APPLES PROFITABLE BUT RISKY STRATEGY

ANSWERS CASE STUDY 1#

Using the concepts in this chapter, undertake a competitive analysis of both Apple
and Nokia who is stronger?
Relevant concepts in the chapter are mainly from section 1.1: value added,
sustainability, processes to deliver strategy, competitive advantage, linkages,
vision.
Apple strengths: Strong brand name, market leader in music delivery, user-friendly
products, design skills, quality, exclusive contracts, profitable, strong vision
Apple weaknesses: High(er) price, limited distribution, small share of large phone
market, features can be replicated over time.
Nokia strengths: Brand name, dominant position in mobile phone market, good
products, profitable, strong processes to delivery new strategies
Nokia weaknesses: Mature phone market, little involvement in music market to the
present, its new music service has no clear sustainable advantage.
Given Apples previous profit record, there is no doubt that it has benefited
significantly from its move into recorded music and the iPod. However, the
extension into Apple mobile telephones remained to be proven at the time of
writing. It suddenly faced some very large companies like Nokia with both the
resources and the desire to take advantage of the market opportunities.
Is Apple stronger than Nokia? In the short term, arguably the answer is that they
both have their strengths. However, Nokia is just moving into the recorded music
market and it has already produced its own version of the touch phone [with clear
advantages over the iPhone according to one independent magazine review]. Thus
it is worth clarifying the question of who is stronger with respect to the time frame.
In the long run, it may be that Nokia will emerge stronger. At the time of writing,
Apples strategy of premium pricing for its phone service had to be revised
downwards it simply was not hitting its sales targets. In addition, Apple managed
to upset some loyal customers by introducing a new version of its phone that had
more features and was also lower-priced. Apple does not look like a company that is
strong in the mobile phone market.
But Apple had one great competitive advantage: its technology and software were
superior i.e. more user=friendly than Nokia. The Finnish company understood
the competitive threat from the new smartphones but failed to recognize that its
software was not up to the task. Even in 2013, Apple has not taken a dominant
share of the mobile phone market, but it is highly profitable.
By contrast, Nokia is really struggling. You can read about Nokias strategic
problems in Chapter 9, Case 9.2.

Importantly with regard to assessing who is stronger, it is essential to identify

the uncertainties in the market place new technologies, responses of consumer
electronics companies, etc. These should add up to major doubts as to how the
market will develop. This then raises the question of what strategy to adopt
an emergent strategy is essential.
2. What are the problems with predicting how the market and the competition will
change over the next few years? What are the implications for strategy
development?
The main problems relate to the uncertainties of new technology and the difficulty
in predicting how these will be exploited. An additional problem is the degree of
economic uncertainty that may impact on customer ability to buy phones. The
implications for strategy development relate to the difficulty in using prescriptive
processes in this strategic context.
3. What lessons can other companies learn from Apples strategies over the years?
Lessons in at least five areas:
1. The benefits of being an innovator and the risks attached with that strategic
route the iPod itself and the rivals now entering the market.
2. The need to build on the competitive advantages of the company if possible
the Apple brand name, user-friendly software design, etc.
3. The importance of understanding your customers and their needs the desire
of its young target group to have a large album list available along with the
ability to augment this legally.
4. The value of taking market-based opportunities in order to launch new
products the recorded music market/download market was arguably ready
for this new product and Apples timing was good.
5. The difficulties that can arise as companies move out of their existing product
ranges and begin to compete in other markets the move into the wider area
of consumer electronics and mobile phones, as explained in the case

FRASER AND NEVER

ANSWER CASE STUDY2#
What external forces would affect the growth of food and beverage industry in
Malaysia and ASEAN region in future?
There are many external forces would affect the growth of food and beverage
industry in Malaysia and ASEAN region in the future which are economic forces,
social, culture, demographic and environmental forces, political, legal and
governmental forces, and competitive forces. The first external forces is economic

forces, economic force affect every industry in Malaysia. That why is it also affect
the growth of food and beverage industry in Malaysia and ASEAN region in future.
Economic forces are the factors that help to determine the competitiveness of the
environment in which the firm operates. F&N will find that Malaysia and ASEAN are
very competitive and the food and beverage industry have a very big opportunity to
develop. Some of the factors that include in the economic forces is interest rate, tax
rate, and value of ringgit in world market. The second external force is
demographic. Malaysia has almost 30 million peoples and for ASEAN, the population
is 633 million peoples. This is very large population for F&N to develop their
business and if they manage to develop, they will definitely affect the growth of
food and beverage industry. Last but not least is Political, government and legal. Not
only that, the changes made from government will create the opportunities and
threats. Same goes to F&N, they will be affected by this force and this force need to
be consider carefully to make sure better growth. Besides that, for the industries its
depend heavily on government subsidies and contracts. The change in law and tax
will affect firm significantly and for food and beverage industry. Question 2
Identify and explain any three (3) strategies adopted by F&N to realize its vision to
become the regional food and beverage player. First strategy that adopted by F&N
is make an investment to purchase Nestle (M) Bhds canned milk business in
Thailand which give them quick access to the Thai market and able to become the
most powerful canned milk producer in South East Asia. Second strategy that
adopted by F&N to realize its vision to become the regional food and beverage
player is to gain entry into the largely untapped markets of Indochina with a total
consumer base of about 224 million. By entering this market, F&N will get easier
access to neighbour country or ASEAN countries as they already enter one of them.
They also can do some research about the ASEAN peoples attitude and behaviour
regarding their industry and then plan the most suitable strategy to be use. Third
strategy that adopted by F&N is lunched a new corporate brand to unify the soft
drinks and dairy brands that enable consumers anywhere in the region to
distinguish the groups many brands as part of F&N groups range products. they
also more focus on their sale volume by increasing the sales volume of milk cans to
generate higher profit rather than gain profit from increasing the price of the
producer.
1. Economic Forces
Economic forces are factor that are related to the economic growth and economic
development. Economic factor have a direct impact on the potential activities of
various strategies. Economic factor like interest rate, tax rate , value of ringgit in
world market, import and export factor inflation rate , consumption pattern , foreign
exchange will affect the growth of food and beverage industry in Malaysia and
Asean region in future.
2. Social, Cultural, Demographic and Environmental Forces Social, cultural,
demographic and environmental change have a major impact upon virtually all
product ,service, market and customer . In future consumer will be more educated
and aware about the healthy life style. They will consume the products that give

value for money and more healthy food and drinks. These scenario will affect the
growth of food and beverage industry in Malaysia and Asean region.
3. Political , government and Legal Forces.
The change of government, government policies and regulation will create
opportunities and threats. For industries that depend heavily on government
subsidies and contract, change in law and tax rate can affect firm significantly.
4. Technologies forces
Technologies change and discoveries such as computer engineering, robotic and
internet is acting as global engine that...

Q2. Identity and explain the strategies adopted by F&N to realize its vision to
become the regional food and beverage player.

Mission: To be a world-class multinational enterprise providing superior returns to

our shareholders, excellent value for our customers and a rewarding career for our
employees.
Vision: To become the leading total beverage company in Malaysia and the region.
Every company has their mission and vision statement served as overall purpose of
business. The mission and vision statement above are set by F&N. There are
external environmental issues have or will affect F&N to achieve their mission.
These external environmental issues are being categorized according to PEST(EL)
model. PEST(EL) model is to analyze the external environment issues of company. It
categorized environment issues into political, economic, social, technological,
ecological and legal influences.
Economic
Improving growth prospect of Malaysia, Thailand and the region brings more income
to F&N as is signals economy are in good condition and peoples are willing to spend
hence will increase sales in that particular region. The growth prospects include
rising of Malaysia GDP in year 2010 that is approximately 10% compare to 4.5% in
2009 that rise from some major factor of manufacturing industry production with a
double digit growth of 16.9% in year 2010. ASEAN countries are growing quick in
their economy thus putting F&N a favourable factor in growing of profits.(Annual
Report 2009 pg 013) F&N has built up positive consumer sentiment to their product.
For example 100PLUS, isotonic drink that is specialized for sportsmen to retain the
metabolism. It is a concept well-built that it is voted number 1 isotonic drinks in
Malaysia since its introduction in 1983. That well-built positive sentiment brings
others drinks of F&N to be well marketable. It is the consumer sentiment to the

products enhanced the profitability factor of F&N towards other competitor thus is
at an advantage in the market

Political
Government had put initiative to boost spending of consumer with new economic
model (NEM), with this model being pursue, Malaysia economic boost as consumer
purchasing power increases and are advised to spend. F&N will get benefit by
provide goods to be sold to the market hence boosting sales.
F&N products are all 'Halal' hence are entitled for Halal Hub Tax Incentive. The
incentive offered had decreased F&N some percentage of tax liability to the
government. It made F&N more profitable compare to those companies which does
not qualified for the incentive. (Annual Report 2011 pg 028)
Government has removed subsidy of fuel and sugar has put an impact to F&N as
most of the F&N core businesses needed large amount of sugar which is dairies and
soft drink business. The withdrawal of sugar subsidy lower the overall profit of the
F&N although there is a large improve a sales but the profit doesn't show much
improvement as the sugar cost increases. Withdrawals of fuel subsidy did also
impact on F&N as the cost of their internal and external distribution cost increases
thus reduces profit. (Annual Report 2011 pg 037)
Technological
In the beginning of 2011, F&N introduced new product, Ice Mountain and it has
faster share gain among bottler waters player which established 5% market share in
Malaysia. (Annual Report 2011 pg 035)
F&N launched new beverage Zesta across Malaysia in October 2011.Zesta has
remarkably great tasting berry soda flavored soda. It contents the Guarana tropical
berries that originate from Amazon, South America. In addition, Guarana tropical
berries invigorate the body and mind. "Zesta is an extension of our already large
array of F&N beverages, a beverage that was initiated to complement our existing
range of F&N brands, creating a transition vehicle for our growing band of
consumers," said Dato' Ng Jui Sia, CEO of Fraser & Neave Holdings Bhd. F&N
believes that Zesta is the illustration of growing trends for beverage enhanced soda.
(Zesta 2011)
Environmental
Sichuan Earthquake of May 2008 has caused the raw material cost increase and
company's profit is affected. Natural disaster is beyond expectation and control of
the company. Profit before interest and tax in 2008 grew only 5%. This
environmental factor has affected company to achieve their mission. Natural
disaster would serve as obstacle that F&N provide superior returns to shareholders.
(Annual Report 2008