3.0 Industry Analysis of Poh Kong Holdings Berhad (PKHB)
3.1 Threat of New Entrants: Moderate to Low
This industry requires a large amount of capital to operate the business, such as acquisition of shop lot, specialized plant and machineries to manufacture jewelries, high securities costs and so on. The inventory itself such gold and diamond is very expensive to afford compared to other industries. Besides, this industry has created a government policy's barrier by Bank Negara Malaysia (BNM) so there is essential to get approval from the Federation of Goldsmiths and Jewellers Association of Malaysia (FGJAM). Furthermore, the competition in this industry is strong as there are listed jewelry companies including PKHB and many private companies…show more content… Silver, brass and gemstones are the substitute products, yet they are not rivals for PKHB in the gold and diamond industry. Besides, imitation jewelries such as poly-plastic or non-precious metals jewelries such as stainless-steel have provided consumers with an alternative at a cheaper price. However, this threat is mitigated as gold has inherent investment value, which Malaysians treat gold and jewelry as a form of investment and as daily-use accessories, and they are no longer luxury items (“Poh Kong mulls selling gold for investment,”…show more content… Therefore, they introduced brands like Tranz, Oro Bianco and Disney Jewellery in targeting younger generations (Lee, 2010). However, several firms had carried out the similar strategy, for instance Tiffany & Co., Tomei’s My Diamond, Pandora and so forth. PKHB has a fully-fledged manufacturing plant with its own gold refinery system (Lee, 2010), as similar to other jewelry manufacturers in Malaysia. Therefore, high barriers to exit due to the expensive highly-specialized equipment lead to high rivalry among the existing players.
In short, Malaysian jewelry industry is quite unattractive although there are high barriers to entry for new entrants and high industry growth rate. Consumers in this market have high bargaining power because they have lots of alternative and relatively low switching cost which may indicate low customer loyalty. Besides, this industry has been dominated by top competitors that occupy most of the market shares; it is unlikely for others to enter into this intense competition because they are lack of capability to