Macro General Environment Evaluation Marketing Essay

Published Date: 23 Mar 2015

Tomei Consolidated Berhad has a mission to establish itself as a premium brand in Gold and Jewelry, with excellence in its quality, design, service value. This is supported by Tomei's financial performance where it has a substantial growth in revenue and profit. Moreover, Tomei has a positively growing trend projected for its revenue and hence, increasing trend of net earnings per share for shareholders which fulfill the requirement in maximizing shareholders wealth. However, based on analysis of gearing ratio, Tomei is dependent on short-term borrowings to sustain its operations and growth of the company in term of expansion plan. This would require Tomei to be aware of its financing decision in order to remain its good record with bankers and avoid possibility of facing liquidity problem in the future.

The macro-environment of Tomei is being evaluated using PEST forces which refer to political, economical, social and technology factors. Different foreign trade regulations, China's open door policy, Special Economic Zones and political stability affect the political factor. In the economical factor, it is influenced by sovereign debt crisis and downgrading of the US credit rating. Next, demographics, festive seasons and ceremonial functions influence the social factor. In the technology factor, it is affected by Tomei's advanced technology in refining and craving the gold, diamond and gemstone to turn them into jewelry.

The industry level analysis of Tomei is carried out using the Porter's 5 forces which analyses the industry structural features. The increase in the intensity of rivalry among the firms causes jewelry companies to struggle to achieve market leadership. The market penetration into jewelry market is getting more difficult due to the growth of companies already established in the industry and due to high initial investment costs. The threat of substitutes depends on the relative price and performance of the competing products, and customers' preferences. In jewelry industry, the customers' demand can be defined to be very unstable because different customers expect different design and requirements for jewelry. Since diamonds are scarce and hard to acquire, diamond mining companies are able to fully control over its selling price.

Furthermore, national competitive advantages of Malaysia produce successful firms such as Tomei which can be evaluated in the four elements consisting of demand conditions; related and supporting industries; factor conditions and structure, strategy and rivalry. There is high home demand in Malaysia for jewelry which enables Tomei to gain economies of scale and experience effects to compete globally. For factor conditions, Tomei has to exploit the advanced factors such as infrastructure such as digital telecommunication to facilitate communication in among firms in the jewelry industry. Unique vision and goals, firm's structure and the extent of competitive rivalry between domestic firms influence the element of firm structure, strategy and rivalry. In the related and supporting industries, Tomei has form a cluster with Eugen Schofer GmbH & Co in the technology partnership which gives Tomei the competitive advantage in the jewelry industry.

Based on BCG matrix analysis, it is observable that Tomei has both its manufacturing & wholesales, and retail segment in star quadrant. This is reflecting that both the segments have high relative market share and high market growth which would require Tomei to sustain its market share to remain competitive against its main rival, Poh Kong. In addition, Tomei uses balanced scorecard to evaluate the key performance indicators comprises of both financial and non-financial aspects.

It is recommended for Tomei to implement market development, product development and diversification based on geographically areas by expanding its business in other countries such as India to improve its portfolio performance.

2.0 Background of Tomei

Tomei Consolidated Berhad (Tomei) is an investment holding company which involves in the design, manufacture and retail of jewelry. In addition, Tomei also engages in the refining of gold and jewelry; and trading of diamonds and jewelry. Tomei started out as a business in design and manufacturing of jewelry; and supplying to the local jewelers way back in 1968. The first retail outlet was established in the early seventies in Campbell Shopping Complex in Kuala Lumpur under the brand name of TOMEI. Subsequently, Tomei had engaged into wholesale and distribution of jewelry business. Tomei operates its retail business under 5 major umbrella brands namely TOMEI, MY DIAMOND, T.H. JEWELRY, LE LUMIERE and GOLDHEART.

Tomei had venture into Vietnam and China to expand its business upon granted the license or approval from the respective government of the both countries. To date, Tomei has a chain of 70 jewelry retail outlets and 18 jewelry retail kiosks. Moreover, Tomei also exports their products to other regional countries such as Indonesia, Singapore, Thailand, United Arab Emirates and Europe. Throughout its business operation, Tomei has received numerous awards for its excellence customer service and reputable brand such as the status "Superbrands Malaysia 2003/2004" and the title "Malaysian Brand Certification" awarded by SIRIM QAS International Sdn Bhd. Tomei also had being accredited with ISO in Quality Management System for its retailing of jewelry from Lloyd's Register Quality Assurance Kuala Lumpur since 2003 as a results of Tomei's continuous effort and commitment to quality of products and customer service.

Now, Tomei holds the exclusive distribution right to sell Prima Gold which refers to 24k jewelry and the exclusive distribution right from Shenzhen Batar Jewelley Company Limited to distribute Batar Jewelry in Malaysia. Subsequently, Tomei secured the license to manufacture, distribute, and sell gold products under Baby Looney Tunes character in Malaysia from Warner Bros. Consumer Product Inc., USA. Recently, Tomei has launched its own e-portal, www.GoldSilver2u.com which specializes in gold and silver investment in line with the increasing demand for gold investment products. Hence, the performance of the company has been consistently improving on a yearly basis.

3.0 Environmental scan

3.1 Macro/general environment evaluation

The macro-environment of Tomei can be analyzed by using the PEST forces which cannot be directly influenced by the Tomei itself. PEST framework includes political, economic, social and technological changes that Tomei has to respond to and adapt to its environment.

In the political factor, Tomei faces different foreign trade regulations in different countries as it wishes to expand its business to other regions as one of the ways in achieving its mission of establishing Tomei as a premium brand in gold and jewelry with excellence in quality, design and value. For instance, China's open door policy [1] in the year 1978 implemented by Deng Xiaoping with the rise of power of the Communist Party of China has opened up an opportunity for foreign investment into China. As a result, China has become the major producer and exporter of the world due to its cheaper labor cost. In addition, Chinese government had also set up Special Economic Zones whereby market-driven capitalist policies are adopted to encourage the maneuver of foreign capital in China market. Among the policies being implemented are the preferential tax exemptions [2] , investing in new infrastructure like office buildings and reduces tariffs or customs duty to attract foreign firms to invest on China especially those firms whose finished goods are mostly for export. Thus, Tomei has taken this opportunity to tap into the China's market to further expand its retailing business in the year 2007.

Besides, it is essential for Tomei to consider the political stability of the countries that it wishes to venture into the market. This is because venturing into unstable political environment may lead to wars could disrupt the operation of the business. Currently, the world is affected by the political upheaval in the Middle Eastern countries and African continent. This will bring impact to the export market and the supply chain of Tomei as Tomei has export businesses to other regional countries as well.

Next, economic factor in the macro-environment such as sovereign debt crisis in the European Union countries and the downgrading of the US credit rating do affect Tomei's performance. Hence, investors turn to gold investment due to their fear of competitive devaluation, the debasement of currencies and the possibility of soaring inflation at some point in the future to protect their wealth [3] and hedge against inflation. This has caused the price of gold and silver to increase continuously. Thus, Tomei has exploited this opportunity to offer more gold and silver products and venture into the gold and silver investment segment of the market. Tomei had launched its e-portal for selling gold and silver investment products in Malaysia in November 2011 which provides customers another channel to buy and invest in gold and silver investment products such as gold bars and gold wafers. These products are guaranteed buy back which will give the investors a sense of security of their investment. In addition, Tomei's extensive retail outlets make the sell back of the investment products easier for the customers to attract them to invest with Tomei in this gold and silver investment market.

In line with Tomei's mission of becoming the premium brand in gold and jewelry, Tomei faces several social factors. One of the social factors is the demographics of the customers in the countries that Tomei operates. For instance, the group of elderly people will favor to buy gold products and jewelry such as jade as compared to middle age people who will prefer to buy silver, diamond and white gold products. Hence, Tomei had acquired GOLDHEART which offers diamond, platinum and white gold products and established "My Diamond" retail shops to cater for the youthful and trendy people while "Tomei" retail shops cater for the preference of elderly people.

In Malaysia, there are many festive seasons that are celebrated by Malaysians such as Chinese New Year, Hari Raya Aidil Fitri and Deepavali. During these festive seasons, many people will purchase gold and silver products to be given to the closed ones as gifts or for ornamental usage. Hence, Tomei needs to roll out more of the mentioned products to cater for the rise in demand in the gold and silver products during these festive seasons. Furthermore, gold jewelry has always been the norm ornamental usage for the wedding dowry and ceremonial/formal functions. Thus, Tomei needs to ensure that their products meet the requirements of such ceremonial functions leading to the acquisition of GOLDHEART which specializes in jewelry for wedding collections [4] .

Lastly, as Tomei's business involves design and manufacturing of gold and jewelry, Tomei has to adopt the best advanced technology in refining the gold, diamond and gemstones and craving them to be jewelries. This is because the dimension of the diamond being cut influences its value besides its color and carat size. The finer the cutting dimension of the diamond, the higher value of the diamond would be. In the case of gold and gemstones, the design of these jewelries determines their prices whereby a more unique and complex design will have a high price tag. Thus, Tomei has constantly keep updated with the modern technology in the refining and craving of the gold, diamond and gemstones through the technological partnership with Eugen Schofer GmbH & Co, one of the largest jewelry chain manufacturers in Germany to produce high quality and best designed jewelries at lower cost.

3.2: Industry level analysis

The industry level analysis of Tomei is carried out using the Porter's 5 forces which analyses the industry structural features that will contribute to the competitive forces in the jewelry industry and hence determining the industry profitability. The following refers to the industry structural features that are being assessed:

Rivalry among existing firms: High

The intensity of rivalry in jewelry industry is affected by the following industry characteristics such as large number of firms increases rivalry because the firms are competing with each other to attract customers and also compete in order to obtain resources such as gold and diamond to manufacture the jewellery. The increase in the intensity of rivalry among the firms that own similar market share causes jewelry companies to struggle to achieve market leadership [5] . In this case, Poh Kong was known to be the leading manufacturer and retailer of gold and gem set jewelry in Malaysia since year 2010 [6] . However, Tomei had been fighting back by growing strong with aggressive expansion, striving to preserve its edge over the other competitors and to sustain all relevant market requirements where it will continue to shine above the rest. Today, Tomei Group has become an integrated manufacturer and retailer of gold and jewelry [7] .

Due to the group continuous effort and commitment to quality, the group was awarded with ISO in Quality Management System for its retailing in jewelry since year 2003. In this year, Tomei Group has further established its position with the winning of the prestigious Enterprise 50 awards. This directly lead to an increase in competitive advantage as Tomei Group is actively finding ways to cater the needs and meet the demand of young and trendy lifestyle required by the customers. Therefore, they introduce a brand called My Diamond, which specializing in trendy white gold and diamond collections to the market in year 2002.

It is very common to find that the jewellery industry companies compete by using price war strategy. However, specialty jewellery companies would choose to compete on quality rather than competing on price. Brand identification and recognition, on the other hand, tends to constrain rivalry. Moreover, there is a high growth rate in the industry. As the jewelry industry expands globally, the industry's top competitors are opening more stores with the purpose of increasing its market share and capitalizing on competition. This had caused the industry to be stagnant that now competes by taking market share away and creates price wars among many of the firms in the industry [8] .

Moreover, Tomei has strengthened its specialization in the wedding jewelry segment with its acquisition of Goldheart Jewelry Sdn Bhd for RM5.6mil [9] . The group is aiming to expand further by opening at least 10 retail outlets this year, which consists of four in Malaysia, two in Vietnam and four in China. The switching costs and degrees of differentiation get lower as the industry grows. These low degrees of differentiation lead to consumers purchasing items based on price rather than quality. Therefore, Tomei has to offer promotion and cash rebates to attract more customers to its retail shops.

Threat of New Entrants: Moderate to Low

Not many of the existing firms have contracts/deals with well-known diamond distributing companies. New entrants may face difficulties in getting into a contract with these companies, because they are lack of the financial support and a reputable name which may cause doubt in the diamond distributing company and thus no contract will be formed as the diamond distributors are not secured with the performance of the potential new entrants.

The entry into jewelry market is getting more difficult due to the growth of companies already established in the industry and due to high initial investment costs. Existing firms experience economies of scale from large investments in research and development, brand advertising, or in physical location of stores and therefore, causes the barriers to entry and to exit are very high in jewelry industry. Large economies of scale make it harder for new entrants to compete in an industry. The more assets a firm has, the greater the firms' ability to take advantage of economies of scale. The following chart shows some of the competitors' total assets from 2008 to 2011.

Chart 1: Total assets from 2008 to 2011

Years

2008

RM'000

2009

RM'000

2010

RM'000

2011

RM'000

Tomei Group

242,324

262,083

302,946

386,977

Poh Kong

501,319

490,109

509,641

576,408

DeGem

210,836

214,552

219,109

266,656

As shown in the above table, there are a few of jewelry companies that are listed but there are a lot of private jewelry companies such as Lazo Diamond, SK Jewellery, 321K Jewelry etc. The competition among the jewelry industry is quite high but hardly have few companies willing to go listed due to a lot of constraints.

Threat of Substitute Products: High

The threat of substitutes depends on the relative price and performance of the competing products, and customers' preferences. A substitute product also will affect the price elasticity of jewelry. For example, as more substitutes become available in the market the demand becomes more elastic because customers have more alternative choices. Therefore, a close substitute product limits the ability of the firms in the industry to raise prices and the competition engendered further by a threat of substitute comes from products outside the industry. For example, the prices of the gold, diamonds and gemstones are constrained by the prices of pearls and crystal. These pearls and crystal are the substitute products of gold and diamond, yet they are not rivals in the gold and diamond industry.

Bargaining Power of Customers: Moderate

When there are a large number of buyers in the industry, the buyers have the ability to set its price as high or low as they wish to be. Customers will have little bargaining power regarding price when they shop at luxury stores and refuse to search for alternatives because of such a limited selection. However, when customer's purchasing power is strong, when there is a case that there are many suppliers and only one buyer whereby the bargaining power of the buyer is relatively strong. In jewelry industry, the customers' demand can be defined to be very unstable because different customers expect different design and requirements for jewelry. Some may pursue to have trendy and the latest design, some prefer to go for a better and reputable brand name, some may go for different gemstones. It is also possible that some customers who believe in 'Feng Shui' will prefer to wear crystals than wearing a diamond or gold. There is a belief that certain crystals may bring luck or good changes in the people's life. Therefore, the bargaining power of buyers considers being moderate in jewelry industry.

Bargaining Power of Suppliers: High

Since diamonds are scarce and hard to acquire, diamond mining companies are able to fully control over its selling price.

Diamond-mining companies such as DeBeers have the absolute control on the price of the diamonds that are supplied to several firms in the jewelry industry, such as Tomei Consolidated Bhd. Since these scare resources are of great value to the firms, the bargaining power of the supplier is even greater. With geographically diverse world-class mining assets, DeBeers [10] have the largest diamond resource and reputable position in the world, as well as an extensive global distribution network and strong brand name that connect with people from all walks of life. The power of suppliers within the jewelry industry has skyrocketed within the last few years due to natural gemstone scarcity.

3.3: National competitive advantage

Country like Malaysia has produce successful firms such as Tomei due to the national competitive advantages possessed by Malaysia whereby Tomei could use Malaysia's national backgrounds to lever world-class competitive advantages. These national competitive advantages of Malaysia can be analyzed by using the Porter's Diamond that consists of four major elements such as the demand conditions; related and supporting industries; factor conditions; and firm structure, strategy and rivalry.

Demand Conditions

In Malaysia, the population comprises of three main races which are Malay, Chinese and Indian. There is high home demand by the Malaysian population as jewelries such as gold and diamond are purchased to be given as gifts to their closed ones during the festive seasons such as Chinese New Year, Hari Raya Aidil Fitri and Deepavali, and formal/ceremonial events. For instance, wedding dowry and ornaments normally includes gold or diamond which is a necessity for a wedding event. Thus, Tomei could take advantage of the high home demand by rolling out more jewelry products in order to cater for the demand. The high demand for jewelry enables Tomei to obtain the economies of scale by producing high volume of jewelry and gain experience effects to compete globally. Tomei has to keep coming out with new designs of its jewelries to suit the changing fashion of the customers especially for the wedding events as the Malaysian customers are critical and demanding in jewelry products. As a result, Tomei gains experience effects and able to ensure there is continuous demand for Tomei's jewelry by the customers.

Factor Conditions

Factor conditions are categorized into basic and advanced factors but only the advanced factors are the roots of sustainable competitive success. However, the government has to implement policies and play its role to encourage the development of advanced factors. The basic factors refer to land, labor and natural resources. In Malaysia, there is availability of land, labor and gold for the jewelry firms such as Tomei to exploit. Moreover, the advanced factors that exist in Malaysia such as digital telecommunication such as 3G which facilitates the communication in the business world and transfer the business information across the borders to compete globally. Hence, Tomei could make use of this competitive advantage to communicate and transfer information to its retail outlets and manufacturing facilities in the Vietnam and China.

Firm structure, strategy and rivalry

The domestic firms has its own unique vision and goals to be achieved, firm's structure of either traditional or empowerment approach, and extent of competitive rivalry between domestic firms which is fierce and internationally competitive such as Poh Kong and Habib. These factors have pushed the firms in the jewelry industry to improve its capability to sustain competitive advantages over the other competitors by either lower its costs, improve the quality of both jewelry products and customer service and differentiate its products from its competitors' products. In the case of Tomei, it has taken the effort to differentiate itself by becoming an integrated designer, manufacturer, exporter and retailer in the gold and jewelry market

Related and supporting industries

The related and supporting industries are regarded as the complementary world-class producers of components or services of the jewelry industry that supports the internationally competitive firm such as Tomei. The close working relations and the ongoing coordination of related supporting industries enhance the competitive advantage of the industry by forming a cluster that refers to linkages between world-class related firms either by vertically which is between buyer and suppliers or horizontally which refers to common customers, technology and channels. For example, Tomei has technological partnership with Eugen Schofer GmbH & Co [11] , the largest jewelry chain manufacturers in Germany. This enables the transfer of expertise within the cluster such as movement of highly-skilled staff to manufacture the sophisticated jewelry at lower cost. This collaboration has enable Tomei to design and manufacture approximately 70% of its jewelry in-house which leads to better margin and reduces its reliance on the outsourced jewelry. Now, Tomei has built up about 36,000 in-house designs in which 1,500 designs are actively being used for its manufacturing and retailing operations.

4.0 Portfolio analysis

4.1 Attractiveness of different business portfolios

In order to further analyze Tomei, an analysis on the portfolios of Tomei is essential to understand on the collection of products or businesses which is of core activities that generates revenues which is likely to be the operating segments. This would allow Tomei to determine which operating segments to invest additional funds as it lays the foundations for sound strategic planning. It is known that Tomei has principally engaged in manufacturing & wholesales and retailing of gold ornaments and jewelry.

Tomei's manufacturing and wholesales is to produce products that best meet the contemporary needs and preferences of customers. Today, Tomei has its own Tomei Group & Jewellery Manufacturing Sdn Bhd which now it has joint ventured with Eugen Schofer GmbH & Co, the largest chain manufacturer in Europe. Moreover, Tomei has license to set up manufacturing facilities in Socialist Repulic of Vietnam in year 2006. In maintaining its leadership in wholesales segment, Tomei has formed a new joint venture company with a 55% interest to undertake the wholesales of white gold jewelry in Malaysia which the products are also marketed to other regional countries through appointed distributor.

Tomei's jewelry retail business has more than 70 retail outlets locally in Malaysia consisting of "Tomei", "My Diamond", "T.H. Jewellery", "Le Lumiere", and "Goldheart" [12] . Also, Tomei further establishing its position in other countries such as China and Vietnam by expanding its retail business by opening outlets at prominent location. For China, Tomei has kiosk outlets at shopping malls in Shanghai while in Vietnam; it operates retail kiosk outlets at cities such as Ho Chi Minh and Hanoi.

Below is the BCG matrix on the two operating segments of Tomei which would help to evaluate the attractiveness of the different portfolios which also known as strategic business units:

High RELATIVE MARKET SHARES Low

High 10x 5x 1x 0.5x 0.1x

M & W

RETAIL

STAR

Problem child

Cash cow

Dog

60

MARKET GROWTH RATE

30

0

Low

Diagram 1: BCG matrix of Tomei [13] 

In Tomei, the Boston Consulting Group (BCG) growth or share matrix is showing the market growth and the relative market share between the Tomei and the other competitor which most likely to compare with the market leader. The market leader of jewelry industry is Poh Kong which has retail and manufacturing & wholesales as well. Thus, the BCG matrix above is done based on comparison between Tomei and Poh Kong. BCG matrix is done to determine the position of Tomei's operating segments. Tomei's retail segment has a relative market share of 1.363 and market growth rate 57.1% while the manufacturing & wholesales has relative market share of 1.375 and market growth rate of 39.1%. The size of retail segment is bigger as it generates more revenue than manufacturing & wholesales segment, about triple the revenue of manufacturing & wholesales segment. As a result, it is seen that both retail and manufacturing & wholesales are in star quadrant.

Based on the BCG matrix, the manufacturing & wholesales segment of Tomei has high relative market share and high market growth rate. However, the revenue generated by manufacturing & wholesales segment is lesser than retail shown by the size of the circle. Falling in star quadrant shows that Tomei's manufacturing & wholesales segment is competitively strong in the industry. Thus, Tomei is required to invest considerable funds to keep up with the market growth rate as well as to stay competitive against its' main rival, Poh Kong. It is advisable for Tomei to hold market share to sufficiently match the commitment of rivals and requirement of marketplace. Tomei should consider product development strategy to retain its market share which is further elaborated in 5.0 recommendations to improve portfolio performance.

In the retail segment of Tomei, it is also in the star quadrant with high market growth rate and high relative market share. However, it is clearly observable that retail segment contributes more sales to Tomei although it has a smaller relative market share compare to Poh Kong. This is because retail segment has more customers' demand as well as provide Tomei with direct dealing with its customers which caused Tomei to switch focus from manufacturing & wholesales to retailing. In the star quadrant, Tomei need to offer more attractive long term prospects to reduce the risk of falling into cash cow quadrant one day.

For retail segment, Tomei may consider for market development where new market is explored with its existing products. This is done by Tomei aggressively where it expands its business to China and Vietnam. Tomei needs to absorb large amounts of cash from investment needs as fixed assets such as retail outlets to sustain growth and the need of cash to beat off competitor attack strategies. On 12 May 2011, Tomei intends to invest a total of RM25mil in capital expenditure in the financial year ending Dec 31, 2011 to open 10 new retail outlets. Tomei is targeted to expand its presence further by opening at least 10 retail outlets in 2011, comprising four retail outlets in Malaysia, two in Vietnam and at least four in China [14] . Furthermore, Tomei also constantly on the lookout to expand business further, and in fact the first quarter of 2011 has seen the opening a new Tomei retail outlet in City Square Johor Bahru, in line with the increasing affluence in the population and rising tourist arrivals. Tomei had the preparation in new areas and likely to be attacked. On the other hand, Tomei is well managed and execute sales promotion and joint-promotion activities and to co-ordinate all outlet and jewelry fair communication.

4.2 Tomei financial ratio analysis [15] 

Year

2008

2009

2010

2011

RM'000

RM'000

RM'000

RM'000

Profitability ratios:

Operating margin

0.0953 or 9.53%

0.1080 or 10.80%

0.1041 or 10.41%

0.1069 or 10.69%

Net profit margin

0.0524 or 5.24%

0.0606 or 6.06%

0.0600 or 6%

0.0617 or 6.17%

Return on assets (ROA)

0.1138 or 11.38%

0.1240 or 12.40%

0.1224 or 12.24%

0.1397 or 13.97%

Return on capital employed (ROCE) [16] 

0.2082 or 20.82%

0.2360 or 23.60%

0.2153 or 21.53%

0.2641 or 26.41%

Liquidity ratios:

Current ratio

2.06 : 1

2 : 1

2.25 : 1

2.1 : 1

Quick ratio

0.24 : 1

0.23 : 1

0.26 : 1

0.24 : 1

Investor ratios :

Earnings per share

12.04 sen

14.48 sen

15.63 sen

22.51 sen

Price/Earnings ratio (PE)

4.15 : 1

3.45 : 1

3.2 : 1

2.22 : 1

Solvency ratio:

Debt to equity ratio

48.03%

44.13%

43.42%

47.58%

Additional ratios:

Percentage of short-term borrowing

79.9%

89.3%

80.8%

83.4%

Profitability ratio

Both the operating and net profit margins have slightly improved from year 2008 to 2009. However, for the year 2010, there was a decrease of 0.39% of operating margin and 0.06% of net profit margin. In year 2011, the profitability ratios show great improvement from previous year 2010 due to a significant growth in profit generated.

In year 2008, Tomei had a significant increased in turnover of RM 289,400,000 as compared to year 2007, which was RM 223,800,000. The improvement in revenue was attributable to the better gold prices and streamlining of retail outlets in different countries which Tomei has relocated some of its existing retail outlets in shopping malls to more strategic locations. After Certificate of Approval has been granted to establish an enterprise in People's Republic of China by Shenzhen Registrar of Trading and Industries, Tomei has started to set up its own retail presence and tapping into the major potential in China. [17] 

It is seen that Tomei's operating profit margin has improved marginally to 10.8% in year 2009 (FY2008: 9.5%) due to a change in its product mix. In year 2009, the company focused majorly on sales of gold ornaments and jewellery. It has shown that the revenue increased from RM 289.4 million to RM 300.89 million, there was a significant increased from year 2008 to 2009 due to the improved sales mainly contribute from the higher gold prices in the year as gold and gold-related products remain as the major contributor consisting 60% of the total revenue generated. It might also be due to trading license which allowed Tomei to import and distribute ready-made jewellery to distributor in Vietnam was successfully applied in the year. For ROA and ROCE, there was an improvement from year 2008 to year 2009. Although there was a significant increased in total assets especially the inventories of gold ornaments, from RM 80,676,000 to RM 98,599,000, but it had a better sales of gold ornaments which has directly increased the profits earned. For the capital employed, there was an increased of RM 5,215,000, but the earning power of the business operations has improved and stewardship of the management was good enough to increase the ROCE. Moreover, the borrowings have been decreased by RM 10,176,000, it meant that Tomei has had enough money to operate business and did not need to borrow money from bank. [18] 

During financial year 2010, there was a significant increase in sales of gold ornaments and jewellery, and also gold bar. However, the profitability ratios have shown as reduction in percentage due to huge increase in expenditure and cost of sales such as product development cost. Besides, launching of Le Lumiere Allure Diamond Wallet in February 2010 might have a huge cost of advertising. [19] Change in foreign currencies might also affect the purchase cost which could be shown by increasing cost of sales, from RM 196,764,000 to RM 241,970,000. Tomei had higher foreign exchange risk due to major purchase of gold and jewellery from foreign countries.

The ROA and ROCE ratios have shown a decreased in returns. It might be due to inefficient utilization of resources and poor stewardship in management. This also indicates that the earning power of business was decreasing. However, it might not be management's fault as Tomei has purchased huge amount of new assets, the ROCE would be reduced because it took time to generate the returns. In addition, the issued and paid-up share capital of Tomei has shown an increased of RM 6,300,000 which was from RM 63,000,000 to RM 69,300,000. It was due to new issuance of ordinary shares of RM 0.50 each. [20] According to Bursa Community, Tomei has a higher ROE and ROA than Poh Kong where Tomei has ROE of 19.1 % and ROA of 9% while Poh Kong has ROE of 12.6% and ROA of 7.6%. It is believed that Tomei could maintain its high efficiency by more expected revenues to be generated from the expansion of retail shops as well as the expected rise in gold price in the future [21] .

In the financial year 2011, the profitability ratios have significantly improved as compared to previous year. The reason might be due to further added on another brand into its fold with the acquisition of Goldheart retail operations in Malaysia. Besides, there was natural disaster happened in Japan and Thailand. These disasters had negatively impacted on the global economy as export markets and supply chain were badly affected where Malaysia has taken advantage from the case since the disruption in the supply chain had caused the shortage to be channeled to the component manufacturers located at Japan and Thailand. This led to Malaysia's economy moving well in the current year and the total revenue rose from RM 356,286,000 to RM 505,387,000. It might also increase the profit as well. [22] For ROA and ROCE, there was a significant increased in percentage. As the total assets and capital employed has increased, the profit before interest and tax has risen as well. It represented Tomei has fully utilized the resources and the management was having good stewardship, therefore the earning power of business was increasing.

Liquidity ratio

Current ratio and quick ratio were calculated to determine the liquidity of the Group. The Group has had better current ratio, but at the same time, it has had a poor quick ratio in the year 2008. However, in year 2009, the Group has achieved the rule of thumb in current ratio, but having worse quick ratio than previous year. For the financial year 2010, the Group has had the ratio of 2.25 to 1 in current ratio and slightly improvement in quick ratio. The Group has improved in current ratio, but not quick ratio in year 2011.

From year 2008 to 2011, the Group has had better current ratio. But, there was a severe liquidity problem resulted in quick ratio. It might be due to poor working capital management, overtrading or rapid expansion of the business. The group was kept on increasing the amount of inventories purchased because the sales of gold ornaments and jewelry were increasing significantly. Excess inventories shall be available for the boost demand of gold ornaments and jewelry. However, the Group must also concern on the liquidity problem as it might be unable to settle immediate or urgent liabilities. Besides, the Group has opened many outlets and expanded its businesses to foreign countries such as Malaysia, Vietnam and China, and also exported to other regional countries within these few years which required a lot of financial support. Moreover, current liabilities were also kept on rising due to increased in borrowings. The Group shall ensure the borrowing level to avoid facing more serious liquidity problem. Start from year 2009, there was an increased in trade receivables and trade payables. It might due to poor working capital management. This could affect the creditworthiness of the Group if the trade payables were kept on increasing. However, the possibility of bad debts incurred would be higher due to higher trade receivables. Therefore, corrective actions shall be taken by the management to resolve this problem. [23] 

Investors ratio

Tomei projects a solid earnings growth as the revenues as Tomei successfully achieved the revenue and net profit CAGR of 5% and 1.5% respectively over the past five years stated by Bursa Malaysia Community. This indicates bright prospect in return of EPS in the future for Tomei. Furthermore, it is proven by the increasing trend of EPS for Tomei from year 2008 to year 2011 as the profit attributable to shareholders increased tremendously due to the rapid rise in revenue generated from retail segment throughout the period especially in year 2011. In year 2011, the EPS calculated is 22.51 sen due to the sudden surge in profit attributable to shareholders despite there is additional 12,600,000 new shares issued and paid at RM0.50 each in year 2011. This clearly shown that Tomei is gaining more market share in the industry and staying competitive against its main rival,Poh Kong with PE ratio of 2.22 in year 2011 from 3.2 in year 2010. Thus, with such a strong EPS and PE ratio, it will allow Tomei to attract more potential investors in the future and retain shareholders' confidence of their investment in Tomei. Besides, this would also allow Tomei to more flexibility in negotiating with banks for more borrowings in terms of bank overdrafts or bankers acceptance as well as less restrictive covenants imposed by the banks.

Solvency ratio

Tomei's gearing ratio which is the debt to equity ratio showing less than 50% borrowings indicates that Tomei is managing its debt effectively. Moreover, Tomei balances its gearing by having capital funds from both equity and borrowings. More equity shares are issued and more borrowings are engaged to provide Tomei with sufficient funds to expand its business in retailing. Based on research done by Bursa Malaysia community, it indicated that Tomei has a high net gearing ratio which is 0.9 times in year 2010 which is significantly higher that its peer, Poh Kong maintained at 0.4 times [24] .

However, the management of Tomei is confident in maintaining its net gearing below 1.0 as Tomei had managed to retain the gearing ratios below 50% throughout its reporting years.

The debt of Tomei consists of long-term and short-term borrowings which are based on the percentage of short-term borrowings calculated; Tomei is mostly dependent on its short term-borrowings. This is because Tomei has more than 80% short-term borrowings every year. The short-term borrowings majorly consist of bankers' acceptance and bank overdrafts as can be seen in the annual report [25] . It is important for Tomei to ensure good relationship with the respective banks in order to remain support from banks to sustain smooth operation of its business. There several covenants set by the respective banks where the gearing ratio of Tomei must not exceed 1.5 times and so far, Tomei has managed to maintain its gearing ratio below 1.0 times and as mentioned above, Tomei has convincingly strong EPS which possibly provide essential support to make repayment with shares if insufficient immediate cash were to occur in the future.

4.3 Operating segments analysis

Analysis on operating segments of Tomei is done to evaluate the performance of each operating segment and determine which segment that is more profitable. Below is the financial analysis of Tomei's operating segments based on the annual reports:

Ratio

Manufacturing and wholesales

Retail

Financial indicators

Return on assets

Year 2011 = 29.6%

Year 2010 = 24.8%

Year 2009 = 68.3%

Year 2011 = 102.0%

Year 2010 = 93.9%

Year 2009 = 92.2%

Return on liabilities

Year 2011 = 57.2%

Year2010 = 50.4%

Year 2009 = 134.2%

Year 2011 = 197.3%

Year 2010 = 191.5%

Year 2009 = 181.1%

Similar analysis in done on most recent quarterly report of March year 2012:

Ratio

Manufacturing & wholesales

Retail

Return on assets (ROA)

=8.87%

=30.8%

Return on liabilities (ROL)

=17.3%

=60.0%

Based on the calculations above, it is clearly seen that manufacturing & wholesales segment is of less emphasized since year 2010 as the ROA and ROL, both plunges drastically as the revenues generated from this segment dropped by more than half from year 2009. This shows Tomei switches its focus from manufacturing & wholesales to retail as retail generates more revenues due to the demand of customers and for Tomei to have direct dealings with customers.

Throughout the three years trend, it is seen that retail segment grows year by year effectively and efficiently utilizing its assets and liabilities. On the other hand, for manufacturing & wholesales, there was a drop in utilization of assets and liabilities in year 2010 as the revenues dropped. However, Tomei shows better utilization in manufacturing & wholesales segment in year 2011 as there was a rise in its revenues generated.

Tomei has a robust revenue growth from both segments as in manufacturing & wholesales; it grew by 52.7% while in retail segment grew by 39% from year 2010 to year 2011. However, based on the portion of revenue, the retail segment has more weightage of 77.5% of the total revenue while manufacturing & wholesales contributed the remaining, 22.5%. This proves that Tomei is dependent on its retail segment to sustain its survival in the industries as well as to establish a strong competitive advantage against its rivals such Poh Kong.

The quarterly report on March year 2012 is showing that retail segment has a better utilization of assets and liabilities compared to manufacturing & wholesales segment. This is supported by the weightage of revenue where retail segment has 77.6% of the total revenues generated while manufacturing & wholesales only covers the remaining 22.4% [26] . Hence, retail segment of Tomei is the main revenue contributor which currently in year 2012, Tomei has an expansion plan where RM 20 million is allocated to open up six new stores nationwide by year end in view of the stronger demand on gold products [27] .

4.4: Key performance indicators

Tomei Group is primarily involved in two business segments which are manufacturing and wholesales; and in retailing of gold ornaments and jewelry. The risk and return of the Group are mainly affected by the methods adopted by Tomei to deliver its products and customer service. Hence, balanced scorecard is used to implement, communicate and evaluate the achievement of the mission and business strategy of Tomei by translating them into objectives and measures such as key performance indicators (KPIs). These KPIs will encourage behavior that is consistent with Tomei's strategy. Balanced scorecard also helps the management of Tomei and its stakeholders to determine whether the business is on track a line with its mission and strategy by controlling and monitoring people by implementation of top-down command-and-control fashion. Besides, the reason why the Group should measure its performance is to learn and improve the long-term financial performance by equipping staffs with basic knowledge. In addition, Tomei also reports externally and ensure it complies with the laws and regulations.

Under the balanced scorecard, there are 4 perspectives which cover both the financial and non-financial performance measures such as the financial, customer, internal business process; and learning and growth perspectives.

Financial perspective

The financial perspective emphasizes on the financial performance objectives anticipated from pursing Tomei's strategy and economic consequences of the outcomes expected from achieving the objectives specified from the other three perspectives. Financial perspective also addresses on the area of "how should we appear to our shareholders?" leads Tomei to have the objective of revenue growth. The KPI that can be used to measure the identified objective is sales growth percentage for each segment. In addition, Tomei has also objective on improving on its asset utilization which can be measured by using return on asset ratio [28] to indicate the success of achieving this objective.

Customer perspective

In the customer perspective, the customers and market segments in which Tomei will compete are identified and underpin the revenue element for the financial perspective objectives. Thus, it is essential to ensure that the customer objectives are achieved which will result in the target revenues to be generated. Increasing customer retention and increasing customer satisfaction are the core objectives of Tomei in line with its mission of being the premium brand in gold and jewelry.

The specific measure for increasing customer retention is the number of repeat sales from the existing customers. On the other hand, the objective of increasing customer satisfaction can be measured using customer survey satisfaction ratings that will determine the ratings given by customers on the products and customer service; and any recommendations on areas to improve. Customers can be retained and satisfied by providing good quality jewelry products and excellent customer service which will gain the existing customers' trust in Tomei and satisfy the customers. Furthermore, the short delivery time taken to export its jewelry products to foreign countries will strengthen the relationship of Tomei with the customers from foreign contries.

Internal business perspective

In the internal business perspective, the critical internal processes of Tomei are indentified for which Tomei must excel in implementing its strategy. These identified critical processes should also achieve Tomei's customer and financial objectives. The critical processes of Tomei could be categorized into innovation, operations and post-sales service.

In the innovation process, Tomei has an objective of increasing the number of new designs for its jewelry to suit the changing customers' taste and current fashion. This particular objective can be measured by the percentage of sales from latest designs. The operation process is related to Tomei's manufacturing segment whereby it has increasing manufacturing efficiency as its objective. The efficiency of manufacturing can be measured by the output/inputs ratios to determine the volume of output (jewelry) compared to the amount of inputs (gold, diamond and gemstones). Lastly, in the post sales service process, Tomei has increase in service quality as its objective. This is because customers regularly return to the retail shops to polish its jewelry especially white gold. The service quality objective can be measured using the percentage of customer requests to polish their jewelry are handle with a single call.

Learning and growth perspective

Tomei and its employees must keep learning and developing in order to maintain the loyal and satisfied customers; and continue to make use of its resources efficiently and effectively procedure hence creating long-term growth and improvement.

Learning and growth perspective emphasizes on the importance of Tomei to invest in its infrastructure such as people, systems and organizational to provide capabilities that will accomplish the other three perspective. For instance, Tomei has an objective to increase its employee capabilities which relates to the employee satisfaction, employee retention and employee productivity. Tomei should provide training and internal education to its employees to further improve themselves on their skills and keep up with the modern technology being used in the design and manufacturing segments. This action will make the employees to be satisfied, increase the productivity of the employees and retaining them in Tomei. The customer satisfaction can be measured by employee satisfaction survey ratings, while the annual percentage of turnover of key staff can be used to measure the employee retention. Last but not least, the employee productivity can be measured by the sales revenue per employee.

5.0 Recommendations to improve on portfolio performance

In this competitive industry, Tomei has to come out of a set of integrated approach to increase its market share and to expand its business nationwide so that can compete with Poh Kong, which is currently the largest manufacturer and also the market leader and leading retailer in gold and jewelry industry. Based on the above analysis, Tomei would require several improvements internally and externally to captivate more market shares and enhance the performance of business in manufacturing & wholesales segment as well as retail segment.

Internally, Tomei could form a group of expertise in designing jewelry products to produce new design of jewelry that is of current customers' requirement. This is a product development strategy where in-house program is to be provided to enhance staff's knowledge and skills. This is appropriate as Tomei is catering to middle-class customers which have to power to demand for delicate and unique design of the jewelry products. Therefore, staffs of the company have the opportunity to keep enhancing the experience and improving skill which will help Tomei to produce knowledgeable and skillful employee in sight of more efficient production. It is essential for Tomei to consider nurture its design and manufacturing to stay competitive and retain its market shares. This might require Tomei to upgrade or invest in advanced equipment or machines to produce fine jewelry products. Thus, it is important for Tomei to make appropriate investment in advanced technology in order to sustain its market shares in the industry. By doing so, Tomei could ensure efficient and effective communication between manufacturing segment with its retail segment to produce jewelry that satisfy customers' requirement on quality and design.

Moreover, Tomei has a training program for its employees involved in retail segment in order to ensure smooth operation of the business. The management trainee of Tomei which is of the main focus of the program to engage the employees involved exposing them to store operation in the areas of planning sales promotions, merchandise display, customer service, inventory selection and control, physical and safety for store management. It will help to improve the sales and more effective control of the staff because they are well trained and more effective to solve problem related to retail store when needed. Other than that, Tomei also focuses in areas display concept for respective brand names, outlet and jewelry fairs and also the display work. It will enhance the marketing strategy for the customer behavior.

Externally, Tomei Consolidated Bhd can strengthen its company position by diversifying its business portfolio or growth by expansion to other countries. For example, Tomei has successfully ventured into the China market, perhaps Tomei can search for another country to penetrate into such as Vietnam or maybe India. India has a relatively strong potential for jewelry business to grow because Indians love accessories and the market potential is huge due to its big population. Tomei could consider setting up manufacturing factory there so as to cater to local needs as well as for export purpose as India has cheaper labor cost. This would help to lower Tomei's cost in manufacturing. However, Tomei must be caution of taking this step as proper planning and training of staffs are required as well as a team of expertise is required to ensure smooth operation in India. For its first step, Tomei should open a retail kiosk in India to determine the acceptance of the locals on Tomei's products which is known as the market development strategy. It will be profitable for Tomei if Tomei could enter into their market. This is because it is expected for gold price and silver price to rise in the future. Thus, economical factor would support Tomei to expand its market in other countries such as India which has a huge demand.

Since it is difficult to get a contract with well-known diamond distributing companies, Tomei need to use this opportunity to get an exclusive right to be the only manufacturer or retailer of certain precious gemstones. Tomei main supplier is DeBeers and if possible, Tomei can eventually seek for another supplier such as Aber as to lower down the absolute control of price on the diamonds supplied. Supported with the strong financial support of Tomei Group, it is advisable to fully utilize its funds to gain economies of scale in production so that can gain cost savings. New entrants will be difficult for them to compete on cost with current existing jewelry companies and therefore, limits potential new entrants. This is due to it will require high initial cost for new entrants to capture substantial market share in order to compete with existing companies such as Poh Kong and Tomei.

It is important to develop customer awareness of the benefits of the product not achieved through substitute products. For example, Tomei holds the exclusive distribution right to sell Prima Gold which refers to 24k jewelry and the exclusive distribution right from Shenzhen Batar Jewelry Company Limited to distribute Batar Jewelry in Malaysia which other competitors do not offer. Recently, Tomei has launched its own e-portal, www.GoldSilver2u.com which specializes in gold and silver investment in line with the increasing demand for gold investment products. This also provides more convenience to the investors to invest in gold and silver investment that other competitors failed to provide in short term. This is where Tomei further develop its market development strategy by expanding its market where it provides convenience for customers to purchase jewelry products where the pricing are based on live international price. It is not like walking physically into a jewelry retail shop, the price is based on price set by Federation of Goldsmith and Jewelers Association of Malaysia, in short, FGJAM. Thing is, FGJAM does not provide pricing for Silver. This move is lauded as it offers better transparency in buying gold and silver. Therefore, by creating the awareness to the general public that Tomei has actually offered a diversified business and service to the customers, consumers might gain more confidence on Tomei and eventually the brand name of Tomei will be enhanced.

In order to expand the total market share, Ansoff's product-market scope matrix can be used to determine what strategy to be used to develop its market or products.

Ansoff-Matrix.GIF

In jewelry industry, the customers' demand can be defined to be very unstable because different customers expect different design and requirements for jewelry. Therefore, different marketing strategies should be implemented in order to diversify the business and attract more customers. First of all, Tomei can choose to develop into Vietnam or maybe other country as Tomei has an outstanding performance in Malaysia and also successfully ventured into China market which now it is well-established in China. Therefore, Tomei should product its current jewelry products to other nations to gain international market share which is recommended above to enter India and promote its jewelry as mentioned above. However, substantial analysis and evaluation methods should be used to analyze the cost and benefit before taking any action.

Due to different customers' needs, Tomei can come out with new product line like including pearls and special gemstones in the jewelry accessories to create a new trend and style in jewelry industry. This kind of products incredibly gain a lot of customer's interests because there are some home business jewelry maker successfully used pearls and gemstones to make a very unique and different style from ordinary jewelry set. This creates a sense of art of fine jewelry designing to the reputation to the company.

Moreover, Tomei has the responsibility to serve and facilitate in branding activities which includes designing and generating marketing collateral for respective brand. Besides, Tomei has the responsibility to assist in core concept development for in-house creative work to stay competitive by creating new design and products. Hence, the designers of the company have the more fantasy space idea to design new jewelry products and bring more creative design or idea to the company, fulfilling customers' requirement.

The above strategies need to be implemented through incremental change. That means a business change to improve the company's performance should change by taking small thoughtful steps, assessing what does the company has in its strength and also to analyze the environment around the company before taking any action. A continuous progression gives an observation on the company's ability to adapt to the new changes and also to monitor the customer's acceptability towards the change to the company's strategy. This will maintain the equilibrium of a company rather than reaching a new equilibrium because direct changeover might not gain positive impact as it takes time for the stakeholders to get used to the change structures. A business plan that includes jewelry making techniques, skills level, customer profiles, sales and growth analysis should be well structured and analyzed before making any changes in the business strategies.

6.0: Conclusion

In the nutshell, Tomei should come out with a set of integrated approach insight with capturing the market share in order to be competitive globally and expand its business nationwide. According to Ansoff's matrix, Tomei should adopt product development, market development and diversification strategy to improve the portfolio performance. Tomei should im