Executive Summary
BreadTalk is a Singaporean firm which has invested in various countries including the Peoples’ Republic of China. This firm requires a working strategy that would help it manage the market competition in the Chinese market. The Chinese market is very attractive, given its size, but it has attracted so many players which makes it one of the most challenging markets.
BreadTalk has come to appreciate this fact and believes that the greater the challenge, the higher the gains. It has therefore come out with measures that are meant to ensure that it is able to match and even supersede the market standards.
The first step in this strategy is to analyze market the market forces. This is done through the analysis of the external environment using PESTEL analysis as the tool for analyzing the external environment. Then the internal capacity of the firm would be determined using the SWOT analysis as the relevant tool.
The internal capacity of the firm would then be compared closely with the external marketing environment that the business would be operating in. The analysis would also involve the Porters five forces to determine the strength of the market competition. The analysis would come to a close by coming up with recommendations of the best strategies that should be involved in the implementation of the strategy.
Background Information about the Industry
BreadTalk Group Limited is operating in a very competitive market. The bakery industry is quite developed in China. This firm has managed to flourish at its home market in Singapore as it is the market leader in this particular country.
Because of the consistent growth and increased financial capacity, this firm has managed to capture market in various countries in this region, including in Hong Kong, Indonesia, Malaysia, and Peoples Republic of China, Oman, Philippines, Vietnam, Kuwait, Saudi Arabia, India, Thailand, Sri Lanka, Bahrain and South Korea.
Although this firm has managed to have complete control of the home market, it has faced a number of problems in acquiring the home market.
There have been so many challenges, especially in the Chinese market. China is considered the largest market in the world. Other than the United States, it is the most attractive market, and many firms have considered investing in this country. The bakery industry faces stiff challenge from various players. The biggest challenge comes from small scale traders in the lower ends of the market.
They make the majority and hence the most attractive market segment. However, presences of small scale traders who manufacture doughnuts and other confectionaries have a huge control of the market, especially in the morning hours when this company expects the biggest sales. Besides these small scale traders, there are the industry leaders who have control of the middle and high class segment of the market.
BreadTalk has the responsibility to fight this competition in order to be in a position to stay any longer in this market. Its financial strength is able to make it be in a position in which it can compete with the current market leaders. In order to achieve this, it would be recommended that the firm specializes in a number of niches within the Chinese market.
There are three main classes of people in this country, based on their purchasing power, hence their general behavior. The three categories include the rich, the middle class and the poor.
The rich have the behavior of being loyal to one brand, if they develop trust towards it. Winning them over may not be an easy task. The middle class also tend to be loyal, but not as much as the rich. Loyalty of the poor is based on cheapness of the product and the mass it offers.
BreadTalk should therefore capture the poor first, for they make the majority. This would give it ground to move to the second segment of the middle class and finally the rich. In so doing, the firm must realize that the brand that was used to attract the poor will be associated with the poor.
For this reason therefore, it would require this firm to develop a new brand when moving to the next class that would be associated with the higher class. Although pricing strategy may be useful for this firm when capturing the segment for the poor, the strategy should completely be avoided when targeting the rich and the middle class.
Situation Analysis
BreadTalk is penetrating the Chinese market at a relatively good rate. The competition is high. Various firms offer similar products and have been in existence for a longer time than this fir, but the rate at which this firm is catching up is very promising.
To analyze the situation of this firm, the analysis of external environment through PESTEL analysis and Porters five forces; and internal analysis through SWOT analysis, will be conducted.
Analysis of the External Business Environment (PESTEL)
Environmental scanning can be done using PESTEL Analysis. This involves the analysis of political, economic, social, technological, and legal environments.
Politically, this firm has not met challenges in various countries that it operates in. Singapore, where its headquarters are located, is one of the most peaceful countries in the world. It has a very stable government that is very supportive of business operations.
The Peoples Republic of China, which makes one of the leading markets for this firm, is one of the most stable countries in the East Asia. This has seen the firm prosper in most of its undertakings.
Economically, this firm has had both ups and downs. The firm has been faced with economic recession that hit various countries in the world, especially the US economy which affected various other economies in the East Asia region. This had serious negative effects on the firm’s revenues as many of the customers considered the products as non-basic.
However, there have been other seasons when the firm has experienced economic boom in various markets, increasing its revenues. Currently, the Chinese economy, and many other economies making up the market of this firm including the home market in Singapore are experiencing steady economic growth, making it have a favorable economic environment.
The socio-cultural environment of this company is diversified. This is because this firm operates in the global market. There are those countries that cherish equality, and women have equal economic strength just as men. In such countries, the firm does not segment the market on the basis of sex, but age.
The Peoples Republic of China is one such country. However, other countries like the neighboring Saudi Arabia have women as subordinates to men. It forces this firm to target the male members of the society because they have bigger purchasing power.
The technological environment of this firm is very dynamic. Technology inventions and innovations, especially in the field of communication have been the main challenge and strength of this firm at the same time. While this firm is left with nightmares of trying to guess what its competitors in the market are going to come up with overnight, it has used this technology to emerge as the leader in the market.
Its recent introduction of ‘transparent kitchens’ where customers can watch how their food is prepared found other firms unawares. The dynamism of technology in this sector has made this firm be seen as the most innovative.
Legally, the firm has not faced major challenges. The laws that govern trade in the Peoples Republic of China, Singapore and many other countries in the region have been very favorable to this firm.
There are no occasions that this firm has faced a major litigation over an infringement of another firm’s right. In most of its markets, especially in the emerging markets in Asia, this firm has met very friendly markets with laws that are conducive to foreign technological firms like it.
Porters Five Forces
The strategic analysis of this firm can also be done through porter’s five forces.
BreadTalk has been able to implement Porters five forces. To tackle the threat of new competition, the firm has been keen on producing new products to rival those of new competitors. It has been keen to introduce new products in the market to counter any possible threat.
To manage the threat of substitute products, BreadTalk has developed different lines of products to satisfy different markets so that it may not be adversely affected if one line is invaded by substitute products. Such new line of products includes the new brands of cakes.
To increase its bargaining power with the buyers, it has continued to produce high end products with qualities that make it easy for the customers to appreciate their high prices. In so doing, the firm has been keen to ensure that the lower end of the market is not assumed. To increase their bargaining power with the suppliers, it has created a scenario where it is a single buyer with various sellers.
This makes it able to dictate the terms of buying the products. To counter the intensity of competition, it has been able to acquire a special niche in this market, rendering its competitors irrelevant as their products are turned into mere substitutes of this company’s products.
Internal Strategic Analysis of BreadTalk Company Limited
Internal strategic analysis of this firm can be done from two main fronts. In order to conduct an internal analysis of the firm, SWOT analysis and Key Success Factors would be important.
SWOT Analysis
The strength of this company lies in various factors. One of the major strengths of this firm is its brand name. As Stated above, the brand BreadTalk is one of the strongest brands in China, Singapore and many other countries in this region. This has made it be able to maintain its market share in the face of an increasingly competitive market. This firm also has a financial strength.
It has been in operation for over 12 years, amassing huge wealth in the process. As such, this firm is in a position to implement its projects, including those of research and extension. The firm also operates in various countries outside the home market. As such, it has been able to balance its production when one section of its market is experiencing economic growth while the other has recession.
Despite the above strengths of this firm, Lippman (2004) says that there are some weaknesses that it has, a fact that has seen some of its competitors eat up a section of its market share. One of the weaknesses that many environmentalists have repeatedly talked about is environmental degradation.
Some of the plastic bags that this firm uses in packing its products are causing havoc to the environment. It is apparent that this firm is yet to develop solution to this problem because as Tanke (2000) notes, BreadTalk Company is yet to replace the plastic bags with better alternatives.
Within the environment that this firm operates are some opportunities that have made it experience massive growth in its market share. According to Panagariya (2008), BreadTalk Company has exploited vacuum that existed in many countries in the region, especially in the Peoples Republic of China.
Weiss (2011) says that there was no huge competition for this firm in the Chinese markets and this Company was able to make the most out of it. Technological advancements have also enabled the firm to conduct trade much easily due to improved means of communication and transport means.
The economic boom that China experienced soon after the wake of the twenty first century was another opportunity that helped this firm to expand its market.
The threats that this firm has had to deal with include competition. The market has gotten increasingly competitive. According to Charantimath (2006), many competitive firms in this market have come up with products, which are close substitutes of those that are offered by BreadTalk Company. They have eaten into the markets of BreadTalk Company.
Political instability in some countries is another threat that this firm has had to deal with. When there is an internal strife, like the one experienced in China in the recent past when a section of the society rebelled against the government, this firm would lose millions of dollars due to the destruction of its assert in those countries.
During such periods, the firm would also lose the profits they get from the country, while yet they will have to pay the employees. This would hurt the firm financially.
Key Success Factors
The market has been very competitive, especially in this country. However, there are some key success factors that this firm has used to ensure that it remains competitive. The Brand name BreadTalk has been one such success factor. This brand name is very strong in the market. The financial base of the firm is another success factor. The firm has a large financial base that makes it easy to undertake various activities
Key Strategic Issues
Within the time span spelt out in this project, this firm must determine how best it would achieve its laid objectives. It is important that this firm first understands the current market forces. It can then come up with some key assumption within which it can work in order to achieve the set goals within the timeline set.
Key Assumptions
Assumptions are always very important in planning for a firm like BreadTalk Company. Some of the assumptions that were made in this project include the following.
- The Chinese market has a pure competition market structure where firms have the freedom of entry and exit.
- Although BreadTalk has the command of the market in most of the cities in China, there is a possibility that the firm can be edged out if it fails to implement competitive strategies.
- BreadTalk in China operates as an independent unit from the parent firm in Singapore.
- Within the three years, the Chinese market is prone to many changes.
- The perception of the market can be swayed depending on the strategy employed by the firm.
Key Issues
Having taken into consideration the current position of the firm of the market and the firm, and given the above assumptions, the firm should take care of the following issues.
- The pricing strategy should not be the basis of competition.
- The brand should be made as strong as possible.
- The management should determine how to counter poor perception that the market might have towards the brand.
- Financial strength of the firm should be used to manage threats that may come from such emerging trends in the market like e-commerce.
Target Marketing and Market Positioning
Targeting and Positioning
Target marketing is one of the current marketing strategies that many business units have found to be relevant. Bird (1977) says that it starts with market segmentation. A business unit must be in a position to segment a large market and then identify those segments that are relevant. This is because the entire market cannot be equally attractive.
For the BreadTalk Company, the market segment that has been identified to be the most attractive is the family (Ruddar & Sundharam, 2009).
Parents with children to take care of are attracted to the products of this company, especially because they can easily be carried from one location to another and that they make the best snacks for such forums as party or picnics, besides their main function of being used as the main meals during breakfasts.
BreadTalk Company has this market segment as its target market. It should therefore develop strategies that would help it further attract this market segment.
In order to attract this segment, it has to developed market positioning strategies that would make it appealing to the families. BreadTalk Company has position itself as the source of satisfaction to families (Kurtz & Boone, 2010). In most of its television commercials, it comes out clearly that this firm has its target market as parents with families which should be given proper care.
In one of these commercials, the firm is demonstrating that with their products, a family would always remain happy, satisfied and very health (Freeman, 2010). To the parents therefore, they go for The BreadTalk products when they need to have a happy, satisfied and healthy family.
It has successfully propositioned itself as a firm that has the interest of all family members at heart by making them believe that it is the genesis of happiness, satisfaction and good health. Moran (2011) described this as a good move. However, it may need further adjustment to appear more attractive. The firm should attempt to convince the parents that its products do not have any negative health consequences to its consumers.
Marketing Objectives
Marketing has experienced a complete shift from what it used to be in the past. After the Second World War, there was a huge market for many of the manufacturers in the world, as there were a handful of them in the market. By this time, the concern was to produce in mass and take them to the ready market in various countries in the world.
The market had no options but to accept the products that were availed to them (Barthe, 2010). However, this has completely changed over the past few years.
Technology has reduced the world into a global village, breaking the physical barrier that existed before. Information is also changing the world market. Customers have easy access to information. They can easily get the information about specific products they need, where to get them at competitive prices.
As Shachaf (2008) says, customers are currently demanding for more value at a lesser cost. The suppliers are also getting more patronizing, especially those that operate in semi autonomous manner. They ask for more at lesser value they give. A business unit would be trapped in between a more demanding customer and a more patronizing supplier (Hirschey, Kose & Makhija, 2004).
This is not the only predicament in which a firm like BreadTalk Company finds itself. Other cases of environmental conservation are also demanding for an attention. The firm must therefore develop a marketing plan that would work in the current business world.
The firm must develop concise objectives that would enable it navigate through the market that has gotten more challenging. For the BreadTalk Company, the following are some of the objectives that it may need to achieve in order to maintain its market position.
To broaden the scope of the baked brands. The current brands are broad enough, but given the new competition that is emanating from the small scale traders, the firm must refocus its strategy.
The objective of broadening the scope of the baked brands is aimed at ensuring that this firm would be in a position to introduce new competitive fronts that would counter the effect of new market competition. This would also result in increased profitability.
Enhance creativity in the process of serving the customers. The research and development team of this company has always ensured that it provides its customers with new products often enough. However, the rate at which market is experiencing changes demands that this firm becomes more creative (Safizadeh, Field & Ritzman, 2003).
This creativity can be demonstrated in the way of packaging the products. Customers should be made to feel that there are changes happening within the firm which are geared towards ensuring that the customers are satisfied.
Transform the subsidiary branches into active partners which are able to be the drivers of positive change for this firm. For a long time, the subsidiary branches in various countries have basically relied on the main branch at Singapore to issue directives and necessary advice in the production process.
They have basically acted as the processing centers which would not give any advice on the management, production or any other concern to the company. By transforming them into partners, this company will be empowering them to be in a position to develop creative ways of conducting their production. The partners can also be of great benefit to this firm because they can be the managers of local competition in various countries.
Embrace technology as the agent of positive change. The society is greatly influenced by the changing technologies around the world. As Warner (2011) says, the current business society has embraced technology. BreadTalk can rely on technology to reduce the cost of production hence lower the prices of the products to competitive levels.
Develop market proposition that would make it be seen as the preferred firm in this industry. This firm’s main objective is to attract and retain its customers through consistent customer satisfaction (Manaschi, 1998). As such, the firm plans to re-engineer its marketing strategies to reflect its new production methods and products that are responsive to customer needs.
Marketing Strategy
This firm has an uphill task of reaching out for new markets. After determination of the current position of the firm and the far it should go, the next stage is the determination of how the firm will reach the desired position. This will involve a series of strategies that would make it superior to others within this industry. The following are five competitive strategies that this firm can employ to ensure that it succeeds.
The Five Competitive Strategies to be Used by This Company
This firm uses various competitive strategies in the market in order to manage competition that is very rife in this industry. First, the firm has employed two of the porter’s competitive strategy of low cost and differentiation. The firm moved part of its production from Singapore to China in order to cut the cost of production.
China, unlike Singapore, has a relatively cheaper labor that would eventually translate to lower cost of production. This makes it easy for this firm to sell its products at lower prices but still make profits. Other than the cost strategy, the other strategy that this firm has employed is the differentiation strategy. This firm has made their products unique.
Some of its present products are differentiated from other conventional products in the market, making it acquire a special niche within the industry. The uniqueness in not only in the product and the packaging design, but also in the way the product is prepared.
The timing tactic of this firm in launching new products has also been superb. This firm always come with a new product at such times that the market feels that they need a better product to serve their current needs. It introduced idea of a transparent kitchen when various individuals started getting concerned of the type of food they are served, and the way they are prepared.
This has seen their new strategy receive huge acceptance in various markets when introduced. The firm has also been keen to employ cooperation strategy whenever needed. During its early years in China, it formed a joint venture with a number of small firms that were already established in this market to produce competitive products in the market. This strategic alliance saw it gain market share both in the home markets and abroad.
Marketing Mix Program
Marketing Mix Program is one of the important factors that a firm should consider when developing business strategies that work, according to Wellington (2001). BreadTalk Company should start by defining the product aspect of the mix in within the three years. In the first year, it should focus on introducing a number of new products into the market.
In the second year, the second year, the focus should be on consolidating the markets for the new products. The third year should be for preparation for development of another new line of products. It should determine which product would be suitable for its current markets. After determining the product that it can produce in the best way, it should determine people who would make the market for the product.
Pricing is another mix that this firm should know how to manage within the three years. The most important factor to consider here is the cost of producing the products. It should determine the cost that the firm incurs in producing a single unit of the product. It should then come up with a price that would take care of the cost of production and the profit margin expected while still ensuring that the targeted people are able to pay.
In the first year, the firm may consider setting prices that would attract a given market segment that is most attractive within this particular year. In the second year, the firm can consider expanding the market share by setting the prices that would attract larger population. In the third year, the firm should ensure that the products of the firm are all inclusive.
Promotion is the third marketing mix that should be given serious consideration. The must design promotional procedures that would be convincing to the target group. In the first year of 2013, the firm should consider focusing on capturing the parents in general. The firm should then confirm who the decision makers and the purchasers are in the process of buying their products.
The second year should focus on how to specifically appeal for them. In the third year, the firm should focus on developing commercials that would attract new markets in new areas of operation. The last mix is the place. The firm currently operates in main cities in China. The firm should consider focusing in this region within the first year, ensuring that the level of competition is contained within the limits.
In the second, year, the firm should consider establishing itself in other minor towns within this country. By 2016, the firm should consider opening branches at selected rural set ups, as a move to capture the entire country. It should incorporate the entire staff members in its strategies and other stakeholders.
Implementation and Control
The firm would be said to have achieved its objectives when it manages to not only increase its profits, but also its market share and maintains the already captured market. BreadTalk should be able to protect markets that it captures as it endeavors to capture new customers.
The firm should properly budget for its profits. The firm should set aside at least 5 percent of its profits for market research. The following Gantt chart below shows the stages in which the firm should follow in implementing the set activities.
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