AB3601 Critical Thinking

This paper aims to identify the current business strategy of BreadTalk’s bakery
division in Singapore and evaluate whether or not the company needs to change its business
strategy depending on external and internal factors. Using various frameworks such as
General, Environmental Analysis, Porter’s Five forces and VRIN, we will come up with a
business strategy that will fit BreadTalk the best in the current market.
Current Business Strategy
Currently, BreadTalk employed a broad differentiation as its business strategy. BreadTalk
bakery division offers a wide range of product such as traditional snacks and dishes from
Toast Box, cakes from The Icing Room and variety of breads from BreadTalk. They also
provide a “BreadTalk Experience” based on their different style of stores. In the past, this
diversification of portfolio has helped BreadTalk as a brand. Firstly, the diverse portfolio
helps to lower the cost of the company’s operation. This can be seen from, “Having multiple
F&B portfolios gave the Group opportunities to enjoy economies of scale, in terms of rent
and raw materials.” Secondly, BreadTalk has also seen an increase in revenue due to their
diverse portfolio. This can be seen from, “ Managed to enjoy a revenue increase of 16.1%
from $212.2 million in 2008 to $246.5 million in 2009.” The low operation cost coupled with
the increase in revenue has increase the profit margin for BreadTalk. However, currently, its
broad differentiation strategy presented some risk:
(a) customers may decide that the difference in price between BreadTalk’s product and
the cost leader’s product is too large
(b) means of differentiation may cease to provide value for which customers are willing
to pay
External Analysis
General Environmental Analysis
Socio-culturally, there is a change in lifestyle and eating habits for consumers in
Singapore. Consumers are becoming more health-conscious and more wary about the food
they eat. They tend to avoid food with high sugar and carbohydrates. This can be seen from, “
As consumers were more educated on health and wellness, they tended towards a diet lower
in carbohydrate and sugar.” Furthermore, millennial consumers have a growing preference
towards high-quality artisanal bakeries. This can be seen from, “there is a growing preference
for well-decorated, higher-quality and higher-priced bakeries, especially among the younger
consumers.
Technologically, millennials based their purchase decisions on the internet and social
media. With internet retailing, consumers can easily access to information and purchase a
product that they desire. Furthermore, there is a rise in automation for labour intensive jobs
which leads to high operational cost.
Porter’s Five Forces
Firstly, the intensity of rivalry for BreadTalk is high. Since BreadTalk is competing in
the retail bakery industry, they faced numerous competition from both boutique and mass-
market bakeries. Competitors such as Baker & Cook and Four Leaves are also equally
matched with BreadTalk in terms of size and power.
Secondly, BreadTalk has a low bargaining power of buyers. BreadTalk’s products are
differentiated as they are able to innovate their product. Furthermore, the products do not
form a significant portion of buyers’ cost. Thus, these two factors lead to the buyer group is
not price sensitive.
Internal Environment
VRIN Framework
BreadTalk resources are valuable for the company as it adds value for the customers.
BreadTalklevergae on automation to increase their productivity and increase their output by
more than 150%. This enables the company to exploit opportunities and neutralise threats in
the environment.
However, their resources are not rare and are imitable by their competitors. This
means that competitors are able to produce similar products with either higher quality or
lower price. This means that BreadTalk is only competitive parity and this may lead to
average returns.
New Business Strategy
BreadTalk should employ a focus differentiation strategy. Instead of having a wide
spread of product, the company should focus on a particular competitive segment. Since
BreadTalk wants to attract more millennial consumers, I would suggest the company to
primarily focus on premium and artisanal bakeries. This is because there is a growing
preference for unique and aesthetically pleasing products. Furthermore, since millennials
enjoy eating with company, tapping on a café-esque bakery will attract these group of people
to purchase their product. Since BreadTalk is already a household name who focus heavily on
their customer relation, it would not be difficult for BreadTalk to venture into this new
market segment.
I, < Muhammad Ariebima Abigara >, declare that this assignment is my own work,
unless otherwise referenced, as defined by the NTU policy on plagiarism. I have read the
NTU Honour Code and Pledge as found at
https://www.ntu.edu.sg/life-at-ntu/student-life/student-conduct
Signed _____ Muhammad Ariebima Abigara_____ Date __ 20/2/2023_____

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This paper aims to identify the current business strategy of BreadTalk’s bakery

Current Business Strategy

Currently, BreadTalk employed a broad differentiation as its business strategy. BreadTalk

broad differentiation strategy presented some risk:

the cost leader’s product is too large

General Environmental Analysis

Socio-culturally, there is a change in lifestyle and eating habits for consumers in

in carbohydrate and sugar.” Furthermore, millennial consumers have a growing preference

which leads to high operational cost.

Porter’s Five Forces

matched with BreadTalk in terms of size and power.

not price sensitive.

BreadTalklevergae on automation to increase their productivity and increase their output by

New Business Strategy

BreadTalk should employ a focus differentiation strategy. Instead of having a wide

NTU Honour Code and Pledge as found at

Signed ___ Muhammad Ariebima Abigara_ Date 20/2/2023_____

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