RIVARLY AMONG EXISTING FIRMS (Moderate to High)

Industry growth (Stable -> High)

Sheng Siong is in the retail industry merchandising commodities and
day to day products. It is a stagnant industry due to its nature of the
business. Sheng Siong supplies household products to its consumer,
where consumers are likely to have frequent purchases. In the stable
industry, Sheng Siong has to ensure that its products are priced at a
competitive price so as to gain its market share.
Concentration of competitors (High -> High)
The major competitors in the retail industry are NTUC Fairprice, Cold
Storage, Giant. The competitors are located has its chain store at
different places. NTUC has the most number of branches among the
rest. Concentration of competitors are located at different places,
however, competition is still relatively high.
Degree of differentiation (Low -> High)
The products are similar and undifferentiated for household and other
purposes. However, the main difference for Sheng Siong is for its
freshness of the food, customer service and the low price.
Learning economies/Scale of economies and ratio of fixed to variable
costs (High -> Moderate)
Due to the supermarkets high fixed cost, the firm in the industry may
engage in price war to gain market shares and maximize installed
capacity. There are low learning economies as no technical expertise is
necessary.
Excess capacity and Exit barriers
Supply is commonly more than demands to meet customers needs.
Company might put products on sale to prevent obsolescence. It is
easy to exit the industry as no licenses or prior approval required.
THREAT OF NEW ENTRANTS (High)
Economies of scale (High -> Low)
The retail industry would require a huge amount of capital and
financing on the products as they require fixed assets such as
warehouses to store the goods as well as rental of space. For a
business with huge economies of scale, they may gain advantage or
exclusive prices from the suppliers. A new entrant will need to achieve
economies of scale to compete on cost advantage with major market
players, there not a easy barrier to cross over. Branding is another
barrier to entry
First movers advantage (High -> Low)
This would deter new entrants due to customers brand loyalty, as
customer would not usually switch to another brand that they are
comfortable with, as well as the license, premier locations, switching

costs, exclusive arrangements with suppliers for cheap raw materials,

established brands.
Access to distribution channels and relationship (Costly -> High)
The cost of developing a new channel, for instance, other product lines
are costly, and the existing relationship with the other firms and the
customers. It is usually difficult for competitors to penetrate into the
distribution access.
Legal barriers (Many -> High)
For a retail company, they require licenses from National Environment
Agency (NEA) for the food standards, Supermarket service licenses and
so on.
THREAT OF NEW SUBSTITUTES (High)

Customers willingness to switch (High -> High)

Threat of new substitute is high as Sheng Siong sells undifferentiated
products, where there are many substitutes available and customer
can switch easily, however, the switching cost is moderate as Sheng
Siong provides fresh goods, low price and good service.
Switching cost
Sheng Siong has a moderate switching costs through provide high
quality food that increases customer satisfaction, convenient location,
operating hours, easy mode of payments, rewards points, promotions
and bundles.
Relative price and performance

BARGAINING POWER OF BUYERS (Low to moderate)

No of buyers v No of suppliers
The bargaining power of buyers is low as Sheng Siong sells
differentiated products in terms of the freshness of food, high quality,
good customer service and low prices. However, for its common
products, the bargaining power of buyer is high as customer can easily
switch to other suppliers.
Volume of purchase by single buyers
An individual buyer has low bargaining power as the buyer does not
have much impact on the earnings of Sheng Siong. However,
collectively, buyer may have power as the consolidated power of
buyers may have an impact on Sheng Siongs profitability.
Importance of product for cost and quality
Customer would want to purchase good quality products at low cost.
No of alternative products available
Alternative products such as online grocery are available and this
increase the bargaining power of the power due to the convenience
and low switching costs.

BARGAINING POWER OF SUPPLIERS (High)

No of suppliers
Bargaining powers of suppliers are relatively high for established
brands products supplier due to the small market that Sheng Siong
operates in. The suppliers would prefer to supply to other business that
has a bigger capacity and name, globally, that could increase the
suppliers sales and improve the profits. Hence, suppliers are less
inclined to reduce their price, especially for iconic suppliers.
Volume of suppliers
Switching costs
The switching costs to other brands may be high, depending on the
type of products. For the established products, the switching costs is
high due to customer loyalty. Sheng Siong may lose business if they do
not carry the established brands that customer values. For the normal
brands, the switching costs is low as Sheng Siong can easily switch to
another supplier with no cost incurred.
Importance of products for costs and quality
Consumers have their optimal and desired brand.