Description of 759 Store and Its Corporate Strategy
Autor: bearinhk1981 • July 28, 2013 • Essay • 635 Words (3 Pages) • 6,982 Views
Description of 759 Store and its corporate strategy
759 Store was established in 2010 and had more than more than 133 stores in Hong Kong in 2013. It attempted to compete with local chain stores by focusing on the niche market of snacks directly imported from Japan and Korea at discounted prices.
759 Store was a key stream of business of the Hong Kong listed company, CEC International Holdings Limited (759.HK) (“the Group”). The Group started with electronic component manufacturing business. Management diversified the Group’s business as the manufacturing sector continued to face many uncertainties since the financial tsunami in 2008. The Group subsequently leveraged on its business contacts and launched the retail outlets of “759 Store” on a trial basis with “low margin with high turnover” as its principal strategy.
Assessment of the diversification strategy
Referring to the Group’s interim results announcement for the period ended 30 October 2012 , while the manufacturing sector suffered in its economic cycle,
According to the BCG Growth-Share Matrix, the manufacturing business is a “dog” with low, unstable earnings and cash flows. The demand was weak and the Group might need to consider diversification.
On the other hand, the Group’s retail business had a remarkable growth. The opening of retail outlets allowed the Group to tap into another market, the consumer goods segment which had a wider customer base and was less prone to economic changes. It was a “star” with high potential growth and worth further investment. The retailing of snacks was not related to the manufacturing of electronic components, the Group’s original core business. Through its business network, the Group managed to expand its scope and source confectioneries directly from its overseas suppliers so that it could have a cost comparative advantage when compared to other local chain stores. The diversification allowed the Group to spread business risk and develop another revenue stream. In addition, excess manpower and
...