Sa Sa International Holding Limited
Introduction
Recently, our society has been greatly influenced by the depression and many
companies were severely affected by the Asian economic crisis.
Sa Sa International Holdings Limited (Sa Sa) is the focus of this project.
Although Sa Sa has been greatly influenced by the crisis, it has returned to the
profitability on the second half of fiscal 1999 due to the improvement of internal
and external conditions. The turnover has increased from HK$487 million in
1995 to HK$1,268 million in 1999. Also, Sa Sa is a new listed company but it
has a large market share in the cosmetic retailing industry. On the other hand, it
will seek opportunities to expand into their markets in many Asia countries such
as PRC, Korea and Japan that are the potential biggest markets in Asia. It is
believed that these new markets will help widen the profit base of Sa Sa.
Background
The Sa Sa International Holding limited (Sa Sa) has established in 1978 by
Simon and Eleanor Kwok for the cosmetic retail business. At the beginning, they
were in just 40-square-feet of retail space in Causeway Bay. They provide many
different products include skin care products, perfume, cosmetics, hair care and
accessories.
After 22 years in the cosmetic retail business, Sa Sa become leading position,
they also developed the good reputation and well-know in Hong Kong. The
company operation with a special "One-Stop-Shop" approach. As global
purchasing strategy, Sa Sa provides a wide selection of products at very
competitive prices. To convenience for consumer choosing, retail outlets
displayed the products openly on the shelves. In recent years, the company has
invested about 15 million to install a Point-of-sale system that ensure the
operations more efficient. As the system allows the company to keep track of all
sales transaction and inventory record throughout its entire Asian operation.
Every year, the company provided complete training course about three to six
months for the beauty consultants.
In 1997, the company established its own brand of skin care and cosmetic
products, named Suisse Program. In June 1997 they listed on the Stock
Exchange of Hong Kong Limited. The company's target market is in Hong Kong.
It has group headquarters and 24 retail outlets in Hong Kong, 8 in Taiwan, 1 in
Macau and 3 in Malaysia and Singapore respectively. In future, they will focus
on further expansion in Hong Kong. In long-term, they interest in Asia-Pacific
market development.
Changes in Recent Year
In 1997, Sa Sa faced important change. Since the Asian crisis, Sa Sa need to face
sharply drops in customer spending and tourist arrivals. Some rent and staff
contract are signed before Asian crisis, they also need to face higher rental and
wages.
With high costs and low sales, they need to work with heavy pressure. Sa Sa
needs to do some changes to make it more effective and efficient.
There are some changes in recent year:
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Inventory level Control and set a competitive price
Strengthen local management team
Staff training
E-Commerce
For those of this part will be explain it later. For some of the changes, it can
explain by the environment.
Analysis of BCG Matrix
BCG Matrix is an integral tool that introduced the idea to the organization and
guides them to make a decision on resources allocation on the basis of market
share and growth rate. In our case, the market share of Sa Sa occupy more than
30% in Hong Kong and the market growth rate is up to 349%. When we apply
above information into BCG matrix, we will easily find that Sa Sa will have a
high market share and high growth rate. That’s mean Sa Sa belongs to the
business groups of Stars. These business are in a fast-growing market and hold a
dominant share of that market but might or might not produce a positive cash
flow, depending on the need for investment in new plant development.
As mentioned before, Sa Sa belongs to the Star business groups; therefore, the
high market share make Sa Sa producing more produce; hence, the product of Sa
Sa is not so expensive with the existence of a cumulative experience curve. Also,
the company claims that their company provides customers with the widest
range of quality products at competitive prices.
Environment
Economics Condition
Cosmetics are not an essential product. The customer spending drops sharply
after the Asia crisis. They are not willing to spend too much money in Cosmetics.
They spend their money on some essential product. For example, they spend on
foods, clothes. Even they spending on it, they are willing to buy some relatively
cheap product.
Customers
There also have some changes in the types of customers. In fact, tourists have a
large proportion of the customer type. Since the Asian crisis, arrival from Japan
and Korea is sharply decrease. Therefore, Sa Sa lost many tourist customers here.
On the other hand, the customers from the mainland show increasing in recent
year. Therefore, the customers from Mainland China start act as important part
of Sa Sa business.
Cosmetics are not just for female now. In the recent year, there is a demand for
the male. However, in Hong Kong, there is no male cosmetics market. Therefore,
Sa Sa wants to extend this market.
Competitors
Competitors act as important part in a business. It can force the management to
monitor their competitors. Sa Sa have been facing some strong competitors such
as Rainbow and Body Shop in the cosmetic industry. These cosmetics companies
also have a considerable market share and a sharp image in the market. They will
also adopt different pricing and marketing strategies, which Sa Sa must alert. For
instance, Body Shop has provided beauty counters to provide consulting services
for the customers. It is attractive for the customers and can increase the sale. Sa
Sa, facing the keen competitions, has to use various strategies to compete in the
market. Sa Sa may then have to spend a large amount of advertising expense in
the market in order to increase the market share and enhance the company
image.
Government
In 1997, government introduced the Information Technology to the society.
Many of companies start planning how to apply the Information Technology
skills in their business. In this time, Sa Sa try to extend their business in Internet.
How they change?
Despite adverse economic conditions and keen competition, the group was able
to strengthen its leadership in Hong Kong with a market share that grew to more
than 30 per cent and Hong Kong still remained the group’s major profitable
market with 25 stores. Sa Sa has this good profit making in the changing of
general environment such as economic condition and information technology on
the ground that they have a well management system and has a clear objective
and their three-year business time frame plan. To achieve this, the groups should
have a good and well planning, organizing, leading and controlling.
First, the group reduced inventory levels and expanded reach to domestic
consumers in Hong Kong. In 1998, the cost–cutting measures included tighter
inventory management, revision of employee remuneration package and closure
of unprofitable store. This action brought down inventory level by 27 per cent
and reduced overhead costs by 14 per cent. On the other hand, the group opened
a total of eight new stores in Hong Kong and oversea market. taking the
advantage of the lower rental, which brought from the finances storm.
Second, strengthen local management team. With the appointment of Mr. Roger
King as the groups President and Chief Executive Officer in August 1997. Sa Sa
has begun to transform itself from a family style business to a professionally
managed enterprise. A strong management team is being assembled and key
appointments have been make, covering information technology, compliance and
internal control, marketing and finance. Because of the rapidly change in
information technology, general environment, Sa Sa should follow this change
and increase their efficiency through new IT system; therefore, replacement of
IT system should be completed by march 2000 and full installation is targeted
for September 2000.
Third, with rapidly change in IT, the group’s plan is to expand into related
business such as electronic business. Electronic business is not a very new idea
in the foreign country, but new in Hong Kong. It is a trend for Hong Kong’s
company to change with. In recent year, there are many companies such as
adM@rt sell their products in the Internet and lots of people in Hong Kong have
a computer. It is really a very convenient way for customer to buy things in the
Internet. Why Sa Sa will invest into e-commerce? From the above mentioned,
many companies realize that e-business has its potential in Hong Kong. Also, It
is acknowledge that Hong Kong already represent a leading online retail market
in Asia, so certain beauty and health products can be effectively retailed over the
Internet. Now, customer can buy some of the Sa Sa product in Admart. At the
same time, they are developing their company web site http://www.sasa.com.hk. In
this web site, it can introduce some product and customer can buy it in Internet
directly. The other component of their plan is to maximize their product brand
potential through aggressive marketing strategies and plans.
Since the competitors are very strong, Sa Sa needs to set a competitive price and
provide a good customer service. To achieve a good customer service, Sa Sa
provides a training course for their staff. In the course, it covers detailed product
information, make-up technique, skin analysis, supervisory skills, shop floor
training and other aspects of customer service. Now, Sa Sa can provide a good
customer service when compare with other competitors. It also receives a top
marks for the quality of customer service from the Hong Kong Retail
Management Association in a preliminary rating of local cosmetics and beauty
products retailers.
Sa Sa has a history of bringing innovative ideas to Asian cosmetics retail market
and has developed into a leading force in cosmetics retailing in Hong Kong.
They also have an aim to provide customer with the widest range of quality
products at competitive price. From the above mentioned, The success of Sa Sa
as they have a good and directional strategy towards their business.
Conclusion
For the future of the Sa Ss, it still has a place to expand its business.
As the proportion of Chinese customers in the customer types on Sa Sa business
becomes larger, Sa Sa should put more capitals to advert their products in China
to attract more Chinese customers. Also the price of the products should not set
too high, otherwise the sales will drop.
Also, as E-commerce becomes more popular and it is very convenient for
customers to choose the products, Sa Sa should further develop the Information
technology skills although they become the largest share of the cosmetic market
on E-commerce in Asia. It is because the potential of E-commerce is very large,
and many competitors will develop the E-commerce, it is worthy to put more
capitals on E-commerce development and improvement to increase the
competition power on E-commerce sales.
Recently, Hong Kong economy experiences the economic recovery, it will lead
to the rise in rental cost. So Sa Sa should continue reducing their inventory levels
as this can reduces inventory cost. Then the total cost can be reduced.
In our point of view, Sa Sa is very successful for the change.
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