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Strategic Planning

1.

Introduction to Myanmar Treasure Wood Industry Co., Ltd.

(MTWI)
Myanmar Treasure Wood Industry Co., Ltd was founded in 2000 and is based
in Yangon, Myanmar and operates machineries by skilled local teams. The
main products of the company are furniture, scantling, decking, boards,
veneer, finger joints, flooring, door frames, quality sawn squares and custom
sizes. The first Europe Quality products are exported to Europe, USA, India,
China, UAE, Singapore, Vietnam and Thailand whereas the second quality
products are locally distributed, especially in Yangon, Mandalay and
Naypyitaw. The objectives of the company are to penetrate export and
domestic markets, to increase sale revenue by 10% by the end of 2017, to
produce high quality products for export, and to control and maintain the
quality.

C
M
hD
a
i
r
p
e
r
s
o
n

Figure 1:

Structure of MTWI

MTWI is in fact a group of companies consisting Timber Extraction Company,


Milling and Marketing Company and Logistics Company. The structure of
MTWI is built on functions and it is a flat multi-divisional structure and
decentralization. It focuses on a team-approach for respective functional
department base on work nature. The span of control of MTWI is a flat
hierarchical structure. The chain of command for decision-making and
communication is divided into as few levels as possible.
2.

Analysis of effects of current business plans (2.1)

Gap analysis: The first tool to analyze the effects of current business plans
of MTWI is gap analysis, which is the comparison of actual performance with
potential or desired performance. If a company or organization does not
make the best use of current resources, or forgoes investment in capital or

Market Share

technology, it may produce or perform below its potential.

50
40

Future Prospect

30

Current Position

20

Gap

10
0

2013 201420152016
Year

Figure 2: Gap analysis of MTWIs Market Share


MTWI is struggling to meet its goal of market share 10% in the current year
2014. It is intended to increase market share to 20% in 2015 according to
the figure 2 shown above. To increase market share from 10% to 20%, the
gap is 10%, which will be fulfilled by strategic planning.
Economic performance: To analyze the effect of current business plans as
a second tool, economic performance assessment is conducted, which is an
assessment for an organization of its success in areas related to its assets,
liabilities and overall market strength. Many business operators take regular
stock on either a formal or less formal basis of the general economic
performance of their company to make sure that it remains on the right track
financially.

Valuable?

Yes

Rare?

Yes

Exploited

Competiti

Costly to

by the

ve

imitate

organizati

implicatio

on?

ns
Sustained

Yes

Yes

Economic
performa
nce

competitiv

Above

normal

advantage
According to this assessment, the economic performance of the company is
found to be above normal, which means that the company can survive and
stand for a certain period. However, it will be necessary to review and revise
strategic plans to comply with changes in policy. Moreover, the business is
one of natural resource extractive industries, which requires review and
revision of strategic plans due to the peoples perceived environmental
concerns. For example, round wood raw material should be sourced from
own plantations or by imports from abroad instead of harvesting timber from
natural forests.

3.

Current position of MTWI in the market (2.2)

To review the current position of MTWI in the market, the Framework of the
Boston Consultancy Group Matrix is applied.

High

20

Stars

Question Marks

Cash Cows

Dogs

10

Low

10x

1x
Relative Market Share

0.1x

Figure 3: Position of MTWI


The company, when studied in accordance with the Boston Consultancy
Group Matrix, is found to be in the Stars, which means that it is running a
major business generating vital income.
4.

Strategic options for MTWI (3.1)

To develop strategic options for MTWI, Portfolio analysis and the Grand
Strategy Matrix are applied:
Portfolio analysis
STAR
-

Question Mark
Forward integration
Backward integration
Horizontal integration
Market integration

Decide whether intensive:


-

Market penetration
Market development

Market development
Product development

Dog

Cash Cow
-

Product development
Concentric diversification

Forward integration
Backward integration
Horizontal integration
Market integration
Market development
Product development

Product development
Or
Divesture

- Retrenchment
- Divesture
- Liquidation
According to Portfolio Analysis, the current position of MTWI is in the STAR:

The Grand Strategy Matrix


Rapid Market Growth

Weak Competitive Position

1.
2.
3.
4.
5.
6.

Quadrant I

Market development
Market penetration
Product development
Horizontal integration
Divesture
Liquidation

Quadrant III
1.
2.
3.
4.

Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate

diversification
5. Divesture
6. Liquidation

1. Market development
2. Market penetration
3. Product development
4. Forward integration
5. Backward integration
6. Horizontal integration
7. Concentric diversification
Quadrant IV
1. Concentric diversification
2. Horizontal diversification
3. Conglomerate
diversification
4. Joint ventures

Slow Market Growth

Strong Competitive Position

Quadrant II

When studied in accordance with the Grand Strategy Matrix, the company is
found to be in Quadrant I where seven strategies are mentioned. They are:
-

Market development,
Market penetration,
Product development,
Forward integration,

5.

Backward integration,
Horizontal integration and
Concentric diversification.
Future organizational strategy (3.3)

The Portfolio analysis and the Grand Strategy Matrix analysis are applied to
develop strategic options for MTWI. According to Portfolio analysis, the
company is in Star, meaning that its growth rate and market are in good
positions. Similarly, according to the Grand Strategy Matrix analysis, it is
situated in Quadrant I which implies that the company is in its optimum. Of
the seven important strategies, two are most relevant to the company. These
two strategies are market penetration and market development.
Market penetration: Market penetration can be achieved by attracting
non-users of products and increasing the usage or purchasing rate of existing
customers. Some of market penetration strategies include price adjustments,
increased promotion, usage of more distribution channels and product
improvements. Since 2000, MTWI has established and installed wood-based
industries to produce value-added finished products. However, the Ministry
of Environmental Conservation and Forestry allowed log export at that time.
Thus, the company focused on log export rather than value adding and
manufacturing finished products for export. But, log export ban policy took
into effect since April 2014, and thus the companys primary concern is
value-adding. These products are being distributed in large volume in
existing local and foreign markets. On the other hand, the log importers, who
now cannot get round logs and cannot manufacture finished products, have
to buy the famous Myanmar teak products. Similarly, MTWI will also keep
trying to increase sales volume for the betterment of the company.
Market development: This strategy can be achieved by expanding a
regional business, by emerging new markets or by discovering new uses for
the existing products. Market development is a business strategy whereby a

business attempts to find new groups of buyers as potential customers for its
existing products and services. These potential customer groups may already
be served by competitors or may not be currently marketed by anyone for
the product. Market development is a process the goal of which is to increase
sales by expanding into untapped markets. The first step starts with market
research. For MTWI, it is planning to develop markets by exporting EU and
USA markets. Previously, due to EU sanctions and Myanmar being
designated in SDN list (SDN = specially designated nations) by USA, neither
MTWI nor any other wood companies could export Myanmar wood products
to these markets. Now, EU has lifted its sanction and at the same time, USA
also exempted Myanmar for one year. Thus, these markets have potentials
for Myanmar wood companies. MTWI is now manufacturing and exporting
high quality products for these markets. Another strategy for MTWI is to
export sawn timber to the customers who formerly purchased round logs and
at least to maintain its market share.
6.

Stakeholder mapping (1.2)

MTWI has already chosen two strategies for the development of strategic
options, but these still need to be confirmed and approved by stakeholders.
Thus, stakeholder analysis is conducted as follows:
The likely situation
Intere
st

Low

Low

Forest Department

Power
Low

High
-

Employees (B)
(-)
Marketing
(-)
Customer abroad (+)
Board of Directors (+)
Customer (Local) (+)
Government
(+)
Local community (+)
Employees (A)
(+)

D
C

According to the results of stakeholder analysis, it is found that board of


directors who has power and is important for the company, customers
(local), government, local employees (A) show positive interests in the
proposed strategies.
7.

The importance of external factor that affect MTWI (1.1)

To assess the importance of external factors that affect MTWI, PESTEL


analysis is applied as follows:
Political aspects
-

Log export ban (LEB) policy


Reduction of timber harvesting volume
EITI member (EITI = extractive industries transparency initiative)
EU sanctions lifted
Exemption of Myanmar from SDN list (SDN = specially designated
nations) by the USA

Economic aspects
-

Shift from closed door self-reliant economy to open market economy


Stock market likely to appear in 2015
Practicing floating exchange rates
Attempt to develop SME by the Government

Social aspects
-

People-centered and all inclusive policy


Teak prized as the world best timber species for society.
Teak furniture and products as symbol of prestige life style

Technological aspects
-

The best machines imported from Germany and Italy


Fair-priced and quality machine from Taiwan
Requirement of foreign technician
Needs for innovative product designs
Needs to strengthen capacity building

Environmental aspects

Increased awareness of environmental conservation at forestry sector


Needs to control problems related to air pollution and water pollution
Needs for raising environmental awareness of the companys

employees
Requirements for conducting environmental impact assessment (EIA)
and for developing and duly implementing environmental management
plan

Legal aspects
-

Foreign Investment Law (2012)


Environmental Conservation Law (2012)
Environmental Conservation Rules (2014)
Taxation policy
- Reduce commercial tax from 25% to 5%

From PESTEL analysis, it is observed that due to log export ban policy, MTWI
could not export logs to foreign countries. Moreover, timber harvesting was
reduced. These situations are actually undesirable for wood-based industries.
On the other hand, it can be seen that raw material supply for local timber
business entrepreneurs are secured. Again, due to EU sanction lift and the
USAs exemption for one year, finished wood products are able to export to
these markets. These are opportunities.
Due to some attractions prescribed in Foreign Investment Law, international
businessmen will come and invest in Myanmar, which creates more
competition. Moreover, according to Environmental Conservation Law, EIA
and environmental management plans will have to be incorporated into the
companys project management.

8.

Analysis of major changes in external factors affecting MTWIs

strategy (1.3)

Changes in political, environmental, social, technological, environmental and


legal aspects create opportunities and threats.
Opportunities
-

Log export ban policy (Possible secured supply of raw material round

logs)
EU sanctions lifted (able to export quality finished products to EU

markets)
Exemption of Myanmar for one year from SDN (specially designated
nations) list by the USA (opportunities to export wood products to the

USA)
Governments SME development policy (Encourage development of

wood based industries)


Taxation policy (reduction of commercial tax from 25% to 5%)
Floating exchange rate policy

Threats
-

Suffer from poaching of trained personnel by competitors


Change in government policy
Enactment of environmental conservation law (needs to comply with

prescriptions)
Gradual reduction in timber harvesting volume (sustainability issue for

raw material supply for long term)


New entry of small saw millers and wood-based industries (creation of
more competitiveness)

9.

Strength and weakness of MTWI (2.3)

Strengths
-

First mover advantages (Experiences and knowledge in wood-based

industries)
Staff motivation
Strong international marketing network
In-depth knowledge of product-market-buyers
Good credibility in eyes of buyers
Ability to meet customers expectations and tastes

Weakness
-

High skilled technical local team


Lack of exposure and expertise beyond timber
Weakness in state-of-the-art technology
Need to apply modern wood modification technology
Need to develop innovative product designs

10.

Comparative understanding of activity from MWTI in the

markets (3.3)
To assess the activities from MWTI in the markets, competitive profile matrix
analysis is applied against its competitors Concorde Company and National
Wood Industry Co., Ltd as follows:
Competitive Profile Matrix
National
MWTI
Weight

Concorde
Weight

Industry
Weight
Rati
ed
ng
score

Key success

Weig

Rati

factor

ht

ng

0.20

0.60

0.40

0.40

0.20

0.80

0.60

0.40

0.40

1.20

0.80

0.40

0.10

0.20

0.30

0.30

0.10

0.20

0.30

0.30

Market share
price
Competitiven
ess
Financial
position
Product
quality
Customer
loyalty
Total
Weighted
Score

ed
score

3.0

Rati

Wood

ng

ed
score

2.4

1.8

According to competitive profile matrix analysis, MWTI has a total weighted


score of 3.0 while its competitors Concorde Company and National Wood
Industry Co., Ltd. gain 2.4 and 1.8, respectively. Thus, it can be understood
that MWTI has reached an optimum position in the market and its activities
are very much relevant to the markets and meet customers taste.
Literature
1. Economic
http://www.

performance,

Business

Dictionary

(Online)

Available

at

businessdictionary.com/definition/economic-

performance.html#ixzz3IMALOZn4
2. Gap analysis - Wikipedia, the free encyclopedia (Online) Available at
http://www. en.wikipedia.org/wiki/Gap_analysis