1.

0 EXECUTIVE SUMMARY

A detailed analysis has been carried out on a Malaysian incorporated company: Elba Holdings Bhd. Basically they deal in
the manufacturing and retailing of garments and they carry three brands: Elba, Edwin, and Adax. The analysis was done by
using the following theories:
The PEST analysis was studies to give a better understanding as to how the external macro environment affects the
company. There are many external risks involved here especially when foreign competition enters the Malaysian market.
Government rules and regulations have affected how Elba can trade and furthermore, the sociological factors are changing
in line with technological changes. Thus each factor in the PEST analysis is intertwined and it can't be unbundled and
looked at separately, because changes in one factor may affect the other.
Porters 5 forces are based on the insight that a corporate strategy should meet the opportunities and threats in the
organizations external environment. Especially, competitive strategy should base on and understanding of industry
structures and the way they change. Looking at Elba, we are able to identify the height of entry and exit barriers, intensity of
rivalry, threat of substitutes, and bargaining power of buyers and suppliers.
Competitors' analysis gives a brief description on each of Elba's competitors including Padini, Bonia, Esprit, Giordano, Lee
Cooper, and Levis. Future goals, strategies, strengths and weaknesses of each competitor is also being discussed.
Customers analysis looks at the buying behaviour of the Malaysian consumers, and how time and technology and Western
influence has changed the way they dress. It also looks into who are Elba's target markets.
Financial analysis looks into several ratios, such as profitability ratio, leverage ratio, activity and liquidity ratio. After the
analysis, it is seen that Elba is not doing very well assuming that it is just recovering from the 97'crisis.
The SWOT analysis looks into the internal aspects of the company, as well as the external opportunities and threat that the
company possess. An analyses is done on each aspect, and followed by the TOWS matrix that provides strategies on how
the firm can benefit from the strengths and opportunities and overcoming the threat and weaknesses. This is then followed
by a brief Conclusion on the total analysis and the Recommendation looks into how the company can improve their position
by evaluating the strategies using the threat matrix and the opportunity matrix.

2.0 INTRODUCTION

Chie Seng Sdn Bhd started its business in 1969 in the form of a sole proprietorship, but then in 1996 the company was
public listed and hence the name Elba Holdings Bhd. the Elba Group is now a fully integrated garment entity involved in
manufacturing and trading of garments and related activities. Its products are marketed under three brand names: Elba
(men's formal and informal clothing and accessories), Edwin (men's and women's jeans, shirts, cotton pants and
accessories), and Adax (formal and informal trendy clothing for young executives of both sexes). The company is also
panning to expand its trading operations and venturing into other market segments such as the children's wear.
The products are marketed through 258 outlets at supermarket chains, departmental stores and retail shops located
throughout Malaysia and Brunei. Concept shops are mainly situated at major cities like Kuala Lumpur, Johor Bahru and
Ipoh. Sales at supermarkets/departmental stores are made through consignment counters. Currently, its subsidiaries
manufacture approx. 240,000 pieces of clothing per annum.
Elba's vision and commitment is to keep abreast with the world by engaging talented people, and investing in R&D, and
sophisticated high-tech equipment including computerised techniques. These computerised techniques are to be
implemented in the manufacturing aspect, so as to achieve a lower cost differentiation amongst its competitors which
includes: Padini, Bonia, Esprit, Giordano, Lee Cooper, and Levis.
In the future, Elba sees itself as having the distinguished reputation of being the oldest local manufacturer of formal suits in
Malaysia and it intends to become a fashion manufacturer of quality products of world reputation.
A major strength of Elba is its ability to do independent research and development so that they are able to come up with
innovative products. Elba has a dedicated team of 6 designers headed by an Executive Director who has more than 12 years
experience in the industry and is also an experienced merchandiser of garments. The designers interact frequently with the
marketing department on the brands to effectively and successfully promote the products.

3.0 PEST ANALYSIS

3.1 Political Factors

To improve consumers spending in the clothing industry, the Malaysian government has implemented the "Mega Carnival
Sale" which is to be held 3 times a year. Its main purpose is to promote Malaysia as a "value for money shopping
destination". This aggressive approach calls on to the tourist to shop at the local malls, which in turn would increase foreign
tourist spending and thus increase the country's foreign exchange earnings. Furthermore, this approach would encourage the
Malaysians to shop locally, which would benefit Elba Holdings Bhd in terms of their sales.
Malaysia is a member of the ASEAN Free Trade Area (AFTA), which aims to reduce trade barriers between the member
countries Malaysia, Indonesia, Singapore, Thailand, the Philippines, Brunei, Vietnam, Laos and Myanmar. This has created
an opportunity for the domestic companies, like Elba Holdings Bhd to venture into the overseas market, such as Vietnam,
whereby the retail market there is lucrative for foreign investors. However, with AFTA, foreign investors would be
interested in the Malaysian market, and with new foreign entrants, competition becomes fierce for Elba Holdings Bhd.
In addition to this, the Malaysian government attempted to stabilize the retail industry after its slump in the 97' crisis by
reducing inflationary pressures in the form of tariffs reductions, so that foreign investors would invest in the domestic
market. The result of this would transform the retail industry into a competitive market, making it difficult for Elba
Holdings Bhd to be a dominant player in the clothing sector as well as a market leader.
Under the Eighth Malaysian Plan covering 2001-2005, the retail industry is expected to play a more prominent role in the
growth of the economy, due to a sustained economic growth and expansion of the tourism industry. A fair trade policy and
law will be formulated to prevent collusion, cartel price fixing, market allocation and the abuse of market power. New
distribution modes will be developed such as franchises, direct sales, factory outlets, and e-commerce, to provide the
consumers with a variety of choice.
3.2 Economic Factors
Malaysia's economic growth is to be maintained at 4.5% in 2003 and expand further to 5.5% or 6.0% in 2004, taking into
account the external demand conditions and the economic impact of the Severe Acute Respiratory Syndrome (SARS) in the
first half of 2003. The economic growth is expected to be due to the domestic market with growth in the private sector. The
private sector makes up the bulk of the Malaysian economy, with private consumption accounting for nearly 44% of GDP.
Despite the recovery in the household consumption over the last few years, inflation has remained unchanged. The overall
inflation rate is expected to be at 1.5% in 2003 mainly due to mild deflationary pressures from major global economies.
Looking at the earlier years, total retail sales in Malaysia amounted to RM46.9 billion in 2001, with a 3.7% increase over
2000. Having experienced healthy growth per annum from 1990, the Asian crisis caused total retail sales to plummet by
21.2% in 1998. Reduced consumption and increased savings were some of the major causes of the significant decline.
Apart from challenging economic conditions, 2001 also had unexceptional events that threatened to have a major impact on
retail businesses. The recovery of the retail industry in Malaysia has been gradual, having yet to return to a pre-crisis level.
The first quarter of 2001 had a slowdown of the retail industry as a result of the economic crisis in the United States. The
September 11, 2001 terrorist attacks on the United States had further dampen the potential of economic recovery in the
country. Nevertheless, the industry managed to have an overall growth rate of 3.7% in 2001. Retail industry growth rate was
above GDP growth rate for the entire year.
The fall in consumer confidence resulted in reduced consumption and increased savings. The government subsequently
launched a national campaign on wise spending, with the aim to educate consumers on the importance of domestic demand
on the GDP growth and economic recovery as a whole. The "Love Malaysia, Buy Malaysia" campaign was also launched to
get Malaysians to buy local products and take local holidays. This effort proved successful.

The implications of these economic events had affected the growth of Elba Holdings Bhd, due to a fall in the tourism
industry as well as the reduction in consumers spending. The company was adversely affected in terms of its financial
position, and it was impossible to have a complete recovery due to unfavourable economic events reoccurring, for instance
SARS.

3.3 Social Factors

Malaysian is classified as an upper middle-income country, and considered as one of the most developed of developing
countries. Middle income households defined as those earning between RM1, 500 and RM3, 500 per month, and has
increased from 32.3% of total household population in 1995 to 37% in 1999. The low-income group, categorised by
household income of up to RM1, 500 per month, spend a proportion of this amount on food. Meanwhile, the high and
middle income households spend most of their money at hypermarkets. A small percentage of about 3.4% of their income is
spent on clothing and foot wear.

There has been a decrease in consumers spending since 2000, because consumers have begun to realise the values of money
especially since the 97'crisis took place. It is now slowly picking up in 2003.
Malaysia's consumers' lifestyle has been changing to rising affluence and education levels. High profile retailers as well we
global mass media have shaped consumers buying behaviour, resulting in the Malaysians being more westernised.
The Malaysian's life leisure life revolves around trendy shopping malls, such as one utama, mega mall, and klcc. Thus Elba
Holdings Bhd has to me more update and kept abreast with the latest trends. They have to advertise and keep the consumers
informed and reminded that they still exist and produce clothing with style and quality.

3.4 Technological Factor

With the Internet and e-commerce, retailers can now sell their products on line and deliver it to customers on their door-
step. It can make customers' life a lot easier as they need to have to go to the city to make a purchase. Furthermore, retailers
can also sell their products to the overseas market without the need to physically enter the foreign country.
Microsoft (Malaysia) Sdn Bhd and Tradenex.com Sdn Bhd, a subsidiary of the Federation of Malaysian Manufacturers
(FMM), signed a memorandum of understanding to develop and operate a supply-chain hub for the retail sector, known as
the Malaysian Retail Exchange. The Malaysian Retail Exchange is part of FMM's broad e-commerce initiative to assist
manufacturers transact electronically with their trading partners as a community. The Exchange will provide the
infrastructure and technology to connect manufacturers, distributors and retailers to adopt electronic trading in order to
improve speed of communication, reduce transaction costs, better synchronization of supply with consumer demand and
significantly improve inventory management. FMM's initiative is in line with the government's call to Malaysian businesses
to be empowered with the tools of emerging technologies to improve operational efficiency and hence, competitiveness in a
more open economy.
The result of this would bring closer ties to the entire retailer in the retail industry, however in the case of Elba Holdings
Bhd, the company stills practice the orthodox methods of getting to the consumers, and this has caused them to be laid back
with other competitors such as Padini Holdings Bhd.

4.0 PORTERS 5 FORCES

SUPPLIER POWER

BARRIERS TO ENTRY RIVALRY THREATS OF SUBSTITUTES

BUYER POWER

4.1 Intensity of rivalry among existing competitors

*Increased of equal sized firms
When the firms are of equal size, they will have to compete for the same resources such as market share, customers' loyalty,
brand image and other factor. This would result in a high rivalry and a threat for Elba Holdings Bhd, especially since its
competitors: Padini Holdings Bhd Bonia Corporation Bhd, and Esprit are of equally size and are all listed in the KLSE
second board. Elba also has foreign competitors such as Giordano, Lee Cooper jeans, Levis jeans, and other potential
competitors. Thus, Elba has to compete with aggressive strategies, such as opening more outlets and capturing a large
customer base.
*Cost of switching is low
The cost of switching is low, because customer will only have to compare prices of competitors clothing and services
offered. They can also compare the styles of the clothing season. This increases the rivalry among competitors and Elba will
have to continuously compete against Padini, Bonia, Esprit, Lee Cooper, Levis, and Giordano to ensure that they make a
sale, and that customers will always keep retuning because of the trendy clothing styles. This is a big catch for the
competitors because constant advertising counts in calling to the customers.
*High exit barriers
There is a high exit barriers for those companies like Bonia, Padini, and Elba which are listed in the Kuala Lumpur Stock
Exchange (KLSE). This is because for those listed in the second board must have a minimum paid up capital of RM
40million, an uninterrupted profit of 3-5 years with an aggregate Profit after Tax of RM12million and the minimum
business operation has to be for 5 years after incorporation. Thus, the cost of setting up the business itself is high, and being
listed in the KLSE furthermore increases the goodwill of the firm, thus, rivalry would be high because firms would not
easily leave the industry so easily, instead they would compete even if they are making low profits or even losses.

In conclusion to this, the intensity of rivalry among existing competitors is very high due to the number of competitors in
the retail industry, as well as the number of established brands. Competition is very fierce and a certain percentage of loyal
customers need to be maintained in order to remain in the competitive industry.

4.2 Threat of Substitutes

In the retailing and manufacturing industry for apparels, there is no visible substitute, because clothing is a basic need and
necessity. However, there are potential substitutes in reaching to the customers. This is in the form of a non-retailing store,
where by it is slowly gaining popularity in the Asian countries. Non-retailing include direct mail, online shopping, direct
mailers, telephone sales, door-to-door selling. In Malaysia, we have already seen this appearing such as SmartShop,
Cosway, Amway, and others.
However the treat of substitutes is weak, because there isn't an entry yet on clothing only perhaps online shopping which is
currently available at large, but hasn't gained popularity in the Asian culture.

4.3 The power of Buyers

Elba shares the same customers as it Padini, Esprit, Levis, Lee Cooper, and Bonia. Thus, switching cost is low and if
customers are not satisfied with the quality, and service offered it can go to its competitors and purchase from them. The
issue here is the fashion, how fashionable is the products of Elba and does it provide the same value to the customers as the
other brands. The bargaining power of buyers here is moderate, and they can influence fashion, and the products carried by
Elba. However, the products are differentiated, thus buyers aren't able to find the same style and instead have to purchase
from Elba even if the price is moderately high.

4.4 The power of Suppliers

As for Elba, they manufacture their own clothing, thus the power of suppliers will arise in the purchase of raw materials.
The number of raw materials available is numerous, especially from foreign countries which would definitely be cheaper.
Thus in the case of the retail industry the bargaining power of suppliers is weak because if they raise the prices or reduce the
quality, then there are other suppliers available especially from the third world countries such as China, Vietnam and India.
Furthermore, the switching cost of the supplier is low, because the basic materials needed to manufacture clothing is the
same, i.e., thread, material, and other necessities. It would however cost a minimal amount to switch, because the supplier
are new, thus, pricing may still be high, and credit terms may not be available unless frequent purchases are made.

4.5 Threat of entry

The threat of entry here is posed by both local and foreign companies.
*Economies of scale
The existing companies such as Padini, Bonia and Elba have already established themselves with manufacturing. They are
already operating at the lowest cost possible because their selling prices are much cheaper than foreign competitors. Thus, it
is difficult for new comers to come into the market, because they will face retaliation from the existing companies. New
companies can come into the market, however they cannot operate in a large scale immediately, instead they can compete
with smaller competitors that are not listed in the KLSE, and once they have been in the market for long and have expanded
in size, can they start to compete with Elba, Padini, Espirit and Bonia.
*Product Differentiation
Established firms like Padini, Elba, and Bonia already have brand identification and customer loyalties. It has taken several
years to obtain this through heavy expenditures spent on advertising, creating a good customer service, creating the products
with style and fashion. As for Elba, they have a better advantage because they were the first in the industry. Thus, entry here
will be low because new companies will have to study the market and do good public relations to win the heart of
consumers. Furthermore, it is very risky to build a brand name, because there is a potential of failure even if a big amount of
money has been spent on advertising, thus suffering from a start up loss which may take years to recover.
*Cost advantage independent of scale
Companies that have already existed in the market for long such as Padini, Elba, and Bonia have established themselves
with their suppliers, the distribution agents and the customers. They have already obtained the learning experience of
studying the market and knowing what exactly the customers are looking for. Thus, this would pose a threat for the new
entrant, because when selling clothing, it may not be according to the taste of the Malaysian consumers, they will have to
undergo a test and trial stage, and this would be costly if they are competing with the large retailers.

In conclusion to this, the threat of entry is low, because Elba is a large retailer and manufacture and they were the first in the
industry market. However, due to their weak strategies, they are not a market leader, but yet, they have a great number of
outlets and they have the experience in understanding the consumers, and producing cheaply so as to sell at lower prices.

5.0 COMPETITORS ANALYSIS

There are a number of retailers that have already been mentioned such as Padini, Bonia, Espirit, Lee Cooper, Levis and
Giordano that are direct competitors of Elba. They are selling the same product but it is highly differentiated in their style
and design.

5.1 Padini Holding Bhd

Padini was incorporated as a private company on 30th August 1979 and it became a public company on 8th June 1992.
Padini has setup an operation in Malaysia's apparel industry, manufacturing and trading. The products manufactured and
sold include garments for men, women, and children; women shoes; and fashion accessories for men, women and children.
The strengths of Padini are that they are very aggressive in their advertising, and bulk of their expenses is on advertising.
They recognize the value of advertising and promotion as a way of building a brand image. They offer their membership
cards, and have promotional events for the members. They have had a rapid expansion with a total of 170 freestanding
outlets and these numbers are still escalating. In addition to this, Padini has diversified into opening Padini caf¨¦ outlets, in
2001. They have also begun expanding into the overseas market in Bangkok and Singapore.
However their weakness is that they have too many product lines, thus they have lost their focus in becoming a brand
leader. Their famous brand is Vincci, and this is largely popular, however, the other 6 brands of Padini, is still in the hide
out and not well exposed. Furthermore, their expansion into the overseas market is rather slow, thus, having a threat of
missing out this opportunity to another competitor.

5.2 Bonia Corporation Bhd

Bonia was incorporated as a private company on 28th August 1981, and became public on 22nd June 1993. The Bonia
Group is involved in the designing, manufacturing, marketing, retailing, wholesaling and franchising of fashionable leather
goods, accessories and apparel for the local and overseas markets. Bonia's market share in Malaysia and Singapore is
currently between 35% and 40%. Bonia has two factories in Malaysia.
The strengths possessed by Bonia is that have a superior and well established brand name, compared to the formal wear at
Elba's fashion menswear. They have also expanded into the foreign market such as New York, London, Paris, Tokyo, Hong
Kong, and Thailand. Bonia has several promotional activities such as the members' card, whereby point can be
accumulated.
The weakness of Bonia is that during the 97'crisis, their financial performance had been affected, and in the later years, they
had to change their strategy and focus on the core products and to ensure a profit, they had to dispose of their land which
was meant for the construction of apartments.
5.3 Esprit Holdings Limited
Headquartered in Hong Kong, Esprit Holdings Limited is engaged in the sourcing, retail and wholesale distribution and
licensing of quality and lifestyle products designed under the globally recognized ESPRIT brand name. It has been a listed
company in Hong Kong since 1993 and has a secondary listing on the London Stock Exchange since December 1998.
The strengths of Esprit is that they have a very well established brand, and they have been expanding tremendously in the
overseas market, and have ventured into new product lines such as sports wear and clothes for kids. They have been
successful in their financial performance, and have managed to survive with positive figures even during the turbulent
events that took place in the economy.
However, the weakness is that in Malaysia itself, they are not very aggressive in their advertising. They seldom advertise
when there is a sale or when any other promotional events are taking place or when they are launching a new clothing
design.

5.4 Lee Cooper

The company was established in 1908 when it first began production for jean in London for work wear. Lee Cooper is
distributed in Malaysia through Amtek Holdings Bhd. The company was incorporated on 27th August 1984, and had
become public on 3rd January 1997. Amtek's core business is the manufacture and distribution of jeans and shoes. The jeans
manufactured are in-house brands, brands held under licence and for other licensees. Lee Cooper is among the largest
selling non-American jeans brands in the world. The supply of denim is sourced locally as well as from the US, Japan,
Hong Kong, Taiwan and Australia.
The strengths of Lee Cooper are that it has a well established brand name and it is sold in many stores in Malaysia.
However its weakness is that no much advertising activities are done by the company to promote its business. It is slowly
becoming unpopular in the Malaysian market as new competitors such as Levis are overriding them.

5.5 Levis
Levi Strauss & Co.'s Asia Pacific Division is comprised of subsidiary businesses, licensees and distributors throughout Asia
and the Pacific region. The Asia Pacific Division was established in 1995. They manufacture and market jeans and casual
wear under the Levis brand throughout the region. The Asia Pacific Division includes the following countries: Australia,
Bangladesh, Brunei, China, Guam, Hong Kong, India, Indonesia, Japan, Korea, Malaysia, New Zealand, Pakistan, the
Philippines, Singapore, Sri Lanka, Taiwan and Thailand.
The strengths of Levis are that they believe in paying close attention to the customers and also to their employees and
shareholders. They also believe that being authentic and innovative would differentiate their brand name from the
competitors. They also play an active role in being socially responsible and ethical to the society. For instance, they had
taken part in the advertising campaign in Malaysia to stop smoking among the youths.
The weakness of Levis is that they don't take part in the Mega Sales carnival, thus they tend to lose out in the sales as
customer would find cheaper jeans from the competitors.

5.6 Giordano
The company was established in 1981 and it is one of the well known and established brands in the Asia Pacific region
especially Malaysia. Giordano is a retailer of unisex casual wear apparel catering to a market which is young and looking
for affordable clothes. Simplicity is perhaps the most important guiding principal of the brand Giordano feels that by
keeping everything simple.
The strengths of Giordano are that it offers simple clothing in terms of its designs. It is cheap compared to other foreign
competitors like Esprit, and even with these affordable prices, their products are of good quality.
The weakness however is that they have been doing poorly in their financial performance ever since the 97'crisis took place.
Thus, with insufficient funds, they are not able to aggressively advertise and expand their outlets across the Malaysia region.

6.0 CUSTOMERS ANALYSIS

The consumers of Malaysia have become very trendy in their lifestyle. With strong influence from the Western culture, and
from Hollywood movies, they are becoming more self conscious in their dressing. They would purchase clothing that are
even expensive, depending on their income just to look good and accepted by the society. With popular brands coming into
the Malaysian market such as Zara, Esprit, Levis, MNG, the consumers are being influenced by the style of dressing.
With full exposure to imported brands, the consumers have lost focus on the local brands. When we think of jeans, the
brand Levis comes to mind, but not Edwin jeans produced by Elba. When we think of men clothing it will be Giordano, and
on women clothing, it will be Padini or Esprit. Consumers associate themselves with imported brands as the designs are
better and they are influenced by aggressive advertisements.
As standard of living has improved tremendously over the past years, the consumers are willing to spend a large portion of
their income on clothing, but this is only for those who weren't directly affected by the 97'crisis. For those affected, they
have become wiser in their spending, and they only make a bulk of their purchases during the sale periods.
The Mega carnival sale has also changed the customers' behaviour. They refuse to purchase during non-sale periods,
instead, they would wait so as to get a discount. Customers have been conditioned to only purchase during sales, and this
has affected the stability of Elba.
The target market of Elba includes men, women, and young adults.
*Men
The male consumers in Malaysia have become more conscious in their dressing and they want to look good and presentable
at all times. With fashion influence from China, Tokyo, and Korea, Chinese males have picked up a quicker pace in
becoming more fashionable in their clothes. However, for the men, they see price as a factor when purchasing their clothing.
They tend to make wise decisions before making a purchase. They would not pay exorbitant prices on Elba products.
There has always been a trend for young adults to use jeans and casual wear, however, now with strong influence from the
Western, even those retired and those above 70 years of age are looking into wearing jeans, as they perceive themselves to
be still young.
*Women
Women nowadays are independent, and they make a reasonable percentage of the workforce. They are very trendy in their
dressing even to work. Jeans is mostly worn as casual wear; however, there has not been a full penetration into the market
by Elba. Instead, Levis is more popular among the women shoppers. They make regular visits to the malls to check on latest
updates for clothing.

7.0 FINANCIAL ANALYSIS

An analysis of Elba Holdings Bhd liquidity ratio, profitability ratio, leverage ratio, and activity ratio for the years 98, 99,
and 2000. This should explain the market performance and its profitability.

¡¡ Ration200019991998
¡¡¡¡¡¡¡¡
¡¡ Current ratio1.511.491.44
liquidity ¡¡¡¡¡¡
ratio¡¡¡¡¡¡
¡¡ Quick ratio0.530.410.30
¡¡¡¡¡¡¡¡
¡¡¡¡¡¡¡¡
¡¡ Gross profit40.23%37.11%41.53%
¡¡ margin¡¡¡¡
profitability¡¡¡¡¡¡
ratio¡¡¡¡¡¡
¡¡ Retune on asset2.21%2.03%-1.97%
¡¡¡¡¡¡¡¡
¡¡¡¡¡¡¡¡
¡¡ Total debt0.970.981.02
leverageto total asset¡¡¡¡
ratio¡¡¡¡¡¡
¡¡ Total debt31%32%34%
¡¡to total equity¡¡¡¡
¡¡¡¡¡¡¡¡
¡¡ Asset turnover1.041.000.99
Activity¡¡¡¡¡¡
ratio¡¡¡¡¡¡
¡¡ Inventory1.821.771.91
¡¡ turnover¡¡¡¡
Table: financial ration for Elba Holdings Bhd

7.1 Liquidity ratio

*Current ratio
This ration determines how liquid Elba is. The average is supposed to be 2.0; however, in the case of Elba it does not reach
the benchmark. But there has been an increase in figures, thus the company can still meet its short term debts. As the
economy improves from the 97' crisis, so does the figures at Elba, whereby there was a 0.05 increase in 1999, and a slow of
0.02 increases.
*Quick ratio
Elba's quick ratio is unfavourable, because it is less than 1.0:1. With a less then 1.0, Elba is unable to pay back all its
creditors in times of a bad situation. However, there has been a great improvement in the figures of an approximate of 0.10
increase in the years 1998 thru 2000.

7.2 Profitability Ratio

*Gross Profit margin
This tells us that for every 1 dollar in sales, we have 41.53 cents to cover operating expenses in 1998. However this had
reduced in 1999 by 4.42%, and had picked up again in 2000. The reason of this drop could be in the depreciation of the
Ringgit value or an increase in raw materials.
*Return on assets
In the year 1998, just after the economic crisis, Elba had recorded a negative return of assets of about 1.97%. This tells us
that they have not been using their resources effectively to generate profits. Their performance as of 1998 had been poor,
however in the following years till 2000, there has been a drastic increase, due to effective sales.

7.3 Leverage ratio

*Total debt to total asset
This figures listed are unpromising. The benchmark of a company is supposed to be 0.50, but Elba is way above that. This
shows that the company has lot of debt; however, it has reduced by a small percentage, showing a slight improvement. But
facing further economic crisis, these figures may reach a dangerous level.
*Total debt to total equity
The benchmark of an industry is supposed to be 30% and lower, but in the case of Elba, it is close to the benchmark rate of
the highest being 34%. These figures tells us that sales are sufficient to cover the debt, if however sales aren't sufficient to
cover the debt, then the company would be in a very risky position, resulting in bankruptcy.

7.4 Activity ratio

*Asset turnover
For Elba, in 1998 it had managed to generate sales of 99cents of every RM1 of assets owned. This figure is not promising as
it did not use its assets appropriately. However, there is a slight increase in 2000 of 1.04. This figures should improve in the
near future, however, with current economic conditions, it seems unfavourable.
*Inventory turnover
The inventory turnover for Elba is approximately twice a year. This indicates that the ratio is unfavourable and it implies
that sales of the company are poor or that they are carrying too much stock.

In conclusion to the financial ratios, Elba needs to use its assets and other resources effectively. They need to boost sales
tremendously, but taking into considerations the economic downturns, Elba may just be in a process of recovery.
8.0 SWOT ANALYSIS

8.1 Strengths
S1: Elba has the ability to do independent research and development. The R&D department works together with the
marketing department in promoting the new products. The department also monitors the fashion of clothing in Malaysia and
in other leading countries. This allows them to benefit from being the first to produce according to consumers' needs and
wants, thus having an ability to increase market share, as more consumers would purchase from Elba.
S2: Uses latest computerised technologies in formulating appropriate designs, fabric selection, pattern and colour
combinations for new garments and accessories. This provides better service to consumers as Elba will produce high quality
products that goes beyond consumers' expectations.
S3: Sample testing of new products including tests of consumers' preference carried out across Malaysia before actually
launching the products, so as to avoid failures. Elba is cautious and prevents itself from exposing a product which is an eye-
sore to the consumers. With testing, it is able to carefully utilise its financial resources.
S4: Has begun operations in 1969 as a sole proprietor, thus it has accumulated abundant experience in the garment industry.
With nearly 35 years of experience in the clothing industry, Elba would have gained sound knowledge, and for this reason,
it has survived all the economic mishaps, and still remains in the second board of the KLSE.

8.2 Weakness
W1: Elba has a poor advertising strategy. Edwin jeans were once upon a time popular, however this popularity cannot be
the same if no advertising is done. The younger generation aren't aware of Elba's existence. There is no advertisement
during periods of sales or launching of new products.
W2: They have a weak customer base. Although they have been in the market for long, they have not captured a satisfactory
market share. Their sales are still too little compared to other local competitors like Padini.
W3: Elba has a weak brand image and brand reputation. They have not established themselves well enough in the clothing
industry. Compared to their competitors, Padini and Esprit, they are well known amongst the older and younger generations.
W4: Although Elba has been in the market for numerous years, they have only managed to have three product lines. Their
current goal is to venture into the kids market however, it is too late to gain a big slice of the pie because Padini has already
entered that market and is currently holding 7 product lines. Where have all those years of planning gone to? Elba had lost
its chance of being a market leader and entering to into the once lucrative market, however now, the market is almost
maturing.
W5: Elba has a weak financial performance, and after conducting the financial analysis, they need to buckle down and
create strategies or a contingency plan to save them when the economy plummets again.

8.3 Opportunities
O1: Malaysia has been made a shopping heaven when the government had implemented the Mega carnival sale to be held 3
times a year. This is to increase the sales and consumer spending because after the 97'crisis, consumers had been reluctant to
spend. Furthermore, this would help Elba achieve it sales.
O2: The government has implemented a campaign on "buy Malaysian products". This is to increase sales of the domestic
market and to help them survive the stiff competition. Elba faces competition from foreign brands such as Levis, Lee
Cooper, Esprit and Giordano. Thus, with support from the local government, Elba is able to still convince consumers to
purchase its products.
O3: With the implementation of AFTA, Elba can sought raw materials from the overseas market as it would then be
cheaper, thus reducing cost of production and increasing profit margin.
O4: There is a great inflow of tourist from Singapore, and other foreign countries, especially during periods of sale. This is
largely due to a weak Ringgit, and thus products here tend to be cheaper. With this, Elba can also focus on the foreign
tourist.
O5: Many companies have already gone into online, however, Elba had not yet taken this opportunity to offer customer
online shopping.
8.4 Threat
T1: There is a threat to Elba because when the AFTA has been implemented; there will be increase competition from
foreign companies that would set up in Malaysia. This would create a fierce competition and only the best can survive.
T2: Lately, there have been many economic downturns and mishaps that have affected businesses. It started with the
97'crisis, then the September 11 attack, the war on Iraq, followed by SARS, and now the bird flu. This is a threat as
businesses are unable to grow due to fears of spending.
9.0 TOWS MATRIX

9.1 Offensive Strategies

*S1, S2, S3, S4, O3: Elba should consider entering the international market, because with the AFTA, and the strengths
possesses by Elba, they can enter Vietnam which is a very lucrative market, and consumers there prefer imported products
as they perceive it to be of better quality.
*S1, S2, O5: Elba should enter into the internet and start selling their products online. So that this can be another medium
whereby sales can take place.
*W1, W2, W3, O1, O2, O4: Begin aggressive advertising so as to inform the consumers that Elba still exists. Advertising is
the key activity to drive up sales and customer awareness. Different forms of advertising should be used including sales
promotion, as well as the use of different media, so as to capture a wide customer base.
*W2, W3, O5, O4: When going online, Elba will be able to enter the international market, because with a weak Ringgit,
overseas consumers will find that purchasing from Elba will be cheaper then purchasing from their home country.
Furthermore with this, sales can be increased, and at a very cheap cost because at this way, they just have to set up the
website and the delivery agent, thus Elba need not have to physically set up a business in another foreign market that might
not be so lucrative.
9.2 Defensive Strategies
*W5, T2: To overcome this, Elba will have to improve its management control system, so that all departments'
performances are being monitored. The departments will have to work collaboratively so that it can survive in the economic
downturns. Furthermore, a contingency plan need to be developed in case a sudden disaster is being encountered.
*S1, S2, S3, S4, T1: Elba should look into developing new product lines or brands so that it can easily curb competition. For
instance, Padini has 7 brand categories for all the target markets available, accept for the older generation. So Elba should
do the same so that consumer awareness and satisfaction because a wide variety of products is being offered at Elba.

10.0 CONCLUSION
When analysing the SWOT analysis, the financial analysis, and the competitors' analysis, it is easily visible that Elba
Holdings has been in a hide out especially when other local competitors had taken their position. The firms' current
strategies are rather ineffective as they are not looking at the key issues: increase sales, market share, and profit.
Although their number of outlets is satisfactory, they should look into building customer awareness and advertising. Having
a brand reputation is a necessity to maintain a company's goodwill and to also raise the price of the goodwill.
There are several weaknesses that have been mentioned that can be avoided, and with the strengths that Elba possesses, they
can easily capture the opportunities if the right strategies and tactics are used. The threats are beyond the company's control;
however several measures can be taken to overcome the threats.
The next chapter provides several recommendations that Elba can use or consider to position them better in the garment
industry.
11.0 RECOMMENDATIONS
11.1 Opportunity Matrix
HighProbability of SuccessLow
S1, S2, S3, S4, O3W2, W3, O5, O4
W1, W2, W3, O1, O2, O4
S1, S2, O5

High

Attractiveness

Low

*S1, S2, S3, S4, O3: When entering into a foreign market like Vietnam, there would be a high attractiveness in the sales and
profit, because Vietnam is a growing economy, and they have an open door policy. Furthermore, Elba can be successful
because of the mentioned strengths. Also, it would be easier to compete there because although Elba would be an imported
product to Vietnam, the selling price would be cheap and affordable.
*W2, W3, O5, O4: Elba is able to convince the foreign customers to purchase the products online because it is cheap,
however, the probability of success may be low, because the clothing may not be according to the style of the foreign
consumers, as products sold are with accordance to the Malaysian taste and preference.
*S1, S2, O5: It would be successful for Elba, however, in terms of attractiveness it would be low, because many competitors
already have well established their products on line, thus Elba can get sales, but it would be to its high peak.
*W1, W2, W3, O1, O2, O4: Elba can be successful if it does advertise, customer would be aware of them, however, because
many competitors have already captured customers loyalty, it may be difficult to brainwash the customers that Elba's
products are of better style. Thus, the potential for sales may not be very substantial. However, higher sales may be
achieved in the long run, after consumers have been brainwashed.

11.2 Threat Matrix

HighProbability of OccurrenceLow
W5, T2
S1, S2, S3, S4, T1
High

Seriousness

Low

*W5, T2: The probability of another economic downturn to occur is high, and it is serious depending on how strong the
economic impact is on Elba. Thus, it case it is impossible to overcome this, Elba should not only focus on the clothing
industry, instead it can diversify into opening up caf¨¦ outlets, similar to Padini's strategy.
*S1, S2, S3, S4, T1: There is a high occurrence of competition to from the foreign and local companies, however it is not
serious if Elba still wishes to have only 3 brands. But it would be a better strategy to have catered for a wider population, at
least then it is easier to obtain a wider market share.

12.0 REFERENCES
*Porter M.E (1980), Competitive Strategies: Techniques for Analysing Industries and Competitors, USA, The Free Press
*Porter M.E (1985), Competitive Advantage: Creating and Sustaining Superior Performance, USA, The Free Press
*Thompson A.A and Strickland A.J. (2003), Strategic Management: Concepts and Cases, New York, McGraw Hill
*Elba Holdings Bhd (2003), www.elbaholdings.com, visited on December 13th 2003
*KLSE (2003), www.klse.com.my, visited on December 13th 2003
*Tradenex (2001), http://www.tradenex.com/corporate/content.asp?RubricID=13&StandardID=36, visited on January 22th
2004
*Emas (2000), http://www.sabah.org.my/ybdrt/ucapan_htm/2000/08062000e.asp, visited on January 22th 2004
*SiamFuture Development (2001), http://www.siamfuture.com/asiannews/asiannewstxt.asp?aid=1388, visited on January
22th 2004
*BankNegara (1995), http://info.sm.umist.ac.uk/dissertation/dissertations/suanchinOngAPPENDICES.pdf, visited on
January 22th 2004
*University Sains Malaysia, (2003) Business.unisa.au ,Visited on 25th December 2003
*Pricewaterhouse Coopers, (2003) www.pwc.com/r&c Visited on 31st January 2004

TABLE OF CONTENTS
PG NOS:
1.0 Executive Summary 1-2
2.0 Introduction3
3.0 PEST Analysis4 - 7
4.0 Porters 5 Forces 8 - 11
5.0 Competitors Analysis12 - 15
6.0 Customers Analysis15 - 16
7.0 Financial Analysis17 - 19
8.0 SWOT Analysis20 - 22
9.0 TOWS Analysis22 - 23
10.0 Conclusion24
11.0 Recommendation25 - 26
12.0 Referencing27