Entrepreneuship

INTRODUCTION Ahmad Zaki Resources Berhad (AZRB) was incorporated in Malaysia under the Companies Act, 1965 on 26 May 1997 as a public limited company under its present name. The history of the AZRB Group began with the incorporation of AZSB on 17 February 1982. AZSB was incorporated as a private limited company. Its first contracting job was landscaping works for a housing project owned by Terengganu State Economic Development Corporation in Kemaman, Terengganu. In April 1984, the company secured its first major contract, which was the construction and completion of an external drainage system for the gas export terminal at the Kemaman Port. Since then, AZSB has successfully secured contracts from government and semi-government agencies and the private sector. These include, amongst others, Jabatan Kerja Raya Malaysia, Majlis Amanah Rakyat, Yayasan Islam Terengganu, Kuala Lumpur City Centre Berhad, KLIA, Majlis Perbadanan Petaling Jaya, University of Malaya and International Islamic University of Malaysia. With the growth, the company upgraded its licensing status until it obtained a Class 'A' contracting license in 1993. Now AZSB has completed nearly 2 (two) Billion Ringgit worth of projects, consisting of various types of buildings and civil engineering works. With the ensuing business growth and financial performance, the group under Ahmad Zaki Resources Berhad (AZRB) was listed as a Public Limited Company on the Second Board of Kuala Lumpur Stocks Exchange in June 1999 and subsequently transfered to the Main Board on 10 September 2003. Looking to the future, the group has ventured overseas with the securing of three projects in Chennai, India and two in Riyadh, Saudi Arabia. Other activities of the group include Oil and Gas, Property Development and Plantations. FINDINGS 1. The macro-environment The macro-environment includes all factors that can influence and organization, but that are out of their direct control. A company does not generally influence any laws (although it is accepted that they could lobby or be part of a trade organization). It is continuously changing, and the company needs to be flexible to adapt. There may be aggressive competition and rivalry in a market. Globalization means that there is always the threat of substitute products and new entrants. The wider environment is also ever changing, and the marketer needs to compensate for changes in culture, politics, economics and technology. 2. The micro-environment The term micro-environment denotes those elements over which the marketing firm has control or which it can use in order to gain information that will better help it in its marketing operations. In other words, these are elements that can be manipulated, or used to glean information, in order to provide fuller satisfaction to the company’s customers. The objective of marketing philosophy is to make profits through satisfying customers. This is accomplished through the manipulation of the variables over which a company has control in such a way as to optimise this objective. The variables are what Neil Borden has termed ‘the marketing mix’ which is a combination of all the ‘ingredients’ in a ‘recipe’ that is designed to prove most attractive to customers. In this case the ingredients are individual elements that marketing can manipulate into the most appropriate mix. E Jerome McCarthy further dubbed the variables that the company can control in order to reach its target market the ‘four Ps’ 3. The proximate macro-environment 3.1 The supplier environment This consists of other business firms or individuals who provide the marketing firm with raw materials, product constituents, services or, in the case of retailing firms, possibly the finished goods themselves. Firms, whether they the retailers or manufacturers, will often depend on numerous suppliers. The buyer/supplier relationship is one of mutual economic interdependence, both parties relying on the other for their commercial well-being. Although both parties are seeking stability and security from their relationship, factors in the supplier environment are subject to change, such as industrial disputes which will affect delivery of materials to the buying company, or a sudden increase in raw material prices which forces suppliers to raise their prices. Whatever the product or service being purchased by the marketing firm, unexpected developments in the supplier environment can have an immediate and potentially serious effect on the firm’s commercial operations. Because of this, marketing management, by means of the marketing intelligence component of its marketing information system, should continually monitor changes and potential changes in the supplier environment and have contingency plans ready to deal with potentially adverse developments. 3.2 The distributive environment Much reliance is placed on marketing intermediaries such as wholesalers, factors, agents and distributors to ensure that their products reach the final consumer. To a casual observer, it may seem that the conventional method of distribution in any particular industry is relatively static. This is because changes in the distributive environment occur relatively slowly, and there is therefore a danger of marketing firms failing to appreciate the commercial significance of cumulative change. Existing channels may be declining in popularity over time, while new channels may be developing unnoticed by the marketing firm. Nowadays, the sector represented by the larger food multiples has well in excess of this proportion. 3.3 The competitive environment Management must be alert to the potential threat of other companies marketing similar and substitute product whether they are of domestic or foreign origin. In some industries there may be numerous world-wide manufacturers posing a potential competitive threat and in others there may only be a few. Whatever the type, size and composition of the industry, it is essential that marketing management has a full understanding of competitive forces. Companies need to establish exactly who their competitors are and the benefits they are offering to the market. Armed with this knowledge, the company will have a greater opportunity to compete effectively. 4. The wider macro-environment Changes in the wider macro-environment may not be as close to the marketing firm’s day-to-day operations, but they are just as important. The main factors making up these wider macro-environmental forces fall into four groups. 1. Political and legal factors 2. Economic factors 3. Social and cultural factors 4. Technological factors. 4.1 The political and legal environment To many companies, domestic political considerations are likely to be of prime concern. However, firms involved in international operations are faced with the additional dimension of international political developments. Many firms export and may have joint ventures or subsidiary companies abroad. In many countries, particularly those in the so-called ‘Third World’ or more latterly termed ‘Developing Nations’, the domestic political and economic situation is usually less stable than in the UK. Marketing firms operating in such volatile conditions clearly have to monitor the local political situation very carefully. Many of the legal, economic and social developments, in our own society and in others, are the direct result of political decisions put into practice, for example the privatization of state industries or the control of inflation. In summary, whatever industry the marketing firm is involved in, changes in the political and legal environments at both the domestic and international levels can affect the company and therefore needs to be fully understood. 4.2 The economic environment Economic factors are of concern to marketing firms because they are likely to influence, among other things, demand, costs, prices and profits. These economic factors are largely outside the control of the individual firm, but their effects on individual enterprises can be profound. Political and economic forces are often strongly related. A much quoted example in this context is the ‘oil crisis’ caused by the Middle East War in 1973 which produced economic shock waves throughout the Western world, resulting in dramatically increased crude oil prices. This, in turn increased energy costs as well as the cost of many oil-based raw materials such as plastics and synthetic fibres. This contributed significantly to a world economic recession, and it all serves to demonstrate how dramatic economic change can upset the traditional structures and balances in the world business environment. As can be seen, changes in world economic forces are potentially highly significant to marketing firms, particularly those engaged in international marketing. However, an understanding of economic changes and forces in the domestic economy is also of vital importance as such forces have the most immediate impact. One such factor is a high level of unemployment, which decreases the effective demand for many luxury consumer goods, adversely affecting the demand for the industrial machinery required to produce such goods. Other domestic economic variables are the rate of inflation and the level of domestic interest rates, which affect the potential return from new investments and can inhibit the adoption and diffusion of new technologies. In addition to these more indirect factors, competitive firms can also pose a threat to the marketing company so their activities should be closely monitored. It is therefore vital that marketing firms continually monitor the economic environment at both domestic and world levels. Economic changes pose a set of opportunities and threats, and by understanding and carefully monitoring the economic environment, firms should be in a position to guard against potential threats and to capitalize on opportunities. 4.3 The socio-cultural environment This is perhaps the most difficult element of the macro-environment to evaluate, manifesting itself in changing tastes, purchasing behaviour and changing priorities. The type of goods and services demanded by consumers is a function of their social conditioning and their consequent attitudes and beliefs. Core cultural values are those firmly established within a society and are therefore difficult to change. They are perpetuated through family, the church, education and the institutions of society and act as relatively fixed parameters within which marketing firms are forced to operate. Secondary cultural values, however, tend to be less strong and therefore more likely to undergo change. Generally, social change is preceded by changes over time in a society’s secondary cultural values, for example the change in social attitude towards credit. As recently as the 1960s, personal credit, or hire purchase as is sometimes known, was generally frowned upon and people having such arrangements tended not to discuss it in public. Today, offering instant credit has become an integral part of marketing, with many of us regularly using credit cards and store accounts. Indeed, for many people it is often the availability and terms of credit offered that are major factors in deciding to purchase a particular product. Marketing firms have also had to respond to changes in attitude towards health, for example, in the food industry people are now questioning the desirability of including artificial preservatives, colourings and other chemicals in the food they eat. The decline in the popularity of smoking is a classic example of how changes in social attitudes have posed a significant threat to an industry, forcing tobacco manufacturers to diversify out of tobacco products and into new areas of growth. 4.4 The technological environment Technology is a major macro-environmental variable which has influenced the development of many of the products we take for granted today, for example, television, calculators, video recorders and desk-top computers. Marketing firms themselves play a part in technological progress, many having their own research department or sponsoring research through universities and other institutions, thus playing a part in innovating new developments and new applications. One example of how technological change has affected marketing activities is in the development of electronic point of sale (EPOS) data capture at the retail level. The ‘laser checkout’ reads a bar code on the product being purchased and stores information that is used to analyse sales and re-order stock, as well as giving customers a printed readout of what they have purchased and the price charged. Manufacturers of fast-moving consumer goods, particularly packaged grocery products, have been forced to respond to these technological innovations by incorporating bar codes on their product labels or packaging. In this way, a change in the technological environment has affected the products and services that firms produce and the way in which firms carry out their business operations. The macro environment also includes the major forces that act not only on the firm itself, but also on its competitors and on elements in the micro-environment. The macro-environment tends to be harder to influence than does the micro-environment, but this does not mean that firms must simply remain passive; the inability to control does not imply an inability to influence. Often the macro-environment can be influenced by good public relations activities. The main elements of the macro-environment are: • Demographic factors; • Economic factors; • Political factors; • Legal factors; • Socio-cultural factors; • Ecological and geographical factors; • Technological factors. • Demographic factors • Demographics is the study of population factors such as the proportion of the  population who are of a given race, gender, location or occupation, and also of such general factors as population density, size of population and location. Demographic changes can have major effects on companies: the declining birth rate in most Western countries has an obvious effect on sales of baby products, but will eventually have an effect on the provision of state pensions as the retired have to be supported by an ever-shrinking number of people of working age. Likewise, changes in the ethnic composition of cities, or in the population concentration (with few people living in the city centres of large cities) cause changes in the demand for local services and retailers, and (more subtly) changes in the type of goods and services demanded. • Economic factors - such areas as the boom/bust cycle, and the growth in unemployment in some parts of the country as a result of the closing of traditional industries. Macro-economic factors deal with the management of demand in the economy; the main mechanisms governments use for this are interest rate controls, taxation policy and government expenditure. If the government increases expenditure (or reduces taxation), there will be more money in the economy and demand will rise; if taxation is increased (or expenditure cut), there will be less money for consumers to spend, so demand will shrink. Rises in interest rates tend to reduce demand, as home loans become more expensive and credit card charges rise. Micro-economic factors are to do with the way people spend their incomes. As incomes have risen over the past 40 years or so, the average standard of living has risen, and spending patterns have altered drastically. The proportion of income spent on food and housing has fallen, whereas the proportion spent on entertainment and clothing has risen. Information on the economy is widely publicised, and marketers make use of this information to predict what is likely to happen to their customers and to demand for their products. • Political factors - often impact on business: recent examples are the worldwide movement towards privatisation of former government-owned utilities and businesses, and the shift away from protection of workers’ rights. Firms need to be able to respond to the prevailing political climate, and adjust the marketing policy accordingly. For example, British Telecom, Deutsche Telekom and Telstra of Australia have all had to make major readjustments to their marketing approaches since being privatised, and in particular since seeing an upswing in competitive levels. Almost all the firms’ activities have been affected, from cutting the lead time between ordering and obtaining a new telephone, through to price competition in response to competitors’ cut-price long-distance and international calls. British Telecom was the UK’s fifth biggest spender on advertising during 2003. • Legal factors - follow on from political factors, in that governments often pass laws which affect business. For example, Table 2.4 shows some of the legislation on marketing issues currently in force in various countries. Sometimes judges decide cases in a way that re-interprets legislation, however, and this in itself can affect the business position. A further complication within Europe arises as a result of EU legislation, which takes precedence over national law, and which can seriously affect the way firms do business in Europe. Case law and EU law are not dependent on the politics of the national governments, and are therefore less easy to predict. Clearly businesses must stay within the law, but it is increasingly difficult to be sure what the law says, and to know what changes in the law might be imminent. • Socio-cultural factors - are those areas that involve the shared beliefs and attitudes of the population. People learn to behave in particular ways as a result of feedback from the rest of society; behaviour and attitudes that are regarded as inappropriate or rude are quickly modified, and also people develop expectations about how other people should behave. In the marketing context, people come to believe (for example) that shop assistants should be polite and helpful, that fastfood restaurants should be brightly lit and clean, that shops should have advertised items in stock. These beliefs are not laws of nature, but merely a consensus view of what should happen. There have certainly been many times (and many countries) where these standards have not applied. These prevailing beliefs and attitudes change over a period of time owing to changes in the world environment, changes in ethnic mix and changes in technology. These changes usually happen over fairly long periods of time. Since 1970 in most Western countries there has been a development towards a more diverse, individualistic society; a large increase in the number of couples living together without being married; and a marked increase in the acceptance (and frequency)of single-parent families. Cultural changes over the same period include a major change in eating habits due to an increase in tourism and world travel, and greater globalisation of food markets. A very few cultural changes come about as the result of marketing activities: a recent example in the UK is the gradual replacement of Guy Fawkes night (at least as a family occasion) with Hallowe’en, an American import which has children dressing up in costumes and going from house to house ‘trick or treat-ing.’ Part of the thrust for this change has come about because Guy Fawkes celebrations involve letting off fireworks, which is a dangerous activity for amateurs, but much of the change has been driven by a desire by marketers to sell costumes, and by the influx of US-made films and TV programmes which show Hallowe’en celebrations. • Ecological and geographical factors - Ecological and geographical factors have come to the forefront of thinking in the past fifteen years or so. The increasing scarcity of raw materials, the problems of disposing of waste materials, and the difficulty of finding appropriate locations for industrial complexes (particularly those with a major environmental impact) are all factors that are seriously affecting the business decision-making framework. In a marketing context, firms are having to take account of public views on these issues and are often subjected to pressure from organized groups as well as individuals. Often the most effective way to deal with these issues is to begin by consulting the pressure groups concerned, so that disagreements can be resolved before the company has committed too many resources; firms adopting the societal marketing concept would do this as a matter of course. • Technological factors - Technological advances in recent years have been rapid, and have affected almost all areas of life. Whole new industries have appeared: for example, satellite TV stations, cable networks, the Internet, CD recordings and virtual reality, and computer- aided design systems. All of these industries were unknown even twenty years ago. It seems likely that technological change will continue to increase, and that more new industries will appear in future. The corollary, of course, is that some old industries will disappear, or at the very least will face competition from entirely unexpected directions. Identifying these trends in advance is extremely difficult, but not impossible. The macro-environment also contains the remainder of the organisation’s publics. • Governmental publics are the local, national and international agencies that restrict the company’s activities by passing legislation, setting interest rates, and fixing exchange rates. Governmental publics can be influenced by lobbying and by trade associations. • Media publics: Press, television, and radio services carry news, features and advertising that can aid the firm’s marketing, or conversely can damage a firm’s reputation. Public relations departments go to great lengths to ensure that positive images of the firm are conveyed to (and by) the media publics. For example, a company might issue a press release to publicise its sponsorship of a major sporting event. This could generate positive responses from the public, and a positive image of the company when the sporting event is broadcast. • Citizen action publics are the pressure groups such as Greenpeace or consumers’ rights groups who lobby manufacturers and others in order to improve life for the public at large. Some pressure groups are informally organised; recent years have seen an upsurge in local pressure groups and protesters. 5. Other macro-environmental factors The macro-environmental factors discussed are not intended to be an exhaustive list, but merely to demonstrate the main areas of environmental change. Other sub-environments may be important to marketing management, for example, in some countries the religious environment may pose an important source of opportunities and threats for firms. In the UK, demographic changes are considered important by a number of firms. In general, the UK population has been stable at approximately 56 million for a number of years, but the birth rate is falling, while people are living longer. Firms that produce goods and services suitable for babies and small children (e.g. Mothercare) have seen their traditional markets remain static or decline slightly. Such companies have tended to diversify, offering products targeted at older age groups. A larger older sector of the population offers opportunities for firms to produce goods and services to satisfy their particular needs. The over-55 age group is the modern marketer’s current major opportunity. In all advanced economies such as the Australia, UK and USA it is this age group that has the largest disposable income, and special products and services such as holidays and pension-related financial services are being marketed to this sector. 6. Impact on the organisatition’s buiness activities. An analysis of macro-environmental factors and their impact in company on manufacturing industry in Malaysia include activities such as producing, manufacturing and marketing. The company distributors its products through wholesalers, national and regional retailers. Because of the globalisation and more intense competition, company find itself planning to begin business in another promising and challengeable country. By analysing carefully and comprehensively, Malaysia becomes the first suitable country for the company, because of the Malaysia's political Stability, economic strength & strategic natural resources, liberal & pro-business government policies, excellent infrastructure, vibrant business environment, quality of life and strategic location makes that country significant for business. Economic forces: Both marketers and customers are affected by economic forces. Pride states changes in general economic conditions affect (and are affected by) supply and demand, buying power, willingness to spend, consumer expenditure levels and the intensity of competitive behaviour. A consumer's buying power are their resources such as money, goods and services and they are important because these resources can be exchanged. Disposable income is the money left after taxes. This is important to marketers because this money is used for spending and saving. Eg. Interest rates on general economics conditions. Political forces: Legislation from the government can affect markets through the organisations and consumers. Some marketers simply adjust to these political forces. Others try to influence political decisions by supporting politicians that can positively affect them. Eg. Industrial Relations laws affecting agreements between organisations and employees. Legal and regulatory forces: Federal laws and regulation agencies affect marketing activities and decisions. Laws such as the Trade Practices Act and the Privacy Act set rules, which organisations must abide by or risk suffering penalties and/or punishment. These laws can be enforced by regulatory agencies who also assist in directing rules and regulations. CONCLUSION The company’s micro-environment has been discussed in terms of variables over which it has control relevant to the marketing mix. This led to a description of marketing and its various sub-divisions including information from the market-place in terms of forecasting and marketing research. Marketing was then looked at alongside other business functions and its place in line management was noted. The company’s proximate macro-environment was then examined under supplier, distributive and competitive environment environments and finally the wider macro-environment was examined under the headings: political and legal, economic, socio-cultural and technological environments.