Strategic Analysis Bonjour Holding Limited
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 2713 words||✅ Published: 2nd May 2017|
Bonjour Holding Limited is a famous cosmetics retailer in Hong Kong. Mr. Ip Chun Heng, Wilson, found it in 1991. At the beginning, it mainly sold French cosmetics and skincare products in the only shop in Kowloon. In 1996, because of recommending Japanese innovative cosmetics and skincare products to Hong Kong, it became a well-known cosmetics retailer. Afterwards, the scale of company was mounting and it listed in HKEx in 2003. In 2006, Bonjour Limited received the award of Hong Kong Top Service Brand. 3 years later, it received Hong Kong Premier Service Brand award. Now it has 38 retail branches in Hong Kong, 1 in Macao and 1 in Guangzhou, China.
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Bonjour Limited is divided into 2 divisions according to the nature of operation. They are Retail and Wholesale Services Division and Beauty Service Division. Retail and Wholesale Services Division concentrates on selling cosmetics, personal care and skincare products such as shampoos, body lotions, perfumes, vanishing creams and facial masks. Beauty Service Division concentrates on providing beauty and healthcare services and it owns two brand names called About Beauty and Top Comfort. About Beauty provides medical beauty care, spa, slimming and beauty services and now it has 13 branches in Hong Kong, 1 in Macao and 2 in Shanghai, China. Top Comfort provides high-class massage services, such as body massage and foot reflexology. Now it has two branches in Hong Kong.
Bonjour Holding Limited owns 38 retail branches in Hong Kong. Most of their shops are located in famous shopping spots, such as Tsim Sha Tsui, Mong Kok and Causeway Bay. Additionally, they have branches in large shopping malls in different districts, such as Tseung Kwan O, Tuen Mun and Sha Tin. This geographical advantage can attract both local and tourist customers. Some famous shopping spots, such as Causeway Bay and Mong Kok, usually have high floating population. They are the choices for most local people to go shopping, gathering and get entertainment. For the tourists, because these places are well-known shopping spots that are recommended in some touring books, they usually come to these places to go shopping and sightseeing. By locating shops in these places, it can attract both local and tourist customers effectively. As a result, this can broaden the customer base of Bonjour Limited and hence boost its sales revenue.
Pricing strategy is also the strength of Bonjour Limited. The pricing principle of Bonjour is to lower the price of their products and earn profits by boosting sales volume. Since Bonjour is an experienced agent reselling cosmetics to individual and company customers, it maintains good relationship with suppliers and it can increase its bargaining power through bulk purchases. Hence, it can purchase goods in lower costs and the products can be labeled with lower prices.
The expansion of Bonjour Holding Limited to the beauty industry gains advantage to its future development. Starting from 2000, Bonjour Limited operated beauty shops in order to provide body treatments and massage services to its customers. After 10 years of development, it accumulates significant number of customers. By combining the retailing service with beauty services, it can build a stable source of customers. Besides, because of the experience in cosmetics retailing, it can help building high customer loyalty.
Electronic transaction becomes the trend of shopping in 21st century. People can buy what they want on the Internet. By using their credits cards, customers can order goods online and get their goods without going out to streets. In 2005, Bonjour established its first electronic shop, targeting on the Generation Y customers. All the goods it sells in the branches can also be found in its electronic shop. So customers can enjoy shopping conveniently. Moreover, because of the borderless Internet world, people all over the world can also access to its electronic shop to buy products. Thus, it can attract the foreign customers to buy goods, which can increase its sales revenue.
The variety of products sold is also an advantage to Bonjour Limited. Because a significant proportion of the customers in Bonjour Limited are female, it mainly sells personal care products, skincare products, cosmetics and its accessories. Moreover, a significant number of customers are married; some of them even have children. So Bonjour Limited also sells layettes such as milk powder. Furthermore, Bonjour Limited understands that beauty is the combination of appearance and health; consequently, it sells health food and medicines. For example, in Bonjour shops, we can find cod-liver oils and cough syrups. Sometimes we can even see natural mineral water and chewing gums on the shelves. Overall, different customers, especially those female customers, can buy products in Bonjour shops in order to get on their roads to beauty and healthy.
The prudent financial policy of Bonjour Limited helps enhancing the liquidity and supports its further expansion. According to the Interim Report in 2010, although there is a slightly drop in both Gross Margin and Net Profit Margin in the first half year, the cash flow statement shows that the company resulted in a net cash inflow in 2010, which is far better than the result of huge amount of net cash outflow. We can observe that the company had a boost in operational cash inflow as well, which supported a significant increase in investing cash outflow. That means Bonjour Limited not only improved a lot on its operational liquidity, but the investment activities also push forwards its long-term development.
The major competitors of Bonjour Limited are Sa Sa International Holdings Limited, Angel Cosmetics International Group and A.S. Watson Group.
The market value of Bonjour Limited is about HKD$2,116,972,500 (based on 1,411,315,000 shares of weighted average ordinary shares and $1.5000/per share on October 15, 2010), which is about one-fourth of the market value of Sa Sa Group. Moreover, A.S. Watson Group is fully owned by Hutchison Whompoa Limited. If Bonjour Limited expands, the amount of capital used for expansion is restricted compared to other competitiors. Even though Bonjour can increase capital from banks and issuing bonds, it will have negative effects to the company’s financial performance in long run, such as the high interest expenses.
The scope of business of Bonjour Limited is smaller than that of Sa Sa Group and Watson’s. Sa Sa has 71 branches in Hong Kong and Macao and a total of 154 branches in the world, including both Sa Sa Stores and Single-brand Image Counters. Watson’s owns over 170 stores in Hong Kong and Macao, and 1700 stores in the world. However, Bonjour owns only 39 stores in Hong Kong and Macao, and 40 stores worldwide. That means Bonjour remains in the local market, while Watson’s and Sa Sa operate their stores in Asia. One of the reasons for the above phenomenon is insufficient capital in the company. As mentioned above, the market value of Bonjour is far less than that of Sa Sa and Watson’s. Thus, the company does not have enough money to support its expansion ideas.
The method of payment in Bonjour Electronic Shop is insufficient to attract the buyers worldwide. Now Bonjour supports Internet payments through Visa Card, MasterCard, PayPal, PPS, Union Pay Credit Cards and Alipay. However, there are other famous brands of credit cards such as JCB and American Express in the world. Most of these cardholders are Japanese and American respectively. Since the two countries have high rankings in the GDP in the world, their potential of purchasing power is high. For that reason if Bonjour E-Shop can support more types of Internet payment methods, it can attract more customers worldwide.
From the annual reports of Bonjour Limited, we can see that Bonjour has many private labels. For example, YUMEI, ESTILO and A + Fit are brand names of cosmetics owned by Bonjour Limited. However, most of them are not popular. This is because the brand name management is not effective. These products do not have clear positioning and hence they do not target the desired group of customers. Additionally, promotion of these products is not enough. As the result, the products cannot generate considerable sales revenues to the company.
Starting from 2003, the Central Government of Mainland China had loosened the restriction for mainlanders to travel in Hong Kong on an individual basis. Under this “Individual Visit Scheme”, mainlanders in specified cities can get their passports to Hong Kong and Macao in simple procedures. Prior to this scheme, mainland travelers can go to Hong Kong for either business purpose or group travelling. With the recovery of global economy and the significant growth of Chinese economy, this scheme brought a huge amount of travelers to Hong Kong, boosting the tourism industry and the private consumption market. According to a research studying the consumption pattern of mainland travelers, these travelers welcome cosmetics. Consequently, the cosmetics market will keep growing.
Recently, beauty services for men become the new opportunity for the beauty industry. Nowadays, people believe that success is depending on not only academic backgrounds, working experiences, interpersonal skills and managerial skills only. Many of the employers will choose the candidates with good-looking appearance, especially those in retailing industry. This is because the employers believe that their employees are representing the company, their good-looking appearance can help making good impression to the outsiders, and hence improving the image of company. For that reason, more and more men go to take beauty treatments, forming a huge market to the beauty industry. Since Bonjour Limited has experience on the beauty industry, they can provide beauty services for men to occupy part of the new market. For example, Bonjour Limited is able to establish a new beauty shop with a new brand name, which provides various beauty treatments for men. With the cooperation between the new beauty shop and its retailing business, it can increase the sales revenue of the whole Bonjour Limited.
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Nowadays electronic transaction becomes the state-of-the-art technology to sell products to both individual and business customers. For example, Taobao and E-bay are electronic transaction platforms where individual sellers can sell their products to individual customers worldwide; Amazon.com is the platform where corporate sellers can sell their products to individual customers. For that reason, in 2005, Bonjour Limited had set up its own electronic transaction platform, selling its products to individual customers. However, platforms like Taobao and Ebay have huge floating population since they are famous to Internet users. Hence Bonjour Limited can co-operate with these E-transaction platforms to expand its scope of retailing business to the world.
The global financial tsunami had swept away the bull markets in 2008. Afterwards many governments tried to carry out expansionary fiscal and monetary policies, in order to maintain the growth of their own economies. However, the credit crisis in Europe and weak economic growth in the United States are uncertainties for the recovery of global financial market. Moreover bubble economy is forming. If the bubble economy crashes, corporations worldwide will have difficulties in financial liquidity. Then the managements are likely to reduce salaries of employees or even fire them in order to reduce expenses. People will then tighten their expenses in order to save more money for future uses. They will spend less on most of the goods, including the products sold in Bonjour Limited. Consequently, the sales revenue of Bonjour Limited in both retailing and beauty services will drop dramatically.
Competitive Advantages of Bonjour Holding Limited
The first competitive advantage of Bonjour Limited is the pricing of its products. This is because almost all the products it sold are purchased from other manufacturers, which means Bonjour Limited itself is a reseller. Because these products can be bought from other resellers such as supermarkets, personal care shops and the competitors, people can search the prices of products easily and buy the goods with lowest prices. So, the low prices of products can maintain the market share and Bonjour Limited can still make profit by having large sales volume.
The second competitive advantage is the place of branches. Although Bonjour has fewer branches than its main competitors do, such as Sa Sa and Watson’s, its branches are located in the districts with high floating population, such as Mong Kok, Causeway Bay and the shopping malls in town centers. This strategy can generate high revenue with relatively low operating expenses because the fixed costs are appointed to the high sales revenue.
The third advantage is the way to promote products. We seldom see advertisements of Bonjour Limited on televisions and newspapers; however, it can still attract many customers. This is because it uses pricing strategy as its advertising strategy. Since Bonjour Limited’s pricing strategy is to lower the prices of its products in order to achieve high sales volume, the profit for each product sold is not high. In order to reduce the cost of operation, it does not spend money on expensive advertisements. However, the low prices of its products attract many customers. These customers will share their shopping experience with their friends, relatives and other Internet users and suggesting them to buy goods in Bonjour shops. As a result, the objective of advertisement is achieved, although Bonjour does not spend lots of money on advertisements.
Most Viable Strategies for the Future Development of Bonjour Holding Limited
The first strategic approach is to maintain its existing pricing strategy. This is because Bonjour Limited is positioned as the shops selling cosmetics, personal care products and health care products with lowest prices. In addition, it had already developed its popularity in Hong Kong, Macao and Mainland China. Hence, there is no reason for Bonjour to change its pricing strategy.
Second strategy is to extend its business to the men’s market. This is because more and more men emphasize on the importance of their looks. Then, Bonjour can invest on this market through, for example, setting up men’s corners in each Bonjour shops, selling products used by men only. Besides, Bonjour Limited can set up a new beauty center using a new brand name, providing beauty treatments specially designed for men. It can broaden the source of revenue of Bonjour Limited in long run.
Bonjour Holding Limited is a leading corporation selling cosmetics, personal care and health care products, and providing beauty services to its customers. When analyzing its strength, we can find that it has good pricing strategy, place strategy and a well-developed electronic transaction platform. When we look at its weakness, we can find that the scopes of Bonjour Limited in both business operation and finance are weaker than that of its competitors. Externally, the Individual Visit Scheme and the expansion of men’s beauty market become the opportunities for Bonjour Limited. However, the risk of global economic recession becomes the threat of Bonjour Limited.
After examining the SWOT of Bonjour Limited, we can conclude that Bonjour Limited has competitive advantages in price of products, place of branches and the way of promotion. Moreover, based on the analysis, we recommend that Bonjour Limited should maintain its existing pricing strategy and expand to men’s market for its long run development.
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