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Business Environment and Strategic Management
(SM0495)
FT NTB MSc 1
Mr. Parameshwaram
14th May 2018
Name - Naman Prakash
Word Count - 4000
Student Id - 17041043
INTRODUCTION
Old Chang Kee has been considered as one of the most established chains of foods and beverages in Singapore started back in 1956 with a small coffee shop which was previously named as Rex Curry Puff (Old Chang Kee (2013)). The company offered more than 30 food products but the specialization lies in the aromas of delicious puff stuffed with a slice of egg, curried potato and chicken fried with specially selected spices and herbs. They positioned themselves to target the local audiences who considered OCK as an iconic brand with so affordable price that even small children can avail the products (Phillip Securities Pte Ltd, 2016). The mission of the Old Chang Kee is “to deliver superior quality finger food and ready meals at value for money, in a hygienic and customer friendly retail environment”. From a very small coffee shop in Singapore which was run by Old Chang Kee since 1956 was taken over by Mr Han Keen Juan in 1986 to change his own lifestyle as well as the food scene with a vision to ‘be prepared for adjustments and challenges’. He invested his savings into this business by moving the small coffee shop to larger premises with all the new system implemented into it to upgrade the production facilities. He also took some critical steps to maintain the consistency in the quality and aroma of the products.
The key competitors like Bread Talk Group Limited which has brand over 12 countries along with Savoury snack industry that comprises of outlets such as Prima Deli, Polar Puffs and Cakes etc. have mushroomed with diversified locations in Singapore. But OCK differentiates itself from its competitors by having a long history of quality standards, distinctive taste and safe to consume. As per the latest financial results for the year 2017 and upon analysing the trend from previous 5 years it has been observed that despite making good revenue of 78.3 million dollar in 2017 from 73.6 million dollar in 2016 the biggest challenge is that the company is unable to pay the expenses due to contraction in pre-tax profit margin which made the shareholder’s equity come down from 17.6% to 6.4% and these scenarios are expected to persist for some time. Even after facing such a pressure situation of labour shortage OCK didn’t compromised on the quality of the products. There prime focus currently was basically upon selling the products as much as possible.
COMPANY’S ANALYSIS
The emphasis is basically done upon the macro and micro analysis i.e. the external and internal behaviour of an organization Old Chang Kee using PESTLE and 5 forces analysis on how the company operates when compared to overall snack industry in Singapore. The PESTLE analysis basically focuses on factors such as economical, technological and social impacts on Old Chang Kee.
As per the economy stature shown in the graph Economy Stature 1, Singapore country has seen the deduction of the corporate tax from 18% to 17% in 2011 which allowed the food company to expand their business. The Savoury snack industry profitability had a growth of 5.8%. Singapore Government supported and facilitated small and medium enterprises to improve the service level and effectiveness of food and beverage industry, this basically shows high political support. This helped them in increasing the customer demand which tends to attract high quality of labour with handsome wages. The overall improvement helped Old Chang Kee to make strategies and created opportunities to them by delivering the products and services to the consumers in the central business district area and other selected region in Singapore .This also provided an added convenience to consumers and to offer an easy route to provide finger foodstuff for event, meeting and parties .due to some of the above stated reasons lead to increase in the company’s revenue by 37.3 per cent since 2011 from 55.7 million dollars in 2010 to an amount of 76.5 million dollars over a 15 period month time till 31st march 2012 to (Economic Survey of Singapore (2012)). Few other reasons for the increase in the revenue were due to the inclusion of the 3 months of year 2012 which comprises of the maximum revenue of 15.6 million dollars. By the end of the financial year of 2012 a total number of OCK’s outlet operating in Singapore was raised to 82 as compared to 78 back in 2010. Revenue contribution from new outlets in China and Indonesia along with higher sales from existing outlets contributed to the revenue growth in the retail division. The company’s performance was good till 2012 financial year end with gross profit increased from approximately S$33.4 million in 12M2010 to S$46.0 million in 15M2012, with an approximate increase of 37.6% from 5.6 % in 2010 due to improved production staff efficiency. There was an increase in market share in 2012 compared to 2010.