Team Cases - Case 1 (Chapter 2): Mustafa Center:...

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Case 1 (Chapter 2): Mustafa Center: Singapore’s All-in-One Retailer Mustafa Center is a well-known retailer in Singapore that provides one-stop shopping. The breadth of product variety is truly amazing, covering a wide range including jewelry, watches, electronics, home appliances, apparel, cloth, personal computers, grocery and food items, hardware, gift items, and luggage. The store combines a department store, grocery store, pharmacy, hotel, and services retailers including currency exchange and travel agency. Mustafa Center was established in 1971 in a part of Singapore known as Little India. From its original site of 500 square feet, it has now grown to cover 150,000 square feet in two adjacent locations, with over 90,000 SKUs. The company’s sales revenue in 1999 was S$240 million. In addition to its retail outlets, it has a warehouse not far from Little India. The founder, Mr. Mustaq Ahmad, can often be seen serving customers, unrecognized by those whom he serves. Under his leadership, the company has achieved national recognition and was a winner of the Enterprise 50 awards in 1998. On a normal weekday, 10,000 customers visit the store with the number increasing to between 15,000 and 20,000 on weekends. Prior to the Asian economic crisis that started in 1997, approximately 80 percent of its customers were tourists, and the rest were locals. The tourists were mainly from India, Pakistan, Bangladesh, and Sri Lanka, although those from Middle Eastern countries, North Asia, and Europe have also been increasing. This is a unique feature given that the majority (about 75 percent) of Singapore’s population is of Chinese descent. In terms of competition, Mustafa Center’s unique positioning grants it much monopolistic power. Its closest competitors are the large department stores on Orchard Rd. (the major shopping stretch in Singapore), including CK Tang, Isetan, Robinson’s, and Takashimaya. It also competes to some extent with the small sundry and provision stores in Little India. The large department stores on Orchard Rd. cannot compete with Mustafa on prices due to higher overheads, while the small stores in Little India cannot offer the same assortment and convenience provided by Mustafa. Mustafa practices EDLP, providing fair value on its product assortment. Although it does not necessarily have the lowest prices in town, it is often perceived to be competitive by its customers. The gross margin on products is 15 percent on average, with the range at 10 to 30 percent, much lower than the department stores. For example, the markups in the supermarket do not exceed 15 percent, thus being very competitive with other grocery stores in Singapore. In order to achieve EDLP, Mustafa is very scrupulous in its sourcing practices. Where it
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This note was uploaded on 03/20/2008 for the course RET 261 taught by Professor Claire during the Spring '08 term at Michigan State University.

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Team Cases - Case 1 (Chapter 2): Mustafa Center:...

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