RIVARLY AMONG EXISTING FIRMS (Moderate to High) •
•
•
•
•
Industry growth (Stable -> High) Sheng Siong is in the retail industry merchandising commodities and day to day products. It is a stagnant industry due to its nature of the business. Sheng Siong supplies household products to its consumer, where consumers are likely to hae fre!uent purchases. In the stable industry, Sheng Siong has to ensure that its products are priced at a competitie price so as to gain its market share. "oncentration of competitors (High -> High) #he ma$or competitors competitors in the retail industry industry are are %#&" 'airprice, 'airprice, "old "old Storage, iant. #he competitors are located has its chain store at dierent places. places. %#&" has the most number of branches among the rest. "oncentration "oncentration of competitors are located at dierent places, howeer, competition is still relatiely high. *egree of dierentiation dierentiation (+ow -> High) #he products products are are similar and undierentiated undierentiated for household household and other other purposes. Howeer, the main dierence for Sheng Siong is for its freshness of the food, customer serice and the low price. +earning economiesScale economies Scale of economies and ratio of ed to ariable costs (High -> /oderate) *ue to the supermarket0s high ed cost, the rm in the industry may engage in price war to gain market shares and maimi1e installed capacity. #here are low learning economies as no technical epertise is necessary. 2cess capacity and 2it barriers Supply is commonly more than demands to meet customers0 needs. "ompany might put products on sale to preent obsolescence. It is easy to eit the industry as no licenses or prior approal re!uired.
THREAT OF NEW ENTRANTS (High) •
•
2conomies of scale (High -> +ow) #he retail retail industry would would re!uire re!uire a huge huge amount of capital capital and nancing on the products as they re!uire ed assets such as warehouses to store the goods as well as rental of space. 'or a business with huge economies of scale, they may gain adantage or eclusie prices from the suppliers. 3 new entrant will need to achiee economies of scale to compete on cost adantage with ma$or market players, there not a easy barrier to cross oer. 4randing is another barrier to entry 'irst moer0s adantage (High -> +ow) #his would deter new entrants entrants due to customer0s customer0s brand brand loyalty, as customer would not usually switch to another brand that they are comfortable with, as well as the license, premier locations, switching
•
•
costs, eclusie arrangements with suppliers for cheap raw materials, established brands. 3ccess to distribution channels and relationship ("ostly -> High) #he cost of deeloping a new channel, for instance, other product lines are costly, and the eisting relationship with the other rms and the customers. It is usually di5cult for competitors to penetrate into the distribution access. +egal barriers (/any -> High) 'or a retail company, they re!uire licenses from %ational 2nironment 3gency (%23) for the food standards, Supermarket serice licenses and so on.
THREAT OF NEW SUBSTITUTES (High) •
•
•
"ustomer0s willingness to switch (High -> High) #hreat of new substitute is high as Sheng Siong sells undierentiated products, where there are many substitutes aailable and customer can switch easily, howeer, the switching cost is moderate as Sheng Siong proides fresh goods, low price and good serice. Switching cost Sheng Siong has a moderate switching costs through proide high !uality food that increases customer satisfaction, conenient location, operating hours, easy mode of payments, rewards points, promotions and bundles. 6elatie price and performance
BARGAINING OWER OF BUYERS (Lo! to "oderate) •
•
•
•
%o of buyers %o of suppliers #he bargaining power of buyers is low as Sheng Siong sells dierentiated products in terms of the freshness of food, high !uality, good customer serice and low prices. Howeer, for its common products, the bargaining power of buyer is high as customer can easily switch to other suppliers. 7olume of purchase by single buyers 3n indiidual buyer has low bargaining power as the buyer does not hae much impact on the earnings of Sheng Siong. Howeer, collectiely, buyer may hae power as the consolidated power of buyers may hae an impact on Sheng Siong0s protability. Importance of product for cost and !uality "ustomer would want to purchase good !uality products at low cost. %o of alternatie products aailable 3lternatie products such as online grocery are aailable and this increase the bargaining power of the power due to the conenience and low switching costs.
BARGAINING OWER OF SULIERS (High)
•
%o of suppliers 4argaining powers of suppliers are relatiely high for established brands products supplier due to the small market that Sheng Siong operates in. #he suppliers would prefer to supply to other business that has a bigger capacity and name, globally, that could increase the suppliers0 sales and improe the prots. Hence, suppliers are less inclined to reduce their price, especially for iconic suppliers. 7olume of suppliers Switching costs #he switching costs to other brands may be high, depending on the type of products. 'or the established products, the switching costs is high due to customer loyalty. Sheng Siong may lose business if they do not carry the established brands that customer alues. 'or the normal brands, the switching costs is low as Sheng Siong can easily switch to another supplier with no cost incurred. Importance of products for costs and !uality "onsumers hae their optimal and desired brand.
