The company that I have chosen is SP
Setia Bhd Group. It was founded in the year 1974, their President and CEO is Tan Sri Liew Kee Sin and it is a company
where their primary business drive and their focuses are on property
development. Construction, infrastructure, wood-based manufacturing and trading
have been developed to maximize synergy for efficiency, cost effectiveness and
innovation (Spsetia.com.my, 2013). Their quality of products and the
sensitivity towards their customer’s needs and wants have earned them a
reputation as a property developer. They worked by four simple words, live,
learn, work and play into all their projects to express their development in
creating environments that perfectly balance the four areas (Spsetia.com.my, 2013).
They have three distinct product ranges as well; they are Setia, Eco and Duta.
In Setia, they are about township range, while in Duta, they successfully evolved
their brand to encompass the market segment and in Eco, the name says it all,
they are market their products that are environmental-friendly.
SP
Setia was being incorporated in the year 1974, but even though it was
incorporated in 1974, it really began in the year 1996 where they really
focused on their business in property development. Their first property
development was at Pusat Bandar Puchong (Puchong Town Centre), which was
700-acre of the town. They have set a standard for their projects, which was a
well-planned development that balances both affordable quality residential and
commercial properties. Now, SP Setia is well established in all three
economic-centers of Malaysia, which are Klang Valley, Johor Bahru and Penang (Spsetia.com.my, 2013).
They have also make their presence in the East of Malaysia where they have a
building of a state-of-the-art transportation hub in Kota Kinabalu, Sabah which
is called Aeropod that is located at Tanjung Aru (Spsetia.com.my,
2013).
With
strong demand for commercial and investment grade properties, SP Setia Group
has expanded it commercial sector with commercial projects such as the
SetiaWalk Puchong. This makes them not only a developer for housing projects
but also commercials. In July 2009, they launched their first luxury high-rise
condominium that is called the Setia Sky Residences, which is located in Kuala
Lumpur City Centre. In order for them to grow regionally, SP Setia commence on
their first international venture in Vietnam during 2007 where they joined
forces with Becamex IDC Corp and developed the EcoLake at MyPhuoc Industrial
Park (Spsetia.com.my, 2013). Not only has it expanded its business
in Vietnam, now, they have businesses in Australia, Singapore and also a huge
development in London called the ‘BatterSea Power Station’.
Market Structure
The
market structure for SP Setia would be monopolistic competition. Monopolistic
competition is where firms have a common market structure but each one sells a
slightly different product and they have many competitors. Like for example,
property development, they offer the same type of product but each one of their
product has something different and has their own element of uniqueness but the
firms are all competing for the same customers.
In
a monopolistic competition, there are a few characteristics, such as, large
number of firms, easy of entry, differentiated products and local advertising.
It is true that property development has large number of firms. They have many
firms in the industry but each firm has a small amount of share of the market,
therefore firms do not need to worry much on how their rivals will react with
their decisions and on the other hand, what their rivals choose to do will not
influenced by what it does (Wride and Sloman
et al., 2012). Likewise, SP
Setia isn’t the only property development in Malaysia, Malaysia have other
property developers too like, Sime Darby, See Hoy Chan, Sunway Property, Dijaya
Group, MK Land, Berjaya Group, Glomac, Mah Seng and many more. But what other
firms do to market their product, it will not effect SP Setia and what SP Setia
choose to market their product, will not effect the other firms as well. This
can also be called as independence whereby the decision of one firm will not affect
the demand curve of other firms in the market and they will have the abilities
to compete with other firms.
Next,
property development is also easy of entrance or another word, barriers to
entry and exit is low. This is because the firms are small, thus it is easy for
new firms to enter and/or existing firms to exit. Property development has
differentiated of products as well, not all products in this firm are the same.
It may be categorized under the same type of development but firms in this
industry do not produce identical products. The differences are based on four,
they are, physical product differentiation, marketing differentiation, human
capital and differentiation through distribution (Economicsonline.co.uk,
2013). Physical product
distribution is about the size or the design of the products, the service
associated or the name of the products. It may not always be real differences;
consumers can also perceive it differences. Like for example, SP Setia have a property
launched that is an eco houses in Klang Valley called ‘Setia Eco Park’, other
firms may not have the same concept of their product as well as their name. In
marketing differentiation, it is about the packaging of the products, firms
differentiate their products by distinctive packaging. Next, the human capital
differentiation is about the skill of the employees and the level of training
they received as well as their uniforms. Likewise, SP Setia has different type
of training for their employees compared to other firms and they have their own
uniforms to differentiate themselves with other firms. Also, differentiation
through distribution is where the distribution of the product is via email or
through Internet. SP Setia has come up with a method where customers can sign
in to their newsletter to get news about their upcoming projects through email.
Other
than that, it has local advertising too, property developers like SP Setia
frequently advertise their products because their firms are small that’s why it
is done on a local level. Developers usually advertise just to help emphasize
the differences to consumers (Inflateyourmind.com,
2013). SP Setia has also
control over the price, they are the price makers because they can charge their
own price, either higher or lower and do not need to take it from the industry.
Therefore, this shows that the demand curve will be downward sloping.
In
the short-run equilibrium, supernormal profits are possible for SP Setia to
earn, which is the shaded area and profits are maximized too where the marginal
cost equals to the marginal revenue. As new firms are entering the market, the
demand of SP Setia products will become more elastic which will pull down their
price and the demand curve will shift to the left (Economicsonline.co.uk, 2013). But with this, SP Setia will not be able to earn short-run
profit. In order for SP Setia to earn profit depends on the strength of their
demand, the more the demand curve move to the right and is more relative to the
average cost curve and the less elastic the demand curve is, the greater the
short-run profit (Wride and Sloman et al., 2012). Therefore when if SP Setia faces a
little competition and their products are differentiated with other firms or
their rivals may be able to earn supernormal profit. Looking at how strong the
demand is for SP Setia, I’m sure they are not worried about competitions.
SP Setia definitely has strong demand, in the year 2010, their sales have hit up to RM900 million in under five months. President and CEO Tan Sri Liew Kee Sin stated that their achievement shown that they are on track to meet their sales target, which is RM2 billion for the financial year (Malaysiapropertynews.com, 2010). Liew added that they’ll be the first Malaysian property to have RM2 billion sales (Malaysiapropertynews.com, 2010). Which in fact, was true. They were also interested in getting more opportunities with collaborations with government-linked or government holding companies and the group was keen on bidding the government land that would be tendered out. The sales have never dropped for SP Setia in fact it was increasing.
As of 2012, SP Setia sales
target was RM4 billion and during their first half of the year, they have
already made 1.8 billion, which is a 28% increase yearly. They have indeed
exceeded their sales target.
SP
Setia has their own wood industries as well, which is called Setia Wood
Industries Sdn Bhd. They are focused on supplying woods to the construction of
their projects, as well as other local construction industry. They are well
known for their fire-rated doors, windows and mouldings and many more. With
this, SP Setia doesn’t have to worry about shortage of supplies because they
are basically their own suppliers. From these statements, we can say that SP
Setia is a very successful property developer. Their sales just kept on
increasing and increasing. Nevertheless, they will manage to exceed their
yearly sales target. They have even become the first property developer in
Malaysia to have RM2 billion sales.
References
References
1. Abraham, E. 2013. S
P Setia hits record sales. [online] Available at:
http://www.theedgemalaysia.com/in-the-edge-financial-daily-today/256089-s-p-setia-hits-record-sales-.html
[Accessed: 24 Oct 2013].
2. Economicsonline.co.uk.
2013. Monopolistic competition. [online] Available at:
http://economicsonline.co.uk/Business_economics/Monopolistic_competition.html
[Accessed: 24 Oct 2013].
3. Inflateyourmind.com.
2013. Section 1: Characteristics of a Monopolistically Competitive
Industry. [online] Available at:
http://inflateyourmind.com/index.php?option=com_content&view=article&id=132:section-3-united-states-federal-government-expenditures&catid=18:unit-8&Itemid=163
[Accessed: 24 Oct 2013].
4. Inflateyourmind.com.
2013. Section 2: Short-Run and Long-Run Profit Maximization for a Firm
in Monopolistic Competition. [online] Available at:
http://inflateyourmind.com/index.php?option=com_content&view=article&id=133:section-3-united-states-federal-government-expenditures&catid=18:unit-8&Itemid=164
[Accessed: 24 Oct 2013].
5. Malaysiapropertynews.com.
2010. Malaysia Property News | Property Market In Malaysia: Strong
demand boosts SP Setia sales. [online] Available at:
http://www.malaysiapropertynews.com/2010/04/strong-demand-boosts-sp-setia-sales.html
[Accessed: 24 Oct 2013].
6. Spsetia.com.my. 2013. S
P Setia: Get to know us. [online] Available at:
http://www.spsetia.com.my/corporate/get-to-know-us.asp [Accessed: 24 Oct 2013].
7. Spsetia.com.my. 2013. S
P Setia: Milestones. [online] Available at:
http://www.spsetia.com.my/corporate/milestones.asp [Accessed: 24 Oct 2013].
8. Spsetia.com.my. 2013. Property
Development - township, residential property, high-rise luxury product and
commercial developments - S P Setia. [online] Available at:
http://www.spsetia.com.my/corporate/property-development.asp [Accessed: 24 Oct
2013].
9. Thestar.com.my. 2013. Archives
| The Star Online.. [online] Available at:
http://www.thestar.com.my/story.aspx?file=%2f2010%2f4%2f1%2fbusiness%2f5974824&sec=business
[Accessed: 24 Oct 2013].
10. Wride, A., Sloman, J. and
Garratt, D. 2012. Economics. Harlow, England: Pearson.
