Where Creativity Is a Bread and Butter Issue

BREADTALK GROUP

Breadtalk first made waves when they entered the bakeries market all over Singapore in the year 2000, bring in a totally new concept of bakeries business into Singapore.

1. From a classic rags to riches tale

Born in 1957, MR. George Quek was a son of a humble vegetable farmer who later became a seaman and a housewife mother. Together with his 3 brothers, they stayed in a rented wooden attap hut in Hougang.

As a boy Mr. George slowed no inferred in studies whereby in his report card you could see more red than blue marks. He rather prefers to dabble with a pencil and drawing board. His creativity ignited into a passion for artistic pursuits. Once completed his “o” levels he enroll himself to Singapore Art Academy and worked as a cable technician to pay his fees. After graduation, he was enlisted for National Service. He signed on as a regular in the Army at the age of 20. The Army has taught him to be tough and strong with endurance and determination and eventually emerged as a company sergeant major, upon leaving the Army, he worked in a Hong Kong handicraft shop in Parklane Shopping Mall. Where he did wood carving metal engraving and also move dragon-bread candy. In 1982, Mr. Gorge Quek left for Taiwan to further his art education. But destiny had no plans for him when he realized he could not afford the 6000 dollars enrollment fee. With the remaining money, he set up a single pushcart stall selling “Dragon Bread Candy” in Taiper Department Store. The snack failed to “bite” at that p, feeling the sheer horror that he might not have money for a return-ticket home desperate for new invention and creativity. Slowly he began to “feel” the tasebud and preference of the Taiwanese customers. Though trials and errors, he modified his sales pitch, marketing, flavors and presentation accordingly business flourished.

2 years later from one single cart outlet it expanded into 4 more push-cart with the sales over $240,000 a month. Emboldened by his “initial success”, he came back to Singapore and invested $100,000 in Singapore’s howker food “ bak chor mee and fishball noodle”, he lost a huge portion in the early stage. Refusing to throw in the towel, eventually the venture paid off in 1992, and had since grown into 21 outlets. He sold off his business and started an ice-cream chain parlour in China, which was again successful. Mr. Quek and his wife Katherine feeling homesick after too many years in China, decided to pack up and head home.

Back in Singapore with his years of experience in F&B, he engaged a few Taiwanese partners and set-up the first Singapore style modern food court in Bishan function 8 in 1994. The venture was a sweet success and within a few years, over 15 such food courts up all over Singapore and overseas.

2 Entrepreneurship

Mr. Quek’s achievement so far had been an Astounding success and he could jolly well “retire” comfortably yet, he was never contended.

While in Taiwan and Japan, he noticed the “popularity” of “designer-bread boutique” outlets among the people.

So in the year 2000, brought in the “designer bread boutique concept” ( an “open kitchen concept”) whereby the breads are presented in elegant clear glass boxes that resemble jewelry showcases creating a bright-looking fluorescent lit-boutique which allows people from outside the shop to look in and watch the chefs making the delectable bread and pastry concoctions from start to finish. Customers also enjoy a breezy and trendy ambience in these bakeries. The walls are splashed with a clinical white and the bread and pastries are displayed on sleek white plastic and glass shelves, life clothes on display in a department store, creating a wonderful potpourri of colours and smells that attract long queues of people round the clock. Stylish plastic carriers used for purchases are trendy looking and carries over the minimalist concept.

Equipped with the new staple of the art bakery

Equipments specially imported from Germany, Spain and Japan, the fasts, aroma, quality and texture consistency of our breads are further enhanced new staff uniforms with French and Japanese influence and biodegradable and Environmentally friendly packaging for all our products complete the entire “ new look”.

Breadtalk has become a “distinctive Singapore brand” that has gained International Appeal and renowned for the way it has revolutionized the culture of bread consumption with its visually appealing, aromatic and unique-fasting products.

From 2002 to 2004, the Breadtalk was recognized as one of the most recognizable Local Brands in Singapore, was awarded the followings: 1) Singapore Promising Brand Award; 2) Singapore Most Popular Brand Award 2002; 3) Super Brand (2002/2003); 4)Enterprise 20 start-up Awards (1st); 5) Singapore Most Distinctive Brand Awards (2003-2004): 6) Design for Asia Awards 2004; and 7) Most Transparent Company Awards 2004

Mr. Quek was conferred an Honorary Business Doctorate by the Wisconsin International University in recognition of his entrepreneurial creativity and successful career record in May 2002. On 10th July 2002 he was the joint winner for the entrepreneur of the year 2002. Eventually he brought Breadtalk to list on the SGX in 2003.

Using the current socio-political-economic outlook, I will examine Breadtalk external general and industry environments, internal analysis of the company as well as provide an assessment of the performance of the company in terms of the company in terms of efficiency, effectiveness and returns to investors.

3.1 External general and industry environment

3.1 Political Factors

Increasing globalization and loosening trade barriers, presents a challenge as well as an opportunity to Breadtalk. The challenge will be to compete against unknown forces and to source the best quality/financially viable products/ingredients from world over. Breadtalk can enter the markets of emerging companies through joint ventures or partnerships to explore these new markets especially those in the less developed Asian markets where bread could be a luxury. However, understanding the other countries’ dietary preferences would be needed to help Breadtalk

Moreover, Breadtalk may stand to lower its costs as governments begin to lower taxes or provide subsidies to help businesses stay afloat in this economic crisis and landlords reduce rents or provide rental rebates to keep their tenants.

3.2 Economic factors

The fluctuating commodity and raw material prices all over the world result in rising purchasing costs for Breadtalk. This will have an impact on the margins of the organisation and might lead to passing over the cost to consumers by increasing prices of most things in the supermarket. Furthermore, rising fuel costs will have implications right throughout the supply chain of Breadtalk leading to an overall situation of increasing prices, resulting in decreased competitiveness. At the same time, the monsoon season may also have a negative impact on prices as crops are destroyed and supply decreased.

The credit crunch can impact Breadtalk negatively as it might decrease the purchasing power of consumers and though they will still buy the essentials they may be more cautious. Furthermore, Breadtalk’s fast expansion needs to be fueled with cash injections and given the latest Dubai crisis, investors and bankers may hold their cash and be less willing to lend.

At the same time, Breadtalk may also face stiffer competition from local small retailers who offer bread at more affordable prices albeit less delicious or varied- something which will appeal to cost conscious consumers. At the same time, traditional big bakeries like Sunshine and Gardenia may also pose a threat as they also offer buns with fillings.

3.3 Social Factors

As Breadtalk forays into the lesser tap markets of China and India, social factors may also come into play. Chinese and Indian customers for example, have different staples depending on the region they hail from and also the styles of food preparation maybe different from the current inventory offered.

3.4 Technological Factors

Modern processes and machinery can also be used to ensure that the cost of labor and production is reduced. At the same time, PDAs and other communication devices can also be utilized to ensure faster processing of orders.

4 Analysis of Industry

Using the Porter’s five forces model, I will provide an analysis of the industry in which Breadtalk operates in.

4.1 INTERNAL RIVALRY/COMPETITORS

The organization operates in a highly competitive industry, characterized by other low priced confectionery producers which are mostly small family-run businesses producing bread that are sold in the neighborhood, which translates to small-scale production for the local market. On the other hand, a few large retailers such as Sunshine, Gardenia also produce affordable products and enjoy economies of scales to compete effectively. Thus, it would seem that competition among rivals is intense with Breadtalk facing competition from both ends of the spectrum. Internally, the organization, according to some accounts, has seen differences of opinion regarding product offerings and positioning. Due to the intense competition and to diversify, Breadtalk has wisely attempted to compete by entering the markets which typically pose the largest competition, such as China.

4.2 Buyers and Suppliers’ Bargaining Power

It is true to see that consumers pose a credible threat of backward integration to retailers however in order to compete effectively against the backdrop

retailers as a result seek different ways of improving performance by adopting strategic schemes of work based on relationship marketing which aim to build greater customer loyalty and long-term relationships with suppliers. This explains Breadtalk strategy in the integration process between suppliers, retailers and customers. Breadtalk integrates backwards by producing and designing its products in its own factories and this benefits customers as products are priced potentially lower.

In relation to buyer power in the industry Breadtalk seeks to enhance customer loyalty through a focus on enhancing existing relationships while aiming at winning new customers also and tying them into long term relationships with companies. This is done by providing customers with positive shopping experience through good customer service. For example, Loyalty card- Spend above $5, you will get a stamp on your card. With correct no. of stamps, customers are able to redeem a free bun. Package meals are also available where 5 buns are sold for $5 and Breakfast set comprising coffee/tea+bun at $2.

4.4 Threat of Substitutes

The position of substitute products is a matter of searching for other products that can perform the same function as the product of the industry or player in the industry. Breadtalk selling confectionery faces several substitutes depending on the purpose the consumer is buying the bread for. Singapore has many hawker centres and restaurants selling food and all these are substitutes for bread. For breakfast, outlets like Delifrance, Mcdonalds KFC etc provide competition while restaurants like hawker centres and Saki Sushi are close substitutes for lunch and dinner in terms of pricing.

4.5 Potential Entrants

There are several furniture retailers in terms of stores such as Delifrance, Mcdonalds KFC and other high end retailers like Jack’s place. It is obvious that the decreasing level of customer loyalty has resulted in higher degrees of competition while threats have also come from new entrants to this industry. Capital investment required in the bread shop can be rather high as shop space needs to be rented, factories need to be built and designs need to be sourced before the entrant could begin selling the products. Furthermore, the new entrant would need to capture a certain market share before it could reap the necessary economies of scales to allow it to compete with rival firms. The difficulty of securing suitable distribution channels for potential new entrants may also create barriers to entry since bread is a common product and supermarket chains may be unwilling to distribute such products, especially if they have their in-house bakery. The confectionery industry enjoys fairly high

product differentiation since established retailers enjoy a degree of brand name recognition and customer loyalty, making it tougher for new entrants to enter. In general there are various forms of new entrants for established confectionery retailers and some companies, notably the small family owned businesses, have exited the industry due to decreasing profit margins and increased competition. This is evident in the neighbourhood bakeries many f which has ceased operations. It is fair to say that branding strategy plays a critical role in maintaining long term customer bases which itself reflects the increasing power of customers.

5 SWOT Analysis

Having looked at how the external environment can affect Breadtalk in its strategy, let us look at the internal analysis of the company.

5.1 Strengths

Breadtalk’s main strengths are a strong international brand recognition attracting key demographic customer groups, built upon a unique philosophy. This Breadtalk business model is unique in its construction and execution with little direct competition on a like for like basis. Perhaps a key asset Breadtalk possesses is the Breadtalk menu. Breadtalk ‘s success has been driven from the price architecture offering value to the customer in innovative and tasty products which are low priced vis-à-vis similar products. Since 1997, the company has enjoyed high sales performance which boosted profit margin and created a healthy reserve which could be used to fund company expansion. Another strength is that the company also a wide menu of confectionery products which allows it to change the menu on daily basis. Its financial strength is also strong as it has the capacity to draw funds from investors as a listed company.

5.2 Weaknesses

The firm’s main weakness is the fact that it is very much reliant on Singapore, with a small domestic market of five million and is underserved in the emerging economies of Asia. This could be a potential drag on company performance in the long term as the local market is fairly saturated with little growth. Another potential snag is that though Breadtalk offers a wide variety of products, it does not have halal certification, which is necessary for them to penetrate the Muslim market and even more critical if it wishes to penetrate the Malaysian and Indonesian markets.

5.3 Opportunities

Breadtalk is countering its main weakness with its key opportunity, which is expansion into emerging markets in China, Vietnam and other Asian countries. Traditional product for Breadtalk has been affordable, low-priced high volume bread. However the movement into mid and higher price points will see an opportunity to move the demographic base and increase the average basket value with less reliance on a limited demographic group. Another opportunity available to Breadtalk is the increasing popularity of online shopping. Its expansion into the realm of the virtual marketplace, the possibility of greater reach coupled with lowered expenses is now a real one for Breadtalk. Although there are negative associations within the development of the Breadtalk Ecommerce site there is an associated opportunity to achieve growth and increase levels of customer service as the additional transactional capability will reduce pressure from stores to a certain degree. This will also create a push for consumers to purchase bread through websites, ensuring that the consumer could have a Breadtalk bun without travelling to town.

5.4 Threats

Unfortunately, these extra developments are driving the threat of a possible over saturation of the market, as mainstream retailers are beginning o offer more variety of bread and other firms like Sweettalk join the fray. Existing bread related firms like Ya Kun could also decide to compete with Breadtalk directly by offering bread with fillings. Such move will have an adverse effect on Breadtalk which draws a significant portion of its revenue from the sale of bread. This is compounded by the existence of alternatives like SubWay which appeal to the health conscious and if it decides to sell low priced bread, would provide Breadtalk with a challenge.

In my opinion, Breadtalk has a two-pronged strategy for growth, branding and expansion. I will attempt to talk about the company’s branding and expansion strategies and show how these are interlinked and also the problems the firm may face in the near to medium term.

6. Branding strategy

The development of a successful brand requires a well-managed, strategic approach that includes three key elements, which Breadtalk has done well. It has successfully came up with a brand idea, created a core identity and made itself authentic. At the same time, the nine-year-old BreadTalk opts for franchising when venturing abroad. This allows optimization of resources. The company focuses on branding while the local partners focus on the network and operations.

In more familiar markets like China and Singapore, BreadTalk prefers to own-and-operate. In total, the company has 42 wholly owned outlets and 26 franchised outlets in the region.

6.1. The brand idea

Every brand must stand for something that is unique, remarkable and relevant to the target markets' worldview and aligned with the company's goals. In Breadtalk’s case, it aims to ‘Establish BreadTalk as the foremost international, trend-setting lifestyle bakery brand’. The branding is a simple but good strategy as it establishes itself as such and at the same time, connects with its core target market which are the heartlanders.

From its foundation, Breadtalk has been successful as it revolutionized the bread market. Many customers were satisfied with the products and they became the firm’s greatest asset as they promoted the brand by word of mouth, allowing it to connect with an increasingly wider audience.

6.2. The core identity

Having established a suitable brand idea, the next stage is to develop a core identity for this idea. This serves a number of functions.

Breadtalk gained the attention of the target market, helped consumers to identify you, and ensured that its remarkable brand idea is attributed to the firm.

The core identity consists of the brand name, logo and visual style as is evident from its website.

However, the brand is not yet complete. Without the third and final element, the brand is unlikely to achieve any significant lasting value.

6.3. Authenticity

This last stage of the brand's development is its creating an authentic brand. It tells the world who Breadtalk is and what it stands for.

This allows it to earn the trust and respect of not just its customers, but also your staff, investors and other business stakeholders.

To achieve the required level of authenticity, its Mission statement guides everything that it does, and below are some of the strategies it used.

Famous for its pork-floss buns that made waves in 2000, home-grown bakery BreadTalk now has over 200 products and can be found in 8 countries.

Making The Dough

Head of Brand Development, Joyce Koh, says: “We opened shop in 2000. In our first year, we had a lot of enquires, especially from Indonesia. But we felt we were not ready operationally.”

BreadTalk waited until it had built up its business development and resources to support a partner before setting up its first outlet in Indonesia in 2003.

“It was a brand new game for us so we decided to engage professional expertise to help us develop the franchise,” Joyce recalls. BreadTalk also works closely with Government agencies such as IE Singapore which provides networking opportunities, intelligence, research and groundwork. This is a good strategy in my view as it allows the company to built up the financial capital needed and at the same time, also allows the firm to build its organizational capacity without stretching its limits.

Once in place, branding efforts will take the company to new heights. “The brand is always progressive and grows through different facets. As the brand evolves, it is important that the vision remains clear to ensure consistency and adherence to the core brand concept,” emphasized Ms Koh. Consistency in a brand name goes beyond just the aesthetics of a logo or punchline.

Choosing Partners

“We have been blessed with partners who are proactive. They approach us so we do not need to source for them. We look for partners who are dedicated and have the drive and passion to build the business,” says Joyce, adding that BreadTalk has rejected big conglomerates, as they did not fulfil BreadTalk’s requirements. This is also a good move as big companies are usually in a diverse field of businesses and may not have the time and resources to work with a fledging company. As such, by choosing to work with partners who are willing and able, the firm is in a good position to enter into win-win partnerships.

Fees And Royalties

For BreadTalk, leaving their mark through franchising in 12 territories around the world including Indonesia, Taiwan, Hong Kong, Philippines, Kuwait, UAE, India, Malaysia and China – it is essential for the brand’s values such as the quality behind the product to be transmitted throughout the different markets at home and abroad. Market experts have urged SMEs to take on a serious approach to establishing brand stability and developing a clear identity before venturing into new waters, something that BreadTalk has adequately achieved before developing the brand further.

BreadTalk’s Master Franchise fee is USD$600,000 to USD$800,000. Franchisees will also have to pay royalties each month. Bi-annual trips are made to the franchise outlets to ensure that franchisees are following the guidelines and doing well. In my opinion, such strategy has several benefits, chiefly, Breadtalk does not need to shell out huge fees to penetrate foreign markets overseas and at the same time, stands to gain more than a million dollars from each market. It also allows the company to grow its brand as franchisees would have to use the Breadtalk brand. In effect, it would be like getting other willing partners to help grow the firm.

Intellectual Creations

At the top of BreadTalk’s agenda is creative innovation. They maintain this through training and constant performance reviews. To ensure that ideas are fresh and innovative, the team regularly travels to countries such Japan and Europe to scout out international trends to bring back to the local team. Brand experts have always advocated that branding efforts should indeed complement the vision of the company.

Being innovative and adaptable helps BreadTalk succeed in overseas markets. It maintains 80% of its product range and adapts 20% to the local palate. For example, BreadTalk used halal mixes and created new recipes at its Kuwait outlet. “Kuwaitis have a sweet tooth. So, we created a range of mini pastries and packed them in a specially designed gift box. It has proven to be very successful,” Joyce says.

The company is diligent in protecting intellectual creations. For instance, the BreadTalk brand is a trademark in 30 countries and is a pending trademark in about 60.

This is also a good move as it helps Breadtalk stay relevant in the market and meet the consumers’ needs rather than trying to get consumers to like the products of the company. Such customizing of products to meet target market needs is also useful in building a brand name that gives consumer the feeling that the firm is sincere about doing business and also wanting to meet consumers’ needs.

Brand Recognition

BreadTalk presently also holds several accolades to its name. It was awarded the Most Promising Brand and voted Most Popular Brand in the Singapore Promising Brand Awards 2002, co-organized by ASME and Lianhe Zaobao.

The repeated wins in 2003, 2004 and 2005 gave further recognition to this well-loved brand. BreadTalk is the Award’s first ever SPBA Gold Award Winner.

It has also won other overseas branding accolades such at the Design for Asia Award 2004 organized by the Hong Kong Design Centre and the Five Star Diamond Brand of the Year 2006 accredited by World Brand Lab in Shanghai.

In a recent Singapore Promising Brand Awards (2005), BreadTalk clinched the overall Most Popular Brand Award. There were more than 150 brands who were vying for the accolade.

Winning such awards helps to strengthen BreadTalk's brand both locally and internationally. And will, undoubtedly, help the company to continue to franchise its way into global markets.

The Breadtalk branding strategy focus and maintain the following tactics :

1) Breadtalk outlets are Designer Bread boutiques to project the image of a friendly kitchen;

2) The bakery uses a concept of Space Age Bakery to inject fun and humour;

3) It utilizes an Open-See Though Kitchen Concept which allows customers to appreciate the hygienic conditions and food standard under which the bread is made;

4) The stalls take the form of Brightly Lit Fluorescent boutiques to exude warmth and close friendship

5) Its products are unique and innovative in terms of taste and freshness6) Besides delicious buns, it also attempts to make the products visually

attractive in the form of creative recipes with funk and exotic names like Spice Girl, Crouching Tiger, Hidden Bacon, Moshi Mushroom, Earthquake Cheese Loaf, Down to Earth and Floss Buns, etc.

7) It offers a Mix of Western-style Buns with Asian ingredient which is an example of creativity and fusion of cultures and tastes

8) A wide variety of products is offer with over 150 varieties of bread, buns, pastries and cakes and offers 40 to 60 different items daily.

9) Last but not least, the company sets itself as a company where strive and creativity are valued and esteemed.

Although branding strategies need to be valued as a core component of business growth, BreadTalk’s Research and Development (R&D) has also played a vital role in leading the market with innovative and delicious recipes that bring much revenue and brand awareness. It creates new varieties of cakes, buns and bread on a daily basis, drawing inspiration from foreign markets.

One aspect of branding that is often overlooked is the practice of corporate social responsibility (CSR). The earthquake in Sichuan has been a heart-wrecking disaster. Both individuals and corporations have stood forward leading the humanitarian efforts in collection of aids in both kind and monetary.

Breadtalk who owns business in China has initiated the efforts by contributing 100% of the proceeds from sale of a specially created bun called the “Peace Panda” as a support to help the disaster. This effort is in collaboration with the Red Cross, and has since put together SGD40,000 in barely a week.

Breadtalk has performed a good example of Corporate Social Responsibility (CSR) and as a CRM strategy, it has indeed worked very well for its brand. A benefit is received is free media coverage. The earthquake is top of the mind concern for every single person on the street and everyone is interested in reading the latest about it. The fact that Breadtalk has led such an effort has built a top of the mind brand recall for their business, further strengthening their market position as the big brother in the bread lines. Secondly, the interest it has created caused a word-of-mouth marketing effect. People will asked each other about the buns and another person will be off to buy it as a gesture of support. So it thus created both the “attention and intention” to purchase. Furthermore, for better or worse, people started talking about it on blogs and forums, tapping the power of Social Media Marketing. Taking into account that no publicity is bad publicity, the internet has a long memory and reaches beyond just the localised demographics. This further created a stronger branding for Breadtalk in the region.

As Breadtalk has a lot of businesses in China, regardless of how insignificant their efforts may seem like, they have already created a top of the mind brand recall for the 1 billion chinese population, especially in a China where people are patriotic and gestures for or against the Chinese people go a long way. So the next time a local Chinese wants to buy bread, they will remember how Breadtalk have supported the disaster and that will translate into a long term ROI.

George Quek’s motto for Breadtalk is:

Seek change

Seek ideas

Seek to differentiate

7. Expanding

THE economic downturn has barely slowed down BreadTalk's expansion plans. The group is still charging ahead with its target of opening the 1000th bakery in the region albeit shifting the deadline for this from 2011 to 2012.

Of these new stores, 550 will be in China - up from a total of 99 currently. Chairman George Quek is optimistic about the bakery business and is convinced the vast size of China's market will provide great returns.

Indeed, key drivers behind BreadTalk's first-quarter growth were the China and Hong Kong markets. Revenue growth in China was 34 per cent and 104.3 per cent in Hong Kong - a success Mr Quek attributed to the management's keen understanding of the culture and business environment in China.

The group will be leveraging this expertise to franchise Carl's Junior in China. There are plans to open 100 outlets of the popular American burger brand with the first outlet slated to open in Raffles City Shanghai this July. Developing the franchise network will cost several million dollars.

The group is also exploring plans to break into the Middle East markets, where it will also experiment with the sub-franchise system.

Breadtalk was incorporated in Singapore in April 2000. It was founded by current Managing Director, George Quek and wife, Executive Director, Katherine Lee.

The 1st Breadtalk retail outlet was open in July 2000 at Parco Bugis Junction.

A 2nd outlet opened within 5 months, in December 2000 at Novena Square.

The 1st HDB heartlands outlet opened at Junction 8 Shopping Center in December 2000 also.

During 2001 another 5 retail outlet was opened. As of April 2003, 22 retail outlet exist in Singapore along with a central kitchen at Kampong Ampat that prepares and distributes “fillings” for breads and buns, bakes cakes and pastries for distribution to various outlets island-wide. Breadtalk opened its first “franchise” outlet in Jakarta in April 2003. They have also received inquiries from interested franchisees in other countries, including Malaysia, Hong Kong, Australia and USA.

Over the last 9 months, Breadtalk has grown from a “humble beginning” to a “household name”. It has put Singapore on the “International Retail Map” at the “World Retail Awards”, the Oscars of the retail industry.

These one of a kind creation are “unique” to Breadtalk and the constant creation of “new” and more “flavourful” products is Breadtalk’s way of staying “Ahead” and “Dealing” with the “counterfeit” market in China.

Breadtalk outlets were initially concentrated in major shopping malls in town area and slowly moved out into neighborhood shopping centers, with the “aim” o attract a larger customer base of those aged 18 to 40 years, targeting mainly students and young working adults.

Today Breadtalk owns 24 retail outlet in Singapore and Breadtalk Group Ltd was listed on SGX in 2003. Breadtalk has 212 retail outlets worldwide and has spread their wings by opening “Branches” in Indonesia, Hong Kong, and People’s Republic of China, Philippines, Malaysia, India, Korea, Kuwait, Oman and Bahrain.

It has also upgraded its listing to the SGX main board trading alongside “ blue chips” companies.

Breadtalk expect to expand to open up to 550 retails outlets by the year 2012 in over 30 provinces and cities.

In venturing overseas, Breadtalk adopted these strategies:

- Built a winning concept in Singapore before venturing abroad. It does so by ensuring that recipes were rolled out, finances and processes are built and strengthened before it ventured. This allows it to build the necessary know how and resources before venturing abroad. This also provides some buffer in the event that the foreign venture fails to take off. Breadtalk also ensured that the company was operationally ready before taking on overseas markets.

- Chose own-and-operate and franchising as complementary strategies. As mentioned earlier, this allows the company to tap on external resources to grow and at the same time, receive payments. Of course, the downside is the reduced potential profits that the firm could reaped.

- Another important step to take in the process of internationalization is to seek professional advice from the relevant bodies such SME associations or government agencies. The latter avail the options and resources available and smoothens the expansion process. In particular, ASME has placed much effort in creating a platform to increase the importance for branding through the Singapore Promising Brand Award (SPBA). Breadtalk moved into new markets only after getting professional advice and help from Government agencies. This removes the need to reinvent the wheel and saves resources from researching the new target market. At the same time, Government agencies could also help the firm in understanding the way business is done in other countries.

Thus, in the words of Mr Quek, the key to flourishing in the competitive food and beverage industry is to have a clear and focused brand strategy, and to move ahead of the competition. Hence the need to push ahead with expansion in spite of the downturn.

However, in its rapid expansion, one wonders where will the funding come from.

According to Catherine Lee, group chief financial officer, cash flows generated from existing operations will be sufficient for growing existing brands, while bank loans and retained earnings will be used to fund new brands like Ramen Play and Carl's Junior.

Currently the group's low gearing ratio of 0.26 leaves much room for increase and Ms Lee said the figure could be comfortably increased to 0.5. Thus, in terms of debt funding, there is indeed a buffer for the firm to expand.

Operating cash flow rose to $0.959 million, up from $0.645 million as Q1 net profits increased to $2.08 million from a loss of $0.302 million a year ago. The turnaround was a result of divesting loss-making J Co Donut. In effect, this will allow the firm to experience increased profits now the loss making firms are divested.

Revenue rose 26.9 per cent from $45.09 million to $57.20 million due to improvements across all business segments. In particular, the bakery and foodcourt segments contributed to an increase of 29.2 per cent and 29.4 per cent respectively. We can probably see this value increase over time as the firm opens more foodcourts in view of the new shopping malls that are springing up and also the new bakeries the firm opens.

However, the group ended the quarter with a lower cash reserve - down $3.79 million to about $44.09 million - due to lower proceeds from short-term loans and repayment of short-term loans. With low interest rate, it is unlikely for the firm to want to increase this ratio except to keep sufficient reserves to expand and for day to day operations. Nevertheless, the group's operating cash flow can be expected to increase in the near future with increased franchise businesses, Mr Quek added.

Another potential pitfall could be the problem of staffing in a fast expanding business. When a company expands regionally, one of the major challenges is hiring the most suitable people to run the new offices or branches efficiently.

BreadTalk's group senior vice president (HR), Goh Khon Chong, says the company's target in the next five years is to expand to a total of 1,000 outlets, including its own outlets and franchisees.

Their strategy is to train the staff, who will activate such an ambitious expansion plan, by bringing key employees to Singapore for training which they can then spread in their home markets.

"Though the employees of our franchisees are not our direct employees, it is essential that we provide training to ensure effective and efficient operations," Goh says.

Trained up employees would then be responsible for giving the workers both on the job and theoretical training. "Based on estimates, even if it's just 10 to 20% sent to Singapore for training, it'll mean more than 300 to 400 a year (are actually trained), including our own employees. It's a real challenge". Thus even when training has been identified as a key, implementing it would not be easy given the number of staff that needs to be trained to gain a critical mass to impact operations back home. Breadtalk has outlets in other cities, particularly throughout China where it has more than 1,500 employees of its own.

If HR leaders are not familiar with the talent pools on the ground in new countries, it can lead to difficulties in hiring enough staff. Chong says, "The main challenges for HR teams are alignment of HR practices and local knowledge, and spotting reliable sources to understand the labour market or getting information on HR rules in the particular country." Talent mobility, for instance, can be a serious issue, Chong says. HR teams must efficiently utilise the channels available to them in finding good workers.

8. Conclusion

From the stories of Mr. Georage Quek from rags to riches. It tells us that being “hard working” is not enough. We must be able to foresee the taste, culture, demands, presentations, sales pitch marketing, design, flavours etc. then taking a step forward by making the first outlet stable before expanding and taking the bigger challenges. The most important is “branding” and offering different varieties and an outstanding design bread boutique with a open kitchen concept. I have learnt that “team spirit” and organization is very important and experiences.

9. Recommendations

I believe that there are some ways Breadtalk can take to increase sales.

One way is to use the strategy of Market Penetration

The use of EZ link cards: This will provide the consumer with an alternative to make payment and is less costly than using NETS or credit cards as it does not come with a merchant cost. Furthermore, many students carry EZ cards

but may not have sufficient cash and this would help them to pay for their purchase, increasing sales.

Having a delivery service would also help as families who are too busy to buy breakfast can always order delivery. With 25 outlets across the island, it would be easy for Breadtalk to provide delivery.

Lucky draws and contests can also be held to increase sales as most Singaporeans do appreciate and take part in them, especially if the draws are of the instant win variety. Of course, this means that the company would need to ensure that the increased sales can offset the cost of holding such draws.

Samples of upcoming buns can also be given. This will not only increase awareness but also allow customers a chance to sample what’s new from the company.

At the same time, Breadtalk could also attempt to develop the Halal market by getting itself certified with a Halal certificate. This is useful as Muslims form more than 12% of the population and thus, a sizeable market to tap. However, due to the nature of the company’s products, it may wish to set up a subsidiary that sells Halal products exclusively as the current inventory includes pork. By having such certification, it would be easier for the company to target the South East Asia market which has more than 250 million Muslims.

It can also offer new products, coupled with a place to sit. i.e a café. This can attract those people who want to sit and eat, not pick and go and would appeal to the younger crowd who prefer to relax and enjoy in cafes instead of munching on a bun while on the goal.

Instead of situating in city areas, close down certain shops that has high rental costs and situate shops around residential areas since brand is already established. This also allows a wider reach as the residential areas would contain a lot more people rather than in the city where many people would just rush to work and off work.

It can also diversify its products by customizing products to ones’ liking. For example, it can allow customers to fill the bread with different type of toppings with the price of toppings varying correspondingly to the value of topping and charging a premium for such a service. This would cater to people who may be bored of Breadtalk’s standard fares.

I personally think it will lower down the cost of each bread if they would have a “factory” to produce a large quantity of breads per day, and also you could allocated all the bakers in the “factory” rather than at the retail outlet. Cause in this way they could monitor the work flow and control the productions and also could bring down the overhead for staff employed at each retail outlet. Some

more, can cut down the overhead for space require for the kitchen area with this idea it will save on the retail in the outlets and also centralizing production in one “factory” place.

It may set up individual departments to focus on the products.

1) Design of different varieties2) Marketing research and development3) Expansion of business4) Complains

With the above mention department whereby is strictly focusing on the issue and to improve and make necessary changes.

References:

http://www.business.gov.sg/EN/CaseStories/case_overseas_breadtalk.htm

http://www.timesdirectories.com/Singlenews.aspx?DirID=101&rec_code=385110

http://noahfinancial.com/Corporate%20New1.htm

Strategic Management: Concepts and Cases (10th Edition) by Fred David

Marketing Management by Kotler Prenticehall

Consumer Behavior (7th Edition) Prentice HallBy Leon Schiffman and Leslie Kanuk

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