economics comparative analysis report

SCHOOL OF ARCHITECTURE, BUILDING AND DESIGN

FOUNDATION IN NATURAL BUILD ENVIRONMENT

Principles of Economics [ECN30205]

Report title:

A Comparative Analysis of 2 Businesses of Similar Industry in

Different Geographical Locations

Group members:

Foo Ji Sun (0323550)

Tan Yan Jie (0323906)

Loh Wen Jun (0323551)

Yeoh Sin Yuen (0323737)

Tan Vin Nie (0323706)

PRINCIPLE OF ECONOMICS [ECN30205] | FNBE March 2015 | Semester 2 | PAGE 1

No Content Pages

1 Summary 3

2 Background of Information of the business

- Fella Design Sdn Bhd

- Home Star Furnishing Sdn Bhd

4 - 5

3 Comparative Analysis of the Businesses’ Competitive

Traits

6 - 11

4 Recommendation 12 - 13

5 Appendices 14 - 20

6 Reference 21


Summary

We have done our research on two similar businesses, which are furniture industry. One of the

furniture industries that we have chosen are Fella Design, which is located at Melaka. We have

interviewed a worker in Fella Design. From the interview, we get to know how his owner

operates and runs the business so successfully. The other furniture industry we chose is Home

Stars, located at Kuala Lumpur. We feel honored to have interviewed a senior employee. She is

very familiar with the operation and management of the business. We have learned how the

obstacles affect their business as well as how they face and solve the problems. Between these

two businesses, we found that there are major contrast on how they manage to run and maintain a

business.

Before going for an interview, we have to call to the company of the furniture industry to make

an appointment with him or her. We have prepared approximately 20 questions in order to help

us to collect and gather the information about the businesses. After we have done the interview,

we start to do our reports using the information and knowledge we have learned from the visit.


Brief Bio of Fella Design

One of the companies we have interviewed is Fella Design. The location of the branch we have

interviewed is located in Bukit Baru, Melaka, while their headquarters is located in Bukit

Subang, Shah Alam. Fella Design has 14 branches all across Malaysia, which are in Bukit

Subang, Ampang, Selayang, Petaling Jaya, Subang Jaya, Alor Setar, Penang, Ipoh, Sungai

Petani, Johor, Melaka, Kuala Terengganu, Kuantan and Kota Kinabalu and has up to around 3

staff in each branch. The main products that are sold in Fella Design are furniture. The estimated

current number of customers, specifically in the Melaka branch is 30-40. Fella Design has been

furnishing Malaysian homes for over 25 years, but the branch in Melaka is currently headed by

MS Yee. Their motive for starting the business is clearly to make money to earn a living but also

to provide high quality premier furniture and fabric. In the past few years, Fella Design had

successfully expanded their business by opening branches all across Malaysia due to the

tremendous incline in business. Fella Design is confident that they can work towards being the

market and industry leader, creating a household brand name that will meet and exceed customer

expectations.


Brief Bio of Home Star:

The furniture shop that we had chosen to interview was Home Star, which is located in

Batu Caves, Gombak Selangor. The full name of the shop is Home Star Furnishing Sdn Bhd.

From the beginning, a small furniture retail shop was established in Old Klang Road in 1990.

Since then Home Star Furnishing has expanded steadily over the period of years. Foo Hon Meng

and Lim Lih Jiun founded the business in 1997. There are 4 branches currently which is in

Gombak, Selayang, Puchong and Shah Alam. Currently, they are still deciding to open new

branches in other area to further expand the business. Besides that, the most common product

that was sold was furniture, in which customers often brought from the shop besides other

products. They also sell other products such as decorations and flowers.

Home Star’s reputation is judged based on the quality products delivered to their

customer at a fair value. The management is fully supportive of its best service they can provide

to their customers. Since the business was founded, the estimate number of customer that the

shop have is estimated around 36540. There are 80 staffs and employees of the shop including

locals and foreigner. The furniture shop produces new designs and better quality to enhance the

customer choices. Customer can get what they had requested to suits their homes and livings.

The pricing of the furniture was also quite affordable and also influences customer to come. In

addition to that, there are promotions and sales, which the price had been lowered. In other

words, the price of the furniture was already at standard and fixed price. If the price were to be

tolerate further, there will be loses in our profit and the expenses for owning the products would

be higher.

Apart from that, their motive for starting the business is to make a living. Starting a

furniture business to earn profit to support their lives. They wish to be successful in life and

giving the customer the most satisfaction of the furniture. There are also several competitors,

which also established and sell furniture like Home Star. These also disrupt the Home Star’s

reputations by reducing the number of buyers. Although it seems competitive between each of

the competitors, Home Star was still a successful business because of their satisfying prices and

quality.


Comparative Analysis of the Businesses’ Competitive Traits

Fella Design

In Melaka, there are around 60 to 80 businesses operating in furniture industry. Market

shares of this business are quite small in Melaka because Melaka is a small state. Furniture

industry requires a big area and suitable location to display and store their goods. Therefore, this

considers a very hard decision to run a furniture industry in Melaka because they have to face the

problems of renting. Fella Design is located at Ayer Keroh, Melaka. There are approximately 8

to 10 furniture industries in this area. Lorenzo, Rozel, SSF and Hoe Heng are considered quite

near to Fella Design, which are just 8 kilometers away.

We have figured out the top three competitors through interview and observation in order

to compare their main products and specialties with Fella Design. The first strong competitor for

Fella Design is Lorenzo which is just 7 minutes of driving distances. Lorenzo is an international

branded furniture retailer with a history of 33 years. It has many branched in different countries

such as Singapore, China and Taiwan. Lorenzo has much more customers compared to Fella

Design because of its branded name. Its huge display area and comfy surrounding also attract

many customers to come and enjoy looking for their furniture. The main product for Lorenzo is

the sofa, which is same as Fella Design. Therefore, it considers hard for Fella Design to compete

with such a big company.

The second strong competitor is Rozel. Rozel has 16 branched where are distributed in all

states of Malaysia. Rozel has over 24 years of experience in the manufacture, sales, marketing

and distribution of furniture in Malaysia. The most popular product in Rozel is leather sofa. The

modern lifestyle and luxurious design of their sofas have become the favorite of the customers

nowadays. The price of their furniture is quite expensive because they are mostly made of

leathers.

The third competitor for Fella Design is SSF. SSF have 22 showrooms with a total shop

area of over 500,000 square feet. It sells large variety of products such as furniture, lighting,

curtain and etc. The innovative design themes of SSF range from French country homes,


Victoria, Oriental, Fusion, Modern, to English homes have satisfied various customers’

expectations. It looks classic and elegant with a western design. However, some of the customers

prefer modern or traditional designs compared to western style of designs. Therefore, the number

of customers in SSF is still below than Lorenzo and Rozel.

Fella Design have planned some strategies to compete with their competitors. The owner

decides to expand their business by having branches at different states. Nowadays, they are

having 14 branches at Malaysia, which are located at Selangor, Kuantan, Ipoh, Penang and so on.

In Melaka, they bought a house few months ago, which is just located opposite to their shop in

order to enlarge the area to display their furnitures. Other than that, they constantly evaluate all

their business areas to ensure operational excellence. Fella Design emphasizes the importance of

providing good service to meet and exceed customer expectations.

The worker in Fella Design stated that it is quite difficult for a new business to enter their

markets because they need to have a large amount of capital to operate their business. Renting is

the most serious problem if they don’t have enough money to rent a store for their goods.

Therefore, it is good if they can find some partnerships together run and manage this business.


Home Star

In Selangor, the businesses are more competitive compared to Melaka. Selangor is the

most populous state which has approximately 5.46 million of people while Melaka has less

people with 0.82 million population. Therefore, the number of furniture industries definitely high

in Selangor which will cause a very competitive market. There are approximately 150 to 200 of

furniture industries in Selangor. There are different furniture industries distributing in Klang

Valley which are Star Living, Li Meng, Valencia, Maju Home, Milanohaus and etc. All these

industries are located approximately 10 kilometers away from Home Star.

We have figured out the top three competitors after interviewing with an senior

accountant, Margaret. The first strong competitor for Home Star is Star Living, which is located

at Subang Jaya, Selangor. With a long heritage since 1981, Star Living has a strong retail

presence in Singapore, Malaysia, Taiwan and China with over 43 retail showrooms, and an

export network of over 45 countries. Their factories are set up in Dongguan, China and Johor,

Malaysia. Their production and sales are extremely high because they have many showrooms

and factories in different places and countries. The number of customers in Star Living is high

for every month because they sell different types of furniture such as sofa, dining table, wardrobe

and etc. Their furniture are designed in different ways in order to achieve customers’ demands

and expectations. They have consistently brought to market superior quality products in modern

innovative designs that are current to market demands. It considers a very hard challenge for

Home Star to compete with.

The second strong competitor is Maju Home, which is located at Subang Jaya, Selangor.

Maju Home has a 3 storey stand-alone establishment occupies a standalone building, offering

estimated 75 000 square feet floor space for the customers to browse at their leisure. Their comfy

and wide spaces for the display of their furniture have increased the number of customers’ visit.

Maju Home has a new exhibition area, The Exhibit. The Exhibit is entirely refreshed every

season in accordance to new and exciting themes, to best show the customers their new and

favourite models. Their furniture have been used in different commercial areas such as Old

Town, MCT and LGB. The prices of furniture in Maju Home are quite expensive compared to

other industries. Therefore, they have provided many promotion sales in order to attract the

customers.


The third strong competitor is Milanohaus. Milanohaus is located at Petaling Jaya,

Selangor, which is approximately 20 kilometer away. Milanohaus have employed skilled and

renowned Italian designer to oversee the manufacturing process in Shanghai. They are selling a

series of furniture with Italian design which looks elegant and modern. The main product in

Milanohaus is leather sofa. Their M&D sofas are considered very expensive because of the

Italian brand. However, there are customers who like Italian design and will come all along to

find their suitable furniture.

To compete with the competitors, Home Star has planned a lot of strategies to face the

obstacles. Margaret, the senior accountant had stated that they have meeting for every month in

order to see whether it is necessary to adjust the prices of furniture. They also need to find an

alternative ways to face the implement of GST. GST has become a major setback for Home Star

as they need to pay additional fees for their inventories to their suppliers. They would also

provide promotion sales for different seasons in order to maintain the number of customers.

From the interview, we know that it is difficult to enter market for new business because

they need a large capital to deal with the implement of GST. Other than paying for GST, they

have to find a large area to display their furniture as well. Therefore, they have to pay for GST

and renting if their business is newly enter the market with low profits.


Competitive Traits Fella Design (Melaka) Home Star (Selangor)

1. Number of Competitors (in

ranges e.g. 2 to 10, 10 to 50, 50

to 150, etc.)

50-80 150-200

2. Barrier to Entry (Weak or

Strong? Why?)

Moderate, the capital is not too

high because the number of

furniture industries in Melaka is

still considered low.

Strong, the capital is very high

because the number of furniture

industries in Selangor is too

high.

3. Differentiated or

Standardized Products (if

differentiated provide 2 to 3

examples)

Standardized products, the main

product in Melaka is normally

sofas.

Differentiated products, they

sells different products such as

sofa. Dining table and wardrobe

in order to gain high profits.

4. Pricing Power (Price Maker

or Taker? Why?)

Price Taker Price Taker

5. Other Characteristics (e.g.

Any close product substitutes,

mutual dependence, constant

advertising)

Low close product substitutes,

no mutual dependence,

inconsistent advertising

High close product substitutes,

no mutual dependence, constant

advertising

6. Verdict (Monopoly?

Oligopoly? Perfect

Competition?)

Monopolistic competition Monopolistic competition


Based on our analysis, Home Star would be the more commercially successful business. Home

Star has about 26 years of experiences which could easily handle all the obstacles or difficulty in

the competitive market. Other than that, the variety of furniture they sell also attracts many

customers come and look for their suitable furniture. However, Fella Design only focus on

selling the sofas which only gives limited options for customer. Another reason is Home Star has

more customers compared to Fella Design. Therefore, they gain more profits for each month

compared to Fella Design. Their good services and products are also the main recipe to success.


Recommendation

Fella Design

Overall, Fella Design has a high variety of products for both leather and fabric. The shop is

located at an area where most of the factory are located. Even though located near the factory,

but the number of customers is also quite high. However, there are some recommendations for

the shop so that the business of Fella Design can be improved.

1. Installation of Automatic Sliding Door

An automatic sliding door at the entrance of the shop should be installed to ensure a cooler

environment. This is to ensure that customers doesn’t feel the heat while choosing their own

furniture in the shop. Not only that, because Fella Design is located near factories, so there must

be lots of dust and smoke around, installing sliding door can ensure that the furniture won’t get

caught with the smell of smoke produce by the factories.

2. Improve the attitude of the workers

Workers attitude toward customers are important for a business. If the worker is not friendly to

the customer, the customer will not buy from that shop again. Not only that a bad attitude of a

worker could make a business shut down, it might also effect other branches of that particular

shops name.

3. The place need more lightning

The store has many furniture inside and most of it looks brown and dark. Unfortunately, the

lightning over there is not bright enough so it looks dark inside the shop. On the other hand,

customers hard to choose their furniture nicely because there is not enough lightning and it is a

bit scary inside. The Fella Design could install more light so that the shop looks much brighter

than before.


Homestar

Homestar is located around factory because it is a warehouse. Homestar can be said to have the

most kind of furniture among all others furniture warehouse around that area. Apart from that,

there are also some recommendations that can be implemented to improve the business.

1. The arrangement of furniture in not that neat

Homestar warehouse is a big place and there is lots of different types of furniture around there.

Unfortunately it is a little too big and messy because all types of furniture mix together. I think

they should separate into different categories so that customers re easy to choose which section

they should go when they need that.

2. The environment over there is hot

The warehouse is big and the air over there is uncomfortable. I think that they should install air

condition so that the customer won’t be choosing their furniture in a hot area. Other than that, the

furniture will also can be in a better condition because the air over there is much cooler.

3. The place is not so clean

The floor of the warehouse is cement so there is dust around it. The dust make the customers

uncomfortable because of the some of them are allergic to dust and they will continue sneezing

when there is dust around. Other than that, the dust will make the furniture dirty and the

customers need to clean it or the workers over there need to clean it before sending it to the

customer’s house.


Appendices

Fella Design

Contact details

Telephone: +606 231 7501

Fax: +606 231 7503

Email: [email protected]

Website: www.fella.com.my

Facebook Page: https://www.facebook.com/FellaDesignGroup

Address

5258, Jalan Penghulu Abbas,

Bukit Baru, 75350 Melaka.

Pictures

1) Storefront


https://www.facebook.com/FellaDesignGroup

http://www.fella.com.my/

mailto:[email protected]

2) Company logo

3) Other branches

Bukit Subang Ampang Selayang Petaling Jaya

Alor Setar Penang Ipoh Sungai Petani

Johor Kuala TerengganuKota Kinabalu

4) Advertising


Home Star

Contact Details

Telephone: 603- 6185 5705

Fax: 603- 6186 560

Email: [email protected]

Website: www.homestar.com.my

Facebook Page: https://www.facebook.com/Home-Star-Furnishing-Group-269830186534201/

Address

Lot 10234, Batu 8, Jalan Batu Caves, Daerah Gombak,

68000 Batu Caves, Selangor Darul Ehsan.

Pictures

1) Storefront


https://www.facebook.com/Home-Star-Furnishing-Group-269830186534201/

http://www.homestar.com.my/

mailto:[email protected]

2) Company Logo

3) Other branches

Prima Selayang Puchong Shah Alam

4) Advertising


Interview Questionnaire

1) When was the business founded?

2) Who are the key founders?

- Current position:

- Who is the owner?

3) Where is current location?

- Any change of location before?

4) What prompted the founders to start this business?

- What is your motivation?

- How much you like your job (Rate 1 to 10)

- How long have you been working on this (what make you stay so long in this

industry?)

5) What are your main products?

- Products:

6) Who are your customers? (E.g. Age group, income-level, education-level, etc.)

- Specific age group? family? ftudent?

- Income level (on the price of service charge)

- Education level (no need)

7) What is the business’ annual revenue figure?


- Daily income:

- Annual figure:

8) How many branch offices/stores do you have (if applicable)?

- How many employees are there?

- Sole trader or partner?

- Any franchise?

9) Can you provide us a brief history of your business and its most recent developments?

- Is there a different location before? Has it always been here?

- Start own business or take over someone business?

10) Do you have many competitors? Who are they? Who are your top 3 competitors?

11) How big is your market share as well as your top competitors?

12) Is the business constantly facing strong competition from other competitors? What

strategies have they used to compete with you?

- Lower price?

13) How much capital is required to start this business? What, if any, specialized field of

knowledge do you need to run this business?

- Capital, how much you spend on rental and utility?

14) Generally, do you feel it is easy or hard to enter this market? Why?


15) How do you compete with your competitors (i.e. what strategies do you employ to divert

customers away from your competitors?)

16) How often do you release a new product (note: this assumes the business sells

differentiated products)?

17) Are your pricing decisions strongly affected by your competitors? Why or why not?


References

Home Star Furnishing Sdn Bhd Company Website

http://www.homestar.com.my/en/

Fella Design Sdn Bhd Company Website




http://www.homestar.com.my/en/