A Case of Bumi Hijau Industries Sdn.

Bhd:

From Backyard to Three Storey Building

Introduction

With only primary six educations, Haji Muhammad Haji Muda is able to build-up Syarikat
Bumi Hijau Food Industries Sdn. Bhd., to be one of the utmost food producers in
Malaysia. This is the interesting story of the hardworking Batu Buruk, Terengganu
entrepreneur. He has progressed slowly but surely in the last 25 years. He relies solely
on his endeavour and willpower. Together with his wife, Hjh Fatimah binti Jusoh sales
were relatively satisfactory even though production was on a small scale and
concentrated only to certain segment. As a new player in the scene, the company
would obtain bookings from nearby customers at a small scale. However, Bumi Hijau’s
brand name had capture new customers by retaining its sauce authenticity. In order to
compete with other producers such as Life, Maggie, Kimball and others, the company
continuously seek new ideas by improving materials used in production in order to
retain authentic Malay sauce. Until today, Bumi Hijau customers are satisfied with the
quality of the product.

1
Bumi Hijau’s Achievement Path

Bumi Hijau Food Industries Sdn. Bhd is a sauce production company established in 1984.
It started as a small family business with limited daily capacity. With initial capital of
RM500, 000.00, it produced chilli sauce, tomato sauce, oyster sauce and black pepper
sauce.

“In 1977, Tun Abdul Razak (Komtar) was opened in Johor Bahru. I was given 1 lot to
trade batik and songket. I borrowed RM5, 000.00 for working capital from MARA and
also the bank. Business was good at the beginning because rental was reasonable at
RM410.00 a month.”

After 20 years in the market, the company has become one of the best and well known
sauces producing company in Malaysia. As a budding company, it hopes to foray into
the global market in the near future. The acceptance and encouragement from
Malaysian customers has rendered the company’s name to the people.

As a company that was growing, there were hurdles to overcome. Among them the
factory capacity unable to facilitate growing demand, production cost, management
cost that was increasing and also the difficulty certificate procedure and complex Acts.

Other than that, the constant government policy changes are also a challenge in order
to be more competitive. However, the company continues carry on by searching for
methods through advanced technology and government incentives.

For the past 8 years, the economic growth of the country has been encouraging and
the company believes it can progress along it. Among the key success is rendering
quality service and fulfilling consumers’ needs as best possible. This is made possible by
utilising high technology modern machine that is able to produce three times the
present capacity. The company has an experienced management and production
team. This is important for the success of the company.

The company has achieved various awards for outstanding performance in its field due
to the company’s firm regulations aligned with its vision and motto. Among the
achievements and recognitions include ‘2009 Agricultural and Agro-based Innovation

2
Award’, ‘2007 MARA Award (AURA) for Outstanding Manufacturing Sector
Entrepreneur’, ‘2006 Johor MARA Entrepreneur Award’, ‘2005 MARDI Quality Verification
System (MQAS 1004)’, ‘2005 Johor – PUNB Main Bumiputera Commerce and Industry
Community Driver’, ‘2001 Johor Category SME 1A Quality Industry Award and SIRIM QAS
MS 532:1995 Certification.

The acceptance and recognition of the company’s product by customers is due to its
‘halal’ certification. This enables the company to further market the product. Nothing
comes easy in business and therefore the company strives continuously to improvise
and create new and quality products at competitive price with strong management
teamwork. The dedication and loyalty of the management team is the foundation of
the development and stability of the company.

As a new player in the food and beverage market, the company has gained
acceptance of the people. This is due to the quality of its product and is the
cornerstone of its success despite competing with other established brands. With that,
the company would foray into the global market with its brand name ‘Bumi Hijau’ and
hope to receive warm responses.

Management

All the company’s products have proven to be of exceptional quality and hygienic.
The strength of its skilled employees enabled efficient production process and on-time.
The recruitment of qualified and recognised employees in the food industry enabled
the company effective management production. The usage of modern and high
technology machinery and equipment produces large quantity.

To achieve the growth, the company changed its management system. Many of
previous manual recording have been upgraded. This indicates that the company is
competitive. From the marketing and operation aspects, the company markets its
own product including the use of agents for both domestic and international markets.

Previously, the company had numerous operation problems but has since rectified by
having 80 percents of its workers local and the remainder 20 percent foreigners. To
strengthen its growth, the company took the initiative to own its own food processing

3
factory. However due to stiff competition, the profit margin has reduced from 30
percent to 10 percent. Notwithstanding, the company continues to expand outside
Malaysia.

Competitors Issue and Market Expansion Strategy

The company is constantly placing importance in marketing their products. Even

though competing with established brands such as Maggi sauce, Life sauce, ‘Kipas
Udang’ ketchup and Jalen ketchup, the company always ensure that their products
are accepted locally. The products that are accepted are chilli sauce, tomato sauce,
oyster sauce, black pepper sauce and both sweet and sour ketchup. They are able to
penetrate Giant, Econsave, Carrefour, Tesco and Mydin. They have also managed to
enter chain store D’mart Felda.

The company is also increasing its factory capacity to fulfil increased demand. It is
now able to produce 50,000 bottles daily. The machine is able to produce up to
100,000 bottles daily. This indicates an additional 50 percent capacity. They have
expanded throughout Malaysia by opening branches in Kedah and Pahang. With the
opening of these branches, the penetration level stands at 60 % by year end 2013.

The sales of the company is not only limited to the Bumi Hijau brand but also by
collaborating with Coop1 Malaysia via goods distribution of other brands by contract
packing.

The company has identified some barriers to promotion due to high costs. During the
1980’s the company only focused on chilli and tomato sauce, while in the 1990’s sweet
and sour ketchups were added. To ensure that the products continue to capture the
hearts of the customers, rebranding of its mango sauce to three taste sauce was
implemented. Other than that, in order to compete with other brands such as Maggi
and Life, the company concentrated on local cooking sauce such as oyster sauce,
black pepper sauce, mango sauce and pineapple sauce. The price of the company’s
product is cheaper than its competitors. However it retains its quality and standard at
par with the competition.

4
The increase of production cost due to the increase of raw material pose a challenge
to the company. The increase of petrol prices has encouraged the company to enter
the export market. To do this, the company is always searching for opportunities to
promote its products by joining exhibitions locally and externally organised by MARA
and Matrade. To penetrate the export market, the company plans to produce tinned
fruits such as pineapple, papaya and guava.

The company takes a serious view of the global potential market of the future. Drastic
steps have been addressed to be competitive at the global level. Among the step is
the certification of ISO 9000 and HACCP. The marketing arm has been given priority to
promote the company’s product by actively involved in ‘halal’ expos. Now, the
company is seeking foreign partners to further strengthen its foreign business. It is going
to produce ‘halal’ soap, shampoo and tooth paste.

In order to stay competitive, the company has embarked on the use of information
technology to increase efficiency management and marketing. Information derived
would assist the company facing competition. The use of internet would enhance
networking and able to promote product whilst not incurring high cost for promotion
and advertisement. Employees’ skill is also emphasised to ensure they are experts’ and
knowledgeable in the operational of the company in financial, marketing, quality
control, good hygiene practices, good manufacturing practices and correct
processing technique.

5
Production Capacity Expansion and Technology Investment

Only a few years ago the company was a household name in Johor and demand was
high, but with the increasing number of competitors, productivity has felled. The profits
have also been affected.

The company has now focused beyond Johor, namely Melaka and Negeri Sembilan.

We asked the Manager, “why were they late in expanding outside Johor while have
long been in operation?” He paused and with a stern voice explained, “We should not
only focus to the same area if the economic climate has eroded. Before this, we were
the leading Bumiputera sauce manufacturer, but no more. The market in Johor is
already saturated. This is the reason why we expand beyond Johor so that the brand
remains in the minds of the people.”

In the present economic era, most businesses are dominated by the Chinese. The
Chinese are always seeking opportunities to expand their businesses. This should not
been seen as a threat to Bumiputera entrepreneur. On the contrary, they should see it
form a positive angle whereby competition is healthy to improve business.

The company also faces stiff competition from other products in the market. Among
them are Maggi sauce, Life sauce, ‘Kipas Udang’ ketchup and Jalen ketchup. These
products have been in the market longer than the company and therefore the
company should ensure that their products are as competitive as its competitors. The
increase of production cost due to increase of raw materials pose a challenge of which
they must face.

The demand for its products outside Johor is on the rise. The company constantly tries
to improve and market their products to capture customers’ interest. They cannot
meet the rise in demand with the present workforce. Alternatives need to be explored
to strengthen their position.

To overcome this problem, the company has purchased machinery to fulfil the
production capacity. This is important to facilitate demand outside Johor. The
machine is able to increase productivity and rendering excellent service to customers.

6
Employees cost have reduced. The company only focused on skilled employees to
maintain quality products.

Investments and steps are taken after ascertaining matters. Even though the purchase
of the machine was of high cost, the return has been lucrative with increase in
production.

With the technology investment expansion in commerce, the company was able to
increase manufacturing facility in processing and filling of lines including the use of
modern machine such as ‘Term oil machine’, “Decreasing cover machine”, Barrier
machine” and “Labelling
machine”. All these elements have
contributed to the increased of
capacity of 20,000 daily bottles or
5,000 kg of daily tomato sauce,
oyster sauce and black pepper
sauce. This would enable the
company to fulfil demand.

Innovative technology and the use

of machine are to maintain healthy
growth. The company would
continue to use innovative
production technique for its
production.

7
Along with the progress in technology, the company has 10 distributors. They assist in
expanding the company’s product. Government’s incentives have much helped the
company. Presently, the company’s product is not only marketed in Malaysia but also
internationally.

Site visit was done to the processing and packaging factories. The scenario was calm
with only a few workers around. The looks on our faces stood out and was read by the
Operation Supervisor who has been with the company for 10 years. “There are not
many workers now and no machine working. This is because at 12.00 pm the machine
must stop operation as it is lunch break. If we were to observe how the machine
operates, processing and packaging, we had to come early in the morning. We
observed our watches, smiled and relived upon the explanation. He then proceeded
to explain that packaging is done in different bottle sizes namely 340 gram, 2 kg and 5
kg. They are packed using high quality material, attractive design and easy to carry
around. A few bottles have been specially designed with different label for
government agencies.”

The company has plans to increase factory capacity by 2015 by enlarging the factory.
This enlargement is on the current site whereby the production capacity and storage
would be doubled to facilitate increase in sales of up to 3 times.

The company is constantly susceptible of quality and the raw materials needed to
produce high quality sauce. Certain products are targeted to different consumers such
as housewives, petty traders, canteen and cafeteria operators, hypermarkets, resorts,
hotels and others.

These products are recognised by SIRIM Islamic Bodies and Malaysia as excellent based
on quality, hygienic and safe to consume.

8
Maintaining Internal and External Relationships

Internal and external relationships are an important aspect for any organisation. It
ensures the success or failure of the company.

In the beginning, the market was only focused to direct users such as restaurant
operators, petty traders and individuals. With the increase in demand of its products,
the company expanded throughout Johor by displaying or distributing its products at
hypermarkets.

Efficient and effective distribution was developed. This is important to the company to
gain peoples’ faith. The wide distribution outlets enable customers’ easy accessibility to
the company’s products.

Distribution chain has been developed with potential business people and wholesaler
through outlets in Johor, Kuala Lumpur and Perak. The networks ought to cover the
whole country for easy customer accessibility. To foster relationships with external
parties, the company has participated in numerous government and private sectors
exhibitions. Among them; ‘halal’ HALTREX in Singapore, PROEXPO 2006 exhibition in
Moscow, Russia, SIAL Expo 2007 exhibition in France, Jom Heboh, MIHAS and MAHA.
Indirectly, it is through these exhibitions the company able to introduce their products to
the public. Also, the company has collaborated with the product Saji in food
demonstration and exhibition throughout the country. Other than that, the company
intends to establish working relationships as management partners and in the services
industry.

For better accessibility to its products, the company is sold in most major supermarkets.
The company has raw materials suppliers near where processing takes place. Among
them Agrin Chemicals (M) Sdn Bhd, Min Tien & Co Sdn Bhd, San Soon Seng Industries
Sdn Bhd, Future Packaging & Trading, Chuam Lee Seng, CNC Supplies, Dooilcap
Malaysia Sdn Bhd and Interstate Packages Sdn Bhd. However, lately the raw materials
are no longer offered al lower cost as previous. On the contrary, the company is
always thinking of strategies to overcome this problem.

9
The company is exposed to international business through government and private
sectors assistance such as MATRADE, MECD, KPDN, MARA, MARDI, SME Corp and SME
Bank. They are also active by participating in China, France, United Kingdom,
Germany, Singapore and others. Recently, there were imports from Jeddah and
Turkey. Trade agreement with the importer was made. The special marketing arm of
the Chief Executive is baring results.

More than 30 years ago, the company’s network has been established. It involves
suppliers and customers, other than due to its participation in trade associations,
government or private sector sponsored seminar.

The strength of a company lies in how it plays it s’ role. Any weaknesses need to be
rectified so as not to jeopardise the company.

External factors are important so as to remain competitive. The company is always

constantly of the drastic technology changes. That is why they purchased the new
machine to increase productivity.

It is not productive to use much labour. This is the argument for the purchase of the
machine to maintain quality, productivity and fulfil increase in demand.

When we asked the question to the company’s Manager, “Is the company affected by
the minimum wages announced by the government beginning January 2013?”
Nonchalantly he replied, “That was the reason why the company decided to purchase
the new machine, to facilitate the ever cost increase.

It is observed that many Bumiputeras’ products have been unfairly treated in shops,
more so in supermarkets. Excuses given include unattractive packaging. Even in the
grocery shops it is difficult to obtain Bumiputeras’ products as the channel
management is controlled by non-Bumiputera with malicious agenda.

Past events such as what happened to Aminah Hasan Chilli Sauce resulting in
tremendous loss to the company, also happened to Tamin Ketchup. The producer of
Cap Kipas Udang sauce faced forgery by another company of its label who sold at
lower price.

10
This is only part of problems faced by Bumiputera entrepreneurs. Price issue occur
where price discrimination between Bumiputera and non-Bumiputera products even
though wholesaler has given large discount to Bumiputera producer.

To guarantee customer satisfaction, the company has embarked on ‘After Sales

Service’ under the purview of the marketing department. To increase customer reach,
the company intend to open 2 new branches in at the north and east Peninsular
Malaysia. This would reduce transport cost and enhance company image.

With the establishment of the Malaysian Malay Chamber of Commerce, it is hoped it

would assist in obtaining government’s assistance.

Business relationship is of paramount importance and therefore the company has

established a department to facilitate it, ‘Strategy and Business Relation’. Many of its
members are influential board of directors. They are tasked to retain existing cordial
relationship and also to seek new partners.

By using web page, organisations need not be large and from an unknown entity it can
be recognised internationally. What is important is to establish effective online services
to gain public’s trust. Big size does not guarantee to the people that the company is on
solid ground. Contrast to the old method of doing business whereby feedback is
notoriously slow, the advert of technology has made feedback immediate. Customers
can give their views and comments in the company’s web page. This would enable
the company to produce product and services as demanded by customers.

11
QUESTIONS

1. Explain the problems that been faced by Bumi Hijau Food Industries Sdn. Bhd.?
( 6 marks )

2. Analyze the factors that can be considered as threats to Bumi Hijau Food
Industries Sdn. Bhd.future growth.
( 10 marks )

3. Identify and explain any 3 strategies adopted by Bumi Hijau Food Industries Sdn.
Bhd.
( 10 marks )

4. Explain any 2 major strenghts that Bumi Hijau Food Industries Sdn. Bhd. has to
support its expansion plan to growth worldwide.

( 4 marks )

5. Suggest ONE (1) best strategy to be implemented by Bumi Hijau Food Industries
Sdn. Bhd to make it more competitive in the industry.
( 10 marks )

12