Information Development Trends

Module Code
Intake Code
Lecturer Name
Hand in Date
TP number
Student Name

:
:
:
:
:
:

2015

CT037-3.5-3-ISDVT
UC3F1410SE
Charles Nzom
09 May 2014
TP035464
Mohammat Arfan Youshuf

Information Development Trends

2015

1.

Introduction ........................................................................................................................................... 3

2.

Background of the Case Study .............................................................................................................. 3

3.

Mydins current market due to its Information Technology position .................................................. 4

3.1.

3.1.1.

Threat of new entry ............................................................................................................... 4

3.1.2.

Threat of substitutes .............................................................................................................. 5

3.1.3.

Bargaining power of customers ............................................................................................ 5

3.1.4.

Bargaining Power of Suppliers ............................................................................................. 5

3.1.5.

Degree of Rivalry .................................................................................................................. 6

3.2.

4.

5.

Porters 5 forces analysis of Mydin .............................................................................................. 4

Strategic Grid analysis of Mydins IT Position............................................................................. 6

3.2.1.

Support quadrant ................................................................................................................... 7

3.2.2.

Factory quadrant ................................................................................................................... 7

3.2.3.

Turnaround quadrant ............................................................................................................. 8

3.2.4.

Strategic quadrant ................................................................................................................. 9

Transformation due to IT .................................................................................................................... 10

4.1.

Localized exploitation ................................................................................................................. 10

4.2.

Internal Integration (II) ............................................................................................................... 11

4.3.

Business process Redesign (BPR) .............................................................................................. 11

4.4.

Business Network Redesign (BNR) ............................................................................................ 11

4.5.

Business Scope Redefinition (BSR) ........................................................................................... 11

Information System and Acquisition method ..................................................................................... 12

5.1.

Proposed IS ................................................................................................................................. 12

5.2.

Acquisition method ..................................................................................................................... 12

6.

Assumptions........................................................................................................................................ 12

7.

Conclusion .......................................................................................................................................... 13

References ................................................................................................................................................... 14

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1. Introduction
Influence of retail industry is comparatively high in the day to day life of the population. Especially
in Malaysia there are plenty of large and small retailers who supply almost all the day to day needs
of the people at their doorstep. Among all Malaysian retailers Mydin SDN.BHD holds a unique
place in the market as it is prominently known as one of the biggest whole sale dealer in Malaysia.
Mydin markets a huge range of products which include all kinds of domestic items, starting from
food line, and soft line to hard line.

Mydin was started by Datuk Ameer Ali Mydin and his brothers in 1957 at Kota Bharu, Kelantan
and the main focus of the business was selling toys. Since 1957 the firm was gradually stepped in
its growth path and eventually take over the Malaysian retailers market and become one of the
most popular house whole product provider among the locals. After approximately 50 years of
sincere service, Mydin currently owns 40 outlets throughout Malaysia including 2 Hypermarkets,
24 Emporiums, one super store, 7 mini markets and 6 convenient stores. These stores are tactically
allocated in all over the main cities including Klang Valley, Terengganu, and Kota Bharu,
Seremban, Nilai, Johor, Alor Setar, Melaka, Pahang and Kelantan.
The plot of Mydins successful story is its low price scheme and the broad product line. Such
strategy attracted especially the middle class and much surprisingly the community as a whole.
Moreover it is well popular among the locals especially among the Muslim community, because
it has embraced the HALAL concept. Since approximately 60% of Malaysian population are
Muslims, Halal embracement is a great opportunity for the Mydin SDN.BHD.
2.

Background of the Case Study

The success of the Mydin depends on the functionality of all the departments and on how efficient
and effective they are. Currently it supports with a rational warehouse management system which
manual functions. Within a day there are hundreds of transactions are performed via warehouse,
for instance, transit damaged goods, clearing shipments of merchandise from suppliers, and stock
picking and delivering and many more. The manual process to function all these activities
consumes lot of time and labor cost. Therefore to shrink these unnecessary costs, Mydin came up
with an IT solution which is an integrated warehouse management system where, the system was
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delivered by Clapper Technology Sdn.Bhd, including CK61 mobile computers integrated with
EX25 near-far scan engine (Mydin Wholesale Hypermarket , 2009).

3. Mydins current market due to its Information Technology position

If we have a look at Mydins current position at a glance, Mydin is one of the emerging retailer
and whole seller in Malaysian market. Mydin earned the loyalty of its customers through its low
price strategy and having a focused customers line. As majority of Malaysian population are
Muslims, Mydin directly projects on the majority population by specializing the Mydin, name as
a Halal product provider and additionally provides Islamic products through its stores (Mydin
Wholesale Hypermarket , 2009).
To further analyze the market position of Mydin and to identify the external forces and the ability
of the organization to survive in the market, the author will use Porters five forces model as a tool.

3.1.

Porters 5 forces analysis of Mydin

Porters five forces model is one of the best tools used to determine a companys current market
position. Further this model helps the company to scrutinize the current market environment by
classifying the threats and competitors in the same industry, and the competitive advantages that
the company has in comparison with its competitors. Porters five forces will be discussed in-depth
in the following sub-chapter (Porter, 2008).

3.1.1. Threat of new entry

According to Porter (2008), the level of threats increases when there is low barriers for the new
competitors to enter the market. When analyzing the retail industry, the barriers to compete and
catch the current market is comparatively high as Mydin along with other popular retailers remain
strong in the market. Further competing with Mydin in low cost leadership is hardly possible.
Apart from that as local industry and a low price merchandise provider, Mydin receives a good
support from the federal government, for instance Mydin was given RM 386 million to initiate and
expand its supplies in Sabah and Serawak (Wee, 2012). According to Gamayanto (n.d)
governments regulations is one of the factor that strengthens the impediment against new entries.
Moreover there are other existing competitors in the retailing market especially Tesco Malaysia,
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Giant and Carrefour Malaysia are the multinational companies who stays stronger ( Abdullah, et
al., 2011). Such an occupied market would possibly a difficult place for new entry to grow. (Porter,
2008).

3.1.2. Threat of substitutes

Threats of substitutes increases when there are alternatives exists outside the realm field of
common product (Porter, 2008). If there are alternative product suppliers who can supply products
at a lower price than existing ones and who can provide more efficient and reliable services,
generally consumers will be attracted to them. KK, 99 market, seven eleven are some of such
substitutes for Mydin. Such substitutes could be a threat to Mydin because most of those shops are
located near residential areas, for instance, close to hostels and apartment areas. It subjects to ease
the substitutes to be accessed by customers. Mydins locations are mostly city centers and small
towns where people do not frequently visit. Hence Mydin has a moderate level of threat from
substitutes (Armum, 2010).

3.1.3. Bargaining power of customers

Retail industry is highly depended on consumers, failing to satisfy customers would be disastrous
for a firm. There are several factors that increases the customers bargaining power such as they are
sensitive on prices and well updated regarding all types product prices (Anon., 2014). As there are
variety of retailers available, the customers have their own preference in choosing the retailer.
Failure to fulfill customer demands would end up customer choosing different firm. Even though
Mydin has executed and maintained a lower price strategy to overcome from this external force,
still customers holds the power to bargain and make their choices ( Dobson, 2005).
3.1.4. Bargaining Power of Suppliers
As an emerging whole sale dealer, Mydin has plenty of local suppliers as well as some international
suppliers from China, India, France, Bangladesh, Indonesia, Pakistan, Korea, Taiwan, Thailand,
Turkey and United Kingdom (Mydin Wholesale Hypermarket , 2009). As it has a large range of
suppliers, it has the power to switch among the suppliers, besides Mydin also provides its own
products which are produced under Mydins brand name, therefore it does not have a high
bargaining power from the suppliers (Omar, et al., 2010).
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3.1.5. Degree of Rivalry

Rivalry defines how the firms take steps upon competitive moves of the other organization in the
same industry (Porter, 2008). There are several facts that determines which firm is having more
competitive advantage among the rivals, such as level of price, introduction of new products,
customer service, warranty and advertising ( Hoskisson, et al., 2008). Currently Giant, Carrefour,
and Tesco are main competitors of Mydin in the market, four of these firms has a huge value in
the current market. The important fact is that most of Mydins competitors are international firms
which has widespread branches around the world (Omar, et al., 2010). Mydin has got a high rivalry
as all of the competitors follows a low price principle and also most of the competitors produces
products under their brand name which also causes to lower the price level. Besides, all these firms
provide a good customer service by providing convenient space for vehicle parking, customer
friendly stores and provides customer enquiry counters to enquire about any item or to exchange
and refund items. As above mentioned, Mydin and the competitors has very similar characteristics
where it shall make the customer switching cost low, which means, there shall be no effect on
customers by either they stay on Mydin or any other hypermarket. Apart from that as Mydin strictly
follow the Halal (permissible to consume according to Islam) concept, Mydin is not much
popular among non-Muslims which also influence to raise the level of rivalry (Maheran, et al.,
2009).

3.2.

Strategic Grid analysis of Mydins IT Position

In current market trend Information Systems (IS) and the Information and Communication
Technology (ICT) helps firms in many different aspects and it strengthens the firms competitive
advantage (Yeon, 2007). For instance Information Systems are deployed in firms to enhance and
enrich the customer relations and the productivity which means to improve the operational
efficiency. Hence in other words IS and ICT can be identified as a tool to combat external forces
which threatens the firm which we have analyzed using porters five forces model. To further
analyze the level of support of IS and IT towards the firm, a strategic model is used which is known
as Strategic Grid model, hence this model is used in this report to study how the external forces
can be outrun by Mydin, using its Information systems (Yeon, 2007).

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As up to today Mydin has implemented several Information Systems to support the business
processes, the current IS systems adopted by Mydin are, Transaction processing system, Batch
processing system, Real time processing system, ERP, Server virtualization, Decision support
system (Mydin, n.d.) And the integrated warehouse management system (Mydin Wholesale
Hypermarket , 2009). Using the McFarland & McKinney Strategic Grid model, the IS systems can

Operational Impact of IS (low to high

be categorized in to 4 sections as following.

Factory

Strategic

Real time processing system

ERP

Integrated Warehouse

Server virtualization

Management System
Support

Turnaround

Transaction processing

Decision support system

system and POS

Batch processing system

Strategic Impact of IS (low to high)

( Laurindo, et al., 2009)

3.2.1. Support quadrant
This section consists of the systems which are used in firms daily activities and these IS are not
much critical as it has low operational and strategic impact ( Laurindo, et al., 2009).
Transaction processing system, POS and Batch processing system falls under this category. These
systems supports Mydins daily transactions. These systems assists in providing efficient services
to the customers where it can increase customers switching cost, therefore it can also be considered
as a strategy which helps to reduce the level of rivalry (Mydin, n.d.), (Clark, et al., 1999).

3.2.2. Factory quadrant

The information systems which are critical for the Mydins current operations especially with high
operational and low strategic impact, comes under the factory quadrant ( Laurindo, et al., 2009).

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Real time processing system (RTPS) and Integrated Warehouse Management System (IWMS) are
two highly important IS systems used by Mydin. RTPS is used for sharing real time information
in the firm, the information stored are required to be 100% accurate and it shall be retrieved later
on for reporting purposes (Microsoft, 2010). Apart from that IWMS is used for warehouse
management. Previously the warehouse management was done manually and it was consuming
lot of labor power and time, but after implementing the automated IWMS, Mydin could increase
the productivity by 60% and reduce both labor cost and time consumption in a huge ratio (Mydin
Wholesale Hypermarket , 2009). A 60% of productivity increase is a huge advantage to Mydin
and the cost saved by reducing labor cost and time consumption can be partially dedicated to lower
the price levels of goods. By providing lower prices Mydin gains the strength to lower the
bargaining power of customers and it definitely gives a good fight for its competitors (Mydin
Wholesale Hypermarket , 2009).

3.2.3. Turnaround quadrant

The information systems which are dedicated towards the Mydins future success are taken in to
account within this quadrant in other words systems which has lower operational and high strategic
impact are listed here ( Laurindo, et al., 2009)..
Decision support system (DSS) is one such system deployed by Mydin. DSS has been utilized to
support the firm to make critical decisions. Especially it allows the managers to determine which
types of goods should put under offer, what are the fast selling items, which goods must be
purchased from suppliers, which brands of items are customer preferable (Microsoft, 2010).
Moreover DSS helps Mydin to trace the customer purchases and accordingly the business can be
shaped elegantly. All the above-mentioned functionalities influences a firms survival. Moreover
DSS assists in making decisions such as enhancing on the product variation, identifying and
increasing products which has high demand. Through monitoring customer purchasing patterns
Mydin would be able to introduce new products and services which may help Mydin to strengthen
competitive advantage over its rivals. Further DSS can be used to tactically reduce prices of certain
goods as well as to increase the quality of required goods in the market as DSS has the functionality
to analyze the customer deviation on price and quality. As a result of this, DSS can be considered
as a shield to support Mydin to lower the customer bargaining power (Mydin, n.d.).
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3.2.4. Strategic quadrant

Information system having high operational and high strategic impact on Mydin are considered in
this quadrant ( Laurindo, et al., 2009). Enterprise Resource Planning system (ERP) and server
virtualization fall under this category. ERP system enables to integrate both internal and external
information used. Furthermore it assists Mydin to manage commercial activities of the business
such as planning, current inventory monitoring and management, purchase management,
manufacturing, finance, accounting human resource management, marketing and sales services (
Moon , 2007). As stated above, ERP provides support towards both operational and strategic
enhancement. Therefore ERP system is highly substantial for Mydins current and future success
in the industry. Besides ERP could possibly utilized to combat against porters five forces (Citrix
case study: Mydin Mohamed Holdings, 2013).
Server virtualization was another strategic and operational IT solution that Mydin adopted since
2009. Before 2009, all Mydins ERP and other information systems were only depended on
physical server farms and followed a client server information access method, but in 2009 onwards
Mydin went on by virtualizing 90% of its servers on cloud. Server virtualization provided 1.5
million ringgit cost saving which was supposed to be spent on physical server implementation and
maintenance. Besides monitory benefit, Mydin could enhance the competitive advantage by
increasing the accuracy of information generated within the systems, and reducing the labor cost
and maintenance cost for servers (Clark, et al., 1999).

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2015

Transformation due to IT

With the aid of information technology, Mydin has been able to step towards a successful
transformation in its business process. To further measure and clarify the level of transformation

Degree of business transformation (Low - High)

due to its IT position Scott Morton's transformation model is being used in this report.

Revolutionary levels
Business scope redefinition
Business network redesign
Business process redesign
Internal integration
Evolutionary levels
Localized exploitation
Range of potential benefits

(low-high)

(Gamayanto, 2004)

4.1.

Localized exploitation

Mydin has achieved the first level of the transformation by using its Transaction Processing system
(TPS) and POS. TPS and POS supports the firm to perform all daily operations effectively and
efficiently. For instance, recording monetary transactions. Placing orders for products or
services, withdrawing money at cash machine are some of the functions performed by TPS. All
these processes are solely dedicated to one business function of the firm and their ultimate target
is to enhance the effectiveness and efficiency of that particular sectors functionality (Mydin, n.d.).

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4.2.

2015

Internal Integration (II)

Internal integration level is a very significant level to be achieved by Mydin as it is the gateway to
access the three level of revolutionary transformation (Gamayanto, 2004). ERP, real time
processing and integrated warehouse management systems are purposely deployed by Mydin to
reach this level. Combination of these three systems acts as a single platform to circulate useful
information to any department in any branch according to their needs in purpose of automat and
enhance the enterprise efficiency.

4.3.

Business process Redesign (BPR)

Main focus of BPR is to revolutionize the firms supply chain and production process (Gamayanto,
2004), with the adaptation of ERP Mydin has been able to grasp this level. ERP in fact has
revolutionized Mydins supply chain by integrating all the supply chain processes under one
system where supplier and customer systems can ensure compatibility, effectiveness and
efficiency across supply chain. Further by providing quality reports and analysis on business
process, ERP enables Mydin to keep track of its market position.

4.4.

Business Network Redesign (BNR)

BNR defines the necessary changes in the processes involved in production and delivery
departments of the company using the information collected through information systems. These
changes are meant for rebuilding the scope and tasks involved during the production and delivery
(Gamayanto, 2004).

4.5.

Business Scope Redefinition (BSR)

BSR involves changes of the business scope and boundaries, as per today Mydin have not yet
extended its scope using its current information systems. Therefore Mydin could not reach the fifth
level of the transformation graph (Gamayanto, 2004).

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2015

Information System and Acquisition method

5.1.

Proposed IS

Mydin has not yet enabled online shopping whereas there is only one existing web system for
customers which keeps update on latest products and promotions and some other basic functions.
Since every major hypermarkets has commenced online shopping facilities and it is highly
recommended, to acquire a web based information system which facilitates online shopping.

5.2.

Acquisition method

There are several IS acquisition method which can be used to acquire new IS. The first one is to
develop the IS by own, which means the firm shall develop the whole system by their own staff
and resources according to their specific needs and requirements. Second way is to buy a pre-built
system, where the firm shall go to software system vendors and buy a prepackaged system which
shall fulfill the firms requirements. The third method is to outsource the IS project in which the
company will hand over the project to a vendor to tailor it according to the firms requirements.
(Hardcastle, 2008).
The third method will comparatively the best match for Mydin, because a retailor normally does
not necessarily require to own a crew of software developers and programmers except for some IT
technicians. The second method does not suit because prepackaged IS are tailored according to
general requirements, where it shall not 100% match with the requirements of the firm. But when
it outsources the development process to vendors, the IS system is 100% built based on the
requirements of Mydin and the functionalities are unique. Hence considering all these factors the
best IS acquisition method is outsourcing the development.
When outsourcing the development, all requirements have to be clearly understood and
documented, then in the next stage the vendors can be called for a bid for the project using a reverse
auction method. By using a bidding method Mydin can choose the best vendor with the best price.

6. Assumptions
It is assumed that, the implementation cost of the suggested system can be obtained back at most
within 3 years of time, where it may not affect the firms current financial position. Further, it will
increase customer attraction towards the firm.

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Conclusion

Mydin has captured and survives in a good position in the retailors market of Malaysia. Mydins
strategies and deployed information systems have a large share in its current success. The existing
information systems and the recently implemented systems hugely benefits to enhance the business
opportunity of Mydin as well as to increase competitive advantages. It is extremely important for
a company to understand customer behavior in order to survive in the market, hence it is highly
recommended for Mydin to quickly look in to the online shopping platform as its competitors
already stepped in and simultaneously customer expectations are growing for online shopping.
Hence acquiring and implementing such IS strategies are important for Mydin at the moment. As
a retailor the best way to acquire IS for Mydin is outsourcing the project to other software
development vendors. This would be cost effective as well as will meet all the needs.

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