Porter 5 Force

Topics: Selangor, Plastic, Vermiform appendix Pages: 11 (3417 words) Published: July 12, 2011
Industrial Analysis

The Plastic Pipe Manufacturing Industry

Prepared by
Lau Yee Leong, Mike

Master of Management, Taylors University Lakeside

No.| Description| Page Number|
| | |
1.0| Market Assessment| 3|
| | |
2.0| Internal Rivalry| 4|
| | |
3.0| Barriers to Entry| 5|
| | |
4.0| Supplier Power| 6|
| | |
5.0| Buyer Power| 7|
| | |
6.0| Substitutes| 9|
| | |
7.0| Conclusion| 10|
| | |
8.0| List of References| 11|
| | |
9.0| Appendices (A to W)| 16|
| | |

1.0 Market Assessment
The plastic pipe manufacturing industry makes up approximately 7% in the entire plastic market in Malaysia (See Appendix A). They are a new technology which has grown over the years as increased innovation results in more efficient and improved plastic materials, and hence better pipes (See Appendix B). The production process of plastic pipes can be found in Appendix C. Within plastic pipes, there exist many different types of plastic materials which spread out the applications for each different material type. The following pie chart shows the proportion of each type of plastic material in the Malaysian market.

Figure 1: The different types of plastic materials and the proportion in the market in Malaysia (ABS - Acrylonitrile butadiene styrene, PVC – Polyvinyl chloride, PS – Polystyrene, PP – Polypropylene, PE – Polyethylene) (Resintech Bhd., 2007)

In Malaysia, there exist many different firms that manufacture plastic pipes. Some manufacture one type of material pipe (eg. PE only), or many different types of materials (eg. PE with PVC, etc). Moreover, some offer complementary services with the sale of pipes (eg. Engineering, welding or fabrication services) or offer pipe fittings (see Appendix D). Besides that, the firms differ in terms of the size and type of pipe that they are selling (Differences of pipe size is explained in Appendix E). Examples of such firms in Malaysia can be found in Appendix F. 2.0 Internal Rivalry

The plastic pipe manufacturing industry is an oligopoly market. This is because there are a few firms who share a large market share, whereas some firms do not. Based on Polyethylene Malaysia’s sales volume proportion, it can be seen that polyethylene market share is shared among Bina Plastic Sdn. Bhd. (18.75%), Resintech Bhd. (15.625%), Spirolite Sdn. Bhd. (12.5%) and others (53.125%) (See Appendix G). Comparing other material types, Bina Plastic holds the highest market share in this entire industry as they have a high capital and reserve to be able to manipulate and monopolise some material types in this market (See Appendix H). However, in the PE market, the competition is extremely competitive between Spirolite, Resintech and Bina Plastic.

There are many factors that spur such rivalry in this industry. Firstly, there is significant cost difference between firms. For example, by being able to buy more raw materials in a bulk reduces the cost of production which allows the firm to give a lower price to compete in the market. This allows Bina Plastic to benefit as they are producing in bulk hence they reduce production and energy costs (electricity). Secondly, in the small pipe sector, technology brings in new production machines which have higher output per machine (See Appendix I). Hence, Resintech and Bina Plastic are able to reduce prices because they are able to produce more and at a faster rate to meet the growing demand which enables them to secure higher market share. In terms of product differentiation, each firm has its own profitable product sector. Resintech and Bina Plastic have a wide range of pipe sizes and materials (PP, PVC, ABS, etc.) (See Appendix J). Spirolite, on the other hand, has a more concentrated product differentiation because they only produce PE pipes and specialise more on fabrication works where there is higher value added element. Following the cube square rule,...
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