JOHN GOKONGWEL AND UNIVERSAL ROBINA CORPORATION

INSTRUCTIONS: The article is about John Gokongwei. This activity has accompanying questions
for you to answer. For further reading, browse the Internet and look for articles on Mn.
Gokongwei and his business portfolio.

(Adapted from the articles on www.urc.com.ph; article on URC dated August 16, 2009 at
www.mb.com.ph and John Gokongwei's speech at the 20"' Advertising Congress, November 21,
2007)

A Success Story
Universal Robina Corporation (URC) headed by John Gokongwei started in 1954. He
constructed a corn milling plant that produced glucose and cornstarch. It was then called
Universal Corn Products. Its first product was Panda Cornstarch.

While it was doing well, he felt that it was just thriving on a single product unlike Nestle
and Procter and Gamble which have had produced diversified products. His vision then was to
have a local multinational company.

Thus in 1961, Consolidated Foods Corporation was born. Its first hit was Blend 45. It
became the best-selling coffee beating Nescafe and Café Puro. Then Nips, a local M&M came in.

Robina Farms started its operations in 1963. Robichem Labs which provides veterinary
products expanded in the '70s with its hog raising.

In 1966, URC expanded its operations with Jack 'n Jill brand. The company produced
market leaders like Pretzels, Piattos, and Maxx. In the early '70s, Gokongwei started Continental
Milling Corporation for flour milling and production. In the late '80s, he acquired three sugar
mills and refineries under URC sugar.

In 1996, Gokongwei decided to start an airline. In its initial operations, Cebu Pacific flew
only 360,000 passengers in three destinations. Ten years after, it flew an estimated S million
passengers in 20 local destinations and 12 Asian cities.

In 2003, Digitel Mobile Philippines was established. Sun Cellular was born. Within one
year, Sun had one million customers.

One year after, the green. tea drink C2 was launched. Coca-Cola companies then domi-
nated the local beverage industry. With the arrival of C2, the beverage industry changed. In its
first month, 100,000 bottles of C2 were sold. Three years after, 30 million bottles of C2 were
sold per month.
 In 2009, the unaudited consolidated income of URC surged P2.24B for the 1" quarter of
2009.

Lessons from Our Neighbors

Korea as we all know has slowly grabbed the world market in semiconductors, robotics,
and biotechnology.

Today, a Korean brand, Samsung is one of the top 100 global brands. Samsung has
already carved a niche in the Information Technology industry. Some experts say it has already
surpassed Sony, a Japanese brand. LG Collins also of Korea is slowly but surely following the
footsteps of Samsung.

China, on the other hand, is fast becoming the 4 th largest economy. Although China's
products are considered cheap and of low quality, China is the choice of a lot of international
manufacturers for their manufacturing requirements. China's Lenovo, Hoer, Cherry, QQ, and
Huawei brands are gaining momentum in the world market.

Singapore has already created world-class brands: Banyan Tree, Singapore Airlines, and
Singapore Telecoms.

A Filipino Global Brand?

Gokongwei felt that the Philippines has yet to build its own global brand. With 86 million
people Gokongwei believes we can create our very own global brand.

Gokongwei further added how Switzerland with only 9 million people can create its own
global brand, Nestle; Sweden with 9 million people has Ericsson; and Finland with 5 million
people has Nokia.

Philippine manpower is used by other international companies mainly for call center and
Business Process Outsourcing industries. The Philippines exports labor around the world.

Gokongwei has all praises for local brands that have already created a niche in the
international market, namely: Goldilocks in the United States and Canada; jewelry and bags by
Bea Valdez and Tina Ocampo (Celestina bags) in shops at Barneys and Bergdorf's in the United
States.

Gokongwei takes pride in making giant leaps in Malaysia and Singapore with its Jack 'n
Jill potato chips. C2 is doing well in Vietnam. Hopefully, the next few years would be a reckoning
for Filipino brands in the elite list of global brands.

On a recent note, Philippine Long Distance Telephone Company (PLDT) acquired Sun
Cellular sometime in the first quarter of 2011. PLDT is also the owner of Smart Communications.
Questions for Analysis:

1. Trace URC's success story. What are the factors that contributed to its success?

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2. Analyze the growing market base in Asia. How did Gokongwei take advantage of it?

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3. Based on John Gokongwei's words of wisdom, how can the Philippines compete
globally?

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4. Are there hindrances for the Philippines' inability to have its own global brand?
Explain.

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5. Identify Gokongwei's entrepreneurial traits which made him successful.

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6. Make a research on the acquisition of Sun Cellular by PLDT. Make your comments.

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7. Is Gokongwei's move a strategic one, with Sun being number 3 in the telecommu-
nications industry?

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 THE ELECTRONIC AGE
INSTRUCTIONS: Make a quick survey on the use of the Internet with about 10 students. The
survey questionnaire will be based on the following aspects: frequency of using the Internet,
frequent websites visited, reasons for using the Internet. The instructor can suggest other
questions. Compare your data with other students. As an additional assignment, research the
meaning of technophobia.

Questions for Analysis:

1. How has the Internet transformed the information gathering and dissemination?

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2. Are there more advantages or disadvantages in using the Internet? Justify your
answer.

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3. What is the meaning of technophobia?

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4. How can one pinpoint a technophobic?

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5. Are there still technophobics around? Justify your answer.

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 BEN CHAN AND BENCH
INSTRUCTIONS: Read the short article and answer the questions after the article. Additional
research can be done on Mr. Chan and Bench. For a thorough discussion, the instructor can
divide the class into groups to observe a Bench boutique. Identify the types of customers that
patronize Bench products. Characterize them and provide inputs also on how the sales
personnel handle customers' inquiries/complaints.

(This article is adapted from a series of articles including www.people.nfo.ph/business-

man/ben-chan and www.fujitsu.com/ph/casestudies/suyen-bench.html, retrieved on January
17, 2010.)

Ben Chan is the founder of a large clothing chain, Bench under Suyen Corporation.
Known for being hardworking and innovative, Ben Chan has expanded his clothing chain in the
international markets.

The word bench which means "long seat," now connotes a different meaning in the
business world. The word Bench stands for a clothing store offering fashionable clothes.

Coming from a family of entrepreneurs (his father, Chan Lib put up Liwayway Marketing
and his brother expanded it), Ben Chan established Dimensione, a modern furniture store and
Finale, an art gallery.

In 1987, Chan started a T-shop in SM department stores in Manila. This marked the
beginning of Bench.

Aside from Dimensione, Suyen Corporation has diversified to Fix Salon for hair salon
services and Human for the hip-hop fashion conscious market.

By 1994, Bench opened its first fashion store in AI-Khobar, Saudi Arabia, then followed
by another store in Shanghai, China. Another one was built in Kuwait.

In 2007, Bench had established stores in Eagle Rock, Los Angeles; Riyadh, Saudi Arabia;
Bahrain; Guangzhou, Xian; and Dubai. The primary location, however, is still China with 27
Company stores and 19 franchises.

Questions for Analysis:

1. How did Ben Chan make a difference in clothing/apparel through Bench?

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2. What makes Bench click?

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3. In your own analysis, how has Ben Chan scanned the environment where Bench
operates?
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 MARKET ANALYSIS
INSTRUCTIONS: The class will be divided into groups. The instructor will assign different stores
in a nearby mall and observe the behavior of customers including the flow of customers. For
further analysis, each group identifies the market structure of the assigned store based on what
is discussed in this chapter.

The instructor can assign any store on the following industries:

a. an apparel boutique

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b. a fast-food chain

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c. a service provider

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d. a drugstore or a bookstore

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e. a shoes and bags boutique

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f. a computer shop

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KEY CONCEPTS TO REMEMBER

power of suppliers — ability of suppliers to control an organization by making their

prices higher

power of buyers — ability of the buyers to drive the company's prices down

rivalry of competitors — ability of each company to counter the strategies offered by its
strongest competitor

threat of substitutes — the challenge lower rates, s, an offered by a company with

similar features but at lower rates, and can substitute products or services of existing
companies

threat of new entrants — the challenge offered by new companies that offer products or
services through product quality, uniqueness, added features, competitive pricing and
the like

competitive intelligence — the art of gathering, analyzing, and distributing vast infor-
mation coined as intelligence about anything that would help in competing in the market

strategic intelligence — being able to understand the competitors' future prospects and
goals

tactical intelligence — a small-scale intelligence and operational in the short run

counter intelligence — knowing how to defend company secrets

SWOT analysis — a basic straightforward model in environmental scanning which helps

the company in identifying four key elements: strengths, weaknesses, opportunities, and
threats

market concentration — the degree by which a small number of companies dominate

the market

product differentiation — refers to the degree by which a company is able to distinguish

its product or service to other players in the market as valued by consumers
entry barriers — refer to the difficulties and challenges experienced by potential new
entrants

atomistic — refers to the structure of the market where there are many small sellers
with a low level of interaction to one another
 oligopolistic — refers to the structure of the market where there are few large sellers
with a high level of interaction to one another
monopolistic— refers to the market with a single player
homogeneous products — refer to the products that are highly similar or identical in
features

differentiated products — products differentiated by design, quality, branding, etc.

ease of entry — refers to the point where there are no difficulties in entering the market

moderately difficult — refers to the point where there are barriers but not too difficult
for sellers to monopolize the market specifically on pricing

blockaded entry — refers to the point where barriers are too high that potential players
cannot enter and present companies monopolize the prices

END OF CHAPTER QUESTIONS

1. Illustrate Porter's Five Forces Model by coming up with a decision in the following
situation: Teresa is in a dilemma. She has been working for many years as a fill-time
office worker in a medium-sized company. Definitely, she will avail of their early
retirement program. With this, she is now in the process of choosing between two
alternatives: start a sari-sari store or buy a farm in Bulacan where her family lives.
Imagine that you are Teresa and come up with the sari-sari store option and then the
farm option using Porter's model. Discuss your output in the class.

2. What is competitive intelligence? How does it fit in the strategic planning process?
3. Use SWOT analysis in assessing yourself.
4. How does SWOT analysis work in a company with small-scale, medium scale, and
multinational corporations? Contrast and compare.
5. Debate on the use and misuse of competitive intelligence as a tool for competitive
advantage.
6. How does Porter's Five Forces Model fit in to the globalization and latest trends in the
global economy?
7. Which among the three structural features of the market is the most important to
consider with the following products: a. service-oriented industries, b. manufacturing
firms, c. pharmaceutical firms?
8. How can the five forces model and the competitive intelligence join forces to come up
with a better strategy?
9. How can competitive intelligence be used with a new product?
10. Recall the product life cycle and explain competitive intelligence based on the product's
introduction and maturity life cycle.
KEY CONCEPTS TO REMEMBER

vision — the expression of what the company wants to become

mission — the statement of the company's reason for existence

differentiation — a generic approach where a company makes its products or services unique
and distinct

cost approach — a generic approach where the company concentrates on keeping costs low
focus — a generic approach wherein a company specializes or concentrates on a particular
market segment

horizontal integration — the strategy of a company to expand its business into different
products that are similar to current lines

forward integration —a form of vertical integration where a company controls the direct
distribution of its products

backward integration — a form of vertical integration where a company purchases the suppliers
in order to reduce dependency

prospector approach — an adaptive method which is based on innovation and exploration of

new market opportunities

defender approach — an adaptive method of making vast improvements in its present products
or services

analyzer approach — an adaptive method of making attempts to copy and make improve-ments
in the success of products or services provided by competitors

diversification — the development of new products for new markets

product development — the development of new products to existing markets

market development — the development of new markets for existing products market
penetration — the desire to achieve greater percentage of the market share through the
company’s existing products in existing markets

Balanced Scorecard — a system that measures the organization's progress in accomplish-ing its
strategic objectives in four key processes: financial, customer, business pro-cess, and learning
and growth perspectives

position —the advantage that an organization gains in the hands of the consumer
power— refers to the company's competitive edge, a following of some sort that a company
should not allow competitors to surpass

pace — a timing and intensity of strategy put on the ground

potential — the probability of the success element of a particular strategy

performance — the effective implementation of a particular strategy

transferability — indicates that a product or service can be transformed into something highly
valued by customers

competitive dominance — t product in or service surpasses its competitors in terms , sales and
brand recall in the industry where it operates

uniqueness — the product or service cannot easily be copied by competitors

substitutability —indicates that the product or service cannot be replaced through substitution
by competitors

durability — indicates that the product or service does not deteriorate or depreciate quickly

END OF CHAPTER QUESTIONS

1. Explain the importance of a mission/vision statement in a company.
2. Research on some vision/mission statements of local companies and compare them. Look on
the following companies: Lamoiyan Corporation, CDO Corporation, San Miguel Corporation, and
Splash Corporation.
3. Discuss the Balanced Scorecard specifically its basic processes.
4. What are the Business Excellence criteria? Explain how they work.
5. Explain and justify this statement: Business excellence will only be achieved if there is
harmony between enablers and results.
6. Compare and contrast the different power Ps and the submethods of each of the power Ps.
7. How do Porter's generic strategies differ from his previous model, the five forces model?
Which is more effective?
8. Which among the five power Ps are the most challenging for managers?
9. How do you integrate the power Ps with the vision and mission of the company?
10. Devise your own business excellence criteria which will be more applicable in today's
business situation in the country. Discuss this in the class.
 CHAPTER IV
ACTIVITY 1
FINANCIAL RATIOS
INSTRUCTIONS: A summary of the key financial ratios is shown below. Research on the formula
and get a balance sheet and income statement of a company and try to use the ratios and
analyze them.

Liquidity Ratio measures a firm's ability to meet a maturing short-term obligation.

Current Ratio measures the extent of the company to meet short-term obligations.

Quick Ratio measures the extent of the company to meet short-term obligations without
having to sell its inventories.

Leverage Ratio measures the extent to which a firm is financed by debt.

Debt to Total Assets Ratio is the percentage of total funds provided by creditors.

Debt to Equity Ratio is the percentage of total funds provided by creditors vs. the own-
ers.
Long Term Debt to Equity Ratio is the balance between debt and equity in the firm's
long-term capital structure.

Times Interest Earned Ratio is the extent by which the earnings can decline without the
firm becoming unable to meet its annual interest costs.

Activity Ratio measures the firm's effective use of resources.

Inventory Turnover determines whether a firm holds excess inventories and whether a
firm is selling its inventories slowly compared to industry average.

Fixed Assets Turnover determines sales productivity and plant and equipment utiliza-
tion.
Total Assets Turnover determines whether a firm is generating enough volume of busi-
ness for the size of its assets.

Accounts Receivable Turnover is the average length of time it takes a firm to collect
credit sales (in percentage).
Average Collection Period is the average length of time it takes a firm to collect credit
sales (in days).
 Profitability Ratio measures the effectiveness of management as seen in returns gener-
ated by sales and investment.

Gross Profit Margin is the total margin available to cover operating expenses and yield a
profit.
Operating Profit Margin determines profitability without concern for taxes and interest.

Net Profit Margin is the after-tax profit for every peso of sales.

Return on Total Assets or Return on Total Investment is the after-tax profits per peso of
assets.

Return on Stockholder's Equity is the after-tax profits per peso of stockholders' invest-
ment in the firm.

Earnings per share are the earnings available to the owners of common stock.

Price Earnings Ratio is the attractiveness of firm in equity markets.

Growth Ratio measures the ability of the company to maintain its economic position in
the growth of the economy and the industry.

Sales measure the firm's growth through sales.

Income measures the firm's growth through profits.

Earnings per share are the firm's growth rate in earnings per share.

Dividend per share is the firm's growth rate in dividends per share.