Thesis (MBA)--Stellenbosch University, 2001. / ENGLISH ABSTRACT: The polystyrene foam tray manufacturing industry started with a monopoly in 1954,
and lasted for more than 29 years. During the last ten years the industry has grown
extremely competitive, seeing many new players enter (and exit) and a reduction in
industry profitability.
This mini thesis attempts to analyze the polystyrene foam tray manufacturing industry
in its current form and to quantify the external, new challenges it currently faces. It
attempts to identify potential pitfalls for new entrants to the industry and to construct
an ideal strategy suited best for the industry, based on an industry analysis.
The polystyrene foam container industry background is discussed to determine its
origins in South Africa. An industry and competitive analysis is done to assess the
strategically relevant aspects of the industry's macro environment. A technique
developed by Thompson and Strickland (1998: 68) is utilized.
The scope of the macro environment in the mini-thesis was limited to the South
African scenario. Ultimately, an ideal strategy, which would deal with all the relevant
challenges of the industry, is proposed.
The industry and competitive analysis revealed important dominant economic traits.
Competition is concentrated in the country's economic hub, namely Gauteng, but
regional manufacturing bases leads to extended market share in those areas. The
product range spans over several hundred coloured, printed and laminated trays, but
the fiercest competition across the board takes place in a few sizes white, commodity
flat trays to the meat industry, which also forms the bulk of sales to the industry.
The growth rate has been organic for the last few years, mainly due to the mature status
of polystyrene foam tray products and the introduction of alternative (though more
expensive) media. The external macro economic environment has also not been
conducive to abnormally high growth (GDP in South Africa has drifted between 1%
and 3% for the last few years). Five competitors exist, and two of these competitors have 80% of the market share,
but are also the furthest away from the largest part of the market, namely Gauteng.
Customers are divided into two groups, distributors and end users. Small
competitors make extensive use of distributors (since they do not own their own
distribution channels), while large competitors limit the use of distributors to limit the
potential buying power of distributors.
The barrier to entry for a new entrant wanting to acquire up to 5% of market share is
around R 10m, which includes working capital. The industry profitability varies
from losses to extreme profits in some years. This becomes a vicious circle, since the
latter attracts new entrants, which in turn causes price wars.
Rivalry amongst competitive sellers is excessive, specifically when new entrants
appear on the scene. Price cutting, although a very blunt tool, is used almost
exclusively to obtain a volume advantage. Substitute products do not really pose a
threat in the South African economic situation where cost is all-important. No other
packaging medium can compete with the wide range of applicability, low cost and
strength of polystyrene foam. Where end-user markets are more affluent, substitute
products may have a minor impact.
The power of suppliers in the industry is limited, since there is a manufacturing over
capacity in the country, and there are no switching costs when changing from one
supplier to another. The power of buyers, specifically ones that buy in bulk
(distributors and the like), is thus quite strong.
The main drivers of change include excessive movement in market pricing, product
innovation, technological changes, increasing globalisation of the industry and
changing societal concerns. Movement in market pricing is by far the most important
and has the greatest affect on industry profitability, since the complete product range
is affected. The latter four drivers affect mostly branded and speciality product.
Strategic group mapping, combined with an in-depth analysis of each competitor,
revealed that the largest two players, Kohler Versapak and Atlantic Forming, are
definitely in the strongest position from a financial point of view. Although drawbacks such a corporate red tape, shareholder pressure and geographic location
exist for these competitors, sheer financial strength to survive price wars will give
them an edge.
With the current amount of competitors and over capacity in the market there is bound
to be some consolidation in the manufacturing industry. It seems that one of the
larger two players (Kohler Versapak or Atlantic Forming) may acquire one of the
smaller manufacturers in a bid to stabilize market prices.
The most important key success factor is the ability to produce polystyrene foam
trays at the lowest possible cost. The absence of switching costs, price wars and a
manufacturing over capacity are all causes of the preceding success factor. Other less
important success factors are distribution related (being close to the market is an
advantage) and technology related (being able to develop advanced branded and
functional trays).
In its current status, where there is a supply-demand imbalance, the industry does not
seem attractive. Although negative external forces such as environmental pressure,
are limited, growth potential is limited and competition is fierce.
In summary none of the competitors have attempted to utilize other tools than pricecutting
to protect market share. From a geographic location point of view, Airshield
and Mainpack are positioned best, but do not possess the financial momentum to
optimally utilise their location in terms of finished product distribution and raw
material acquisition. Atlantic Forming and Kohler Versapak seem to have expanded
their product ranges to low profit and unprofitable products, while the other
competitors have stayed focused on a few high volume items. It seems that it may
have been a better idea for the larger players to utilize existing resources on other
profitable media rather than expanding its interests in polystyrene foam trays. / AFRIKAANSE OPSOMMING: Polistireen skuim houer vervaardiging het in 1954 met 'n monopolie begin wat vir 29
jaar staande gebly het. Gedurende die laaste tien jaar het die polistireen skuim
industrie baie kompeterend geraak, met heelwat kompeterende maatskappye wat die
mark betree het (en uitgetree het), en 'n gevolglike afname in industrie profyt gehad
het.
Hierdie minitesis poog om die polistireen skuim bakkie industrie te analiseer in sy
huidige vorm en om die eksterne uitdagings wat tans bestaan, te identifiseer. Die tesis
poog verder om potensiele probleme te identifiseer wat nuwe kompeterende
maatskappye in die industrie mag teëkom, en dan om 'n ideale strategie saam te stel,
gebasseer op 'n industrie analise.
Die polistireen skuim houer industrie is bespreek, sodat die oorsprong van die
industrie in Suid-Afrika bepaal kon word. 'n Industrie en kompeterende analise is
gedoen om die strategies belangrike aspekte van die industrie se makro omgewing te
bepaal. Vir die bogenoemde analise is 'n tegniek soos ontwikkel deur Thompson en
Strickland (1998: 68) gebruik.
Die omvang van die makro omgewing in hierdie minitesis is beperk tot die Suid-
Afrikaanse omgewing. Die uiteindelike ideale strategie sal al die relevante uitdagings
van die industrie aanspreek.
Die industrie en kompeterende analise het belangrike dominante ekonomiese
eienskappe blootgelê. Markgerigte kompetisie is gekonsentreerd in die land se
ekonomiese enjin, naamlik Gauteng, maar streeks gebaseerde vervaardigings aanlegte
lei gewoonlik tot 'n verbeterde mark aandeel in 'n spesifieke streek. Die produk reeks
bestaan uit honderde gekleurde, gedrukte en gelamineerde houers, maar die grootste
kompetisie vind plaas oor slegs 'n paar plat, wit vleis bakkies - wat ook die grootste
volume verkope in die industrie beslaan.
Die groei tempo was organies vir die laaste paar jaar, hoofsaaklik as gevolg van die
volwasse stand van polistireen skuim produkte en die bekendstelling van alternatiewe produkte. Die eksterne makro ekonomiese omgewing het ook nie bygedra tot
bogemiddelde groei nie (BBP in Suid-Afrika het tussen I% en 3% gewissel vir die
laaste paar jaar).
Vyf produseerders van polistireen skuim houers ding mee in die mark, en twee van
hulle besit 80% van die totale mark aandeel, alhoewel hulle ook die verste vanaf
grootste mark, naamlik Gauteng, is. Kliënte word in twee groepe verdeel, naamlik
verspreiders en eind-gebruikers. Klein produseerders maak meestal gebruik van
verspreiders omdat hulle nie oor hulle eie verspreidings kanale beskik nie. Groter
produseerders beperk die gebruik van verspreiders om uiteindelik potensiële koopkrag
van verspreiders te beperk.
Vaste kapitaal, asook lopende kapitaal om ongeveer 5% van die mark te bekom, is
ongeveer R10m. Die industrie profyt variëer tussen verliese tot oorgrote profyt in
sommige jare. Hierdie variasie vorm 'n afbrekende sirkel, aangesien oorgrote profyt
potensiële nuwe produseerders aantrek wat dan weer tot prys oorloë lei.
Mededinging tussen kompeterende produseerders is oormatig sterk, spesifiek
wanneer nuwe produseerders die mark betree. Alhoewel prys verlaging 'n redelike
kru metode is om markaandeel te bekom, word dit amper uitsluitlik gebruik.
Alternatiewe, duurder vervangings produkte is nie werklik 'n gevaar vir
polistireen skuim produkte in Suid-Afrika nie, aangesien prys die belangrikste
element is. Geen ander verpakkingsmedia kan meeding met die toepasbaarheid, lae
koste en sterkte van polistireen skuim nie. Slegs in sekere wel-gestelde segmente van
die mark kan alternatiewe produkte 'n minimale impak op die polistireen skuim mark
toon.
Die mag van verskaffers in die industrie is beperk, aangesien daar 'n geweldige
oorkapasiteit in die land is en omdat daar geen oorskakelingskoste bestaan wanneer
daar van een verskaffer tot 'n ander geskuif word nie. Die mag van kopers, en
spesifiek die wat in grootmaat koop, is dus redelik sterk.
Die hoofdrywers van verandering sluit in sterk beweging in mark pryse, produk
innovasie, tegnologiese veranderinge, toenemende globalisering van die industrie en veranderende sosiale standaarde. Variëerende beweging van markpryse is by verre
die belangrikste en het ook die grootste effek op industrie profyt, aangesien die hele
produk reeks geraak word. Die laaste vier drywers affekteer meestal handelsmerk
produkte en spesialiteits produkte.
Strategiese groep kaarte, gekombineerd met 'n indiepte analise van elke
produseerder, het aangedui dat die twee grootste kompeteerders, Kohler Versapak en
Atlantic Forming, definitief in die sterkste posisie is vanaf 'n finansiële oogpunt
gesien. Alhoewel negatiewe punte soos korporatiewe sloering, aandeelhouer druk en
geografiese posisie teen die twee mededingers tel, sal blote finansiele mag om prys
oorloë te deurstaan hulle die oorhand gee.
Met die huidige hoeveelheid oorkapasiteit in die mark moet daar uiteraard
konsolidasie in die vervaardigings industrie plaasvind. Dit is waarskynlik dat een van
die groter spelers (Kohler Versapak of Atlantic Forming) van die kleiner mededingers
mag bekom in 'n poging om die mark te stabiliseer.
Die mees belangrike sleutel sukses faktor is die vermoë om polistireen skuim
bakkies teen die laagste koste te vervaardig. Die afwesigheid van oorskakelingskoste,
die aanwesigheid van prys oorloë en vervaardigings oorkapasiteit is almal oorsake
van die genoemde sukses faktor. Ander minder belangrike sukses faktore is
verspreidings verwante (om nabyaan die mark te wees is 'n voordeel) en tegnologie
verwante (om handelmerk produkte en moderne funksionele produkte te kan
ontwikkel) faktore.
In die mark se huidige vorm is daar nie 'n vraag-aanbod balans nie, en lyk die
industrie nie aantreklik nie. Alhoewel negatiewe eksterne kragte soos omgewings
druk beperk is, is groei potensiaal ook beperk en kompetisie agressief.
Opsommendergewys het geen van die mededingers ander metodes as prys verlaging
probeer gebruik om mark aandeel te beskerm nie. Vanaf 'n geografiese oogpunt
gesien, is Airshield en Mainpack die beste geposisioneer, maar hulle het nie die
finansiële momentum om hulle posisie optimaal te benut in terme van klaar produk
verspreiding en rou material aankope nie. Atlantic Forming en Kohler Versapak het hulle produk reeks uitgebrei na lae profit en verlies-lyende produkte, terwyl ander
mededingers gefokus gebly het op 'n paar hoë volume items. Dit lyk asof dit beter
sou gewees het vir die groter spelers om bestaande bronne te gebruik het op ander
winsgewinde media as om verder uit te brei in polistireen skuim.
| Identifer | oai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:sun/oai:scholar.sun.ac.za:10019.1/49688 |
| Date | 12 1900 |
| Creators | De Klerk, Hendrik |
| Contributors | Burger, J., Stellenbosch University. Faculty of Economic & Management Sciences. Graduate School of Business. |
| Publisher | Stellenbosch : Stellenbosch University |
| Source Sets | South African National ETD Portal |
| Language | en_ZA |
| Detected Language | English |
| Type | Thesis |
| Format | 58 p. : ill. |
| Rights | Stellenbosch University |
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