Ntuc Fairprice Co-Operative Limited

Table of Contents

1.        Brief Company Description        2

2.        PESTEL Analysis        2

3.        Porter’s Five Forces Analysis        5

4.        Management Recommendations        7

5.        Conclusion        9

1. Brief Company Description

NTUC FairPrice Co-operative Limited is one of Singapore’s largest chains of supermarkets, department stores and convenience stores. It was founded in 1973 by the Singaporean labor union with the objective of influencing Singapore’s high cost of living through the implementation of regulated pricing on many everyday consumer goods. Currently, FairPrice’s vast 130-outlet supermarket chain includes concepts like FairPrice Finest, Fairprice Xtra and Fairprice Supermarkets. Meanwhile, Fairprice also maintains two convenience store lines namely: FairPrice Express and Cheers—with both having a combined network of more than 150 branches. In response to the growing demand for online shopping, the company has also launched FreshPrice Online—a web platform that enables shoppers to buy their groceries online and have them delivered straight to their homes. FairPrice’s multiple and diverse selling channels enable them to serve more than half a million customers on a daily basis (FairPrice, 2017).

According to Bloomberg (2017), FairPrice’s outlets offer mainly products like food items, beverages, frozen goods, fresh produce, alcohol, toiletries, health and beauty items and other similar merchandise. Aside from its regular retail and grocery operation, the company also maintains warehousing, trading and distribution businesses.

1. PESTEL Analysis

Political Factors

Political factors pertain to the degree of influence and capacity of governments to intervene in the operations of businesses through public policy, tax laws, import and export restrictions and other trade regulations (Aguilar, 1967).

 Singapore, being a largely commercial and highly urbanized country, is mostly unable to grow its own agricultural products that are needed in the production of food and beverage goods. This being the case, the country is largely dependent on international trade with countries like the United States, Australia, a large part of Europe and the Middle East. The country maintains a relatively open economy—being able to conduct business with the aforementioned countries with minimal sanctions and restrictions. In fact, the Singaporean government does not impose any import taxes on most food and beverage products with the exception of tobacco and alcoholic goods. The government’s openness on international trade may implicate a great advantage for FairPrice whose merchandise are primarily imported food and beverage goods (USDA Foreign Agricultural Service, 2015).    

Economic Factors

Economic factors pertain to key trends concerning consumer’s disposable income, general unemployment levels, interest rates, inflation rates and other economic indicators that can affect a populace’s willingness and ability to buy and to consume goods (Aguilar, 1967).  

According to Tang (2017), despite the general slowdown of the Singaporean economy in the recent years, the country achieved higher than expected economic growth in the final quarters of 2016. In fact, Singapore’s economy expanded by 1.8 percent from 2015 to 2016. The country’s gross domestic product also grew by at least 9.1% during the final quarter of the year. While this proves to be a positive sign for the economy, he still warns that 2017 may be marred with dismal business growth and a lack of consumer confidence as the Singaporean economy may get affected by the continued weakening of the Euro, the slowdown of the Chinese economy and the protectorate stance of the Trump administration. These events along with the fact that Singapore continues to be one of Asia’s most expensive cities to live in can cause great concern for customers and may seriously affect their ability to spend on consumer goods.

Social Factors    

Social factors primarily pertain to the general behavior and mindset of a group of consumers. Particularly, it can pertain to their current set of preferences as dictated by their demographic profile, psychographic dispositions and the presence of new trends in the market (Aguilar, 1967).

Singapore’s populace is generally characterized by a highly productive and fast-paced workforce. In fact, Singaporeans are known to clock in an average of 46 working hours per week—one of the highest in the world (Ministry of Manpower, 2015). This may have led many customers to develop of culture of convenience—opting for activities and services that can help them save time and be more productive. Firstly, this could mean a sustained increase for demand of instant and easily prepared food items. Secondly, it could also mean that more and more users are open to trying and subscribing to their online platform.  

Technological Factors

Technological factors pertain to the advancements that can significantly improve a business’ internal and external operations. They may pertain to new discoveries that can help create new products or services or to new innovations that can streamline systems and costs (Aguilar, 1967).

Being a highly urbanized society, the Singaporean market has become highly dependent on technology. This includes grocery shopping. In a study conducted by Shandwick (2014) about general grocery shopping behavior, more than 60% of the respondents claimed to prefer buying instant and readily prepared meals and goods. In the same year, more than 200,000 shoppers bought their groceries online to be able to save time and effort in shopping for their everyday needs (Jenner, 2016). This could imply a huge opportunity to grow FreshPrice Online.  

Environmental Factors

Environmental factors pertain to the general attitude of customers and the stance of the government when it comes to preservation of the natural environment. The company may be affected by laws on waste management, energy consumption regulations, general environment protection sanctions and even the public’s perception on a company’s responsiveness to environmental issues.

According to National Environment Agency (2017), Singapore’s daily solid waste output has reached 8,400 tons a day—marking an eight-fold increase from its waste output from the 1970s. This continuously increasing trend has forced the Singaporean government to implement a more systematic public waste collection scheme and a more stringent illegal dumping law. Being one of the largest producers of solid food waste in the country, FairPrice took a proactive stance and led the implementation of the Food Waste Index that essential measures and tracks the waste the company produces on a periodic basis. It is the first step towards the implementation of other key initiatives (Zero Waste Singapore, 2015).