team of internationally trained designers that can
cater to the taste and preference of different markets. Total Baby Products Specialist;
offering a complete range of apparel, toiletries, disposable diapers, feeding equipment,
toys, baby accessories and gift sets. In addition to the Anakku house brand, a variety of
international and well-established names are represented and distributed by Anakku.
These include the world-renowned Disney Babies, Sesame Street, Looney Tunes and
Pur from the United States; Tommee Tippee from the United Kingdom ; Smiley Babies
from France and Tommy & Oscar from Italy. Every product that carries the Anakku
name is a labour of love - from selection of premium quality materials to the finest
craftsmanship right down to packaging and delivery.

Generic Strategies and Industry Forces of Anakku

Industry Generic Strategies

Force Cost Leadership Differentiation Focus
Entry Ability to cut price in Customer loyalty can Focusing develops core competencies
retaliation deters
Barriers potential entrants. discourage potential entrants. that can act as an entry barrier.

Ability to offer lower Large buyers have less power

Buyer Large buyers have less power to
price to powerful to negotiate because of few
Power negotiate because of few alternatives.
buyers. close alternatives.
Suppliers have power because of low
Supplier Better insulated from Better able to pass on supplier volumes, but a differentiation-focused
Power powerful suppliers. price increases to customers. firm is better able to pass on supplier
price increases.
Can use low price to Customer's become attached to Specialized products & core
Threat of
defend against differentiating attributes, competency protect against
Substitutes substitutes. reducing threat of substitutes. substitutes.
Better able to compete Brand loyalty to keep Rivals cannot meet differentiation-
Rivalry on price. customers from rivals. focused customer needs.

Table 2
2. STRATEGIC MANAGEMENT

Definition Of Strategic Management

Strategic management is the art and science of formulating, implementing and

evaluating cross-functional decisions that will enable an organization like “Anakku” to
achieve its objectives.”Anakku” strategic management is integrates the activities of the
various functional sectors of “Anakku” business, such as marketing, sales, production
etc. , to achieve organizational goals.

We are able to study Anakku strategic management by looking at the following factors:

2.1 ENVIRONMENT FACTOR

The Environments of an Organization

Social Technological
Variables

Financial
Customer
Institutions

Competitors Employees Suppliers

Organization

Government
Media Shareholders and Board of Directors
Table 6

Labor Unions Special Interest

Economic Variables Political Variables

Table 3

a. Internal Environment Analysis

Note: 7s model has been used as a primary tool to analyze the internal
environment

Strategy

Giant strategies are visible in the company's corporate, business and functional levels.
They have already diversified their business across many areas during the last few
years. The business plan is formulated at the beginning of the year considering main
objectives of the company. The progress of each project is monitored in a monthly
basis through different strategic committee meetings. On the other hand, Giant tries to
introduce latest technologies into the market considering global mega trends through
its comprehensive Research & Development wing. The technology initiatives can be
considered as a strategy used to capture the market by effectively saying ahead from
the competition in the technology and innovation sphere.

Structure

The Company’s business and operations are managed under the supervision of the
Board of Directors comprising of five (5) non executive directors and one (1) executive
director. Divisional structure can be identified in company level but performances of the
divisions are measured through different strategic committees.

Systems

Apart from the technical back bone, Digi uses several systems to execute their
business strategies successfully. For instance;

 SAP ERP (Enterprise Resource Planning) –

This was launched in 2006 January to
integrate identified key process in the
company .
 CCBS (Customer Care Billing system) –
Currently existing billing system is going to be
migrated in to a new system to provide more
customer centric services.
 HRIS - Used for human resource
management and all the day to day functions
are carried out through this system.


Style
The management style always depends on targets and objectives. Strict deadlines are
imposed while performance and progress are very closely monitored at all levels of the
organizational structure. Rewards and benefits schemes are in line for the top
performers and better achievements.

All the employees will have a number of recreational opportunities such as trips, get-
together, sports…etc to take some time off from busy work schedules.

Staff

The Company currently employs a workforce of 17000 who in turn are considered
pivotal to the organization’s growth and success. Annual manpower planning and
recruitment is carried out in parallel with the business plan preparation. The
capabilities required by potential employees are based on the requirements of the
business plans applicable to respective departments of the Company in any given
year. Seven percent (7%) of the total HR cost is devoted to training and development.
The training needs for individuals and teams are identified from the competency
requirements arising from the Company’s business plan and employees’ annual
performance review.

Superordinate Goals

All individuals with different backgrounds, different ethnics and nations are teamed up
and driven towards a common set of goals and objectives at Giant. The company has
been successful in focusing the entire team towards a single vision by incorporating all
individuals’ goals and personal objectives together.

Skills

Giant consists of number of individuals with distinctive capabilities and competences

from top to bottom. In addition to that Giant is served by a team of top class individual
in the Malaysia Industry with lot of talent and exposures.

b. External Environment Analysis

Note: PEST model has been used to analyze the external environment
Political

Giant related to changes in government and their priorities and legislation programme.
Giant has thrown its weight fully behind the Malaysian Government’s programme to
create smart consumers of Malaysia.

Economical

Giant’s possible impact of economic changes can be assessed in a number ways,

which is economic growth, inflation, government spending, interest rate, exchange
rate, the money supply, investment and taxation. The strength of Giant on the
economy influences is the availability of credit and the willingness of people to borrow
(shareholders and financial institutes).

Socio-Cultural

The socio-cultral environment encapsulates demand and taste, which vary with fashion
and disposable income, and general changes can again provide opportunities and
threats for Giant. Giant is aware of demographic changes as the structure of the
population by age, affluence, regions; numbers of working and so on can have an
important bearing on demand as a whole and on demand for particular products and
services.

Technological

Technology in one respect is part of the Giant half of the model as it is used for the
creation of competitive edge. Computers are used to help customer to do price
checking ( avoiding price conflict) and information technology such as electronic
points of sale in retailing.

2.2 COMPETITIOR ANALYSIS

Definition :

Competitor analysis in marketing and strategic management is an assessment of the

strengths and weaknesses of current and potential competitors. This analysis provides
both an offensive and defensive strategic context through which to identify
opportunities and threats. Competitor profiling coalesces all of the relevant sources of
competitor analysis into one framework in the support of efficient and effective strategy
formulation, implementation, monitoring and adjustment.

Competitor Analysis Components

   What the competitor is doing
What drives the competitor or is capable of doing

Objectives Strategy

Competitor
Response Profile

Assumptions Resources
& Capabilities

Table 4

Anakku competitior analysis is clearly identified in the Five Forces, which is mention
below:

1.Threat of New Entrants

The most awaited fifth mobile operator license for Sri Lanka has been awarded to
AIRTELL, India’s largest mobile operator. With this the threat of competition increases.
However as per TRCSL there will not be any further licenses issued which creates an
entry barrier for any others to the market.
2.Bargaining Power of Buyers

In Sri Lanka buyers/customers are not strong as compared to customers in Western

countries. The number of customer groups to protect themselves is almost non-
existing in the Sri Lankan context. This is quite evident from the demanding nature of
customers in the Western countries. Hence quality, standards and support are
comparatively not major concern if they exist to a basic level.

However people are very cost conscious, as such when switching costs are fewer,
buyers tends to go for the lowest rates. As there are four other operators and switching
cost is negligible, bargaining power of buyers will increase. But with the increasing
number of Value Added Services (VAS) provided by Dialog Telekom, they are able to
keep certain segment of buyers tied to them.

3.Threat from Substitutes

In strict Mobile Telecommunication sense there is no substitute technologies like VOIP

over wireless which is popular here in Sri Lanka. However in general, fixed line
communication operators (SLT, Suntel & Lankabell) create the substitution effect,
particularly with the award of CDMA licenses.

SLT, Lankabell and Suntel are the substitute telecommunication providers which one
can go for if he/she is looking at connectivity without mobility (eg. for home usage).
However this is still a smaller market as compared to the total market.

4.Bargaining Power of Suppliers

There are suppliers both local as well as international for Dialog Telekom in various
operations it performs. For network connectivity back haul is critical. Dialog Telekom
does not own a national backbone hence has to depend on local providers. It is only a
few like SLT, MTT and few other VSAT operators who have direct access to the
national back bone. Hence these suppliers are quite powerful and certain suppliers are
indirectly competitors as well. For this reason Dialog Telekom has recently acquired
MTT and now it is part of the group and operates as a subsidiary known as Dialog
Broadband Network.

Sri Lanka being a small country with a comparatively smaller number of data/voice
users the traffic generated is quite low. With this the bargaining power of upstream
providers (eg. specially International ISPs), Content Providers for VAS and peering
partners are high.

5.Rivalry among Competing Firms

Even though the competition is high in the Sri Lankan mobile communication market,
there are few factors which have given the edge to Dialog Telekom over others. The
product and service characteristics offered are different to most other operators. They
have a variety of Value Added Services like Star Call, e-Channeling via mobile, RingIN
Tones, Push N Talk, Photo Technica & D-Services are to name a few. These are
becoming popular among the users and most operators provide only basic services.

Also the amount of investment for the new services as well as expanding the coverage
and capacity is quite high. This is also another differentiator which gives Dialog
Telekom the competitive edge. The diversity of the rivals in the industry is another
factor. As such Dialog Telekom competes on value addition and differentiation, while
most other operators compete on rates and coverage.

Hence Dialog has surpassed all the mobile operators as well as it has gained more
subscribers than incumbent SLT, which reflects how it stands apart from others due to
above factors.

2.3 Swot Analysis

Definition:

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats

Once key strategic issues have been identified, they feed into business objectives,
particularly marketing objectives. SWOT analysis can be used in conjunction with other
tools for audit and analysis, such as PEST analysis and Porter's Five-Forces analysis.

a.Strengths

 Worldwide sales have grown 14% indicating a strong position for the global
group.
 The business model adapted by Johnson and Johnson fundamentally uses the
adaptation of entrepreneurial values in order to retain an edge within the market
place.
 Working with intensive scientific notions Johnson and Johnson utilise a varied
expanse of problem solving techniques in order to challenge the standard
practice and capitalise on growth through emerging markets which enables
 associated growth.
 The use of independent offices working as standalone units provides the
opportunity to develop concepts with cultural considerations which can prove
important when taking a product to global markets.

b.Weaknesses

 There is increasing pressure within pharmaceutical markets to reduce prices in

line with medical budgets and maintain patent expirations to ensure generic
programmes are updated within critical path movements.
 Challenges have been faced within Johnson and Johnson where a reduction in
the market demand for key products has been identified; some of these
products were branded and have been replaced by generic programmes at the
end of patent time lines.
 Internal weakness across the industry and not isolated to Johnson and Johnson
would be the level of theft and counterfeiting of drugs managed through internal
personnel.

c.Opportunity

 Whilst the recent acquisition of Pfizer Consumer Healthcare will act as an

opportunity in its own right to promote growth for the organisation through
alternative routes there is the added value capitalised through the return on
investment which will be realised 12 months before plan releasing funds back
into the bottom line.
 Johnson and Johnson have highlighted new developments in pharma products
with five undergoing regulatory review which provides the opportunity to grow
the existing product portfolio.
 Development into new functions of medical devices and diagnostics will provide
new markets to entry which will result in business growth.
 With the development of WTO rules to prevent the availability of cheap generic
drugs there is the opportunity to reduce the level of lost profit due to generic
introduction as patents run out. Whilst this will aid Johnson and Johnson where
they own the brand where they are looking to capitalise on introducing generic
drugs to market this ruling will become a hindrance.

d.Threats

 Generally within the main pharmaceutical companies there is a high level of

competition for the generics markets where patents finish and it is the first to
entry where success will generally be determined.
 Technological developments with bio-tech concepts will potentially move the
traditional pharmaceutical methods out of the market place in the long term
although there is an economical argument that this form of development can be
segregated to run alongside traditional methods and complement as opposed to
 replace.

SWOT Analysis Framework

ENVIRONMENTAL SCAN
SWOT Analysis Framework

Internal Analysis External Analysis

Strengths Weaknesse Opportunities Threats

s

SWOT MATRIX
Table 5

3. STRATEGIC ALTERNATIVES & RECOMMENDATIONS

a. Corporate Strategy

Considering the current performance, the Key Success Factors and the SWOT
analysis the directional strategy alternatives would be as follows:

 Growth strategy to expand the activities of “Anakku” further would be the first
alternative. Since the current product lines have real growth potential
concentration of resources on those would be ideal. In concentration “Anakku”
can follow the vertical growth strategy to take the benefit of the value chain
convergence opportunity that is existing in Malaysia context.
  Stability strategy to continue with current activities without any changes to the
direction would be the second alternative. Here “Anakku” can utilize
pause/proceed with caution strategy to have only incremental improvements
while the weaknesses stated are overcome. It can use this time to stabilize the
organization due to the changes took place due to multiple strategies it adopted
earlier such as acquisitions and investing on innovative developments, which will
help to get back the loosing internal employee motivation.

 The recommendation would be to implement the second alternative initially to

stabilize the organization without any other drastic change in the direction. And
after some time they can adopt their long-term beneficial value chain
convergence option depicted in first alternative.

b. Business Strategy

The business strategy alternatives available for “Anakku” to improve the competitive
position in the industries it operates would be as follows.

 The first alternative for the competitive strategy would be to improve on the
current strategy of differentiation. It can improve this by having unique value
added services for each of its current strategic business units of “Anakku”. This
can improve the customer loyalty and thereby can charge a reasonable premium
rate than competitors.

 The second alternative which can try to implement is cost leadership to

overcome the threat of lower rates provided by competition, “Johnson &
Johnson” and “Pureen”.

 Typically the differentiation strategy is more likely to generate higher profits than
low-cost strategy. However differentiation strategy implementation may involve
higher investment than low cost strategy.

 Competitive scope is an important factor when considering competitive

strategies. The recommended alternative depends on the competitive scope in
this situation. Considering both alternatives and there pros and cons of each,
most ideal should be to have culmination of both differing from the segment of
the market. “Anakku” should have a focused differentiation strategy in the
market where people are valuing the service and cost.
  Simultaneously “Anakku” should look at strategic alliances as a corporative
strategy to gain competitive advantage by working with other organizations.
Currently they have stated this with some banks. However this can be vastly
improved to include alliances with Insurance Companies, Stock Brokers, retailers
and Popular Food Chains etc.

c. Functional Strategy

Functional strategies based on the strategic choice of corporate and business strategies
should be as follows:

 The Marketing strategy currently followed by “Anakku” should be slightly

modified to accommodate the business strategy of cost focus. There should be
new packages to attract new customers as keeping existing customers who
require basic product and service. This product/package development for the
existing market can be supported by improving the current “pull” marketing
strategy for advertising and promotion.

 “Anakku” should not do any changes to there current Financial strategy as they
are going to have pause/proceed stability corporate strategy. Hence they could
further improve there financial stability as there are no major growth strategies to
be implemented.

 “Anakku” being a technological leader, R&D/Technology strategy is critical for its

performance. They should further improve R&D capabilities by having strategic
alliances with their major technology vendors. This is because most of these
vendors are the pioneers in developing latest technological developments. This
will be mutually beneficial to both the parties.

 The Operational strategy of “Anakku” should be streamlined to have a common,

more efficient and effective operations flow with all business units. This
requirement has arisen from the recent expansions and acquisitions. Also
change management would be required in creating a common culture among
retailers.
 The Human Resource Management strategy is another key functional strategy
for “Anakku”. It should review its programs and procedures to suit the new
stabilizing corporate strategy. It should improve on its current team based
working environment to self-managing work teams which is more suited for an
organization where rapid growth is anticipated in future.

 The current Information Systems strategy should also be changed to handle

Hypermarket development in much more strategic level. The Information
Systems developed should be aligned with corporate and business level
objectives. And also there should be an integrated approach among business
units as much as possible.

 Apart from this “Anakku” should outsource certain operations such as legal, IS/IT
infrastructure support, Advertising, 1st level Call Center operation etc apart from
the already outsourced operations like cleaning and transportation. This is mainly
because there are no major distinctive and/or core competencies of Giant in the
above areas.

 “Anakku” is known for its quality innovations due to their high emphasis on
Research & Development. However this precious research and their
development work needs to be protected by patents, copyrights and other
legislative means. Hence if applicable, “Anakku” should aggressively follow
these protective legislations.