Internationalization Strategy – Eu Yan Sang International Ltd Integrated Project Internationalization Strategy Table of Contents Content 1. 2. 3. 4. Executive Summary Introduction Financial Analysis Environmental Analysis 4. 1 PEST Analysis 4. 2 SWOT Analysis 4. 3 Industry Analysis: The 5 Forces Internationalization Strategy 5. 1 Leadership Challenges for Different Modes Of Entry 5. 2 Retail Marketing Mix & Merchandising Strategy 5. 3 Internationalization & Ethics 5. 4 Organizational Management Conclusion Recommendations Page No. 4 5–6& Appendix B 7–8 8 9 10 – 11 11 – 12 12 – 18 18 – 20 20 – 22 23 24 25 – 36 5. 6. 7. References / Appendices / Supervision Contact Form Integrated Project Internationalization Strategy 1. EXECUTIVE SUMMARY This report would give an overview of the internationalization strategy of Eu Yan Sang International Limited (EYS), a company that specializes in Traditional Chinese Medicine (TCM) that has expanded internationally over the years. Its success in branding, through collaboration with global market players and acquisition of established brand has allowed growth in its market share globally.
EYS has maintained consistent effort in introducing new products and ensuring quality standards of its products through liaison with reputable educational and research centers internationally. This definitely adds value to its brand equity.
EYS has been proactive in enhancing its public relations and performed exceptionally well in its associations with the relevant authorities and thus successfully built its brand recognition during disturbance period like the SARs outbreak in Hong Kong (HK).
It is concluded that Eu Yan Sang would continue to do well in the revolutionary international stage considering its prevailing success factors and abilities in handling future challenges. Integrated Project Internationalization Strategy 2. INTRODUCTION According to Dawson et al, 1998, internationalization of retailing was defined as “the operation, by a firm or alliance, of shops or other forms of retail distribution, in more than one country”. This report was written for the urpose of discussing the internationalization strategy of EYS, a progressive, global healthcare company with a focus in TCM and Integrative Healthcare (Appendix A: Vision & Mission of EYS). This report covers a careful analysis of the financial performance of the company 1 over the last 5 years, a methodical examination of the environments in which EYS operates in and the internationalization strategy of EYS which includes the company’s: ? ? Retail Marketing Mix (incorporating Merchandising Strategy); Ethical Issues involved when operating in the six countries, namely China (i. e. Guangzhou, Hong Kong & Macau), Taiwan, USA, Australia, Singapore and Malaysia; and ? Challenges faced in and values derived from management of staff in different cultures. In conclusion, an overall assessment of the company’s key success factors would be given. 1 Company here refers to Eu Yan Sang International Limited and its subsidiaries. Integrated Project Internationalization Strategy 3. FINANCIAL ANALYSIS From the figures shown in Appendix B (calculations, Financial Reports over the last 5 years + graphs), EYS had experienced increasing turnover, gross margin and net profit since 2003.
Turnover Its turnover had increased steadily from S$110. 8 m in FY2003 to S$191. 5 m in FY2007. This was due to the continual expansion of its network of retail stores and TCM clinics, the introduction of new products and successful implementation of its advertising and marketing strategies. Liquidity Although there were fluctuations in the current ratio from FY2003 to FY2007, the ratio of 1. 52 in FY2007 was still higher than that of FY2003. This meant that the company was in a better position to pay its current liabilities with its current assets as compared with FY2003.
Activity The lower inventory turnover ratio in FY2007 indicated that the company was not able to sell its inventory as quickly as in FY2003. The slight increase in asset turnover in FY2007 over FY2003 meant that the company was better able to generate sales from its total assets in FY2007. Gearing The company had a higher proportion of assets financed with debt in FY2007 compared with FY2003. Profitability The company experienced a slightly lower gross margin % of 49. 5% in FY2007 compared with 50. 2% in FY2003. However, its net profit % increased dramatically from 2. % in FY2003 to 7. 7% in FY2007. This meant that the company was better able to achieve some cost savings in its operating expenses. Integrated Project Internationalization Strategy However, there was a dip in the net profit % from 8. 3% in FY2006 to 7. 7% in FY2007. This was attributable to three factors. Firstly, EYS commenced the relocation of its Hong Kong factory to larger premises in June 2006, which caused a temporary disruption in its operations for the first half of FY2007. Secondly, its new lifestyle concept store – Red White & Pure™ incurred startup losses of S$3. m million, and lastly, its Australian operations underwent voluntary administration and incurred an operating loss of S$0. 95 million. The company also enjoyed a higher rate of return on total assets in FY2007 than in FY2003, which means that it was increasingly able to use its assets more profitably. Integrated Project Internationalization Strategy 4. ENVIRONMENTAL ANALYSIS The environmental analysis is a useful tool for understanding market growth/decline and as such the position, potential and direction for a business. In this section, analysis would be made to the macro- and industryenvironments of EYS.
In macro-environment, PEST and SWOT would be the measurement tools employed. Under the industry-environment sector, Michael Porter’s Five Forces of Competitive Position Model would be applied. 4. 1 PEST ANALYSIS (EXTERNAL ENVIRONMENT) PEST is an acronym for Political/Legal, Economic, Socio-Cultural and Technological/Physical factors used to assess the market of a business. Based on questions and issues commonly raised while performing PEST analysis (see Appendix C), EYS shown great market potential both locally and internationally. The following table by no means exhaustive was conjectured for the purpose of this report. strong legislation in home market, supported by Agri-Food & Veterinary of Singapore (see Appendix D) with the development of the EYSGAP-H Certification Scheme – the world’s 1st Certification scheme for Safety & Assurance of TCM herbs Political/Legal Economic •vast opportunities in modernizing/transforming TCM into western style drugs, e. g. Artemisinin ??? now widely used in the treatment of malaria Socio-Cultural •many chinese medicines have different names for the same ingredient depending on location/time, resulting in inappropriate use or worse case, food poisoning.
EYS can come along side to improve its environmental effort in TCM Technological/Physical •TCM are often not standardized from one pill to the next, or from one brand to the next. EYS’s potential is in its ability to standardize the market’s practice & take on the leadership role in this industry In summary, EYS projects excellent market potential in the TCM industry as the products are highly accepted in all of its target markets and popularity is also mounting in the western economies.
Coupled with more affluent societies and higher disposable income across the Integrated Project Internationalization Strategy operating markets, EYS believes that the consumers are ready for its premium TCM products. 4. 2 SWOT ANALYSIS (PARTIAL INTERNAL & PARTIAL EXTERNAL ENVIRONMENT) SWOT essentially conveys what is good/bad about a business. The aim is to translate Strengths (maintain, build & leverage), Weaknesses (remedy or exit), Opportunities (prioritize & optimize) and Threats (counter) into action. The SWOT analysis as follows: STRENGTHS Recognized Brand Name •”Most Valuable Singapore Brand” in 2002 •EYS Malaysia received 3rd Asia Pacific International Honesty Keris Award 2004 •”Singapore 1,000 Company” & “50 Fastest Growing Company in Singapore” •Top 200 Forbes Asia “The Best Under a Billion” •”Most Trusted Brand 2007 – Platinum Award” by Reader’s Digest •Conducive Retail Locations & Format •Convenient locations •Online store •Excellent Customer Service & Selling Environment •Convenient retail hours •Ease of locating merchandise •Well-trained staff •Pleasant Store Layout •Warm lighting (atmospherics setting) •Consistent products layout (internationally)
WEAKNESSES •Costly products •Lack of sophisticated point-of-sale system to track customers’ purchasing patterns, thus deficient in good understanding of customers’ needs OPPORTUNITIES •Short-Term •Create greater awareness of preventive healthcare •Long-Term •To modernize TCM to fit into contemporary lifestyles •Sizeable market potential in the Western countries (i. e. Europe, USA) due to influx of Chineseethnic migrants •Entry (via Acquisition, JV, Franchising or Management Contracts) into Korea or Japan market where people are advocate of TCM
THREATS •Competition from global specialty retailers of nutritional products like GNC, Nature’s Farm & locally from self-help remedies & traditional medical halls •Economic instability/inflation – leading to higher cost of living, consumers cutting down on “nonessentials” Integrated Project Internationalization Strategy 4. 3 INDUSTRY ANALYSIS: THE 5 FORCES The model of the 5 Competitive Forces is an important tool for analyzing an organization’s industry structure in strategic processes.
Porter’s 5 Forces Bargaining Power of Suppliers Intensity of Competition Raw materials for medicine/herbs production are commodity items that are very cyclical in price, quality & availability ? something the company has no control over The switching to an alternative product (e. g. western nutritional items) is relatively simple and is not related to high costs The threat of new entrants for EYS in modernized TCM is relatively low as this business requires high initial investments and ixed costs A threat from substitutes definitely exits as there are alternative products with lower prices of better performance parameters for the same purpose Customers could easily switch between products in this industry, thus businesses in the industry would be vying for market share Influencing the Power of 5 Forces As EYS has partnership arrangement with its suppliers and has control over the supply chain, it decrease its dependency on 1 or 2 suppliers EYS could work on its loyalty program, increases incentives and add value to purchases.
It should move purchase decision away from price EYS could further reduce the threat of new entrants by ? Enhancing marketing/brand image ? Utilizing patents ? Creating alliances with associated products EYS could accentuate differences (real or perceived) and conduct customer surveys to learn about preferences EYS should differentiate its products & focus on different segments instead of the mass markets Bargaining Power of Buyers Threat of New Entrants Threat of Substitutes Competitive Rivalry bet. Existing Players In summary, EYS is operating in an attractive industry which sees itself having immense threat of substitutes.
In combination with the macro-environment analysis, EYS should adopt new strategic directions, be it in new positioning or more differentiation for competitive products. Integrated Project Internationalization Strategy 5. INTERNATIONALIZATION STRATEGY Internationalization Milestones (see Appendix E: EYS Milestones): Year 1910s 1973 1980 Description Began operations in Singapore, Hong Kong (HK) & China Listed on SGX, incorporating both Malaysia and Singapore operations Set up Weng Li Sdn Bhd, manufacturing arm of EYS in Malaysia 1) Fragmented operations in HK, Malaysia & Singapore. ) Embarked plan to modernize the medical hall business, introduced modern, convenient packaging for traditional soup products & selling in supermarkets Continued modernizing & expanding – opening more outlets, turning to retail network Formed Eu Yan Sang International Holdings (merged operations in Malaysia & Singapore under 1 management team) 1) Acquired of EYS HK, merged & consolidated HK, Malaysia & Singapore offices as 1 entity with common shareholders & mgmt 2) Started expansion plans in HK Listed in SGX main-board & named as Eu Yan Sang International Limited (EYSI) Entered Australia market with integrative health clinic services under the “YourHealth” brand of Integrative Medicine Centers Entered USA (Los Angeles) market by acquiring retail brand Elixir (store & range of health tonics & teas) Entered Thailand market with a Distribution Agreement with SSUP’s General Nutrition Centers stores in Bangkok 1) Relocated EYS HK office & factory, representing major commitment by Group to the scientific advancement of TCM in the region (machinery & equipment were installed to comply with latest GMP requirements) 2) Launched of EYS’s new lifestyle brand – Red, White & Pure – a new retail concept that offered holistic approach to wellness & targets @ international markets especially western countries 3) Signed agreement with Ginseng Board of Wisconsin in America for sole rights to worldwide distribution of Wisconsin American Ginseng 4) Grand opening of Mega-Store – Health Cite in KL, Malaysia Opened 1 retail outlet in Taipei, Taiwan Developed new integrated online portal (iGATES), ready by 2009 to keep track of TCM herbs throughout the whole value chain st 1989 1990 1993 1996 2000 2001 2002 2005 2006 2007 2008 Integrated Project Internationalization Strategy
Internationalization of retailers is particularly challenging and complex, especially when compared to manufacturing. Retailers normally need to develop and manage a set of stores on the new market and thus could not use a traditional exporting strategy. This would involve the recruitment and education of staff, development of property, contacts with local and national institutional players, etc. Consequently, the need to develop a “fool-proof” internationalization strategy would be especially crucial for retailers. From the condensed internationalization milestones listed in the previous page, one could surmise that EYS’s expansion strategy is based on a standardized retail offer with the flexibility to adapt to different cultural settings.
In supporting its expansion into new markets, EYS has ventured with various entry modes building on its past experiences/insights and key leadership capabilities. EYS’s distinct leadership capabilities is indubitable a motivation in its success in organic growth versus other entry modes (i. e. strategic alliances and mergers & acquisitions). 5. 1 LEADERSHIP CHALLENGES FOR DIFFERENT MODES OF ENTRY INTERNATIONALIZATION CHALLENGES MODES OF ENTRY EYS’S KEY LEADERSHIP CAPABILITIES Organic Growth: ? Bringing innovation in form of new products/services; ? Identifying opportunities for existing offerings in new markets; or ? Generating more revenue from existing offerings from current customers. Strategic Alliances: ? companies join forces to exploit a market opportunity while retaining individual identities. ? ? Cultivating satisfied & loyal customers; and Responding to customer pressure for improved products & services. ? Focusing on customer; ? Sticking to a few critical priorities; ? Executing relentlessly; and ? Innovating & experimenting. ? Communicating a compelling vision & shared purpose; ? Building trust; ? Engaging others; and ? Building networks & informal links. ? Improving processes continuously; and ? Adapting quickly to change & ambiguity. ? ? ? ? Aligning goals, plans & structure; Sharing information to enhance integration; and Making efficient decisions with core team.
Using mergers & acquisitions as foundation for long-term results; and Quickly demonstrating to investors the value of the acquisition. Mergers & Acquisitions: ? 2 companies combine to form a new organization that is owned by acquiring company. ? Integrated Project Internationalization Strategy It is attested from the table above that EYS’s internationalization drive is in its organic growth strategy. The company is aware of its products’ strengths and weaknesses; it spends time/effort to base its strategies on understanding customers’ needs/wants and organizes itself around its clients. In addition, EYS’s emphasis on innovation, particularly through experimentation is also another facet of its success in organic growth. 5. 2
RETAIL MARKETING MIX (incorporating Merchandising Strategy) According to Dunne et al 2008, retail marketing mix is the combination of merchandise, price, location, advertising & promotion, store layout & design and customer service & selling environment. The section would first look at the profile of EYS’s customers in general before elaborating on its retail marketing mix (incorporating merchandising strategy) used in the internationalization strategy. USA (LA) Singapore Australia (Sydney & Melbourne) Malaysia China (Guangzhou, HK & Macau) Taiwan Integrated Project Internationalization Strategy The Target Customer Singapore Common Profiles Diff. Malaysia China (GZ, HK & Macau) Taiwan ? Health-conscious mindset ? Believe in healing power of TCM ?
Mid- to high-income household S’poreans are Malaysia has HK preserves generally more lower the most westernized & population traditions & is dining out is density & only famous for common due 23% of belief in to hectic population is enhancing lifestyle of Chineselongevity; ethnic double-boiled soup is a common dinning dish Taiwan has mixed culture. The older generation preserves traditional Chinese culture on TCM & the younger generation religiously follow the western culture. Singapore & Malaysia are in tropical region; cultures & living habits affected by weather & multi-racial society Taiwan & HK are in subtropical region with the presence of 4 seasons. The diet of longevity would be different from those countries in the tropical region EYS has continuously work on appealing to new target customers, such as young busy professionals who need to work hard, look good and lead healthy life. The Gen-Yers are also its target market as esearch had showed that people are more likely to be loyal to one brand if they get in contact with the label at a younger age. Product Raw Herbs: As a TCM store, EYS has focused on providing the finest quality Chinese medicines and herbs. This would supply the clinic service in Singapore, Malaysia and Hong Kong with over 1,000 different raw herbs. TCM Clinic – Jurong Medical Centre, Singapore Integrated Project Internationalization Strategy Proprietary Products: EYS currently markets over 280 proprietary products under its brand. These top sellers include EYS’s Bottled Bird’s Nest, Lingzhi Cracked Spores Capsules, Hou Ning Powder, Bak Foong Pills and Bo Ying Compound.
It markets more varieties in HK and Singapore as compared to Malaysia possibly due to the larger market and higher buying power of the more fluent Hong Konger and Singaporeans. Lifestyle (Well Being): The product range has also expanded into various lifestyle and packaged items including soup packs (see Appendix F: 1st in Singapore, Yang Sheng Le ??? ), health foods, dietary supplements and personal care range. Merchandising Strategy: ? Application of science/technology in TCM. EYS’s working with reputable universities and research centers had also enabled it to develop not only cutting-edge technology for producing TCM’s products consistently, but also the advantage in branding in that market. A critical factor that supports EYS For eographical expansion is its increasing brand recognition. FY2007, the brand was independently valued at S$65 million by IE Singapore and Interbrand. ? Product exclusivity to retain customers’ loyalty. Most of EYS’s household brands are in its flagship/representative products (i. e. Bak Foong Pills, Bo Ying Pills etc). Its sole rights to worldwide distribution of Wisconsin American Ginseng create exclusiveness for better returns and competition. Expected revenue in FY2008 in excess of S$10 million with potential to grow to ;S$40 million within the next 3 – 5 years (see Appendix G: Extract of EYS Annual Report 2007 – Chairman’s Statement). Integrated Project Internationalization Strategy Price
Product Bak Foong Pills ??? Bottled Bird’s Nest ???? American Wild Ginseng Tea ????? S$59. 90 M$138. 00 S$57. 80 HK$458. 00 S$87. 60 S$46. 80 M$98. 00 S$41. 10 HK$278. 00 S$53. 20 S$45. 30 M$88. 00 S$36. 90 HK$198. 00 S$37. 90 Singapore S$ Malaysia M$ S$ Hong Kong HK$ S$ The above table is a quick comparison of the 3 most popular items’ selling price in the 3 main markets of EYS. Factoring the cost of living (Hong Kong was ranked 5 in the world last year followed by Singapore in the 14th position and Malaysia, not in the top 50) and adjusting solely with current exchange rates, it was not difficult to see why the pricing were slightly different.
Prices set in Malaysia were slightly cheaper as compared to Singapore. Hong Kong’s prices as compared to all major markets were one of the highest except for Bak Foong Pills. A consistent pricing policy helps to maintain the image and reputation of the company. EYS always highlights its product quality and exclusivity as a differentiation factor instead of adopting the value for money pricing strategy. Place EYS has an extensive distribution network comprising of more than 140 branded retail outlets in Malaysia, Singapore, Hong Kong, Macau, China and Taiwan. The product range could also be found on the shelves of many stores worldwide and EYS had penetrated the global market via the World Wide Web as well.
Singapore: The retailing stores are located mostly in shopping malls and heartland HDB town centers so as to capture the high traffic flow at the convenience of the residents. Integrated Project Internationalization Strategy Malaysia: More than 50% of the shops are opened in Kuala Lumpur, and 90% of the shops are in the shopping numbers centers/malls. are incorporated Large into supermarkets/hypermarkets, such as Tesco, Giant, and Carrefour. This is an adjustment to the lower population density and weaker buying power from consumers. Health Cite – KL & Mid Valley, Malaysia Hong Kong: The shops are located at shopping and business districts, market-places and suburban areas to satisfy the locals’ needs. Telford, Hong Kong
Online shop: Besides physical stores, EYS has a comprehensive and user-friendly website where online purchases were made easily available. Detailed instruction of usages and ingredients are clearly stated in Chinese and English. Place Strategy ? Widen Distribution Channel Besides specialist store, EYS’s products could also be found at hypermarkets/supermarkets, drug China), stores (19,000 in medical stores halls, and convenience selected polyclinics. In addition, partnership with hotels and spa Integrated Project Internationalization Strategy centres, providing tonic soup recipes and TCM therapies is an added channel. The widening of its distribution network has helped to achieve greater adaptableness to the growing competition; to gain greater exposure, to provide more onvenience; to enhance the channel of reaching out to the potential customer and lastly, to advertise itself. Advertising & Promotion VIP Card Membership Program: EYS’s loyalty program offers regular customers a 5% discount for regular-priced products. An online membership portal is also available for frequent and international purchase (see Appendix H: EYS VIP Members’ Privileges). Credit Cards and Shopping Centers Tied-up Promotions: The company also has association with different credit cards so as to encourage purchases from customers in different venues/occasions. Joint promotions with local shopping centers gave EYS an edge in its promotional efforts.
Festive Promotions: The festival promotions are held throughout the work-year to boost the sales of EYS products by offering attractive packages as gifts or personal consumption. Integrated Project Internationalization Strategy Promotion Strategy ? Promotion of product as gift. The exposure of EYS products to the young would inevitably cultivate liking, thus allowing EYS to establish its popularity among different generation. ? Promotion as a form of education. EYS closeness with the media in publishing new development is another fast way to reach the young and busy professionals. Health seminars and talks are organized regularly. Store Design & Atmosphere EYS standardized designs and layouts yield identical shopping ambience for all customers internationally.
Stocks are well-organized and seamlessly display to project a clean and comfortable shopping experience. Customer Service & Selling Environment Warm welcome is given whenever customers step into the shop. As proprietary medicines are the main product sold in the shop, more female personnel are providing the service in contrast to the traditional approach of having “old uncles” weighing raw herbs with the “daching”. Instructions and functions of all products are clearly shown on shelving in Chinese and English, saving time and effort in locating products. EYS has been changing to adapt to the competition environment over the years from product-driven to customer-driven.
EYS had always trained staff to go the extra mile to satisfy customers and is constantly seeking customers’ feedbacks for continuous improvement. 5. 3 INTERNATIONALIZATION & ETHICS In ensuring product quality, EYS only sources herbs from reliable and reputable suppliers with GAP (Good Agriculture Practice) certification. These herbs are subject to scientific tests before being processed in Integrated Project Internationalization Strategy EYS’s GMP (Good Manufacturing Practice) certified factories in Hong Kong and Malaysia. At all stages – from the harvesting to the manufacturing process – the emphasis is on quality to ensure the efficacy and more importantly, safety of its products.
In March 2008, EYS launched the world’s first certification standard – EYSGAP-Herbs. This certificate serves to ensure world standards are maintained at all stages in the process of growing, processing and retailing of TCM Herbs by taking a modern approach in safety control of herbs beginning with agricultural and manufacturing practices through to the retail point. The objective of the scheme is to ensure safety and traceability of EYS’s TCM herbs at source thus helping to promote the global acceptance and trust of TCM products. This scheme also recognizes the desire of consumers to make informed decision and to be 100% confident of its purchases.
A new EYSGAPHerbs label for easy identification had been created. In April 2008, EYS and KOOPrime Pte Ltd (KOOPrime) worked together to develop a new integrated online portal to keep track of TCM herbs throughout the whole value chain. The new online portal – “Integrated Good Agronomic Practice for Traditional Chinese Medicine Electronic System’ (iGATES) provides an online framework which integrates world class safety and quality standards with cutting edge fingerprinting technologies to ensure safety and traceability of TCM herbs. Once iGATES is ready in 2009, it could be licensed to industry players to enhance their existing food safety tracking system.
EYS is also mindful to act responsibly in not harming the environment. EYS do not sell any parts of animals that are classified under the endangered species and are in full support of the Acres & Stoc. In support of the conservation of wildlife, EYS also contributed to the Wildlife Conservation Singapore Fund managed by the Singapore Integrated Project Internationalization Strategy Zoological Gardens. The fund is used to advance research, It is development and application of TCM in animal healthcare. hopeful that it would ultimately result in better treatments for animals and more veterinarians adopting TCM in its practice. EYS also plays an active role in educating the public on the benefits of TCM medicine.
In 2004, EYS collaborated with the Baptist University of HK in publishing an academic reference book on TCM herbs entitled ‘An Illustrated Chinese Materia Medica CMM’. The first work which prescribed the standard and set the benchmark of the CMM. In addition, during the SARs outbreak in HK, EYS helped to manufacture and distribute sachets of anti-SARs remedy free-of-charge to healthcare workers. These educational and environmental awareness efforts improve the image of EYS as a caring company that engenders education and supports learning. 5. 4 ORGANIZATIONAL MANAGEMENT This section would feature the challenges EYS faced in and values derived from managing of staff in different cultures/countries. Countries China (Hong Kong, Guangzhou, Macau excluding Taiwan)
Predominate Culture 1) Family ties, community, unity, respect for the elderly carry significant weight in this culture; 2) Group-centeredness to maintain harmony is witnessed & goals are achieved through teamwork; 3) Communicate subtly to maintain harmony; 4) 95% of population is Chinese; & 5) Cantonese is widely spoken among all generations while Chinese and English not widely used. Values Derived Attributable to Challenges in Organizational Management ? ? Work processes modified due to style of communication difference; & Goals/objectives have to be clearly specified for greater synergy. Integrated Project Internationalization Strategy Countries Taiwan
Predominate Culture 1) Work culture is heavily influenced by Asian Culture (similar to the above); 2) Over 90% of population is Chinese; & 3) Mandarin is widely spoken among all generations while English rarely used. Older generation converse in Min-nam (Hokkien dialect). 1) About 10. 4% of the population in LA is Asian; 2) Believe in modern medicine more than TCM; 3) Straight forward style of communication; & 4) Work culture is more resultbased and task-oriented. 1) About 7% of the population is Asian; 2) Believe in modern medicine more than TCM; 3) Down to earth, laidback ‘no worries’ attitude; & 4) Do not like to draw attention to its achievements and tend to downplay on its success. ) A mixture of Asian and Western cultural influences; 2) Younger generation are not as loyal to the company & more willing to job-hop when better opportunities emerge; 3) About 75% of population is Chinese; & 4) Older generation tends to converse in Chinese or dialects while younger generation tends to converse in English but are mostly bilingual 1) Laid back, pace is slower as compared to Singapore; 2) Younger generation prefer to venture overseas; 3) About 23% of population is Chinese; & 4) English used less often Values Derived Attributable to Challenges in Organizational Management Staff training especially in language is an essential enhancement before full launch of retailing business. USA (Los Angeles) ? ? “Expatriate-workers” from Asian markets recruited to manage the 1st critical years in USA; & Recruiting & educating a core group of Americans to manage business subsequently. Australia (Sydney & Melbourne) Difficulty faced in teaching Australia employees how to manage according to the EYS way rather than the traditional Australia’s way. Singapore ? ?
Provide satisfactory career path to retain excellent staff; & A need to impart product knowledge for continuity of business (especially to younger generation) Malaysia ? ? Good incentive programs required to push staff to work; & Opportunities make available for overseas posting Integrated Project Internationalization Strategy One of the probable reasons for EYS’s closure in the USA and Australia’s markets could be the working culture difference in the 2 countries as compared to the Asian culture which EYS is more familiar with. If EYS decides to enter these markets again, it must learned from its experience of earlier mistakes and acquire market knowledge through market presence.
Systematic recruitment and training for new employees on all levels from country management to store staff, including encouraging interactions between old, experienced employees and local staff members on the new markets is vital. Integrated Project Internationalization Strategy 6. CONCLUSION From the analyses done, it is concluded that the key success factors of EYS are its: i) ii) iii) iv) Recognized and trusted brand name; Convenient retail locations; Good customer service and selling environment; Ability to continually introduce new products owing to the use of cutting-edge technology; and v) Internationalization strategy of venturing into countries where TCM would be well received by the people.
Although having achieved increasing turnover and profits in the last five years, EYS still has to face future challenges such as: i) ii) iii) Entry barriers into non-Asian markets; High cost of production; Lack of good understanding of customers’ needs and ability to provide the right selection of products at the retail outlets as a result of absence of sophisticated point-of-sale system to track customers’ purchasing pattern; iv) Competition from global specialty retailers of nutritional products, self-help remedies and traditional medical halls; and v) Economic instability and inflation, leading to higher cost of living and consumers cutting down on “non-essentials”.
If EYS is able to adopt strategies to broaden its appeal by monitoring changing consumer trends/needs, investing in new business ideas, engaging in research and development with strategic partnerships and expanding its distribution network, it would overcome these challenges. Integrated Project Internationalization Strategy RECOMMENDATIONS It is recommended that EYS should build on its success factors in its brand name and expand further into the region. EYS should i) Invest in a good point-of-sale system to track customers’ purchasing pattern to further improve on fulfilling customer’s needs and demands; ii) Introduce products that are lower priced to attract the lowerto middle-income group of customers; iii) iv)
Continue to focus on R&D to further enhance the image of TCM and also to come up with new products; and Expand further into China and Taiwan due to the immense potential in these 2 markets. Integrated Project Internationalization Strategy APPENDICES 25 of 35 Integrated Project Internationalization Strategy APPENDIX A 26 of 35 Integrated Project Internationalization Strategy APPENDIX B RATIOS Turnover Gross Margin (GM) Profit before Tax (PBT) Profit after Tax (PAT) Current Ratio FORMULAE 2003 $110. 8 m $55. 6 m $4. 5 m $1. 7 m 1. 27 2004 $135. 3 m $68. 7 m $12. 2 m $6. 7 m 2. 03 2005 $165. 9 m $81. 8 m $16. 5 m $12. 4 m 1. 88 2006 $173. 4 m $88. m $17. 5 m $14. 4 m 1. 47 2007 $191. 5 m $94. 8 m $19. 7 m $14. 7 m 1. 52 Net sales – COGS GM – Operating Exp. PBT – Taxation Current assets ? Current liabilities COGS ? Average inventory Net sales ? Average total assets Total liabilities ? Total assets GM ? Net sales Net profit after tax ? Net sales Net profit ? Average total assets Inventory T/O Ratio 3. 21 3. 40 3. 20 2. 65 2. 68 Asset Turnover 1. 29 1. 53 1. 66 1. 48 1. 39 Debt Ratio Gross Margin % Net Profit % 0. 37 50. 2% 2. 1% 0. 36 50. 8% 5. 2% 0. 39 49. 3% 7. 5% 0. 37 50. 7% 8. 3% 0. 39 49. 5% 7. 7% Rate of Return on Total Assets 2. 7% 7. 9% 12. 5% 12. 3% 10. 7% 27 of 35 Integrated Project
Internationalization Strategy Turnover 200 180 160 191. 5 165. 9 135. 3 173. 4 140 120 110. 8 $m 100 80 60 40 20 0 2003 2004 2005 2006 2007 Year Gross Margin 100 88 90 80 68. 7 70 60 55. 6 81. 8 94. 8 $m 50 40 30 20 10 0 2003 2004 2005 2006 2007 Year Profit Before Tax 19. 7 20 17. 5 18 16 14 12 16. 5 12. 2 $m 10 8 6 4 2 0 2003 2004 2005 2006 2007 4. 5 Year 28 of 35 Integrated Project Internationalization Strategy Profit After Tax 16 14. 4 14. 7 14 12. 4 12 10 $m 8 6. 7 6 4 1. 7 2 0 2003 2004 2005 2006 2007 Year Gross Margin % 100. 00 75. 00 % 50 . 8 50 . 2 50 . 7 25. 00 0. 00 2003 2004 2005 2006 2007 Year Net Profit % 10 9 8 7 7. 5 8. 3 7. 7 % 6 5 4 3 2 1 003 2004 2005 2006 2007 5. 2 2. 1 Year 49 . 3 49 . 5 50. 00 29 of 35 Integrated Project Internationalization Strategy APPENDIX C PEST Analysis’ Questions & Issues Political ? ecological/environmental issues ? current legislation home market ? future legislation ? international legislation ? regulatory bodies & processes ? government policies ? government term & change ? trading policies ? funding, grants & initiatives ? home market lobbying/pressure groups ? international pressure groups ? wars & conflict Social ? ? ? ? ? ? ? ? ? ? ? ? ? Economic ? home economy situation ? home economy trends ? overseas economies & trends ? general taxation issues ? axation specific to products/services ? seasonality/weather issues ? market & trade cycles ? specific industry factors ? market routes & distribution trends ? customer/end-user rivers ? interest & exchange rates ? international trade/monetary issues Technological ? competing technology development ? research funding ? associated/dependent technologies ? replacement technology/solutions ? maturity of technology ? manufacturing maturity & capacity ? information & communications ? consumer buying mechanisms/technology ? technology legislation ? innovation potential ? technology access, licensing, patents ? intellectual property issues ? global communications ifestyle trends demographics consumer attitudes & opinions media views law change affecting social factors brand, company, technology image consumer buying patterns fashion & role models major events & influences buying access & trends ethics/religious factors advertising & publicity ethical issues 30 of 35 Integrated Project Internationalization Strategy APPENDIX D The Straits Times, Thursday, April 3 2008 31 of 35 Integrated Project Internationalization Strategy APPENDIX E Full listing available at Eu Yan Sang’s website: http://www. euyansang. com/index. php? option=com_content&task=view&id=43 6&Itemid=324 32 of 35 Integrated Project Internationalization Strategy APPENDIX F Today, Thursday, November 6, 2008 33 of 35
Integrated Project Internationalization Strategy APPENDIX G Annual Report 2007 – Chairman’s Statement 34 of 35 Integrated Project Internationalization Strategy APPENDIX H EYS VIP Members’ Privileges Eu Yan Sang Singapore VIP Members 1. VIP membership is not transferable. 2. VIP member is entitled to a 5% discount. 3. Discount is not applicable with concurrent promotions or cases where a discount is already granted. 4. Applicouldts to membership must accumulate over S$300 worth of EYS products within a calendar month. VIP Application Form would email to the applicant. 5. We reserve the right to amend the Terms and Conditions without any prior notice. 35 of 35
Delivering a high-quality product at a reasonable price is not enough anymore.
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