strama paper
TRANSCRIPT
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University of Santo TomasCollege of Commerce and Business Administration
España, Manila
PRIMER GROUP OF COMPANIESA Strategic Management Paper
Presented to:Mr. Real C. So
In Partial Fulfillmentof the Requirements for the Course
Strategic Management (Entre 7)
By:Mary Ann L. Mendoza
4M9
(Deadline of Submission)
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ACKNOWLEDGEMENTS
This Strategic Management paper would not have been possible without the guidance and the help of several individuals who in one way or another contributed and extended their valuable assistance in the preparation and completion of this paper. After all of the hard work, and sacrifices that have made for this completion, it is just right to express my gratitude to the following people:
First and foremost, to the Primer Group of Companies, for their complete information and warm welcome that they have given me and also to the Marketing Department for the support, assistance and significant data that they have provided.
I would also like to extend my gratitude to my instructor of this Strategic Management subject, Mr. Real So, for guiding and being the inspiration of constructing this paper. He was abundantly helpful and offered invaluable assistance, support and guidance throughout the end.
Special thanks also to all my graduating friends, especially to my 4M9 block-mates for sharing the literature and invaluable assistance. Not forgetting my bestfriend who has always been there.
To my family, for their unending support, confidence and trust for showing me that no matter what happens they will be there for me.
And lastly, to my beloved Almighty God, for giving me the knowledge of discernment to know what perseverance was all about and determination to finish this paper, this would not all be possible without my faith and strength to you. Everything that I did and will do is all for your glory.
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TABLE OF CONTENTS
Acknowledgements ------------------------------------------------------------------------------ 1
Table of Contents ------------------------------------------------------------------------------ 2
I. Introduction/Executive Summary --------------------------------------------------
II. External Environment ----------------------------------------------------------
Definition of Industry --------------------------------------------------------------------
Analysis of Present Task Environment
------------------------------------------- Analysis of Potential Changes in
the Macro-environment ----------------
Threats and Opportunities -------------------------------------------------------------
Industry and Competitive Analysis -------------------------------------------
III. Internal Environment Analysis ----------------------------------------------------
Overview of the Company -------------------------------------------------------------
Financial Analysis ----------------------------------------------------------------------
Value Chain Analysis
------------------------------------------------------------- Strengths and
Weaknesses ----------------------------------------------------
IV. Strategic Plan-------------------------------------------------------------------------------
Vision and Mission ----------------------------------------------------------------------
Objectives -------------------------------------------------------------------------------
Evaluation of Present Corporate Strategies
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---------------------------------- Proposed Corporate Strategies
----------------------------------------------------
Competitive Advantage -------------------------------------------------------------
V. Functional Area Strategies -------------------------------------------------------------
Marketing -------------------------------------------------------------------------------
Operations -------------------------------------------------------------------------------
Finance
-------------------------------------------------------------------------------
Human Resources ----------------------------------------------------------------------
Information Technology -------------------------------------------------------------
VI. Implementation ----------------------------------------------------------------------
Analysis of Company’s Capabilities to Implement -------------------------
Managing Internal Organization for Strategy Execution ----------------
VII. Financial Projections ----------------------------------------------------------------------
Probable Scenario ----------------------------------------------------------------------
Best Case Scenario ----------------------------------------------------------------------
Worst Case Scenario -------------------------------------------------------------
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INTRODUCTION/EXECUTIVE SUMMARY
Primer Group of Companies is a Philippine company engaged in the retail sale and distribution of consumer brands and products. The company carries international brands mostly lifestyle products. Primer also operates its own lifestyle boutique which includes ResToeRun, Travel Club, Ladybug, Bratpack and R.O.X. In addition to the retail and distribution, Primer recently opened its first retail and merchandising academy.
Primer Group was founded in the Philippines on 1985. It was formerly called Primer International Corporation (PIC) as a trading company, importing seasonal; merchandise. In 1992, the company Primer Group ventures into apparel licensing of Disney and Warner Bros. Later the same year, UniglobeTravelware Co., Inc. (UTCI) was established, opening the Primer Group’s first retail concept store specializing in luggage; The Travel Club. Five years later, the first Bratpack store was launched; a unique lifestyle concept store for young, hip and bold generation today.
The company continued to grow in the year 2000s. From a retail and distribution company in the Philippines, Primer Group expanded business to its neighboring regions in Asia. To date, the company distributes to HongKong, Indonesia, Japan, Malaysia, Philippines, Singapore, Thailang with 100 free-standing concept stores and 600 consignment deals in the Association of South-East Asian Nations (ASEAN). The
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brands carried by Primer include DC, Gravis, Quicksilver, Volcom, Roxy, Bandals, Fitflop, Kickers, KruZin, Native, Olukai, Sanuk, Sledgers, Tretorn, Ace, Eagle Creek, Delsey, Design Go, Mendoza, Tumi, Victorinox, World Traveller, Boxfresh, Eastpack, Ellesse, Gaiam, Hedgren, High Sierra, JanSport, Kangol, Slendertone, Timbuk2, Tough Jeansmith, Outdoor Gear, Coghlans, Columbia, Mountain Hardware, Nalgene, Nathan, Salomon, Salvas, Sea to Summit and The North Face. Industrial products include Aircond, Network Philippines, Inc. (A.N.P.I.), Brushstroke Creatives, Primer Printing Services Inc. (P.P.S.I.), South AmerAsia Chemical Corporation (S.A.C.C.), Stellar Equipment and Machinery, Inc. (S.E.M.I) and Union Inks and Graphics Philippines, Inc. (U.I.G.P.I.).
EXTERNAL ENVIRONMENT ANALYSIS
1. DEFINITION OF INDUSTRY
RETAIL AND DISTRIBUTION INDUSTRY
The Primer Group of Companies is a retail and distribution powerhouse engaged in the distribution and licensing of the world’s top consumer and industrial products. The Primer Group has over 50 premium outdoor and lifestyle brands with over 100 free-standing concept stores, 600 doors in consignment all of which are in regional (ASEAN) operation across Asia.
Steadily, the Primer Group is rapidly flourishing in the retail and distribution business as it opened regional companies and concept stores in Japan, Malaysia, Thailand, Vietnam, Hong Kong, Indonesia and Singapore. Clearly, with its 25 years of unparalleled growth and solid business foundation, the Primer Group of Companies is set to reach greater heights in the retail and distribution industry as it brings closer to Asia the world’s best consumer brands in Premium luggage and travel bags, footwear and apparel, outdoor wear and equipment.
In the pursuit of continuous growth and excellence, the conglomerate diversified into several large scale businesses in industrial products and services, with regional operations in the Manufacturing operations of industrial ink, garment operations, printing
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operations, distribution and maintenance of air conditioning and mechanical ventilation (ACMV) systems.
Truly enough, with its network of companies across the ASEAN region multiplying in a pace never achieved before, the Primer Group of Companies is realizing its vision to become the LEADER in the global distribution and innovation of premium goods and services and with achievements and international retail commendations, the Primer Group will continue its mission to bring the world closer to its customers as the company and its strong 1,200 employees adhere to its five core values entrepreneurial spirit, passion for excellence, integrity, teamwork and self-discipline.
PHILIPPINE RETAIL AND DISTRIBUTION INDUSTRY OVERVIEW
The Philippine retail market is a growing market. Despite the global economic downswing that depleted gross domestic product (GDP) of many Asian economies last year, the Philippine economy expanded by 3.4 percentYoY, thanks to 3.5 percent growth in consumer spending. The government estimated that consumer spending, as measured by personal consumption expenditure (PCE), accounted for 79 percent of GDP in 2001.l the 3.5 percent growth in consumer spending last year was equivalent to about P89.6 billion or approximately US$1.75 billion. The fact that growth took place at a time the government limited its expenditure indicates the domestic market’s potential for higher growth. Over 90 percent of establishments in the Philippine employ less than ten persons each. Most large establishments are concentrated in Metro Manila, which covers only 636 square kilometres out of the country’s total land area of 300,000 square kilometres.
In the censuses and annual surveys, the National Statistics Office (NSO) defines wholesale trade as the “resale or sale without transformation of new and used goods to retailers, to industrial, commercial, institution or professional users, to other wholesalers, and to government, wholesale merchant, industrial distributors, exporters and importers.” Likewise, retail trade is defined by NSO as the “resale or sale without transformation of new and used goods for personal or household consumption” (NSO)
There is a preponderance of retailers and wholesalers in the food, beverages and tobacco classification, followed by retailers and wholesalers in dry goods, textile and wearing apparel. The third most numerous retail and wholesale establishments are in
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the wholesaling and retailing of construction materials and supplies. The preponderance of retailers and wholesalers in food, clothing and housing is not surprising because they constitute the bulk of expenditures of a Filipino consumer. In 1991, 48.5 percent of total family expenditures was spent on food, 13.5 percent on housing, 3.7 percent on clothing, footwear and other wear, and 2.7 percent on beverages and tobacco. In 1997, 43.9 percent of total family expenditures were on food, clothing housing, beverages and tobacco as a share of total family expenditures was 68.4 percent in 1991 and 64.7 percent in 1997, respectively (NSCB).
Not surprisingly, Metro Manila houses the majority of large wholesale firms, and even to some extent, retail firms. In 1991, Metro Manila accounted for 60 percent of the country’s large wholesale firms and 47 percent of all the large retail establishments. In 1995, Metro Manila accounted for 56.7 percent of the 15 country’s large wholesale establishments and 45.3 percent of the large retailers. The dominance of Metro Manila in large wholesale and retail establishments is even more evident in terms of gross sales and gross value added. Metro Manila’s large wholesale and retail establishments accounted for 69 percent of gross sales and 75 percent of gross value added of all large wholesale and retail establishments in 1991, although the share declines to 64 percent and 67 percent, respectively, in 1995. For the whole distribution sector, Metro Manila accounted for 63 percent of total sales and 68 percent of gross value added in 1995 declined significantly to 50 percent for both gross sales and gross value added.
The share of Metro Manila to gross sales, gross value added and employment by industry in 1995. It shows that Metro Manila virtually monopolizes the large establishment segment in a number of industries, particularly wholesaling of office and household furniture, furnishings and appliances (615), wholesale trade not elsewhere classified; i.e., merchandise brokering, import and export (619), dealing of machinery and equipment (616), retailing of books, office and school supplies (621) and retailing of dry goods, textiles and wearing apparel (623).
The share of Metro Manila in gross value added is generally higher than its share in gross for large wholesale enterprises, suggesting that much of the returns of wholesaling in the country accrue to the Metro Manila large wholesalers. Metro Manila is not as dominant in retailing as in wholesaling, especially for small retail establishments. Nevertheless, the region is still an important presence especially in the retailing of office and household furniture, furnishings and appliances (625), retailing of books and office and school supplies (621), retailing of transport machinery and
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equipment, accessories and supplies (626), and retailing of construction materials and supplies (624). The large presence of Metro Manila even in retailing systems from the fact that the region is the premier retail market in the country gicen its large population and higher capita income.
2. ANALYISIS OF PRESENT TASK ENVIRONMENT
Task Environment includes forces from suppliers, distributors, customers, and competitors, which the organization interacts directly and that have a direct impact on the organization’s ability to achieve its goals.
Porter’s five forces is a framework for the industry analysis and business strategy development. The five forces determine the competitive intensity and therefore attractiveness of a market. It is a simple tool for understanding where power lies in a business situation. This is useful because it helps us understand both the strength of the current competitive position and the strength of a position you’re looking to move into.
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THREAT OF ENTRY IS LOW
Companies diversifying through acquisition into the industry from other markets often use their resources to cause a shake-up. Thus acquisition into an industry with intent to build market position should probably be viewed as entry even though no entirely new entity is created. Within the industry of Primer Group of Companies, acquisitions of brands of the other companies, either multinational or local can be a potential entrant.
The threat of entry to an industry depends on the barriers to entry that are present, coupled with the reaction from existing competitors that the entrant can expect. Porter identified six major sources of barriers to entry:
Economies of Scale
Economies of Scale arise when the cost per unit falls as output increases. The retail industry has economies of scale in producing their products due to its mass production. So for the retail industry, an economy of scale is also present in its market because of the volume of products produced in the market. This means companies in the retail industry can produce more at a lower price and possibly sell more and eventually would help improve the profitability of the company. As a matter of fact, the existing players have already achieved a cheaper, high quality and trendy design products with a low-cost manufacturing process to increase operating profit. Economies of scale in production, purchasing, research and development, marketing, sales force utilization and distribution can be the key barriers to entry for a potential entrant in this industry.
The retail industry is composed of very large manufacturers and retailers. This manufacturers and retailers are able to build brand loyalty and image for the existing players, thereby adding value to their company. Potential entrants may find it moderate to penetrate the industry since the power of the internet has created also a venue for the manufacturer to double as a retailer. Though, smaller entrants will have a tougher time entering the retail industry because the large players have the authority and have the cost advantage against new entrants to bid down costs from its suppliers. Potential entrants should establish manufacturing plants in countries that have low-labor cost such as China in order to achieve economies of scale.
Product Differentiation
Product Differentiation is a marketing process that showcases the differences between products. Differentiation looks to make a product more attractive by contrasting its unique qualities with other competing products.The stronger the attachment of buyers to established brands, the harder it is for a newcomer to break into the marketplace.
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Successful product differentiation creates a competitive advantage for the seller, as customers view these products as unique or superior. There are numerous players in the retail industry that offers similar products and service that most companies can produce. In the retail industry particularly in shoes, slippers, bags and clothes, product differentiation is high because everybody buys different products and each brand has different value to different people. This threat would be brand loyalty. Being first in the industry, poses a threat to new entrants because of their customers brand loyalty. So, high product differentiation is needed because consumers have strong brand identification and loyalty to brands. Potential entrants will face a difficult undertaking because investing in building a brand name are particularly risky and they will have no salvage value if they fail.
Another thing is that if it is difficult or costly for a customer to switch to a new brand, a new entrant must persuade buyers that the brand is worth the switching costs. To overcome switching cost barriers, new entrants may have to offer consumers discounted price or an extra margin of quality or service. These barriers discouraged new entrants since they act to boost financial requirements and lower expected profit margins.
Capital Requirements
Capital requirements are the standardized requirements for banks and other depository institutions, which determine how much liquidity is required to be held for a certain level of assets. Nowadays, there is an increasing technological advance in the internet and production process which means that there is a small amount of capital needed to enter in the retail industry.
Access to Distribution Channels
Most of the company’s distribution channels in the retail industry access their products through retailing and distribution, where in the company usually place their products in malls or in retail boutiques. Retail industries recognized the importance of the internet and adapted to the internet to have their own websites. Wherein nowadays, there are catalogues in their websites, place it in carts, then some internet users use this service where they can purchase the clothes or accessories they want without leaving their home.
The major players in the retail industry have already established their distribution channel through the wholesalers and retailers. The major players are struggling in their shelves space to make their product more accessible and visible to the consumers. If
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the major players are already struggling for shelve space, it will be more difficult for new entrants for the fact that retailers and wholesalers may be reluctant to take on a product that lacks buyers recognition.
Cost Disadvantages Independent of Scales
Cost Disadvantages Independent of Scale, is whereby established companies already have product technology, access to raw materials, favorable sites, advantages, in the form of government subsidies and experiences. In the retail industry, managerial know-how is an advantage for existing firms and most existing firms have already benefited from the learning curve. This advantage can also be associated with any business function, from marketing, purchasing raw materials to distribution and service that can lower costs. New entrants will take time to achieve these advantages. Having no experience of new entrants will definitely inherent higher costs than established firms and they must bear heavy start-up losses from below or near cost pricing in order to gain such experience and having more experience with the new and late entrants, employees from existing company can already forecast trends that can add great significance to the company and benefit from key relationships with suppliers and people within the retail industry.
Government Policy
Government policies and organized bodies such as World Trade Organization (WTO), International Labor Organization (ILO), industry and trade associations, and others create a barrier of entry in the retail industry, since majority of labor production is performed overseas. Also, these organized bodies set regulations, standards, testing and certification procedures such as ISO. This applies to companies, where their products are manufactured overseas. Like the Bureau of Customs which check the proper and qualified items to sell in the country.
THREAT OFSUBSTITUTE PRODUCTS OR SERVICES IS LOW
Substitute products are the natural result of industry competition, but they place a limit on profitability within the industry. A substitute product involves the search for a product that do the same function as the product the industry already produces.
Porter’s Five Forces Analysis of the Retail Industry
There can be many substitute products within the retail industry. Example of a substitute within the industry is Havaianas slippers for Sanuk sandals and Crocs for our brand Native. There can be also low switching costs for the consumers. It should be noted,
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however, that these substitutes are within the industry only. In order for a product to be considered as a substitute, it must perform the same function outside the industry.
Potential substitute for these sandals are slippers. Nonetheless, the sales of these substitutes are not growing faster than the sales of the retail industry. Neither the profits of the producers of substitutes are on the rise nor are the producers of these substitutes moving to add a new capacity.
However, consumer preference may be considered as a threat because not every customer is the same. Some might prefer wearing slippers in summer over sandals or wearing tank tops over shirts during rainy season. Customers also might substitute brand other than those elements where they might substitute brand for preferences such as fit, color, comfort, design and even price point.
INTENSITY OF RIVALRY AMONG EXISTING COMPETITORS HIGH
Rivalries naturally develop between companies competing in the same market. Competitors use means such as advertising, introducing new products, more attractive customer service and warranties, and price competition to enhance their standing and market share in a specific industry. To Porter, the intensity of this rivalry is the result of factors like equally balanced companies, slow growth within an industry, high fixed costs, lack of product differentiation, over capacity, price-cutting, diverse competitors, high-stakes investment, and the high industry exit. In the retail industry, rivalry is high and intense due to the similarities of the product being offered. Threat of rivalry includes all stores that sell bags, shoes, sandals, clothes and many more. Stores and brands are those such as Havaianas, Crocs, Toms, and many more. The retail industry is comprised of several main rivals of equal size and each brand has their customer base. When consumers establish brand loyalty, it shows striking signs of rivalry. And when rival firms threaten existing firms, it reduces their economic profits. Since there are so many stores that sell different brands in the retail industry, this presents very competitive pricing for the product. That is why; often times in the retail industry, celebrities and models are used to influence customers to purchase products. Another is that, competitive moves by one firm have noticeable effects on its competitors and thus may incite retaliation or efforts to counter the move; that is, firms are mutually dependent. One indicator of this is that there is a lively price competition. The prices of the products of the firms within this industry are almost the same because they counter the price of each other.
Other indicator that there is an active rivalry among industry members is that members are racing to differentiate their products from rivals by offering higher-quality products but in a cheap price and a wider product selection. The industry members are also
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pursuing their best efforts to build stronger dealer networks expanding their distribution capabilities and making more presence in the market.
BARGAINING POWER OF BUYERS HIGH
Buyers compete with the industry by forcing down the prices, bargaining for higher quality or more services, and playing competitors against each other all at the expense of industry profitability. The buyer’s power is significant in that buyers can force prices down, demand higher quality products or services, and in essence, play competitors against one another, all resulting in potential loss of industry profits. The bargaining position of buyer changes with time and a company’s competitive strategy.
The threat of buyers depends on the marketing efforts for the product. If a company has good marketing strategy then customers are most likely to purchase their products. Also, the retail industry buyer’s are as big as the population. Every consumer is a buyer in the retail industry, since our products are necessity for humans. Primarily, the buyer dictates the type of products sold because the firms are the one catering to their needs and wants. And often times, even fashion trends in the said industry are dictated by the buyers. Also, due to similarities of product being offered in the retail industry, the threat of buyers can be greater.
BARGAINING POWER OF SUPPLIERS IS LOW
The term 'suppliers' comprises all sources for inputs that are needed in order to provide goods or services. Suppliers in the food processing industry can exert bargaining power over participants by threatening to raise prices or reduce the quality of purchased goods. Supplier bargaining power is likely to be high when, the market is dominated by a few large suppliers rather than a fragmented source of supply. There are no substitutes for the particular input. The suppliers’ customers are fragmented so their bargaining power is low. The switching costs from one supplier to another are high. There is the possibility of the supplier integrating forwards in order to obtain higher prices and margins. The buying industry hinders the supplying industry in their development and the buying industry has low barriers to entry.
Suppliers have a great deal of influence over an industry as they affect price increase and product quality. A supplier group exerts even more power over an industry if it is dominated by a few companies, there are no substitute products, the industry is not an important consumer for the suppliers, their product is essential to the industry, the supplier differ costs, a forward integration potential of the supplier group exists. Labor supply can also influence the position of the suppliers. Threat of Suppliers all depends on the amount of raw materials. In some cases, companies in the retail industry; produces their own product, then there isn’t a threat of suppliers other than the materials it takes to produce their products. Distributing own product of a company in
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the retail industry is an advantage of the company because they don’t have to rely on other businesses to do it. Price increase of raw materials can be considered as a threat because if that is the case, the threat of wages going up can be considered.
Five Competitive Forces Intensity
1. Threat of Entry Low2. Threat of Substitute Products Low
3. Intensity of Rivalry among Competitors High
4. Bargaining Power of Buyers High
5. Bargaining Power of Suppliers Low
3. ANALYSIS OF POTENTIAL CHANGES IN THE MACRO- ENVIRONMENT
The Macro Environment Analysis is tradionally the first step of a strategic analysis. It is sometimes referred to as an external analysis. The purpose of the Macro Environment Analysis is to identify possible opportunities and threats to the industry as a whole that are outside the control of the industry.
There are many factors in the Macro-environment that will affect the decisions of the managers of any organization. Tax changes, new laws, trade barriers, demographic change and government policy changes are all examples of macro change.
Political factors. These refer to government policy such as the degree of intervention in the economy. What goods and services does a government want to provide? To what extent does it believe in subsidizing firms? What are its priorities in terms of business support? Political decisions can impact on many vital areas for business such as the education of the workforce, the health of the
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nation and the quality of the infrastructure of the economy such as the road and rail system.
Economic factors. These include interest rates, taxation changes, economic growth, inflation and exchange rates. For example, higher interest rates may deter investment because it costs more to borrow, a strong currency may make exporting more difficult because it may raise the price in terms of foreign currency, inflation may provoke higher wage demands from employees and raise costs and higher national income growth may boost demand for a firm's products.
Social factors. Changes in social trends can impact on the demand for a firm's products and the availability and willingness of individuals to work. In the Philippines, for example, the population has been aging. This has increased the costs for firms who are committed to pension payments for their employees because their staffs are living longer. The ageing population also has impact on demand. For example, demand for sheltered accommodation and medicines have increased whereas demand for toys is falling.
Technological factors. New technologies create new products and new processes. MP3 players, computer games, online gambling and high definition TVs are all new markets created by technological advances. Online shopping, bar coding and computer aided design are all improvements to the way we do business as a result of better technology. Technology can reduce costs, improve quality and lead to innovation. These developments can benefit consumers as well as the organizations providing the products.
Environmental factors. Environmental factors include the weather and climate change. Changes in temperature can impact on many industries including farming, tourism and insurance. With major climate changes occurring due to global warming and with greater environmental awareness this external factor is becoming a significant issue for firms to consider. The growing desire to protect the environment is having an impact on many industries such as the travel and transportation industries and the general move towards more environmentally friendly products and processes is affecting demand patterns and creating business opportunities.
Legal factors. These are related to the legal environment in which firms operate. In recent years in the Philippines there have been many significant legal changes
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that have affected firms' behavior. Legal changes can affect a firm's costs and demand.
LOCAL NATIONAL GLOBAL
POLITICAL Provision of services by local council
Philippines’ government policy
on subsidies
World trade agreements e.g.
further expansion of the EU
ECONOMIC Local income Philippines’ interest rates
Overseas economic growth
SOCIAL Local population growth
Demographic change (e.g. ageing
population)
Migration flows
TECHNOLOGICAL Improvements in local technologies e.g. availability of
Digital TV
Philippines’ wide technology e.g.
Philippines’ online services
International technological
breakthroughs e.g. internet
ECONOMIC MACRO-ENVIRONMENT
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Inflation rate in Philippines was last reported at 4.5 percent in May of 2011
The inflation rate is one of the most important economic forces consistently weighing on the value of a nation's currency.In the Philippines the inflation rate has increase to 3.80% from the 3.20 from the last year’s computation, an 18.75% increase; this would be gradually felt by the public. For those who are buyers, they might experience a little disappointment to the ability of their peso, but compared to the percentage given to the 2009 computation which was 9.20% inflation rate, this was a big change.
POTENTIAL CHANGE
IMPLICATION EFFECT ON COMPANY
The inflation rate in Philippines was last
reported at 4.5 percent in May of
2011
There is a possibility that the consumer
demands will decrease
Decrease sales revenue for the
company, due to the purchasing power of
the peso is not anymore the same
as before that would decrease sales for
the company
No new high tax measures
A possible increase in consumer
demands, cause of the no movement of
taxes and prices.
The company won’t be able to increase
its prices if the possible cause is
tax.
Philippines raises 2011 GDP growth goal to 7-8 percent
An increase on the investments, inside and outside of the
country
There might be an increase in trust and
confidence of the investors.
National Income Account on
agriculture is down by 0.5%
Reflection that there is no improvement
on agriculture on the said country and
they weren’t able to further invest on
technology, studies etc.
This would cause the company to
calm, unable to be distracted by local market, especially
new ones to be able to replicate its
products.
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No new high tax measures
One of the promises of the president was not to increase taxes on his term as what he have promised during the 2010 election to the Makati business club, with the statement “"We will refrain from imposing new taxes or increasing tax rates," as what President Aquino have said” "I strongly believe that we can collect more taxes at the BIR (Bureau of Internal Revenue) and higher duties at customs if we become more serious in curbing and punishing tax evasion and smuggling." With this promise he was able to impress different sector of the business community which means bigger profit for them. Other investors will also be allure on such offer to invest to the country.
Philippines raises 2011 GDP growth goal to 7-8 percent
GDP is one of the indicators if one economy is growing or falling, this computation of investment, consumption and government spending minus to the import and export of the country. And having an increase of one percent in our GDP means,that the government action towards the economy are moving in a good flow, even though that it is not felt that much we could tell that the economy is blooming and if the investors trust and confidence will be lift.
National Income Account is down by 0.5%
A National Income Account provides a quantitative basis for choosing and assessing economic policies as well as making possible quantitative macroeconomic modeling and analysis. This is not used to make decision, but only they do provide a basis for the objective statement and assessment of economic policies. These would be their guide, as to where are the sectors of governance need focus.
Based on the latest NIA, the government didn’t focus much on its Agricultural and Aquatic resources. This would take as an opportunity for foreign investor. Example rice we somehow import rice, due to our focus on Industrial development, rather than agricultural or balance.
POLITICAL-LEGAL MACRO-ENVIRONMENT
LEGAL CHANGE IMPLICATION EFFECT TO THE COMPANY
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Philippines Product Registration,
Importation and Exportation
Obtaining the proper licensing and ensure legal compliance for
importation, exportation and
distribution of the product in the Philippines.
This would cost liability in the part of
the company for importation of the
products/ingredients that will be used for the said production.
REPUBLIC ACT NO. 8976 (An Act
Establishing the Philippine Food
Fortification Program and for Other
Purposes)
The addition of nutrients to
processed foods or food products at levels above the
natural state.
There will be an increase in sales
especially when the health conscious
people are aware of the nutrients that are
found on food.
Execution of Value Added Tax
An increase in consumer product
taxes by 12%.
This would cause increase the Taxes that are given to all consumer products that are being paid by the customers.
Implementation of the Anti-Smoking
Law including inside the hotels, shopping malls, and buildings except for smoking
areas that are approved by the city
government
Customers who are smokers will only
dine at restaurants and delis with smoking areas
Decrease in number of customers who
are smokers
Philippines Product Registration, Importation and Exportation
There are certain laws that are being followed. One is which called Tariff law, that stated law sections that contains the things that should be imported and not to be imported. According Sec 602 of the Custom Law site the certain role of the Bureau of Custom on imported products/materials, which they are the one responsible on assessment of the revenue that would came out of such importation. These would cause liability to the company, but would give assurance to the customers that the
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ingredients that are used are Starbucks certified ingredients, and are legal well paid on the taxes.
REPUBLIC ACT NO. 8976 (An Act Establishing the Philippine Food Fortification Program and for Other Purposes)
Nowadays, people who are health conscious are being a trend to the society. Through such republic act, the government could increase the necessary nutrients by the body. The government should ensure that the process foods and food products be inspected for the safety of its users. According to Sec. 7 of this republic act “The agencies charged with the implementation of this Act shall establish a quality assurance system. Likewise, the manufacturers and importers of processed foods or food products shall also establish their own quality assurance system in accordance with the quality assurance system of the implementing agencies.” Meaning insurance that we eat and drink should be safe and clean for the consumer’s health benefits.
Execution of Value Added Tax
This was enacted through the effort of Republic Act No. 9337 provides that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied:
Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%).
In which products, from food to clothes, are given 12% taxes additional to its products, that are carried by its consumers, this would cause suffering to the market especially on these period that labor unemployment is increasing.
SOCIO-CULTURAL MACRO-ENVIRONMENT
Cultural Issue of the Philippines
Many of those living near or below the poverty line in the Philippines experience constant hardship, suffering, and oppression. Most of them remain homeless and without jobs. Even those who receive small paychecks or wages cannot sustain their families with such meager incomes.One of the factors that greatly influence such low
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standards of living and sustenance is very poor self-esteem. Because of their state of life, they tend to harbor derogatory feelings of inferiority. They see themselves at the whim of wealthier people and at the mercy of those who drive society. Thus, what results is poor motivation to try to work harder. They have resigned themselves to their lifestyles and intend to just live their lives like slaves.This factor cycles into limited freedom because of poverty.
Their state of life prevents them from escaping societal evils such as oppression and abuse, especially from the upper classes. They remain powerless without any voice in matters that run their lives. They are their own slaves to their lack of confidence and motivation. They are imprisoned in economic and material hardship.Aside from being born into poverty, there are other elements that keep a person under that dreaded poverty line. One of the most important of these is poor education. The lack of sufficient academic foundations and work experience brings about the inability to perform higher-paying jobs. This relegates the poor to the level of unskilled laborers who finds themselves in the simplest and lowest-paying jobs around.
Another major contributor to a low standard of living is the poor state of health that many of the poor experience. Ailing workers lack motivation, they have little discipline in them to enable them to tackle more complicated areas of work or longer shifts. This not only turns out progressively unskilled laborers, but also hampers quality production.The poor also lack knowledge in family planning. They believe that the more children they have, the more they can send them to be victims of child labor and earn income for the family. They abuse their kids to earn more and turn a blind eye to the rights of the child. It is very common sight in the Philippines. Parents with notions that the child will study hard, and one day lift his or her parents from poverty. All of this backfires because the labor supply continues to shoots up. This brings down the price of labor and allows huge capitalist organizations to take advantage of cheap labor. In most cases, it leads to abuse and neglect.Another one of the major causes of poverty are low savings. These, in turn, equate to low investments. The poor seldom have enough finances to bring into existence even a little business of their own. They are often placed under the iron fists of unfair employers who fail to take into account the welfare of their workers.
Languages in the Philippines
Filipino is based on Tagalog and is the official language of the Philippines. In spite of being the national language, only about 55 percent of Filipinos speak the language. In addition to Filipino are about 111 distinct indigenous languages and dialects, of which only about 10 are important regionally.English is generally used for educational, governmental and commercial purposes and is widely understood since it is the medium
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of instruction in schools. The Philippines are the third largest group of English speaking people in the world, after the United States and the United Kingdom.Since English is widely spoken in the Philippines, it is common to hear Filipinos use a mixture English and Filipino words or phrases, known as "Taglish" (a mixture of English and Tagalog), in their everyday conversations. A steadily dwindling minority still speak Spanish, which had at one time been an official language.
Demographics
Demographics are records of human population in the country, including its population density, population growth, education level, health, and other aspects of the population. The main demographic force that is essential in this paper is the population because people make up markets. According to the 2007 Census, the population of the Philippines was 88,574,614. The national Statistics Office is the office in-charge of taking note these data. From 2000-2007, the population growth is 2.04%. As of 2010, the estimated population is 94,013,000 people. This estimates the population growth for 1.957%.
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With the chart above, we can see that there is an increasing growth of our population. With the population growth rate, NSO predicted that by 2025 our population will be 163,072,000 or almost double of the population this year.
The age distribution is at most in the working age which is 59.2 in 2007. This means that almost half of the population is in the middle stage of their life. There is also rapid urbanization since urban areas comprise of 65% of the total population in 2008.
The rapid growth of the population and the urbanization are the major population issues of our country. Although there is a high rate of urbanization in the country, this indicates that there can also be an increase in the people’s income. When there is an increase of income, the consumption and demand for high quality goods will also increase.
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Source: National Statistics Office, Philippines
Culture
Lifestyle
To further understand the factors that can affect the food processing industry, it is better to discuss the Filipino lifestyle in foods.
Filipinos love to eat, and since they’re naturally hospitable and gregarious, food is the basis of their social life. Because the feeling of fulfillment after eating rice, their staple ingredient, is relatively short-lived, they eat three meals a day and two snacks in between. Filipinos, especially country folk, rise early. Some will eat a segundo almuerzo (second breakfast) around 10:30, plus a merienda, or mid-afternoon snack. Rural folk eat their main meal at midday, while city dwellers emphasize the evening meal. The diet of poor families is usually rice, fish, and vegetables, interspersed with starchy snacks. At fiesta time, all families try to eat meat.
Filipino eating lifestyle is also shifting towards healthy foods because they are now conscious of their looks and figures. With the increasing awareness by consumers on healthy eating and a healthy lifestyle, food-processing companies continue to develop or add new products that cater to the demand of this growing segment. Beverages continue to be the trendsetter with new brands and/or variety of flavored waters, soy beverages, and yogurt drinks, energy drinks, and health drinks such as green teas. The marketing campaigns for the beverages emphasize “no sugar”, “natural”, “vitamin and fiber enriched”, “no fat”, “no cholesterol”. A highly competitive market place has led companies to seek out prime shelf space in supermarkets and convenience stores.
In relation to the food processing industry, this Filipino eating lifestyle can be a basis for creatively innovate their products and marketing their products. For example, if Filipinos
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eat snacks in between of the main meals, companies in the industry, which produce snacks, can have a marketing activity via commercial airing at the afternoon where snacks are usually eaten.
Education
Filipinos have a deep regard for education, which they view as a primary avenue for upward social and economic mobility. However, according to the NSO data, there is a decreasing rate of Filipinos who can finish college. From the elementary stage to college level, the number of enrolees also decreased. It indicates that there is an issue with regards to the education of our country. One example is that middle-class parents make tremendous sacrifices in order to provide secondary and higher education for their children.
Some universities were excellent; others were considered "diploma mills" with low standards. Public elementary schools often promoted students regardless of achievement, and students, especially those in poor rural areas, had relatively low test scores. (Please refer to the table below)
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Source: National Statistics Office, Philippines
DEMOGRAPHICS MACRO-ENVIRONMENT
POTENTIAL CHANGE
IMPLICATION EFFECTS ON THE COMPANY
The current population of the Philippines as of
2009 is 92,226,600, and projected
population on 2010 is 94.01million.
There is a competition on
scares resources that are available in
the market.
There are possibilities of
increase of consumers of the product based on the increase on
population.
The Philippine is made up of different ethnic groups that composed of 120-
170 different dialects.
A differ on dialects could bring a barrier for one to exchange
goods/products
This would be a challenge for the company to serve
different groups with different dialects.
80% of the Filipinos are Catholic 5% are
Muslims and the 10% are Protestant and other religious
group.
Being a colony of Spain for 300 years, this was one of their
influences.
There would be less stress for Starbucks of discussing certain
Ethical issues on their products.
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Issues regarding overpopulation in the country
There are many factors affecting this problem on overpopulation such as poverty, hunger, lack of job openings, lack of proper education, etc. many of which result from another. Regardless of what the true cause of the problem is, it all boils down to the creation and sustenance of life. Some studies claim that a baby is born every eight seconds and somebody dies every thirteen. Others might contest that a baby is born every three seconds. Although these studies may vary, the fact of the matter remains that the birth rate far outnumbers the fatality rate. This implies that there are an excessive number of people living in the world today. While there are many proposed solutions to this crisis that may have a high rate of effectiveness, such as the use of contraceptives and certain policies limiting the progeny of a couple, they are not highly encouraged or implemented here in the country. Due to the influence of the Catholic Church, the Government cannot easily impose certain regulations that might affect the country and the economy. In fact overpopulation is one of the reason why there is a large number of unemployed people, not only education is the cause, but with the computation on few slots that are available people are trying to attain what is the only option for survival. For those who cannot compete leaves the country. Other nations are one who benefits the ability of these individuals.
TECHNOLOGICAL MACRO-ENVIRONMENT
POTENTIAL CHANGE
IMPLICATION EFFECT ON COMPANY
ITW Food Equipment Group Receives Highest Honor with 2011 ENERGY STAR Sustained Excellence Award
ITW FEG is committed to supporting customers in their drive to cut costs, consume less water and electricity, and decrease waste.
ITW FEG companies that support the sustainable initiatives of customers and end-users with new products and technologies that directly address their concerns about operations and the environment.
Using or upgrading of current POS (point
Custom made to the company’s
Less time consuming work for the
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of sales) software specification or need. A software or equipment where the sale is made official
management to keep track of the company’s sales
Availability of Commercial/Domestic used coffee makers
in the market.
Easier and more convenient coffee makers, that are
using by hotels and restaurants are
available strait from your office and at
home
Competition on coffee making are
intense, the availability of
cheaper coffee makers make
different shop cater to the demands of its
customers.
Employing or upgrading of current POS (point of sales) software
Majority of commercial food service companies nowadays make use of the POS (point of sale) technologyis the location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register.
The POS makes everything easier for a store/company to audit and track the records of its inventory, with this stores won’t need any more to worry regarding lost inventories and changes in prices, because everything is updated and would be able to change as long as a database is available.
LABOR MACRO-ENVIRONMENT
POTENTIAL CHANGE IMPLICATION EFFECT ON THE COMPANY
Low wages are given to the Filipino Labor
Laborers would rather find another
Employees would ask for increase or
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force that is not enough to their daily
living.
job to increase their monthly salary
or would seek opportunities
abroad
would lessen their performance if the demands are not
attained
The issue regarding job mismatch is
prominent to some companies today
Many Filipinos are unsatisfied on their
jobs due to this mismatch that would result on
less performance and lack of ability
for the said employee
Companies would put these people on a low wage bracket especially it’s not
their forte, that would result to
underdevelopment
Underemployment rate is 7.30% as of 2011 a
2.26 increase as of last year underemployment
rate
A great indication that there is no growth in the
economy and that poverty is increasing
Companies should be able to find
quality employees because of lack of employment in the
country
Issue of Low Wages in the Philippines
The Philippine is one of the countries that has the lowest labor which is P389.00-P426.00 ( $ 9.83) which is not enough to the daily cost of living of a typical Filipino family is around P800. That bothers many Filipinos especially if that person has a child, which they need to send to a decent school, a decent life they need to save a couple of money to be able to do that. With this kind of salary given to every Filipino Laborer it’s not enough for one’s family.
Issue regarding Job Mismatch
There are many Filipino workers who are underemployed, meaning that their skills didn’t match the need of a company 19.4% of the total labor force, some of these people are part of the mismatch labor force. Their skills, talent and education during
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college, was not the same profession that they were able to work on. These people are the one who are unsatisfied on their jobs and the one who cannot resign due to the crisis in our country.
Employment and Unemployment Rate
The quality of the Philippines labor market is already weak to start with. For the past seven years through 2008, the economy grew at 5.4 percent on average per year. Yet, during these prosperous times, the labor market was characterized by (i) a high unemployment rate (7.4% in 2008 and 7.5% in 2009); (ii) even higher underemployment rate (19.3% in 2008 and 19.1% in 2009) with a high incidence among the youth, and even skilled (graduates) youth; (iii) high informal sector (mostly in agriculture and services); (iv) a rigid labor market environment (including an outdated and complex labor code); (v) and a falling trend in real wages since 2001.
Notwithstanding the resiliency of the economy, the quality of the labor market is slowly weakening. The quantity of jobs lost is already large but difficult to fully capture. The unemployment rate continued its steady rise in 2009 (from 7.4% in October 2008 to 7.5% this January12). Along with the slump in exports (annual contraction of about 40% in both January and February), the manufacturing sector continued to shed jobs, posting more than 100,000 job losses in January. Starting 2008, data point to a particular worsening of the job market for unskilled workers. Overseas employment an important safety valve given the rapid growth of the Filipino labor force also weakened in November, and contracted by 5.8%, in December. It again registered strong growth earlier this year but downside risk still lies on the scenario of deeper global downturn. Nevertheless, the services sector continued to create jobs even as the economy slowed down. The underemployment rate remains below 20%. Surprisingly, measured employment quality remained broadly stable at this stage.
Half of the estimated 35 million employed persons in 2009 were engaged in services, distributed mostly in the wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods. About 35 percent of the employed were engaged in agriculture while the rest (14.5%) worked in the industry sector.
Occupation-wise, the laborers and unskilled workers comprised the largest group (32.5%), followed by farmers, forestry workers and fishermen (16.7%), next by officials of government and special interest organizations, corporate executives, managers, managing proprietors and supervisors (13.5%). The service workers and shop and market sales workers accounted for 10.5 percent of the total employed persons in 2009. In addition to the market sales workers, the rapid expansion of the call centers or the BPO Industry constitutes a large percentage on this labor force.
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More than half of the total number of employed persons worked as wage and salary workers. One-third were own account workers while the rest (12%) were unpaid family workers. There is also an increase in the number of household with both parents working.
Net Job creation started deteriorating inJuly 2008
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Unskilled workers are increasingly being hit by the crisis
Job Quality remains broadly stable so far
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Consumer Spending
Filipino families earned a total of P3.01 trillion in 2006 according to the final results of the 2006 Family Income and Expenditure Survey (FIES). Distributing this total annual income among the estimated 17.4 million Filipino families in 2006 resulted in an average annual family income of approximately P173 thousand. The total annual family expenditure was approximately P2.56 trillion, or P147 thousand per family on the average.
Considering the inflation between 2003 and 2006, the total family income in 2006 would be valued at P2.18 trillion at 2000 prices. Likewise, the total family expenditure in 2006 would be valued at P1.86 trillion at 2000 prices. In real terms, the total income of families increased by 8.5 percent while the total expenditure increased by 10.5 percent between 2003 and 2006.
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Total Number of Families, Family Income and Family Expenditure andGini Coefficient: 2006 and 2009
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Percent Distribution of Family Expenditure by Expenditure Item for Bottom 30 Percent and Upper 70 Percent Income Group: 2006 and 2009
There was a shift in the spending pattern of Filipino families particularly those in the bottom 30 percent income group because it slides towards more spending on food. In 2009, 59.9 percent of all expenditures by this group were on food, increased by 0.8 percentage points from 59.1 percent in 2006. In totality of the income group, there was an increase in food spending of 1.2 percent from 41.4 in 2006 to 42.6 in 2009.
Consequently there was a decrease in tobacco, fuel, light and water expenditures. All other expenditures were increased or at par both in 2006 and 2009.
OFW Remittance
There was a total increase of OFW remittance in all of the continents. Basically, it can be attributed to the deployment of the OFW because there was a 15.1 percent change from 2008-2009. There is also an increasing demand for the Filipino workers abroad since the government is intensifying their human resource development to improve the competitive advantage of the Filipino workers abroad.
Remittances of Overseas Filipinos : 2003 - 2009(In Thousand US Dollars)
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Number of Deployed Overseas Filipino Workers by Type of Hiring: 2008-2009
Inflation Rates
The annual headline inflation rate at the national level went up to 3.0 percent in November from 2.8 percent in October primarily due to the jump in the annual growth in fuel, light and water (FLW) index to 12.0 percent from 8.3 percent in October. Higher annual rates of price increments in housing and repairs (H&R) and services index also contributed to the uptrend. Inflation a year ago was 2.8 percent.
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Excluding selected food and energy items, core inflation advanced to 3.5 percent in November from 3.3 percent in October. Similarly, the annual inflation rate in the National Capital Region (NCR) increased to 3.6 percent in November from 2.2 percent in October. It resulted from higher annual price adjustments in food, beverages and tobacco (FBT), H&R and FLW index.
Annual inflation rate in Areas outside the National Capital Region (AONCR) continued to move at a slower pace of 2.8 percent in November from 2.9 percent in October brought about by the deceleration in the annual price gains in FBT and H&R index.
Import and Export
Total external trade in goods for January to October 2010 reached $87.911 billion, a 31.4 percent increment from $66.897 billion registered during the same period in 2009. Total imports posted a 26.3 percent annual increase to $44.826 billion from $35.501 billion. Similarly, an increase of 37.2 percent for merchandise exports was noted to $43.084 billion in January to October of 2010 from $31.397 billion during the same period in 2009. Thus, the balance of trade in goods (BOT-G) for the Philippines
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registered a deficit of $1.742 billion during the 10-month period in 2010, a value lower than the $4.104 billion deficit in the same 10-month period last year.
Businesses involved in international commodity trading (i.e., importers, exporters and those engaged in dual activities) have a positive but less favorable outlook relative to the previous quarter’s survey results due to expectations of low export demand on account of the slow economic recovery of international markets from the global financial crisis. This is as quoted from Business Expectations Survey of BSP, Quarter 4, 2010.
Philippine Import Annual Growth Rates: October 2009 – October 2010
Combined import and export merchandise trade for October 2010 was up by 27.9 percent to $9.664 billion from $7.556 billion in October 2009. Total merchandise imports increased at 28.4 percent to $4.888 billion from $3.808 billion in October 2009. Total exports, on the other hand, rose by 27.4 percent to $4.776 billion from $3.748 billion in October 2009. The balance of trade in goods (BOT-G) in October 2010 posted a deficit of $112.00 million compared to last year recorded deficit of $60.00 million. On a month-on-month basis, total imports for October 2010 grew by 6.9 percent from $4.573 billion recorded in September 2010.
Philippine Trade Performance in January-October: 2010-2009(F.O.B. Value in Million US Dollars)
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Philippine Trade Performance in October: 2010-2009(F.O.B. Value in Million US Dollars)
Exchange Rate of Philippine Peso vs. US Dollar
The Philippine Peso is continuing to appreciate though the rate is fluctuating. As of September 2010, the exchange rate accounts to 44.31 compared to 48.139 of September 2009. Despite of the financial crisis, the Philippine Peso proved supple because of the OFW remittances, export earnings and foreign investments. The increase in exchange rate of Peso and Dollar can definitely affect the import and export of the country. The strengthening of the peso contributed to the lower confidence of respondents in the exports business, but the same factor provided support to the more sanguine outlook of importers given that a stronger peso reduces the cost of imports in peso terms. Some say that the increase in the rate of Philippine Peso is good
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for the country’s economy especially to the importers. However, it will have a great impact for the families of the OFW because they will have to undergo a decrease in their family income.
ECOLOGICAL MACRO-ENVIRONMENT
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The ecological environment involves the stock of the physical and natural resources within a region. It can be broadly segmented into: (1) Physical – Land, air, water, and sea, and (2) Nature – Flora and fauna.
The Philippines was one of the first countries to adopt the Agenda 21 process, initiated at the Rio Earth Summit in 1992, by formulating its own National Agenda 21, through a highly participatory process, in 1996. However, despite its government’s good intentions, rapid population growth, urbanization and industrialization have far outstripped urban environment services and weak natural resource management systems have led to rapid degradation of those environments, too.
Rapid conversion of forestlands and grasslands to urban use is depleting these natural systems. Agricultural yields in lowland areas are stagnating, and population pressures are stimulating cultivation of fragile upland areas, causing serious soil erosion. While estimates of deforestation differ, forest cover in the Philippines has certainly been significantly reduced over the last forty years, due to increasing urbanization, illegal logging, and forest fires. Reforestation efforts by the government have been erratic, with low tree survival rates. Marine resources are heavily stressed by over-exploitation and pollution.
The loss of forests and other critical habitats is also threatening the Philippines’ rich biodiversity. Although the number of protected areas has grown on paper, so have the rates of destruction and habitat conversion within them. Management is hampered by inconsistent laws, inadequate regulations, over-lapping institutional mandates, weak enforcement and funding shortages.
Over the past decade, the Government of Philippines has tried to reverse environmental degradation by introducing innovative institutional and legal reforms. In addition, in recent years, many donors, including the World Bank, have supported efforts to improve overall environmental governance in the country by building the capacity of the Department of Environment and Natural Resources (DENR), the Laguna Lake Development Authority, the National Economic Development Authority, the Department of Public Works and Highways, the Land Bank of the Philippines, local governments, NGOs, and local communities, and by supporting innovative partnerships among them. In spite of all these efforts, capacity in environmental and natural resources governance still requires significant improvement, particularly in local government units.
INSTITUTIONAL MACRO-ENVIRONMENT
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Transportation
Road System
The Philippines has 199,950 kilometers (124,249 miles) of roads, of which 39,590 kilometers (24,601 miles) are paved. As of 2004, the total length of the non-toll road network was reported to be 202,860 km, with the following breakdown according to type: National roads - 15%, Provincial roads - 13%, City and municipal roads - 12%, Barangay (barrio) roads - 60%.
Road classification is based primarily on administrative responsibilities (with the exception of barangays), i.e., which level of government built and funded the roads. Most of the barangay roads are unpaved village-access roads built in the past by the Department of Public Works and Highways (DPWH), but responsibility for maintaining these roads have now been devolved to the Local Government Units (LGUs). Farm-to-market roads fall under this category, and a few are financed by the Department of Agrarian Reform and the Department of Agriculture. However, despite having a large road network built over the country, large parts of the road network continue to be in poor condition (only 20 percent of the total road network is paved). Parts of the road system are the jeepneys, buses, railways.
Water Transportation
he main gateway to the Philippines through the sea is through the Manila International Cargo Terminal and the Eva Macapagal Port Terminal, both in the pier area of Manila. Other cities with bustling ports and piers include Bacolod, Batangas City, Cagayan de Oro, Cebu, Davao, Butuan, Iligan, Iloilo, Jolo, Legazpi, Lucena, Puerto Princesa, San Fernando, Subic, Zamboanga, Cotabato, Allen, Ormoc, Ozamiz and Tagbilaran. Most of these terminals comprise the Strong Republic Nautical Highway, a nautical system conceptualized under the term of President Gloria Macapagal Arroyo where land vehicles can use the roll-on/roll-off (Ro-Ro) ship service to traverse the different islands of the country at minimal costs.
Air Transportation
There are 76 total paved runways and 190 unpaved runways. There are also 13 airports on which there are domestic and international flights. This can also be a mode of transportation of goods and other cargoes.
4. THREATS AND OPPORTUNITIES
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Potential Change in the Macro Environment Segment Opportunity or Threat
1. No new high tax measures Economic Opportunity2. Philippines raises 2011 GDP growth goal
to 7-8 percentEconomic Opportunity
3. National Income Account on agriculture is down by 0.5%
Economic Threat
4. An Act Establishing the Philippine Food Fortification Program and for Other Purposes
Political-Legal Opportunity
5. Execution of Value Added Tax Political-Legal Threat
6. ITW Food Equipment Group Receives Highest Honor with 2011 ENERGY STAR Sustained Excellence Award
Technological Opportunity
7. Using or upgrading of current POS (point of sales) software
Technological Opportunity
8. The issue regarding job mismatch is prominent to some companies today
Labor Threat
9. Underemployment rate is 7.30% as of 2011 a 2.26 increase as of last year underemployment rate
Labor Threat
10. Issue of Low Wages in the Philippines Labor Threat
4.1 EFFECT OF POTENTIAL CHANGES ON THE TASK ENVIRONMENT
THREATS
Political-Legal
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Execution of Value Added Tax
This was enacted through the effort of Republic Act No. 9337 provides that the President, upon the recommendation of the Secretary of Finance, shall, effective January 1, 2006, raise the rate of value-added tax to twelve percent (12%), after any of the following conditions has been satisfied:
Value-added tax collection as a percentage of Gross Domestic Product (GDP) of the previous year exceeds two and four-fifth percent (2 4/5%); or
National government deficit as a percentage of GDP of the previous year exceeds one and one-half percent (1 1/2%).
In the retail industry, from food to clothes, are given 12% taxes additional to its products, that are carried by its consumers, this would cause suffering to the market especially on these period that labor unemployment is increasing.
Labor
Issue regarding Job Mismatch
There are many Filipino workers who are underemployed, meaning that their skills didn’t match the need of a company 19.4% of the total labor force, some of these people are part of the mismatch labor force. Their skills, talent and education during college, was not the same profession that they were able to work on. These people are the one who are unsatisfied on their jobs and the one who cannot resign due to the crisis in our country.
Issue of Low Wages in the Philippines
The Philippine is one of the countries that has the lowest labor which is P389.00-P426.00 ( $ 9.83) which is not enough to the daily cost of living of a typical Filipino family is around P800. That bothers many Filipinos especially if that person has a child, which they need to send to a decent school, a decent life they need to save a couple of money to be able to do that. With this kind of salary given to every Filipino Laborer it’s not enough for one’s family.
Employment and Unemployment Rate
The quality of the Philippines labor market is already weak to start with. For the past seven years through 2008, the economy grew at 5.4 percent on average per year. Yet, during these prosperous times, the labor market was characterized by (i) a high unemployment rate (7.4% in 2008 and 7.5% in 2009); (ii) even higher underemployment rate (19.3% in 2008 and 19.1% in 2009) with a high incidence among the youth, and even skilled (graduates) youth; (iii) high informal sector (mostly in agriculture and
P a g e | 45
services); (iv) a rigid labor market environment (including an outdated and complex labor code); (v) and a falling trend in real wages since 2001.
Notwithstanding the resiliency of the economy, the quality of the labor market is slowly weakening. The quantity of jobs lost is already large but difficult to fully capture. The unemployment rate continued its steady rise in 2009 (from 7.4% in October 2008 to 7.5% this January12). Along with the slump in exports (annual contraction of about 40% in both January and February), the manufacturing sector continued to shed jobs, posting more than 100,000 job losses in January. Starting 2008, data point to a particular worsening of the job market for unskilled workers. Overseas employment an important safety valve given the rapid growth of the Filipino labor force also weakened in November, and contracted by 5.8%, in December. It again registered strong growth earlier this year but downside risk still lies on the scenario of deeper global downturn. Nevertheless, the services sector continued to create jobs even as the economy slowed down. The underemployment rate remains below 20%. Surprisingly, measured employment quality remained broadly stable at this stage.
Half of the estimated 35 million employed persons in 2009 were engaged in services, distributed mostly in the wholesale and retail trade, repair of motor vehicles, motorcycles and personal and household goods. About 35 percent of the employed were engaged in agriculture while the rest (14.5%) worked in the industry sector.
Occupation-wise, the laborers and unskilled workers comprised the largest group (32.5%), followed by farmers, forestry workers and fishermen (16.7%), next by officials of government and special interest organizations, corporate executives, managers, managing proprietors and supervisors (13.5%). The service workers and shop and market sales workers accounted for 10.5 percent of the total employed persons in 2009. In addition to the market sales workers, the rapid expansion of the call centers or the BPO Industry constitutes a large percentage on this labor force.
More than half of the total number of employed persons worked as wage and salary workers. One-third were own account workers while the rest (12%) were unpaid family workers. There is also an increase in the number of household with both parents working. Economic
National Income Account is down by 0.5%
A National Income Account provides a quantitative basis for choosing and assessing economic policies as well as making possible quantitative macroeconomic modeling and analysis. This is not used to make decision, but only they do provide a basis for the objective statement and assessment of economic policies. These would be their guide, as to where are the sectors of governance need focus.
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Based on the latest NIA, the government didn’t focus much on its Agricultural and Aquatic resources. This would take as an opportunity for foreign investor. Example rice we somehow import rice, due to our focus on Industrial development, rather than agricultural or balance.
4.2 THE RESULTING CHANGES IN THE PRESENT TASK ENVIRONMENT
OPPORTUNITY
Economic
No new high tax measures
One of the promises of the president was not to increase taxes on his term as what he have promised during the 2010 election to the Makati business club, with the statement “"We will refrain from imposing new taxes or increasing tax rates," as what President Aquino have said” "I strongly believe that we can collect more taxes at the BIR (Bureau of Internal Revenue) and higher duties at customs if we become more serious in curbing and punishing tax evasion and smuggling." With this promise he was able to impress different sector of the business community which means bigger profit for them. Other investors will also be allure on such offer to invest to the country.
Philippines raises 2011 GDP growth goal to 7-8 percent
GDP is one of the indicators if one economy is growing or falling, this computation of investment, consumption and government spending minus to the import and export of the country. And having an increase of one percent in our GDP means,that the government action towards the economy are moving in a good flow, even though that it is not felt that much we could tell that the economy is blooming and if the investors trust and confidence will be lift.
Political-Legal
REPUBLIC ACT NO. 8976 (An Act Establishing the Philippine Food Fortification Program and for Other Purposes)
Nowadays, people who are health conscious are being a trend to the society. Through such republic act, the government could increase the necessary nutrients by the body. The government should ensure that the process foods and food products be inspected for the safety of its users. According to Sec. 7 of this republic act “The agencies
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charged with the implementation of this Act shall establish a quality assurance system. Likewise, the manufacturers and importers of processed foods or food products shall also establish their own quality assurance system in accordance with the quality assurance system of the implementing agencies.” Meaning insurance that we eat and drink should be safe and clean for the consumer’s health benefits.
Technological
Employing or upgrading of current POS (point of sales) software
Majority of commercial food service companies nowadays make use of the POS (point of sale) technologyis the location where a transaction occurs. A "checkout" refers to a POS terminal or more generally to the hardware and software used for checkouts, the equivalent of an electronic cash register.
The POS makes everything easier for a store/company to audit and track the records of its inventory, with this stores won’t need any more to worry regarding lost inventories and changes in prices, because everything is updated and would be able to change as long as a database is available.
ITW Food Equipment
During it’s nearly 100 years of existence, ITW's recipe for success has been focused on creating value-added products for key customers around the world. We do this by growing our business and making acquisitions that provide additional product solutions to our customers. We invite you to learn more about the history of our company. These were the ITW Food Equipment Corporation aim, the provided solutions to each of their customers. ITW’s proven strategies of increasing market penetration with product innovations, extending current products to new industries and acquiring businesses that improve customer offerings provide the foundation for continued success in the 21st century.
Today, its 825 decentralized business units in 52 countries employ approximately 60,000 men and women who are focused on creating value-added products and innovative customer solutions. The dedication of their people is the basis for their success and longevity.
5. INDUSTRY AND COMPETITIVE ANALYSIS
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Strategy of firms competing in the same industry varies. Understanding which companies are strongly positioned and which are weakly positioned is an integral part of analyzing an industry’s competitive structure. Listed below are the strategic dimensions or typical variables which can differentiate the competitive characteristics of firms in an industry:
Variable Definition 1. Price/Quality Range Its relative price position in the market.
Price position will usually be related to such other variables as cost position and product quality, but price is a distinct strategic variable that must be treated separately. The quality is in terms of raw materials, specifications, adherence to tolerances, features, and so on.
2. Geographic Coverage The exposure of a company in local, regional, national or global. This is also the market that a company caters to.
3. Degree of vertical integration The extent of value added as reflected in the level of forward and backward integration adopted, including whether the firm has captive distribution, exclusive or owned retail outlets, as in-house service network, and so on.
4. Product-line Breadth Product line is how many products a firm has. Product line breadth is the extent on how narrow or wide the product categories of a firm are.
5. Use of Distribution Channels The choice of distribution channels ranging from company owned channels to specialty outlets to broaden line outlets.
6. Degree of Service offered The degree to which it provides ancillary services with its product line, such as engineering assistance, an in-house service network, credit, and so forth.
5.1STRATEGIC MAP
The best technique for revealing the market positions of the firms in an industry is through strategic group mapping. This is useful in comparing the market positions of each firm separately or for grouping them into like positions when an industry has so many competitors.
GC
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Both Primer and Rustan’s have the same geograpgic goverage since they offer their products not only in the Philippines but also in Asia and other parts of the world, these two firms are in the stage of introducing their products in other countries.
Since SM Retail is focusing in other goods, its product line is growing. It is a local company and marketing the Filipino consumers who are working in the Philippines.
LEGEND1- SM RETAIL GROUP2- RUSTAN’S RETAIL GROUP 3- PRIMER GROUP OF COMPANIESPLB- PRODUCT LINE BREATHGC- GEOGRAPHIC COVERAGE
PRIMER GROUP OF COMPANIES
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PLB
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Primer Group of Companies is a Philippine company engaged in the retail sale and distribution of consumer brands and products. The company carries international brands mostly lifestyle products. Its vision is to become one of the leading distributors of consumer goods in the country. Having different international brands competes with the increasing number of competitors in the country.
SM RETAIL INC.
SM Shoemart, The Philippine’s leader in the retail industry approaches its milestone with a new vitality and energy to serve a new generation of shoppers, as well as the many customers that have made it part of their lives. SM was founded as a shoe store by Mr. Henry T. Sy Sr. in October 1958, the first shoe store, along Rizal Avenue. Mr.Sy who is regarded as the visionary of Philippine Retail envisioned a chain of shoe store, each characterized by a distinct merchandising layout never attempted before in the country. In the 60’s, the company expanded its shoe store chain, becoming one of the pioneers in the new urban center when it opened bigger shoe outlets at the Makati commercial center in 1963, and in Cubao in 1967. In the seventies, SM worked a shift from a shoe store to a department store, in SM Manila in Echague and later, with SM Makati. SM, a name that has been synonymous with one-step shopping excitement had positioned itself for growth in the 80’s, diversifying into the supermarket and appliance store businesses. Later in 1985 marked the opening of its first shopping mall, SM City in North Edsa. More malls, particularly SM Megamall opened in 1990’s giving rise to what is known as the malling phenomenon in the Philippines. Today, SM is a dynamic group of companies with core businesses in retail merchandising and shopping center and complementary businesses in financial services, real estate and tourism development.
RUSTAN’S COMMERCIAL CORPORATION
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Considered as the country's most prestigious retailer, RUSTAN'S remains the exclusive address of note of many of the world's most famous names and signatures - from Cartier to Mikimoto, Tiffany to ErmenegildoZegna, Nina Ricci to Alfred Dunhill, Sonia Rykiel to Estee Lauder, to name a few of the stores-within-a-store concepts that it has pionered. It has just as easily become the place to find the best products of the Philippines as well. Today, in the competitive environment of world marketing, brands and companies wishing to make inroads into the upbeat Asia Pacific market realize that RUSTAN'S is a major force and player to contend with. A place in the RUSTAN'S hearth is one of the best credentials with which to enter this booming market. And for the consumer, RUSTAN'S in the Philippines is considered the ultimate source for gift-giving as well as the only place for fashion options and accessories for the art of living.
VI. ANALYSIS OF INTERNAL ENVIRONMENT
1. COMPANY OVERVIEW
Our Primer story began with a simple trading venture of a group of friends working hard to make it prosper. And as the business flourished, the group soon expanded and later diversified to what we now call Primer Group.
Primer’s businesses can be classified in three groups:
CONSUMER
Retail and distribution are Primer’s core competency and through the years, we have created a niche in marketing travel goods, lifestyle products and outdoor gears.
INDUSTRIAL
Primer’s diversifications include our joint ventures with foreign partners engaged in sales and service maintenance of air conditioning units, manufacturing of industrial inks and the integration of creative and design services. This division also provides import and export services that complement the Primer business.
SHARED SERVICES
Our in-house Strategic Business Partners support our requirements for infrastructures, people and financial resources; accounting and legal services; warehousing and logistics; information and communication technology and general administration.
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With our headquarters bases in the Philippines, Primer Group has now expanded its reach primarily across the Southeast Asian region with a vision to be the global leader one day.
Over the years, Primer has grown from the original five partners to close to 900 employees in the Philippines alone and has continuously expanded its business activity in the region that includes Singapore, Hong Kong, Thailand, Malaysia, Vietnam and Indonesia. The company has successfully replicated the Primer Management System on its business activity in the region, thereby maximizing the efficiency and synergy of its business practices that mutually benefit our principals and partners.
OUR PARTNERS
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OUR CREATION
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Innovation defines how we evolved our business. Primer takes risk in developing unique retail concepts that define the new Asian retail landscape.
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The commitment of Primer does not cease on business activity alone. We are proud to be on the forefront of major issues and advocacy of our time. Primer advocates and acts on environmental conservation issues and contributes to nation building through our unique and pioneering way.
ENRIONMENTAL CONSERVATION
We have partnered and supported several environmental organizations and individual conservation scientists conducting scientific expeditions in the Philippines.
Wildlife scientists Carmela Espanola (seated), co-discoverer of Calayan Rail bird in Babuyan island, Philippines.
Our contribution to the environment is beyond tree planting and coastal cleanup; we support scientific studies and advocate the deeper issues of biodiversity conservation. Our scientists have discovered new species and racing against time to preserve endangered species of our once rich flora and fauna.
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Our sponsored scientist works on the last few remaining forest of the Philippines to study its biodiversity in hopes of its conservation and rehabilitation.
NATION BUILDING
Our contribution to nation building is uniquely focused on building the morale of our citizens and developing a responsible tourism industry in our country that will directly benefit the local communities. Primer through its CORE program (Center for Outdoor Recreation and Expedition) has been managing several athletic expeditions that inspire our countrymen to achieve what seems impossible.
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2. CORPORATE VALUES
Our Core Values are:
Entrepreneurial Spirit Passion for Excellence Integrity Teamwork Self Discipline
PRIMER MANAGEMENT SYSTEM
The Primer Management System is anchored on its Core Values of Entrepreneurial Spirit, Passion for Excellence, Integrity, Teamwork and Self-Discipline. For more than two decades, Primer has built its business on trust and good relationship with its partners, people and customer.
The Primer Management System has a solid foundation on the fundamental of a dynamic business practice with emphasis on the value for our people and customer as a source of our inspiration and continuous innovations.
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3. VALUE CHAIN ANALYSIS
The essence of Value Chain Analysis is to improve strategic learning in enterprise development. Specifically, it treats the enterprise not as a singular entity, but as part of an integrated chain of economic functions and linkages across geographic boundaries. It emphasizes on the diverse interrelationships among market opportunities, constraints, and directives at various levels of the supply chain and at different levels of influence, from which specific value addition takes place. This feature of Value Chain Analysis lends to its completeness, as a strategic tool in exploring different alternative strategies for poverty reduction.
A company’s value chain consists of two broad categories: (1) the primary activities that are foremost in creating value for customers. The activities involve here are the physical creation of the product and its sale and transfer to the buyer as well as after sale assistance, and (2) and the requisite support activities that facilitate and enhance the performance of the primary activities by providing purchased inputs, technology, human resources, and various firm wide-functions.
Primary Activities
Primary Activities are those functions which are directly involved in the production, processing, and distribution of the product. These activities may fall among the following: Inbound Logistics, Production and Processing and Outbound Logistics. Inbound Logistics refer to management of production and processing units; whereas outbound logistics pertain to product distribution from point of production to final
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consumption. The production and processing component is involved in the actual manufacture of products ready for sale.
Finally, market information and finance play a pivotal role in the movements of products as these factors send signals of when, where, how, and how much products to be delivered. The seamless flow of market information and efficient financial delivery are very important elements in further enhancing the efficiency of supply chain activities and in potentially controlling demand for major marketing services such as transportation and storage. Furthermore these build into the system responsiveness and flexibility to address the dynamic end-user preferences.
Retail Value Chain
Inbound Logistics
Activities include the receiving, warehousing, and inventory control of input materials. Here goods are received from a company's suppliers. They are stored until they are needed on the production or assembly line. Goods are moved around the organization.
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Primer Group of Companies has warehouses in parts of Metro Manila. These warehouses are taken care of the employees in the specific location. When it comes to distribution, Primer distributes their products through third party agencies like FedEx many more. Since the products are manufactured outside the Philippines and most of the products are imported, they have loyal agencies that supply to them their products. These products are measured by tons and have imposed taxes and tariffs. Consequently when products arrived at the airport, loyal agencies will be the one who will directly forward it to the warehouses. There are also taxes and duties settlement in which the logistics take a big part of.
Operations
This is where goods are manufactured or assembled. Individual operations could include room service in an hotel, packing of books, videos, games by an online retailer, or the final tune for a new car's engine and activities, costs, and assets associated with converting inputs into final product from production, assembly, packaging, equipment maintenance, facilities operations, quality assurance, and environmental protection.
In Primer Group of Companies, the productivity of their equipment is efficient because they can deliver, offer products simultaneously. The equipments of Primer Group of Companies are aligned with all of its subsidiaries therefore they achieve maximum efficiency. With regards to equipment maintenance they have certain procedures before and after they use the equipments to ensure that the equipment is in its best performance. In terms of the printing equipments, they ensure that the equipment has full supply of inks before using the machine.
Since Primer Group of Companies main office includes its warehouse, there are protocols that all employees must follow. The owners of the company ensure that the rules are followed by the employees. This reminds the employees that they must follow it in order for them to achieve maximum procedures and safeties.
Outbound Logistics
The activities in the warehouse and distribution of finished goods and they need to be sent along the supply chain to wholesalers, retailers in the final consumer.
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What to Assess Timeliness and efficiency of delivery of finished goods and services Efficiency of finished goods warehousing activities
Distribution and Location is part of Primer Group of Companies Supply Chain Management. Primer has warehouses in parts of Manila are only in the Philippines and has other warehouses in other parts of Asia. These warehouses are taken care of the employees in the specific location. When it comes to distribution, Primer distributes their products through third party agencies like FedEx many more.
Marketing and Sales
The activities of receiving, storing, and disseminating incoming goods or material for use and Activities, costs, and assets related to sales force efforts, advertising and promotion, market research and planning, and dealer/distributor support.
What to Assess
Effectiveness of market research to identify customer segments and needs
Innovation in sales promotion and advertising Evaluation of alternate distribution channels Motivation and competence of sales force Development of an image of quality and a favorable reputation Extent of brand loyalty among customers Extent of market dominance within the market segment or overall
market
Primer Group of Companies marketing department played a major role in increasing Primer brands and company as a whole. With the brand promotion of Sanuk, Native, Fitflops the brand turned around with a largest market share in the retail industry. Victorinox was also launched successfully before and made a foray into the mainstream luggage category. Understanding consumer insights is very important to the marketing department because it is in here that they can get ideas for their marketing campaigns.
Service
This includes all areas of service such as installation, after-sales service, complaints handling, training and activities, costs, and assets associated with providing assistance to buyers, such as installation, spare parts delivery, maintenance and repair, technical assistance, buyer inquiries and complaints.
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The service that Primer Group of Companies gives is with their key accounts and territory distributors. As a matter of fact, Primer is thinking of making a loyalty card for their customers that intends to help their customers in their business by having rewards and it gives and provides also discounts for all their brands. This helped Primer Group of Companies customers because most of the products are expensive and it gives privileges for their loyal customers. This means that Primer provides quality service to their customers not only by this program but also in a way that Primer is prompt in their customers’ needs and complaints.
Supporting Activities
While support activities are not directly involved in the manufacture and movement of the product, these activities have critical impact on the efficiency of production and distribution. Support activities serve as the value chain’s enabling environment. These support activities include: Policies, Rules and Regulations, Infrastructure and Enterprise Development Facilities, Research and technology, and Socioeconomic and Cultural Considerations.
Policies, Rules, and Regulations
Laws and regulations govern standardization of their supply chain services. The commitment of government to supply chain development of the retail industry, in general, can be seen from policy directions as contained in its medium term development program as well as in the number and quality of laws and regulations that tend to create a business environment conducive for growth in the value chains of the retail industries.
In Primer Group of Companies, type and capacity of transport, schedule of deliveries and responsiveness to customers’ requirements and preferences, maintenance and operations costs, and technology and capacity investments are all important in improving the company’s policies. Mostly, all the employees are following the rules and guidelines in the company. Before they start in the company, they were all given seminars to be followed inside the premises of the company.
Infrastructure and Enterprise Development Facilities
What to Assess
Means to solicit customer input for product improvements Promptness of attention to customer complaints Appropriateness of warranty and guarantee policies Quality of customer education and training Ability to provide replacement parts and repair services
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Transportation infrastructure is an important key to the fast and on time delivery of goods which is vital in preserving product quality and value. For multimodal delivery systems such as Primer Group of Companies, not only adequacy of transportation mode is important but also the coordination of these transports systems. An efficient transport system can translate to savings in delivery cost, inventory, quality deterioration and wastage.
The fast and reliable movement of products is a function of transport infrastructure. However, processing infrastructures such as stores in malls, kiosks and packaging facilities are equally important in achieving transportation efficiency and preserving the potential quality of the products.
What to Assess
• Capability to identify new-product market opportunities and potential environmental threats
• Quality of the strategic planning system to achieve corporate objectives
• Coordination and integration of all value chain activities among organizational subunits
• Ability to obtain relatively low-cost funds for capital expenditures and working capital
• Level of information systems support in making strategic and routine decisions
• Timely and accurate management information on general and competitive environments
• Relationships with public policy makers and interest groups• Public image and corporate citizenship
The general management of Primer Group of Companies always make sure that they will plan ahead of time by having strategic planning meetings every first day of the week. In this meeting, the management will tackle about their strategies and this also for the evaluation of the past projects, present projects, sales and ongoing projects.
Primer Group of Companies already built their public image as an excellent firm because of what they offer and their corporate social responsibility. They don’t forget to give back to those families who are in need and those who helped them in achieving their success.
Research and Technology, and other Institutional Services
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Research and Development institutions, financial institutions, and industry associations play indirect role in how the supply chain performs. R&D institutions are important in coming up with innovations in product development, packaging and other processes that will allow better handling, storage and transport.
What to Assess
• Success of research and development activities in leading to product and process innovations
• Quality of working relationships between R&D personnel and other departments
• Timeliness of technology development activities in meeting critical deadlines
• Quality of laboratories and other facilities• Qualification and experience of laboratory technicians and scientists• Ability of work environment to encourage creativity and innovation
Financial institutions are conduits for capital investments for transportation and processing, packaging infrastructure. With access to finance, the other players in the supply chain can adequately enhance infrastructure requirements and establish communication systems. Industry associations on the other provides the means of integrating industry goals not merely on policy advocacy but in furthering technology transfer and adoption, collective strategy in enhancing existing markets, developing and entering new market frontiers.
The Research and Development department of Primer Group of Companies is always ahead in delivering and offering products to customers. This is why Primer Group of Companies is also known as one of the leaders in the retail industry. They also allocate their financials in R&D to help the company offer quality products at the least possible cost and at the most ideal state.
Socioeconomic and Cultural Considerations
Aside from market signals and financial flows, different agents in the supply chain also interact based on social, economic, and cultural nuances. These factors affect the level of participation of supply chain agents. Social and economic concerns and cultural antecedents drive these factors may hinder effective communication and efficient bargaining among the agents.
4. STRENGTHS AND WEAKNESSES
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4.1 DESCRIPTION OF THE STRENGTHS AND WEAKNESSES
Strength is defined as something a company is good at doing or a characteristic that gives it enhanced competitiveness while weakness is something a company lacks or does poorly or a condition that puts it at a disadvantage.
Strengths
WIDE GEOGRAPHIC SCOPE
Primer Group of Companies has a wide geographic scope. When a company has a wide scope, it means that they also have various markets which can contribute to the profitability of the business. This is true with Primer because their market is all over the Philippines and even in Asia. If their market is only is the NCR area only, they cannot have big returns and profits in their business. Wide market means more profit and brand equity for the business. This will also be a strength for the company because they can be known well inside the Philippines and outside the world and can reach millions of consumers simultaneously.
CONCENTRATION ON THE YOUNG MARKET
Primer Group of Companies targets consumers in different areas. One example is that in World Traveller or in Travel club which they sell luggages, they target consumers ages 40 and up while in Sanuk, Fitflops and Native they target consumers that are in ages 20 to 40. In the demographics of the Philippines, majority are 5-20 years old. It indicates that Primer’s young market is the largest market in the country. This can bring value to the company. Marketers in Primer are creative thinkers and young. Focusing on the young market can be an advantage for them because they can swiftly follow the trends of their market. Thus, this will further add equity in the brand portfolio. Eventually, almost all of the employees working in Primer are mostly young professionals.
FINANCIAL STRENGTH
Since Primer has companies inside the Philippines and Asia , financial resources is not a problem for them. One reason that it is strength for them is that they can execute lots of marketing promotions both above and below the line just for them to make the brand be known. This a strength for most of the multinational companies because they are already stable in all aspects of their business.
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DIVERSE RANGE OF LEADING BRANDS
The brand portfolio of Primer has already built their standing in the market. Most of their brands are market leaders for their own category. One example is Sanuk, where in they are the first in the market to sell sidewalk surfer shoes. This means that they can have less marketing efforts to make the consumers aware of it. It helps the company by spending less on awareness thus they can concentrate on new promotions and maintaining the brand equity.
FOCUS ON RESEARCH AND DEVELOPMENT
Primer Group of Companies is known to be the excellent in research and development system in the retail industry. While R&D is often thought of as synonymous with high-tech firms that are on the cutting edge of new technology, many established consumer goods companies such as Primer spend large sums of money on improving products. The resources and experience of Primer in the field of research enable the Philippines to establish efficient research and development system. This helps the company distribute and offer quality products at least possible cost and at the most ideal state.
Weaknesses
MORE EXPENSIVE PRICE RANGE RELATIVE TO COMPETITION
Products prices higher relative to the competition may be considered as a weakness for Primer. In the Philippines, only World traveller is their main brand and manufactured only in this country. This means that the rest of the products offered to the market have been imported from other countries. This imposes higher costs to the company and it shall at the same time reflect on how the products are being priced.
In a country where there is limited disposable income and there are available cheaper alternatives in a very price sensitive market, such products priced higher than the alternatives may suffer in this environment.
4.2 STATE THE BASIS OF EACH STRENGTH AND WEAKNESSES5. FINANCIAL ANALYSIS
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FINANCIAL STATEMENTS
STATEMENTS OF INCOME FOR THE FISCAL YEAR ENDED MARCH 31, 2007, 2008, 2009, 2010 & 2011
Statement of income 2011 2010 2009 2008 2007
Sales 766,897,718 525,299,237 449,681,048 346,050,618 255,147,388
COGS 422,016,779 301,601,900 256,093,357 201,920,535 148,621,077
Gross Profit 344,880,939 223,697,337 193,587,691 144,130,083 106,526,311
Interest Income 150,707 128,530
Other Income 100,151 112,568 303,601
Total Income 345,031,646 223,825,867 193,687,842 144,242,651 106,829,912
Distribution Costs 212,562,060 140,204,611 132,532,037 97,005,698 75,343,771
Admin Expense 111,172,958 65,871,454 51,572,094 43,299,666 26,236,916
Finance Costs 3,045,112 5,296,891 6,784,103 1,684,881
Other Expenses 679,461
PBIT 18,251,516 12,452,911 2,799,608 2,252,406 4,569,764
Income Tax Expense
Current 6,189,100 4,490,760
Deffered 740,207 777,539
Total 5,448,893 3,713,221 927,862 1,482,778 1,543,630Profit for the Year 12,802,623 8,739,690 1,871,746 769,628 3,026,134
5.1 FINANCIAL RATIOS
PROFITABILITY RATIO
PROFITABILITY RATIOS
2007 2008 2009 2010 2011
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Gross Profit Margin
.42% .42% .43% .43% .45%
Operating Profit Margin
.07% .025% .016% .078% .07%
Net Profit Margin .01% .004% .004% .017% .017%
ROA 4.78% 0.57% 1.06% 3.44% 3.34%
ROE 13.75% 3.28% 6.16% 22.35% 24.66%
The high gross profit margin shows that the company’s revenues are sufficient to cover operating expenses and yield profit. It reached its peak during 2006 with 82%. The same goes with operating profit margin with almost consistent digits for the past six years.
LIQUIDITY RATIO
LIQUIDITY RATIOS
2007 2008 2009 2010 2011
Current ratio 1.5327806 1.57106992 1.50002913 1.34669956 1.93192886
Working Capital
22,015,645 49,043,447 58,643,028 65,474,517 185,175,704
The ratio is mainly used to give an idea of the company's ability to pay back its short-term liabilities debt and payables with its short-term assets cash, inventory, receivables. The higher the current ratio, the more capable the company is of paying its obligations. A ratio under 1 suggests that the company would be unable to pay off its obligations if they came due at that point. While this shows the company is not in good financial health, it does not necessarily mean that it will go bankrupt as there are many ways to access financing but it is definitely not a good sign.
The current ratio can give a sense of the efficiency of a company's operating cycle or its ability to turn its product into cash. Companies that have trouble getting paid on their receivables or have long inventory turnover can run into liquidity problems because they
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are unable to alleviate their obligations. Because business operations differ in each industry, it is always more useful to compare companies within the same industry.
This ratio is similar to the acid-test ratio except that the acid-test ratio does not include inventory and prepaid as assets that can be liquidated. The components of current ratio (current assets and current liabilities) can be used to derive working capital (difference between current assets and current liabilities). Working capital is frequently used to derive the working capital ratio, which is working capital as a ratio of sales.
LEVERAGE RATIO
LEVERAGE RATIOS
2007 2008 2009 2010 2011
Debt-to-Asset Ratio
0.65 0.83 0.83 0.85 0.86
Debt-to-Equity Ratio
1.88 4.74 4.79 5.50 6.39
Capital Ratio .35 .17 .17 .15 .14
Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses. A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income. Fixed and variable costs are the two types of operating costs; depending on the company and the industry, the mix will differ. In finance, leverage is a general term for any technique to multiply gains and losses. Common ways to attain leverage are borrowing money, buying fixed assets and using derivatives.
ACTIVITY RATIO
ACTIVITY RATIOS
2007 2008 2009 2010 2011
Total Assets Turnover
4.03 2.56 2.56 2.07 1.99
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Fixed Asset Turnover
22.76 12.45 13.52 10.04 10.20
Accounts Receivable Turnover
12.19 8.85 17.19 17.62 21.98
Accounting ratios that measure a firm's ability to convert different accounts within their balance sheets into cash or sales. Companies will typically try to turn their production into cash or sales as fast as possible because this will generally lead to higher revenues. Such ratios are frequently used when performing fundamental analysis on different companies. The asset turnover ratio and inventory ratio are good examples of activity ratios.
VII. STRATEGIC PLAN
1. VISION AND MISSION
Vision Statements and Mission Statements are the inspiring words chosen by successful leaders to clearly and concisely convey the direction of the organization. By crafting a clear mission statement and vision statement, you can powerfully communicate your intentions and motivate your team or organization to realize an attractive and inspiring common vision of the future.
Mission Statements and Vision Statements do two distinctly different jobs. A Mission Statement defines the organization's purpose and primary objectives. Its prime function is internal to define the key measure or measures of the organization's success and its prime audience is the leadership team and stockholders.
Vision Statements also define the organizations purpose, but this time they do so in terms of the organization's values rather than bottom line measures, values are guiding beliefs about how things should be done. The vision statement communicates both the purpose and values of the organization. For employees, it gives direction about how they are expected to behave and inspires them to give their best. Shared with customers, it shapes customers understanding of why they should work with the organization.
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The Primer Group of Companies is a consortium mainly engaged in the retail and distribution of the world’s top consumer brands and products. We are also proud to have expanded our business portfolio in the area of industrial products and services through the production and distribution of chemical printing products, retail and maintenance of ACMV and HVAC units with after-sales services and creative graphic design and services. Most recently, the company also opened its first professional retail and merchandising academy.
Present Vision and Mission Statement
Vision Statement:
“We at Primer will be the leader in the global distribution and innovation of premium goods and services.“
The Primer Group’s network of companies is multiplying in a pace never achieved before. The company is now realizing its vision to become the LEADER in the global distribution and innovation of premium goods and services across the ASEAN region. After 25 years of continuous and steady growth, its retail authority has grown to over 50 premium brands, 100 freestanding concept stores and over 600 consignment doors in the ASEAN region. The company is set to reach greater heights through its numerous milestones and marketing commendations locally and abroad. Their vision tells the world their employees, customers, consumers and the communities where they make and sell our products what they care about.
Mission Statement:
“To bring the world closer to our customers.”
Core Values
In Primer Group of Companies, personal values are always applied. The corporate values are EPITS which stands for:
E-ntrepreneurial Spirit
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P-assion for ExcellenceI-ntegrityT-eamworkS-elf Discipline
2. OBJECTIVES: STRATEGIC AND FINANCIAL
There are two (2) objectives that every business organization should strive for: outstanding financial performance and excellent strategic performance. These two objectives will help any company to survive and maintain their competitiveness.
Financial objectives
A strategic market objective focuses on the company’s intent to sustain and improve the organization’s competitive strength and long-term market position through creating customer value. Strategic objectives focuses on winning additional market share, overtaking key competitors on product quality or customer service or product innovation, achieving lower overall costs than rivals, boosting the company’s reputation with customers, winning a stronger foothold in international markets, exercising technological leadership, gaining a sustainable competitive advantage, and capturing attractive growth opportunities.
Strategic objectives need to be competitor-focused and strengthen the company’s long-term competitive position. A company exhibits strategic intent when it pursues ambitious strategic objectives and concentrates its competitive actions and energies on achieving that objective. The strategic intent of a small company may be to dominate a market niche. The strategic intent of an up-and-coming company may be to overtake the market leaders. The strategic intent of a technologically innovative company may be to create a new product. Small companies determined to achieve ambitious strategic objectives exceeding their present reach and resources, often prove to be more formidable competitor than larger, cash-rich companies with modest strategic intents.
The financial objective set for Primer Group of Companies is in line with the financial growth they are experiencing right now. During 2010, they already achieved a 10% revenue growth and became a Billion Peso company. Although the current ratio and debt to equity ratio are not optimistic, Primer Group of Companies still experiencing revenue growth for the past years. In line with this, they must continue to achieve this kind of financial objective for them to attain their vision as the leading food company through striving for a revenue growth of 12% annually.
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Strategic objectives
Financial objectives focus on achieving acceptable profitability in a company’s pursuit of its mission/vision, long-term health, and ultimate survival. Financial objectives signal commitment to such outcomes as good cash flow, creditworthiness, earnings growth, and an acceptable return on investment, dividend growth, and stock price appreciation.
The Strategic objective for Primer Group of Companies for the next 5 years is to be recognized as a leader in global distribution and innovation of goods and services all over the world. The strategic objective which aims Primer to be recognized as a leader in global distribution and/or innovation will also be in line with the proposed vision. Primer Group of Companies will never cease to innovate their products in response to the changing needs and wants of their consumers. At the end of the day, their consumers are still their bosses so they must continue to give delight to them by their innovations.
3. EVALUATION OF PRESENT CORPORATE STRATEGIES
A business strategy represents the game plan that your company will use to run its business, gain market share, and conduct operations. This plan of action determines how the company appeal to and satisfy customers, compete effectively, and accomplish managerial objectives. Developing a strategy should mean there is a managerial dedication to follow a specific group of actions that will advance the company's financial market performance and increase its bottom-line.
According to Porter, competitive strategy concerns the specifics of management’s game plan for competing successfully and achieving a competitive edge over rivals. Most companies aim to do a better job of providing what buyers are looking for and thereby gain the upper hand over rivals. There are many variations in the competitive strategies that companies employ because each approach entails custom-designed actions to fit its own circumstances and industry environment. The five approaches are illustrated below:
The Five Generic Competitive Strategies
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In developing the overall strategy, the company is beginning its pursuit for a competitive advantage. The biggest and most important differences among competitive strategies boil down to whether a company’s market target is broad or narrow, and whether the company is pursuing a competitive advantage linked to low costs or product differentiation. These are the following description of each of the five generic competitive strategies:
A low-cost provider strategy- striving to achieve lower overall costs than rivals and appealing to a broad spectrum of customers, usually by under pricing rivals.
A broad differentiation strategy- seeking to differentiate the company’s product offering from rivals’ in a way that will appeal to broad spectrum of buyers.
A best-cost provider strategy- giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals; the target is to have the lowest best costs and prices compared to rivals offering products with comparable upscale attribute.
A focused or market niche strategy based on lower cost- concentrating on a narrow buyer segment and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals’ products.
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A focused or market niche strategy based on differentiation- concentrating on a narrow buyer segment and outcompeting rivals by offering niche members customized attributes that meet their tastes and requirements better than rivals’ products.
Among the five generic strategies aforementioned, Primer Group of Companies has adopted the broad differentiation strategy. With the aggressive marketing campaigns, in-store executions and focusing promotions, Primer Group of Companies is making sure that they will be able to provide their customer what they want with different variety of products that customers can choose from. Although they are known as one of the big distribution company, Primer research and development department still study quality products that could also be offered because the consumers wants the best product in the market. Primer is conducting consumer immersions for them to further know the qualities that consumers perceives as best and at the same time they ask consumers on how they want products to be offered for them through surveys, in-store checking and many more. Since Primer Group of Companies is a multinational company, they have a cost advantage because of their economies of scale. With the factors mentioned above, it can be concluded that Primer adopted the broad differentiation strategy.
The strategies of companies competing in the industry vary. Based on the 13 dimensions of competitive strategy, Primer has the following applications in their business:
SpecializationPrimer Group of Companies product line is wide starting from footwear to clothing and to different categories. With their wide product line, their target customer segments also vary from the high-end consumers to down line consumers but mostly they offer their products to customers in the upper classes. As of now, Primer is more focus on their downline channels because they need to target people who could have the best products in so expensive way of buying it. Obviously, Primer Group of Companies geographic market served is national.
Brand IdentificationSince Primer Group of Companies has companies in different parts of the world including Asia, the brand identification for their products is strong. However, due to competition, Primer’s products should also keep in abreast especially when it comes to advertising and pricing.
Push Versus PullPrimer Group of Companies is making use of the push strategy since they want their products to be available to the consumers directly. Example of the push strategy of
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Primer is their in-store promotions on which they give incentives to the winners. Programs are created because they want their brands to be available to the consumers and they could easily access to the products they offer.
Channel SelectionSince Primer Group of Companies products are mostly available in the malls, kiosks, retailers and many more the choice of their distribution channel is broad-line outlets.
Product QualityPrimer as a global brand is well-known for their product offerings in high quality. At some point, due to the high quality products, Filipino down line consumers perceived it as a costly, well in fact it is at par with the competition.
Technological LeadershipIn line with their mission and vision, Primer Group of Companies is always a leader in innovation. Primer is one of the few companies in the Philippines capable of combining flexibility and expertise in complex systems. Expertise in state-of-the- art technologies and the “systems” approach integrates the understanding of customer expectations with cost, deadline and performance requirements.
Vertical IntegrationPrimer make use of third party agencies especially in house to house mailing of loyalty cards. They practice vertical integration to offer the tasks easier for the employees and gain access to different suppliers that could also be an effective customer.
Cost PositionThe investment of Primer Group of Companies in cost-minimizing facilities and equipment in delivering helped them to be efficient and effective. Through these equipments, Primer is achieving economies of scale on which facilitate their low cost position in delivering the goods to end-users.
ServiceThe accounts serve as the customers of Primer Group of Companies. Primer develop sustainable relationships with their most valuable consumers, by meeting their need for product solutions and helping them make their lives easier by integrating Primer brands into their everyday lives.
Price Policy
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The price position of Primer products is at par with industry average making the competition more intense.
LeverageSince Primer Group of Companies is a full-size company on which they really have to operate with accounts payable, they have high financial leverage. This same goes with their operational leverage because they need to distribute large number of products.
Relationship with Parent CompanyPrimer Group of Companies is a fully-owned by the Chinese businessmen. The strategies, mission, vision, goals and values are also practiced by Primer since it is engaged in all of the subsidiaries of Primer Group of Companies all over the world.
Relationship to Home and Host GovernmentIn order to maintain a good relationship with the Host government, Primer makes sure that they comply with their due taxes on time, filing of required documents (such as financial statements submitted to SEC) and remitting of contributions to varios government agencies.
PRESENT CORPORATE STRATEGIES
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Establish a strong and sustainable company
The first strategy is all about Primer’s employees. They are also their competitive advantage so they make sure that their people have the right compensation and benefits. One factor in establishing a strong and sustainable company is continuing to look for talented persons that can help the company as a whole. The continuous search of Primer for the best is one way of transforming the organization. In relation to this, Primer has a simplified organization that puts local business units at the heart of the company so decisions are made closer to the consumer.
Reframe our categories
Primer Group of Companies markets many of the world’s leading and most beloved brands. These products are made with excellent quality to give consumers millions of smiles every day. Primer is doing this by focusing on building a global powerhouse in footwear, clothing, luggage and many more.
Sales forces to reach targeted consumers
Primer Group of Companies is taking full advantage of their size and broad reach. In the distribution industry, Primer has one of the largest and most powerful sales forces. This gives Primer an advantage that other competitors simply can’t match. To make Primer’s products available and accessible in all of the most possible touch points of the consumers. This is the main focus of the sales force of Primer and they are doing all ways to reach these points.
Reasonable cost that gives high standard quality goods
For Primer, product quality always comes first to their customers. But they are also always looking for ways to reduce costs, so they can invest more in making delivering quality products that people love.
4. PROPOSED CORPORATE STRATEGY
The present strategies of Primer Group of Companies need not be changed. Primer Group reframed their company as a whole and made a centralized strategy that the
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subsidiaries will also use. With these four corporate strategies, Primer is now the best distribution company not only in the Philippines but also in the global market.
Primer products are already in maturity market and experiencing a slow growth in the industry. In this situation, Primer is always building new or more capabilities. They continue to develop and introduce new products that the consumers will have a difference day when they had it.
Despite the fact that Primer product prices are higher than competition, they still have to make sure that quality is not compromised by having trade checks. Primer sees that quality is a driver of growth because the consumers nowadays are more into products that are worth their money. In cooperation with R&D, the consumer insights department gives them on what the consumers want in a product and in return will develop a product that the consumers will value.
5. COMPETITIVE ADVANTAGE
When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of much of business strategy is to achieve a sustainable competitive advantage.
Michael Porter identified two basic types of competitive advantage:
Cost advantage Differentiation advantage
A competitive advantage exists when the firm is able to deliver the same benefits as competitors but at a lower cost, or deliver benefits that exceed those of competing products. Thus, a competitive advantage enables the firm to create superior value for its customers and superior profits for itself.
Cost and differentiation advantages are known as positional advantages since hey describe the firm’s position in the industry as a leader in either cost or deifferentiation.
A resource-based view emphasizes that a firm utilizes its resources and capabilities to create a competitive advantage that ultimately results in superior value creation. The diagram combines the resource-based and positioning views to illustrate the concept of competitive advantage:
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A MODEL OF COMPETITIVE ADVANTAGE
Resources and Capabilities
According to resource-based view, in order to develop a competitive advantage the firm must have resources and capabilities that are superior to those of its competitors. Without the superiority, the competitors simply copuld replicate what the firm was doing and any advantage quickly could disappear.
Resources are the firm-specific assets useful for creating a cost or differentiation advantage and that few competitors can acquire easily. The following are some examples of resources:
Patents and trademarks Proprietary know-how Installed customer base Reputation of the firm Brand equity
Capabilities refer to the firm’s ability to utilize its resources effectively. An example of a capability is the ability to bring a product to market faster than competitors. Such capabilities are embedded in the routines of the organization and are not easily documented as procedures and thus are difficult for competitors to replicate.
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The firm’s resouces and capabilities together form its distinctive competencies. These copmpetencies enable innovation, efficeincy, quality, and customer responsiveness, all of which can be leveraged to create a cost advantage or a differentiation advantage.
5.1 PRESENT COMPETITIVE ADVANTAGE
Primer Group of Companies present competitive advantage is basically its system and employees. The company’s success really depends on how the system works in the company and their employee’s performance, attitudes, competencies and skills; their ability to generate commitment and trust, communicate aspirations and work in complex relationships and not primarily on how big their budget or the technologies that support their products.
Primer intends to keep making a difference in many aspects in the workplace so that employees can perform their tasks and responsibilities in the best way they can. Primer Group of Companies led by their senior leadership team which consists of the SBU heads and the brand managers are committed to learning and development that are also the best example for all of the Primer employees. The company ensures that their employees receive excellent premiums, incentives, competitive benefits, comfortable allowances, caring assistance, helpful programs, and other benefits that will definitely make the employees feel secured and cared for. The company is proud of its people and committed to their growth they are the key to the company’s success.
5.2 PROPOSED COMPETITIVE ADVANTAGE
Primer Group of Companies is achieving their success because of the people behind their strategies and processes. Since their competitive advantage is working enough to achieve the company’s success, there is no need to change it. Hence, the right and talented persons must be retained by the company.
Using the Wharton Competitive Advantage Cycle, the following demonstrates how Primer Group of Companies employ their competitive advantage in contributing to their success:
Investment in Renewal
Primer will invest in renewal by constantly looking for fresh ideas in the improvement of their brands, workplace, partnerships, communities and other companies in the world. However, it shall target on customers that can easily see the good quality of products
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that the company offers. They should also be effective in implementing supply chain management and through looking at cost effective ways to market the business like ensuring that the company’s software is not costing them in the long run in hidden costs, increasing customer retention through improved customer care, and reducing effectively and efficiently on operating costs.
Sources of Advantage
Sources of competitive advantage have shifted from financial resources to technology resources and now to human capital. In Primer, their employees are their competitive advantage. The company empowers its customers by selecting highly skilled individuals, giving employees more discretion, using minimal controls, making a greater investment in human resources, providing more resources for experimentation, allowing and even rewarding occasional failure, and appraising performance for its long-run implications.
Fairness is an essential element of trust. For employees to trust that they’ll be treated fairly at work, management must make decisions about people based solely on merit. The company won’t permit discrimination or harassment based on factors like age, race, ethnicity, sex, or any other legally protected status. Primer prizes a diverse workplace and benefit from it as a business. The company wants to be the employer of choice and attract the best candidates. Career success at Primer comes from hard work, talent, and a commitment to the company’s values nothing else.
This approach makes Primer workplace safer and more efficient, which is not the right thing to do; it’s good for the bottom line. It also helps keep Kraft Foods employer of choice.
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Positional Advantage Realized
Primer has a wide distribution reach nationwide. Effective management must take into account coordinating all the different pieces of this chain as quickly as possible without losing any of the quality or customer satisfaction, while still keeping the company’s costs down. Key to the success of a supply chain is the speed in which these activities can be accomplished and the realization that customer needs and customer satisfaction are the very reasons for the network. Reduced inventories, lower operating costs, product availability and customer satisfaction are all benefits which grow out of effective supply chain management.
A comprehensive and systematic master plan is needed to effectively manage a large-scale effort. The company’s supply chain provides state-of-the-art technical application tools and emphasizes a continuous improvement approach. This exclusive management transformation program creates a master plan that systematically enacts supply chain agility. It encompasses the full supply chain from customer through production, assembly, supply, warehousing, and distribution. The company therefore has a strong orientattion in addressing the distinct needs of its customers.
Competitive Dynamics Eroding Present Advantage
Employee piracy and intrusion are the factors that may erode Primer present competitive advantage. The intrusion threat is very real; break-ins would in fact be one of the biggest piracy threats, especially considering the high value of data to competitors and others. There is a need for the company to definitely be spending big to protect against potential unknown intruders.-piracy.
VIII. FUNCTIONAL AREA STRATEGIES
1. Marketing
1.1 Target Market Segments
Primer Group of Companies shall focus belonging to all ages because of their wide variety of products offered nationwide. Focusing on this segment can be an advantage for the company especially in increasing its sales and profit since they can swiftly follow the trends of their market. Teenagers can easily adapt to the changes and new offered products because of the new technology and fashion statements launched nowadays. Thus, this will further add equity in the brand portfolio. Another thing is that, Primer
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should also focus on expanding more on their distribution of products in the downline market which by fact drives most of their sales because many consumers are fond of buying cheaper products.
1.2 Marketing Objectives
Improving the brands’ positioning by creating effective and efficient methods and strategies of brands in different areas for exposure to reach the brand’s target consumer in relevant aspects.
Providing insightful analysis of media environment and competitive activities that impact on strength of the product or brand.
1.3 Marketing Plan
Product Enhancing portfolio consistently to offer leadership in their market segments
Price Maintaining market share of the company by meeting competitor prices
Achieving price stability, or maintaining public image without compromising cost
Place Add and enhance the in-store promotions in malls.
Primer’s downline channels are responsible for the products that carry to different areas to make it accessible for the consumers.
Promotion Securing leadership by managing brand portfolio in continuous airing of products to consistently visible in the market.
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2. Operations
2.1 Objectives
. To minimize the time in purchasing of products and orders.
To achieve cost advantage in assembly, operations and production costs.
2.2 Plan
3. Finance
3.1 Objectives
Scheduling Providing a monthly or weekly schedule to plan the time of delivery of products and orders to customers.
Capacity Innovating new machines that can help in minimizing the production of goods in an efficient and effective way.
Applying new technology for improvement of development plan.
Standard Maintaining the standards of the facilities of the company by following the guidelines and procedures implemented by the company.
Control Teamwork can be very useful in monitoring, evaluating and maintaining to meet the standards of the company. 3 to 5 persons per group can be assigned to different areas for controlling.
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Marking down costs without reducing the quality of materials used.
To ensure that work is expedited through efficient financial and administrative procedures while at the same time ensuring adequate financial controls.
To protect and strengthen the bases of financing the organisation's activities and to provide efficient and comprehensive financial accounting and reporting for these activities.
3.2 Plan
Liquidity Expand the company’s liquidity through assessing over head costs and looking for opportunities to decrease them. Unproductive assets should also be decreased.
SolvencySeeking financial solvency by driving down costs and
improving earnings for company’s growth.
Profitability Reviewing the profitability of the company’s various products.
Assessing where prices can be increased on a regular basis to maintain or increase profitability.
4. Human Resources
4.1 Objectives
To hire reasonable applicants and retain the excellent employees in the organization.
To build HR’s organizational capability.
4.2 Plan
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Selection Hire applicants that are suited in the position of vacancy
Develop talents of employees by joining organizations and social interactive media to boost self-confidence and increase awareness to possible clients.
Recruit and bring new employees
Appraisal Identify skill gap areas and develop on these gaps.
Reduce regrettable attrition rate by implementing appropriate programs.
Rewards and Recognition
Ensure total employee rewards from affiliation, indirect financial, direct financial, career and work content.
Giving recognition like trophies and plaques for employee titles
Training and Development
Design a core training curriculum linked to career stages
Conducting seminars once every quarter for company’s overall improvement
Develop a succession planning process to identify and promote development of talent
Ensure 100% completion of Primer Group of Companies training calendar
5. Information Technology
5.1 Objectives
Identify emerging and mainstream technologies.
Provide more advanced web tools and materials to enhance and attract more potential consumers and meet community’s changing needs.
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5.2 Plan
Strategic Information System
Innovate or enhance the website of Primer Group of Companies that can be easily access and visit by the consumers.
Information Management
Information Management will leverage existing, emerging, and innovative technologies to enhance, improve, and streamline business processes.
Obtain feedback from users on satisfaction levels and desired new services and implement changes accordingly.
IX. IMPLEMENTATION
1. Analysis of Company’s Capabilities to Implement
The McKinsey 7S model involves seven interdependent factors that are categorized as either "hard" or "soft" elements:
Hard Elements Soft ElementsStrategyStructureSystems
Shared ValuesSkillsStyleStaff
"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems.
"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful.
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Strategy- Strategy is the plan of action an organization prepares in response to, or anticipation of, changes in its external environment. Tactics or operational actions differentiate it by its nature of being premeditated, well thought through and often practically rehearsed.
Structure- The structure of the company dictates the way it operates and performs. The businesses have been structured in a hierarchical way with several divisions and departments, each responsible for a specific task such as human resource, production or marketing.
Systems- Every organization has some systems or internal processes to support and implement the strategy and run day-to-day affairs. These processes are normally strictly followed and are designed to achieve maximum effectiveness. Traditionally the organizations have beenfollowing a bureaucratic-style process model where most decisions are taken at the higher management level and there are various and sometimes unnecessary requirements for a specific decision to be taken.
Style- All organizations have their own distinct culture and management style. It includes the dominant values, beliefs and norms, which develop over time and become relatively enduring features of the organizational life. It also entails the way managers interact with the employees and the way they spend their time. The businesses have traditionally been influenced by the military style of management and culture where strict adherence to the upper management and procedures was expected from the lower-rank employees.
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Staff- Organizations are made up of humans and it's the people who make the real difference to the success of the organization in the increasingly knowledge-based society. All leading organizations put extraordinary emphasis on hiring the best staff, providing them with rigorous training and mentoring support, and pushing their staff to limits in achieving professional excellence, and this forms the basis of these organizations' strategy and competitive advantage over their competitors.
Skills- This helps in identifying the basic set of skills that each employee has within the organization. This includes specific type of expertise, knowledge, talent or competency required to perform organizational tasks and roles become skills requirements.
Shared Values- All members of the organization share some common fundamental ideas or guiding concepts around which the business is built. This may be to make money or to achieve excellence in a particular field. These values and common goals keep the employees working towards a common destination as a coherent team and are important to keep the team spirit alive.Strategy 1: Establish a strong and sustainable company
Structure Primer Group of Companies should conduct a board meeting every month to open and see the growth of their company. All of their staffs and employees shoul make a step in improving and developing their company. Through teamwork, they could practice the values that are into them.
System Primer set operations for different areas in their department. They should set procedures and processes that can move them in a better innovation and changes for the positive outcome of the company.
Style Primer should use management styles for leading their employees. They should train more their employees for better improvement so that they can be able to adapt to the changes of their environment.
Staffing Primer Group of Companies environment is different from
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other retail companies. Employees must be given the time to grow in different areas in order for them to excell and enhance their abilities. They must be given the chance to show better than those that are not managed by their leaders.
Skill Through the brands offered by the company, employees should seek more of the advantages that it offers to them. The benefits that the company is giving in helping them to be creative and confident in their field of work.
Shared Value Primer has corporate values that meet and must exceed their goals to continue to aim for a better improvement of the company. This must be accomplished through the weekly supervision of the leaders and managers of different departments.
Strategy 2: Reframe Our Categories
Structure Reaserch and Development department gives new informations and ideas for each set of departments. It gives hints on how the company will expand more to achieve its quotas.
System Human resorce department supervise the employees in the problems they encounter more especially in the job related exposure of the employees. They should give procedures on how this guidelines can help them.
Style Acknowleding the new innovation in strengthening the companies growth to exell through investments and contracts for different branding techniques.
Staffing Primer’s employees must communicate the plan to the other departments and establishes systems for implementation and better movement.
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Skill Primer experts at team collaboration in creating innovative solutions and ideas in developing a new structure of the company.
Shared Value Values helps them to attain and improve the categories through conitnuous innovation and development.
Strategy 3: Sales forces to reach targeted consumers
Structure The sales team of Primer must negotiate to the different brands to gain new learning’s and opportunities for the organizations’ wealth.
System Every Monday, each department must conduct a meeting to see the growth and changes in the profits of the company. Every month, they must have a BOD meeting wherein they could report directly to the board of directors to present the whole increase in the profit of each departments and discuss the internal and external issues regarding the management.
Style Sales team must get the other known brands for product expansion of the business and must use different management styles in order to regain and have a position in the marketplace.
Staffing Primer’s sales team should be very approachable and goal-oriented in dealing with their customers. They should assure that these customers are happy and must transact to them with legal documents and achievable time frame.
Skill Primer’s salesmen should ask their clients, customers and prospects good quality questions to fully determine their situation and buying needs. This leads to improvements in customer collaboration and allows them to effectively discuss the features and benefits of their product and service that most relate to each customer.
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Shared Value The most common drive to uplift Primer’s sales is to expand the company’s reach to grow market share for the positive outcome of the company.
Strategy 4: Reasonable cost that gives high standard quality goods
Structure The companies operations works in handling the products and dealing to the customers. They should go to different malls to see and check if the amployees are performing well.
System The team must govern the processes through weekly visitation of stores and implementation of the guidelines of the company.
Style Employees must work more closely and efficiently with suppliers, customers and ultimately, with consumers. This leads to being able to drive sustainable savings.
Staffing Primer should cultivate an environment wherein team members can collaborate and work together in a flat hierarchy. Through this, employees have superior technical expertise in performing their jobs and are cross-trained for other roles.
Skill Primer must invest and get brands that can be profitable for them. They must choose brands that offers good quality of products with low costing so that customers can buy these products with minimal and less complaints.
Shared Value Primer should always keep an eye on keeping costs down through offering promotions and incentives but not at the expense of lowering the quality of materials used in the production of the goods they offer.
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2. Balance Scorecard Framework
The Balanced Scorecard is a strategic performance management framework that has been designed to help an organization monitor its performance and manages the execution of its strategy. In a recent worldwide study on management tool usage, the Balanced Scorecard was found to be the sixth most widely used management tool across the globe, which also had one of the highest overall satisfaction ratings. In its simplest form the Balanced Scorecard breaks performance monitoring into four interconnected perspectives: Financial, Customer, Internal Processes and Learning & Growth.
The balanced scorecard has evolved from its early use as a simple performance measurement framework to a full strategic planning and management system. The “new” balanced scorecard transforms an organization’s strategic plan from an attractive but passive document into the "marching orders" for the organization on a daily basis. It provides a framework that not only provides performance measurements, but also helps planners identify what should be done and measured. It enables executives to truly execute their strategies.
The Financial Perspective covers the financial objectives of an organization and allows managers to track financial success and shareholder value.
The Customer Perspective covers the customer objectives such as customer satisfaction, market share goals as well as product and service attributes.
The Internal Process Perspective covers internal operational goals and outlines the key processes necessary to deliver the customer objectives.
The Learning and Growth Perspective covers the intangible drivers of future success such as human capital, organizational capital and information capital including skills, training, organizational culture, leadership, systems and databases.
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OBJECTIVES MEASURES TARGETS INITIATIVES
FINANCIAL(Finance)
Marking down costs without reducing the quality of materials used.
To ensure that work is expedited through efficient financial and administrative procedures while at the same time ensuring adequate financial controls.
To protect and strengthen the bases of financing the organization’s activities and to provide efficient and comprehensive financial accounting and reporting for these activities.
Increase shareholder value
Operating costs Return on
investment Product cost
Asset Utilization Revenue
Growth
Liquidity- expand the company’s liquidity through assessing over head costs and looking for opportunities to decrease them. Unproductive assets should also be decreased
Solvency- Seeking financial solvency by driving down costs and improving earnings for company’s growth.
Profitability- Reviewing the profitability of the company’s various products.
Assessing where prices can be increased on a regular basis to maintain or increase profitability.
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CUSTOMER(Marketing)
Improving the brands’ positioning by creating effective and efficient methods and strategies of brands in different areas for exposure to reach the brand’s target consumer in relevant aspects.
Providing insightful analysis of media environment and competitive activities that impact on strength of the product or brand.
Customer satisfaction, loyalty and profitability
Improve brand image
Improve brand position
Create effective strategies
Percentage of sales from new products
Number of employee efforts
Customer Feedback
Test returns Repeat
Purchase Brand recall Brand loyalty
Product- Enhancing portfolio consistently to offer leadership in their market segments
Price- Maintaining market share of the company by meeting competitor prices
Achieving price stability, or maintaining public image without compromising cost
Place- Add and enhance the in-store promotions in malls.
Primer’s down line channels are responsible for the products that carry to different areas to make it accessible for the consumers.
Promotion- Securing leadership by managing brand portfolio in continuous airing of products to consistently visible in the market.
INTERNAL BUSINESS
To minimize the time in purchasing of products and orders.
On-time market projects
Delivery time Employee
Response time Operation
Processes
Scheduling- Providing a monthly or weekly schedule to plan the time of delivery of products and
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(Operations) To achieve cost advantage in assembly, operations and production costs.
productivity improvement
Time to recover defects
Revenue from new programs
Marketing performance audit
Actual launch date vs. plan
orders to customers.
Capacity- Innovating new machines that can help in minimizing the production of goods in an efficient and effective way.
Applying new technology for improvement of development plan.
Standard- Maintaining the standards of the facilities of the company by following the guidelines and procedures implemented by the company.
Control- Teamwork can be very useful in monitoring, evaluating and maintaining to meet the standards of the company. 3 to 5 persons per group can be assigned to different areas for controlling.
LEARNING AND GROWTH
(HR & IT)
To hire reasonable applicants and retain the excellent employees in the organization.
To build Human Resource’s
Hours in strategic skills training
Employee satisfaction rating
Training
Leadership effectiveness retio
Selection- Hire applicants that are suited in the position of vacancy
Develop talents of employees by joining organizations and social
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organizational capability.
Identify emerging and mainstream technologies.
Provide more advanced web tools and materials to enhance and attract more potential consumers and meet community’s changing needs.
effectiveness Time compared
to competitors
interactive media to boost self-confidence and increase awareness to possible clients.
Recruit and bring new employees
Appraisal- Identify skill gap areas and develop on these gaps.
Reduce regrettable attrition rate by implementing appropriate programs.
Rewards and Recognition- Ensure total employee rewards from affiliation, indirect financial, direct financial, career and work content.
Giving recognition like trophies and plaques for employee titles
Training and Development- Design a core training curriculum linked to career stages
Conducting seminars once every quarter for company’s overall
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improvement
Develop a succession planning process to identify and promote development of talent
Strategic Information System- Innovate or enhance the website of Primer Group of Companies that can be easily access and visit by the consumers.
Information Management- Information Management will leverage existing, emerging, and innovative technologies to enhance, improve, and streamline business processes.
Obtain feedback from users on satisfaction levels and desired new services and implement changes accordingly.
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X. FINANCIAL PROJECTION
A. BEST CASE SCENARIO
Best Case 2011 2012 2013 2014 2015 2016NET SALES 168,068,994 184,875,893 203363482.7 223699831 246069814.1 270676795.5COST OF GOODS SOLD 125,959,004 137295314.4 149651892.7 163120563 177801413.7 193803540.9GROSS PROFIT 42,109,991 47,580,579.60 53711590.09 60579268.02 68268400.46 76873254.64INTEREST INCOME 51,116 57096.69552 64453.90811 72695.12163 81922.08055 92247.90556TOTAL INCOME 42,161,107 47,637,676.30 53,776,044.00 60,651,963.14 68,350,322.54 76,965,502.54OPERATING EXPENSES 39,375,654 35438088.6 31894279.74 28704851.77 25834366.59 23250929.93PROFIT BEFORE INJCOME TAX 2,785,454 12,199,587.70 21,881,764.26 31,947,111.38 42,515,955.95 53,714,572.61INCOME TAX EXPENSE CURRENT 1,054,410 4617543.943 8282247.771 12091981.66 16092289.33 20330965.73DEFFERED 227,783 1000366.191 1794304.669 2619663.133 3486308.388 4404594.954 PROFIT FOR THE YEAR 1,958,827 8,582,409.94 15,393,821.15 22,474,792.85 29,909,975.01 37,788,201.83
Assumptions:
It is assumed that there will be an increase of 10% in NET SALES annually.
It is assumed that there will be a decrease of 10% in the OPERATING EXPENSE annually.
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B. WORST CASE SCENARIO
Worst Case 2011 2012 2013 2014 2015 2016NET SALES 168,068,994 182354858 197855021 214672698 232919878 252718067COST OF GOODS SOLD 125,959,004 137295314 149651893 163120563 177801414 193803541GROSS PROFIT 42,109,991 45059544 48203129 51552135 55118464 58914526INTEREST INCOME 51,116 54071.453 57843.755 61862.562 66142.157 70697.432TOTAL INCOME 42,161,107 45113616 48260973 51613998 55184606 58985224OPERATING EXPENSES 39,375,654 39296903 39218309 39139872 39061593 38983469PROFIT BEFORE INJCOME TAX 2,785,454 5816712.9 9042663.7 12474126 16123014 20001754INCOME TAX EXPENSE CURRENT 1,054,410 2201625.8 3422648.2 4721456.5 6102560.7 7570664.1DEFFERED 227,783 476970.46 741498.42 1022878.3 1322087.1 1640143.9 PROFIT FOR THE YEAR 1,958,827 4092057.5 6361513.9 8775547.4 11342540 14071234
Assumptions:
It is assumed that there will be an increase of 8.5% annually in the NET SALES
It is assumed that there will be a decrease of 2% annually in the OPERATING EXPENSES
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C. PROBABLE CASE SCENARIO
Probable Case 2011 2012 2013 2014 2015 2016NET SALES 168,068,994 183615376 200599798 219155280 239427143 261574154COST OF GOODS SOLD 125,959,004 137295314 149651893 163120563 177801414 193803541GROSS PROFIT 42,109,991 46320062 50947906 56034717 61625729 67770613INTEREST INCOME 51,116 55584.074 61137.487 67241.66 73950.875 81324.735TOTAL INCOME 42,161,107 46375646 51009043 56101958 61699680 67851937OPERATING EXPENSES 39,375,654 37013115 34792328 32704788 30742501 28897951PROFIT BEFORE INJCOME TAX 2,785,454 9362530.9 16216715 23397170 30957179 38953987INCOME TAX EXPENSE CURRENT 1,054,410 3543717.9 6138026.7 8855828.9 11717292 14744084DEFFERED 227,783 767727.53 1329770.6 1918567.9 2538488.7 3194226.9 PROFIT FOR THE YEAR 1,958,827 6586540.5 11408459 16459909 21778376 27404130
Assumptions:
It is assumed that there will be an increase of 9.25% in the NET SALES annually. It is assumed that there will be a decrease of 6% in the OPERATING EXPENSES
annually.
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LETTER TO THE CEO
Mr. Jimmy ThaiChief Executive OfficerPrimer Group of Companies
Dear Mr. Thai,
I would like to inform you that I use your company, Primer Group of Companies to comply in one of the requirement in my Strategic Management Class. In case you want to know the result of the study, please allow me to share with you the significant findings in regards to your present corporate strategies.
After carefully studying the external and internal environment, it is good to know that Primer Group of Companies is one of the strongest and fastest growing retail companies here in the Philippines. I’ve learned that your company focus different strategies in order to grow and develop their skills in achieving the company’s goals. Using strategies is a robust one since it can help the company in attaining the desire goal in terms of financial and strategic goals. I believe that without the teamwork and hand in hand work of your employees, this company will not be possible and successful as it is right now.
First thing that I would propose to further develop the strategies is to engage in an extensive Reasearch and Development. Invest time and money more to study and forsee the fashion trends more on adding new brands to the company because this will be a good help in expanding and increasing the company’s revenue. Developing the process or expanding the operation is also part of R&D that may contribute a big part in experiencing future growth of the company. In this case, you are allowing your company to go beyond and prepare for the future nuisance. And by considering Research and Development, you are investing to your company’s future for its vital to continued growth and prosperity.
The propose method for developing the current strategy must be taken with the full compliance of all the people involved in the company. The company must be ready enough to adopt and take challenge brought by the proposed development strategies and certain evaluation is needed to verify the effectivity of the suggestes strategies.
The making of this paper is very enriching for me because I learned a lot in your company. I was able to get to know the deeper startegies that you use in order to maintain the company in a good position. It also help me to choose the right company
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for me wherein I can stay for good and also to work with your employees. They already became close to my heart. The culture of the company is quite different from the other ordinary companies because of the time and approach of the employees as well as the comfy attires of all the people working in your company. It was a great experince working with all your staffs. I hope that by this study I was able to share my knowledge and hoping to help for the improvement of your company.
Thank you very much and more power!
Sincerely yours,
Mary Ann MendozaMarketing Intern
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BIBLIOGRAPHY
http://www.tradingeconomics.com/philippines/inflation-cpi
Source: National Statistics Office, Philippines