Macro Environment External Forces that Affect Bakery Industry Free Essay Example

Executive summary

Paris Baguette is a French inspired Korean bakery, which started in 1945, and it started off as a small bakery. Paris Baguette is now a highly competitive bakery that has 32 stores worldwide and 4 stores in Singapore. This report is to advice Paris Baguette on matters that are associated with effective marketing for its product, place, promotion and price. This report will talk about things like, what Marco-environment that will affect the bakery industry as well as what microenvironment that will affect our organization.

This report will also be explain what product positioning and perceptual mapping is and with the aid of perceptual mapping it will illustrate the product positioning of Paris Baguette against their competitors.

The recommendation for the report is to advertise Paris Baguette on television or the newspaper to increase brand awareness. In addition, to open more branches in Singapore, as four stores is nothing compared to their competitors like Bread Talk.

Background

Paris Baguette has started in 1945, called as ‘Sang-mi-dang’ in Woongjin, Korea.

They had moved Sang-mi-dang to Seoul in 1948. The president of the company, Chang Sung Hur had changed the name of the company as ‘Sam Lip General Food Company in 1968 and entered the franchise market as a general food company. In 1997, they have decided to have product brand called ‘Shany Cake’ hence, the Sam lip and Shany cake shown great impact in the bread industry.

In order to strengthen their business, they realized they need bakery brand so they established Paris Croissant in 1986 and they called it as ‘Paris Baguette’, which is a luxury French bakery brand.

They have made first store at Gwanghwamun(Korea), one of the place that a lot of people in Korea. They had good success, kept expanding the stores, and had 100 stores in Korea in 1992. They did 1st place in bakery industry in 1997, and they maintained the 1st place all the way. In 2004, they decided to expand the stores overseas and opened first store in Shanghai. As a result, they have around 3,200 stores in Korea alone.

Macro Environment external forces that affect bakery industry

2.1Demographic environment

The term ‘demography’ refers to the study of human population on the basis of gender, age, race, income level, density, education, family size, occupation, etc. According to the data reports that released by Singapore government, the population of female residents is nearly equal to males. The main target customers of bakery industry are consider as females because they are most likely to have a sweet tooth.

It means that there is still some room for improvement to attract potential customers, such as males. Besides, an aging population and declining birth rate also has impact on bakery industry. The range in age from 5 to 35 is considered as main target customers in bakery industry. With the increase of elderly and decrease of children, consumers of bakery industry will be gradually decrease. In order to attract more potential customers, bakery companies may launch new products that suitable for males and elders, such as salty bread with meat or soft bread, which can be easily chew.

2.2Political Environment

As a country, which has been crown the most business-friendly economy all over the world for the previous 7 years, no one will doubt that Singapore government encourage the development of company. Policy support helps with company operation, such as decrease the business income tax- it will increase the profit of company. Singapore government increase the wages tax in order to help poor people, thus, more customers will be able to afford bread. In addition, policies of childbirth encouragement and immigration also help to increase the numbers of consumers. Children are attract by lovely look and sweet taste of desserts, Europeans and Americans prefer bread instead of rice, and they should be regulars of bakeries. However, these policies also benefit other companies in bakery industry, and it will result in increasing of competitions. In order to hold the market share, the company may reduce the price of bread or launch more variety of bread.

2.3Economic Environment

Economic factors are consists of inflations, taxation, interest rate, currency exchanges rate, depression, etc. Those factors will influence the purchasing power and spending patterns of customers. If the interest rate increased, people would like to save their money in bank instead of spending them. That will result in decrease of buying power, thus, the profit of company will reduced also. Inflation also causes decrease of buying power. Inflation puts a lot of pressure on people, and they will decrease daily expenses, it may influence the bakery industry.

Micro Environment forces that affect Paris Baguette

2.4Competitors

In Singapore, Break Talk considered as a competitor of Paris Baguette because both of these two brands are consists of bakery and café. In comparison, Bread Talk is more famous and familiar than Paris Baguette because it is the local brand and it is plenty of branches. There are only four outlets of Paris Baguette, but more than 25 branches of Bread Talk in Singapore. The advantages of Paris Baguette are ‘delicacy’ and variety of products. Delicate appearances of decorate and products attract many customers. The advantages of Bread Talk are it’s lower price and promotions. To compare these two brands, Paris Baguette is more suitable for yuppies, but Bread Talk is suitable for ordinary family.

2.5Customers

The customers positioning of Paris Baguette: children, couples and 15 to 35-year-old females. Products of Paris Baguette are more expensive than other general bakery brands, thus, consumers of Paris Baguette should be well pay. Customers prefer café of Paris Baguette, so they frequented braches in the afternoon, especially during the weekends.

Macro environment forces that affect Paris Baguette

Two of the Macro environment, which have affect Paris Baguette are the Economic environment and social-cultural environment. The economic environment affected the Paris Baguette franchises, which the production costs increased due to the price of the oil and the grain increased. All the franchises have to pay more in order to purchase the ingredients. Besides, Paris Baguette in the American and China markets have faced some uncertain economic failure. This has cause quite a big impact to Paris Baguette. “A weak currency is the sign of a weak economy, and a weak economy leads to a weak nation.” (Perot, N.D).

In addition, the social-cultural environment, which affect Paris Baguette have to know the different cultural food taste of the chosen country, which mean they have to find out what type of products can increase the interest and Paris Baguette have to cooperate with it by creating the product the people like. Besides, for the aging people and woman will give more attention to their own health and they prefer more on organic food. In order to aim a bigger market, Paris Baguette has to produce more organic and healthy products due to the healthy diet flow.

Product Positioning.

Product positioning is one of marketing techniques that promote products in the best way to target audiences. The most important thing is to buy the product. It is quite similar with market segmentation as the product positioning is made of creating the message and involves the symbol and manipulation, which conclude display and packaging. In Paris baguette, they used 5methods for the product positioning. They are ‘threat of new entrants (too much capital is not required for joining the bakery franchise market)’, ‘bargaining power of suppliers (the raw material is important for them in bakery industry and the materials like rice and flour)’, ‘threat of substitute products (many other substitute products are exist such as flour based food, instant food, etc.

For example, Starbucks is one of café that makes high profit with substitute products)’, ‘bargaining power of customers (They don’t have difficulty to switch purchasing outlets because of standardized bakery products)’ and ‘competitive rivalry within an industry (there is intense competition in the market among other brands because of saturation. There does not have many firms within industry but big brands like Tour les Jour exist. There also have high exit barriers and hard to differentiate the strategic for each firm.)’.

Perceptual mapping

From the picture above, we can see that Paris Baguettes (PB) and Baker & Cook (B&C) has the high price and high quality compared to Sunshine Bakery (SB). It is because PB and B&C uses very good quality and high cost for the ingredients compared to SB. B&C is selling products slightly higher than PB is because of the company’s regulation. Paris Baguette use the product positioning strategy, which is ‘positioning by price/quality’. This is because they want to make sure their customer satisfy with their products and can consume their product is in high quality in other words mean the taste of the bread, the freshness and the crispiness of the bread. However, in order to produce a high quality product, they have to use high quality raw materials to produce their products such as the flour, butter, grain and other, which mean their products are in high quality and the price is
slightly higher. “The quality of a leader is reflected in the standards they set for themselves.” (Kroc, 1984)

Marketing research

The primary marketing research technique that I would recommend Paris Baguette to use for collecting information related to customer satisfaction is the survey method. The survey method is by far the most popular of all the research method. Survey method is a list of questions that ask individuals about their preferences, attitudes towards our product and buying behaviours. We would need to create the questionnaire that will record the data. Example of the survey question will be:

What is the first thing that comes into your mind when you think of Paris baguette? Do you enjoy our selection of bread?

Which one of our product do you like best?
How can we improve on our product?
Are our prices reasonable?
Are our staffs friendly?
Is our branch location convenient for you?
What new product would you like to try?
What is your age group?

Others-

These questions will help Paris Baguette improve on their product and find out what their customers thinks about the organization and what new products they would like to see from Paris baguette. One finding that I have found from the marketing research is that our shops location is inconvenient for people that are rushing. In addition, we open only at 10a.m, which is after the morning peak hour. Paris Baguette can make our stores more convenient for the working class by putting them near the MRT stations and opening our stores before the morning peak hour. By opening our stores during peak hour we can attract people who have not ate their breakfast as they are rushing for work, and by putting our stores near an MRT. It would make it much more convenient for people to come to our stores to buy our product especially those who are rushing.

Marketing Mix Strategies of Paris Baguette

Marketing mix consists on the 4Ps, which are product, price, promotion and place. We are going to analyse the marketing mix the Paris Baguette bakery. In first place, we can see that the Paris Baguette is a bakery with a high variety of products. The Paris Baguette supplies fresh bakery products in over 3000 locations worldwide. Their products are different for each country depending on the culture and the people of each country. They do not have the same products In United States and In Singapore, for example. This is because people from different countries have different preferences of taste. However, there are some common products in all their branches. For example, the most common products are the types of bread, the pastries and pie, the cakes, desserts and sandwiches and beverages.

They also sell other type of products like cups of tea. Talking about the price, the price in the Paris Baguette is equal to the quality of the product and the cost of purchase. The Paris Baguette keeps affordable prices in order to be accessible for more people to attract more customers. Of course they have to analyse the competitors prices and offers before adjust the final price of their products. Also determining the demand of each product and the estimating costs. If a product has a high demand, the cost would increase. For example, a piece of cake would cost around $3.95. Talking about the promotion, the Paris Baguette is a bakery with lots of promotions. They use two different ways of promotion to attract people. The first way is to do advertisements about their products with nice pictures and an apparently family friendly place.

The second way is doing sales promotion. For example, buy one dessert and get the second one free, or doing breakfast offers like a cup of coffee and a sandwich for $3.50. They use this two ways for promotion. Finally, the place. The Paris Baguette focuses always in getting branches in the centre of the cities. They are not interested in getting branches in small towns or places with not too much people. This is because they want a high average of people per day and this can achieved just in the centre of the cities and specific places. For example, in Singapore they have a big branch in Orchard, which is the main road in Singapore.

Marketing Mix

In my opinion, there are a few points that Paris Baguette could implement in the future. This can be focus on the promotion events. In my opinion, the Paris Baguette could implement quite a lot their customers by doing some cake and bread events. Paris Baguette can attract more customers, while promoting their products. This could be done by doing some events each year rent a place in a shopping mall and set up a stage in a large crowd places .

Meanwhile, while promoting their products, Paris Baguette can give out their new products with free of charge . This would be an improvement for their fame. This because as long as it is free, when people try their bakery products and it taste good, people will buy the products. These events will attract people from everywhere, which mean Paris Baguette will have more customers buying their products and it will increase their profit. “Profit in business comes from repeat customers, customers that boast about your project or service, and that bring friends with them.” (Edwards, 1993)

Recommendation

In Singapore, Bread Talk’s fame surpasses Paris Baguette. Thus, Paris Baguette may advertise on TV or newspaper in order to increases brand awareness. Besides, they also need to expand more branches all around Singapore in every single shopping malls to increase competitive. This is because are only four branches of Paris Baguette, which is far less than numbers of branches of Bread Talk and other bakery companies.

Conclusion

‘Sang mi dang’ was a small bakery which began in 1945. After some improvement, Paris Baguette have been start up and their business expand with a rapid speed. Paris Baguette is a mature domestic franchise bakery with a high percentage of share terms and their shops have already franchised to worldwide. Paris Baguette have maintained their high position for a period. This is because they have did their Micro and Macro environmental factors, which will affect their business, and they try to overcome it. Besides, Paris Baguette also did investigation of its competitors, in order to know more about its competitors. After the investigation have done, they try to compare it to their own companies by using a perceptual mapping concept, which can help them to know their own range with its competitors.

Moreover, to know how to gain more customers, Paris baguette choose a survey method by asking the random passers and to know more about, which bakery products do they prefer or like. In addition, Paris baguette known as a bakery which more on product and price, which mean they sell high quality products. Therefore, they will choose a high quality of raw ingredients to produce their products and set up a higher price but reasonable. Nevertheless, Paris Baguette also choose more crowded area to set up their shop to let more people notice their shop and buy their products. Besides, in order to attract customer, Paris Baguette also did some promotions for theirs products such as the special of the day for the products.

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