Analysis BreadTalk Group Limited Essay Example

of New Entrants

The threat of new entrants in the F&B industry is high due to the low barriers of entry because of:

• low initial capital outlays – cost of equipment and research is low,
• products rarely have patents to it, making it easily imitated,
• product differentiation exists,
• easy access to effective distribution channels.

 Threat of Substitute products or Services

The threat of product substitutes is high considering that BreadTalk’s customer face low switching costs. For example, there are many local snack chains that BreadTalk Bakery’s customers can alternate to, such as Mr. Bean and Polar Puffs & Cakes.

Bargaining Power of Customers

Customers in the F&B industry have high buying power, as there are low switching costs. Generally, the industry’s demand is highly price elastic, with many being price-sensitive and would easily switch to alternatives, especially with high inflation in the economy.

Bargaining Power of Suppliers

Suppliers in the industry have a low bargaining power due to the high number of existing suppliers and the basic ingredients (e.g. flour, egg, butter etc.) are largly homogenous and differ little in quality, lowering their bargaining power.

Intensity of Competitive Rivalry

The F&B industry is highly competitive by nature. In its bakery business, BreadTalk faces a diversity of rivals ranging from large bakeries such as Four Leaves and Crystal Jade Bakery, to small neighbourhood bakeries. BreadTalk food atrium faces competition from similar food courts such as Kou Fu, Food Junction and Kopitiam. All in all, rivalry is volatile and intense as there are high exit barriers and moderate growth.

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The market industry and its nature

The Food and Beverage (F&B) industry has been growing significantly, both locally or globally. In Singapore, there has been a steady increase of establishments in the F&B industry; in 2011, there was a 4.5% increase in establishments from 2011, hitting a new record of 6,500 establishments. The revenue in 2011 increased by a 12.1% from 2011 (Singapore Department of Statistics, 2012) With the increase in population and growth in the toursim sector, there is definitely a high demand in the F&B industry. (Refer to Appendix B for F&B industry statistics)

Market Competition and BreadTalk’s

Market Share The F&B industry in Singapore is fiercely competitive, owing to the low barriers to entry. The industry is highly saturated as seen in the reported growing numbers of F&B establishments. Many of BreadTalk Bakery’s competitors provide similar products at comparable prices (refer to Appendix C & D for competitors’ offerings)

Despite stiff competition, BreadTalk is one of the top 2.4% of the F&B establishments, raking in $365.9 million revenue in 2011. Compared to key players, BreadTalk has a constant growth in both revenue and profits (refer to Appendix E) (Singapore Department of Statistics, 2012).

Target Markets

The target markets of BreadTalk businesses are mainly the middle or income, young adults who are in the working class, thus explaining the strategic locations at train stations.

Trends and Factors affecting the market Firstly

the market is highly subjected to inflationary pressures; it causes prices to rise along with the costs. Singapore’s consumer price index (CPI) was 4.3% in 2012 (Enterprise One, 2013).

BreadTalk reported that it had raised prices by 15% for its products in late 2012 to cope with rising costs (Xiang, 2012).

Secondly, changing consumers’ preferences is another factor affecting the growth of the business. Any shift in consumer preference away from BreadTalk’s products may affect the business. Thirdly, technology plays an important role in the F&B industry, helping to propel many businesses forward. New technology may help to improve businesses.

Lastly, seasonality of sales for the F&B industry is faily important, earning more revenue during festive seasons and holidays, such as mid-autumn festival and school holidays.

SWOT Analysis

Strengths

Market Leader

Being a market leader, the status helps in gaining new partnerships with other companies. With a higher potential in gaining new partnerships and financing opportunities, the increase in capital and resources can enable Breadtalk to venture further expand the regional market reach that the company has in the world.

Constant Innovation and Improvements

BreadTalk was the first to have an open kitchen concept in its bakeries, and have constant improved itself by making innovative changes. They have constant variety of recipes, bread desings and also promotions (Refer to Appendix A1 for examples). BreadTalk’s constant innovation and improvement have led it to elevate its profile and keep its competitive edge in the industry.

Strong Branding

The BreadTalk brand grew to become a prominent local brand in Singapore. BreadTalk Group has won many different awards such as the”Singapore Promising Brand Award 2002” and “ Regional Brand Award 2006” by Association of Small and Medium Enterprises (ASME) (BreadTalk Group, 2012).

Strategic Retailing Locations

Most

of BreadTalk’s stores are found in strategic locations with high human traffic. Many of them are situated near public tranport systems and popular shopping malls. (Refer to appendix A2 for outlet locations examples)

Experienced Management

Mr George Quek, the founder and managing director, has experience in the F&B business for more than 20 years. Along with his support of managers with more than ten years of experience in the F&B industry gives the brand a good position with its management experience. (BreadTalk Group, 2013)