Page 17 - CIMA MCS Workbook May 2019 - Day 1 Suggested Solutions

SUGGESTED SOLUTIONS

sustainability includes the prefabricated modular home building companies which is
therefore of increasing relevance to JORD. Controls over the use of “greener” materials
purchased from environmentally friendly sources, reduction of transportation fuel and
minimising material consumption, for example, are all extremely important. A sound and
visible policy in these key areas could be a major differentiating factor among competitors.

 From an ethical perspective there is also considerable concern as to the treatment and
payment of workers, particularly given the potential of moving production to low wage
economies, fair treatment of suppliers in negotiations and when sourcing new products
from overseas. This is a key issue for JORD and forms a significant part of the mission
statement.

 legal influences – are another important factor that affects the profitability and
performance of brands such as JORD. Products selling in the market are subject to laws
related to product quality and safety and strict controls are necessary. It is the duty of each
employer to ensure that each employee is fully trained to carry out their tasks safely, a key
objective of JORD. Changes in laws and regulations affecting such processes can result in
the damaging financial effects of compensatory claims for failed, faulty or poor quality
products. Similarly intellectual property, advertising legislation and employment law must
be considered as well legal processes in other countries should international expansion be
considered. Ignoring such aspects can only serve to damage the JORD reputation and
brand.

Porters Five Forces:

 New entrants – (low threat) new players may enter the industry but to compete against the
major players would be difficult. Initially, a significant investment will be required to set
up the manufacturing facilities, distribution network and to hire skilled staff, which may
be a significant barrier to entry. Brand image is a major competitive advantage for the
existing brands and unless a new brand brings an innovative and differentiated product to
the market, chances to gain a market share are low with brand image and reputation
major challenges for new players. Any new brand would have to focus on design and
product quality. Similarly access to raw material can be easy but then achieving
economies of scale difficult for small players. Moreover, penetrating new markets is not
easy e.g. some governments have applied high import taxes to discourage foreign brands.
Having said that, the threat of cheap budget operators still remains.
 Rivalry amongst competitors – (high threat) the number of recognised and influential
brands is low. Having said that the intensity of the rivalry between the top competitors
will be intense and while the industry is large and fragmented, it has matured, intensifying
the competition for market share. The level of brand loyalty will be driven by the quality
of the product, service and after care provided. Different brands tend to target different
market segments but in recent years this distinction has become less defined and in many
cases they now overlap. Brands compete on the basis of price, design, quality, technology,
customer safety and several other points. Competition in the prefabricated/modular
house manufacturing industry is therefore fierce although the experience (learning) curve

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