In overall the threat of substitutes is very high in

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In overall, the threat of substitutes is very highin newspaper industry and it exerts a strongcompetitive pressure against the industry. 4)Threat of new entrants i.Capital requirement There is a high capital requirement in terms of buying printing machinery and paying wages to reporters and journalists. (Positive) ii.Incumbent cost advantages An existing newspaper company earns advantages from its experienced journalists and designers. New entrants may have to incur a big amount of employees hiring and training costs. (Positive) In overall, the threat from new entrants is low in newspaper industry and it exerts a weak competitive pressure against the industry. 5)Intensity of rivalry i.Growth of buyer demand The buyer demand is declining due to the large number of substitutes. (Negative) ii.Buyers’ switching costBuyers can switch to another newspaper company with low costs and even free of charge if they do not subscribe to any particular newspaper company. (Negative) iii.Degree of product differentiation Newspapers produced among the industry members are less differentiated. (Negative) iv.Number of competitors There are many competitors in this industry such as New Straits Times and The Sun. (Negative)
(3)External Environmental Analysis 12 In overall, the intensity of rivalry is high in newspaper industry and it exerts a strong competitive pressure against the industry. Notes: Information in brackets are referring to their respective impact to the Star Media Group Berhad. In short, the main driving force of newspaper industry comes from the threat of substitute products. The advanced in technology has changed the habits of consumers from reading printed newspapers to everything online.
(4)Internal Capability Analysis 13 Financial Analysis 1)Profitability ratios The gross profit margin for 2016 is the lowest among the three years. The sales revenue earned by Star Media shows a downward trend. (Negative) The net profit margin for 2016 do not drop much. The Group earned more other income while successfully cutting down its distribution costs in 2016. (Neutral) The ROCE for 2016 has decreased too. The company has lower efficiency in using its resources to generate profit. (Negative) The ROE for 2016 is the lowest among the three years. The shareholders of the company received a lower return in 2016 due to the lower profit earned. (Negative) In overall, Star Media Group is still making profit but the company’s profitability has tendency to reduce continuously in the future. 2)Liquidity ratios Star Media does not face liquidity problem over the three years as their current ratios are above the ideal level of 2 times. (Positive) The working capital of the Group is gradually decreasing. Their ability to cover the day-to-day expenses of running the business is reduced. (Negative) The Group has the lowest debt ratio in 2016 among the three years. It is situated in a less risky financial position due to the smaller amount of debts borrowed.

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