Sogo Department Store: Retail Industry Situational Analysis in HK

This report provides a situational analysis of the retail industry in Hong Kong, focusing on Sogo Department Store. It uses SWOT and Porter's Five Forces to analyze the micro and macro environments impacting the industry. The analysis covers the strengths, weaknesses, opportunities, and threats facing Sogo, as well as political, economic, social, technological, environmental, and legal factors affecting the retail sector. The report also examines the media landscape in Hong Kong, highlighting the importance of digital marketing, social media platforms like YouTube, WhatsApp, Facebook, and Instagram, and e-commerce platforms such as HKTVMALL. It concludes that conducting a situation analysis is crucial for companies to understand market trends, competitive strategies, and the impact of environmental factors on their productivity and profitability.

A situational analysis of the
retail industry in Hong Kong
from macro and micro
perspective

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Situational analysis of the retail industry in Hong Kong by using SWOT and Porters five
forces analysis........................................................................................................................1
The media landscape of retail industry in context to competitors and market.......................3
CONCLUSION................................................................................................................................4
REFERENCES................................................................................................................................5

INTRODUCTION
Situation analysis refers to the determine the impact of macro and micro environment on the
operation and productivity of the company (Chan, Shen and Cai, 2018). To determine the
concept of situation analysis the selected organisation is Sogo Department store which is located
in Honk Kong as well as it was established in 1830 By Ihei Sogo in order to provide various
items such as beauty, grocery, household, food and many more to the people under one store.
This project covers the competitive and market analysis in order to address the issues as well as
analyses of the media landscape of selected market.
MAIN BODY
Situational analysis of the retail industry in Hong Kong by using SWOT and Porters five forces
analysis
In Hong Kong, the retail industry is referring to the sector which provide basic and
necessary items to the people to meet their daily needs. The Sogo department store is one of the
retail company which operate their business to earn profit and customer base (Dermawati, 2018).
The management of the company conduct situation analysis in order to determine the market
trends and competitors’ strategy which create problems in their business. For Micro analysis they
use SWOT as well as for Macro analysis they use Porters Five Forces.
SWOT analysis in context to Sogo department store are as follows-
Strengths
Positive market and brand value
Brand recognition as it is one of the oldest
department store in Hong Kong and known for
quality (no counterfeit products)
Identity of being a Hong Kong name. Its cloest
competitors Marks and Spencer (UK)Sogo
(Japanese), Aeon (Japanese)
Owns most of its own property in a city where
rental prices is the highest in the world
Weaknesses
Outdated in its supply chain management
Lack of a grocery department (its competitors,
sogo, Aeon and Marks and Spencer all has a
successful one.
Average age of employees is 50
No real digital marketing presence (Hardy,
2021)
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Opportunities
Has room to grow its grocery store market
Grow its online retail store by having more
point of sales digitally
Sustainability (Ong. and Ito, 2019)
Threat
Ongoing covid 19 restrictions which means
decrease in tourism and emigration of Hong
Kong residence
The rise of ecommerce shopping
More department stores with more CDB
presence are moving a bigger share of
consignment counters
The rise of parallel imports which means a war
on prices.
Its core audience is aging
PESTEL
Political:
 The enactment of the national security law has many people fleeing the city
 Covid 19 policies are still keeping tourist from visiting Hong Kong’s preferential treatment was denounced putting it on par with China. This
has revoked license exceptions for exports to Hong kong amongst other things (No
Longer Special: The U.S. Suspends or Eliminates Different and Preferential Treatment
for Hong Kong, 2020).
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Economical:
 Hong Kong increased its lending rate for borrowers. This is the first time prime rate has
gone up in 4 years. The result of this will put a strain on Hong Kong’s economy.
 Hong Kong’s adoption of China’s zero covid policy has affected many retail stores. As
stores are forced to shut 1-2 weeks if any employees or consumers have been tested
positive.
Social:
 Minimum wage has gone up at a time when the market is down causing more
unemployment than necessary due to pressure.
 Consumer buying habits have changed drastically and is moving towards online
spending.
 Almost 100,000 people have left the city to emigrate over the last 2 years which saw
Hong Kong’s population drop by 1.2 % (Saima and Khan, 2020)
Technology:
 Data privacy currently a major issue in Hong Kong retail industry
 Leading to more cyber crimes happening in Hong Kong
 The launch of digital coin (launching e-coin in the end of 2022) and the rise of digital
wallets) along with granting license to digital banks
Legal:
 e-commerce laws in hong Kong has not caught up
 Data privacy and protection is ramping up (Dermawati, 2018)
 New uncertain updates to covid 19 restrictions and penalties is confusing
 New Laws are being suggested to regulate use of AI and air pollution
 Press freedom is becoming an issue cause many media outlets to leave Hong Kong
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Environmental:
 The new generation is increasing becoming ethically and environmentally conscious.
 Waste charging scheme was imposed in 2021 as China is no longer taking wastes
 The rise of CSR increases the overall operational cost of department stores
The media landscape of retail industry in context to competitors and market
In Sogo Department store, the media play most important role as well as help them to
influence and reach their target segment in target market. It also helps them to promote their
brand, product and services in the market as well as enable them to make their company different
from the competitors in order to gain competitive advantage over competitors.
The four most used social media are:
YouTube, WhatsApp, Facebook and Instagram for ages 16-64. With YouTube holding 86.9% of
users while WhatsApp is a close second with 83.6. Facebook and Instagram both holds 3rd and 4th
with 83% and 59.1% respectively.
When it comes to digital marketing, it seems Hong Kong people are quite reliance on researching
for a brand before deciding on a purchase. This includes consumer reviews from social media
and e-commerce platforms and an upward trend of being heavily influenced by KOL and live
streaming of sales event (Song and Park, 2020).
As such search engines and social networks are the primary channels for brand research with
48.1 % reliance’s on search engine and 44.2% on Social networks respectively.
As such, for Wing On to reach to its targeted audiences, they could invest in the following:
Collaborate with e-commerce website, especially HKTVMALL which is the top e-commerce
platform in 2021. HKTV mall has been successful in maintaining its lead in the e-commerce
sphere thanks to its investment in big data. The pandemic has proved to be fruitful for this e
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commerce giant as the city saw a 27% increase in 2020 with ecommerce activities as the average
monthly web visits to the platform has reached over 4,642 million with over 250,000 people
visiting the platform daily. It’s dominance is so phenomenon with over 41,400 order per day
(Dec 2021) that Its closest competitor (Tall) a subsidiary of Alibaba, had 4,387.8 but has already
announced that it will shut down its Hong Kong operation on October 31st (Average monthly
web visits of leading e-commerce platforms in Hong Kong in 4th quarter 2020, by platform,
2021).
Facebook and Youtube
Face book- Facebook still dominates in the social media world with over 5.6million out of a
population of 7.8 being facebook users. (73.9% of the entire population). Women accounts for
56.1% with the largest users between the age of 25-34. YouTube is another advertising avenue
that Wing On could take advantage of as it is estimated that 6.68 million users are subscribed to
the platform. ( “Among Gen Z & millennials, YouTube is mainly used to follow influencers and
KOLs (29%) and product research or shopping purposes (13%).”
WhatsApp- Another important media outlet is WeChat, a communication tool akin to
WhatsApp. There are over 1 billion million users in China with over 58% of the Hong Kong
population with a WeChat account. 75% of WeChat users outside China is also younger than 34
with an average spending time of 3.5 hours. We chat’s social media revenue was at 17.49billion.
In 2015, it was only 3.6 billion. It is evident that Hong Kong’s media landscape is changing and
e-commerce is growing.
Traditional media is no longer a force in the Hong Kong media landscape. A look at TVB, Hong
Kong’s most dominant TV station is a good indication of where the market is heading. In 2019,
the group’s revenue was 3,659 million (Announcement of 2020 Annual Report)
Advertising revenue in 2020 fell 54% from 2019 but saw a little increase in 2021 due to its
acquisition of two e-commerce company (Ztore and Neighbuy) and a lower never before seen
TV advertisement package. Traditional media companies such as Ming Pao daily is trying to
cash in on the market by starting their own e-commerce platform, Power Up, selling lifestyle
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products. Source It is evident that Hong Kong’s media landscape is changing and e-commerce is
growing (Hong Kong Media Landscape Highlights, 2021).
Hong Kong’s digital media spending is expecting to reach almost 6 billion, up from4.5 in 2021
with an annual growth rate of 5.1% Thanks to having 85.6% of the population being active social
media users. That is 6.44million of a population of 7.52 million It wasn’t long before Traditional
methods such as TV commercials still dominated the marketing scene with 33% back in 2017
but that number has been taken over by digital media with more than 1.23 billion digital ad
spending by 2021 (Wong, Zhou and Li, 2020).
CONCLUSION
As per the above presented information, it has been concluded that it is very important for the
company to conduct situation analysis in order to determine the effect of micro and macro
environment on their productivity of the company. By using SWOT analysis and Porters five
forces they conduct market as well as competitive analysis to reduce the impact of future
challenges. The Instagram, Facebook, TV helps the company to reach and influence the customer
for profit.
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REFERENCES
Books and journal
Chan, H.L., Shen, B. and Cai, Y., 2018. Quick response strategy with cleaner technology in a
supply chain: coordination and win-win situation analysis. International Journal of Production
Research, 56(10), pp.3397-3408.
Dermawati, W., 2018. Pengaruh Hedonic Shopping Motive dan Price Discount terhadap
Impulse Buying pada Sogo Departement Store PVJ Bandung (Doctoral dissertation, Universitas
Komputer Indonesia).
Hardy, J., 2021. Branded content: the fateful merging of media and marketing. Routledge.
Ong, Y.X. and Ito, N., 2019. “I want to go there too!” Evaluating social media influencer
marketing effectiveness: a case study of Hokkaido’s DMO. In Information and communication
technologies in tourism 2019 (pp. 132-144). Springer, Cham.
Saima and Khan, M.A., 2020. Effect of social media influencer marketing on consumers’
purchase intention and the mediating role of credibility. Journal of Promotion
Management, 27(4), pp.503-523.
Song, S. and Park, K., 2020. Thematic analysis of destination images for social media
engagement marketing. Industrial Management & Data Systems.
Wong, J.C., Zhou, Q. and Li, X., 2020. FROM THE MTR CONNECTION SPACE TO THE
BUILDINGS IN URBAN RENEWAL: LINK FOR WHAT? A COMPARATIVE STUDY IN
HONG KONG. In Актуальные проблемы теории и истории региональной
архитектуры (pp. 36-42).
Online
No Longer Special: The U.S. Suspends or Eliminates Different and Preferential Treatment for
Hong Kong, 2020.[Online]. Available through: <https://www.lexology.com/library/detail.aspx?
g=c8969e8f-dfc3-48a4-94e1-042be9bd3cec>
Hong Kong Media Landscape Highlights, 2021. [Online]. Available through: <
(https://en.prnasia.com/blog/2021/02/hong-kong-media-landscape-2020/>
Average monthly web visits of leading e-commerce platforms in Hong Kong in 4th quarter 2020,
by platform, 2021. [Online]. Available through:
<https://www.statista.com/statistics/1271025/hong-kong-leading-e-commerce-platforms-based-on-
monthly-visits/>
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