Porter 5 Forces for Classic Scenic Berhad

Porter 5 Forces for Classic Scenic Berhad

Entry

The entry into the market is governed by Promotion of Investment Act 1986 which revised to include wood based product in 2012

Tax incentive provided for R&D for wood based industry under PIA Act 1986

Companies with Shareholder of RM2.5 Million and Above or has 75 fulltime employees can register to obtain their licenses under the Industrial Coordination Act 1975

A lot of Incentives given by government to join this industry in Malaysia

Global   market demand  is  driven  primarily  by  North  America  given  the  popularity  of  wooden picture  frames  in  American  culture,  which  is  not  seen  in many parts  of  the world. As the US market is considered a mature market, the industry does not attract  too  many new  entrants  as  it  is deemed too  small  and occupying a low growth environment

Power of Input Suppliers

Supplier are Rubber Estate Holder in Malaysia. Their consent to fall trees aged 20 years and above unable to produce rubber is sufficient to supply the rubberwood for the wood industry

Price of rubber wood are lower compared to other woods in the market

More Mills are opening up for Wood in Malaysia but rubber plantations are reducing. Old rubber trees are being fallen for Palm Oil. Supply may be low in the future and affect pricing

Other inputs besides rubber can be used thus besides rubber wood according to CIMB report CSB also uses other 4-5 types tropical hardwood available in Malaysia

Cost of tropical hardwood increasing yearly and only 26% of CSB earnings was used to buy Timber

Power of Buyers

Buyer for CSB products are mainly overseas at US. US customers do like to use wood frames

CSB’s average selling price of its picture frames Is about US$0.65 per linear ft. Its customers sell the same product to the endconsumer at 10x higher ~US$6.5

0 per linear ft

Industry Rivalry

4-5  large scale  global  players  in the wooden picture  moulding  industry.  There  are  two  in  Malaysia  (CSB  and  E-Wood Moulding), two in Indonesia and one in China. During the global financial crisis many  of its  North  American  competitors went  bankrupton  account  of  their high cost basesIn  recent years, China has  also  lost  its  competitive  edge  given its high labour costs