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Joo Parkson Retail Asia Contents Introduction Introduction Established in 1987 in Malaysia
Under 'The lion group'
Total 54 stores in Asia
Market value SGD$ 830 million (was listed 3 November 2011)
Fashion, Beauty , Lifestyle (The lion group, 2012) (Asia, 2011) (Bloomberg, 2012) (Parkson, 2012) Tan Sri William Cheng Heng Jem Strategic Analysis and direction External Analysis – General Environment Pestel model
Caters to the middle to middle-upper income (Asia, 2011)
Middle income classified:
Low-middle income: GNI/capita of $1026 - $4035
Middle-high income: GNI/capita of $4036-$12,475 (The World Bank, 2012)
GNI/Capital: Gross National Income per Capita - total value of currently produced final goods and services produced by the domestic economy of a country divided by the mid-year population. (Unicef, 2012) GNI/Capita, PPP (The World Bank, 2012) Pestel Model - Social Rising middle income in markets targeted
Target market segment to increase
Parkson set to expand 2 more stores in Vietnam and undergo renovation
Introduce new Parkson departmental stores in first tier Indonesian cities. (Parkson Holdings Berhad, 2012) Pestel Model - Economic
Economy slowing – 2012 GDP of 5.2% out of
target of 6.5% (Business times, 2012)
Costs of doing business has gone down from
(Doing Business, 2012)
Foreign investors remain upbeat that economy
will rebound in the second half of 2013.
(Business times, 2012)
Economy maintaining resilence - GDP
growth in second quarter 2012 6.4%, up from
6.3% in first quarter (World Bank, 2012)
Healthy economy - Economy growth above
estimates (Grant, 2012) Pestel Model - Economic Vietnam
Parkson can make use of lower costs to expand in Vietnam in preparation for predicted economic rebound in late 2013.
Positive outlook for the economy indicates greater consumer spending abilities and confidence. (BBC News, 2012)
Parkson increasing Centro stores and introducing its first Parkson store to capture a wider , more affluent audience. (Parkson Holdings Berhad, 2012) Malaysia
Chance for Parkson to consolidate and strengthen its domestic presence.
Enhance awareness, improve loyalty programmes and promotional activities. (Parkson Holdings Berhad, 2012) External Analysis – Specific environment Porter’s 5 Forces Threat of New Entrants High capital requirements
High barriers to entry (Store location)
Dominance of existing players (Report, 2008) Threat of new entrants: LOW Threat of Substitutes Low switching costs for consumers
Low perceived level of product differentiation
Buyers’ considerations: Relative prices
Ease of shopping
Waiting time Bargaining Power of Buyers INDIVIDUAL customers
High buyer concentration to firm concentration ratio
Low switching costs for buyers
However, low volume of purchases Threat of substitutes: MEDIUM Bargaining power of buyers: LOW Bargaining Power of Suppliers Suppliers of GOODS (Distributors or wholesalers who stock products from multiple brands)
High supplier concentration to firm concentration ratio
Low differentiation of inputs (Clothes, lifestyle goods)
High switching costs for suppliers Bargaining power of suppliers: LOW Bargaining Power of Suppliers LABOUR
Labour-intensive industry (Financial Times, 2012)
Relatively easy to train
Minimal specialised skills required Bargaining power of suppliers: LOW Competitive Rivalry between Existing Competitors Large Departmental Stores and local stores
High concentration ratio
-Industry held by few strong rivals
Moderate exit barriers
Strong brand identity
Low product differentiation and innovation Competitive rivalry between existing competitors: HIGH Government
One of the world’s longest hours spent doing taxes
-872 hours vs 12 hours in UAE
(Doing Business, 2012)
-259 hours in Indonesia and 133 hours in
Malaysia (Doing Business, 2012)
Inefficient government operation makes it
difficult for new entrants to enter the market
Improve competitiveness for experienced players Conclusion Low Low Low Med Internal Analysis - Core Competencies Efficient and competitive model Stable revenue streams from concessionaire sales and anchor tenants
State-of-the-art management tools give Parkson the edge in controlling costs and customising its product mix. (Parkson Retail Asia Limited , 2011) Enhance product range
Presence of international brands boosts attractiveness
Decreases inventory risk and costs
Decreases working capital required Internal Analysis - Core Competencies Well established store network Established network in Malaysia Indonesia and Vietnam.
Stores located conveniently in prime locations in major cities
Online store for additional ease of shopping Internal Analysis –Strategic Competitive Advantage Well-recognised, strong brand name Operating in Malaysia for over 24 years, Vietnam over 6 years 8 years of operation in Indonesia under “Centro” (Parkson Holdings Berhad, 2012)
Preferred partner for major international brands planning to enter Asian markets like Malaysia, Vietnam and Indonesia
Strong brand image and familiarity
Expertise in product mix and brand management (Parkson Retail Asia Limited , 2011) Internal Analysis –Strategic Competitive Advantage Loyalty Programme Extensive network of loyalty card members 1.28 mil card
holders in Malaysia, 65000 in Vietnam and 200,000 in
(Parkson Retail Asia Limited , 2011)
Database of customer specific information Improves
understanding of purchasing habits
Exclusive loyalty programme - BonusLink
Allows cardholders unprecedented usage with a range of
other specialty retailers
More than 50% of all merchandise sales in each country are
generated by loyalty card holders.
(Parkson Retail Asia Limited , 2011) Weaknesses E-Commerce The number of consumers opting to shop online in the Asia/Pacific region are increasing
(MasterCard Worldwide Insights, 2008)
Huge growth in e commerce sales attributed to economic growth and Internet penetration
(MasterCard Worldwide Insights, 2008)
Parkson introduced their online shop in 2012
(The Star, 2012) Limited to Malaysia
Limited product range Conclusion Parkson has a dominant position in physical markets
Established position allows it to expand rapidly into new markets
Its products are mostly fashion/lifestyle products which are frequently bought by consumers online.
Eg. Ladies fashion accounts for 40% of all online purchases (MasterCard Worldwide Insights, 2008)
Weak offering as compared to international retailers such as Amazon which is Indonesia and Malaysia’s top online retail site. (Comscore, 2011)
Tough to establish a competitive advantage and profits may be eroded as more people switch to online shopping Strategic Direction-Setting Strategic Objectives
Focus on productivity and same-store sales growth
Expand existing store network
Enter countries with strong potential to grow department store business
Give back to society while enhancing bottom line and shareholder value (Parkson Retail Asia Limited , 2011) Ethics matrix Stakeholder analysis Conclusion Strategic objectives mostly align with the stakeholder’s needs
Employees are not adequately covered
May lead to dissatisfaction
Serious consequences Employee heavy organisation
No misalignment at present
Take extra care to look after the employee’s needs Business-Level Strategies Ansoff’s Product/Market Strategies Source: www.rebel-marketing.co.uk Business-Level Strategies GDP (Purchasing Power Parity) (Billion USD$) Source: www.indexmundi.com Business-Level Strategies Parkson has been expanding into S.E.A. rapidly.
In Indonesia alone Parkson has opened 6 departmental stores in 2011 alone (Berhad, 2011).
This is with further plans to open another outlet by end 2012, and another by early 2013 (www.TheJarkataPost.com).
Parkson also plans to open a store in Cambodia in the 2nd quarter of 2013 (www.TheJarkataPost.com). Business-Level Strategies Miles and Snow’s Adaptive Strategies Business-Level Strategies Porter’s Competitive Strategies Source: www.charliealfred.wordpress.com Business-Level Strategies Parkson has adopted a Cost Leadership approach.
It has done so by:
-Making online shopping available to its
-Having various types or promotions all year round
-Expanding volume through development
strategies. International Strategies A transnational strategy seeks to achieve both global efficiency and local responsiveness. International Strategies Parkson opened 5 malls in Indonesia under the already familiar name of Centro.
It also opened one under high-end supermarket chain Kem Chicks (www.theedgemalaysia.com). International Strategies Parkson attempted to achieve global efficiency and local responsiveness by adopting a transnational approach.
Tried to ease itself into the Indonesian market by expanding under a well-renowned local brand. Conclusion of Broad Business-Level and International Strategies Parkson has adopted Ansoff’s market development strategy.
Parkson’s plan to eventually sell its existing products in a new market segment (i.e. Indonesia and Cambodia) shows obvious signs of a market development strategy.
As mentioned earlier, Parkson’s attempt to ease itself into the Indonesian market, shows us signs of a transnational strategy. Strategic Implementation:
General Perspective Upon carrying out an Environmental Turbulence Analysis of Parkson, it is situated in a: Highly complex
Moderately unpredictable environment Therefore, there is no mismatch between the level of environmental volatility and top management’s strategic focus being customer and competitor based. Strategic Implementation:
General Perspective Business strategy of Parkson thus far, has led to a path of: Realised strategy
And Imposed strategy Strategic Implementation:
General Perspective Strategic Drift – Where an organisation’s response to the changing environment is often within the parameters of the organisation’s culture, which over time becomes more and more apparent
(www.managementaccountant.in). Strategic drift has occurred where Parkson has had to break out of its norm of expansion only within Malaysia.
It started to expand into various countries within S.E.A. Strategic Implementation:
General Perspective The Sigmoid Curve Strategic Implementation:
General Perspective Source: www.theedgesingapore.com Strategic Implementation:
General Perspective Parkson has embarked on 2nd curve activites.
Despite constant revenue, Parkson has continued to delve into new market segments in S.E.A. The BCG Matrix Strategic Implementation:
General Perspective Strategic Implementation:
General Perspective Source: www.markets.ft.com Date: As of Nov 06 2012 Source: www.markets.ft.com Date: As of Nov 06 2012 Strategic Implementation:
General Perspective Growth Rate Comparison Conclusion of Strategic Implementation: General Perspective Business level strategies of Parkson (High growth rate, high market share), places it in the star category of the BCG matrix.
Parkson has a high market share in a growing market, as seen from earlier.
If market share is kept, it can grow into a cash cow.
Having being listed on the SGX fairly recently, Parkson has managed to streamline its business strategies relatively well.
Our conclusion is that, with the environment it is in, resources it has and strategies it has laid out, Parkson can become an even more profitable company in future. Strategic Implementation Issues Key issues faced when implementing business level and international strategies
Appropriate Business level and international strategic plans
Using the M&A tool successfully Appropriate business level and international strategic plans Why is it so important? Using the wrong type of strategy will lead to disastrous consequences
E.g., Harvey Nichols a high end departmental store from London closed its retail store in Jarkarta only after 2 years in operation (2008- 2010)
One of the most prestigious retail stores in Jakarta, covering over 9500 square meters and cost almost $12.3 million to construct
Adopted a global strategy which offered standardized products across all its outlets, however since Indonesia has a low capita per income, premium retail stores like Harvey Nichols tend to struggle
(www.thejakartaglobe.com) Appropriate business level and international strategic plans What Parkson did
Instead of a global strategy, adopted a transnational strategy instead
Allows for local flexibility in each individual market
Targeted the mid-end segment of the market under the brand name of Centro
Will eventually convert the outlets into higher end departmental stores when Indonesia becomes more affluent
Currently has 8 Centro outlets, planning to invest US$15 million to open 2 more Parkson stores and 3 more Centro outlets in 2013
(www.thejakartapost.com) Using the M&A tool successfully Why is it so important?
Wanted to gain a foothold in Indonesia hence it acquired Centro Department store in June 2011
A profitable local retailer with 8 outlets in Indonesia
This allowed Parkson to leverage on the Centro brand name to expand in the central areas before converting them into the Parkson brand names in the future
Also allowed Parkson to get familiar with the Indonesian market
(www.theedgemalaysia.com) If the M&A of Centro was not successful, Parkson would have several disadvantages
May face additional competition such as Centro which was already a familiar brand name in Indonesia
Might have used the same strategy as Harvey Nichols, introducing a full fledged Parkson departmental store
An unknown brand name and with a target market of the middle to upper class might result in dismal sales figures
This is because at that time the majority of departmental stores in Indonesia (e.g Ramayana) catered to the lower income group
(http://www.bloomberg.com) Strategic Evaluation How well is Parkson doing?
Are the Strategic objectives being met?
Strategic Objectives of Parkson Focus on productivity and same-store growth sales
Expand its existing store network
Enter countries with strong potential to grow department store business
(http://www.scribd.com) Evaluation of Strategic Objectives Focus on productivity and same-store growth sales Same-store growth sales For the financial year ended June 2012, Parkson saw same-store sales growth of 9.2% in Malaysia, 9% in Vietnam and 9.3% in Indonesia
(biz.thestar.com) Productivity Continue to redesign stores and offerings to retain and attract new customers. –recently refurbished a Parkson’s store in Sarawak on 1 Dec 2011 (www.liongroup.com) Evaluation of Strategic Objectives Expand its existing store network Continue its store expansions across Malaysia, Indonesia and Vietnam
Opened its 37th store in Malaysia on 20 October 2011
Opened 8th store in Vietnam on 2 December 2011
Plans to open 1st Parkson store in Indonesia in 2013
(www.theedgesingapore.com) Evaluation of Strategic Objectives Enter countries with strong potential to grow department store business
The Malaysian, Vietnamese and Indonesian economies are projected to grow at a rate of 7.9%, 12.1% and 11.8% respectively between 2011 and 2015.
Obtained the necessary license to open a department store in Cambodia, expected to be completed in 2013.
Will be the first foreign department store operator in Cambodia.
(www.scribd.com) Evaluation of Strategic Objectives Focus on productivity and same-store growth sales
Expand its existing store network
Enter countries with strong potential to grow department store business Strategic Analysis and direction Vietnam Indonesia Malaysia Ease of doing business Vietnam PESTEL Model Concessionaires advantages Conclusion Good position in physical market
(Fashion/Lifestyle products) Lack of online market
(Amazon ; top online retail store in Indonesia and
Malaysia) Overall However Parkson need to establish competitive advantages of online shopping Using the M&A tool successfully Reference 9. References
Business times. (2012, October 31). Business times. Retrieved November 7, 2012, from Business times: http://businesstimes.com.vn
Chern, K. W. (2012, September 3). Retrieved November 4, 2012, from The Edge Singapore: www.theedgesingapore.com
Comscore. (2011). State of the Internet Southeast Asia March 2011. Comscore.
Doing Business. (2012). Vietnam: Doing Business. Retrieved November 7, 2012, from Doing Business: http://www.doingbusiness.org
Factbook, C. W. (2011, January 1). Retrieved October 26, 2012, from Index Mundi: www.indexmundi.com
Financial Times. (2012). Parkson Retail Asia Ltd. Financial Times.
Grant, J. (2012, October 16). Financial Times. Retrieved november 7, 2012, from Financial Times: http://www.ft.com
Group, T. W. (2012, June). Retrieved November 18, 2012, from www.doinbusiness.org
Indexmundi. (2012). Retrieved November 7, 2012, from Indexmundi: http://www.indexmundi.com
BBC News. (2012, August 6). BBC News Business. Retrieved November 7, 2012, from BBC News: http://www.bbc.co.uk
Strategic choice: the broad business strategies pursued
Strategic Implementation: General perspective
Strategic Implementation Issues
Lee, J. (2011, April 12). Retrieved November 2, 2012, from The Edge Malaysia: www.theedgemalaysia.com
MasterCard Worldwide Insights. (2008). Enter countries with strong potential to grow departmentstore business.
Parkson Holdings Berhad. (2012). Annual Report: Parkson Holdings Berhad. Retrieved November 2012, from Parkson Holdings Berhad: http://www.lion.com.my
Parkson Retail Asia Limited . (2011). Parkson Retail Asia Limited - Prospectus.
Post, T. J. (2012, June 28). Retrieved November 1, 2012, from The Jarkata Post: www.thejarkatapost.com
Report, I. I. (2008). DepartmentStores in Australia. IBISWorld Pty Ltd .
The Star. (2012, September 22). Parkson to continue expanding in Asia. The Star.
The World Bank. (2012). Data: The median World Bank. Retrieved November 7, 2012, from The World
Times, T. F. (2012, November 10). Retrieved November 10, 2012, from The Financial Times: www.markets.ft.com
Unicef. (2012). unicef.org. Retrieved November 7, 2012, from unicef.org: unicef.org
World Bank. (2012, October 15). World Bank. Retrieved November 7, 2012, from World Bank: http://www.worldbank.org/