Case Study 4 – Buah Bagus Sdn Bhd
Buah Bagus Sdn. Bhd. (BBSB) is a Selangor, Malaysia based manufacturer and distributor of fruit based cordials. It began operations in 1983 under the leadership of Rosli bin Khaled. Prior to entering the cordial manufacturing business, Rosli was an employee of a firm the manufactured automotive safety belts. He left the firm to search of new challenge, in the course of which he founded BBSB. The firm sells its cordials in three sizes, namely 720ml, 2 liters, and 4.55 liters. The firm largely relies on government tenders with government owned or linked corporations such as FELDA, MARA, PERNAS and ...view middle of the document...
Furthermore, BBSB has an established reputation as a quality cordial provider through its contract first with FELDA. This proves especially vital since it is a SME Bumiputra firm, and it is likely that the Malaysian government will allow it preference over other larger, multi-national competitors such as F&N.
4. BBSB in the form of Rosli bin Khaled has an owner who is driven by taking on new challenges. This can be seen by the fact that he chose to switch from being a Production Manager at a safety belt manufacturing plant to venturing into the cordial business, something he does not have prior experience in. As a result of this drive, there is a high probability that Rosli could lead the firm into a highly diversified FMGC company rather than just a cordial manufacturer.
1. BBSB currently has limited capacity. As seen in the case, the firm is unable to take advantage of opportunities, where it has been forced to let go of nearly MYR150,000 of revenues.
2. The production process at present is very rudimentary. As a result, BBSB used tap water for its production process. While in the short run it may be cost-effective, in the long run it would be preferable if the firm switched to treated and filtered water to ensure product safety.
3. Weak administration. The firm lacks the human resource to operate an efficient and effective sale, logistics and delivery system. As per the case, the sales force has historically been unsupervised, making it susceptible to fraud and employee theft. This lack of administrative overview is likely to prove costly to the firm in the long run.
4. Since BBSB is not an established brand as its competitors. Thus, BBSB products are likely to be place further up a supermarket aisle. This makes it less likely that BBSB products would be sold at supermarkets. This is a sign of weak marketing on behalf of BBSB sales team. This can also be seen by the fact that established competitors such as F&N and Magnolia have much larger advertising budgets and market presence through advertising.
1. The cordial business has relatively low barriers to entry. The industry has low capital requirements and is not technology intensive. As a result, BBSB can face threats from new entrants into the market, who could easily replicate BBSB’s quality and product portfolio.
2. Established players such as F&N, given their long established presence in the market and larger scale of operations are more likely to take advantage of economies of scale, which could afford them the opportunity lower prices and eat into the market share of BBSB.
1. Lowering manufacturing costs. BBSB already enjoys comparatively higher profit margins compared to its competition. The firm could further improve on this by sourcing its flavor, coloring and ingredients from outside Malaysia. BBSB already charges prices lower than its competition, lowering manufacturing costs will give it the opportunity...