economic report

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RESEARCH REPORT

CONFECTIONERY WHOLESALE BUSINESS

Butterworth , Penang & Kepong, Selangor .

COVER PAGE

SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN

FOUNDATION IN NATURAL AND BUILT

ENVIRONMENTS

A TALE OF TWO BUSINESSES

A COMPARATIVE ANALYSIS OF CONFECTIONERY

WHOLESALE BUSINESSES IN PENANG AND KLANG

VALLEY

LAU WEI LING

0315389

PRINCIPLES OF ECONOMICS (FNBE 0153)

FNBE JULY 2013 INTAKE

LECTURER: MR. CHANG JAU HO

TABLE OF CONTENTS

0

CONTENTS

KEY SUMMARY 1

DESCRIPTION OF THE HISTORY OF THE TRADE 2

BRIEF BIO OF THE BUSINESSES 3

COMPARITIVE ANALYSIS OF THE BUSINESSES' COMPETITIVE TRAITS 7

RECOMMENDATION 17

REFERENCE 19

APPENDICES 20

KEY SUMMARY

Page 1

For the final assignment of 3 subjects, we were assigned to conduct a research to

compare two similar businesses in two different geographical areas which are Penang and

Klang Valley. After discussed among the group members, we decided to compare the

confectionery wholesale businesses in Butterworth, Penang and Kepong, Selangor. The

wholesale company we had interviewed in Penang is Heap Leong Enterprise Sdn. Bhd. while

the company we had interviewed in Kepong is Hoy Yung Trading Sdn.Bhd. After the research

and analysis of the two businesses, we concluded that Heap Leong Enterprise Sdn.Bhd would

be a more commercially successful company than Hoy Yung Trading Sdn.Bhd due to their

larger business scale and annual revenue.

DESCRIPTION OF HISTORY OF THE TRADE

Page 2

Wholesale businesses play an important role in the marketplace. This business sells

goods or merchandise to other retailers and consumers. Wholesaler buys the goods from the

manufacturers and resells them at increased prices to earn profits. This happens because most

of the retailers or consumers are not able to purchase the sufficient amount of goods from the

manufacturers due to their businesses scale and storage capacity. Therefore, the wholesalers

will usually have a large amount of retail clients.

The transportation network created by the railroads towards the middle of the 19th

century was a quite a big impetus to wholesale trade around the world. Chicago became the

center of the wholesale trade due to the large amount of rail lines located over there. The city

was home to many trade products such as timber from Wisconsin, agricultural products, live

stocks, drugs, dry goods and hardware.

However, some external forces began to work against the wholesale industry toward

the end of 19th

century. . Populist movements such as the National Grange argued that farmers

were being gouged for the difference between their selling prices and what their goods fetched

on city exchanges, and they fought for regulations on the fees charged by the railroads and

warehouses (‘‘Wholesale Background’’, n.d.).

Nonetheless, wholesale industry will still continue the trade with their clients in the

future. The industry will keep on developing as long as there are still demands from small

retailers, small-scale companies and consumers.

BRIEF BIO OF THE BUSINESSES

Page 3

Heap Leong Enterprise Sdn. Bhd.

The wholesale business that we interviewed in Penang is called Heap Leong

Enterprise Sdn. Bhd. It is located at No.4827-C, Tingkat Mak Mandin 5, Kawasan Perusahaan

Mak Mandin, 13400 Butterworth, Penang. The interviewee, Tan Hooi Leong is the owner of

the wholesale company. Heap Leong Enterprise Sdn. Bhd is the only company Mr. Tan owned.

The company does not have any other branches.

The business was founded in February, 1984 as a sole trader company by Mr. Tan

and his wife. It was founded because of the influenced of Mr. Tan’s father since Mr. Tan’s


Page 4

father were involved in this field too. Therefore, Mr. Tan started to help his father with his

business since he was little. His interest towards the business grew years by years, so he

decided to set up a wholesale business on his own.

Mr. Tan’s company is selling products which are focusing on biscuit confectionery.

Their customers are located all over Peninsula Malaysia. As such, their customers are mainly

confectionery shops, wholesalers and minority of van operators.

Recently, the company has moved from rented a storage house to a larger warehouse

that located nearby. Thus, the company has owned the land and the premise. Besides, there are

more space available in the new building to store the stocks and this has expanded their

business scale. The annual revenue of the business gained is within 15millions to 18millions,

while it was started with a capital of RM150, 000.


Page 5

Hoy Yung Trading Sdn. Bhd.

The other wholesale company that we had interview is Hoy Yung Trading Sdn. Bhd.

which located in Kepong. The current address is No.563, Jalan E3/5, Taman Usaha Ehsan,

Kepong, 52100 Selangor. The interviewee is Mr. Seng Chu Soon who is the owner of the

wholesale company. The business does not have any other branches. Hoy Yung Trading is the

only company of the business.


Page 6

Links to video about brief bio: http://youtu.be/bfwOUHBmC5U

Their main products are candies and confectionery. Hoy Yung Trading is providing

products to their customers who are mostly confectionery wholesalers and some van vendors.

Their business customers are from East Malaysia.

The business was founded in 1989, by Mr. Seng Chu Soon and the other 5 business

partners. However, Mr. Seng is the only one who was in charge of the operation and

management of the business. 10 years later, Mr. Seng bought the full ownership of the business

from the other stockholders. According to Mr. Seng, they founded the business because it was

the only better way to make a good living since they did not receive much education back then.

Besides, Mr. Seng decided to be involved in this field because he had some marketing

experiences in this industry since he worked as a salesman before he founded his current

business.

Recently, the business has bought some properties to gain profits at faster rate.

According to the owner, if the property is bought at the correct timing, the profit might be

double up in a short period. The annual revenue of the business is about 6 million, while the

capital of the business was RM120, 000.

http://youtu.be/bfwOUHBmC5U

COMPARITIVE ANALYSIS OF THE BUSINESSES’ COMPETITIVE TRAITS

[ NUMBER OF COMPETITORS ]

Page 7

Every company and business has their own competitors. The competitions are high for

the wholesale market in Penang and Kepong. For Penang wholesale market, there are at least

42 competitors and to be specific, there are 19 competitors in Butterworth approximately.

While in Selangor, there are about 120 competitors in the market, specifically in Kepong, there

are at least 37 competitors. The Hoy Yung Trading will experiences greater competition as they

would have to compete with companies from Kuala Lumpur, Johor and even some companies

from East Malaysia.

The top 3 competitors for Heap Leong Enterprise are Hup Seng Sdn Bhd, Tan Lean

Hong Sdn Bhd and Ooi Beng Huat Sdn Bhd.

As for Hoy Yung Trading, they did not mention about the competitors. However, the

possible competitors are TLS Trading Sdn Bhd, NCM Food - Malaysia Biscuit, Cookies &

Confectionery Supplier and Dnd Marketing Sdn Bhd.

ANALYSIS OF THE BUSINESSES’ COMPETITIVE TRAITS

[ BRIEF BIO OF THE TOP COMPETITORS]

Page 8

Links to video about comparative analysis: http://youtu.be/sgx5IJ2Z05c

Heap Leong Enterprise

Hup Seng Sdn Bhd

Hup Seng Sdn Bhd was established in 1958, the company operates in three segments, the

biscuits manufacturing segment, the beverage manufacturing segment and the trading division

segment. The trading division is in the business of sales and distribution of biscuits,

confectionery and other foodstuff. There are famous with their biscuit and mostly their

customers have a strong brand loyalty towards their products.

Tan Lean Hong Sdn Bhd

Tan Lean Hong Sdn Bhd was established in 1973, it located at Lorong Mak Mandin 2,

Butterworth.

http://youtu.be/sgx5IJ2Z05c



Page 9

Ooi Beng Huat Sdn Bhd

Ooi Beng Huat Sdn Bhd was established in 1983 and has become

one of Malaysia leading chocolates confectioneries, wafer biscuits, candy and snack

manufactures. It located at Jalan Ong Yi How, Butterworth.

Hoy Yung Trading

TLS Trading Sdn Bhd

TLS Marketing Sdn Bhd is located in Lot 1453, Section 66, KTLD, Jalan Kemajuan, Bintawa

Industrial Estate, 93450, Kuching, Sarawak. It is also known as Teck Lee Seng. It is considered

as one of the largest importer and distributor in East Malaysia. It began as a family business in

the year of 1968 and had a product range, which included fast moving consumer goods, both

food and non-food, covering Sabah and Sarawak. TLS Marketing Company has 5 branches

which covered around both Sarawak and Sabah (Profile, n.d.).



Page 10

DnD Marketing Sdn Bhd

DnD Marketing Sdn Bhd is located in 214, Jalan Bukit Desa 9, Taman Bukit Desa, Kepong,

Kuala Lumpur, 52100 Malaysia. It is a wholesale supplier of tropical fruits, dessert, pastry, and

durian fruit. It was established in 2000. It was self-developed under government control and

archieve its satisfactory (‘‘NCM food- Malaysian Food and Beverage Store, n.d.). . It acts as a

trading company, distributor or wholesaler. The employee number is around 5-10 people.

NCM Food - Malaysia Biscuit, Cookies & Confectionery Supplier



Page 11

NCM Food Sdn Bhd is located in NO. 9, Jalan 8/32, Taman Jinjang Baru, Off Batu 6, Jalan

Kepong, Kepong 52000, Kuala Lumpur. It was established in 1989. Products can be found in

Indonesia, Vietnam and some parts of Asia. The company has registered the unique trademark

which is "Pally Pally" (with the meaning of friendly friendly) for easier remember and

distinguish by consumers (‘‘Company Introduction’’, n.d.). It is a manufacturer of buscuits,

cookies, chewing gum, beans, and cakes. It also acts as distributor and supplier. The number of

employee is around 50-100 people. NCM food supplies snacks and biscuits from well-known

brands such as Cadbury, Munchy’s, Mentos and Julie’s.



Page 12

HEAP LEONG ENTERPRISE

i) To compete with the competitors, Heap Leong Enterprise would provide good and

efficient service to their retailers and suppliers as well. By doing so, it will leave a

good impression on them so they will continue to deal with Heap Leong Enterprise.

ii) Heap Leong Enterprise would also establish and maintain good connection with

people. By having a lot of connection and good relationship with the others, Heap

Leong Enterprise could gain a lot of advantages when competing with the

competitors. The clients would prefer to deal with Heap Leong Enterprise due to

their relationship.

HOY YUNG TRADING

i) The price range of their product is generally low and reasonable compared to other

wholesale companies in Kepong area. They keep their prices low to attract more

customers since the competition is high around the area.

ii) This company would provide good services to the customers. They would always

ensure the products are in good condition when delivered to the clients.

iii) They also provide fast and accurate delivery service for their customers.

iv) Hoy Yung Trading always maintains good long term relationship with their clients

so that they can deal the business without any difficulties.


[ DIFFICULTY AND OBSTACLE WHEN ENTERING THE MARKET ]

Page 13

HEAP LEONG ENTERPRISE

According to Mr. Tan, it was not easy to enter the wholesale market for Heap Leong

Sdn. Bhd years ago. One of the main reason is that large capital was needed to start the

business. When Mr. Tan started the business, RM150, 000 was required for the business to

operate. Apart from that, it was hard at first because it required good connection with people be

it the retailers or the suppliers for the company to operate smoothly. Various competitors have

already existed before the establishment of Heap Leong Enterprise. Therefore, the company did

not have many clients during the first few years.

HOY YUNG TRADING

It was not that hard when Mr. Seng, the owner of the Hoy Yung Trading started his

career as he had experience in sales and marketing. Not only that, he had enough capital to start

up his business since there were six shareholders including Mr. Seng to provide the money. Mr.

Seng was the one who mainly in charge of the business operation. However, there were not

many customers at first since the company was just newly established. Besides, there were

customers with bad ethical that were in default of payments. Mr. Seng also encountered

problem with premise rental as the landlord wanted to increase the rent. Therefore, the business

was moved to the current location since Mr.Seng refused to rent the place with an increased

price.


[ COMPARITIVE ANALYSIS SUMMARY TABLE]

Page 14

The confectionary wholesaler market for the wholesaler in the region of Penang and

Kepong has an oligopoly type of market structure. A market with an oligopoly structure has a

few numbers of large firms where the ease of entry to the market is not that easy. They can sell

products that are differentiated or homogeneous. With the slightly better pricing power, an

oligopoly wholesaler tends to have positive long run profits. Below are the proofs of such

characteristics in Penang and Kepong.

In Penang, there are 32 wholesalers firm where only a few of them are the large ones.

On the other hand, there are at least 37 wholesalers firm that located in Kepong area which

some of them are large firms too.

The market sells different types of products in order to compete with its competitor.

Firms like Heop Leong Sdn. Bhd. will find suppliers for products they had in mind to sell.

Since it can be either a differentiated or a homogeneous product, the firm can either sell the

product at a price as they have some control over it or the firm would just sell the products at its

fixed price. For example, Hoy Yung Trading Sdb. Bhd. that sells toys and foods can be either

increase the price to be higher or lower so that they can would not loss any income and increase

profit in the business. However, due to oligopoly are constantly competing with each other,

they will not increase their price too much as the oligopoly can replace each another.

As oligopolies are price setters, the firms have the tendency to affect the price strategy

of the product market. These firms can perpetuate a long term profits as the barriers are slightly

stronger.


[ COMPARITIVE ANALYSIS SUMMARY TABLE]

Page 15

COMPARATIVE ANALYSIS SUMMARY TABLE

COMPETITIVE

TRAITS

HEAP LEONG

ENTERPRISE

HOY YUNG

TRADING

Numbers of

Competitors (Specific

geographical area)

About 19 competitors

About 37 competitors

Competition Moderate. Competitors from

West Malaysia only.

High. Competitors from K.L.,

Johor and East Malaysia.

Barrier to Entry High, requires a lot of capital,

requires a lot of people

connection, various competitors

already existed

Medium , has experiences, has

enough capital

Type of products Differentiated. Some biscuits

only can be found in that

company.

Differentiated. Flavors and type

of snacks. Candies and chocolate,

biscuits and snacks.

Pricing power Slightly higher. Large amount

of stocks provide customer

efficient service.

Low. Strong competition. The

marginal profit is low.

Strategies to Compete Efficiency, good service, good

relationship with people

Low pricing, good service, long-

term relationship with clients

Annual Revenue 16-18million approximately

6million approximately

Workers 11 workers

4 workers

Verdict Oligopoly

Oligopoly

CONCLUSION

Page 16

Based on the analysis, Heap Leong Enterprise Sdn. Bhd in Penang would be the more

commercially successful business than Hoy Yung Trading Sdn. Bhd. This is because the

competition in Penang is lower than Selangor. The huge competition in Selangor has caused

Hoy Yung Trading to lose plenty of customers since the customers have many choices in

choosing the wholesale company.

Secondly, Heap Leong Enterprise Sdn Bhd is considered as more successful is because

of its geographical market.Heap Leong Enterprise Sdn. Bhd has larger business scale. Heap

Leong Enterprise covers larger business area than Hoy Yung Trading. Heap Leong Enterprise

deals business with clients in East and West Malaysia while Hoy Yung only deals with clients

located in East Malaysia. Heap Leong also can save a lot of transportation fees as their stocks

are mainly delivered around Peninsula Malaysia while Hoy Yung would need to fund some

expenses on their delivery service across the ocean.

Apart from that, Heap Leong Enterprise has a larger annual revenue figure which is

around 17million while Hoy Yung Trading earns lesser, around 6million a year. Therefore,

Heap Leong Enterprise Sdn.Bhd is considered as the more commercially successful business.

RECOMMENDATION

Page 17

Links to video about recommendation: http://youtu.be/onBHQTC-t-k

Heap Leong Enterprise Sdn. Bhd.

The customer range of Heap Leong Enterprise is small. The confectionery products are

mainly distributed to confectionery shops. The other customer types like retail store, grocery

store and supermarket are not included as the main customers of the company. Therefore, the

company’s business scale is quite limited. We recommend that Heap Leong Enterprise to

expand their customers range to other business categories that are mentioned above instead of

just dealing with the current customers.

I would also advise Heap Leong Enterprise to find new products for their company. As

he mentioned that the manufacturer will automatically find Heap Leong Enterprise to help them

to distribute their products, I recommend them to create a website that could help them to

increase their publicity to compete with their competitors. Besides, it would be better if they

could take the first step to try to find manufacturer for new products. This is because they might

lose some differentiated products that are supplied only to a wholesale company if they did not

take the initiative.


The number of employees of Hoy Yung Trading is quite insufficient. For now, there

are only a total of four people including the owner himself working in the company. Thus, the

http://youtu.be/onBHQTC-t-k

RECOMMENDATION

Page 18

workload of each person is high since he have to be in charge of several tasks while working.

Our recommendation is that the company to employ more workers to hold different job

positions. By having job specialisation, employees are able to focus on their job and show

better job performances.

Apart from that, Hoy Yung Trading trade areas are limited. The company only trades

with clients in East Malaysia instead of including Peninsula Malaysia into their business areas.

The profit made is limited since they do not trade with clients located outside of East Malaysia.

As mentioned by the owner, their businesses are considered as sunset industry as the prices of

products between East and West Malaysia are standardizing by the government. They should

focus more on the local market. Other than that, their marginal profit is relatively low as their

expenses are higher and they provide lower price to their customer. We recommend that Hoy

Yung Trading to expand their trade areas to Peninsula Malaysia or neighbour countries such as

Thailand, Brunei and Singapore.

References

About us. (n.d.) Retrieved 1 June 2014 from NCM Food website:

http://www.ncmfood.com.my/aboutus.asp

Company Introduction.(n.d.) DND Marketing Sdn Berhad. Retrieved 1 June 2014 from:

http://leongks52.fm.alibaba.com/

Profile. (n.d.) Retrieved 1 June 2014 from HotFrog website:

http://www.hotfrog.com.my/Companies/NCM-Food-Malaysia-Food-and-Beverage-

Store_205427

Profile. (n.d.) Retrieved 2 June 2014 from Ooi Beng Huat Food Ind Sdn Bhd website:

http://www.dashyou.com/obhfood/

Personal interview in person

Structure: Seng, C. S. (2014, May 21). Personal interview.

Personal interview in person

Structure: Tan, H. L. (2014, May 16). Personal interview.

Wholesale. (n.d.) Vault Career Intelligence. Retrieved 24 May 2014 from

http://www.vault.com/industries-professions/industries/wholesale.aspx

http://www.ncmfood.com.my/aboutus.asp

http://leongks52.fm.alibaba.com/

http://www.hotfrog.com.my/Companies/NCM-Food-Malaysia-Food-and-Beverage-Store_205427

http://www.hotfrog.com.my/Companies/NCM-Food-Malaysia-Food-and-Beverage-Store_205427

http://www.dashyou.com/obhfood/

http://www.vault.com/industries-professions/industries/wholesale.aspx

Appendices

Interviewee Information

Company Information

Heap Leong Enterprise Sdn. Bhd

4827-C, Tingkat Mak Mandin 5,

Kawasan Perusahaan Mak Mandin,

13400 Butterworth, Penang.

Tel 04- 3315352

Email [email protected]

Company Information


No.563, Jalan E3/5,

Taman Usaha Ehsan,

52100 Kepong, Selangor.

Tel 03-62763650

Email [email protected]

INTERVIEWEE 1

NAME : TAN HOOILEONG

POSITION : OWNER OF

COMPANY

INTERVIEWEE 2

NAME : ALAN LOW

POSITION: LONG FRIEND OF MR. TAN

TEL : 012-5705080

EMAIL : [email protected]

-

INTERVIEWEE 1

NAME : SENG CHU SOON

POSITION : OWNER OF

COMPANY

APPENDICES [ PHOTOS ]

Page 27

Heap Leong Enterprise

Company premise

Storage Area


Page 28

Hoy Yung Trading

Business premise

Storage area


Page 29

A variety of products supplied by Hoi Yung Trading company.

Group photo with Mr. Seng

APPENDICES [ MINUTE ]

Page 30

MINUTES OF THE MEETING 1

DATE: 4 May 2014

TIME: 12pm – 2pm

VENUE: Facebook group

NAMES OF GROUP MEMBERS TUTORIAL GROUP ROLE

Lim Chin Yi Monday 11am-1pm Leader

Lau Wei Ling Monday 11am-1pm Member

Patricia Kong Monday 11am-1pm Member

Goh Yen Nee Monday 11am-1pm Member

Siew John Loong Monday 11am-1pm Member

Azalia Eliany Bt Alias Monday 11am-1pm Member

NO. ACTIVITY ACTION TAKEN BY

1. Discussion about business industry to be chosen.

-Made a list of different kinds of business can be found in

Penang and Klang Valley.

-Chosen kopitiam as our business.

Decision made by voting by

everyone.

2. Find and contact possible kopitiam to be interview.

-Search through online about information of kopitiam in

Penang and Klang Valley.

- Chong Kok kopitiam and Pakliko Kopitiam as first choice.

Goh Yen Nee

3. Interview Question Written

-The interview question is written by Patricia initially.

-Suitable questions to be asked is suggested by everyone.

Patricia


Page 31


DATE: 9 May 2014

TIME: 9pm – 10 pm




Lau Wei Ling Monday 11am-1pm Member




1. Discussion about interview of kopitiam.

-John decided to go to survey the kopitiam in Klang

Valley on the next day.

Siew John Loong

2. Discussion about changing the business industry if the

Kopitiam rejects.

-Wei Ling suggested finding hotels that have more than

10 years history to interview.

-Cindy also suggested finding confectionery industry.

Everyone looks for shops and

company related.


Page 32


DATE: 10 May 2014

TIME: 8pm – 10pm




Lau Wei Ling Monday 11am-1pm Note Taker






1. Decided to contact the hotel after the next day

-Azalia wrote a formal email to the hotels.

-We decided if the hotel did not give a reply, we will contact

them by phone.

Azalia

2. Decided to contact the confectionery supplier the next day

-Cindy contacts the supplier by phone.

Lim Chin Yi

3. Decided to record the interview

-Patricia will record the interview in Penang while John will

record for the one in Klang Valley

Patricia, Goh Yen Nee

and John Siew

4. Edited the interview questionnaire

-Added the personal details form into the interview and print it

out.

Wei Ling

5. Decided who to go to the interview and arrange the interview. Everyone

6. Decide task for everyone to do during the interview.

-Interview

-Record

-Taking note

Everyone



Page 33

DATE: 25 May 2014

TIME: 2pm – 3pm

VENUE: Library Discussion Room



Lau Wei Ling Monday 11am-1pm Note Taker






1. Divide the report task to each member. Lim Chin Yi

2. Post the video and picture to Facebook group. Patricia and John

3. Decide to translate the interview video. Wei Ling

4. Decide to compile the report Lim Chin Yi

economic report

Education

wholesale company

wholesale trade

businesses page

wholesale industry

businesses scale

tans company

similar businesses

successful company