BreadTalk Group Limited
BreadTalk Group Limited
The BreadTalk Group Limited has rapidly globalized into 16 countries such as Singapore, China, Hong Kong, South Korea and the Middle East(http://www. breadtalk. com/ourbrand-bt. html Our Presence,2012). It is well known for its bakery, restaurant and food atrium, and this compromises of BreadTalk, Toast Box, The Icing Room, Din Tai Fung, RamenPlay, Carl’s Jr China, and Food Republic. Being founded in 2000, the young company has achieved numerous awards which includes the Singapore Prestige Brand Award in 2011(http://www. breadtalk. com/brand-accolades. tml Brand Accolades, 2012).
The Group has a global network of over 400 bakery outlets, with a strength of more than 6000 employees, as well as operating 11 Michelin Star Din Tai Fung restaurants in Singapore and Thailand, and over 30 award winning Food Republic food atriums in Singapore, PRC, Hong Kong and Malaysia. The household brand is founded by the Chairman George Quek Meng Tong, who was appointed to the board in 2003, and re-elected in 2010. Being very experience in food and beverage industry since 1982(http://www. breadtalk. com/board-of-directors. tml, Chairman,2012), he started the bakery business with BreadTalk Private Limited and bought it to list on the Singapore Exchange Limited in 2003.
The Group made an average revenue of $333, 000, 000 and a profit of $11, 450, 000 between 2010 and 2011. With an available financial asset of $911, 000 at the end of 2011, the BreadTalk Group has a promising future, with the addition of rapid growth of franchising network in Asia Pacific region (http://www. breadtalk. com/franchising. html, our presence, 2012). Today, organizations and firms have to keep changing and adapting to the global shift (R . Gomez-Mejia, 2012, page 56) to stay competitive in the industry. And this is because the general environment is always moving, and these dimensions – Demographic, economic, political or legal, sociocultural, technological and global – always influences the industry and firms.
These segments are uncontrollable and thus, in order to stay competitive, the BreadTalk Group gathers information required to understand each segments and plan a strategy that can be implemented to tackle environmental changes like demographics in China, global consumer preference, threat of new entrant, nd management across cultures. In recent years, firms are venturing into China’s market due to its huge population of least 6. 8 billion (Worldbank, 2012) , and is seen as a driver of growth for BreadTalk Group.
In Boston Consulting Group’s Growth-Share Matrix (R. Gomez-Mejia,2012 page 235), BreadTalk Group is a “Star” that earnings is growingly stable and high, with cash flow that is not negative. And thus, is to invest and grow. By purchasing an existing presence in China, Food Republic, BreadTalk was able to reap benefits from low setup cost, as well as to observe the consumers’ behaviors in China.
Up to date, BreadTalk has already spread into 32 cities of China, and outnumbers Singapore with 20 food courts, 3 Carl’s Jr fast food restaurants, 3 Ramen Play restaurants, and 184 Bakery outlets. The BreadTalk Group plans to grow aggressively in the market as “China currently accounts for about a third of BreadTalk’s revenue” (Themalaysian insider, 2010), and by establishing most of its presence in Beijing and Shanghai, BreadTalk has took advantage of the rising income which led to higher expenditure in consumers.
Thus, the demographic environment of China, has boost BreadTalk Group’s revenue, as well as being a large market for it to expand, unlike in Singapore where brands are very saturated . The BreadTalk Group tackles global consumer tastes and preferences very well even though it changes as time goes by. It has a very strong branding and has a very standardized layout.
For example, each BreadTalk is designed with the same clear glass concept, and “see through” kitchens which conveys their bakery as fresh and artistic while Food Republic holds a more nostalgic style of a Chinese village and Toast Box is designed with a more warm atmosphere of local Nanyang coffee shops in the 60s and 70s(http://www. breadtalk. com/ourbrand-tb. html, our brands 2012). Thus, by standardizing the layouts of the brands in BreadTalk Group, the Group has saved cost on the tedious process of customizing to local conditions as well as creating a strong brand through its unique layouts.
Although the BreadTalk Group holds a very strong branding, the barriers to entry to food and beverage industry is very low. And thus, the threat of new entrants is very high as they can threaten the market share. Likewise in BreadTalk, existing competitors such as Bengawan Solo, Crystal Jade My Bread, Imperial Kitchen, as well as many neighborhood bakery stores that are located all over the countries, shows a threat to BreadTalk as they are sharing the same market of consumers.
Being a big company, BreadTalk faces risk of new entrants as new comer can learn from existing companies and create a similar or even a better concept. With an extra competitor, unless the demand for BreadTalk bakery increases, the revenue will fall. Thus, it is very important for BreadTalk Group to keep innovating and moving to survive against many competitors. Lastly, the management across cultures is also an environmental factor that affects BreadTalk Group as it shapes the consumers’ preferences and tastes.
For example, the highest selling bun in BreadTalk is the “Pork Floss Bun”( http://www. breadtalk. com/franchising. html,more bread business, 2012), however in Malaysia, the Muslim law does not allow Malays to consume pork, and thus, it is taken out of the choices. BreadTalk also follow themes and trends in countries, like creating the Obunma bun during Obama’s elections, and the “Peace Panda Buns” after the Sichuan earthquake in 2008, to raise social awareness to donate and help the affected people in the earthquake.
Through connecting to cultures of different country, the BreadTalk Group not only holds a social responsible frontier, it also caters to the taste and preferences of different cultures and thus, able to attract many consumers. Besides the above factors, economic and cultural environment affects the business in BreadTalk Group as well. BreadTalk Group is now facing the rising of labor cost and inflation in China, and these are unpredictable to how much it will affect the profits.
With the cost of goods sold attributing to nearly 30% of sales(http://breadtalk. istedcompany. com/financials. html, financials 2012), an inflation will cause an increase in the cost of goods sold nearer to its gross margins. Likewise in China, the government has gradually increased wages and might continue to do so. And this will increase the expenses of BreadTalk Group, leading to a decrease in the profits. Although some companies could retrench, but BreadTalk Group needs the human capital and thus, could only adjust its raw materials cost by buying forward, and negotiating contracts in bulk and then purchase at the best price available.
By doing so, the cost of sales would be reduced and the Group will be more efficient. The BreadTalk Group holds a low power distance, goals achieving culture, and uses a justice approach. For example, BreadTalk strives to have high and consistent standards of products to their customers. Employees will under-go hands on training on various outlets to make sure that they have a formal entrance to the organization and thus, would not face a cultural shock(R. Gomez-Mejia, 2012 page 66). BreadTalk also emphasizes on team-building by organizing team building trips and activities for its employees.
By doing so, employees will interact and understand each other, as well as building bonds that enhances teamwork, boosting effectiveness of the team. In BreadTalk, employees are also encourages to think uniquely and are treated fairly, and thus, managers are required to develop a service culture and all these are to achieve an increase customer’s loyalty. Planning is essential for a company and this is one of the four management functions. Through planning, BreadTalk is able to make action plans on how to expand further into China, as well as allocating its resources to different regions.
Through the experience of Food Republic in PRC, BreadTalk was able to capture consumer trends and thus, making use of the core competencies of knowing how to make bakery that attracts PRC nations. Planning is beneficial to BreadTalk as it can excess the external forces as mentioned above, as well as develop a sense of direction and purpose of “innovation” in both managers and employees. One method of planning is the “SWOT” analysis, which allows BreadTalk to see its strength, weakness, opportunities, and threats. However, planning has to be continuous and capable of adapting to change.
And this can be seen in BreadTalk taking a major internal review of paving a future growth, by dividing into 3 divisions – Bakery, Food Atrium, and Restaurants, and inviting 3 new CEOs(http://www. breadtalk. com/message-shareholder. html, consolidating long term growth, 2012) to handle each division. With such willingness to change, the senior management would function more effectively. Forward planning can also be seen in the upcoming headquarters of BreadTalk Group in Paya Lebar Singapore, which will involve all its brands, logistics, training center, departments, and a common ground for staff all over the world to gather at.
BreadTalk Group holds a geographical organization which allows the Group to focus on customer needs that may vary by geographic region of Asean region and China region. And then its further diversify into Bakery, Food Atrium and Restaurants. Through this method, the senior management bench will be deepened, and thus, it can strengthen the strategic focus of BreadTalk Group and allow it to execute plans more effectively. All brands under each segment will be managed in totality.
This also provides the platform for each brand to be specially positioned based on its unique brand strategy and especially in view of expansion into the region. One of the strategy that BreadTalk Group holds is sharing the set up cost. This can be seen in NEX Serangoon Singapore, whereby a few brands are set up together in a high human traffic area. Thus, competitors can be minimized, as well as saving cost by renting locations in “bulk”.
University/College: University of Chicago
Type of paper: Thesis/Dissertation Chapter
Date: 12 November 2016
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