Strategic Management: Sugar Bun Case Studies

EXECUTIVE SUMMARY

The main objective of this paper is identifying, choosing and implementing activities that will enhance the long-term performance of Sugar Bun by setting direction, and by creating compatibility between the internal skills and resources of the organisation, and the changing external environment within which it operates.

To achieve this objective, this paper focused on performing industry framework analysis - Porter Five Forces to provide a simple perspective for assessing and analysing the competitive strength and position of a Sugar Bun.

Besides, SWOT analysis was used to understanding Sugar Bun's Strengths and Weaknesses, and for identifying both the Opportunities open to Sugar Bun and the Threats Sugar Bun faces. SWOT Analysis helps Sugar Bun to carve a sustainable niche in their market.

Before proposing strategic options for Sugar Bun, this paper looked into the current strategies employed by Sugar Bun to identify the strategic gap and potential development area to further enhance its business model to achieve competitive advantage.

At the end of this paper, three strategic options were proposed namely Benchmarking, Market Expansion and Differentiation Strategies to Sugar Bun to improve its performance and stay competitive in the industry.

INTRODUCTION

Strategic Management is the term applied to describe those activities of an organisation that enable it to meet the challengers of a constantly changing environment (Viljoen & Dann, 2003).

Given its diverse roots, strategic management cannot be considered to have a single approach to problem solving. This paper is tried to understand the Sugar Bun business environment by using Porter Five Forces analysis and SWOT analysis technique to generate relevant information, decide future direction and implement these activities.

Good strategies are based on quality of information rather than guess works. Therefore, Porter Five Forces analysis and SWOT analysis are carefully implemented to assist strategic analyst to focus the thinking in a structured way and to make sense of diverse range of influences operating on and in the organisation.

Sugar Bun, a local fast food chain store that established 32 years was chose to be the subject of study. Sugar Bun was one of the popular local home brands in East Malaysia but due to the lacking of strategic management, its business was facing down turn in 2000s.

Although it recent comes back due to the group restructuring exercises and the franchise business model, it is important to further understand its business environment to ensure the flexibility and immediate responses to incidents in a volatile environment.

ABOUT SUGAR BUN

Start as an ice cream parlor in 1979, Sugar Bun has changed to become one of the leading and most innovative Quick Service Restaurants, Cafes and Destination Centers in East Malaysia (Sugar Bun, 2005).

Starting of with broasted chicken as its main seller, SugarBun has progressed beyond chicken and hamburgers to become the first Quick Service Restaurant with the "4-in-1" and Destination Centres Concept offering mouth watering Asian Cuisine, Patisseries, Café Bar Beverages and Western Cuisine catering to a great variety of taste (Sugar Bun, 2005).

Sugar Bun is now one of the subsidiary companies under the Borneo Oil Berhad, an investment holding Company, comprises of various subsidiaries involve in fast-food operations & franchising, property and related business, oil, gas and energy related businesses and other activities (Borneo Oil, 2009).

Borneo Oil Berhad was founded in and it was formerly known as Sugar Bun Corporation Berhad and changed its name to Borneo Oil Berhad in 2007.

PORTER'S FIVE FORCES ANALYSIS

In the global market, industries are facing many challenges and opportunities which include the globalization of markets and production, advancement in information technology, competition, workforce diversity, deregulation, and ethics of good governance among others (Hitt et al., 2003; Dess et al.).

The extended rivalry model developed by Porter (1980) can be applied to any industry to determine how attractive an industry is. The more attractive of an industry is the greater is the potential for profit. Second, by determining the strength of individual forces it is possible to determine the best strategy to neutralize the strongest industry forces. The five forces of the model are the buyers, suppliers, rivals, potential entrants, and substitutes.

Threats of New Entrants (High Pressure)

Threats of new entrants refer to the difficulty levels of potential competitors to enter to the industry (Viljoen & Dann, 2003).

Sugar Bun is operating in the Quick Services Restaurants (QSR) industry. In this case, new competitors can easily enter to this industry without any regulatory barriers. Further more, the popularity of dining out culture and increasing in living standard have encouraged many enter to the food and beverage industry.

Sugar is facing threats of new entrants such as restaurants, theme coffee shop (Ipoh Town Kopitiam, Old Town Café) and theme restaurant (Station One, Sushi King) which can be categorised as their industry competitors. These industry competitors are providing similar or alternative options for consumers in term of food selection and dining out venues.

Beside, Sugar Bun also facing market penetration strategy employed by their major competitor such Kentucky Fried Chicken (KFC) and McDonald's. These competitors are setting up their franchise outlets around the country. However, high franchise fee and set up cost might offset some of the threats posed by these two International fast food chain stores.

Due to the lack of any of the barriers to entry being so significant as to thwart the majority of private start-ups, the threat of new entrants is high. The threats of new entrants can be reduced by improving product differentiation or by gaining control of strategic suppliers (Viljoen & Dann, 2003). This will makes the potential new entrants area that the business will retaliate most aggressively if they enter the market

Threats of Substitute Products (High Pressure)

Threats of substitute products refer to how easy is a company's product being replaced by other substitute especially the cheaper ones (Viljoen & Dann, 2003).

In the food and beverage sector, Sugar Bun is facing threat of substitute products. Any foods and beverages provider such as