Keywords: pest evaluation food processing industry, breadtalk pestel
A tactical management process like strategy analysis, strategy formulation, and strategy implementation are important for a business. (Anthony H, 2008)
Macro-environment can become an research which provide early on warning system for organizations to anticipate threats, opportunities, and develop appropriate replies (Ginter and Duncan, 1990) in the discerning tendencies on the whole environment which might impact upon its industry and marketplaces. Strategy research can make group to focus on factors and conditions which effect a firm's profitability within an industry and concentrate on predicting the dynamics of competitor's activities, responses and motives. (Anthony H, 2008) This tool of research will discuss about Infestation framework, Porter's Five pushes construction and SWOT analysis for BreadTalk in BreadTalk Group Ltd.
PEST research is a good tool to help Breadtalk Group Ltd to help find and monitor all weak alerts to recognize the discontinuities or fractures to form the environment. Infestation refers to political, economic, communal and scientific.
i) Politics Factors
The politics factor encompasses all legal elements like legislation, taxation, deregulation philosophies, labour training and etc. (Anthony H, 2008) All corporation within the food control industry are obligated to innovate and spend less to stay competitive to avoid new entrants as new entrants will go into the market with less expensive and much more clearing knowledge of consumer needs by offering more progressive products and services.
Increasing globalization and trade barriers has created an opportunity and struggle to BreadTalk as BreadTalk can go into the marketplace by emerging companies in political stable country to explore the new market especially in marketplaces where bakery could be luxury but at exactly the same time BreadTalk will have to struggle with all type of options to source for low priced high quality from world over.
ii) Economic factors
The strengthening associated with an overall economy will generally profit industries but its effect will vary according to which factors are most affected. The economic factors include interest rate, throw-away income, inflation, gross domestic product, unemployment rates, budget deficit and surplus, personal personal savings rate, business personal savings rates and exchange rates. (Anthony H, 2008)
The go up and fall season of product and raw materials and rise in fuel costs across the world cause the climb of purchasing charges for BreadTalk and the extra cost must pass over to consumers by increasing the costs of products. The credit crunch can impact BreadTalk as it might decrease the vitality of purchasing of consumer and BreadTalk may face competition from local small bakery retailers who offer at more affordable prices though less delightful to cost mindful consumers.
iii) Friendly factors
Social factors include all ethnical changes like interpersonal cultural within the environment or country and it would affect consumer spending patterns. Social social include traditions, lifestyles, values, attitudes, beliefs, tastes, and labor force diversity. (Anthony H, 2008)
BreadTalk forays in to the marketplaces of China and India and social factors enter into understanding. Chinese and Indian customers have different culture in lifestyle, plus they have different ideas and needs on the existing products offered.
iv) Technological factors
No doubts that major changes occurring in the general environment that are impacting the competitive environment are technical. Technical factors include product development, applications of knowledge, new communication systems and etc. The swift rate of changes of technology has allowed new entrants to enter in the market at a lower cost base. (Anthony H, 2008) Modern techniques and machinery with many communications devices now can now be used by BreadTalk to ensure the price tag on labor and creation are reduced and purchases to process faster scheduled to globalization and changes in technical factors.
The five causes of Porter are, threat of new entrants, bargaining electric power of purchasers, Bargaining electricity of suppliers, threat of substitute product and intensity of rivalry
Threat of new entrants
The threat of new entrants is when new rivals decide to get into a business and reduce earnings being attained by incumbent businesses and to lower level of customer's devotion within the meals processing industry. (Anthony H, 2008) With BreadTalk's product differentiation and high brand name identification and customer commitment, it'll prevent new entrants to get into the market, and so the threat of new entrants will be low.
Bargaining ability of buyers
Buyers possess the influence vitality for an industry to induce down prices and provide top quality as consumer's purchase signifies a sizable percentage of organization's overall sales. (Anthony H, 2008) BreadTalk produced products that are probably cheap for customers as they design its products and have their own factories. BreadTalk enhance customer loyalty by enhancing existing customer and getting new customers by providing positive shopping experience through good customer services, so the buyer electricity is high.
Bargaining vitality of suppliers
Suppliers have the energy of bear or apply within an industry by nurturing price or minimizing the quality of products. (Anthony H, 2008) The increase of dealer power is the reflection image of increase buyer electricity. BreadTalk uses a strategy of building greater loyalty and long-term human relationships marketing with suppliers and retailers and then to bring about improve performance in work and provide good service to customers.
Threat of swap products or services
By having a products or services that meet similar needs will make customers swap to substitutes in response to a cost increase on product. (Anthony H, 2008) In Singapore, there are extensive substitutes for bread like hawker centers and restaurants like Delifrance and McDonalds' are close substitutes in conditions of costs and perform the same function to market food.
Intensity of rivalry among companies in an industry
When a business exhibit a high degree of rivalry, it'll cause the industry's profits to lessen because of hostile competition on price as when rivalry cut down on price, the other organizations will decrease price to sustain in their market positions. (Anthony H, 2008)
BreadTalk main competition are Four Leaves, Prima Deli, Q-Bread, Sweet Secrets, Bengawan Single, etc. BreadTalk is facing an strong rivalry competition from both small-scale development like small family-fun in the neighbourhood and large sellers like Sunshine and Gardenia which produce affordable products. Because of this powerful competition, BreadTalk attemptedto type in China's market for diversity purposes.
SWOT analysis identifies strength, weaknesses, opportunities, and dangers. Strength and weaknesses refer to the BreadTalks's inner environment within the firm's control while opportunities and hazards make reference to BreadTalk's exterior environment which the firm has less control.
The BreadTalk's notion is exclusive from the original bakeries in the market as BreadTalk has a broad menu of confectionery products like breads, buns, pastries and cakes which allows the menu change on daily basis to meet customers mixed needs. BreadTalk will introduce new products every four calendar months to accommodate customer's changing flavor. (competitive strengths, 2009) Apart from this, proper locations is one of the competitive power. BreadTalk's shops are mostly nearby the public transfer systems like bus terminals, the Mass Super fast Transit Channels, and the Light Rail Transport channels. (competitive strengths, 2009)
There is very much reliant on Singapore with a little local market of five million which is also underserved in the appearing economies of Asia, in result this might move BreadTalk's company performance in long term reasonably saturated with little growth in local market. Although BreadTalk offers a wide range variety of products, it does not have halal qualification, so it is very difficult and critical to permeate in to the Muslim market, Malaysia market and Indonesia marketplaces.
BreadTalk oppose its main weakness by increasing and emerge its market in China, Vietnam and other Asian countries with its affordable, low-priced high level breads. Apart from this, the increase of acceptance of online shopping has provided an opportunity to BreadTalk to lower expenses by widening its business into the realm of virtual marketplace.
Existing loaf of bread related firms like Gardenia, Ya Kun and Sweettalk are also competing BreadTalk right to offer breads with fillings and much more variety of bread, this move will significantly influence on BreadTalk's earnings of the sales of breads. If medical conscious option like Subway determines to sell reasonably priced breads, BreadTalk will face an effort.
There are two analytical tools like Value Chain examination and Benchmarking to asses whether BreadTalk's costs are competitive with those of rivals as is a crucial part of company situation analysis.
Value Chain examination is more suited to BreadTalk Group Ltd. A company's businesses are contains all activities carried out in producing, creating, marketing, delivering, and promoting its product and service which perform internally incorporate to create a value string. Value chain examination was devised by Porter (1985) which helps us to examine an organization's resources to ascertain its talents and possible weaknesses. Value Chain has two types of activities which can be most important activities where most value for customers is created while support activities help performance of the primary activities. For bakery goods machine like BreadTalk, its primary activities would be producing breads from raw material to semi done products by the activities emulsifiers, enzymes, sourdoughs and yeasts, supply chain management, formula development and assessment, mixing and baking, packaging, sales and marketing and then syndication. For its support activities, it would be quality control, individual learning resource management and then administration.
Value Chain analysis has a few characteristic:
- To combine costs for all activities in a company's value string to define the company's inside cost structure
- To compare a firm's costs activity by the activity against costs of key competitors from raw materials purchase to and price paid by ultimate customer
- To pin point the source of cost edge or disadvantage on its internal activities
Strategy formulation can be argued that it can constitute differential firm performance and allows BreadTalk to accomplish sustainable competitive benefit and to accomplish their goals and mission. A business must be mindful of its capability before it can implement strategy during the strategy formulation stage. Business level and corporate and business level strategy will be discussed as BreadTalk Group Small used both of these strategies to enhance the company's performance.
- Business Level Strategy
Business level strategy can work as separating out and formulating a competitive strategy at the amount of individual business product and sometimes referenced as tactical business product (SBU) which concentrates upon a particular market or market segments because of its products and services. (Anthony H, 2008) Business product is needed to devise a technique to allow it compete efficiently to industry and contribute to corporate and business strategy. Business level strategy can be examined by using Porter's common competitive strategies as business strategy is actually in search of a sustainable competitive advantage. (Anthony H, 2008) Porter's seminal focus on industry and competitor evaluation (Porter 1980) argues that exactly what will drives an organization's performance and differential organization performance and it is also referred as to the "positioning" of the firm within the industry to make the most and the attractiveness or profitability of a business is determined by his five pushes framework.
- Generic Competitive Strategies
Performing different activities or similar activities in various ways which is named being more advanced than its rivals can create a lasting competitive edge. Porter (1980) argues that competitive strategy develop a defendable position within an industry which enable the firm to offer effectively with the five competitive forces and create superior profits on return for the company.
BreadTalk can perform it by pursuing these steps; first, BreadTalk can provide its products at less price than rivals but without reducing the grade of products. Second, BreadTalk can produce differentiated product with advanced price for customers who perceive better value than from rival organizations, third BreadTalk should choose which market sections to compete within. Porter (1980) developed three common strategies to help business to outperform rivals and position itself against the five makes within the industry which can be Overall Cost Management Strategies, Differentiation Strategies and Emphasis Strategies.
- Overall Cost Control Strategies
This strategy consists of company to be the lowest-cost designer within the industry and target its products and services at a broad market to outperform rivals within the industry as it demand lower prices and its own lowest-cost-base can still earn superior earnings where the rival simply cannot match. Corresponding to Porter, cost management strategy require group to pursue "aggressive development of efficient-scale facilities, strenuous quest for cost reductions from experience, limited cost and over head control, avoidance of marginal customer accounts, cost minimization in areas like research and innovations, service, sales team and advertising. " (Porter 1980, p. 35)
BreadTalk generate above-average profitability where intense tournaments exist in Singapore. Its less expensive bottom part allows BreadTalk to still earn dividends after other more expensive direct main competitors like Gardenia, Four Leaves and my loaf of bread (CIMB research report, 2009) to competed away their earnings through rivalry. An inexpensive position allows BreadTalk to defend itself against clients who can only price right down to the next most efficient competitor. BreadTalk give a hedge against any increases in their insight prices when facing with the bargaining electricity of suppliers as BreadTalk has been a low-cost company. BreadTalk is at effective position to compete prices to prevent the risk of entry and acts as hurdle to accessibility.
- Differentiation Strategies
Differentiation strategy means firm produce unique or different products at a broad market for consumers and it also operates as an opportunity to meet different customer needs. Customers eager to pay a premium price for unique products and services. The major benefit for this strategy is the fact that rivals will find it difficult to imitate. Company can identify their product offerings like design, brand image, market expertise, reliability, creativity, customer service etc.
BreadTalk different themselves from other bakeries using their open-concept design and space-age looking store facades that actually allowed customers to view the bakers while they are working and it also generated fascination with customers of the products. (Unique Principle and Branding, 2009) BreadTalk also offer vast range of baked products every four calendar months to satisfy every customer's. All the creative and progressive differentiation methods will placed BreadTalk away aside from their rival. (WIDE VARIETY of Products, 2009)
- Corporate level strategy
Corporate level strategy can be explained as "the range of the sectors and markets within that your organization competes to be able to attain its organizational purpose". (Anthony H, 2008) The managers of sections have flexibility of action to set-up their business level strategy with the data of local marketplaces, customers and opponents and show their business strategy eventually to donate to the corporate strategy. Corporate and business parenting is out there when a business is composed with multiple business units which those levels of management that aren't part of customer-facing and income run business within the multi-business business. (Anthony H, 2008) There are several strategies in commercial level strategies like Growth Strategies, related diversification, unrelated diversification and so forth.
- Growth Strategies
Ansoft (1965) created a matrix to investigate different strategic directions organizations can achieve and there are four approaches for organization to follow, market penetration, product development, market development, and diversification.
i) Market penetration
Market penetration increase market talk about in existing marketplaces by using existing products aiming to get new customers to increase organization's profits. Business will improve its products quality and level of service and add on with promotional spend prior to the firm will achieve market penetration. This strategy is relatively low risk as business will use the existing resources and capacities to penetrate to the new market. (Anthony H, 2008)
In 2009, BreadTalk efficiently penetrate new market segments and also infiltrated in countries like Singapore, PRC, Hong Kong, Malaysia, Thailand with 119 outlet stores and 182 franchise retailers in Indonesia, Philippines, Kuwait, United Arab Emirates, Oman, Bahrain, India, Korea, PRC. (BreadTalk Financial Review 2009)
ii) Market development
Market development includes entering new marketplaces with organization's existing products like targeting new market sections and new geographical areas. Certain social and cultural changes will be made to ensure the products will meet up with the needs of particular geographical market segments. (Anthony H, 2008)
BreadTalk increase their market show by penetrating their in close proximity to existing market like Malaysia, Indonesia, China, Taiwan and India with their existing products. BreadTalk has good store locations in China's fast multiplying stores which can be easy found. (Daily Bread, 2008) BreadTalk is wanting to get halal license in order to totally develop its development in Malaysia and Indonesia. Apart from this, BreadTalk got made some changes on its current existing cooked products to fulfill the demand of china and India customer as they have different cultural beliefs and tastes in cooked products
- Product development
Product development will establish new products to market in existing marketplaces. A strategy of product development is necessary where organizations are confronted with rapid changes in consumer markets and shorter product life-cycle. In food control industries, organizations are compelled to continually develop new products to keep competition on the defensive and keep maintaining and grow their market talk about. (Anthony H, 2008)
In bakery companies like BreadTalk, BreadTalk must produce services to maintain its position on the market to prevent its competitor to overtake it positions as customers will change to competitor's products and services if BreadTalk never change its menu of providing. BreadTalk always produce with new baked products every four calendar months to gratify customer must maintain its position in the prevailing markets. The most recent special was planting season summer(fresh from oven, 2009)
Diversification can be defined as develop services to provide new market segments, in another word, firm that move away from its current products and market segments to carefully turn into new products and new marketplaces to broaden its opportunity of activities are the steps of diversification for organizations. Broadening the range of the business can help to spread risk by reducing the reliance of any one market or product. (Anthony H, 2008)
Not only they give convenient atypical of other typical bread stores, BreadTalk diversified their business by opening restaurants like Din Tai Fung concentrating on on family market as their goal market other than relying too much on the competition in the neighborhood food processing market sectors. BreadTalk diversify their functions in other countries like China to start a new market aiming to dominate the new market and become dominating by importing the concept of smart food beverage retail and provides western-style cooked goods. (Daily Bread, 2008) BreadTalk not have only Bakery business, they may have diversified into Restaurant and Food Atria businesses. On 17 December 2007, BreadTalk Group Limited acquires and manages the franchise contract with J. co Donuts & coffee.
The best formulated strategy in the world would are unsuccessful if the strategy is poorly implemented. To be able to use effective strategies, it requires organization to be sufficiently adaptable in its organizational design and effectively communicated and properly resourced, the changes must be clearly known and properly coordinated with stakeholders inside and outside the organization. Strategy execution allocates resources for strategy-critical activities and create strategy-supportive policies and to motivate people to pursue the
There are a whole lot of management issues in BreadTalk like annual objectives, guidelines, resources organizational composition, restructuring, rewards, resistance to change, environment, supportive culture, functions, and human resources to be integrated. BreadTalk must manage conflicts in the management issues however, not all conflict is always bad and no conflict may indicate apathy. Issues can energize the opposing groupings to action and can also help managers to identify problems. (Fred R. David, 2009) Corresponding to Chandler's (1962) strategy-structure marriage, he says when a new strategy is developed, new administrative problems will emerge and cause the organizational performance to declines and a new organizational structure will be set up and finally organizational performance will improve and BreadTalk experienced this issue when they start employing their developed strategies. In order to let BreadTalk to be more effieciency, staff must be treated well in order for them to work willingly for the company as employees will be the greatest asset for company. Human resources strategic obligations are to assess staffing needs and costs, develop performance bonuses, employee stock possession plans, child attention plans, work-life balance issues. (Fred R. David, 2009) By applying all the excess benefits to individuals, it'll diverse labor force like improves corporate and business culture, improves employee morale, increases creativeness, increases productivity, permits the organization to go into emerging markets, maximizes brand personal information, causes higher retention of employees, diminishes grievances and litigation, reduce interpersonal issue, reduces training costs etc.
In a successful strategy implementation, organization will maintain a good market and providing and experiencing well services and increase needed working capital. Marketing changing will affect success or failing of strategy implementation. Marketing issues like market segmentation and product positioning are centrally important to execution. (Fred R. David, 2009) Marketing segmentation can be defined as company subdividing market segments into smaller segments which is often reached more effectively and effectively with products and services that match customer's unique needs and purchasing behaviors while product positioning can be defined as just how of something identified by customer on important capabilities like the area of the product occupies in customers' minds relative to compete products. (Kotler P, Armstrong G, 2008) BreadTalk is facing issue of marketing segmentation around all its outlet stores throughout the world when employing and formulating its corporate strategy level.
Marketing segmentation is linked to corporate level strategy's development strategy on market-development, product-development, market-penetration, and diversification. Market segmentation will directly have an effect on the marketing mix variables like product, place, promotion and price. (Kotler P, Armstrong G, 2008)
Product means the mixture of products and services offer with a company to their targeted markets. Product influence make a difference on consumer tendencies and it is important for the marketers to identify their products from rivals to create a perception to consumer that the product is worth purchasing. (J. Paul Peter and Wayne H. Donnelly, 2003) In order to sustain and keep maintaining its strong brand name, BreadTalk has to offers more than 150 varieties of cooked products, special events products and other services to provide more choices to customers and make its company to vary from its strong rivals like Gardenia in order to sustain in the market and success on its strategy formulation.
Place means how the offer of product open to focus on consumers. Places of a product and services can affect on consumer's buying power. An ideal location of any services or products should be in a convenient and proper place to ensure consumers will get and purchase them easily. (J. Paul Peter and Wayne H. Donnelly, 2003) In order to support to its strategy formulation and put into practice it, BreadTalk only open up its electric outlet location near community travel systems like bus terminals, Mass Super fast Transit, and Light Rail Move, departmental stores, supermarkets to attract potential customers and to mark down sales territories as having high customer traffic movement is vital to Breadtalk's success of retail outlets and steer clear of customers change their buying power to rivals' offerings.
Promotion means activities that communicate the merit of the product and persuade concentrate on customer to buy it. Special offers can influence consumers' thoughts, thoughts and activities about purchasing and using the merchandise. (J. Paul Peter and Adam H. Donnelly, 2003) Every 4 months BreadTalk will offer special new cooked products with promotion as well as for normal special offers with discounts for customers so that customers will not get uninterested and switch to alternative or rivals and notify consumers about products and services while creating favourable images and perceptions.
Price is the total amount charged on the products which have to be paid to get the products. The price of products and services often affect consumers whether to buy them or not. (J. Paul Peter and Adam H. Donnelly, 2003) BreadTalk must offers affordable prices on their products even sometimes at loss to capture potential customers and record the loyalty of existing customers as their local competition are offering less expensive to compete with BreadTalk but at the same times, BreadTalk offers some offerings with higher prices but this will not deter customers to purchase as customer believe their products or services are higher quality or more exclusive.
- Market Portion Basis
Organization must try different segmentation variables in on your and combinations for the best way to see market framework and there are few major variables mostly used in segmenting consumer market segments, the Geographic, Demographic, Psychographic and Behavioral. . (J. Paul Peter and Adam H. Donnelly, 2003)
Geographic can separate market into different physical systems like region, country size, city size, denseness, climate etc. (J. Paul Peter and Adam H. Donnelly, 2003) Although Singapore's populace is greater than Madium, singapore's competitor is much higher and intense as it is a modern country, Madium has bigger field and resources and it is a potential chance of BreadTalk's business.
Demographic can divide market into groups predicated on variables like age, family size, family life pattern, income or occupation, education, religion, race or nationality. (J. Paul Peter and Wayne H. Donnelly, 2003) Madiun is a tiny city in Indonesia and small people, despite small but there is no store that can satisfy their needs from south to western world, but BreadTalk type in the market using its innovative and creative products and they understand what different cultured customer needs as they may have been successful in all business extensive, from small population to big. After they obtained the halal qualification, they started to penetrate into muslim marketplaces like Jakarta, Malaysia and then Madiun.
Psychographic can split market into groups based on social course, lifestyle and personality. (J. Paul Peter and James H. Donnelly, 2003) Customers in Madiun desires balanced diet, BreadTalk as offered four new kinds to compromise as healthy meals and giving the state in grain in their country.
Behavioral can split a market into groups based on use occasion, benefits sought, user status, consumption rate, loyalty status, readiness level and frame of mind toward product. (J. Paul Peter and Wayne H. Donnelly, 2003) BreadTalk is rolling out a strong brand name and brand commitment to customers, therefore customers are willing and they possess the readiness to buy. BreadTalk sometimes will offer promotions to stimulate purchases.
Management issues can be fixed by using strategic leadership. Leadership can be involved with making a shared eyesight of what and where in fact the organization is wanting to purpose and achieve, and formulate ways of bring up needed changes to do this eyesight while management is approximately coping with the complexity to create orderly and steady results. Management activities are usually more to formulating strategy and then inspire and inspire employees while management activities implement strategy and control tendencies and solving problems to ensure the strategy is put in place. (Fred R. David, 2009) The role of innovator can help developing a learning company and help to develop in distributed perspective and shaping the value of a business. The learning group can be defined as "an organization which facilitates the learning of most its people and continuously transform itself and (Senge, 1990) it includes adaptive and creating learning. Adaptive learning is the ability to deal with changes in one's environment and generative learning is approximately creating change when you are ready to question the way we go through the world. (Fred R. David, 2009) The chairman of BreadTalk, Dr. George Quek, as known as the founder is a good leader in leading its marketing team as he has 30 years of experience in the food and beverage industry. The chairman is often aided by his older management whom have great experience in the food and beverage or retail companies, when a leader leads a team successfully, the performance rate will be maximum.
Strategic management is important to every organization's employees to manage strategically in organization to perform well performance and it can act as a fundamental in technique to determine why do companies succeed or fail. Every business uses strategic management ideas and technique to enjoy higher degrees of performance.