Ntuc Fairprice Co-Operative Limited

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Legal Factors

Legal factors pertain to the stringency of the government and other governing bodies in key aspects of business operations. These factors may cover employment regulations, workplace safety requirements, product testing procedures, anti-trust laws, competitive regulations and other similar factors.

According to Shaffer (2013), Singapore’s fairly controversial position of limiting the influx of foreign laborers in the country had significant detrimental effects on many food and retail establishments. Since as much as 40% of Singapore’s population can be considered foreigners, the government’s stance has cut businesses’ access to affordable labor—hampering their ability to expand swiftly.

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Porter’s Five Forces Analysis

Threat of New Entrants (Low)

The threat of new entrants in any industry implicates the possibility of losing market share to new players, hence having to split returns and profits amongst many competitors (Porter, 1985). In the case of FairPrice, the threat of new entrants can be considered low. Firstly, entering the supermarket and grocery industry requires substantially large capital to be devoted to the purchase of expensive real estate, building and infrastructure requirements as well as the different facilities and fixtures used in day to day operations. The business will also require huge investments in inventories, warehousing and wages for the labor force.

Bargaining Power of Buyers (Moderate)

The bargaining power of buyers implies the customer’s influence and capability to put pressure on the company to make changes in their strategies (Porter, 1985). In the case of FairPrice, this can be considered only moderately threatening. For instance, individual customers purchase in relatively small quantities which create a fairly insignificant portion of the company’s total sales. The decisions of one customer may prove immaterial in the long run. However, in the unlikely scenario where FairPrice decides to increase prices or suffers from the poor service of their personnel, it is not impossible for customers to opt for different supermarkets.

Bargaining Power of Suppliers (Low)

Likewise, the bargaining power of suppliers pertains to their ability to put pressure and influence the strategic decisions of a company. Because of the scale of FairPrice’s operations, the bargaining power of suppliers can be considered significantly low. Suppliers may prove to be very careful in negotiating and doing business with a client of over a hundred branches as they may be easily replaced with a different brand. In fact, FairPrice may have enough leverage to demand the lowest prices and the biggest margins from its many suppliers.

Threat of Substitutes (Moderate)

The threat of substitutes pertains to the propensity of current customers to try out alternative products and services (Porter, 1985). In the case of FairPrice, this can be considered as a moderate threat. On one hand, online shopping has yet to capture a significant portion of the market to be considered highly threatening. However, the threat for substitutes can be considered relatively high in some product lines that FairPrice is carrying such as alcoholic beverages, hair care products, cosmetics and others similar goods. Customers may easily opt to purchase them in other shops such as liquor shops, drugstores and the like.

Competitive Rivalry (High)

FairPrice has equally popular and trusted competitors in the likes of Dairy Farm Singapore, Sheng Siong and Cold Storage (Singapore Business Review, 2012). Because the prices for consumer goods are relatively transparent and easily comparable, small variations in pricing can cause customers to prefer a competitor over another. Besides the proximity of the grocery stores from their residences or offices, there is very little motivation to keep customers loyal to a single line of grocery.

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Management Recommendations

Prioritization of FairPrice Online

While it can be said that there is still minimal demand for online grocery shopping, the steadily increasing adoption rates and customer usage suggest that the channel can be a significant contributor to sales in the next few years. If FairPrice could occupy and dominate the online grocery shopping market first, it may help avert tight competition in the future. It may be an opportune time for FairPrice to invest heavily in marketing their platform through the use of social media, in-store advertising through their shops and subsidized promotions amongst many other options to try and raise the adoption level amongst Singaporeans.

Creating and Improving Customer Loyalty Programs

The Five Forces Analysis reveals that while FairPrice can be considered one of the stronger players in the grocery market, it is still susceptible from losing customers due to tight competition. One way to address such an issue is improve the already-existing NTUC Plus Card which entitled frequent buyers to rebates. Instead of just offering rebates, allowing loyal customers to choose from a wider range of rewards like free travel, discounted spa treatments, and other lifestyle-based rewards could prove compelling. In addition, FairPrice could tie up with leading electronics, luxury or fashion brands and have them offer exclusive deals to the most loyal customers.

Maximizing Environmental Programs

FairPrice’s proactive stance on environmental programs could be a source of sustainable competitive advantage. FairPrice may invest in a full-blown department solely devoted in studying its environmental and waste footprint and finding ways to reduce them through technology. Firstly, such an investment can pay off in savings from avoiding waste products. Secondly, FairPrice can strengthen the reputation of its brand.

Reinforcement of Concepts’ Branding

While the FairPrice brand remains popular and distinct, the concepts under it like FairPrice Xtra and FairPrice Fresh amongst others may benefit from further brand building. By differentiating and specializing each one, they could occupy different spaces in the market and further reinforce the market leadership of FairPrice. A good start could be the launch and maintenance of