Scp Analysis of Jaygee Group(Singapore)

Market Structure

As defined by Bain, the Market Structure is the prominent character of the market which persuades the pricing and nature of competition (Scherer ,1970). Depending upon the degree of competition a firm frames its strategies. Jay Gee Melwani Group is operating in a highly competitive market. In order to determine the structure of the market within the paradigm, the following dimensions are considered:

  • Market concentration: If firms are identical, concentration rate is inversely proportional to number of firms. There is intense competition among the firms (Hanson, et al. , 2008). The sellers have no power whatsoever to affect the price of the product. Now if any seller decreases its price, to increase its market share, the other are also forced to do the same. This high intense competition reduces down the profits to marginal cost levels.
  • Threats from new entrants: In a perfect competition market there is no barrier to new entrants. The existing companies always have a threat from new entrants. It is easy for company to enter in this type of market, and this leads to cut-throat competition (Porter, 1980). Jay Gee Melwani Group was no exemption to this phenomenon. After 2008, the economy saw a drastic change in the apparel retail markets. There were new brands coming up with new strategies and saturating the apparel market. Due to intense competition the profits have fallen down, recovers marginal costs only. Moreover fixed costs began skyrocketing in past decade.
  • Buyers bargaining power: Buyers are in the driving seat. They have the power to influence the price of the commodity. Moreover buyers are sensitive to price in a perfect competition economy, if same goods are available at cheaper price, they will not hesitate to switch (Fitzgerald, 1988). The products are not much differentiated from each other, thus it’s simpler for buyers to switch from one brand to another. Jay Gee Melwani Group sells products which are more appealing to young generation, who are willing to pay good price for a good quality. Company is well aware of their competitors, if they charge high price than buyers will be switching to some other brands. They offer attractive discount on goods, so that buyers don’t find any reason to switch to other brands or products.
  • Easy availability of substitutes: Most important feature of perfect competition market is availability of substitutes or complimentary goods. If the buyers are getting same or similar kind of goods at a lesser price he will quickly switch over to it (Porter, 1980). The Melwani group has cemented their position in the Singapore apparel retail industry. They provide their customers with quality product to provide maximum customer satisfaction. To outperform other brand retailers, it buys goods it bulk quantity and serve its customer with low prices. It makes sure that their customers don’t have to search for cheap substitutes.
  • Competitive rivalry: Last but not the least, competitive rivalry among existing firms in an industry leads to low profit earnings and Jay Gee group was no exemption to this fact. It happens because of high competition cost. In a perfect competition economy, number of sellers is large and every seller wants to increase its market share. Most of the firms have a perception that by providing goods at lower rate will help them but, it doesn’t happen. The other sellers also reduce the price to save their market share and they do this by sacrificing profits (Hall & Lieberman, 2008).
  • Summarizing the Market Structure: Singapore market is highly concentrated with brand retailers. Post 2008, the industry has witnessed a robust increase in number of retail dealers and is also a cause for intense rivalry in the industry. The company faces tough competition from other brands. However, Jay Gee group has shown a constant increase in revenue. Buyers get demoralized if they have to incur switching cost. Moreover to curb threats from new entrants Jay Gee Melwani Group provides incentives to its frequent buyers, so customers don’t prefer to switch brand. Sellers have to be very careful while pricing their goods because if they charge higher price compared to other sellers, than it will lose its market share.
  • Structure affects Market Conduct: Above mentioned factors play an important role for Jay gee group to plan its functions and strategies. Based on the market structure, managers plan their operations and strategies. With the help of market structure, they plan their marketing strategy; decide their operating level, when to buy goods from suppliers, pricing strategies, diversify into different business and many more factors. In this industry, market structure influences market conduct of the company.

Market Conduct

According to theory of contestable markets, the retail strategies are not determined by the market structure alone, it also necessitates the Conduct of the market in the current situations (Porter, 1980). Market Conduct is the behavioral framework or strategies adopted by the enterprise in an exertion to adjust with the existing market scenarios in which they operate. The few dimensions of Conduct include diversification strategies, pricing strategies, value chaining, collusive behavior, merger etc.

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Jay Gee Melwani group functions with the basic strategy of wider in operation and leaner in structure. They bound their operations nothing beyond retails and hence work in a controlled aggressive manner (obtained from Space Matrix analysis) in the market. In order to survive in the market, the enterprise changes its strategies with the change in retail customer’s tastes and trends. Below an in-depth analysis is done on various strategies of Jay Gee Melwani group’s market conduct:

  • Strategic Positioning: In the present era of globalization, due to intense rivalry and unstable market, it creates more complexity for an organization to sustain long-term success (Aaker, 1989). Initially Jay Gee started its business engaging with the footwear apparels and it finally veered towards the multi brand clothing and other apparels targeting youth retail trend lovers. Now the enterprise clearly focuses on the “Fresh Fashion” by changing its various positioning strategies. With the Research on the customer type visiting their stores, the enterprise alters their pricing and supplementary strategies to attract them as prospective consumers.
  • Diversification Strategies: In business, Diversification is often considered as a high risk approach. Looking into Jay Gee groups, they have adopted immaculate diversification strategies without giving up their quality standards (Rumelt, 2006). They initially started their business on a small scale as a foot wear dealers and subsequently watching the growth in modern organized retailing, made them to expand their operations in various apparels. Before planning for the related diversification, the company carefully assessed its abilities of competencies in the market.
  • Pricing Strategies: In order to survive and thrive in this high competitive retail market, every retailer has to be more attentive and meticulous with their pricing (Lazear, 1984). The financial success of every industry purely depends on their cost strategy. Customers insist to have reasonable prices in exchange of their business. So in order to draw the new consumers as well as to keep hold of the existing consumers it’s vital for an enterprise to have good pricing strategy. With the ubiquitous difficulties from lessening margins, rising costs, and competition, charming in the retail arena nowadays demands a better strategy.

Jay Gee groups follow the stage wise approach in achieving the pricing strategy as shown in the below figure: The enterprise offers with various types of schemes which are categorized as follows:

  • Values pricing This pricing is incorporated when external factors like rescission or increased competition forces the company to add values to the product and retain sales.
  • Promotional Pricing It is a common kind of offer provided by all kind of retailers. It involves offers like “Buy one get one” or “Buy two get one”. Physiological Discounting Organization used this approach when product has emotional values rather than rational value. For an examples pricing a good as $99 instead of $100.
  • Time Pricing By providing some kind of special offers during festivals and other occasions will increases the attraction of the consumers.
  • Value Chaining Jay Gee Groups keenly focuses on creating value for their clients by having innovative strategies in their operations and also creating differentiated products in varying trends (Hoskisson, 2008). The enterprise shows keen focus in modifying their strategies in every aspect, beginning from the good import to after sales support for the customer. The below figure illustrates the elaborated value chain framework of Jay Gee group of company.
  • Summarizing the Market Conduct: With the perfect competition in the market, it’s utterly a complicated task for an enterprise to survive who lack in proper strategic planning. So Jay Gee group solely focused on various strategies to withstand their position in the retail business. They had an outlook of keep modernizing their market strategies with changing trends. The enterprise intensely concentrated on their diversification strategy, pricing strategy and value chaining to fulfill the needs of the existing customer and attract new customers.
  • Market Conduct influences Performance: The Market conduct of an enterprise has a high impact on its performance (Fitzgerald, 1988). In order to achieve profitability its mandatory for an organization to understand its consumer’s need and offer services for them in a better manner than the competitor does. So appropriate strategic positioning and competitive advantage plays a vital role in deciding the performance of an enterprise.
  • Market Performance: The Performance of an enterprise can be termed as the outcome or encompass of end results of an organization in the market due to its Structure and Conduct (Porter, 1980). Market Performance can also be referred in terms of how well the enterprise accomplishes definite social and private objectives. These comprise the Cost level and Cost Stability in the Profit levels, Efficiency, long and short run terms and quantity and quality of goods sold.

Conclusion

From the various types of concentration measures, conclusions regarding the SCP-Paradigm can be drawn from Absolute, Relative and Summary measures. The variations in the measures led to different results, because of the uncertainly in data. Since the variables of SCP-Paradigm are closely related with each other which makes it complex to conclusively specify whether structure leads to performance or vice versa. Therefore, we can conclude that the drive to profitability of an enterprise is vital framework of Market behavior. 8. Recommendations: Based on the analysis and findings employed in this report, we would like to suggest few recommendations for Jay Gee Melwani groups to perk up their operations in better approach among its competitor in the market.

Reference

  1. Aaker, D. 1989, Strategic Brand Management, Prentice Hall, United States Of America. Besanko, D. , Dranove, D. , Shanley, M. & Schaefer, S. 2007, Economics of Strategy, John Wiley & Son (Asia).
  2. Corporate team. 2007, Company Report and Manual, Jay Gee Melwani groups.
  3. Davidson, R. & Mackinnon, J. G. 1993, Estimation and Inference in Econometrics, Oxford University Press, New York.
  4. Datamonitor, 2010, Retail in Singapore-Industries profile, viewed on October 29
  5. Fitzgerald, T. J. , 1988. Understanding the differences and similarities between services and products to exploit your competitive advantage. Journal of Services Marketing, 2(1), pp. 25-30.
  6. Hanson, D. , Dowling, P. & Hitt, M. 2008. Strategic Management: Competitiveness & Globalisation,Australia: Cengage Learning.
  7. Hall, R. and Lieberman, M. , 2008. Microeconomics: Principles and applications. 4th ed. New York: Thomson South-Western.
  8. Hoskisson, R. E. , 2008. Competitive for advantage. Mason: south- western
  9. Gereffi, G. , Memedovic, O. , 2010. The Global Appareal value chain:What prospects for upgrading by Developing countries?. 14(3), pp. 45-48
  10. Kotler,P,. 1999, Marketing Management, Prentice Hall, India.
  11. Lazear, P. E. ,1984. Retail pricing and clearence sales, Retail Management, 62(4),pp. 42-47
  12. Lockett, A. amp; Thompson, S. , 2001. The resource based view and economics. Journal of Management, Volume 27, pp. 723-754.
  13. Porter, M. E. 1980. ‘Industry Structure and Competitive Strategy: Keys to Profitability’, Financial Analysts Journal , 36 (4), pp 30-41. (Dequech, 2001)
  14. Rumelt, P, R. , 2006. Diversification Strategy and Profitabilty. Strategic Management Journal, 3(4), pp. 365-369.
  15. Scherer, F. M. ,1970. Industrial Market Structure and Eco-nomic Performance, Rand NcNally,Chicago.
  16. Shank,K & Govindarajan,V. , 2007. Strategic cost management:The new tool for competitive advantage. Cost Accounting, 4(4), pp. 96-102.a

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