Strategic Management Analysis of URC PDF

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A strategic management paper onUniversal Robina CorporationSubmitted to: Prof. Ricardo Palo Faculty, CASSubmitted by: Kristel Mae J. Bunagan 4-ALMTABLE OF CONTENTS I. EXECUTIVE SUMMARY...................................................................................... INTRODUCTION RESEARCH DESIGN ...

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A strategic management paper on Universal Robina Corporation

Submitted to: Prof. Ricardo Palo Faculty, CAS

Submitted by: Kristel Mae J. Bunagan 4-ALM

1 | Page

TABLE OF CONTENTS I. EXECUTIVE SUMMARY………………………………………………………………………….. 1. 2. 3. 3.1. 3.2. 3.3. 3.4. 3.5. 4. 4.1. 4.2. 4.3. 4.4. 5. 5.1. 5.2. 5.3. 6. 6.1. 6.2. 6.3. 6.4. 6.5. 7. 8.

INTRODUCTION ……………………………………………………………………. RESEARCH DESIGN AND METHODOLOGY ……………………………………. MACROENVIRONMENTAL ANALYSIS …………………………………………... Political Forces ……………………………………………………… Economic Forces ………………………………………………………… Social/Cultural Forces ………………………………………………… Technological Forces ………………………………………………… Environmental Forces ………………………………………………… INDUSTRY, MARKET AND COMPETITOR ANALYSIS …………………………. Porter’s 5 Forces Model …………………………………………….. Market Analysis ………………………………………………………. Competitive Profile Matrix (CPM ……………………………………. External Factor Evaluation (EFE) Matrix …………………………… COMPANY ANALYSIS ……………………………………………………………….. Company Internal Audit ………………………………………………. Key Financial Ratio Analysis ………………………………………… Internal Factor Evaluation (IFE) Matrix ……………………………... STRATEGY FORMULATION ………………………………………………………… Strengths, Weaknesses, Opportunities, Threats (SWOT) ……….. Strategic Positioning & Action Evaluation (SPACE) ………………. Boston Consulting Group (BCG) Matrix……………………………… Internal-External Matrix……………………………………………….. Grand Strategy Matrix…………………………………………………. Quantitative Strategic Planning Matrix………………………………. Objectives and Strategy Recommendations………………………..

3 4 5 9 9 15 23 25 28 30 30 32 35 35 38 38 43 46 47 47 49 52 53 54 54 55

II. Strategy Evaluation, Monitoring and Control…………………………................

57

III. List of Tables………………………………………………………………………..

59

IV. Appendix……………………………………………………………………………

60

V. Bibliography…………………………………………………………………………

65

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I. EXECUTIVE SUMMARY Universal Robina Corporation is a leading company in terms of snack foods industry and is one of the largest food manufacturing company in the Philippines. It is excellent in providing quality foods and services in the Philippines and across the South East Asian Countries. The food industry is a basic commodity that never experienced a significant down turn in terms of its demand from the customers. It has always been the most patronized industry. Meanwhile, the players in the industry often experiences down turn in terms of how demandable their products are. The key competition among them is how attractive your products are and how likely you are going to be patronized and produce loyal. The Company URC has ventured in different market segments and fortunately its snack food products generate most of its return of investments. Thus, URC registered an EFE rating of 3.1 in terms of responsiveness to external environment. The food industry is led by three major players each dominating in a specific income segment. In terms of global expansion, URC is a market leader based on CSF rating and market share. This is evident on the international expansion that the company recently had. URC however, has a total modest competitive position with a CSF rating of 2.9 considering that it has strong capitalization but poor accessibility to its product moderated by its price competitiveness. Hence, an opportunity exists for URC to be the market leader in the industry. Internally, most of the company’s strengths are owed to its synergy with URC’s diversified brand segments. The operational synergy has allowed URC to obtain a sales growth by 14% compared to the sales growth of year 2014. Despite this, the company still generated a total rating of 2.89 in terms of responsiveness to its internal environment. Based on the URC’s SPACE rating, URC falls within the Aggressive profile quadrant which states that it has an excellent position to use its internal strengths to take advantage of external opportunities, overcome internal weaknesses and avoid external threats. Feasible strategies under this quadrant are market penetration, market development, product development, backward integration, forward integration, horizontal integration, diversification or a com The company is very competitive in competing with other leading companies. This paper shows the recommended strategies gathered through research by identifying the possible hindrance the company is currently facing in the market. Ultimately, this paper is aimed at identifying the areas of concern that need improvement. This paper will also be tackling what these strategies best do for the said company and what will be the most appropriate strategy for the company to achieve its strategic objective to be a strong market leader. The is also a score care for URC which states how will the firm is improving in the industry and how it is continually creating values through measures, it also states how it improved upon its core competencies and competitive advantages and how satisfied the firm’s customers are.

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1. Introduction Business Overview Founded in 1954 when Mr. John Gokongwei, Jr. established Universal Corn Products, Inc., a corn manufacturing plant in Pasig, Universal Robina Corporation (URC) was founded. Mr. Gokongwie Jr. established a vision for Universal Robina Corporation to become one of the leading pan Asian players in snack foods and beverages. This vision is gradually being realized as URC has managed to transform itself from a Philippines operation to a recognized Asian Multinational with full scale operation in eight countries outside the Philippines, and soon in emerging markets such as Myanmar, Laos and Cambodia. Universal Robina is involved in a wide range of food-related businesses, including the manufacture and distribution of branded consumer foods, production of hogs and day-old chicks, manufacture of animal and fish feeds, glucose and veterinary compounds, flour milling, and sugar milling and refining. It is one of the largest branded consumer food and beverage product companies in the Philippines and as mentioned above it has a significant growing presence in the ASEAN markets. URC is among the Philippines’ pioneers in the industry. URC operates its business through operating divisions and wholly-owned or majority-owned subsidiaries that are organized into three core business segments, namely, branded consumer foods, agroindustrial products and commodity food products. Branded consumer foods (BCF) segment, including their packaging division, is the Company’s largest segment. Majority of URC's branded consumer foods business is conducted in the Philippines, but the Company has expanded into other Asian markets through its subsidiary, URC International, and subsidiaries in China, Malaysia, Thailand, Singapore, Indonesia, Vietnam, and Myanmar. Business Operations and others URC’S financial position remains healthy with strong cash levels. The Company has a current ratio of 2.35:1 as of December 21, 2015, higher than 2.30:1 as of September 30, 2015. It has its total assets amounted to P117.375 billion as of December 31, 2015. More particularly, its current assets is currently at P52, 040,781 while P65, 334,494 amounts to its non-current assets in the year ended December 31, 2015. With regards to its total liabilities and equity, they amount to P48, 557,288 and P68, 817,987 respectively. The Company’s financial position can be seen in its financial statement for the first quarter of Fiscal Year 2016 as it was filed in the Securities and Exchange Commission. On the other hand, the company’s revenues for the first quarter ended December 31, 2015 and 2014 by each of the principal business segments is as follows:

First quarter ended December 31 4 | Page

In millions Branded Consumer Foods Group Domestic International Packaging Total BCFG Agro-industrial group Commodity Foods Group Total

2015

2014

P15,695 8,985 24,680 315 P24,995 2,287 2,2705 P29,987

P14,840 7,535 22,375 294 P22,375 2,250 2,032 P26,951

Aside from its market leadership in snack foods and beverages in the Philippines, URC is the first “Philippine Pan ASEAN Multinational” and has proven itself to be a trailblazer in manufacturing with a strong and loyal consumer base. It has built three strong regional brands over the years; “Jack ‘n Jill” for snack foods, “C2” for ready to drink tea, and “Great Taste” for coffee and these brands are becoming popular across the ASEAN Region. Just recently, in November 2014, the Company acquired 100% shares of NZ Snack Foods Holdings Limited. It is the holding company of Griffin's Food Limited, a snack food company in New Zealand, from Pacific Equity Partners. URC also entered into joint ventures with Calbee, Inc. to form Calbee-URC, Inc., which manufactures and distributes food products under the "Calbee Jack 'n Jill" brand name; and with Danone Asia Holdings Pte, Ltd. to form Danone Universal Robina Beverages Inc., which manufactures and distributes food products under the "B'lue" brand name. 2. Research Design and Methodology Collections of data and information as well as tables and figures endowed in this paper were all gathered from various reliable resources from the internet either as official publication or the segment of an official publication. Official publications would comprise, but not limited to, of the different official websites of the government agencies and the segments of these agencies would comprise of the private and private institutions duly accredited by the government to conduct projects and researches for general and specific resources. As to the industry analysis of the subject company of this paper it will be limited to the food and beverage industry which include branded consumer food groups and packaging industry. All other information sought under this paper are taken from reliable resources in the internet those of refutable background in the conduct of researches and outputs. 3. The Company’s Vision and Mission Statement A. MISSION Universal Robina Corporation (URC) is one of the largest branded food product companies in the Philippines and has a growing presence in other ASEAN markets.

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Components 1. Customers

Yes *

No

Evaluation They are into expansion to ASEAN

countries

which

means that they want to offer the same quality brand 2. Products/Sevices

to other nationalities. It is stated in their mission

*

that they aim to be the largest

branded

food

product companies in the Philippines 3. Markets

and

across

South East Asian Countries. The company plays a

*

dominant leadership in the market

or

industry

it

belongs through the quality and convenience it can give 4. Technology

*

to the customers. The mission does

not

specifically

the

states

technological component of 5. Concern for survival,

the company. The company is concerned

*

growth, profitability

with its survival that they aim to be the market leader

6. Philosophy

*

in the industry. This element in the mission of the company is not

7. Self-concept

*

present. It is stated in their mission that they aim to have a presence

in

countries

which

ASEAN is

a

manifestation that they aim for more trust from the customers 6 | Page

through

8. Concern for public image

expansion. They aim for what is best

*

for

the customers and

gaining the trust of every 9. Employees

*

individual. They did not include the livelihoods

10. Nation Building

of

the

employees. They are constructing an

*

identity

as

an

active

contributor to the economy by providing high quality product. B. VISSION URC’s Vision is to be the best Philippine food and beverage company, with a powerful presence throughout the ASEAN region, carrying a wide portfolio of delightful brands of exceptional quality and value, equipped with efficient systems and motivated people. We are committed in making lives a truly fun experience.

Parameter 1. Does it clearly answer

Yes *

No

Evaluation It has been indicated that

the question: “What do we

they want to be the best

want to become?”

food and beverage company with a powerful presence in the

2. Is it concise enough yet

*

inspirational?

ASEAN

regions/countries. The vision is straightforward on what the company really want to achieve and what they

3. Is it inspirational?

*

can

offer

to

the

customers. The company is determined to

expand

its

market

internationally with a wide portfolio of their brands,

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efficient 4. Does it give clear

*

indication as to when it

systems

motivated people. There is no

and specific

indication as to time.

should be attained?

RECOMMENDED MISSION: To be the customers’ first choice inn fun snacks, dominant market leader in the Philippine Food Industry and has a growing presence in other ASEAN markets with ultimate passion and commitment in endowing quality, value and convenience that the customers deserve and to hand over a great livelihood to every employee. RECOMMENDED VISION: URC’s Vision is to be the best Philippine food and beverage company, with a powerful presence throughout the ASEAN region, carrying a wide portfolio of delightful brands of exceptional quality and value, equipped with efficient systems and motivated people. We are committed in making lives a truly fun experience.

4. External Analysis With about seven thousand islands lying off south west coast of the Asian mainland, the Philippines is one of the largest island groups in the world. It is strategically located as a gateway to the East and Southeast Asian market, and well-poised to be a staging area for local food and beverage processors that seek to penetrate the lucrative market. The Philippines’ food and beverage processing industry is comprised of the following major factors: beverages, coffee and cacao, condiments and seasonings, dairy products, fats and oils, flour and bakery products, fruits and vegetables, meat and poultry products, seafood products, snack foods, and sugar and confectionery. As reported by Global Agricultural Information Network, the food processing industry contributes to the country’s total manufacturing output. Roughly 90 percent of the Philippines’ food and processing industry’s output is consumed locally. Consumption growth in the coming years is underscored by the country’s robust economy and a fast-growing, highly urbanized population with increasingly sophisticated tastes and ever-growing access to supermarkets. 3.1 Political forces Existing laws and government regulations

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The regulation of food and drugs in the Philippines is enshrined in the 1987 Philippine Constitution. Statutory laws are also in place to provide legal basis for the creation of a regulatory agency such as Bureau of Food and Drugs, Department of Health, Department of Agriculture, Department of Trade and Industry and other, all mandated to ensure the safety, efficacy and good quality of all food and drug products being made available to the general public. Among these statutes four of them are of relevance to the industry of Universal Robina Corporation namely: Consumer Act of the Philippines (RA No. 7394), Food Safety Act of 2013, Food Fortification Act of 2000, and Food, Drug and Cosmetic Act. There had been laws passed with regards to food safety control and regulatory system in the Philippines. The National Food Safety Network is generally composed of agriculture and fisheries (Fresh produce), the food industry (food manufacturing, distribution and retail outlets), the food service sector (restaurants, caterers, street vendors) and the consumers (household consumption). Each components has a corresponding responsible regulatory agencies/bureaus and services and regulatory laws. Alarmed of the emergence of food borne disease incidence, the national government in 1998, created through an Executive Order the National Food Security Council Under this, a National Food Safety Committee was organized to formulate National Food Safety Policy Program. Together with partner agencies a consultative meeting was convened to discuss and formulate of a framework for a National Food Safety initiative. Several issues were raised in the consultative meetings and the committee came up with the following recommendations namely: •

Formulation and issuance of a national policy on Food Safety.

•

Review critical areas of the food chain which are unprotected by laws or regulations and standards.

•

Development of a comprehensive Food Disease Surveillance System

•

Develop detection methodologies and assessment in the emergence of GMOs.

The action plans however were only given a life span of 3 phases from a period of year 2002-2007 with threeyear coverage each phase because of certain adjustments such as changing of leadership in the local government units and national leaders. Hence, the current laws governing government regulation with regards to the food industry and the food service sector are elucidated in this portion. A. Republic Act No. 7394, The Consumer Act of the Philippines Under the statute, the provisions provided and the implementing rules and regulations shall be enforced by: The Department of Health with respect to food, drugs, cosmetics and devices and substances; the department of agriculture with respect to products related to agriculture; and the department of trade and industry with respect 9 | Page

to other consumer products not specified above. Article 7 of the said statute the concerned departments shall establish consumer product quality and safety standards which shall consist of one or more of the following: •

Requirements to performance, composition, contents, design, construction, finish, packaging of a consumer

• • • •

product; Requirements as to kind, class, grade, dimensions, weights, material; Requirements as to the methods of sampling, tests and codes used to check the quality of the products; Requirements as to precautions in storage, transporting and packaging; Requirements that a consumer product be marked with or accompanied by clear and adequate safety warnings or instructions, or requirements respecting the form of warnings or instructions. Relevance: Under the statute, before entering the industry there are certain requirements that should be complied first. The company would have to take into consider this because this might affect the company’s overall expense and might occur barriers to entry.

B. Republic Act No. 10611, An Act to strengthen the food safety regulatory system in the country to protect consumer health and facilitate market access of local foods and food products, and for other purposes Food security refers to the assurance that food will not cause harm, human health is protected and market access of locally produced foods and food products is facilitated. Food, as one of the basic needs of man, provides the health requirements of a p...