Market Competitiveness In The Malaysian Poultry Supply Chain Economics Essay

Market Competitiveness In The Malaysian Poultry Supply Chain Economics EssayThe structure of the Malaysian bird industry is different from the one that existed in the nineties, due largely to vertical coordination and integration. Independent and self-operated activities that once dominated the action system have been replaced by contracts and inexhaustible ownership and operation of the production by integrators. By this many individual poultry processing companies own almost all aspects of production-breeding farms, multiplication farms, hatcheries, feed mills, about broiler growing farms, and processing plants. The structure therefore, involve an aspect of integrated production-marketing systems which involves a single firm owning and operating every aspect of production from importing resurrect stock to marketing packaged chicken-meats in company own outlets. For instance the ex-farm level has been dominated by the integrators because there are only four (4) companies abso lute 100% share of the importation of the breeder birds. The four integrated companies are Ayamas breeder leaven Sdn Bhd, CAB breeding Farm Sdn Bhd, Charoen Pokphand Farm sdn Bhd and Leong Hup Poultry Farm Sdn Bhd. There are ninety two (92) Parent stock (multiplication) farms owned by twenty five (25) separate companies. According to DVS (2012) report ten (10) of these multiplication companies are owned and operated by integrators. There are fifty three (53) hatcheries in Peninsular Malaysia, thirty one or more than 58% of the hatcheries owned and operated by integrators. The total day-old chicks (DOC) production in 2011 by the industry was estimated at 653,006,812 million chicks, and the integrators contributed 70.75% of the total (DVS, 2011). The Department of Statistics (DOS) Malaysia report on the census of pastoral establishments shows there are only 292 poultry farming establishments registered in Malaysia as against more than 3,500 reported by DVS suggesting that integrator s are likely to owned and operate quintuple farms and that a number of independent operated farms are not formally registered. Report from DVS, (2011) have shown that Malaysian broiler-chicken industry control 62.56% of the total chicken meat append in the Peninsular Malaysia and non-integrators control 21.4% share of the supply.Problem statementAlthough the integrating production system allows the firm to achieve economies of scale, decrease transactions costs, as surface as the ability to closely monitor product quality at every stage of production by controlling all inputs and processes at every level. However, on the other hand the traditional structure-conduct-performance paradigm hypothesized that the level of concentration in a particular market will influence the degree of disputation among firms in that market. Markets that are highly concentrated (few large firms dominating the market) are less war-ridden than markets where concentration is low. As such, according to the hypothesis, firms in less competitive environment charge higher prices and reap monopolistic profits. A higher price above marginal cost implies inefficient allocation of resources and the resulting implication is production inefficiency. A concentrated industry structure could therefore weaken the efficiency and effectiveness of market performance. In view of this, the study is aimed to evaluate the indicators of competition in the supply chain of the Malaysian poultry industry.Objective of the StudyIn broad sense the objective of the study is to evaluate the indicators of competitiveness of the Malaysian poultry industry supply chain specificallyTo assess the structure, conduct and market performance of the Malaysian poultry supply chainTo determine the strategic behaviours of the firms and blood among supply chain participants of the industry.To describe the farm-retail-wholesale price spread along the supply chain to observe symmetry or otherwise in the price transmission system process within the industry as an indicator of price setter and takerTheoretical Framework and MethodologyThe concept of S-C-P which emanated from industrial organization studies primarily to go the competitive conditions in industries by examining how the industry structure relates to market conduct and its performance was explored in this study. The S-C-P framework postulates that as market structure deviates from the ideal staring(a) competition, the extent of competitiveness of the market will decrease and consequently a decline in market efficiency (Scarborough and Kydd, 1992).The S-C-P ModelConcentration Ratio compartmentalisationMarket structure CR4 CR8Highly concentrated 75-100Moderately concentrated 50-75 slightly concentrated 25-50 Atomistic 0-25