The Company Nanning Optical Group was chosen because it is a Singapore company with a humble beginning. Today, Nanning Optical Group has more than 20 optical retail outlets across Singapore, Malaysia and China. This is due to the persistent pursuing in service excellence, quality, branding and innovation. The results of the company perseverance are recognized both local and overseas, and has won several prestige design awards. (bottom, 2012) Background information Nanning Optical Group started out as a lens grinding and edging workshop in Gelling in the asses.
Founder Yang Way Kiang took over the then lens-grinding shop t 14 years old when his father died. The eldest child of the family took care of the shop and family while coping with his studies. During the asses, the booming of shopping centers has boasted the number of aware stores creating high demand on lens grindings. This led to the opening of second outlet in Skating Mall and never looks back since. Today, Nanning Optical Group has staff strength of more than 80 and a turnover of 10 million. (Eng, 2007) External Analysis This section uses Porter Five Forces to identify the attractiveness of optical industry in Singapore.
Monsoon, 2011) Threats of Entry Nanning Optical Group being pioneer has accumulated vast experience curve in the industry. Being a well known local brand has certain economies of scales in terms of accessibility to supply, distribution channels and brand awareness. Expected retaliation is expected notably from few main players like Spectacle Hut and Capitol Optical in a form of price cuts. Government Action is consistently through aids and subsidies. Differentiation of products are low as less variation. Threat of substitutes Eye laser or Alaska is a threat outside this industry.
Extra-industry effects are people re not willing to take surgery risk even through the risk is low. However, Alaska has becoming affordable options over the past few years in terms of price and performance ratio. (Eng, 2008) Power of Buyers In Singapore context, buyers are also the ultimate consumers in the optical industry. The bargaining power of these concentrated buyers puts businesses under pressure, because buyers have low switching cost as they shop around due to low differentiation of frames and lens.
Most businesses source their supplies of frames and lens from conventional suppliers like Carl Zeus Lens or Paris Miss frames, these increase suppliers bargaining powers. Unless businesses perform backward vertical integration which will be discuss in details further in Strategic Options section. Power Pestle Company analysis By Blabbing to Supplier Concentrated suppliers translated to taking only mass orders to achieve economies of scales which impact smaller businesses like Nanning Optical, which have to pay higher cost for smaller orders.
Unless smaller businesses have some form of backward vertical integration to sustain low cost and differential products, but it comes with initial high switching cost. Started off as lens grinder, Nanning Optical is able to close up to the buyers by eliminating middleman for processing of lens prescription, reducing cost, time and enhance service experience. This is a form of forward vertical integration which reduces supplier competition threat. Competitive Rivalry The competitive balance is less rivalries with few dominant players like Spectacle Hut and Capital Optical, as well as smaller outskirt shops.
Progressive industry growth rate is mainly on dominant players in terms of more outlets in Malaysia and China. Being mostly brick and mortar means high fixed cost. Various options include increase order capacity and scales of economies by opening more outlets. As well as reduce distribution and inventory cost using information technology. Main players in the industry have high exit barriers due to heavy initial investment on outlets and support infrastructure like distribution and warehousing software. Lastly, optical industry has low differentiation as competitors have identical brands of products.
One needs to fight in terms of price, after sales service and brand awareness to educe competitive rivalry. This section uses PESTLE framework to explain following environmental influences on businesses. Monsoon, 2011) Political and Economic Singapore which Nanning Optical is based creates an excellent environment for small businesses and startups. Singapore government has always encouraged the growth of small businesses in terms of grants and subsidies for Seems. For example, government subsidies Seems up to 40% of the upgrading IT infrastructure cost.
The Singapore Government hopes that such initiatives will keep local Seems raised their radioactivity and innovative which will sustain and improve their position in the competitive market. (Lord, 2012) Seems constitute 92% of all firms, employ 51% of the workforce and account for 34% of GAP. (Escaper, 2012) They will in turn provide quality employments and raising skills of employees through effective use of technology. These initiatives are revised according to the economic conditions, and more support from government during worse times.
At regional level, Singapore governments representative have regularly visit emerging countries like China and India in order to reach memorandum and tree trade agreements A good example is the Ouzos Tech Park in China, consist of high tech manufacturing facilities with built in residential and recreational facilities. This is a Joint development between Singapore and China. (Semipro, 2012) Back at home, Singapore resembles a warming welcome environment for startups of local companies in the form of political stability.
Leadership in Singapore does not change every two years. Reigning government is able to plan in a long term basis, this place the country into an advantageous mode, revived the current environment has gain solid grounds in terms of strong and sustainable economic growth, established infrastructures which is well linked to the rest of the world. Taxes are key considerations for setting up business. Singapore key advantages are being low effective personal and corporate tax rates.
Personal income has a tier system that starts from nothing and cap at 20% for income above $320 000. Effective corporate tax rate for Singapore private limited companies for profits up to $300 000 is below 9% and caps at 17% above $300 000. Dividends for shareholders re tax free. Singapore has one of the lowest SST rates at 7%. (Team, 2012) Social Singapore Government has adapted a social security system of low tax rate but heavily subsidies public health care and housings finance in equal measure by employees and employers alike.
The government has being actively administered necessary measures to ensure every child born here are vaccine against chronic diseases, a ready pool of funds in citizen savings with heavily subsidies aid from government for the use of hospitals, elderly homes, childcare, education and other accessible resource during different aspect of life. (Singapore Budget 2012, 2012) The above measures affect the well-being and health of the people, and are closely related to the social aspect of Singapore.
There are numerous countries with inadequate social system in place which indirectly translate into increase of crime rates and unrest. For example, the current anti-Muslim movie made in the United States “Innocence of Muslims” has sparked protests and riots all over the world. Singapore, being a country of really strong emphasis on respecting various cultures ND religions, the nation is instantly aware that violence is never a response to prejudice, which the latter should not happen at the first place.
Above mention social aspects of Singapore not only is a favorable place for local companies, it is also a magnet for foreign direct investments. Technology Singapore is in the midst of rolling out island wide fiber speed internet connectivity. Main local Telecoms are also implementing G mobile telecommunications. People can keep in touch of internet and communications even faster before no matter where they are. Businesses operations and deals are as if running virtually rounds the clock even if the brick and mortar offices are close. Neo, 2012) Rising in technology aids in developing more advance business applications at a cheaper cost in implementation, for example, warehousing and account software designed in a modular manner, which can be easily tailored to different business environment. Due to high speed internet transmission, small local companies can host their data and application with providers instead of purchasing the whole suite of software, which at times is understanding. (SUM, 2012)