The Findings Of The Strategic Analysis Marketing Essay

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.

3.0 SWOT Analysis

3.1 General Environment

Demographic

First of all, the latest population in 2011 is 26,384,446 in Malaysia. In Malaysia, there are many races. Hence, the ethic and gender diversity in the Malaysia workforce is on the rise. Although the workforce is on the rise, but half of the Malaysian earn less than RM3000 per month. That means the buying power of Malaysian is quite low.

Economic

Nowadays, the unemployment rate was decrease to 2.9%. But due to the recession, the share prices of Parkson have decrease from 5.82 to 5.39. During the recession, the inflation occur, hence the buying power has reduced. It is because when the income earns from inflation period, it can only chase for fewer goods and services. Besides, the buyers have higher price elasticity.

Political/Legal

There are some rules set by the Parkson. First, if we are browsing the site of Parkson as a non-commercial consumer, we may download material displayed on the site for non-commercial, personal use only. Second, if we are browsing the site as an employee, agent or member of any business organization, we may download material displayed on the Site only for non-commercial purposes within your business or organization.

Sociocultural

In order to attract more buyers, Parkson is try to understand each of the customer segments, including the information about their favorite brand, spending power, types of purchase and more. Besides, Parkson also support environment friendly, such as selling refillable perfume, KENZO, to reduce the impact of planet.

Technology

The internet is more and more important. Many buyers more on the Web for information, entertainment, and shopping, retailers are discovering the need to use their online presence not just to spur online sales, but to drive traditional-format sales as well.

Global

Going to globalization have to face many problems. Trade barriers continue to come down around the world and as technology enables greater access to information, the world is becoming one-mega market of labor, capital, goods, and services. Besides, Globalization will also caused by the technology.

3.2. Industry conditions (Porter’s Five Forces Analysis)

It is proposed by Porter about identifying five forces that would bring an

impact towards the organization’s behaviour in the market place.

Force 1:The threat of entry

It shows the market barrier that hinder new competitors from entering into the

market.Besides that, it will also show the influence of the existing and

potential competitors in the market.

Force 2:The degree of Rivalry

It shows the competitiveness and the intensity of competition in the market.

Besides that, it will also show determine the attractiveness of the particular

industry.

Force 3: The threat of substitute

It shows about how easy can the goods be subsituted. For example, can our current

goods be substituted with cheaper ones.

FOrce 4: Buyer power

Buyer power talks about the concentration and size of the buyers.It also shows

the impact that customers bring to for a certain industry.

Force 5:Supplier power

It is a mirror image of buyer power as it talks about the concentration and size

of the supplier. Besides, it shows how much pressure the supplier can place in a

business.

3.2.1 The threat of the entry of new competitors

The competitors of Parkson can be classified into 2 types which are direct and indirect competitors. Direct competitors of Parkson are like Isetan and Carrefour while the indirect competitors of Parkson are like Mydin, Jusco and Tesco. It is hard for competitors to venture into this business because the barrier of entry is very high. The barrier of entry is high because these businesses have already been well established in the market place.

Besides that, it requires a large amount of capital to start a similar business. Since it has already been established since the year of 1987, the reputation of the company is very strong. It leads to a group of hardcore customes in Parkson, if people are considered as the loyal or die hard customers of Parkson.

Therefore, we believe that even though the market is attractive, it is very hard for new competitors to venture into the business.

3.2.2 The intensity of competitive rivalry

The competition within in the market place can be considered as strong because basically these businesses target the same group of people which are the high income ladies. There are several promotion offered Parkson in order to lure the customers. However, there are several brands such as Laniege are only available in Parkson but not other retailers. It boost the competitiveness of Parkson towards its competitors.

Even though it mainly targets the high income ladies, it still does not give up on other target marks. For example, we can see “For Her”, “For Him”, “For Kids” and “For Home” in Parkson’s website. It shows that it has a lot of target groups but it emphasizes more on ladies as their main customers.

Some of the competitors of Parkson such as Carrefour have started Original Equipment Manufacturer (OEM). They start producing their own products like Carrefour water. It is indeed a threat for Parkson as it heavily rely on other companies products to advertise. Even though there is Parkson elite card points for the customers to redeem something, their competitors are offering the same service as well.

3.2.3 The threat of substitute products or services

Instead of buying from Parkson, the consumer might change in their taste to try other products. Besides that, manufacturers normally will offer a lower price compare to Parkson, it might move purchase goods from the manufacturers instead of Parkson.

Parkson basically are giving a place in order for vendors to do their business in it. Therefore, Parkson must always be aware of what is happening in the market so that their competitors will not offer a lower price to attract the vendors from Parkson to move to their competitors.

3.2.4 The bargaining power of customers (buyers)

In Parkson, we believe that there are two types of buyers in it. One type is the vendors because they are renting place of Parkson to start their business. The other types of buyers are the normal shoppers.

In Parkson, the bargaining powers for shoppers are low because all of the prices of the products are basically fixed and non negotiable. For the vendors, it is believed that the better the brand name, the better the bargaining power because Parkson needs famous companies to add variety in Parkson. Furthermore, when a huge companies venturing into Parkson, it will raise the value of Parkson in the eyes of the people.

3.2.5 The bargaining power of suppliers

The bargaining powers of suppliers are for the vendors as well because the goods of Parkson come from them. Therefore, it relates to the better the brand name, the better bargaining power for suppliers as well because the Parkson needs them and vice versa.

Besides that, it is not all vendors are allowed to simply venture into Parkson. Parkson will study about the companies first such as history, financial report, reputation and others first before allowing a particular company venturing into it. Thus, In order to maintain the brand name of Parkson, most of the tenders in Parkson are well established. Therefore, these tenders will also have strong distribution channel.

3.3. Description of key stakeholders

3.4. SWOT analysis based on stakeholder groups

SWOT analysis scans both the internal and external environment of the companies.

The internal environment include the Strength (S) and Weaknesses (W) whereby the

external environment includes the Opportunity (O) and Threat (T).

The strength of the company are normally use to evaluate about the competitive

advantages of a particular company. When we talk about the weaknesses, it is more about the absensce of the strength of the company towards certain areas such as legal protection.

When we talk about the opportunities, it is about the future potential expansion or growth of a company that will be able to make a profit. Threat is normally talking about the changes of external environment that might leads to some problems for the company.

3.4.1 SWOT- Product Market Stareholder

Strength:

In product market stakeholder, it has a good reputation for its customers and suppliers. Parkson has already been established since the year 1897, the reputation has already been established long ago. Besides that, the customers of Parkson are both the customers who shop in Parkson and the vendors because vendors need to pay in order to do business in Parkson. Since Parkson has a good reputation, vendors are rushing to start their business in Parkson and Parkson will always have a guaranteed supplier to join them.

Besides that, there are few ways for the customer to reach Parkson such as Facebook group, Parkson official website, phone call and others. These are the feedback from the customers and it certainly will bring an impact towards the quality of services in Parkson. Furthermore, Parkson successfully build and impression that it is a high class and branded place. Therefore, whoever that shops in Parkson are considered as so called “high class” people. This will definitely boost the revenue of Parkson.

Weakness

As what we have mentioned, Parkson does not have enough target markets. It targets only those customers who are rich specifically high income ladies. Therefore, most of the people will not shop in Parkson as it is believed to be just a place for high income ladies instead of everyone.

Besides that, when we compare Parkson with their comeptitors such as Isetan and Carrefour, we do not really see a clear competitive advantage that is really in Parkson. It is undeniable that business are about cooperation, however, it is about survival as well. Parkson should focus on its marketing strategy and expanding its comsumer based in order to fit into the marketplace and compete.

Opportunity:

The opportunity that Parkson has for product market stakeholder is going online. In this informational age, everything is about the internet and speed. Therefore, it is a truly an opportunity if Parkson is able to impart the vision to people that customers can also purchase goods online in Parkson website. Parkson should not only limit themselves in expanding their physical store, but the trend of the internet should be taken care too.

Besides that, we are still yet to see any Parkson product that is originated from Parkson. Therefore, we believe that it is an opportunity for Parkson to start Original Equipment Manufacture (OEM). Since the reputation of Parkson has already been well established and there are numbers of hardcore customers, if Parkson starts using OEM, it might boost the revenue to Parkson, at the same time, customers are more confident towards the products produced in Parkson.

The other opportunity for Parkson is merger. Since Parkson does not have a clear competitive with its competitors, it shows that actually both companies using the same strategy to target the same group of people. If this is the case, it is an opportunity for Parkson to merge with its competitors so that when both companies work together, it boosts the quality of the products and it will definitely boost the revenue of the companies. Besides that, it will also enhance the quality of the products sold in Parkson.

Threat:

The threat that Parkson faces is the shift in consumer taste and it is hard for companies to cater to every single one of the customers’ need.

Besides that, during economy downturn, the purchasing power of constomers might fall. It causes the customers to purchase lesser goods from Parkson. This will cause the revenue of Parkson decreases.

There are many online businesses have already been well established such as Mudah.my in Malaysia. Therefore, when there are new competitors moving into the market, it is a threat of Parkson because a number of customers will be attracted away.

Strategy copied

Economic downturn affect purchasing power

Merger of competitors and competitors

Shift in consumer taste

New regulation

Online business

3.4.2 Organizational Stakeholder

Strength:

In term of the organizational stakeholders, we went to a parkson outlet to interview two Parkson workers who willing to reveal themselves as anonymous. The very first strength that they mention is the competent of management. Besides that, they are convinced with the fair and ethical business practices. It does not only promote whoever that are more senior whereby it looks at the competency of the employees.

Besides that, the employees were being treated very fairly with a good work life balance. There are several programs that are being given to the employees for example company trip and company dinner. All these are treated generously and they are administered fairly too. Furthermore, Parkson allows open communication between upper management and other employees in order to build Parkson to be a better company.

Weakness:

However, there are several weaknesses in Parkson too. Based on the interviewees, they mention that Parkson is growing with an extremely conservative outlook toward business risk. In other words, Parkson normally play safe instead of thinking big. It is understandable that it is unsafe to take risk, however, risk creates creativity, innovation and opportunity.

In addition, there is transparency issue within Parkson. The employees do not really understand about the real performance and issues that is happening within Parkson. It directs us to the transparency issues in Parkson. The employees admit that sometimes the actions of Parkson do not reflect what the reports shows. In other words, whatever that you see from the report of Parkson might not be true.

Opportunity:

In order to expand the business and working environment of Parkson, Parkson should be more aggresive and pro active approch towards taking and managing business risk. Besides that, there mist be a better communication of message within the organization. Parkson should let the employees know about the real issues that is happening within Parkson. Other than that, the employees should be informed about the actions taken to solve the issues too.

Besides that, anonymous reveals that there are issues about hiring and letting people go in the company. Some of the employees recruited are not as skillful as expected. However, some of the skillful employees left the company without a clear reason. Therefore, there must be a better communication in Parkson towards this matter.

Threat:

The threat that Parkson is facing is about the confidence of employees towards Parkson. Since there is transparency issue within the organization, it might cause the employees to lose confidence towards Parkson. The worse case might happen are employees will be leaving the Parkson.

Besides that, the employees can flow with Parkson if they do not understand the vision of Parkson clearly. A company without vision will not move far. It is the same case to Parkson, the employees should be imparted the vision of Parkson so that the employees can understand about the company better. Last but not least, employees loyalty in the company are doubted. Due to the lack of confidence towards the company, the employees might leave the company. However, the worse case might happen if the employees move to their competitors and it will cause a huge disadvantage towards Parkson compare with their competitors.

3.5. Summary of situation analysis

Strength:

First of all, we believe that it is low risk to invest in Parkson. Parkson has already been established since the year of 1987. In other words, it is a relatively strong company in the market place. In fact, there is no doubt about the competitiveness of the company. Therefore, it is a very safe investment for capital market stakeholder to invest in Parkson. Other than that, it is almost a guaranteed return if investors invest in Parkson. Based on the financial report of Parkson, the dividend sent to the stakeholder are raising gradually from the year of 2005 to the year of 2009. The dividend that is given to the stakeholder is as Table 1:

Year

Dividend Sent in US Dollars (in million)

2005

0.025

2006

0.084

2007

0.120

2008

0.145

2009

0.150

Table 1: Dividend Sent to Parkson’s Stakeholderm(Source: Parkson Financial Report)

Other than that, it is undeniable that the brand name of Parkson is already established. Wherever and whenever we talk about Parkson, people know about it. It shows the popularity and the awareness of the people towards Parkson.

Last but not least, it is legally protected such as trademark. It is impossible for other users to copy the name “Parkson” to run their business without getting the permission from the company. It shows that the reputation of Parkson will not be easily shaken due to pirated products.

Weakness

The weaknesses that Parkson faces are mainly about the confidence of capital market stakeholders towards Parkson. The capital market stakeholders do not really know the investment strategy of Parkson. Therefore, it causes the investors to lose confidence towards Parkson.

Based on Hwang DBS Vickers Research, the market shares of Parkson have decreased from RM6.20 to RM5.51. The value of the shares reflects the performance of the company. Therefore, it causes the investors to lose confidence towards Parkson as well. This happens because Parkson focus the most in China instead of segregating their business equally in all three countries that they are investing in. In fact, they Parkson put in the most effort in developing China’s market. Therefore, if China experiences slow economic growth, it will directly affect the performance of Parkson.

Opportunity:

Business is all about teamwork. So, the opportunity for Parkson to improve is merging with their competitors to boost a greater revenue, reputation and brand. However, they really need to look into the projects as merging is not always successful and it may end up in a tragic situation.

Besides that, it is advisable for Parkson to increase the transparency within the company. Parkson may show the capital market stakeholders about the investment strategy that is implementing and going to be implemented for example growth strategy, expansion and others.

Other than that, based on Hwang DBS Vickers Research, the foreign interest towards Parkson has increased from 20% in the year of 2009 to 25.4% in the year of 2010. It shows interest of foreign investors towards Parkson and it is indeed a great opportunity for Parkson.

Threat:

As we can see from the website of Parkson, there are a few areas which are “For Him, For Her, For Kids and For Home”. However, most of the products are for “For Her” category. It uses up about 50% of the search list in Parkson website. Based on Kelvin Chan, the Parkson’s Executive Director, their major customers are high income earners. Therefore, I believe that when Parkson target only high income earners, especially women are not enough. In fact, Parkson should start targeting a wider market.

If Parkson is not careful, it might be eaten alive by their competitors. Business world is ugly and cruel. If Parkson is not alert, especially when they are one of the influential and famous companies in the world, it is crucial for Parkson to maintain its position in the market. If they fail to do so, we believe that there are many companies preparing to take over Parkson.

Other than that, economy downturn might affect the overall performance of the company and it is something that is really out of their control. We may not use SWOT analysis to look for growth in the company. However, it certainly is an eye opener for us so that we can understand about the company better.

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 [