Module: Introduction to Management (ITM)
1. Introduction
Sheng Siong was founded by Mr Lim Hock Chee. After ending his business selling pork in 1985, Lim founded Sheng Siong’s foremost operation in a single shop house unit. Sheng Siong has a current chain of 33 supermarkets, in Singapore. The goal of Sheng Siong is to provide communities in which they conduct quality products at acceptable prices together with value added services provide by their employees to the customers. Sheng Siong vision is to be the preferred retailer in the market, starting from its own ground, Singapore and further on.
2. SWOT Analysis
STRENGTH
The brand name is highly recognizable and also one of the top three supermarket chain in Singapore. They uses advertising tactics in television show as to engage more with their customer. Also serve as rewards in terms of game to thank customers for supporting the group.
Experience in management skills, as the three Lim brothers have 73 years of combined experience in grocery retailing. With their detailed knowledge of the industry in Singapore to get the company rising to new level. (Anonymous, 2011)
WEAKNESS
Untapped areas in Singapore. As Sheng Siong currently focusing on heartland areas of Singapore only.
(Anonymous, 2011)
OPPORTUNITY
Untapped areas in Singapore. As Sheng Siong currently focusing on heartland areas of Singapore only.
Increase fresh produce market share. They can produce more organic and convenient products like cut fruits and vegetables or prepack salad.
(Anonymous, 2011)
THREATS
Competitive operating environment. Beside Sheng Siong, there is other small convenient shop located near them.
To face more competitors also mean, there will be having more aggressive promotion tactics to win customers over. Which leads to more advertising on posters and by television advertisements which would definitely have a huge amount incurred to the company expenses where they might not be able to cope due to limited financial resources.
(Anonymous, 2011)
3. External Analysis – General Environment
3.1. Demographic Trends
Demographic trends are the study of population and its faculty. Wholesalers are always interested in population related increase because in the long run it depends highly on it. The slowing down of population growth in European countries and led business person to look for develop markets like India and China. Demographic trends study the increasing rate of population in cities, towns, urban areas, villages, age, educational level and household patterns (Nadu, 2011).
3.2. Economic Conditions
Sheng Siong had reported a 20.8 percent increase in net profit growth which is $8.5 billion in the second quarter of the year 2013, even though the individual earnings are decreasing and the cost of living are getting higher. Due to this factor individuals and families would have to cut down their expense but even in the middle of an economic crisis, business is still continuing to blossom for McDonalds. Another reason why patrons keep coming back to McDonalds during the tough times is that there was a misconception that the food products were much cheaper compared to any substitute (Huff, 2011). Not to forget that there was also a negative five percent influence on its earnings due to the currency translation (Ausick, 2012).
3.3. Political/Legal force
Some examples of the political force affecting McDonalds were its political activities of workers. McDonalds normally do not make donation to political parties or candidates. However due to public policy issues that could affect the Company’s business, its employees, franchisees and the district in which McDonald’s bring about. Because of this the management believes that it is the right way in certain cases to make political contributions for the best of the company (McDonald’s, 2011).
3.4. Socio-cultural conditions
The Socio-cultural condition affecting McDonalds was when it first introduced in India. There is also a combination of different spices, thus the food in this country reflected on their culture and traditions. One of the challenges McDonalds faced was vegetarianism in India as cow being sacred and worshipped, so beef could not be served. There is also Muslims that do not eat pork. McDonalds resolved the issues by creating burgers for the Indian vegetarian customers. There is also competition from local food stalls and they were familiar with the market and the understanding of local taste since they were doing business for years compared to McDonalds (Kulkarni, Lassar, Sridhar ; Venkitachalam, 2009).
3.5. Technological Changes
McDonalds is moving forward with new innovation in a way how customers make their order in Europe, and it is the use of touch screen devices and swipe cards. This method would replace cashiers and cash, while estimating it would cut down waiting time up to 2-3 seconds (Carson, 2011). In 2000, McDonald’s website was introduced to the ‘Contact Us’ page and since then it was the customers favourite way to provide feedback (McDonald’s Corporation, 2008). McDonald’s trials in technology have failed during the past few years. They had made variation of technology advance with mixed results. Till today, it is still unsuccessful for McDonalds to serve hungry customers faster despite its attempt to use technology (Clarke ; Chen, 2007).
4. External Analysis – Competitive Environment
4.1. Intensity of Rivalry Among Competitors – High
The rivalry among competitors is high because there is a number of fast-food restaurant also competing with McDonalds like Burger King, Wendy’s and KFC. One of the competitors that are always competing with McDonalds is Burger King. This both company rivalries started in the middle of 20th century as both companies spring up, batting for territory and franchisees. But in 2011, Wendy’s surpassed Burger King and from then on these three companies were competing with each other on whose burger is bigger and cheaper. McDonalds also got into a war involving coffee after it was announced (Kowitt, 2013).
4.2. The Threat of New Entrants – High
Threat of new entrants would be high in the fast-food trade because the opening restrictions are very low as it requires a low capital and could get easy access to raw stock. New entrants would attempt to challenge the official companies, as their brands are unknown and it’s expensive for them to advertise. Last factor that increases the threat is that it is a highly profitable industry as it requires less capital (Anonymous, 2010).
4.3. The Threat of Substitutes – High
Substitutes are the products that could serve the same purpose as which the original could. The threat of substitute in which McDonald could face is high as there is an increasing growth in the convenience food industry. Convenience food stores are now selling the same type of food products in fast-food restaurant. Customers go to McDonald’s to dine and for kids to play, in which now is substituted with local food like Kabab, Karahi, Tikka, etc. As for kid’s entertainment, they could go to nearby park to play instead of going to McDonalds (Anonymous, 2010).
4.4. Suppliers – Low
The power of supplier is low for McDonalds as it had already constituted long term association with its suppliers. They purchase stock in large quantity and in a low price range. The brand propose by the suppliers is not so apart and it makes it easy for McDonald to change to another supplier. The only element that could give power to suppliers was the costs for McDonalds to switch to another supplier as it would have to set aside old terms and create new ones (Anonymous, 2010).
4.5. Customers – Low
The power of customers is low in this fast-food industry as compared to other industries. This is because in the fast-food industry, customers normally only buy products in a small amount and customers are also scattered everywhere so they could not make them consolidate. This is why customers could not get the topmost price at McDonald. There is a small amount of chances for the customers to swap to other brands because they knew of the singularity and seperation in all of its products that McDonalds had created. Therefore, the power of customers is low (Anonymous, 2010).
5. Internal Environment Analysis
5.1. Resource Types
When identifying McDonald’s resources types, there are both tangible assets and intangible assets. For tangible assets McDonald’s has a lot of buildings and equipment, but it has become more unprogressive in the past few years. Long term assets of McDonalds are tested for damage yearly, or when the asset current carrying price may not be restorable. McDonald’s was in compliance with the new accounting policies, even though it contributed a decrease in net profit of roughly $30 million.
McDonald’s holdings are reevaluated for any type of damage by grouping them together according to television market level (Reynolds, 2005). For intangible resources is such as brand image, goodwill or license. Lots of businesses have a competitive advantage and are surviving by just outshining in brand logo like the McDonald’s golden bow. Technology advances can be referred to as intangible resource if the corporation is concentrating on innovating and improvement of technology (Thornton, n.d).
5.2. Firms Capabilities
McDonald’s capability is different from its resources as some of the capabilities are used to tell apart themselves from other fast-food restaurant. McDonald’s marketing skills allows them to induce superb advertising expedition, which then created an image that their food quality and service is on top of other fast-food restaurants. McDonalds places a big significance on human resource management as it trains and develop the employees, in which allow them to create a reference book for new franchises to remain constant for both service and products quality.
McDonald’s strategy to win business image allows the company to keep in step with the changing civilization and introduce new items and menus that are more updated with the current customers’ taste and course. McDonalds associated foundation is built based on integrity and trust so that it could assure the company and its employees are focused on delivering quality service and food (Anonymous, 2010).
6. Conclusion
To conclude, McDonald is a well known brand throughout the world and their suppliers is giving them what they needed. McDonald’s goal was to become customers’ first choice to go to dine and drink. There is competition between McDonald’s competitors which is Burger King and Wendy’s, but McDonald thrives above them and came top of the fast-food chain. McDonalds is also stepping up their technology improvements as they are implementing the use of touch screens and swipe cards. They also found ways to break through to the Indian market by introducing burgers for the vegetarian customers. Customers could also provide feedback in McDonald’s website if any of the food or service quality is not up to standard.
7. Recommendation
There is around 34,000 McDonalds restaurant throughout the world. In order for McDonald’s to remain at the top of the fast-food restaurant list, they would need to come up with new advertising programmes so that customers would come back to buy their products. Although economics is getting bad nowadays due to the increase in population worldwide and the cost of living is getting higher, McDonalds could offer some discounts to the customers if they were to buy more and thus it would be a win-win situation for both McDonald’s and the Customers.
For raw materials that are already provided by suppliers, McDonalds could also search for suppliers to offer them with fresh vegetables and lower fat oils. McDonalds could also find new suppliers or cooperate with the current existing suppliers to ensure that the supplies are always available when required. As for McDonald’s food products, they could innovate in which how their products are being presented. By offering special deals to customers would also bring in more revenues for McDonalds. They could also come up with new products like for example fruits salad and cheese fries, or they could even change the sauce in the burgers for a much more unique taste. McDonald’s should also come out with a technology to order their food through machines so that it could cut down waiting time to order food during peak hours.
8. References
Anonymous. (2011, September 23). SWOT Analysis of Sheng Siong. Retrieved on September 28, 2013 from http://www.ocbcresearch.com/pdf_reports/company/Sheng%20Siong-110923-OIR.pdf
Anonymous. (2010, April 17). McDonalds. Retrieved on March 31, 2013 from http://www.scribd.com/doc/30083551/McDonalds
Anonymous. (2010). Mcdonald’s Analysis. Retrieved on April 2, 2013 from http://www.studymode.com/essays/Mcdonald-s-Analysis-474870.html Ausick, P. (2012, July 23). McDonald’s Stumbles on Currency Exchange Rates. Retrieved on March 30, 2013 from http://247wallst.com/2012/07/23/mcdonalds-stumbles-on-currency-exchange-rates/
Carson, M. (2011, May 19). McDonalds Moving into the Digital Age with Touch Screen Terminals and Swipe Cards. Retrieved on March 30, 2013 from http://socialnowpr.wordpress.com/2011/05/19/mcdonalds-moving-into-the-digital-age-with-touch-screen-terminals-and-swipe-cards/
Clarke, A & Chen, W. (2007) International Hospitality Management (1st ed.). Retrieved on March 30, 2013 from http://books.google.com.sg/books?id=3rDpzAdwqmUC&pg=PA123&lpg=PA123&dq=mcdonald+technology+trials&source=bl&ots=pCSuufWAfb&sig=TUkJzAPPQy_fNbJn7UOi_oc2rJk&hl=en&sa=X&ei=sXZWUYK5E8XQrQeS34H4CQ&ved=0CE0Q6AEwBA#v=onepage&q&f=false
Huff, E. A. (2011, October 26). McDonald’s Announces Nine Percent Income Growth In The Midst of Ongoing Economic Turmoil. Retrieved on March 30, 2013 from http://www.naturalnews.com/033979_McDonalds_economic_news.html
James, R. (2009, October 28). A Brief History Of McDonald’s Abroad. Retrieved on March 27, 2013 from http://www.time.com/time/world/article/0,8599,1932839,00.html
Kowitt, B. (2013, March 21). 50 greatest business rivalries of all time. Retrieved on March 31, 2013 from http://money.cnn.com/gallery/news/companies/2013/03/21/greatest-business-rivalries.fortune/12.html
Kulkarni, S., Lassar, W., Sridhar, C. & Venkitachalam, A. (2009). Social Perception in India. Online Journal of International Case Analysis, 1(2), 2-5. Retrieved on March 31, 2013 from http://ojica.fiu.edu/index.php/ojica_journal/article/viewFile/19/18
McDonald’s. (2010-2013). McDonald’s is Global. Retrieved on March 27, 2013 from http://www.aboutmcdonalds.com/mcd/investors/company_profile.html
McDonald’s. (2011). Political Contribution Policy. Retrieved on March 31, 2013 from http://www.aboutmcdonalds.com/mcd/investors/corporate_governance/guidelines_and_policies/Political_Contribution_Policy.html McDonald’s Corporation. (2008). Customer Services at McDonald’s. Retrieved on March 30, 2013 from http://www.mcdonalds.co.uk/content/dam/McDonaldsUK/People/Schools-and-students/mcd_customer_services.pdf
Nadu, T. (2011). St. Peter’s University. Retrieved on April 1, 2012 from http://www.stpetersuniversity.org/CDE/Pdf/materials/MARKETING%20FOR%20MANAGERS.pdf
Reynolds, R. J. (2005, April 25). McDonalds Corporation. Retrieved on April 1, 2013 from http://mmoore.ba.ttu.edu/ValuationReports/McDonalds.pdf
