EXECUTIVE SUMMARY

Porter's Five Forces are a framework for analyzing the development of industry and business
strategy; it also determines the intensity and attractiveness of a market. Attraction means that the
lack of attractiveness in relation to the profitability of the business as a whole lowers profits.
This model means that there should be continuous profit or return on business and industry.
However, studies have shown that different industries may have different levels of profitability
due to their different structures. Organizations can use the model to gain an advantage over
competitors.

About teen years ago, the international freight forwarding business in Myanmar was few
numbers of companies are operate and most are local national citizen own. And its market
competition was not high. The freight forwarding market of Myanmar has made significant
development steps along with the growth of the longstanding forwarding company, the
settlement of many new companies and foreign direct investment and joint ventures companies
are currently penetrate in this market also made this market more active and rise competition.
One of the new setup companies which had above Five years age in this field is Nadi Myat Thu
(NMT) International Logistics and Freight Forwarding Company.

Porter’s Five Forces Analysis is a strategic management tool for analyzing the industry and
understanding the profitability of a given industry. The managements of NMT Logistics, to
understand how managements can influence profits from the five competitive forces, NMT
Logistics to understand competitive advantage and long-term profitability in Freight Forwarding
Services Industry.
1.0 Introduction
The industry comprises of warehousing, courier, shipping, road, rail and air cargo. (Chhilwar,
2015) It is collaborations of supply chain, product management and distributions. It is a
combination of tasks that takes place form the point of origin to the point of consumption. These
tasks include material handling, packaging, transportation, inventory, security and warehousing.
There are numerous applications of logistics industry like media, entertainment, banking, retail,
information technology and manufacturing sector (Leonnetti, 2016).

1.1 Brief overview of Nadi Myat Thu Logistics Co., Ltd.

Nadi Myat Thu Logistics Company was founded in 2015 under Directorate of Investment
and Company Administration office under laws of Myanmar Companies Act. The form
of corporation of the company was a company with limited liability and a hundred
percent own by Myanmar National Citizen. The board of directors consists of FOUR
members in total.

Nadi Myat Thu Logistics Company is a one of the logistics and freight forwarding
company in Myanmar shipping, logistics and freight forwarding industry, starting time it
had only one marketing staff. All day to day work and tasks are working by board
member as sharing the work load and tasks.

After two years business operating, NMT had get place in local market and reached as
professional logistics services provider. And relation and signed with business partner or
service agreement with overseas logistics firms and international freight forwarding
agents.

1.2 Study the freight forwarding and logistics market of Myanmar

The freight forwarding market of Myanmar has made significant development steps
along with the growth of the longstanding forwarding company, the settlement of many

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new companies and foreign direct investment and joint ventures companies are currently
penetrate in this market also made this market more active and rise competition

Freight forwarding services means services of any kind relating to the carriage,
consolidation, storage, handling, packing or distribution of the goods as well as advisory
services in connection therewith , including but not limited to customs and fiscal matters,
declaring the goods for official purposes, procuring insurance of the goods and collecting
or procuring payment or documents relating to the goods. The freight forwarding industry
is wide in scope and rich diversity as can be seen in the definition above. It comprises
huge multinational firms, medium sized firms, and small sized firms

The multinational and medium sized firms offer multiple services such as shipping and
shipping agency services, consolidation, container freight station operation, bonded
warehouses and transit god owns, warehousing and distribution, cold chain and cold
storage, transport logistics, airfreight, supply chain management, door to door delivery
services and turnkey project handling. The small sized firms engage mainly in
international air freight forwarding, sea freight forwarding with conventional or container
shipping, local customs formality and clearance services, trade license formality services,
warehouse services and local transportation services of individual general importers,
brand new and second hand motor vehicles importer, consolidation/deconsolidation of
LCLs.

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2.0 Management Framework and Structure of NMT Logistics Company.

2.1 The Structure of NMT Logisctics

The structure of Nadi Myat Thu Logistics Co.,Ltd is divided into six departments. In
particular, Sales and Marketing department, Customer service and documentation
department and Operation department are business operational departments. Specific
functions of the operational department are as follows:

Sales and Marketing Department:

Undertake the input of business activities, this department carried out the following
activities:

- Planning for sales and marketing activities, customers’ appointment schedule of each
week, setting targets monthly quarterly and annually.
- Write a report after each customer meeting and appointment.
- Coordinating with forwarding network across the country in the exploitation of
information and mining customer list.
- Reply and settle letters, enquiry email, faxing, sending shipping schedule and
shipment information related to the customers.
- Searching and browsing new customers and promote and introduce the company’s
available services.
- Use software for research and analysis for customers, market and competitors
- Based on the evaluation of the carriers, and consider the competitive situation from
time to time to setup charge rates of NMT’s service rate and price list.
- Forecast and recommend on appropriate marketing strategy.
- When the shipment has been designated or customer agrees to use the services of
Nadi Myat Thu Company create job file and receive guidance from owners, transfer
instruction files to Operation department to carry out.
- Booking space with the carrier and receive confirmation from the carrier.
- Set the price (the buying and selling price, commission and other expenses) and
transferred to the accounting department for billing, report customer service
department to issue a bill of lading.

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 Customer Service and Documentation Department:

This department is responsible for:

- Transfer information to Sales and Operation departments.

- Coordinate with Sales and Operation departments to resolve the sales information.
- Notice before (Pre - alert) or inform about shipping (Shipping advice) for foreign
dealer network based on the template and the lists of agents, ensure the right people
are responsible and right department are in charge. Contents of Pre - alert will inform
the details required for cargo loading as ship, number of MB / L, HB / L, method of
payment, the sender's name, the recipient and the type of service requested by the
customer.
- Return fax, telex, mail and issues related to the cargo assigned by the manager.
- Preparation of statistics, compile a dossier for shipments within days, weeks, months.
Save the relevant documentation.
Operation department:

This is the department directly involved in shipping operations and freight forwarding
service. Operation department is responsible for operating and escorting cargo from the
starting point to end point of the freight.

We can see the structure of NMT Co is quite clear; the department is divided specifically
to particular tasks but still maintain close links with each other. The operational
departments are arranged logically can help a company arrange the work better; different
departments work together smoothly.

2.2 What are Porter Five Forces?

Definition : Porter’s five forces model is an analysis tool that uses five industry forces to
determine the intensity of competition in an industry and its profitability level.
It draws from industrial organization (IO) economics to derive five forces that
determine the competitive intensity and, therefore, the attractiveness (or lack of it) of an
industry in terms of its profitability. An "unattractive" industry is one in which the effect
of these five forces reduces overall profitability. The most unattractive industry would be
one approaching "pure competition", in which available profits for all firms are driven to

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normal profit levels. The five-forces perspective is associated with its originator, Michael
E. Porter of Harvard University. This framework was first published in Harvard Business
Review in 1979.
Understanding the Tool
Five forces model was created by M. Porter in 1979 to understand how five key
competitive forces are affecting an industry. The five forces identified are:

Threat of
Entry

Bargaining Bargaining
Industry
power of Power of
Rivalry
Suppliers Buyer

Threat of
Substitutes

These forces determine an industry structure and the level of competition in that industry.
The stronger competitive forces in the industry are the less profitable it is. An industry
with low barriers to enter, having few buyers and suppliers but many substitute products
and competitors will be seen as very competitive and thus, not so attractive due to its low
profitability.

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 It is every strategist’s job to evaluate company’s competitive position in the industry and
to identify what strengths or weakness can be exploited to strengthen that position. The tool is
very useful in formulating firm’s strategy as it reveals how powerful each of the five key forces
is in a particular industry.

Threat of new entrants : This force determines how easy (or not) it is to enter a particular
industry. If an industry is profitable and there are few barriers to enter, rivalry soon intensifies.
When more organizations compete for the same market share, profits start to fall. It is essential
for existing organizations to create high barriers to enter to deter new entrants. Threat of new
entrants is high when:
 Low amount of capital is required to enter a market;
 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand
reputation;
 There is no government regulation;
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other
industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.

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Bargaining power of suppliers: Intense bargaining power enables suppliers to sell high-priced
or low-quality raw materials to their customers. It directly affects the profitability of the
purchasing companies as they pay more for the goods.
Suppliers have strong bargaining power when:
- There are few suppliers but many buyers.
- Suppliers are large and threaten integration;
- There are few alternative raw materials.
- Suppliers hold scarce resources.
- The cost of converting raw materials is particularly high.

Bargaining power of buyers: Buyers have the power to demand lower price or higher product
quality from industry producers when their bargaining power is strong. Lower price means lower
revenues for the producer, while higher quality products usually raise production costs. Both
scenarios result in lower profits for producers. Buyers exert strong bargaining power when:
- Buying in large quantities or control many access points to the final customer;
- Only few buyers exist;
- Switching costs to other supplier are low;
- They threaten to backward integrate;
- There are many substitutes;
- Buyers are price sensitive.

Threat of substitutes: This force is especially threatening when buyers can easily find substitute
products with attractive prices or better quality and when buyers can switch from one product or
service to another with little cost. For example, to switch from coffee to tea doesn’t cost
anything, unlike switching from car to bicycle.

Rivalry among existing competitor: This force is the major determinant on how competitive
and profitable an industry is. In competitive industry, firms have to compete aggressively for a
market share, which results in low profits. Rivalry among competitors is intense when:
There are many competitors;
- Exit barriers are high;
- Industry of growth is slow or negative;

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 - Products are not differentiated and can be easily substituted;
- Competitors are of equal size;
- Low customer loyalty.
Although, Porter originally introduced five forces affecting an industry, scholars have suggested
including the sixth force: complements. Complements increase the demand of the primary
product with which they are used, thus, increasing firm’s and industry’s profit potential.

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3.0 Studying the strategic environment of NMT Logistics

Strategic environmental analysis is an important part of business strategy management

and is essential for business to develop strategies. It provides a broad analysis of the local and
international environment of the business; it clearly identifies strengths, weaknesses, risks and
opportunities, and develops scientific and logical business development. Establish correct
orientation methods and measurements. The purpose of strategic environmental analysis is to
anticipate the future development of the business from a long-term perspective. This is the basis
for setting strategies for the business. Each business is in a separate environment. The strategy is
mainly based on the business environment in which the business development direction and the
business-performance environment are balanced with a rational balance between business and
performance. The topics of strategic environmental analysis are generally - Macro-environmental
analysis; Industrial environment analysis; and internal environment analysis.

3.1 Analysis of Industry Environment

The industrial environment is a direct influence on the viability and development of a

business. The industrial environment is generally characterized by the level of industrial
development; The overall market size and development path of the industry; Barriers to entry
into industry; The number and focus of upstream suppliers in the industry; downstream
enterprises in the industry and basic characteristics of consumers.

The most common method used for industry environment analysis is Porter's Five Force
model, which has a profound impact on business strategy design. Based on competitive tactical
analysis, this model can effectively analyze the competitive market environment; Porter's Five
Force model Access of potential competitors; Replace ability; Supplier negotiation and customer
negotiation; The different combinations of these five forces will ultimately affect industrial
competition and profitability.

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3.1.1. Analysis of the competitiveness of industry competitors

Currently, Myanmar Logistics is a highly competitive business and NMT Logistics is

facing competition from a number of competitors. There is a delicate relationship between NMT
Logistics and many industry competitors. In Myanmar, the logistics market is not supported by
many logistics companies and many logistics services are needed in the market to meet the needs
of social and economic development. NMT and many of its competitors are the logistics
providers needed to support Myanmar's social economy. But in many areas, This large logistics
company will compete fiercely with NMT Logistics.

3.1.2. Analysis of potential competitors' ability.

NMT Logistics specializes in medium to high quality logistics products and has many
advantages in terms of speed and quality of delivery. At present The medium-sized logistics
market is becoming more filling. Many operators in the mid-range logistics market are targeting
the mid-range to high-end market. NMT Logistics faces pressure and threats from many potential
competitors. EFR MRTW Freight forwarders such as HHM and S&S have developed high-end
products with faster speeds and better services, and strive to compete in the mid-to-high-profit
logistics market, where these competitors have the power to achieve the perfect performance
distribution of logistics technology and logistics stores.

3.1.3. Analysis of alternative ability of substitute.

NMT Logistics' core business is advanced logistics products in the logistics market, and
its main replacements are EFR, MRTW these are the original intermediate products of logistics
companies such as HHM and S&S. While these alternatives still have some differences with
NMT in terms of speed and quality of service, the gap is gradually narrowing compared to
previous models, with competitors continuously improving the quality of logistics services and
continuously improving delivery speeds, replacement has the advantage of being affordable and
the replacements are quite strong.

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3.1.4. Analysis of supplier bargaining power.

NMT Logistics's suppliers are mainly logistics aids and equipment; Logistics information
system; Logistics arrangements; Provides logistics technology and logistics operations.

3.1.5. Analysis of buyers' bargaining power.

Myanmar's logistics market has many buyers. There are many requirements for medium
to high quality logistics products provided by companies such as NMT Logistics. However, there
is an increasing supply chain in the Myanmar logistics market that can supply medium to high
quality logistics products. When customers do not meet their expectations in terms of price,
logistics service and quality, they have more choices; most notably you can turn to competitors
like EFR, MRTW, HHM and S&S. Therefore Buyers and sellers are more likely to bargaining.

3.2. Porter’s Five Forces Analysis of NMT Logistics Service

Porter's Five Forces are a framework for analyzing the development of industry and business
strategy; it also determines the intensity and attractiveness of a market. Attraction means that the
lack of attractiveness in relation to the profitability of the business as a whole lowers profits.

This model means that there should be continuous profit or return on business and industry.
However, studies have shown that different industries may have different levels of profitability
due to their different structures. Organizations can use the model to gain an advantage over
competitors.

In this revolutionary article - "Five Forces that Shape Strategy", Michael Porter observed five
forces that have significant impact on a firm's profitability in its industry. These five forces
analysis today in business world is also known as -Porter Five Forces Analysis.

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The Porter Five (5) Forces are –

 Threat of New Entrants

 Bargaining Power of Supplier
 Bargaining Power of Buyers
 Threat from Substitute Products
 Rivalry among the existing players.

Porter’s Five Forces is a comprehensive strategic framework based on strategic analysis of

current competition. Porter’s Five Forces focuses on, how NMT Logistics can build a sustainable
competitive advantage in regional logistics and international freight forwarding services
industry. The management team of NMT will not only use Porter Five Forces to develop a
strategic position in the Local Transportation & International Freight Forwarding Services
business, but also look for profitable opportunities throughout the service sector.

3.3 Threats of New Entrants

New entrants to domestic logistics and international freight services include innovation;
introducing new ways of doing business, including NMT Logistics; reduce costs and provide
new value for customers.
NMT Logistics needs to build effective barriers to manage all of these challenges and protect its
competitiveness.
3.3.1 NMT Logistics, how can it deal with the threats of new entrants?
Start by innovating new services. The new services not only bring new customers into the yard,
but also give existing customers a reason to buy NMT Logistics products. By building a scale
economy to reduce fixed costs per unit; spending money on capacity building and research and
development. Established players such as NMT Logistics are less likely to be new entrants to an
active industry where standards are regularly set.
It discourages new players in the industry by significantly reducing the window of significant
profits for new companies.

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3.4 Bargaining Power of Suppliers
Most companies in the logistics and international freight forwarding industry buy their raw
materials from a large number of suppliers. Leading suppliers can reduce revenue margins in the
NMT Logistics market.
Powerful suppliers in the service sector use their bargaining power to extract higher prices from
companies in the logistics and logistics services sectors.
The overall effect of higher supplier concessions is to reduce the overall profitability of logistics
and freight services.

3.4.1 How NMT can handle to avoid bargaining power of suppliers

- By building an effective supply chain with multiple suppliers.

- By experimenting with product designs using a variety of materials to enable the
company to switch to another product when the price of a raw material rises.
- Set up a business based on your company. One of the lessons learned from Wal-Mart and
Nike at NMT Logistics is that these companies have created the business of outsourced
companies that rely on them, creating an environment in which negotiation is
significantly less than Wal-Mart and Nike.

3.5 Bargaining Power of Buyers

There are many buyers. They want to buy the best deals available at the lowest possible price.
This puts pressure on NMT Logistics profitability in the long run.
The smaller and stronger the customer base the higher NMT Logistics customers' bargaining
power. The higher their ability to find discounts and offers.

3.5.1 How NMT can handle to avoid bargaining power of Buyer

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 - By building a large customer base, this will help in two ways. This will reduce
customer negotiation and give the company an opportunity to streamline its sales
and production processes.
- By rapidly innovating new products; NMT Logistics customers often look for
discounts and offers on specific products. This may limit the ability of customers
to negotiate if new products continue to emerge.
- New products include NMT Logistics It will also reduce the scam of its existing
customers to its competitors.

3.6 Threats of Substitute Products or Services

When a new product or service meets the needs of similar customers in different ways,
the business is profitable. For example, services like Dropbox and Google Drive replace
storage hardware drives. The threat of an alternative product or service is higher if the
industry offers a different value proposition than the current offer.

3.6.1 How NMT can handle to avoid Threats of Substitute Products or Services

- It's focused on service rather than product.

- By understanding the basic needs of the customer rather than the customer.
- By increasing the transition costs for customers.

3.7 Rivalry among the Existing Competitors

If the competition between current players in an industry is fierce, It will lower prices and
lower profits for the whole business. NMT Logistics operates a highly competitive airline
and freight forwarding service. This competition affects the long-term profitability of the
organization.

3.7.1 How NMT Logistics can tackle Intense Rivalry among the Existing Competitors in
Logistics & Freight Services industry.

- By building a sustainable differentiation

- By building scale so that it can compete better

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 - Collaborating with competitors to increase the market size rather than just competing
for small market.

4.0 Implication of Porter Five Forces on Nadi Myat Thu International Freight
Forwarding and Logistics Limited.

Regarding to the Porter's Five Forces model framework, by formulating all the five
competitive forces Nadi Myat Thu International Freight Forwarding and Logistics Company's
strategists can achieve complete image of what impacts the profitability of the organization in
Air & Sea Freight Services in logistics industry.
They can identify game changing trends early on and can swiftly respond to exploit the
emerging opportunity. By understanding the Porter Five Forces in great detail Nadi Myat Thu
International Freight Forwarding and Logistics Company’s managers can shape those forces in
their favor.

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