The Future of the Singapore Retail Industry - Term Paper Example

The Future of the Singapore Retail Industry Name: Course: Tutor: Institution: Date: Executive Summary This report is a future business analysis. In this case, the report acknowledges on the nature of a changing global market. In this case, the report evaluates the Singapore retail industry case study. As such it evaluates the market through PEST and Porters five forces model evaluation tools. Therefore, through this approach the report establishes that the markets favourable political, social and economic environment will support the industry change into the future. However, technology changes will increase operational investment costs. Moreover, an evaluation of the suppliers and buyers influence establishes a potential trend in alliances and partnerships development, as well as expected increased competition. Finally, the report establishes two strategic recommendations for existing and interested investors namely business models diversification and partnerships development respectively. Table of Contents Executive Summary 2 Table of Contents 3 2.0 PEST Analysis 4 2.1 Political Analysis 4 2.2 Economic Analysis 5 2.3 Social Analysis 6 2.4 Technology and Environmental Analysis 7 3.0 Porters’ Five Forces Model 7 3.1 Buyers Bargaining Power 8 3.2 Supplier Bargaining Power 8 3.3 Competition Threat 9 4.0 Recommendations 10 4.1 Business Models Diversification 10 4.2 Forming of Associations and Alliances 11 5.0 Conclusion 12 References 13 1.0 Introduction Singapore is one of the most advanced nations in the global market in which organisations have directly invested into the market. Globalization has created an increasing range of organizational opportunities to expand in their profit margins as well as capital gains. In this regard, the increased consumer bases as well as market segments present the organisations with increased growth and development opportunities. However, the development of these international markets present an increasing global operational challenges management challenges. One of the most affected industries is the retail industry that majorly bases its success on not only existing macro-economic actors but also changing consumer demographics. This report develops an analytical evaluation of the Singapore retail industry performances and expected changes into the future. As such, the report evaluates the macro-economic factors as well as the industry porters’ five forces analysis and their subsequent expected changes into the future. 2.0 PEST Analysis One of the strategic approaches through which the Singapore retail industry present and expected future changes can be evaluated is through an audit of the existing industry macro-economic factors. In this regard, the report evaluates it through a political, economic, social and technology (PEST) analysis approach. 2.1 Political Analysis A political analysis involves an evaluation of the existing political goodwill as well as the immediate regulations in the market. On one hand, a political evaluation of the Singapore economy establishes a supportive marketing environment through domestic and foreign investors’ encouragement (Wattanawisitporn, 2005, p.15). In this regard, the government has propagated increased free market approach in the market. As such, market players have an opportunity to apply and use their competitive advantages to gain increased market control and influence. Therefore, market conditions as well as supply demands and price equilibriums are determined through the forces of demand and supply. With the rising trends in global demands, the concept is bound to project into the future. Thus, this implies that the market stakeholders in the retail industry will have increased control over the market, and fair competition based on organizational merits. However, due to the merits experienced by multinational organisations in capital success, the industry will acquire increased foreign dominance in the industry. This is likely to reduce on the overall domestic stakeholders in the market. 2.2 Economic Analysis An economic analysis on the Singapore market establishes a low unemployment rate. In this case, the unemployment rates as of 2004 the rate was at 4%. This implies that the market has a relative large working population base, offering it an increased disposable income amount. Moreover, the analysis establishes a steadily growing economy. Despite the 2002 dot com bubble as well as the 2008 global financial crisis implications, the economy is gradually growing with registered growth rates of 3.5% in 2013. This concept implies that a majority of the citizens are productive thus raising opportunities for existing market demands. In addition, financial analysis forecasts on the economy indicate an increased steady growth although the labour market growth projection rates remain high. Therefore, there are expected increased unemployment rates into the future. This development is bound to implicate on the economic standards in the future, with a decline in disposable income. As such, it implies that a majority will have minimum funds for expense and thus most of the purchases will be in small quantities. Therefore, the expected economic developments are bound to positively influence the growth and expansion of the retail industry that will gain an increased consumer base, which currently purchases through the wholesale supply chain levels. Therefore, based on the economic forecasts analysis, the Singapore market provides a viable future expansion opportunity for the retail industry. 2.3 Social Analysis An economy’s social analysis involved a critical evaluation of the existing society structures and demographics. As such, such an evaluation focuses on establishing the existing population, growth rates as well as societal structures and their merits. Further, such an evaluation focuses on evaluating the consumer buying behaviours and patterns in a given cultural setting market. On one hand, an evaluation of the Singapore population base establishes a higher population in the middle working class at their prime productive years. Therefore, a majority of the citizens are currently in their middle years and thus providing a high market base for market products. Moreover, the Singapore government introduced the welfare centres for the aged in the society. Further, through the provident fund contributions, the government ensures that employees and their employers contribute to the fund through which they acquire compensation upon retirement (“OECD, 2011, p.44). The establishment of this fund ensures that the society will have enough disposable income for necessities even in their old age. As such, this presents a mixed approach on the future of the retail industry. On one hand, a declining working population is bound to reduce on the overall industry demand into the future. However, the presence of the provision fund and retirement compensation ensures that the society will retain reasonable living standards guaranteeing the continuity of the Singapore retail industry profitability into the future. 2.4 Technology and Environmental Analysis Technology is classified as a critical organizational component through which ventures reduce their operational costs while increasing efficiency and effectiveness. Therefore, through increased technology application in a market, organisations are guaranteed of increased profit margins in the long run. Based on this concept, an analysis of the Singapore economy establishes that the economy has adopted a trend to increase technology application. In particular, this is supported by the Singapore government that works under its 1991 strategic economic plan (SEP) that targets as shifting the economy form a production to an innovation hub (Sung, 2006, p.62). Moreover, the consumer trend is shifting from a physical market to an online based trend. Therefore, the economy is bound to shift from the current physical retailing market to an online based retailing industry. As such, in order for organisations to successfully venture and succeed in this industry, they will be required to develop an increased online presence through developing and acquiring the necessary IT infrastructure and support professional workforce. The adoption of a technology platform would increase environmental conservation for the industry a virtue bound to increase concern into the future. However, the trend is expected to be gradual and thus organisations will be expected to retain and adopt both operational business models. 3.0 Porters’ Five Forces Model Besides conducting a general market macro-economic factors analysis, this report develops an industry specific analysis. In this case, the evaluation focuses on the evaluation of existing supply, demand, operations against expected future changes. As such, the report uses the porters five forces model. The model evaluates on buyers and suppliers bargaining powers, existing and potential competition threat as well as the treat of substitutes. For the report analysis, the study narrows down to three elements of the model namely buyers bargaining power, suppliers bargaining power, as well as competition threat. 3.1 Buyers Bargaining Power A buyer bargaining power is evaluated based on the respective buyers’ control of the industry. This involves their actual market numbers as well as quantity of purchases per buyer unit. On one hand, a low buyers base who have high capital bases demonstrate a high bargaining power while a high buyers base with low capital bases demonstrate a low buyers bargaining base. An evaluation of the Singapore retail industry demonstrates a low buyers bargaining base. In this case, the industry is highly diversified cutting across all other market industries such as the groceries industry, the technology industry among others. As such, it has a wide consumer base against its supply. Moreover, a further evaluation on the industry buyers establishes that a majority of its buyers are households who buy as independent units with minimal capital bases. However, this concept is bound to change into the future. Recently, as Teo and Jek (2002, p.258) noted is experiencing increased consumer rights and groups associations. Through the formation of these groups, the consumer base is bound to increase its market bargaining power on issues such as quality and price into the future. 3.2 Supplier Bargaining Power Similar to a buyers bargaining power, a suppliers bargaining power involved the development and the establishment of the overall suppliers’ control of the market. Such power and control is characterized by two factors namely their number in the market as well as individual capital bases. Based on this concept, an evaluation of the Singapore retail industry suppliers establishes that just like the buyers they are numerous. This is due to the government support. As such, the industry is saturated with both foreign investors as well as domestic inventories both large and SMEs. Therefore, this establishes the mixed suppliers control in the market. As such, on one hand, the large suppliers in the market regulate prices while the rest of the suppliers and buyers act as price takers. However, changing globalization dynamics are bound to change this concept. In this regard, under geopolitics associations such as the Asian economy associations, the market is likely to control some of the industry sectors such as the food sector into the future. As such, the firms’ control on the market would be significantly reduced through government regulations and industry sectors control. Moreover, the establishment of the Singapore retailers association (“SRA”, 2014) will increase the influence of the small scale retailers against large retailers in the industry into the future. 3.3 Competition Threat An industry competition is two-fold namely the existing competition and the threat of new entrants. Currently, the Singapore retail industry has a high competition rate. In this case, the industry has a variety of major global stakeholders such as Woolworths. Therefore, the presence of these global stakeholders poses a major industry competition to the local domestic small scale investors. However, the expected government support and stimulation of local ventures growth through the introduction of support systems such as iSPRINT that targets on developing increased technology application by the SMEs in Singapore (“IDA”, 2014). Therefore, the level of competition in this industry is bound to rise and increase into the future, especially between SMEs and large retail suppliers. Moreover, increased government support as well as the existing Singapore favourable political and economic factors is bound to increase the overall threat of increased investors in the industry, an approach bound to increase the overall competition in the retail industry. 4.0 Recommendations Based on the report analysis on the external macro-economic factors through a PEST analysis tool, as well as an industry review through the Porters fiver forces model, this report develops a range of recommendations. The recommendations offers strategic advice and direction to retail suppliers seeking to venture in the Singapore retail industry in the present and into the future. In this case, the recommendations seek to establish a synergy between the changing industry trends to overall organisations efficiencies and profit abilities in the long run. 4.1 Business Models Diversification One of the already established eminent changes in the Singapore retail industry is the development of increased technology application. In this case, technology use will develop of two fronts namely the governments’ economy transformation efforts such as through iSPRINT as well as changing consumer decision making and purchasing models. In this regard, a majority of the retail products will be purchased online. However, the change process will be gradual and systematic. In particular, the ageing population will be less flexible to technology application and will most likely stick to physical retail outlets purchasing. Therefore, in order to overcome the market expected challenges into the future, organisations venturing in this market should seek to diversify their business models as well as operational platforms. This includes the establishment of online platforms through IT infrastructures establishment. On the other hand, the organisations should focus on expanding their physical outlets competitiveness. This can be achieved through increased customer services development and improvements. Chikweche, Stanton and Fletcher (2012, p.207) argued that the increasing consumer base changes are characterized by increased consumer knowledge and information saturation. Therefore, in order to increase the overall physical stores efficiency, organisations should consider developing alternative market approaches besides the traditional formal routes. In this case, such unique marketing approaches could include CSR programs that seek to support the society as well as improve the respective retailers profile and status in the market. 4.2 Forming of Associations and Alliances An additional development trend is the increasing associations and consumer lobby groups’ development in the Singapore market not only in the retail industry but also across the entire market. In this case, the lobby groups are bound to increase their influence and market control into the future through purchasing and financial consolidation. In this case, increasing buyers bargaining power is expected to reduce overall equilibrium industry prices as well as propagate quality increments. Consequently, as Lohrke, Simpson and Hunt (2007, p.155) argued, these developments will lead to reduced overall profit margins as well as suppliers’ control of the market. In order to overcome this challenge, the industry suppliers both present and potential should focus in developing industry based alliances and partnerships. On one hand, alliances would ensure the consolidation of the overall suppliers’ power and financial base. Subsequently, the adoption and development of this strategic approach would increase their bargaining power in the industry stimulating overall price and profit margins increments. Further, the consolidation of the organizations supply chain infrastructures such as the distribution channels would allow for increased performance efficiency at reduced production costs, under resources sharing by the suppliers. 5.0 Conclusion In summary, this report offers a critical audit of the Singapore retail industry. In this regard, the report evaluates both the current and expected industry situations into the future. In order to offer an increasingly comprehensive analysis, the report conducts both the external environment and industry analysis approaches under the PEST and porters five forces tools respectively. On one hand, A PEST analysis establishes that the Singapore attractive and supportive political climate is expected to project into the future. Moreover, the existing economic conditions and well structures social settings are bound to retain and increase retail industry demand into the future. However, increased technology application is bound to increase the organizational capital and investment costs, curtailing eventual SMEs growth in the market. On the other hand, a porter’s industry evaluation establishes currently low buyers bargaining power bound to increase into the future. Moreover, the current suppliers influence is bound to change in the future with increased suppliers associations in the market. Further, a competitor’s analysis establishes that the current competition levels will increase with increased new market entrants. Finally, the report offers recommendations on the need for organisations to develop diversified business models as well as forming alliances and partnerships in the market. References Chikweche, T., Stanton, J. & Fletcher, R. 2012, "Family purchase decision making at the bottom of the pyramid", The Journal of Consumer Marketing, vol. 29, no. 3, pp. 202-213. Infocomm Development Authority of Singapore, 2014, iSPRINT Funding For Packaged Solutions, [Online] Available at < http://www.ida.gov.sg/Collaboration-and-Initiatives/Initiatives/Store/iSPRINT-Packaged-Solutions> [Accessed September 17, 2014]. Lohrke, F.T., Simpson, G.W. & Hunt, D.M. 2007, "Extending the bargaining power model", Journal of Management History, vol. 13, no. 2, pp. 153-171. Organisation for Economic Co-operation and Development. (2001). Insurance Regulation and Supervision in Asia and Latin America. Paris: OECD Publishing Singapore Retailers Association, 2014, About SRA, [Online] Available at < http://www.retail.org.sg/> [Accessed September 17, 2014]. Sung, J. (2006). Explaining the economic success of Singapore: The developmental worker as the missing link. Cheltenham, UK: Edward Elgar. Teo, T.S.H. & Jek, S.T. 2002, "Senior executives' perceptions of business-to-consumer (B2C) online marketing strategies: The case of Singapore", Internet Research, vol. 12, no. 3, pp. 258 Wattanawisitporn, R. (2005). Foreign direct investment in Thailand: With special reference on European foreign direct investment in the Thai manufacturing sector. Göttingen: Cuvillier Read More