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The Strategy Used By Munchys Make The Company

Strategic management is the process that refers to strategy formulation, implemention, and evaluation of cross-functional decisions to enable an organization to achieve its objectives. A strategy is about long-term planning and it must be implemented and the organization’s resources as well as its capabilities properly harnessed so as to achieve the planned outcome. Strategic management focuses on integrating management, marketing, finance or accounting, production or operation, research and development, and computer information system to achieve organizational success.

Strategy Management

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2.0 Munchy’s Background

Munchy’s is known as Malaysia’s No.1 homegrown biscuit brand which is a remarkable Malaysian success story of five brothers from Muar, Johor. Besides that, Munchy was a company which gains Super brands Status of year 2003, 2004, 2005, 2008, and 2009. Actually the name Munchy’s was derived from the Mandarin term “Mai Qi” which “Mai” is the meaning of flour or wheat and “Qi” is refers to the magical quality found in the delicious wafers that are made from only the finest ingredients.

In the beginning, this business is started by two elder brothers from Tan family who asked their father to allow them to start their own company. With his agreement, their business started out as a cottage operation in Johor back in 1991 with producing wafers, wafer sticks and biscuits with an Austrian-made second-hand wafer stick machine costing RM80, 000. With their high spirits they try their best to produce the highest quality wafer sticks around and they make it as Malaysia’s No.1 homegrown biscuit brand. From an Original Equipment Manufacturer to a household name, the Munchy’s brand was born in 1993. In year 2006, Munchy was recorded in Malaysia Book of Records as ‘Largest Wafer Manufacturer in 2005’.

During 1997 till 1998, Munchy almost went bankrupt during the Asian financial crisis but luckily the company was survived from the Asian financial crisis and its revenue jumped from RM20mil in 1998 to RM50mil in 1999. According to a Nielsen Retail Index Corporate Value Share report in 2008, Munchy’s was ranked Malaysia’s No.1 homegrown biscuit brand excluding Sabah and Sarawak from June 2006 to 2008. Besides that, Munchy’s is keep looking forward at new potential products and innovations as it works towards keeping up its standing in Malaysia as the country’s most innovative and success biscuit brand. They have an entire R&D department that specifically focuses on this aspect, so as to always stay at the forefront of innovation.

Munchy’s major markets are in Asia, such as Indonesia, Thailand, Singapore, Taiwan and Japan being its key markets, their vision is to be significant in 100 countries by 2020. On the other hand, Munchy’s mission is to bring joy and add flavor to every occasion with their high quality, affordable and fun-eating snacks. The company’s CEO, C.K Tan always believed in the power of branding and automation and technology will gain benefits in a business. He spent RM500, 000 on IT systems for Munchy’s in 1997 and now a day he still investing on it because he believe that computerization will makes the productivity of company more efficient.

3.0 PEST in Strategic Analysis

The PEST analysis is an analysis which concerned with the environmental influences on a business. It is a business measurement tool for understanding market growth or decline, and as such the position, potential and direction for a business. PEST analysis is also an acronym stand for Political, Economic, Social and Technological issues that could affect the strategic development of a business to assess the market.

3.0.1 Political

Munchy’s have always recognized the important of manufacturing only Halal product since the government of Malaysia focusing on turning the nation into an international Halal Hub. That is a reason why Munchy’s have a dedicated committee that deals with all things Halal. The Committee is made up of representatives from each key section that contributes to the making of the products. Munchy’s is setting its sights on a greater share of the regional pie while the tariff and trade barriers are trimmed with the formation of the ASEAN Free Trade Area (AFTA). In fact of this, Munchy have been opened a new branch offices in ASEAN neighbors.

3.0.2 Economic

Nowadays, Munchy’s sales in ASEAN have seen a clear uptrend because of the proactive approach of Munchy’s done in sales and distribution, For instance, Mr. Tan reveals that sales in Singapore have grown by more than 50% since 2003, making the island Munchy’s third largest export market. Besides that, The Company has experienced double-digit growth not only within Malaysia but also in Japan, Singapore and other Asian countries. Still, Munchy’s export growth has been broad-based and their exports have been grown by close to 60% within this year. The local market is also growing, as Malaysia’s population expands.

3.0.3 Social

Nowadays, health as a prime concern is now increasingly by many consumers, accordingly, Munchy’s have been reformulating their range to feature less sugar, less salt, lower fat and high nutrient content. Munchy’s believes that it must be a balance achieved between good taste and health. The CEO of the company Mr. Tan frequently used Teamwork as the key word to describe how the company has evolved and transformed. In order to work for teamwork, the staff from all levels must believe and have confidence with the brand of the company and be able to deliver the brand promise effectively to consumers. Munchy’s has various CSR (corporate social responsibility) programmes in place which mainly aid to orphanages and hospices for children. Munchy Food also aims to produce more quality products on par with international brands but reflecting a typical Malaysian identity by carrying the spirit of “Malaysia Boleh.”

3.0.4 Technology

Munchy’s tried to keeping up its standing in Malaysia as the country’s most innovative and success biscuit brand, in fact Munchy’s keep looking forward at new potential products and innovations as it works towards. They have an entire R&D department that specifically focuses on new potential products and innovations to ensure the company always stay at the forefront of innovation. They believes that with the technologies and know-how today’s, they could probably walk three steps ahead compared to the old days when they could only do things step by step. Actually, Mr. Tan has been started its regional expansion plans where Munchy’s has sales and marketing teams in Singapore and Indonesia, while establishing teams in a number of other Asian countries. Munchy’s always believed in the power of branding and automation and technology will gain benefits in a business. He spent RM500, 000 on IT systems for Munchy’s in 1997 and now a day he still investing on it because he believe that computerization will makes the productivity of company more efficient.

3.1 SWOT analysis

SWOT analysis is a basic, straightforward model that provides direction and serves as a basis for the development of marketing plans. It is an acronym used to describe the particular Strengths, Weaknesses, Opportunities, and Threats that are strategic factors for a specific company. It is the first stage of planning and helps marketers to focus on key issues. SWOT analysis is a tool for auditing an organization and its environment. Strengths and weaknesses are internal factors. Opportunities and threats are external factors.

3.1.1 Strength

Munchy’s always emphasizes the delicious wafers that are made from only the finest ingredients. They believe that the only way to produce the highest quality wafer sticks is using the finest ingredients. Besides owning state-of-the-art machines, have a good and committed management team with a strong multinational background assist Munchy’s investment in talent and that is a factor that sets Munchy’s apart from the rest of the competition. Another area of strength is their focus on brand-building, Mr. Tan engaged an international branding consultant to establish Munchy’s as a distinct brand in 2004. Although Mr. Tan believes in continuous product development and he knows that everything starts from the product so he put a lot of innovative ideas into designing the products from the packaging to brand image, the sharp and weight of the products, basically from all aspects. Until now, Munchy’s company still keeps thinking on how to make the existing products better in innovative.

3.1.2 Weaknesses

Although Munchy’s company always thinking about how to make their product become more innovative, but what they done is just put effort on the wrapping of their product but not in the flavor and the varieties of the product. Munchy’s should put effort on the variety of their product. For example like Nestle Company, their production such as Milo drinks, ice cream, Chocolate and so on. The varieties of their products on the market strengthen the value of their product in the market.

3.1.3 Opportunities

In laying the groundwork for their Asian expansion, Tan started to transform the company three years ago. This included bringing in an impressive senior management team with a strong MNC (Multinational Corporation) background. The idea is to eventually allow Malaysia to run without him as CEO so that he can focus on its regional plans. With the need to bring in new skill sets, Munchy’s structured a supervising board which is filled by some of the brothers and also some very experienced former chief executives to help guide the company forward. To produce better products, Munchy’s claims that it is the market leader in the wafer category and the top three in the biscuits market share ranking. Invests substantially in R&D, adding that research is an important aspect of branding and it is imperative to work closely with consumers to understand their wants and needs.

3.1.4 Threats

Munchy’s intention to re-brand or remodel Munchy’s into an international brand which aimed at establishing home-grown Munchy’s as a global brand in line with its new business directives of aggressively expanding into foreign markets. Besides that they also plan to increase their export sales by 25% to RM50mil in year 2010 and the company is heading towards a new business direction for further market expansion. Munchy Food maintains its competitiveness through endless upgrading of its operations, marketing, sales and distribution, research and development, and most importantly, capital-intensive investments. Most of these heavy investments derive from world-class machinery and automation, computerization, and ERP engagement for its management.

3.2 Benchmarking analysis

Benchmarking analysis is an analysis contributes ‘lessons are learned.’ This analysis is a process of continual improvement which helps a company who is still growing to identify their trouble spots and provides a systematic approach to improving production efficiency and profitability.

Nestle is the world’s largest food and beverage company which leading in Nutrition, Health and Wellness and they employs over a quarter of a million workers. Compare with Munchy’s, Nestle strategy is based on a broad range which the company overcome cultural barriers and customer resentments to foreign brands by purchases local brand names which the consumer is accustomed to. After these niches of basic food supply are filled Nestle moves on into the more upscale segments such as chocolate, soft drinks and the like. Their strategy is to establish a basis and then expand into more niches as demand rises. Connected to the rising demand is the rising income level as the population can afford to spend more money on food products. As mentioned in the book, Nestle provides about 8500 brand names, but only 750 of them are registered in more than one country and only 80 are registered in more than ten countries.

Many household names such as Nescafe, KitKat and Nesquik were Nestle produces and some other brands are also well known by consumers just they might not have realized that they were Nestle products. In 2002 Nestle had a sales turnover of over £38.3 billion on which it made a net profit of over £3.2 billion. The majority of this profit was re-invested in the business whilst the remainder was paid out to shareholders in dividends. Munchy’s put more effort in R&D on their wrapping and brand-building. They have spending close to RM4 million on branding and ads every year and this budget is increasing. Besides that, the company also invested RM10 million to buy packaging machines from Japan. Munchy’s always thinking about how to make their product become more innovative, but what they done is just put effort on the wrapping of their product but not in the flavor and the varieties of the product. Munchy’s should have a broad range to improve their performance in production efficiency and profitability.

4.0 Strategy Formulation

Strategy formulation is the second phase in the strategic management process which produces a clear set of recommendations and supporting justification that revises as necessary the mission and objectives of the organization, and supplies the strategies for accomplishing them. Strategy formulation is the process of planning strategies such as corporate strategies and business strategies. Sometimes it is useful to think of corporate-level strategies as “where to compete” and the business-level strategies as “how to compete in those areas.”Strategy formulation includes the planning and decision making that lead to the establishment of the firm’s goal and the development of a specific strategic plan by assessing the external environment and internal problem and integrate the result into goals and strategy.

4.1 Corporate Strategic

A corporate strategy depicts the corporate culture’s perception of progress and growth. Besides that, this strategy is comprises a directional strategy through a corporate vision and a mission statement. One of the most important roles of this strategy is to define a company’s domain of activity through selection of business areas in which the company’s domain of activity through selection of business areas in which the company will compete.

Portfolio analysis is an analysis which combines internal and external factors and could be dealt with in the discussion of strategy in a company. Besides that, portfolio analysis is an enterprise strategy development tool based primarily on the market share of business and the growth of market in which company business exists. Munchy’s boasts a great range of portfolio that includes biscuits, wafers and wafer sticks. In order to achieve the best product quality, Munchy’s has invested in fully-integrated conveyer system to state-of-the-art warehouses for its commitment to have facilities of the highest quality. This includes two wafer plants with the capacity to manufacture up to 740 tonnes per month, four biscuit plants which can produce up to 3,400 tonnes per month, and four wafer-stick machines with 16 production lines that have the capacity to produce up to 250 tonnes per month. These manufacture enable Munchy’s maximize their production and now reach the capacity of 5,000 tonnes upwards per month.

Few years ago, Munchy’s have the launch their new product, new Munchy’s Mini crackers and it affect the company in expecting export sales from RM90mil to RM100mil and a total revenue of over RM300mil, against RM250mil. In fact of this, Munchy’s had invested about RM75mil in new equipment in two years before launching this product and it resulted in the production of the new Munchy’s Mini crackers.

4.2 Business Strategic

Business-level strategy formulation pertains to domain direction and navigation, or how business should compete in the areas they have selected.

Low-cost provider strategy is using by a company which securing a competitive advantage by serving a lower price than rival competitors. This is a strategy is an integrated of actions taken to produce goods or services with features that are acceptable by customers at the lowest cost compare to the competitors which just with features that are acceptable to customers. This strategy maintain present price, be content with present market share, and use lower-cost edge to earn a higher profit margin on each unit sold, thereby increasing total profits. Munchy’s mission is to bring joy and add flavor to every occasion with their high quality, affordable & fun-eating snacks. Munchy’s make an achievement in low overall cost which by manufacturing nutritional biscuits in convenient packets as well as coated and cube wafers at lower prices than rivals. The products that Munchy’s produce are currently include approximately of the consumers across all segments like kids, teenagers, and adults. So that Munchy’s product is offering the buyers consider essential with their various types of product.

Differentiation Strategy is an Action which set an acceptable cost that let customers perceives the different on the produce goods or services. The objective of this strategy is to affect buyers to prefer Munchy’s product or service over brand of rivals. On the other way, it means that a company has to take an initiative action such as creative idea on what is important to customer. With the constant line-up of new products and product innovation constantly introduced to the market, Munchy’s has become synonymous with innovation. Most recently Munchy’s was launched in response to the current trend and desire for healthy snacks. This kind of healthy snack filled with healthy and scrumptious fruit, oats, and more, the Oat Krunch makes a delectable, healthy biscuit that one will reach out for anytime of the day. In the second quarter of 2009, Munchy’s launched the irresistible Captain Munch which aimed their targeted at teenagers and kids. This product is enriched with Energy Plus that contains Vitamins B1, B2, B3, B6 and B12. This makes Captain Munch a source of vitamin and nutrition, as well as the perfect nutritious health snack solution for smart and active kids and teens. These recent additions products, Oat Krunch and Captain Munch have been reinforce Munchy’s commitment to providing more great-tasting snacks that help consumers strike a healthy balance in their daily lives. With their product which differentiating in features cause their rivals not easily to copy or matched. So, it may cause the buyers to prefer Munchy’s product or service over brand than rivals.

Best-cost provider strategy is a combination of a strategic which emphasis on low-cost strategy and differentiation strategy. In this strategy, company must make an upscale product at a lower cost to prove the customer that its benefit for the value. It works on deliver comparable features at a lower price than rivals or matches rivals on prices and provides better features. Munchy’s brand mission is to produce all kinds of fun-eating snacks for every home all over the world. Presently, its strength lies in its high quality and diverse product range which Coupled with marketing strategies like manufacturing nutritional biscuits in convenient packets as well as coated and cube wafers at lower prices than competitors. Munchy’s Food also aims to produce more quality products on par with international brands but reflecting a typical Malaysian identity. Besides selling products at lower prices, Munchy’s always ensure that its products always in good quality, Munchy’s Quality Assurance and Quality Control Department ensures that all production procedures that are in place are constantly adhered to. According to the international standards set by the many regulatory boards from which Munchy’s has received official certification. With their good-to-excellent performance at a lower cost than rivals, they may affect consumers who are sensitive to price and value.

5.0 Strategy implementation

Strategy implementation is the most important and most difficult part of the strategic management process which requires the organization’s employees and managers at all levels to turn strategies into action. Actually, strategy formulation is described what a company going to do but strategy implementation is doing it. A successful strategy implementation requires support, discipline, motivation, and hard work from all managers and employees. In the aspect of management issues, Munchy’s has its own policies to operate on Munchy’s daily operation. Munchy’s prefer to focus on company and product development which boast a great range on produce its products with world class quality and build a long term brand. To produce the high quality product, Munchy’s has invested in full-integrated conveyer system to state-of-the-art warehouse which have two wafer plants, four biscuit plants and four wafer-stick machines with 16 production lines. With these systems, Munchy’s can have maximum production capacity of 5000 tonnes upwards per month.

To keeping up its standing in Malaysia most innovative biscuit brand, Munchy’s always looking at potential new products and innovations. Although Munchy’s has already a strong presence in Malaysia, it still continues to raise the bar by constantly strengthening their product appeal and market network in Asia and around the world. Besides that, Munchy’s believes in strong and effective in brand building, and achieves this through its strategic consumer-led promotions. To achieve this, Munchy’s is regularly brand-building through their numerous innovations and new products. One of the Munchy’s key on drivers in brand building is its active in sponsorship role. Munchy’s is a big player and firm believer in sponsorship and now being the proud sponsor of major concerts organized by top concert and event organizers, television and radio stations. Before this, Munchy’s has sponsored the Miss Chinese Cosmos Southeast Asia Pageant with created its very own title – Miss Munchy’s Fun & Fit. The title is in line with the launch of its new health range of product, Oat Krunch. Nowadays, sponsorships help Munchy’s increased in its mileage and the brand image is easily recognizable as one that offers high quality products.

To ensure consumer can taste its keep supporting Munchy’s high quality products, Munchy’s Quality Assurance and Quality Control Department played an important role. This department ensures that all the production procedures that are in place are constantly adhered to the international standards set by the many regulatory boards from which Munchy’s has received official. The department is function in three categories which is in-process quality control, incoming control and laboratories. In-Process Quality Control is used on monitoring the product quality parameters at various processing stages from raw material until finished goods. Incoming Control is to monitoring of raw material and packaging at the entry level. The third category is the Laboratories and this category is divided to 2 part which is Microbiology Laboratory that responsibility on analyze and minimize microbiology contamination of products, processing lines, operators and general environment, thus ensuring the products are free from harmful bacteria contamination. General Laboratory is responsibility to ensure that all the products meet legislative requirements, and are up to its consumers’ expectations.

Munchy’s today boasts state-of-the-art manufacturing and warehousing facilities which cover more than 400,000 square feet in Batu Pahat, Johor, Malaysia. Besides that, Munchy’s products can be found in approximately 60 countries around the world. In fact of this, MunchWorld Marketing Sdn Bhd which set up in 1996 was played an important role as the marketing arm of all Munchy’s products. Munchy’s vantage point was its in-depth know-how into the successful marketing of fast-moving consumer goods or FMCGs, both locally and internationally. Munchy’s marketing prowess was proven through its own well-known, established and popular products among consumers. Besides that, MunchWorld was able to impart invaluable insights into product development, having grown Munchy’s from scratch with our endless pool of resources and knowledge. This made us feel it was time to share our skills and expertise with other reputable brands that understood the potential and value of good marketeering.

To strengthening their product appeal and market from rivals, Munchy’s products always attract consumers across all segments such as kids, teenagers, adults. For example, Munchy’s launched the irresistible Captain Munch which aimed their targeted at teenagers and kids. This product is enriched with source of vitamin and nutrition as well as the perfect nutritious health snack solution for smart and active kids and teens. These products have been reinforce Munchy’s commitment to providing more great-tasting snacks that help consumers strike a healthy balance in their daily lives.

6.0 Conclusion

The strategy used by Munchy’s make the company become stronger and stronger. The product their product are aimed on the teenagers and kids which enrich with health sources, and halal which mean the products are available to Islamic. Their R&D which specifically focuses on new potential products and innovations will ensure the company always stays at the forefront of innovation. Every new products come out from Munchy’s are always supported by their chocolate lover. The main reason why the customers always supporting their product is Munchy’s always emphasize on using the high quality ingredient to process the high quality product. The effort on using the high quality ingredient on process the high quality product ensures Munchy’s become successful.

Referencing:

http://www.munchys.com/MY/html/history.aspx

http://www.1000ventures.com/business_guide/strategy_formulation.html

http://www.munchys.com/MY/main.aspx

http://www.batupahat.org/?p=942

http://www.nestle.com/AllAbout/AllAboutNestle.htm

Author by CATHY A.ENZ, Hospitality Strategic Management (concept and cases), second edition, page 18.

Author by Richard L. Daft, Patricia Lane, Management, page 191.

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