New World Shwe Pyi Tan (SPT).

New World Shwe Pyi Tan is the name of the company that we spoke with and researched (SPT). The company started off in the logistics and shipping industry before diversifying into sectors that were related to building and engineering. Diversification was primarily done to protect the company from any impending crises that would lead to its demise. The article includes a thorough discussion of the concept of diversification, with a focus on the company’s decision-making processes, reasons for diversifying, and problems they faced. To lessen the demands of day-to-day operations, the company decided to diversify into a closely similar industry. Because it has improved corporate performance and because the two industries do not overlap, increased in the business performance as they two sectors not only compete on building more funds but also work hand in hand to complete each other. A SWOT analysis was also carried out to analyze whether the aspect of diversification diluted the economic performance of the firm. A SWOT analysis entails a complete checkout of the strengths, weaknesses, opportunities as well as threats of any business organization. The analysis was critical in determining the position of the firm in the business world. However, the firm had different areas it could have diversified. The company had thought of setting up a brick production facility or a battery producing facility using aluminum cans. The firm opted not to expand on such activities following a detailed analysis of the profit margin. The diversification was critical as the company was in a position to take most of the government development project. Shipping and construction aren`t closely related; Nevertheless, the owner believes that the two business activities have similarities regarding the knowledge and skills they all require. (282 words)

Q1 — Jes

Why did the firm expand into other businesses?

New World Shwe Pyi Tan is currently in shipping and logistic business, and then it diversified into the construction sector especially for government development projects.  The main reason of this expansion act is to prevent itself either from any upcoming economic crisis as a general or downturn especially in the industry which they are in. In this way, if there were to be any crisis, there is another business in other industry, which they can rely on, while the other business recover. A backup plan is always a compulsory for any company around the world, which in this case, this construction business acts as a backup plan. SPT’s businesses are operating in Myanmar, which is a rapidly developing country, which could be a advantage because there’s always new marketing opportunities popping up every where for the company, however SPT cannot keep their eyes off from the factors like economic, politics and social factors to avoid unnecessary cost. In terms of economic, Myanmar is still facing economical and political instability especially after its political reformation, which occurred quite recently, when National League of Democracy party (NLD) comes into power. The new government is making changes in policies and regulations here and there so things cannot be taken for granted since anything can change unexpectedly in Myanmar. On the other hand, the company is in an adapting state along with the current economical state and also relatively with the political conditions. Briefly speaking for the social factor, shared belief and attitudes of the vast population is changing as to what they want and what they expect to see in this newly developing country. As long as SPT keeps serving the needs of the population they will continue doing well. People need new housing and better transportations in order to have higher standard of living. And also, according to the interviewee, which is the MD, the company has been able to adapt well with never ending political and economical changes.

Q2 + Q3 — Kim

Were these related?

In general, shipping and construction have no direct relation according to the owner. Nevertheless, the owner believes that both businesses have similarities in terms of knowledge and skills required. For instance - engineers, ways of conducting businesses. New World Shwe Pyi Tan Company believes that instead of diversifying into totally unrelated businesses such as jewellery to restaurant, it is certainly much easier and lesser risks arise when diversified businesses are not so far off from one another in terms of requirements, skills and knowledge. In addition, Myanmar is a developing country and many buildings are rising up in daily basis which justified the company crucial decision in diversification into construction business as it is the golden opportunity to shine above the rest. (121 words)

How?

The shipping company transports raw materials such as sand, rocks, woods, oil and other natural resources all over Myanmar. As such, the company has background knowledge of the prices, suppliers and often uses these transporting materials as supplies for its own construction business, which is the main strength that company has possessed. By using this advantage, the company is then able to compete against powerful local competitors in construction sector such as Ah Yone Oo construction, Naing Group and international competitors such as Seogwoo E&C. At the same time, this advantage does not only contributed in saving costs for sourcing of necessities but also the storage costs and labor costs in some cases as workers are able to work in both shipping and construction due to similar knowledge and skills needed. These factors further contributed in reduction of bargaining power of suppliers. On the other hand, the bargaining power of buyers remains moderate, as there are many, both existing and upcoming, local and foreign enterprises in that region. Furthermore, connections and knowledge in shipping industry act as supplementary benefits for the company by providing better understanding in logistic and significantly aided in construction business as it had diversified into. (200 words)

Q4 — Christine

Did the choice dilute the focus on the firm?

Diversification is one of those factors that contribute to the increase in the performance of a given organization. The decision made by the New World Shwe Pyi Tan hardly diluted the focus of the firm. Rather than leading to the dilution of the firm, the move by the company has led to an enhancement in the performance of the firm through different perspectives. First and foremost, the choice by the New World Shwe Pyi Tan Company to diversify had reduced its exposure to different forms of risks such as market and investment risks that might have hindered its performance. With the diversification in the company’s investment portfolios, the company’s market share also improved significantly. An enhancement in an organization’s market share is a clear sign of the company’s strengthening financial performance.  

The choice made by the firm to diversify into other business also gave it an upper hand in increasing its productivity. With the diversification, the company’s consumer base increased significantly and this implies that its ability to increase its productivity was also attained. Other than enhancement in the company’s productivity, the diversification process also played a key role in the improvement of the company’s focus and its ability to meet its set strategic goals. The efficiency of the company’s operations was also notable with the decision by the company to diversify into other businesses. With an enhancement in the company’s operations, it was easier for it to meet its set goals and objectives. A combination of the company’s ability to meet its strategic goals and an enhancement in its operations contributed to an increase in the company’s performance. (269 Words)

Q5 — Wai

What other choices could have been taken?

For this section I’m going to divide it into two parts. Firstly, it is going to be the choices that they mentioned which they could have taken, and the other will be the choice, which we think they should’ve taken. According to SPT, there were several different business opportunities they could have taken back in the day such as recycling aluminum cans and making batteries out of it and setting up a brick production facility. They had set up a brick factory in the year 2013, to supply the growing demand of construction materials in the market, however it resulted in millions of lost due to low production capacity, which they ended up selling more than half of their shares to other business party. In a rapidly developing country like Myanmar, well executed foundation of infrastructure and buildings are much needed, so they foreseen the market of construction materials and heavy machinery on the rise, diversified into the market of producing brick and construction. According to the market demand, cement factory could have been one of their choices, since cement is one of the mains, if not the main recipe in setting up buildings or any kind of structures. It is understandable that cement factory requires loads of money, with high risk. So this might be the reason cement factory isn’t on their list. Many of Myanmar’s top business organizations such as Max Myanmar Holding Co., Ltd, has set up new cement production facilities. Steel construction engineering is another choice they could’ve taken since lately many of the buildings are built using steel structures, which is a lot faster to build compare to traditional building method. They could sell both the steel construction material and contract and build on demand. This kind of investment requires advanced production equipment and strong technical ability, which Myanmar is not very familiar with. Going into this business, will require massive training and time. (319 Words)