Parkson Corporation Analysis

The objectives of this report is to present the findings of the strategic analysis conducted for Parkson Corporation Sdn Bhd and recommend the key strategies that the organization should implement in order to against with their competitor. So, the report begins by examining the general environment that affect the growth of organization, industry condition by using Porter’s Five Forces Analysis. The discussion part will describe the three stakeholders that affect the decision making of company and organization direction. Next, review the strength, weakness, opportunities and threats which can call SWOT analysis. The SWOT analysis determines and specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieve that objective for company. Lastly, discuss about the key selection criteria and recommendations for Parkson Corporation Sdn Bhd. to identify their strategies to against their main competitive and maintain its market share, market value and also their company reputation.

1.3 Scope of the report

This report had covered the operations of Parkson Company in China, Vietnam and Malaysia. For information, the report had analyzed the internal and external environment and also its industrial conditions and competitors which are the factors of operation growth for Parkson Corporation Sdn Bhd. Moreover, the online research such as online article, online magazine, online newspaper that related to Parkson Corporation Sdn Bhd is the major information sources for the analysis.

1.4 Limitations

Parkson Corporation Sdn Bhd has their limitation too. Firstly, not all customers know the strategy of Parkson Corporation Sdn Bhd. It causes them to lose their confidence towards the company. For example, from the operations of Parkson Company in China, it was showed that the market shares drop significantly. It highly depend on China causes customers to lose confidence because of their lack of the information about the company. Besides, the company sometimes showed some uncertain of their real performance and problems. The reason behind is sometimes the actions do not reflect what the report have mentioned so called transparency issues. Furthermore, Parkson Corporation Sdn Bhd cannot purchase their products through online. It show the inconvenient to the customers when they are not free or busy. In addition, it has their limited target market. They only focus more on the high income ladies. Therefore, it shows that it has no obvious competitive advantage compare with other competitors. Thus, without the important information, the company will face lots of difficult problem. In order to solve their problems for their company, they must try to improve their operation management.

2.0 Background Of The Organization

Parkson was one of the well known shopping malls. There was a lot of Parkson outlet can be found around the world. In other country such as China and Vietnam, there was a lot of Parkson outlet were available to be shop. Parkson was one of the largest department store company in China and Parkson currently has 35 outlets in Malaysia.Parkson branded department stores was divided into 36 brand and 2 Xtra branded. Parkson was established in the year of 1987. In Malaysia, the founder of Parkson was the retailing arm of the Lion Group and it is rapidly became one of the largest shopping malls in Malaysia. As an example, we can find Parkson outlet in Kuala Lumpur such as Subang Parade, Pavilion and other stated as well in Malaysia. Inside the Parkson, it has divided into few departments. The departments were strategically divided into different market segments and locations. The main purpose of the segmentations was preventing the customer to be confusing as the stores are categorized into 3 tiers depending on suitability of market and location. Since the Parkson was one of the successful shopping mall, it has been given a lot of achievements as their growing from strength to strength. Parkson always strive to do away with the conventions and to bring a fresh perspective to the retail industry. As an example, Parkson has been given a title of Malaysia Most Valuable Brands in 2009 or known as MMVB. MMVB is a part of a national brand valuation study commissioned by an Association of Accredited Advertising Agents Malaysia and conducted by Interbrand. Other achievement such as Certificate of Excellence Awarded to Parkson Pavilion being the Overall Best Retail Outlet in 2009/2010 and achievements that had achieved by Parkson. Parkson has its own moving forward target or mission. Parkson will constantly stays true to the needs and aspirations of the consumers. It has promises to continue to improve themselves in order to stay relevant. Parkson has emergence of younger age consumers who are well travelled, brand or image conscious and lifestyle-oriented will be the key of Parkson considerations which will lead Parkson lead the Parkson brand strategy.

4.0 Strategic Options

Based on the situation analysis conducted, several strategic options or alternatives are proposed for the organisation. These strategic options include:

1. Set target customer higher

We suggest Parkson Holdings upgrade their operation system and relocation their business direction by set their target customer among medium class income and upper class income customer. Parkson Holdings also can invite more branded company such as Gucci, LV and other come set their shop lot. There are few shopping center that sell luxury goods in Malaysia and previously Parkson Holdings’ image in public already is a high cost expenses shopping center. So now, we suggest Parkson Holdings try to upgrade their image and specific their customer segment, which medium and high classes’ income customers.

2. Refurbishing and Construct a new building

For example, Parkson renovate the whole buildings by upgrade its store image and profile. Parkson can refine all the merchandise to higher income products and brand mix. This indirectly can enhance the productivity of retail space.

Besides revamp the whole buildings, we would suggest that Parkson re-construct the building for instance let Mahkota Parade to be the Parkson Holdings shopping complex. Parkson will do all their business activities inside the shopping complex. Besides that, they also can rent their shop lots to other suppliers or clients to earn profits.

3. Preserving cash for potential M&A opportunities and retail property acquisition

Table 1. Major M&As Announced During 2006

M&A

Value (RM Billion)

Parkson Retail Group, Lion Diversified Holdings Bhd, and Amalgamated Containers Bhd

4.3

Source: PWC Research

As we can see from the Table 1 above, when Parkson Retail Group merged with Lion Diversified Holdings Bhd, and Amalgamated Containers Bhd, it can create the value of RM4.3 billion. Thus, we suggest that Parkson can choose to preserve some cash for potential mergers and acquisition opportunities and retail property acquisition. As mentioned in the first strategy, we suggest Parkson target medium and high classes’ income customers. Therefore, Parkson can choose to merge with Cold storage producers that sell high quality products like organic foods and used organic production method. We select organic foods as green products and services are now becoming the center attention of consumers.

4. Diversified product line to other industry and Retail space

We suggest Parkson to invest in hotel industry other than just Parkson shopping centre complex. For example: we can refer to Hatten square which have their own buildings for retail shopping complex and also hospitality service suites in addition come out the ideas of Information Technology (IT) in their buildings. In addition, according to Parkson, it will target to expand its retail space by 15% – 20% each year or 9-12 new stores in the countries where it operates. Hence, we suggest that Parkson can target country like India as India now is a fast growing country. If globalization success, this indirectly can helps in the formation of international financial system.

5. Go green projects

For example, we can convey to Parkson Subang Parade, Parkson Corporation Sdn. Bhd. by implemented the ‘No Plastic Bag Day Every Saturday’ green campaign to reduce plastic bags in response of Environmental Social Responsibility (ESR). However, this strategy only covers in Selangor State. Thus, we suggest that this strategy can be further implemented to all parts of Malaysia. Furthermore, we also could follow the step of 1 Utama shopping mall in Petaling Jaya by come out a secret garden which has the system that reduces its usage of treated pipe water by 30%, and a building automation system with sensors that automatically adjust lighting and temperature. Moreover, we also can could followed the step of Tesco Greener Living by come out green gifts which using recycle material to handmade products.

6. Involve in Charity

Apart from that, money that we earn from the Green projects will donate to the society for charity work. Parkson can also join charities and support groups that concentrate on eco-friendly lifestyles and choices. Parkson can donate items to schools, churches, city clubs and organizations. Parkson can promote themselves at eco-friendly events and give away items like free gifts or sample at school fairs, carnivals, or local cities farmers market. Involved in such events and can help people can become aware of contributing to the health of our planet and indirectly to help Parkson build a superior images in market.

Key selection criteria

According to Brundtland Commission (1987), sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs. Sustainable development is a worthy goal for small and big businesses everywhere, especially for globalization organization. As members of various communities, we know that society, the environment, and the economy are interconnected. In order to maintain sustainable image and revenue, Parkson will appear few strategies that try to create and more focus on awareness, reputation, make profit and efficiency when making strategies.

Profit maximisation is the aim of the owners and shareholders. Company will try to make the most profit as possible. One of the essential factors for Parkson needs to focus its sales growth. Parkson need make as many sales as possible. This may be because we believe that the survival of the business depends on being large. Large businesses can also benefit from economies of scale. In order to this cases, Parkson will attempt to upgrade its store image and profile, diversified product line to other industry and also can merger or joint-venture with other sector industry. When Parkson struggle to merger with other sector industry or use differentiation strategy, it can help Parkson establish good reputation by thrust business into the limelight and open doors for Parkson. Besides, it also can assist Parkson to partner with a larger company such as Lion Diversified Holdings Bhd [1] , and Amalgamated Containers Bhd to access their large list of customers and it will frankly improve Parkson profitability and EPS. Parkson can share the risks with partner and help to gain higher competitiveness; nevertheless it can be rigid Parkson to enter the new market and it will become barrier to entry for Parkson.

Pay attention to the environmental impact of our economic practices, and try to ensure that our communities are healthy, pleasant places to live. Nowadays, organizations started to paying attention and actively producing greener products and services to create a center of attention consumers. Parkson Corporation Sdn. Bhd. actively involved in sustainable development and follows the pace to adopt environmentally sound business principles and translate these into action. Parkson Corporation CEO raises awareness and reputation at this time, and he believes that the positive impact for the environment is immense for 2011 and well into the future. He adopt this approach because he believe and aware that operating a green business is not only good for the environment but good for their business’s bottom line because conserving resources and cutting down on waste saves money However, Parkson Corporation Sdn. Bhd. promotes “No Plastic Bag Day” only covers in Selangor State initially, it haven implement in other states. Environmentalism is no enough for certain places; it should engage numerous metropolitan areas and every branch in promoting the use of eco friendly bags in order to get more efficient and successful effects. Even thorough Parkson Corporation Sdn. Bhd. had implement eco-friendly, nevertheless it still no adequate to contributing to a healthy world and healthier place for us and for the future. Parkson should put more improvement and enhancement to implement eco-friendly. For example, we can follow the step of Tesco Greener Living by come out green gifts which using recycle material to handmade products. We also can put more focus of store on the eco-friendly category. Parkson can let customers see that there are practicing what their sell. If customers feel like you have a true passion about the environment, it will help them purchase these items with confidence. If customer is interested in an item, try to offer them a similar item that is eco-friendly. It not merely can make contribution to making the world a better place; it also straightforwardly can enhance and create awareness to customers and build customer loyalty.

In order to determine where it is going, the organization needs to know exactly where it stands, then determine where it wants to go and how it will get there. Parkson need to carefully establish unique value proposition and strategies compared to competitors, executed through operations that provide different and tailored value to customers and drives continual improvement within the organization and moves it toward its vision in order to become market leaders in market.

6.0 Recommendation

Key Questions

Option/Hypothesis/ Recommendation

Decision Criteria

Pros

Cons

(i)Parkson had started to pay attention to the environmental impact of our economic practices, and try to ensure that our communities are healthy, pleasant places to live.

(i)Parkson should propose the shop outlet to have a zero plastic bag day in order to archive a green environment target.

(ii)Zero plastic on Saturday was not enough to influence the customer to be more green environmental minded but should apply to other day as well.

(i)No plastic bag was given to the customer whenever the customers purchase their stuff in Parkson during Saturday period.

(ii)The customers who really or ask for the plastics bag will be charge for 20 cent each.

(i) A green business able to provide a better environment and also a good for their business’s bottom line because conserving resources and cutting down on waste saves money.

(ii) Able to prevent damaging the environment from the chemicals in cleaning products that are sprayed out into the air.

(i)There will be some of the customer dislike the strategy of the Parkson

(ii)The customer might be dislike to shop on Saturday.

(iii)The non given plastic bag strategy might cause the sales of the Parkson drops.

(iv)Other competitors might gains advantages on Parkson strategy and increase their sales.

Since everyone of the shopping mall had started to pay attention on the green environment activities, the Parkson also had started the move on it. Most of the shopping complex had their own strategy like no plastic bag will be provide to the customer who purchase stuff or item on Saturday. We believe that it is not enough for Parkson to active on this program. As a result, Parkson can improve it by having more zero plastic bag days for the week. Nevertheless, it is important for the shop outlet in Parkson to be corporate with them as well. The shop outlet also can propose not to provide plastic bag to the customer. In directly, it can help our environment to be a better place and also can help them to save their cost.

(ii) How Parkson time to times change improve their Parkson images and environment of the shopping complex?

(i) Parkson can create their own super market and no need other super market or hyper market such as Cold Storage. With this, Parkson can have a better environment and gain more competitive advantages.

(ii) Once Parkson have their own brand name, they can try to sell their product at other shopping mall in order to have a different shopping environment for the customer.

(i)Parkson always construct or renovate their building As an example in Malacca( Mahkota Parade had relocate the shop location and paint their building.

(i) Parkson able has a better management for the shop.

(ii) Parkson able to generate new image, give new shopping feels and attract more customer to shopping.

(iii) They also can rent their shop lots to other suppliers or clients to earn profits.

(v) Parkson upgrade their operation system and relocation their business direction.

(i)It might comsume a lot capital for the renovation and building construction in order to have a new building.

(ii)Is hard to find a new place or location to construct a new building

(iii)When there is a renovation, it might disturb the businesses which are going on.

(iv)When there is a renovation, A lot of space consuming will be required. Such as the place to store the renovation stuffs and parking lots.

When time past, the customer might be started to get bored due to the unchangeable environment or shop in the Parkson. As a result, Parkson had started to change their image and the shopping environmental. As we can see, most of the Parkson had reconstructs their building, painting their building and so on. I believe that it is not enough to satisfy the customer needs. Parkson can try to create their own super market or hyper market instead of renting their space to the Cold Storage or Giant. It can help them to gain more competitive advantage and have a better shopping environment for the customers. It might include a lot of capital but we believe that Parkson able to generate more profit in the future. By that time, Parkson no longer depend to other super market or hyper market but it has it own brand or name of the super market.

(iii)What capability should Parkson develop to ensure the success?

(i)High diversification to increase the profit.

(ii) Since Parkson have their own member card or member day, Parkson should have more attractive reward which can redeem by the customer with the bonus link point.

(iii) Parkson should attract more investor to invest in to their share as well. With a huge capital provide from the investor, Parkson can develop more their shopping more or maybe have a better management.

(i)High diversification.

(ii)Differentiation strategy.

(iii)Focusing on their product line.

(i)Less risk with the premium pricing and increase retail consumer market.

(ii) Parkson able to gain more competitive advantages.

(iii) With a interesting or attractive reward, it can indirectly influence the customer to spend more on their products.

(i)Economic downturn.

(ii)Competitor strategy to counter the Parkson strategy.

(iii) If investment by the Parkson fail will cause the investor occurs loss.

(iv) The cost of the reward to member might include a huge capital.

Parkson was one of the famous shopping mall. In every department of the Parkson, we can find a lot of product sell by them and it has show Parkson product is highly diversified. It is one of a good strategy to increase the profit. But there is a weakness among them. Most of the product sell by them were more to the female department comparing with department. Parkson should implement differentiation strategy and make the diversification in to more wide area. Focus more on the product line and make it balance well be one of the great solutions for this matter.