External Analysis of NTUC FairPrice: Strategies for Profitability

This report presents an external analysis of NTUC FairPrice, a leading retailer in Singapore, focusing on strategies for improving profitability and effectiveness. It begins with a company and country background, highlighting Singapore's economic strengths. The core of the report uses PESTEL analysis to examine political, economic, social, technological, environmental, and legal factors impacting NTUC FairPrice. Furthermore, Porter's Five Forces framework assesses the competitive landscape, including buyer power, supplier power, the threat of substitutes, new entrants, and competitive rivalry within the Singapore retail industry. Based on these analyses, the report offers recommendations for NTUC FairPrice to maintain a competitive edge in the dynamic market. These suggestions emphasize the importance of adapting to consumer preferences and the competitive market, promoting health and safety, and leveraging technological advancements.

Running head: NTUC FAIRPRICE 0
Name
Title of the Report
12th May 2018

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Table of Contents
1. Introduction.........................................................................................................................2
2. Company Background........................................................................................................3
3. Country Background...........................................................................................................3
4. PESTEL Analysis...............................................................................................................3
5. Porter’s Five Forces Framework.........................................................................................8
6. Recommendations.............................................................................................................10
7. Conclusion........................................................................................................................12
8. References.........................................................................................................................13

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1. Introduction
In the present business environment, leading organisations gains and maintains a
competitive advantage in the industry by effectively developing business strategies after
evaluating internal and external factors which affect their business. NTUC FairPrice Co-
operative is one of such corporations that evaluate a number of factors before implementing
business strategies for promoting their profitability. Singapore is one of the leading
economies in the world, and it offers significant growth opportunities to organisations
operating in the country (Min, 2018a). The purpose of this report is to conduct an external
analysis of NTUC FairPrice by using PESTEL analysis and Porter’s five forces framework to
provide appropriate strategies for improving its profitability and effectiveness. The structure
of this report will include a background analysis of NTUC FairPrice and Singapore.
Furthermore, the report will conduct an external analysis of NTUC FairPrice and provide
appropriate strategies for the enterprise.
Figure 1: NTUC FairPrice's Logo
(Source: FairPrice, 2018a)

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2. Company Background
NTUC FairPrice Co-operative was founded in 1973, and it operates in the retail industry.
It is a co-operative of NTUC or the National Trades Union Congress. The company has
grown as the largest retailer in Singapore, and it has established a network of over 230 outlets
which include brands such as FairPrice Xtra, FairPrice supermarkets, Cheers convenience
stores and FairPrice Finest (FairPrice, 2018a). The corporation offers a wide range of
products to its customers including drinks, snacks, bakery, sea foods, frozen foods, meat,
grocery, alcoholic beverages, deli, pharmacy, dairy and others. Moreover, the enterprise has
established an online retailing facility for its customers through which they can book their
order, and the company delivers them to their house.
3. Country Background
Singapore was established as a British trading colony in 1819, and it became independent
in 1965 after separating with Malaysian Federation. It has a strong per capita GDP (52,600.6
USD) which in on par with western nations (Trading Economics, 2018). Singapore’s
economy is second freest in the world according to Index of Economic Freedom 2018 (Min,
2018b). In terms of location, Singapore has become an economic success, and it is considered
as the business gateway to Southeast Asia because it is growing faster than every other nation
(McLean, 2018). Its government is made up of the President and the Cabinet of Singapore,
and the National assembly amends most provisions in the Constitution through majority
votes. Singapore government has established effective trading policies for encouraging
companies and investors to invest and expand their operations in the country.
4. PESTEL Analysis
A PESTEL analysis is referred to a tool which is used by enterprises in order to evaluate
different macroenvironmental factors that affect their business (Jurevicius, 2013). The
primary reason to use PESTEL analysis is that it allows the management to systematically
and thoroughly evaluate external factors that are likely to affect their business. The second
reason is that it enables the management to develop business strategies after assessing
external factors which resulted in improving the effectiveness of business policies. Following
is a diagram of PESTEL analysis of Singapore.

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Figure 2: PESTEL Analysis
(Source: Business-to-you, 2016)
Figure 3: PESTEL Analysis of Singapore
Political factors

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The government policies in a country affect the operations of a business. These
policies include factors such as labour laws, trade restrictions, political stability and tax
regulations. There is one of the more efficient and high-quality governance structure
established in the country which creates positive opportunities for NTUC FairPrice. The
government policies are favourable for NTUC FairPrice, and other enterprises operating in
the country and the process of development and implementation of new government policies
are efficient as well (Rikvin, 2018). While planning new venture, NTUC FairPrice faces
substantially lower risks relating to political environment and investments.
Economic factors
Economic factors that affect the business of a corporation include exchange rates,
inflation rates, interest rates and others. In Singapore, the economic growth is strong with per
capita GDP around 52,600.6 USD that is growing continuously in past years (Trading
Economics, 2018) (Figure 4). Furthermore, the GNI per capita in Singapore is 51,880 USD
which is on par with western nations (The World Bank, 2018). Due to strong economic
growth, the average income and living standard of citizens in Singapore is higher than
compared to other nations which create positive business opportunity for NTUC FairPrice.
Figure 4: Singapore GDP Per Capita (in USD)
(Source: Trading Economics, 2018)
Social factors

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Social factors which influence the operations of an enterprise include age distribution,
health and cultural aspects, career and income distribution and population growth. As of
2018, Singapore has a population of 5,780,501 which is growing continuously, and all of its
population lives in urban areas (Worldometers, 2018) (Figure 5). Furthermore, the literacy
rate in Singapore is considerably high with over 97.05 percent. The male literacy rate in the
country is 98.73 percent, and the female literacy rate is 95.45 percent (Country Economy,
2018). These factors create a positive business opportunity for NTUC FairPrice because most
people prefer to purchase products from supermarkets which are situated near their houses.
Moreover, people are literate, and they prefer to use online shopping facility of NTUC
FairPrice which resulted in increasing their overall profitability.
Figure 5: Singapore Population
(Source: Worldometers, 2018)
Technological factors
Technological factors include rapid change in technologies, automation, rate of
technological advancements and investment in research and development. In Singapore, there

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are over 4.41 million smartphone users that create a positive business opportunity for NTUC
FairPrice (Statista, 2018) (Figure 6). People use their smartphones for activities such as social
media, banking, communication, shopping and others. NTUC FairPrice advertises their
products and services through social media sites in order to let people know about its offers
and expand its customer base. Moreover, the enterprise offers online shopping facility for its
customers which they can easily access through smartphones. The number of smartphone
users is expected to grow up to 4.82 million by 2022 which creates a huge business
opportunity for NTUC FairPrice (Statista, 2018).
Figure 6: Number of Smartphone Users in Singapore
(Source: Statista, 2018)
Environmental factors
There are a number of environmental factors that affect the business of corporations
such as climate change, natural disasters, epidemics, eco-friendly regulations, weather and
others. Singapore is a developed country, and its government is concerned about the
environment and factors such as global warming, climate change and cleanliness of the
nation. The strict laws regarding environmental protection affect the business of NTUC

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FairPrice in both positive and negative way. The company focuses towards implementing
recyclable policies in the business in order to reduce waste and carbon footprint. The
corporation has introduced recyclable plastic bags since 2006 which are durable, reusable,
washable and created by 100 percent polypropylene (FairPrice, 2018b). Furthermore, in order
to increase their use, the company offered 20 shopping vouchers to customers who use them.
The company has also launched an initiative to discourage food waste at the stores (Boh,
2015). These factors increased operating costs of NTUC FairPrice which is negative for the
company’s profitability; however, they positively affect the brand image of the corporation
which creates new business opportunities.
Legal factors
The legal factors that affect a company’s operations include law and order established in
the country. The regulations such as consumer tax, labour laws, discrimination laws and other
regulations affect the way an enterprise operates in the country. Singapore government has
established an efficient legal system in the country, and it has the lowest corporate tax rates
than compared to other nations in Asia. The flexibility in legal regulations positively affects
the business of NTUC FairPrice. While expanding its business or investing in new ventures,
NTUC FairPrice receives the support of the government, and they face fewer issues due to
flexible legal regulations. For example, Singapore government applies 7 percent Goods and
Services Tax on all products and services of enterprises which is a relatively simpler process
of taxation (MOF, 2018). NTUC FairPrice complies with this regulation, and it allows the
company to maintain a low cost of their products and services. The company has introduced
Everyday Low Price (EDLP) basket in which offers the lowest prices on products than
compared to its competitors.
5. Porter’s Five Forces Framework
The five forces framework was developed by Michael Porter, and it focuses on evaluating
the attractiveness or unattractiveness of an industry (Dobbs, 2014). Marketers use the model
for analysing the competitive environment in which the company or a product works. The
five forces that affect the attractiveness of industry include the threat of entry, the bargaining
power of suppliers, the intensity of competition, the bargaining power of customers and the
threat of substitutes. The five forces model is an important tool because it assists the
management in evaluating the attractiveness of the industry in which their product operates or

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assists them while launching a new product in the industry. Following is a diagram of five
forces that affect the retailing industry in Singapore.
Figure 7: Porter's Five Forces Model
(Source: Joly, 2015)
Buyer Power High
Supplier Power Low
Threat of Substitutes High
Threat of New Entrant Low
Competitive Rivalry Mid to high
Buyer Power
The buyers’ bargaining power of customers in Singapore retailing industry is high.
The first reason for high buyer power is that it is easier for customers to switch between
NTUC FairPrice or its competitors without any additional costs. The second reason is that
many companies offer similar prices and services to customers such as Giant Singapore,
Sheng Siong and Cold Storage.

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Supplier Power
The bargaining power of suppliers is low. There are a large number of suppliers
available in the Singapore retailing industry, and NTUC FairPrice does not depend upon
single suppliers, and it can easily switch between them. Furthermore, NTUC FairPrice creates
a contract with its suppliers based on which they cannot increase the price of their products
which reduce their bargaining power (Unglobalcompact, 2017).
Threat of Substitutes
The threat of substitution is high because there are a number of competitors available
in prime locations that offer similar products as NTUC FairPrice. Another factor is that
customers can easily compare similar products prices through their smartphone and book
their order through an online platform which increases the threat of substitution for NTUC
FairPrice.
Threat of new entrants
The threat of new entrants is low in Singapore retailing industry. The first reason is
that the initial investment cost is considerably high with relatively lower returns. The second
reason is that there are already established market players such as NTUC FairPrice and Sheng
Siong which makes it difficult for new companies to capture the market share.
Competition Rivalry
The competitive rivalry is low to medium in the retailing industry of Singapore. The
competitors of NTUC FairPrice include Giant Singapore, Sheng Siong and Cold Storage.
Sheng Siong is the primary competitive of NTUC FairPrice because it also targets low-
income individuals by offering them competitive pricing. Furthermore, Dairy Farm
International focuses on mid to high-level income customers which resulted in increasing
competition for NTUC FairPrice. However, NTUC FairPrice stays ahead of its competition
by offering high-quality services and competitive pricing on their products and it also
improvises its services which provide it’s a competitive advantage (Prakash and Tan, 2014).
6. Recommendations
Following are different recommendations based on the external analysis conducted above
which should be adopted by NTUC FairPrice.

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1. Singapore retailing market is highly competitive, and NTUC FairPrice faces high
competitive from its competitors. In order to stay relevant in the market, NTUC
FairPrice should supply products which are high in demand at relatively lower prices
and introduce new and creative ideas and services to stay relevant in the market.
2. The company should focus on health and safety of its customers since the awareness
of healthy food is growing continuously. In order to compensate the healthy food
requirement of growing population of Singapore, the company should introduce new
category in which it offers healthy food at relatively lower prices.
3. Along with growing number of smartphone users, the influence of social media has
grown as well. NTUC FairPrice should improve its social media image by increasing
interactions with customers through social media sites and resolving their queries
which would establish a loyal customer base of the company.
4. NTUC FairPrice should improve its operations by making them more environmentally
friendly. In the long run, it will reduce the operating costs and create a positive brand
reputation of the company which will provide it a competitive advantage and assists it
in addressing fierce competition in the industry.

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7. Conclusion
In conclusion, NTUC FairPrice has established its operations throughout Singapore, and
it offers high-quality services and products to its customers at relatively lower prices. The
background of the company and Singapore was analysed along with the external analysis of
the company which assists in analysing different political, social, environmental, legal,
technological and economic factors which influence the business of the firm. Furthermore,
the attractiveness of the industry was analysed by using five forces framework. Based on
these factors, various recommendations are given for NTUC FairPrice such as the use of
social media, healthy food section, creative new services and environment-friendly
operations. These strategies can assist NTUC FairPrice in improving its market share and
efficiency of its operations which resulted in sustaining its future growth.

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8. References
Boh, S. (2015). NTUC FairPrice launches initiative to discourage food wastage at stores.
Retrieved from https://www.straitstimes.com/singapore/ntuc-fairprice-launches-
initiative-to-discourage-food-wastage-at-stores
Business-to-you. (2016). Scanning the Environment: PESTEL Analysis. Retrieved from
http://www.business-to-you.com/scanning-the-environment-pestel-analysis/
Country Economy. (2018). Singapore – Literacy Rate. Retrieved from
https://countryeconomy.com/demography/literacy-rate/singapore
Dobbs, M. (2014). Guidelines for applying Porter's five forces framework: a set of industry
analysis templates. Competitiveness Review, 24(1), 32-45.
FairPrice. (2018a). Out Stores. Retrieved from
https://www.fairprice.com.sg/wps/portal/fp/ourretailformats
FairPrice. (2018b). NTUC FairPrice ramps up ongoing sustainability efforts with inaugural
sustainability report and community engagement. Retrieved from
https://www.fairprice.com.sg/wps/portal/fp/pressreleases/2016/NTUC%20FairPrice
%20ramps%20up%20ongoing%20sustainability%20efforts%20with%20inaugural
%20sustainability%20report%20and%20community%20engagement
Joly, N. (2015). How to Competitive Analysis using Porter’s Five Forces Framework.
Retrieved from http://www.logiq3.com/blog/how-to-competitive-analysis-using-
porters-five-forces-framework
Jurevicius, O. (2013). Pest & pestel analysis. Strategic Management Insight, 13, 2013.
McLean, M. (2018). Why Singapore is Your Business’ Gateway to Southeast Asia. Retrieved
from https://www.veem.com/singapore/singapore-business-gateway-southeast-asia/
Min, C.Y. (2018a). Singapore among 25 countries leading the world in advanced
manufacturing: World Economic Forum. Retrieved from
https://www.straitstimes.com/business/economy/singapore-among-25-countries-
leading-the-world-in-advanced-manufacturing-world

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Min, C.Y. (2018b). Singapore still 2nd freest economy in the world but gap with top-ranked
Hong Kong widens. Retrieved from
https://www.straitstimes.com/business/economy/singapore-still-2nd-freest-economy-
in-the-world-but-gap-with-top-ranked-hong-kong-0
MOF. (2018). Goods and Services Tax. Retrieved from
https://www.mof.gov.sg/Policies/Tax-Policies/Goods-and-Services-Tax
Prakash, R., & Tan, P. (2014). Landscape of social enterprises in Singapore. Ridge Drive:
Asia Centre for Social Entrepreneurship & Philanthropy (ACSEP).
Rikvin. (2018). Why Singapore is Preferred by Foreign Companies. Retrieved from
https://www.rikvin.com/incorporation/why-singapore-is-preferred-by-foreign-
companies/
Statista. (2018). Number of smartphone users in Singapore from 2014 to 2022 (in millions).
Retrieved from https://www.statista.com/statistics/494598/smartphone-users-in-
singapore/
The World Bank. (2018). Singapore. Retrieved from
https://data.worldbank.org/country/singapore
Trading Economics. (2018). Singapore GDP per capita. Retrieved from
https://tradingeconomics.com/singapore/gdp-per-capita
Unglobalcompact. (2017). FairPrice CSR Online Report. Retrieved from
https://www.unglobalcompact.org/system/attachments/13159/original/
FairPrice_CSR_Online_Report.pdf?1322554756
Worldometers. (2018). Singapore population. Retrieved from
http://www.worldometers.info/world-population/singapore-population/