CIS in F&N Malaysia: crowd sourcing as a recommendation

F&N: BUSINESS CONTEXT

Fraser and Neave, Limited (F&NL) has its roots from more than a century ago, when two entrepreneurs, John Fraser and David Neave, decided to diversify from their printing business to a water production business in Southeast Asia in 1883 (SuperBrands.com, 2012). The company further expanded its production to include brewing in 1931, diaries in 1959, the manufacturing of glass bottles in 1972, property development and management in 1990, and printing and publishing in 2000 (SuperBrands.com, 2012). Today, F&N is the leader in pan-Asian consumer goods, with dominance in the food and beverage, property, and printing and publishing industries (SuperBrands.com, 2012). The company is headquartered in Kuala Lumpur, Malaysia.

PRODUCTS PROVIDED BY F&N

As a leader within the beverage industry, F&N is the owner of many leading brands in the market, with a diverse range of foods and beverages. The brands under F&N are:

100 Plus -  which was launched in 1983, has become the number one isotonic brand in the Asean market and serves over two million consumers daily. Synonymous with providing optimal hydration to aid its customers, 100Plus also encourages customers to go further, seek more success, and overcome their limitations (SuperBrands.com, 2012).

F&N Sparkling Drinks -  this represents effervescence and fun and is marketed mainly to the young consumer market with the intention of cheering up occasions during Malaysia’s festive period. The sparkling drinks are marketed as a relaxing, no-sugar drink for health-conscious customers (SuperBrands.com, 2012).

F&N Seasons: This range of products derives goodness from natural sources to enhance well-being. Both its Seasons and Asian Drinks offer consumers a range of products to choose from, including flavored, thirst-quenching, refreshing, Asian heritage, and goodness-inspired drinks (SuperBrands.com, 2012).

F&N Ice Mountain Bottled Water—this is the number one brand of water in Singapore and is also available in other Asean markets. It is trusted for its quality, and it’s now the essential daily hydration for most consumers within the market (SuperBrands.com, 2012).

F&N Magnolia, Daisy, and Farmhouse Milk—this is also the leading mild brand in Singapore, with a pure, natural, and trusted positioning as the most widely used milk in Malaysian coffee chains. The Milk brand delivers healthy and nutritious products that meet the ever-evolving needs of the Malaysian market. The Magnolia brand also offers a refreshing and delicious range of yogurt smoothies with live cultures and juicy fruit bits (SuperBrands.com, 2012).

F&N Fruit Juice: The juice brands are made from hand-picked and freshly squeezed juice. The Fruit Free brand offers "No Sugar Added" fresh fruit drinks with 100% pure fresh juice and natural fruit bits. This mouthwatering brand offers customers the opportunity to enjoy a wide variety of natural and sweet fresh fruits (SuperBrands.com, 2012).

Malaysian diary market

In accordance with Stanton (2000), Malaysia (with a population of 28 million) was one of the countries in Asia to return from growth after the Asian economic crisis of 1997–1998. In 1999, Malaysia reported an economic growth of 5.8%, with local analysts forecasting economic growth in the region of 7.5% to 8.5% in 2000. Currently, Malaysia is the third wealthiest country in Southeast Asia after Singapore and Brunei.

In Southeast Asia, Malaysia has one of the most sophisticated markets when compared with other countries such as Indonesia, Thailand, and the Philippines, as the country's consumer base comprises both urban and rural areas (Stanton, 2000). The country's middle-to-upper income group accounts for 61% of the total population, and they are key market targets for the entire range of dairy products available today.

Figure 3: Percentage of Malaysians that regularly purchase dairy products

Source as adapted from: Stanton (2000)

From the above figure (3), it can be inferred that the percentage of the population consuming dairy products is high. Thus, the Malaysian market provides a great atmosphere for the sale of dairy products. This can be seen from the number of global brands that manufacture, market, and sell dairy products in the country.

2.4 DAIRY F&N MARKETS

While it was disclosed above that F&N offers numerous consumer products, this paper will focus on the dairy products only. This is because the comparing companies all specialize in dairy products, and focusing on a single product will help create an equal base for the arguments and strategies deployed by all the companies. F&N dairy products are heavily available in all Asean countries, with strong presences in Thailand, Malaysia, Singapore, Vietnam, and Brunei Darussalam. In Malaysia, the brand is the market leader in evaporated and condensed milk, and in Singapore, it is the market leader in liquid milk, pasteurized juice, pasteurized soya, and pasteurized tea. The dairy products also occupy major market shares in other Asean countries.

Since 2007, the company has taken advantage of its ever-expanding Pan Asian market, with the dairy business section expanding by over 200% and bringing home RM1 billion in additional revenue per year. As a result, F&N is now the largest canned milk player in the ASEAN region, with brands such as Carnation, Milkmaid, Ideal, Cap JunJung, Milo UHT, and Bear under the company’s belt. In addition to this, the company has acquired production facilities located in strategic positions in Thailand.

The dairy division recorded RM1,036 million in revenue in 2010, which declined by 7% in comparison with the previous years. This decline was caused by factors such as an increase in the price of their products, intense price competition in the Malaysian market, and the influence of 32 OEM brands within the market. These OEM manufacturers are also believed to be able to acquire subsidized sugar following the elimination of subsidies on sugar for companies such as F&N. Export revenues also declined due to price competition.

The overall profit closed at RM53 million in 2010, which is a 46% decline from that of 2009. The most likely cause of this is a price decrease as the company discounted to protect its market share in the face of intense competition.Thus, the cost incurred to cover the rise in raw materials such as sugar was covered by the profit as companies with subsidized sugar engaged in intensive price competition to gain market share. Figure 3 shows a more detailed representation of the overall market analysis.

Figure 4: Financial performance of the dairy division (2009–2011)

Source: adopted from Bursa Malaysia (2012).

As shown in the graph above, 2010 was a difficult year for the dairy division, with the main cause being the removal of government subsidies from 13 major industrial players, including F&N.This resulted in a hefty increase in the price of sugar and thus gave competitors with subsidized sugar the opportunity to engage in high-priced competition. However, canned milk remained a key contributor in the diary division, holding control of 60 percent of the market share for both sweetened condensed and evaporated milk. With a strong marketing campaign, the company was able to improve its market share in the milk and juice segments.

The diary division is expected to continue managing rising costs by leveraging its market leadership, introducing more value-added products, and extracting production efficiencies. In terms of capacity and manufacturing effectiveness, the completion of the new plant in Pulau Indah is also expected to contribute to long-term growth.

2.5 F&N competitors

While there are many competitors in the industry, the two chosen for analysis are Dutch Lady and Nestle.The reasons are that these two companies are major players in the dairy industry and they maintain a significant market share of the Malaysian dairy market.

2.5.1 Malaysian Dutch Lady

Dutch Lady Milk Industries Berhad (Dutch Lady Malaysia) was incorporated in 1963 and is the current dairy products leader in Malaysia. It was listed on Bursa Malaysia in 1968 as the first milk company to be listed in the Malaysian stock market. Its holding company is Royal FrieslandCampina, the biggest dairy co-operative in the world and an international corporation from the Netherlands (Dutch Lady, 2012).

The company offers a wide range of quality dairy products for both Malaysian and international markets. Its ability to deliver high-quality products is the result of the company's strong belief in innovation and constant change in its business processes in order to better serve the market.On a global scale, it was the first company to market a Growing-Up Milk powder formulated for children between 0 and 3 years old. This particular brand is marketed in Malaysia as Dutch Lady 123, Dutch Lady 456, and Dutch Lady 6+. The company also holds an unbroken record as the preferred milk brand in Malaysia since 1999 and is recognized as one of Malaysia’s more valuable 30 brands as awarded by Readers’ Digest Magazine (Dutch Lady, 2012).

2.5.2 NESTLÉ

Nestlé's commitment to providing quality products to the Malaysian market dates back 100 years. Nestlé started operating in Malaysia in 1912 as an Anglo-Swiss condensed milk company in Penang. In 1939, Nestlé expanded to Kuala Lumpur as the company continued growing. The company established its first factory in Petaling Jaya in 1962 and currently undertakes its manufacturing process in 7 different factories across the country, with its head office located at Mutiara Damasara. Nestlé Malaysia was listed on Bursa Malaysia in 1989 as one of the dairy product manufacturers. The company currently employs more than 5,000 workers, and its brands are trusted household names. Besides dairy products, the company has other brands such as MILO®, NESCAFÉ®, MAGGI®, NESPRAY®, and KIT KAT®.

Just like Dutch Lady, Nestlé Malaysia is one of the main manufacturers and F&N’s competitor. The company leverages economies of scale and its global brand image to build a highly competitive atmosphere within the Malaysian dairy industry. Having been in service in Malaysia since 1912, the company also understands the market to a great extent and has deployed necessary marketing tools meant to increase their market shares. Nestlé also maintains a high presence in other Pan Asian countries; thus, competition between the two brands is on a global level rather than just in Malaysia.

Part 2: Analysis of business challenges using the management, organization, and technology model

From a business point of view, an information system is an organizational and management solution that is based on information technology in relation to the challenge facing the organization in the external environment. Laudon & Laudon (2006) presented the information system as an important tool in organizational management by stating that it is a necessity in the present business environment in the sense that it helps in the creation of understanding and acceptance from which the business process is coordinated, managed, and integrated in order to yield the best results. While "information system" is a word that seems to be synonymous with computers, the authors presented a clear distinction between these two concepts, and the distinction is based on the understanding that a computer is only related to peripheral systems of a technological application, while "information system" is an ideology used to define the process of organizing processes in the company in such a way that information is well disseminated in order to ensure that employees and managers have the necessary understanding of the business process and are capable of ensuring that the business process yields the most significant results through a well-managed system that is based on information availability. On that note, the authors presented a model for understanding how information systems can be used to understand the issues facing companies and how these companies can solve these issues.

Figure 1: Information Systems in Organizations

Source as adapted from: Laudon and Laudon (2006)

Organizational aspect of information systems: as described by Laudon and Laudon (2006), information systems are very important in organizations and they represent an integral part of the functionality of the organization. Realistically, a number of organizations, such as the credit reporting firm, cannot exist without an information system. The key elements of an organization, as described by the authors, are the people in the system, the corporate structure, operations processes, politics, and culture.

Organizations are made up of different levels and specialties, with these levels undertaking their designated tasks independently. While there are differences in terms of levels and specialties, all these levels are bound by the same goal of increased productivity and moving the organization towards enhanced profitability through an increase in their ability to meet the demands of customers. On that note, it becomes very clear that there is a need to establish a system in which the necessary information needed to move the organization forward is readily available. This information is communicated in the form of increased information awareness and adoption.

On the side of F&N, the company needs an information management system in order to ensure that the organization's processes are well integrated and the system is well positioned to meet the needs of customers. Currently, the company understands this issue and has adopted an information system in its organization. While the company adopts information systems, it must be noted that these systems are used independently in the different departments, and such an approach means that information circulation is limited within departments.

As noted by Laudon and Laudon (2006), there is a need for organizations to be integrated in such a way that each department is well positioned to understand the processes going on in other departments, as it will help them organize their own activities. For instance, the production department needs to know the amount of goods available in the warehouse, and such information will be used to determine the extra amount to be produced. Without this information, the production department might either be overproducing or underproducing, and it will eventually be detrimental to the organization because it will either be unable to meet the demands of customers or overproduce more than is demanded by customers. As such, the lack of integration means that the company is weak in terms of adopting an information system for the organization of its business processes.

The information system's management aspectLaudon and Laudon (2006) noted that the management of any given organization calls to mind the challenges in the business environment, and they use the understanding gained from such challenges to set the strategy for responding to business issues and allocating the necessary human and financial resources in order to achieve the set business strategy as well as coordinate the work process. Through the course of their undertakings in the business process, they will have to exercise responsible leadership. The authors made it known that the job of management is to "make real sense" of the many situations facing the organization and define the right course of action to be taken in order to solve these problems.

Basically, information systems play an integral role in management because managers will not manage what is already existing, but instead have to create new and innovative products and/or services that are capable of meeting the sophistication of customers’ demands, which will eventually lead to an increase in customer loyalty as customers will be able to associate their brands with higher value. As such, it becomes clear that the information system is a very important aspect of the management process, and this is based on the notion that it helps the management to understand the issues facing the organization and draft the right measures to regulate these issues and ensure that the outcome from their management process yields enhanced profitability for the organization.

On the side of F&N, it is clear that their case is not different from what is available in other organizations, and this calls on the need for the company to utilize information systems in its management process. The approach will involve understanding issues in the external environment and developing the right strategy to meet these issues. As such, the company needs to keep a record of their business processes, the issues facing the company, and the solutions used to solve these issues. This will be used for future references when such issues recur. Although the company adopts this format of management in the sense that they keep a clear record of their past business processes, as can be seen in their annual report, it must be noted that there are not set guidelines or rules that define how the management will make use of these reports, and as such, it is not clear whether the management actually makes use of it. On that note, it can be stated that just having the historical record that will aid the management process is not enough, and the company needs to have a clear guideline or set of rules on how these records will be used in the management process.

The technology aspect of information systems Laudon and Laudon (2006) noted that information technology is one of the tools that managers adopt to cope with change in their business environment. In view of elaborating on such a statement, the authors made known that computer hardware is the physical equipment used in inputting, processing, and outputting business activities in an information system. The hardware was described as being made up of the following: a computer processing unit; various inputs, outputs, and storage devices; and physical media used in linking these devices together.

In information system management, the technological aspect involves understanding the best way to collect data, process the collected data into information, store the processed information, and make the information readily available. This implies that there is a need for companies to call to mind the need to design a system solution in which vital information in the company is kept properly for future use and data that seems complicated is processed in an easy-to-understand format. For instance, the company can gather research data with the computer and process the data with SPSS in order to present a clearer understanding of the concepts being discovered in the research and how they are related to the business process. Basically, the understanding presented in this view is the need to use technology to define new approaches to management by integrating technologies into the management process of the company. Technologies, as noted by Laudon and Laudon (2006), are very important in the organization process, and the level of importance is based on the understanding that they help define a more precise approach to management by reducing the issues that might result from human error.

On that note, it is important that F&N adopt technologies in their business processes, as they represent a clear approach to management. Technological integration is very important in the company as it will help to preserve sensitive information about their production process and make this information only available in the production unit in order to eliminate the potential of their competitors gaining access to such information. Clearly, it can be seen that technology is an important aspect of the business process and that it helps determine the best approaches to management in the company.

From the above analysis, a number of issues were noted in the case of F&N, and the issues are related to the lack of an appropriate information system in the company. These issues include the fact that the company is not able to integrate the information systems used in its organization, and there are not clear guidelines on how the management will adopt information system management. These issues indicate that the company is not well positioned to reap the full benefits of successful information system adoption in its business setting in terms of increasing productivity and profitability.

Part 3: Crowdsourcing: Background and Recommended Strategy

What exactly is crowdsourcing?

As defined by Laudon and Laudon (2006), crowdsourcing is a form of business strategy in which the company makes use of open source software in order to make their business processes available to the public and understand the best approaches by which such processes can be improved. Crowdsourcing is quickly becoming an easy way to gather information in organizations, as it allows companies to source information right at their desks without having to pay for it or take on the extra task of organizing research programs.A good example of crowdsourcing as demonstrated by the company comes in the form of the approaches adopted by Procter & Gamble, in which they host their operation processes online and seek opinions and views about how such processes can be improved through open comment boxes where they can comment on the best approaches to enhance the production process.

Business opportunities and benefits from crowdsourcing

A number of opportunities can be obtained from crowdsourcing in the sense that the process involves outsourcing the business operations of any given company through open source systems and seeking out the right software or technology to improve their business process. On that note, benefits come in the form that the company will be able to gather a higher volume of solutions for any given problem as the solutions will be presented by numerous individuals from different market settings. On that note, it becomes clear that the company will benefit hugely by adopting a system that keeps track of these solutions and sorts them in the future when they experience similar problems. Considering the fact that a vast volume of solutions emerge from such a business strategy, it should also be noted that the company will be able to find the right solutions to business issues by combing the solutions provided by the crowd.

Problems and drawbacks of crowdsourcing

While crowdsourcing has been linked to a number of benefits, it is important to understand that there are also setbacks associated with such approaches. These setbacks come in the form of incompetent responses. Since it is an open system, anybody can offer his or her own opinion, and this increases the level of incompetent responses from responders who are not familiar with the concept being discussedpetent responses. Since it is an open system, anybody can offer his or her own opinion, and this increases the level of incompetent responses from responders who are not familiar with the concept being discussed. This is a serious issue, as the adoption of such opinions might actually increase the problems facing the company. However, this can always be solved by filtering the opinions.

Recommendation for F&N

Considering the fact that sourcing solutions to the problems facing the company might lead to the company having to incur high expenses, it is understandable that finding the best ways in which the company can reduce such potential is inevitable. On that note, it is recommended that F&N adopt crowdsourcing as the right formula for understanding issues facing the company and how such issues can be handled. The best approach for such practice will be based on similar concepts as those adopted by P&G, which is also a similar brand name in the sense that they function in the same market and offer competitive brands. The approach involves hosting their production process online and having people across the globe present their own opinions about how such processes can be enhanced. Through this medium, the company will be able to access a high volume of information related to the issues they currently face and adopt this information in the process of achieving the set objectives of solving these issues. Basically, it can be concluded that crowdsourcing is very important to F&N, and the fact that a competing brand in the form of P&G has experienced tremendous growth with such a business process now means that it will also be very beneficial to the company.

Appendix

Activity A: Journal

A management information system is becoming a key tool in the management settings of modern organizations, and the high level of importance is being drawn from the fact that companies need to have a record of their past approaches to business in order to have a well-defined environment from which they will be able to ensure that their present practices are not done in a way that yielded little success or high failure in the past. Basically, management information systems as they have been defined entail the new definitive approach to management in the sense that managers can make use of their historical information to undertake their present tasks, and this means that companies are well positioned towards eliminating the issues that have been linked to poor performance in the past.

On that note, this paper was developed to understand the concepts of system information management in F&N Malaysia. The reason for choosing the company is based on the understanding that it is a very popular brand in the country with numerous customers and products available in the market, which makes it inevitable for the company to function without communications and information systems.

On that note, the paper was developed to understand issues that the company has faced in the past in relation to communication and information systems and then to understand how MIS would have helped improve the company's performance if such an application had actually been adopted in the company. As such, extra time was taken to gain a background understanding of the operational processes in the company and how these processes are interdependent, then create the right atmosphere to understand how the integration of CIS would help the company's performance.

Basically, the research process required a lot of study, which meant that the entire study took a month. The research was developed around four view points: understanding the business process in the company, understanding issues in the company, understanding how these issues would have been improved with CIS, and recommending the best practices.

References

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Bursa Malaysia (2011), “Business review of listed companies.” Available at: http://www.bursa.com.my [Accessed on: 12 – 08 – 2012].

Dutch Lady (2011), Annual Report. Available at: http://dutchlady.com.my [Accessed on 12-08-2012].

Dutch Lady (2012), “Media: Release: Dutch Lady Malaysia Posts Record Results for Q4 and Fy11.” Available at:http://www.dutchlady.com.my/sharedfiles/Media/2012/20120228_PRelease_Q4_FY11.pdf [Accessed on: 11-08-2012].

Nestle Malaysia (2011), Annual Report. Available at: http://www.nestle.com.my [Accessed on: 12-08-2012].

Laudon, K. &Laudon, J. (2006), Management Information Systems: Managing the Digital Firm, 9th ed. Prentice Hall. Available at: http://www.ta-u.net/up/uploads/files/ta-u.com-27fe6a3b984.pdf [Accessed on: 10/06/2013]

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