Sheng Siong Case Sample For Students PDF

BUS489 Strategy for Business
BUS489
Strategy for Business
Group-Based Assignment
July 2019 Presentation
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Case Analysis Report
SHENG SIONG GROUP LIMITED.

6 Mandai Link
Singapore 728652
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Table of Contents
Table of Contents
TABLE OF CONTENTS .............................................................................................................................. 3
EXECUTIVE SUMMARY ........................................................................................................................... 4
INTRODUCTION ..................................................................................................................................... 5
EXTERNAL ANALYSIS ............................................................................................................................ 10
PESTEL ANALYSIS ................................................................................................................................. 15
INTERNAL ANALYSIS ............................................................................................................................. 18
SWOT ANALYSIS................................................................................................................................... 20
KEY FINDINGS AND IDENTIFICATION OF STRATEGIC ISSUES.................................................................... 25
RECOMMENDATIONS ........................................................................................................................... 26
CONCLUSION ....................................................................................................................................... 30
REFERENCES ........................................................................................................................................ 31
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Executive Summary
Sheng Siong Group is the parent company of Sheng Siong Supermarket Pte Ltd who is the third-
largest chain of supermarkets in Singapore. Since its establishment by Mr Lim Hock Chee and
his two brothers in 1985, the group has grown by leaps and bounds in the past 26 years to its
current 54 retail outlets today. Through its well-established business model, the company has
recorded year-on-year growth in 2018 for revenue at S$890,934 million and gross profit at
S$238,380 million, as well as maintaining debt-free and a favourable cash flow of S$87 million.
While its current business model continues to reap rewards from its current operations,
opportunities to diverse and expand its business operations should not be neglected. Sheng Siong
should not be resting on its laurels but to continue exploring avenues to increase profits and
minimise economic risks. In order to scale revenues to the next level of profits, we recommend
Sheng Siong Group to:
(a) Incorporate partnership with Singapore Petroleum Corporation to run convenience stores
at petrol stations. This partnership allows both companies to tap on each other’s strengths
to provide their customers better deals through Sheng Siong’s established procurement
network and the convenient locations of SPC stations.
(b) Initiate joint venture with Food Junction to supply fresh produce to hawkers. This helps
to cushion the high operating cost for hawkers, secure a stable source of revenue for its
grocery retail business. The centralised source of procurement also helps to migrate the
risk of poor food safety and quality standards.
(c) Introduce a new concept of a premium Sheng Siong supermarket. This aims to serve a
new range of premium products targeting consumers would be willing to pay more for
higher quality and premium food products.
(d) Implement exclusive membership program to retain brand loyalty. This will further
strengthen its cooperation with Food Junction and SPC, boosting sales and revenue,
building up brand loyalty for all three organisations.
These recommendations help Sheng Siong to expand its operations to more markets with growth
potential and grow sustainably and profitably through more channels which will further enhance
its competitive position.
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Introduction
I. Company Background
Sheng Siong Group is the parent company of Sheng Siong Supermarket Pte. Ltd., commonly
known as Sheng Siong, the third-largest chain of supermarkets in Singapore. Sheng Siong was
listed on the SGX mainboard in August 2011 and has been awarded the “Superbrand” status by
Superbrands Singapore since 2008. In 2014, Sheng Siong embarked on an omni-channel retail
journey to become not just a brick-and-mortar supermarket, but also an online supermarket by
launching its “AllForYou.sg” online shopping platform for groceries, which offers e-commerce
services in almost all postal districts in Singapore. Sheng Siong has an international presence with
its first overseas store in Kunming, China, which began operations in November 2017.
A Brief History of the Company
Sheng Siong was founded in 1985 by Mr Lim Hock Chee and his two brothers, Mr Lim Hock
Eng and Mr Lim Hock Leng, with the seed capital given by the Government who phased out the
pig farms belong to their parents.
The very first Sheng Siong store was set up in Ang Mo Kio, and this was shortly followed by
openings in Bedok and Woodlands within the first ten years of operations. In the subsequent ten
years, Sheng Siong grew rapidly and has seen the opening of 14 new stores island-wide. Despite
the bad times during the financial crisis and the Severe Acute Respiratory Syndrome (SARS)
outbreak, Sheng Siong persevered through the nature of its business, its low cost of operation,
and the hard work and dedication of family members and staff.
C M M Marketing Management (CMM), the sister company, was incorporated in 2000, to serve
as the warehousing and logistics arm of Sheng Siong Supermarket. Over the years, CMM
gradually became the corporate headquarters of all the related companies and provided backend
support to Sheng Siong Supermarket. Functions carried out at CMM include purchasing,
marketing, administration, finance, information technology and human resource management.
To support its retail operations, Sheng Siong built a customised central distribution centre in
Mandai Link in 2011. Construction of this corporate headquarters-cum-warehousing and
distribution centre has since allowed Sheng Siong to leverage on an extensive distribution
network, food processing capabilities and warehousing facilities thereon. Today, Sheng Siong
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Group has become one of Singapore’s largest retailers by sales volume with a total of 54 retail
outlets in Singapore.
II. Organisation Structure
Sheng Siong Group is led by an experienced management team comprising of the three Lim
brothers, Executive Chairman Lim Hock Eng, CEO Lim Hock Chee, Managing Director Lim
Hock Leng, Vice Chairman Tan Ling San and Executive Director Lin Ruiwen. To date, Sheng
Siong has a local staff strength of 2,850 employees with a healthy 50:50 gender distribution.
Its China subsidiary, Sheng Siong (China) Supermarket Co., Ltd., started in mid-November 2017,
spanning a retail space area of 50,000 square feet, and its staff strength has grown to 82, as of 31
December 2018.
III. Vision, Mission & Values
Sheng Siong Group has a vision of “being the preferred retailer in the market, starting from
Singapore and then further ashore” and aims to do so with its mission of “offering communities
in which it operates quality products at reasonable prices together with good service in order to
create value to its customers”. The values that apply by Sheng Siong employees are to be
reasonable, harmonious, responsible, dedicated, earnest and efficient at work with no empty
promises and excuses.
IV. Products
Currently, Sheng Siong operates 54 retail outlets across the island as well as its “AllForYou.sg”
online shopping platform, offering various selections of food products including live, fresh and
chilled seafood, meat and vegetables as well as packaged, processed, frozen and preserved food.
Other than food provisions, Sheng Siong also offers the sale of general merchandise such as
toiletries and household products. Sheng Siong offers substantial savings to its customers by
providing an extensive selection of 1,200 products sold under 18 different house brands.
V. Current Strategies
Sheng Siong strategises its business growth in five different ways, which include business
excellence, care for its customers, care for its employees, care for the community, and care for
the environment.
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(a) Business Excellence
As a responsible business, Sheng Siong observes good corporate governance and business ethics
to achieve its business objectives, build trust among stakeholders, and drive performance
improvements. This is done so by providing training and education on anti-corruption and anti-
competition among its staff and ensuring that its suppliers are equally informed. On the issue of
risk management, Sheng Siong has adopted ISO9001 Quality Management framework and
Enterprise Risk Management framework, targeted to complete by 2020.
(b) Care for its Customers
Sheng Siong constantly monitors feedback from consumers across its various channels including
email, in-store feedback forms, service hotline and social media platforms, and strives to address
the issues raised within seven working days.
Sheng Siong works closely with Agri-Food and Veterinary Authority of Singapore (AVA) and
National Environment Agency (NEA) to ensure that its food products and handling processes are
compliant with Singapore’s stringent food safety and hygiene standards respectively.
Additionally, Sheng Siong requests its suppliers to comply with the Singapore Sale of Food Act
which includes providing accurate and sufficient product and marketing information for
consumers to make informed choices.
(c) Care for its Employees
Sheng Siong strives to keep employee monthly turnover rate at below 4% by continuously
benchmark its remuneration and benefits package against the industry’s standards to ensure
competitive remuneration. Formal trainings and on-the-job trainings are conducted where
immediate feedback can be provided by the leadership. Sheng Siong is working on setting up a
training centre by 2021 to formalise some of these trainings and have had its first batch of
potential in-house trainers identified for training and designing of its training curriculum.
Employees are also trained on work health and safety related matters to enable safe behaviours
and environments.
(d) Care for the Community
To ensure the success of its business, Sheng Siong is committed on building strong and lasting
relationships by treating its suppliers in a fair and ethical manner. Together with its suppliers,
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Sheng Siong continually improves its house brand products to provide consumers with healthier
and safer choices. Sheng Siong is supportive of community activities and has made charitable
donations and sponsorships to the local community. Continual work with local town councils to
reduce disruption to the minimum will be regularly monitored and actioned by its operations.
(e) Care for the Environment
Sheng Siong believes in the conservation of resources and has been constant in monitoring and
measuring the usage of its resources. It continuously engages with suppliers for new conservation
technologies and waste reduction technologies, and actively builds dialogues and partnerships
with government agencies and non-governmental organisations (NGOs) on advocating the topic
of conservation and waste reduction. In 2018, Sheng Siong became a signatory of the Singapore
Packaging Agreement (SPA.
VI. Financial Information
Figure 1. Financial performance of Sheng Siong. (Source: Sheng Siong Group 2018 Annual
Report)
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Sheng Siong Group reported revenue growth of 7.4% in the year 2018 from S$829.9 million to
S$890.9 million, of which 10% of it was contributed by new store openings in the last two years.
Sheng Siong’s gross profit margin has attained an increase of 26.8% in 2018 as compared to
26.2% recorded in 2017. This increase was achieved through attaining better buying prices, higher
rebates from suppliers, efficient use of volume discounts, improved efficiency in distribution
centre and a higher mix of offerings for the customers.
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External Analysis
I. Market Analysis
Singapore is an island country with a population of 5.7 million. Although it is small, it has a high
degree of urbanisation and high consumption levels. Food and groceries are daily consumption
for everyone and are inextricably linked to retailers such as supermarkets, convenience stores,
traditional stores and specialty stores.
According to the Singapore Business Review, Singapore’s grocery market is expected to increase
by 14.5% to S$9.9 billion by 2023 and will become the 23rd-largest grocery market in Asia. It
is because there is almost no agricultural production in Singapore, the grocery market is highly
dependent on international trade and imports for over 90% of its demand. In 2017, Singapore’s
total imports of various types of food sources were recorded at S$13 billion.
(a) Threat of New Entrants is Moderate
The retail industry in Singapore is highly competitive. The main supermarket retailers in
Singapore are the NTUC FairPrice Cooperative, Dairy Farm International Holdings and Sheng
Siong Supermarket. Due to the maturity of the industry, there will be minimal effect on the
existing conditions, even with a new retailer entering the trade.
(b) Threat of Substitutes is High
Products sold in Sheng Siong supermarkets are also available at any other major supermarkets.
The key to this high threat of substitutes is the convenience, due to the hectic lifestyle of
Singapore consumers. Sheng Siong Group is constantly reviewing its operations and increasing
its presence in the heartlands bringing its brand closer to the consumers. The Group has also
tapped into e-commerce as an official website has been introduced to allow consumers to order
online and have the items delivered right to their doorsteps.
(c) Bargaining Power of Buyers is Moderate
There are no switching costs for buyers, making it easy for consumers to switch from one retailer
to another as and when they like. Henceforth, applying a low-cost strategy will help to retain
price-sensitive consumers who are constantly looking out for savings and value options.
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The implementation of a membership program will help to build brand loyalty as it encourages
consumers to return to the same retailers, in order to accumulate rebate points or receive freebies.
(d) Bargaining Power of Suppliers is Low
Despite having over 90% of its food supply dependent on imports, there are plenty of suppliers
offering similar food products. However, the management of supplier relationship should be
critical as any change of food product might affect customer satisfaction. With that being said,
constant reviews of suppliers allow retailers to achieve a better purchase price and passing the
cost savings to their consumers.
(e) Extent of Rivalry in the Industry is High
In addition to the traditional rivalry of large-scale supermarkets and hypermarkets, the food and
grocery market in Singapore is expected to usher in new trends soon. Firstly, as the pace of
modern urban life accelerates, consumers tend to choose a more convenient way to shop. As a
result, the demand for online shopping has increased as more retailers adjust their operating
models, such as the inclusion of door-to-door delivery services. Additionally, the widespread use
of social media and smartphones affects the way consumers shop. More retailers are promoting
their brands through social networks to attract more consumers through online promotions. The
development of cross-function and multi-forms partnerships with other brands has also been
rising as companies realise the need to seek win-win cooperation between retailers and suppliers
or technology companies.
II. Consumer Analysis
Sheng Siong Group’s customer target market can be classified into 6 different segments. First,
the chore shoppers view grocery shopping as a chore when they seek to reduce time, effort and
cost related to grocery shopping. These shoppers favour convenient location, clear display and
easy to find information. The chore shoppers were more likely to develop brand loyalty to the
retailers as they shop due to a habit rather than a rational attitude.
Second, the family feeders are the main grocery buyer that purchase on behalf of the entire family.
Their purchase tends to be regular with significant varieties from time to time impacted by the
end users’ preference. While these shoppers are not as price sensitive, a good value of products
is still crucial, hence these shoppers will lean towards well-known brands that run sales and
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promotions frequently.
Third, the on-the-go shoppers tend to have a busy and hectic lifestyle due to work, travel and
studies. As a result, these consumers are usually high purchasers for ready-to-consume food
products, snacks and other convenience foods. It is also because they are always on the move,
they are less likely to have brand loyalty and will frequent a larger set of retailers. With
consideration of their hectic lifestyle, these shoppers are more likely to engage in online retailing
activities including grocery shopping.
Fourth, the variety seekers have little brand loyalty as they seek to enjoy variety in retail
experiences, tastes and food choices. These shoppers will be more responsive to sales, promotions
and new product launches. These shoppers are easier to attract but also harder to retain, hence
they will likely contribute to short-term sales results through sales promotions.
Fifth, the health and nature shoppers are particularly concerned about the health and
environmental impact of their purchases and will likely to prefer environmentally-friendly
establishment. In terms of grocery products, products that are natural, fat-free, low- carbohydrate,
vegetarian, gluten-free, or with some other health attributes will be high on their shopping list.
These consumers are also likely to purchase brands that they trust and they know that are ethical.
Lastly, the gourmet lovers are attracted to quality in both retail environments and brands they
purchase. They seek high-quality food products and are less price sensitive. They are also more
likely to invest time in food preparation than going for convenience food or snack options. These
consumers would prefer brands that builds a high-quality image, higher quality products or higher
priced products. Sales promotion and discounts will have little impact on their purchase decision.
III. Competitor Analysis
Sheng Siong’s competitors can be broken down into three different segments: the big chains, the
neighbourhood supermarkets, and the online grocers.
(a) The Big Chains
NTUC Fairprice is the leading giant in the grocery retail industry, offering competitive prices in
a wide range of household essentials, from fresh produce to dried foods, toiletries to personal care
products. Targeting the low- and middle-income consumers, keeping prices low and affordable
is their priority. NTUC procures its food products from consolidators, distributors and local
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importers. Partnering with Tesco in 2017, NTUC Fairprice was the first to implement a “store-
in-store” concept, whereby it carries Tesco’s products in dedicated shelf space at selected stores.
Also, NTUC Fairprice has added “Pasar Organic” to its range, offering organic produce at
affordable prices since July 2018. Being the leading grocery retailer, NTUC Fairprice has a
network comprising 112 Fairprice supermarkets, 16 Finest stores and 8 Xtra hypermarkets. In
addition, the Group has 160 Cheers convenience stores and 23 Xpress stores, which are mainly
located in Esso-Mobil petrol stations.
Dairy Farm International Holdings (DFI) is the largest supermarket chain in terms of numbers of
supermarket retail stores and operates under its brand names, Cold Storage and Giant. Cold
Storage offers a broader selection of international brands and a large percentage of western-style
products from the European Union, Australia, New Zealand and the United States, making it a
very popular supermarket among the expats. Giant has 27 Giant Express, 25 Giant supermarkets
and 8 hypermarkets located across the island from the neighbourhoods to the CBD areas. These
include all 56 Shop outlets which Giant acquired in 2010 and rebranded in April 2013. Giant
targets the lower-income segment and budget-conscious consumers. Giant collaborates with
DineInn to create a series of cooking videos, which involved the partnership of an established
nutritionist to develop kids’ recipes for parents and parents-to-be.
(b) Neighbourhood Supermarkets
Operating 24 hours around the clock, U Stars Supermarket has 21 outlets located in the heartlands,
offering great value on daily essentials. From dry food and snacks to drinks and breakfast items
with generally affordable pricing creates a stiff competition to the neighbourhood-focused Sheng
Siong. U Stars has been ranked the cheapest in fresh food, daily necessities, toiletries by
MoneySmart, an online financial portal that did a price comparison analysis of U Stars, NTUC
and RedMart.
Targeting primarily the traditional Asians, predominantly Chinese, Ang Mo Supermarket is a

small heartland business with complete handwritten labels in 6 outlets, holding its own stand
against the retail giants like NTUC and Sheng Siong. Ang Mo Supermarket operates in a typical
size of neighbourhood NTUC, with squeezy aisles due to the packing of bulky food products in
a small area. Ang Mo Supermarket carries dry noodles, fresh vegetables and snacks, and does
not carry much of the fresh produce or fancy stuff like cheese.
Prime Supermarket entered Singapore since 1991, and today it has a total of 19 chain outlets - 5
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in the North, 3 in the East, 6 in the West and 5 in the Central area, making it very convenient for
consumers.
(c) Online Grocers
RedMart was founded in August 2011 as a Singapore-based online supermarket chain that
operates its own transportation fleet for door-to-door delivery across Singapore. It carries all the
ordinary household items, from milk to fresh produce, with an emphasis on competitive prices
and local products. RedMart allows consumers to nominate the two-hour delivery window,
offering convenience that is underpinned by RedMart’s careful supply-chain management.
RedMart is only available through Lazada now after its acquisition by Lazada.
Although online shopping in Singapore is now quite popular, the proportion of online grocery
stores is quite low, accounting for only 0.6% of the market. The low probability of buying fresh
food online is mainly since local consumers prefer to pick their own food before buying fresh
food. RedMart’s online revenue has continued to grow in recent years, and RedMart’s product
scale has been expanding for a long time. RedMart will take reference from the local consumer
tastes and preferences during product selection, which will help the company’s sales performance.
RedMart has been well received in the field of fresh food, expanding the number of fresh fruits
and vegetables from dozens to hundreds in three years. Imports of fresh produce will also be
selected based on seasonal regions.
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PESTEL Analysis
I. Political
According to former diplomat Bilahari Kausikan during a public lecture at the National University
of Singapore, the current political instability amongst the members of the ruling Pakatan Harapan
(PH) coalition in Malaysia and the coalition’s lack of success in garnering support from the
Malays, are starting to strain relations between Malaysia and Singapore.
To add on, Malaysia announced last year that it would restrict certain seafood exports and limit
or end egg exports to Singapore. With over 90% of its food supply dependent on imports,
Singapore is exposed to the volatility of the global food market, including export bans and sudden
disruptions to transport routes. As one of Singapore’s top import sources, Malaysia supplies more
than 35% of Singapore’s supply of chicken, 17% of fish, 93% of duck and 76% of eggs.
II. Economic
Firstly, as grocery retail is Sheng Siong Group’s core business, its operations see a need for large
manpower support. Sheng Siong has a local staff strength of 2,850 employees with a healthy
50:50 gender distribution. Apart from local Singaporeans, Sheng Siong hires a fair number of
foreign workers to manage operations in its retail outlets.
Secondly, according to the Urban Redevelopment Authority (URA), the prices of retail space
have been fluctuating in the past few quarters, especially in the central region of Singapore which
saw an increase of 1.5% in the last quarter of 2018, followed by a drop of 1.9% in the first quarter
of 2019, and then a rise of 0.4% in the second quarter. Such inconsistency in retail rental costs
pose challenges for Sheng Siong as it continually moves forwards with its long- term plans.
Thirdly, there have been growing signs that the deteriorating relations between the United States
and China is having an impact on Singapore’s external relations and economy. The size and scale
of U.S. investments in Singapore far outpaces many other countries, and this has created many
quality jobs for Singaporeans. In addition, Singapore has many collaborative endeavours with
U.S. institutions, companies and experts, in the fields of innovation, research, and development.
China, on the other hand, is Singapore’s largest export market. Singapore has extensive economic
cooperation with China, including three government-to-government initiatives in Suzhou, Tianjin
and Chongqing, as well as sizeable investments in both countries. Henceforth, the Singapore
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dollar is poised to weaken further as the escalating trade war between the world’s two largest
economies weighs down growth in the export-dependent city- state. This will in turn affect Sheng
Siong’s engagement in the supermarket operations, and trading of general and wholesale
importers and exports.
III. Social
Amid rapid urbanisation and rising income, Singapore consumers are becoming more receptive
to the notion of optimising their current wellness and preventing declining health. Thus, they are
paying more attention to their food consumption, becoming committed to organic food and are
willing to pay more for premium products.
Consumer buying trends have shown that more people are buying healthier food today. According
to the Health Promotion Board (HPB), sales of food products with the Healthier Choice symbol
are growing at 9 per cent annually. The number of such products has also grown steadily from an
initial 300 in 2001 to 2,500 across 70 food categories in 2016. These include staple food items
such as rice, bread and noodles, and others including sauces and beverages. This trend is not
expected to slow down anytime soon, as emerging vegan, vegetarian and vegetarian-friendly
restaurants start opening in Singapore, and even airlines like Singapore Airlines has been adopting
the “farm-to-plane” concept by serving specialty salads made from hyper-local organic produce
grown at indoor vertical farms. The HPB predicts that the market share of healthier-choice
products will continue to grow and is expected to hit 25% by 2020, which indicates a window of
opportunity Sheng Siong could tap into.
IV. Technological
Online and social shopping, plus health and freshness, are amongst the top five trends set to
influence Singapore’s grocery retail market. According to Euromonitor International, the offline
grocery market in Singapore is worth $8 billion, while online grocery retailing is worth at least
$120 million taking the combined sales of major players like Fairprice Online, Cold Storage
Online and RedMart. Despite the online sales making up to only 2% of the entire grocery market
in Singapore, there is plenty of room for growth in the online grocery market, as the Millennials
who are fast adopters of technology, begin entering their peak earning and spending years. New
operational models focusing on service excellence and delivery, coupled with the convenience of
being able to shop anywhere, anytime and anyhow they like, have allowed online grocery gain
traction amongst the young Gen-Z and Millennial segments.
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According to global measurement company Nielsen, online grocery shopping among Singapore
consumers has grown by 10% from 2017 to 2018, with an increase in confidence within the online
buying ecosystem leading to purchasing in a broader range of categories. In addition, technology
transformation has been helping supermarkets to differentiate their offerings, raise service levels,
develop stores that are set up for an online future, and deliver more efficient operations in the
face of rising costs.
V. Environmental
Packaging waste constitutes about one-third by weight of Singapore’s domestic waste. According
to the National Environment Agency (NEA), Singapore’s population and economy growths have
contributed to a significant increase in the amount of solid waste disposed of by seven times from
1,260 tonnes daily in 1970. Along with the growing affluence and population in Singapore, waste
quantities are expected to rise even further, resulting in Singapore facing land shortage woes for
waste disposal, considering the limited land stock we have.
VI. Legal
Founded in April 2019, Singapore Food Agency (SFA) is a new agency formed under the
Ministry of the Environment and Water Resources to oversee food safety and security. It is
established to dissolve the Agri-Food and Veterinary Authority (AVA) and to absorb the duties
of National Environment Agency (NEA) and Health Sciences Authority (HSA). All non-food
plant and animal-related functions of the AVA were transferred to the National Parks Board
(NParks) under Animal and Veterinary Service (AVS).
Going forward in 2020, a new Food Hygiene Recognition Scheme (FHRS) will be implemented
for licensed food retail establishments to recognise and affirm consistent efforts in upholding high
hygiene standards. Food retail establishments will attain a Bronze, Silver or Gold award based on
at least two, five or ten years of good hygiene track records respectively. Similarly, each of Sheng
Siong’s retail outlets in Singapore will be faced with such evaluations and awarded accordingly.
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Internal Analysis
I. Financial Performance Analysis

Table 1. Summary of the financial analysis.
Overview of Key Financial Highlights

Sheng Siong FY2017 FY2018 YOY Favourable
Revenue 829,877 890,934 7% Yes
COGS 612,472 652,554 7% Neutral
Gross Profit 217,405 238,380 10% Yes
Gross Profit Margin 26.2% 26.8% 0.6% Yes
Net Profit 69.5 70.5 1% Yes
Other Income 10,344 7,607 (26%) No
Selling and
5,509 5,824 6% No
Distributing Expenses
Administrative
137,936 154,044 12% No
Expenses
Other Expenses 2,449 2,333 (5%) Yes
Tax 12,559 14,149 13% No
Foreign Currency
Translation Differences 100 204 104% No
for Foreign Entity
Sheng Siong has reported a year-on-year growth of 7% in revenue of S$890 million in 2018, with
a 10% year-on-year growth in gross profit to S$238 million and a 7% increase in the cost of goods
sold (COGS) to S$652 million. The increase in COGS is proportionate to the increase in revenue
and gross profit. There is a 5% decrease in other expenses in the Financial Highlight, which is
favourable to Sheng Siong as lowering its expenses would result in a better net profit. However,
Sheng Siong has reported a 1% increase in net profit despite the 7% and 10% year- on-year growth
in revenue and gross profit respectively and the gross profit margin has experienced a slight
increase of 0.6% to 26.8%. The lagging in the net profit is contributed by the significant increase
selling and distributing expenses by 6% and administrative expenses by 12% to S$0.3 million and
S$16.1 million respectively. Sheng Siong has reported a 26% decrease in other income to S$7.6
million. There is a 13% hike in tax expenses to S$14 million and an unfavourable foreign
currency translation differences from Sheng Siong’s outlet in China due to the fluctuation in
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foreign exchange risk.
II. Capabilities Analysis
Improvement in operational efficiency and effectiveness becomes the next focus as labour remain
scarce and costly as the current ongoing implementing projects of Hybrid Self- Checkout system
(HSCO) to create flexibility of manpower and labour. HSCO has been successfully implemented
in 47 stores since 2015 and Sheng Siong is aiming for the full implementation of HSCO by first
half of 2019. HSCO is helpful in reducing the time spent on queueing for checkouts and payment,
directly enhance the consumers’ shopping experience and satisfaction by shortening the time
spent, offering time flexibility.
Also, Sheng Siong has launched “$tm” machine at ITE College Central and Fernvale outlet.
“$tm” machine is the first “recycling” cash withdrawal machine in Singapore where Sheng Siong
would top up the machines with cash received from its sales operations and consumers could
withdraw money from their bank account using their DBS, POSB, OCBC OR UOB ATM cards.
This initiative has greatly improved Sheng Siong’s operating efficiency by reducing the daily
cash deposits from the sales and saving on the cash handling.
III. Operational Performance Analysis
Sheng Siong has reported a growth of 22.8% in operating area which is further expanded from
404,000 square feet in 2017 to 496,000 square feet in 2018. The new stores continued to be the
major source of revenue growth of 0.7% despite the softening consumers’ sentiment. However,
the growth of revenue was hindered by the permanent closure of The Verge and Woodland Block
6A stores in 2017.
High staff costs, rent, depreciation and utilities arising from the opening of new stores and higher
provision for bonus has resulted an S$16.1 million. Ans Sheng Siong remains positive in its cash
generative and cash generated from operating activities before working capital changes and tax
payment amounted to S$100.3 million in 2018. After factoring in the S$28.2 million for capital
expenditures, S$15.9 million on upgrading supermarkets’ equipment, S$10.2 million on
warehouse extension, S$0.9 million on equipment upgrades at the central distribution centre and
S$1.2 million on purchases by the Chinese subsidiary, Sheng Siong has generated a free cash
flow of S$65.2 million. And Sheng Siong’s balance sheet remained healthy with cash of S$87.2
million as at 31 December 2018 after paying dividends of S$51.1 million.
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SWOT Analysis
I. Strengths
Based on our research findings, we have identified the strengths of Sheng Siong Group, and these
include its resilient business, strong financial capabilities, and debt-free with positive cash flow.
(a) Resilient Business
Sheng Siong belongs to a class of resilient business regardless of the economic cycle as Sheng
Siong runs its chain supermarkets to provide food and groceries. Public consumption remains
even when financial crisis hits or market crashes. In fact, Sheng Siong has rooted well in
Singapore despite the downturn of economic cycle in 2014/15, as Sheng Siong has expanded from
39 stores in 2015 to 54 stores in 2018. With its current upgrading works in the Singapore stores,
Sheng Siong is very likely to replace the traditional wet markets with its wet market department
to provide a cleaner and more comfortable shopping environment for the consumers, creating a
positive shopping experience, to attract and retain consumers.
(b) Strong Financial Capabilities
Sheng Siong benefits by leveraging on the economies scale as a big chain of supermarkets. Sheng
Siong can boost its gross profit margins from 22.1% in 2011 to 26.8% in 2018. As Sheng Siong
continues to grow and expand, economies of scale will continue to work in its favour as Sheng
Siong has further expanded its presence in the neighbourhood, providing affordable food and
groceries at heartland area, bringing convenience to the public.
(c) Debt-Free with Positive Cash Flow
Sheng Siong is achieving great in self-sustainability and growing without the need of debt. Zero
debt allows substantial financial flexibility for a small-cap company like Sheng Siong as Sheng
Siong does not require to adhere to any strict debt covenants. Sheng Siong has reported an 18%
growth in net cash and equivalent to S$87 million at the end of 2018, providing the management
with more options to grow and expand the retailing business by pursuing growth projects with
higher internal rate of return to improve earnings, continuous upgrade for the current facilities
and to develop a more consumer friendly system (“$tm” machine, NETS QR for cashless
payment); to build a stronger and confident relationship with investors by paying more dividend;
20
to conduct share buyback if the management determines their share is undervalued. Have a debt
free business model with strong and positive cashflow is a total beneficial to both Sheng Siong
and the shareholders.
II. Weaknesses
Detracting from its strengths, below are weaknesses identified of Sheng Siong Group, and these
include the lack of product differentiation and lack of brand loyalty.
(a) Lack of Product Differentiation
There is not much product differentiation between products from Sheng Siong and its competitors
as the range of groceries and food are similar and it is just the fight of who sell it cheaper and
who offer convenience to the consumers as consumers are price sensitive and their unwillingness
to travel far just to make simple purchases.
(b) Lack of Brand Loyalty
Since Sheng Siong, Fairprice and Giant are all about low price, consumers would choose to shop
at the supermarket which is located at the neighbourhood which is more accessible and convenient
to them as the marginal difference in price is not significant and motivational enough for the
consumers to travel far to shop at a specific supermarket if there is one nearby. This indicates that
location and convenience play an important role in attracting sales as consumers are less cost
sensitive when convenience is available as they are less likely to travel a distance to get the needed
goods.
III. Opportunities
Below identify opportunities which Sheng Siong Group could tap into for the upcoming years,
and these include the changes in consumer behaviour and lifestyle, increasing presence in the
neighbourhoods, and room for margin improvement.
(a) Changes in Consumer Behaviour and Lifestyle
Mobile device proliferation, lightning paced lifestyle and challenging working hours have been
contributing greatly to the complexity to every Singaporeans’ lives. Singaporeans are feeling
more stretched than ever before and are increasingly eager to strive for solutions to simplify their
21
busy lives. Eating out is no longer reserved just for special occasions and it is becoming a part
of many Singaporeans’ lives. Due to the availability of a diverse plethora of food around, the
eating out option has become more prominent, convenient and attractive.
According to Nielsen’s Out-of-Home Dining Survey conducted in August 2018, 24% of the
respondents have indicated that they eat out daily, while more than 55% do so on a weekly basis.
Of the typical three meals a day, Singaporeans are opting to dine out for dinner, comparing to
lunch and breakfast. 72% of the respondents consume their dinner out of home, while 66% dine
out for lunch and only 15% for breakfast. 81% of the respondents have highlighted that they have
stopped by a casual dining outlet while 76% prefer to patronise fast food restaurants for their
quick service and 64% chose to dine out at a café.
(b) Increasing Presence in the Neighbourhoods
Figure 2. Development of HDB towns. (Source: HDB website)

With the continuous development of Built-to-Order (BTO) from the Housing Development Board
(HDB), various estates in different towns are increasing at a consistent rate while Punggol is
experiencing a rapid growth in the number of flats developed in the recent decade.
22
The expansion of the new BTOs around is a good indication of opportunity availability for Sheng
Siong because where there is a population, there is a need for a supermarket to meet the needs of
consumers for grocery shopping. Sheng Siong was the highest bidder for a HDB shop at Fernvale
in 2015 and Sheng Siong has bidded for the supermarket operation at the Alkaff Vista estate at
the recent Bidadari project. New opportunities will arise for Sheng Siong so long as there are new
areas opening up for residency.
(c) Room for Margin Improvement
Sheng Siong’s management has been quick to act to introduce Hybrid Self-Checkout System
(HSCO) in 47 stores since 2015, with an aim to achieve a full implementation at all the stores by
2019 to reduce the need of hiring numerous employees at the cashier lines, which in turn reduces
cost per sale and increasing profit. In addition, various government agencies have been providing
grants to Sheng Siong in the partial support of productivity improvement programmes as well as
grants under the Wage Credit and Special Employment Credit schemes, which are aiding Sheng
Siong to buffer against the rising cost of labour.
IV. Threats
Below are some external factors that would pose challenges for Sheng Siong Group, and these
include strong competition from other players and food security under the unforeseen tension
arising from the neighbouring countries.
(a) Strong Competition from Other Players
Sheng Siong ranks third place in terms of market share, after NTUC Fairprice and Dairy Farm
which have been ranked first and second with their aggressive retailing location, especially in
shopping malls. However, Sheng Siong does not seem to be motivated on competing with NTUC
Fairprice and Dairy Farm in shopping locations, as it strategically places its focus deep within the
heart of housing estates, bringing affordable groceries to residents within a stone throw distance,
offering convenience and availability of goods to consumers.
(b) Food Security from Neighbouring Countries
Food security is a constant work in progress for Singapore. With over 90% of the food supply
dependent on imports, Singapore is exposed to the volatility of the global food market,
23
including export bans and sudden disruptions to transport routes. One example would be the
global food crisis in 2007 leading to a 12% increase in prices of Singapore’s food imports.
Presently, Singapore also faces possible disruption to its food imports due to Malaysia’s
announcement last year that it would restrict certain seafood exports and limit or end egg exports
to Singapore. Prices of eggs has also risen since 2014 when Malaysian farms were suspended
from exporting eggs to Singapore after their eggs had been found to contain Salmonella
Enteritidis, a bacterium that causes food poisoning.
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Key Findings and Identification of Strategic Issues
With reference to our analysis of Sheng Siong Group, below are some notable findings.
1. Strong Financial Positioning with a Resilient Business Model
In 2018, Sheng Siong recorded a year-on-year revenue increase of 7% to over S$890 million and
gross profit increase of 10% to over S$238 million. The company maintained a debt-free status
with positive cash flow which suggest that it is capable of new investments with minimal
constraints on its finances. The revenue and gross profit margin have seen a steady growth over
the past five years despite it having undergone an economic downturn from 2014 to 2015. This
means that Sheng Siong’s business model is resilient and strong as it continues to grow despite
adversity in the economy with their concept of business operations well received by consumers.
2. Lack of Diversification in Sheng Siong’s Business Model
Even though Sheng Siong Group has been performing well and recorded a constant growth
throughout the recent years, it is exposed to threats from the lack of entry barriers in the industry
and faces strong competition from existing and new competitors due to the nature of the industry
where substitutes are readily available. The products sold in Sheng Siong, when unavailable, can
be easily substituted by those sold at their competitors, and consumers’ brand loyalty is reduced
to the lowest, as they are quick to compare and put their money wherever offer them items at the
lowest price. Hence, the current lack of diversity in Sheng Siong means that the supermarket can
only continue to increase its presence by opening more stores, offering low prices and improving
its existing business processes, as this is their sole source of revenue.
3. Changing Consumer Behaviours and Evolving Lifestyle Trends
Along with the development of social economy, Singapore consumers’ education and income
levels have also been increasing. They are becoming more receptive to the notion of optimising
their current wellness and preventing declining health and hence, are willing to pursue higher
quality and pay more for premium products. On top of that, consumption habits are seen gradually
changing as more people are opting to dine out for time efficiency. This could be bad news for
supermarkets like Sheng Siong, for when more people choose to dine out, the sales for groceries
will slowly begin to dip.
25
Recommendations
To address Sheng Siong Group’s shortcomings and scale revenues to the next level of profits, we
have come up with four growth strategies as below.
1. Incorporate Partnership with Singapore Petroleum Corporation to Run

Convenience Stores
This is a horizontal integration strategy to increase the presence and market share of Sheng Siong
by introducing Sheng Siong Express, a convenience store-concept to replace the existing Choices
convenience stores at Singapore Petroleum Corporation (SPC), which owns the third largest
motoring retail network in Singapore, after Shell and Esso, with 40 service stations island-wide.
Presently, Esso has an existing partnership with Fairprice Xpress, whereas Shell just ended its
decade-long partnership with 7-Eleven to focus on its own retail operations despite seeing positive
increases in sales, profitability and customer count since its establishment. Throughout Shell’s
partnership with 7-Eleven, the convenience store recorded double-digit growth in profitability,
and this represents the potential returns of such partnership. Hence, the partnership between
Sheng Siong and SPC is seen to be highly viable.
Even though the existing Choices at SPC offers reasonably-priced products, it does not appeal to
motorists who are keen to shop while having their petrol tank refilled. Hence, these motorists
would often look out for petrol stations with more established convenience stores such as Cheers,
7-Eleven and NTUC Express that could potentially offer them a wider product range and more
attractive deals due to economies of scale achieved through their parent companies, NTUC
Fairprice and Dairy Farm Group.
Sheng Siong Group could offer its established sourcing network and economies of scale achieved
through their 54 supermarkets island-wide, a better product assortment at more competitive prices
for the motorists. The partnership can also potentially draw more motorists to SPC as their
preferred petrol station for petrol refuel and grocery refills. Beside the operations of a traditional
convenience store, Sheng Siong can also set up a drive- through station at SPC that allows item
pickups for customers who have pre-ordered online earlier. Customers can simply place their
order online, drive to the station en-route to their destination and wait for a SPC employee to
wheel their order out to their vehicles. This offers customers convenience and efficiency, as the
key advantage of a drive-through includes customers not requiring to leave their vehicles nor look
26
for parking lots.
2. Initiate Joint Venture with Food Junction to Supply Produce to Hawkers
This is a corporate renewal strategy to address the lack of diversification of Sheng Siong Group.
While Sheng Siong has been performing well over the past few years where it achieved
considerably stable growth in terms of revenue and gross profit, its sole focus has been on its
supermarket retailing. Despite the continuous improvement in business processes and its presence
expansion island-wide, Sheng Siong faces strong competition from other major players like
NTUC Fairprice, Cold Storage, Giant, as well as neighbourhood specific competitors such as U-
Stars and Prime Supermarket. The recent disruption by online grocery start-ups like RedMart and
honestbee, has also became a game changer in the grocery industry as these start-ups vie for
market share in the domestic market.
In the face of this saturated market, Sheng Siong should look into viable avenues to diverse its
business without compromising or abandoning its roots in the grocery industry. Henceforth, we
recommend Sheng Siong Group to establish joint venture with major food court operator Food
Junction to supply produce to the hawkers.
Food Junction is an established operator in the food hall industry, operating at 11 locations island-
wide. As rental cost in Singapore has been increasing year on year, Food Junction will soon be
facing rental woes from mall management and in turn transferring the increasing rental rates to
its hawkers. These moves will possibly drive hawkers to suffer a loss and consider changing
locations or even closed down permanently.
Through joint venture with Food Junction, Sheng Siong can offer to supply produce to all Food
Junction food malls which in turn centralised their purchasing avenue, as well as ensure food
safety and quality standard in the supplied produces. In return, Sheng Siong will provide rebates
for hawkers who makes continuous ordering and for those who are keen to build and maintain
a long-term strategic relationship. Through the rebating initiative, Sheng Siong will be able to
reach out and attract new hawkers while retaining the existing ones, hence building and
maintaining the brand loyalty to a great level.
This joint venture will ensure hawkers greatly benefit from the consistency of quality food
supplied at a competitive rate, improving their earning margin as currently the hawkers order their
supplies from various vendors of their source and supply quality might not be assured. Quality
27
food supplies at competitive rates together with rebate help the hawkers to lower their operating
cost and enhanced their sustainability while Food Junction will benefit from the continuous
renewal of the leases. As for Sheng Siong, this represents a steady source of revenue as fresh
produce commands a higher gross margin and a diversification from its usual source of revenue,
diversifying from retailing to setting a foothold in wholesaling.
As different hawkers commonly use different suppliers to develop their menus, this also
represents an opportunity for Sheng Siong Group to review its present suppliers and increase the
product lines in its offering through inclusion of new suppliers.
3. Introduce New Premium Concept of Sheng Siong Supermarket
While various strategies to integrate and diversify Sheng Siong’s business are being considered,
we should not neglect the core strength of its supermarket operations. Given that Sheng Siong
has a wide network of suppliers and a comprehensive sourcing strategy, the company should also
concentrate on its primary line of business while increasing the product range and introduce a
new concept of an upscale supermarket, Sheng Siong Premium, to attract new customers as well
as serve its current core of customers.
Along with the development of social economy, Singapore consumers are becoming better
educated and earning higher incomes, resulting in changing consumer behaviour and evolving
consumption habits. Consumers are now more likely inclined to purchase items of higher quality
and value as compared to before. Instead of maintaining the current business model of striving to
only provide low-cost option for its customers, the viability of Sheng Siong Premium presents an
attractive option for the high-value consumer market.
Strategically located in residential areas with high density of private housings such as East Coast
and Upper Bukit Timah, Sheng Siong Premium will offer a wide premium selection of fresh,
healthy, exported food products and complementary items to its current products offers a different
option to potential customers.
4. Implement Exclusive Membership Programme to Retain Brand Loyalty
Singapore consumers are deal seekers when it comes to shopping. With the above three strategies
implemented, Sheng Siong Group can introduce an exclusive single membership programme to
strategically link Sheng Siong Supermarket, SPC, Food Junction and Sheng Siong Premium
together, entitling consumers and end-users with benefits and rebates, which would attract new
28
consumers while retaining the existing ones. Rebates can be used interchangeably across all
participating outlets of Sheng Siong Supermarket, SPC, Food Junction and Sheng Siong
Premium. Additional rebates can also be given as bonuses for purchases made during members’
birthday month and their membership anniversary month.
A single membership programme linking these three giants from different industries together will
offer consumers a dynamic range of products and services at a competitive price with loyalty
rebates that are usable at all their outlets. Additionally, personalisation is becoming a key part of
customer experience. By having records of its consumer profiles and purchase histories, Sheng
Siong will have a better understanding of consumer buying behaviours, which allows it to
personalise customer experiences through creations of customised marketing campaigns using
behavioural retargeting. Through the intelligent use of data, Sheng Siong will be able to create
relevant promotions that hold customers’ attention for longer span.
Hence, the implementation of a single membership programme will not only further boost the
growth and profitability of Sheng Siong, SPC and Food Junction, but also generate brand loyalty
for these companies in the long-run.
29
Conclusion
Generally, the report and findings reflect that Sheng Siong Group is facing both internal and
external challenges despite recording growth of 7% to 10% in both revenue and profit in 2018.
While its current business model continues to reap the rewards from its current operations,
opportunities to diverse and expand its business operations should not be neglected.
We recommend a few strategies for Sheng Siong to adopt. Firstly, Sheng Siong can incorporate
a partnership with Singapore’s third largest retail network of petrol stations Singapore Petroleum
Corporation (SPC) to replace its existing Choices convenience stores in its 40 petrol stations
island-wide. Secondly, Sheng Siong can initiate a joint venture with Food Junction to supply
produce to the operating hawkers. Thirdly, the introduction of a new concept of a premium Sheng
Siong Supermarket will allow Sheng Siong to serve a new range of premium products targeting
consumers would be willing to pay more for higher quality and premium food products. Lastly,
Sheng Siong can implement an exclusive membership programme, which will further strengthen
its cooperation with Food Junction and SPC, boosting sales and revenue, building up brand
loyalty for all three organisations.
With the implementation of the recommendations above, Sheng Siong will be able to further its
growth in revenue, profits and sustainability.
30
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BUS489 Strategy for Business

Case Analysis Report

SHENG SIONG GROUP LIMITED.

A Brief History of the Company

II. Organisation Structure

III. Vision, Mission & Values

(a) Business Excellence

(b) Care for its Customers

(c) Care for its Employees

(d) Care for the Community

(e) Care for the Environment

VI. Financial Information

(a) Threat of New Entrants is Moderate

(b) Threat of Substitutes is High

(c) Bargaining Power of Buyers is Moderate

(d) Bargaining Power of Suppliers is Low

(e) Extent of Rivalry in the Industry is High

II. Consumer Analysis

III. Competitor Analysis

(a) The Big Chains

(b) Neighbourhood Supermarkets

Targeting primarily the traditional Asians, predominantly Chinese, Ang Mo Supermarket is a

(c) Online Grocers

I. Financial Performance Analysis

Overview of Key Financial Highlights

foreign exchange risk.

II. Capabilities Analysis

III. Operational Performance Analysis

(a) Resilient Business

(b) Strong Financial Capabilities

(c) Debt-Free with Positive Cash Flow

(a) Lack of Product Differentiation

(b) Lack of Brand Loyalty

(a) Changes in Consumer Behaviour and Lifestyle

(b) Increasing Presence in the Neighbourhoods

Figure 2. Development of HDB towns. (Source: HDB website)

(c) Room for Margin Improvement

(a) Strong Competition from Other Players

(b) Food Security from Neighbouring Countries

Key Findings and Identification of Strategic Issues

1. Strong Financial Positioning with a Resilient Business Model

2. Lack of Diversification in Sheng Siong’s Business Model

3. Changing Consumer Behaviours and Evolving Lifestyle Trends

1. Incorporate Partnership with Singapore Petroleum Corporation to Run

for parking lots.

2. Initiate Joint Venture with Food Junction to Supply Produce to Hawkers

3. Introduce New Premium Concept of Sheng Siong Supermarket

4. Implement Exclusive Membership Programme to Retain Brand Loyalty

Retrieved from https://expatliving.sg/supermarkets-in-singapore-all-you-need-to-know-

HoneyKidsAsia. (2019, August 16). A Beginner’s Guide To Supermarket Shopping In

Infocomm Media Development Authority. (n.d.) Infocomm Usage-Households and

and-singapore-continue-dispute-air. Accessed Date.

Lee, J. (2019, October 10). Vegan, Vegetarian And Vegetarian-Friendly Restaurants In

Maria, A. (2019, February 22). Singapore-Malaysia Relations Strained By Political

National Environment Agency. (n.d.) Food Waste Management. Retrieved from

National Environment Agency. (n.d.) Singapore Packaging Agreement. Retrieved from

National Environment Agency. (n.d.) Waste Management. Retrieved from

Sheng Siong Group. (n.d.) Milestones. Retrieved from

Singapore Food Agency. (n.d.) Food Retail. Retrieved from https://www.sfa.gov.sg/food-

https://www.businesstimes.com.sg/consumer/supermarket-of-the-future. Accessed Date.

Teoalida. (n.d.) HDB Statistics, Facts & Figures. Retrieved from

Species Of Fish, Shrimp From Jan 1 To Feb 28. Retrieved from