Yee Lee Corporation Bhd group (YLC) is a holding company which is the edible oil repacker in Malaysia in 1968.Through its subsidiaries, it operates in four segments which are manufacturing, plantation, trading and others which related to tourism services and investment holding. YLC not only manufactures cooking oils and also as a marketing and distribution company which helps to do marketing on beverages and distributing to customers. Its direct subsidiaries are Yee Lee Trading Co.Sdn.Bhd., Yee Lee Palm Oil Industries Sdn.Bhd., Yee Lee Edible Oils Sdn.Bhd., South East Asia paper Products Sdn.Bhd., Canpac Sdn.Bhd., Intanwasa Sdn.Bhd. and Yee Lee Marketing Sdn.Bhd. In 1993, YLC was listed on the KLSE.
In order to increase the demand of using palm oil, Malaysia government provides subsidies for that domestic use only since the cooking oil crisis in January 2008. This situation encourages more Malaysian to use cooking oil that produced by palm oil. During the shortage time, government negotiates with cooking oil manufacturers to increase their production capacity by using palm oil to produce cooking oil. Because of this, it encourages those housewives who prefer palm oil than others. Therefore, this has created an opportunity for Yee Lee Corporation Berhad to produce cooking oil in low cost. This also beneficial to YLC Berhad because using palm oil to produce cooking oil can reduce the cholesterol in the food while cooking. Hence, their products are the first choice for those who want cook with low fat oil.
Malaysia had gone through two recessions and two sharp slowdowns since 1970s. Each had its own causes and characteristics. The first downturn was in 1975 triggered by the 1973-74’s oil shock, followed by the 1985 recession, which was dragged down by a sharp slowdown in global growth. The third was a steep recession in 1998 which caused by the Asian currency crisis, followed by the downturn in 2001, which was hit by the bursting of the dotcom bubble and terrorist attack on the US. The GDP also dropped about 45% since the crisis. So, in order to encourage more people to use palm oil cooking oil, government launched a campaign “Palm Oil Reduces Cholesterol” to encourage people to use more cooking oil that made by palm oil. Besides, government also provides the subsidies for those low income families who are using this cooking oil. By doing this campaign, people can learn about the importance of the GDP growth and also the economy will be recovered as a whole.
Malaysia is considered one of the most developed among the developing country. There are many exported goods originated from Malaysia, especially palm oil. Palm oil is one of the world’s most popular vegetable oils. In Malaysia, almost 80% palm oil is exported to other country. Recently, there are some issues about the oil industry which resources are limited. Due to the limited oil, local government encourages Malaysian buy the cooking oil which is made by palm oil. Therefore, YLC produces the cooking oil by implementing the concept of palm oil-made cooking oil. Besides that, producing cooking oil with palm oil are more cheaper than those are not using palm oil. So, YLC also uses this opportunity to target those housewives who want to buy cheaper cooking oil.
Due to the improvement of technology, oil industry in Malaysia has used the most and efficiency machinery to produce cooking oil. Therefore, YLC has introduced AUM cooking oil machinery which is suitable to extract and produce cooking oil. Besides that, one of the YLC subsidiaries products which are gloves, are produced with multiple uses together with the state-of-the-art technology and stringent in-house quality assurance procedures. By using this new technology, the gloves that are produced are non-sterile, ambidextrous, and disposable.
PORTERS 5 FORCES
The rivalry between existing sellers in the market
In today’s industry, many companies have increased their sizes in order to competitively fit. When they are competing among each other in term of sizes, they are still competing in term of their brands image, product quality, pricing or market share. This would result in a high rivalry and threats Lee Yee Corporation Bhd. Since LYC’s competitors like Lam Soon Group and PPB Group have a well-established brand names, so YLC has to provide good services and good pricing strategy in order to reduce the rivalry and threat as well as increase their market share in Malaysia.
The power exerted by the customers in the market
The switching cost for Yee Lee is low because their product’s price doesn’t have big differences compared with their competitors. Cooking oil is concern about how good quality it has and how useful it is. Therefore, Yee Lee has to do more R&D and put some new raw material in order to increase the usage.
The impact of the suppliers on the sellers
The power of suppliers has influences in all the industries. It also can affect the cost of producing a product for particular firm. Lam Soon and PPB has own suppliers so they can control the cost and get a good price to buy the raw materials. So Yee Lee has to establish its own suppliers in order to lower the cost of production. Purchasing raw material from other suppliers is difficult to get lower prices because they are selling based on market price and the prices also affected by the demand-supply customers.
The potential threat of new sellers entering the market
The degree of barriers entry is important to a firm in a market share. It can restrict other firm to come into this market. In order to maintain a market share, Yee Lee, Lam Soon and PPB has established a well know brand name. This brands also recognized by all the people in Malaysia. Besides that, they also have a good relationship with their suppliers and the most important is their product differentiation. So this is very difficult for a new firm to come into this market
The threat of substitute products becoming available in the market
The threat of substitute products is one of the concerns for all the industry. It can help to keep a product in long time in a market. If the level threat of substitute product is high, means the products easily to substitute by others product. Like nowadays, many cooking oil industries are using palm oil to produce cooking oil. Palm oil is easily to get and it has many usage for us. Not only palm oil, some firm also use corn to produce cooking oil. All of this materials are healthy to people. So the threat of substitute product in this industry is low.
Strategic Group Map
Lam Soon Group
Lam Soon Goup is a group of companies which operates in plantations, detergent and soap manufacturing, marketing and distributing branded consumer product. It was incorporated in August 1950 by Ng Keng Soon. In 1995, his sons Whang tar Choung and Whang Tar Liang took over the management after his death. Its operations not only in Singapore and also in overseas like Malaysia, Vietnam, Thailand and Hong Kong. However, its main operation is in Singapore which operates in manufacturing of cooking oil and laundry soap. Lam Soon’s cooking oil has about 40 % to 45% market share in Malaysia. It also has its own factory in Malaysia which produces cooking oil and soap. The strengths possessed by Lam Soon are it has a well design and strong value on its brand like ‘Knife’ was awarded as the best brands in consumer cooking oil in 2010. Besides that, ‘Bio Home’, one of the Lam Soon’s brand, was awarded as a good design in household care category’s brand.
PPB Group Berhad
PPB Group Berhad starts its core business with the initial business of sugar cane cultivation and refining in 1968. It also includes in manufacturing edible oil, marketing and distributing consumer packaged goods, as well as be a dominant player in the grains trading, flour and animal feed milling processing. PPB Group has its operations in China, Vietnam, Indonesia, Myanmar, Thailand and Singapore. The strengths of PPB Group Berhad are it has well-established brand names like ‘Neptune’ for cooking oil and ‘Seri Murni’ food processing as well as a stable market for food industry in Malaysia. It also becomes a leader in sugar refinery, flour milling and film exhibition. However, the weaknesses of PPB Group Berhad are the earnings are affected by the prices of CPO, raw sugar and wheat. Since the sugar and flour are controlled items in Malaysia, it is very difficult for PPB Group Berhad to sustain the increasing of cost in those controlled items. This will has some impacts during the economy downturn.
Based on the strategic group map, we can know that Lam Soon has a high market share in the industry because it has highest level of brand awareness among these three brands. So, the prices for Lam Soon’s cooking oil are also very high. For PPB, it has moderate brand awareness compared with Lam Soon and Yee lee. Therefore, the prices of PPB’s cooking oil are cheaper than Lam Soon. However, Yee Lee has lowest brand awareness in the industry so the prices for its cooking oil are lower than Lam Soon and PPB.
Recommendations and conclusion
The one of Key Success Factors (KSFs) of Yee Lee are its product’s quality. Yee Lee manufactures cooking oil with good quality and it was awarded Certificate Excellent by International trade and Minister Industry. For example, Red eagle was voted as a Trusted Brand Gold by the readers of Reader’s digest because it is more stable compared to others brand and is able to withstand high heat when after the food is heated and it can be remained safe and healthy when consumption. Red eagle is considered as healthy cooking oil which is cholesterol-free and naturally rich in Vitamin E.
Another factor that Yee Lee can successful in its business is its pricing strategy. Many housewives like to buy Yee Lee’s cooking oil is because the price is cheaper than others brands and customers can have similar functions by using their cooking oil.
Besides that, Yee Lee has a good advertising in its own product. For example, Lee Yee has its own marketing and distributing channel in its business. By having own marketing and distributing channel, Yee Lee can save a lot of cost in term of finding advertising company or hiring salesman to promote its products.
Furthermore, the innovation of technology brings a lot of benefits for Yee Lee’s company. This technology helps the company to produce its product in efficiency and effectively way and at the same time it can help in cost reduction. By having these benefits, Yee Lee can compete with its competitors in the business.