San Beda College
College of Arts and Sciences
Department of Legal Management
STRATEGIC MANAGEMENT PAPER
On
Submitted to:
Prof. Ric Palo, CPA, MBA
Submitted by:
SANTOS, Arantxa Stefi L.
1
TABLE OF CONTENTS
Executive Summary
I.
Introduction
1
II.
Research Design and Methodology
1. Research Design
2. Scope and Limitation
5
III.
External Analysis
1. Economic Performance and Forecast
2. Economic, Political-Legal, and Governmental Aspects
3. Social/Cultural Aspects
4. Technological Advances
7
IV.
Industry and Competitor Analysis
1. Industry and Market Segments
Market Segments and Trends
Pricing
Advertising and Promotion
Buyer’s and Consumer’s Profile
2. Porter’s Five Forces of Competitive Analysis
3. Competitive Profile Matrix
4. Strategic Issues based on External Factors
5. External Factor Evaluation Matrix
26
V.
Company Analysis
1. Internal Environment Analysis
2. Internal Factor Evaluation Matrix
39
VI.
Strategy Formulation
1. SWOT Matrix
2. SPACE Matrix
3. Internal-External Matrix
4. GRAND Strategy Matrix
5. Summary of Strategies
6. Quantitative Strategic Planning Matrix
47
VII.
Objectives and Recommendations
62
2
1.
2.
3.
4.
5.
6.
7.
8.
VIII.
Current Vision Statement
Proposed Vision Statement
Current Mission Statement
Proposed Vision Statement
Financial Objectives
Strategical Objectives
Recommended Strategies
Financial Projections
Appendices
1. Puregold Financial Statements
78
3
STRATEGIC MANAGEMENT PAPER
EXECUTIVE SUMMARY
Puregold is the second leading hypermarket in the Philippines. The company is
in a very competitive position. This paper reflects that the company’s portfolio is above
average and near to outstanding. The top competitors of the company are also studied
in this paper to further envision the strategies and objectives to be drafted for the
constant growth of the company.
The company’s vision and mission is very commendable and a proposal for
change is herein established to hopefully help in developing the company
I. INTRODUCTION
Background of the Company
Puregold Price Club, Inc. is a chain of supermarkets which offers a wide variety
of general merchandise and a full-service supermarket with wholesale. Unlike other
Puregold stores, Puregold Price Club offers wholesale in merchandise. Puregold has
Puregold Jr., which is a neighborhood store which offers targeted consumers’ items and
limited variety of general merchandise, without the wholesale operations. On the other
hand, Puregold Extra offers a very limited number of Stock Keeping Units at discounted
prices., provides consumers with a discount on time, not just on the price.
This chain of supermarkets in the Philippines was established way back in 1998.
In the year 1998, Puregold opened it’s first ever branch in the City of Mandaluyong. And
presently, they have grown into a big retail chain and they now have 180 stores in the
4
country. Amazingly, they did this for only 14 years. The company launched a loyalty
program in 2001; renamed as Tindahan ni Aling Puring in 2004. In between the years of
2002 and 2006, they have launched an average of 3 stores per year and have
expanded their operations in the Northern and Southern part of Luzon.
In 2008, Puregold was branded in Reader’s Digest Asia’s “Most Trusted Brands”
and have introduced a new store format, Puregold Jr. In 2009-2010, Puregold became
the 2nd largest hypermarket and supermarket retailer in the Philippines as regards to
the net sales, in this period of time, they have introduced the Puregold Extra, a new
store format.
In 2011, Puregold Price Club went public and inaugurated as listing on the
Philippine Stocks Exchange. They had a rapid expansion via organic new Puregold
stores roll-out and acquisitions other than that they have made history by having had
acquired the highest number of new store openings ever, opening 38 new Puregold
stores.
In 2012, Puregold opened 31 new Puregold outlet stores and acquired Kareila
Management Corp., which owns S&R Warehouse Membership Shopping Club with 6
stores and Parco Supermarkets with 19 stores. And those 19 operating outlets were
purchased and converted to Puregold. The shareholders of the retail chain Puregold
have approved the merger of the other two operating units into the parent company,
consolidating Puregold's supermarket businesses under the publicly listed supermarket
operator.
Currently, Puregold is continuing new stores roll-out via organic geographic
expansion and acquisitions. They are targeting to open 25 more Puregold stores and 1
S&R store.
Nature of Business
5
The advent of one-stop shopping convenience began in 1998 when PUREGOLD
opened its first branch along Shaw Blvd. in Mandaluyong City. The store offered a
wide array of goods from groceries, apparel, household accessories and furniture at
very affordable prices. During that time, the one-stop shopping philosophy was still a
novel idea to consumers but with the excellent service and quality products it provided,
it did not take long for Puregold to make its mark in the retail industry.
Current Revenue and Profit
6
From the previous years, Puregold has an uptrend revenue. The revenues
generated each year comes from the different store formats: Puregold Price Club, Extra,
Jr. And S&R stores.
Consolidated net sales grew by 49.8%; Puregold and Parco stores sales
increased by 18.2%; S&R contributed 16.4% and Company E accounted for 1.0% of
total consolidated net sales. Gross profit grew by 62.8%; with gross profit margin
improving to 17.6%; S&R accounted for 22.4% of the realized gross profit. Operating
7
income increased by 88.5%; with operating margin shooting up to 7.4%; S&R
contributed 42.3% of the recorded operating margin. Consolidated NIAT expanded
105.3%; Puregold and Parco stores NIAT swelled 30.1%; S&R added 36.4% to the
consolidated NIAT. Net profit margin chalked-up at 6.0%.
Major Markets Served
Today, Puregold is the No. 1 Retailer in the Hypermarket Format in the
Philippines and the No. 2 in Retail Format in the Country. The company has been
catering to more and more Filipinos having over 150 (159) stores nationwide. They
have over 1500 Suppliers and Trade Partners. With their exemplary services, they are
servicing to over 230,000 sari-sari stores and small businesses in the Metro, various
places in the Northern and Southern parts of Luzon, and Visayas. Puregold has
completed over 600 million sales transactions.
Number of Employees
Puregold supermarkets houses more than 30000 employees. With its competent
employees, Puregold is serving its valued customers through its effective customer
service program and competitive price scheme.
Other Relevant Information
Puregold was featured in Reader’s Digest Asia’s “Most Trusted Brands”. They
became the 2nd largest hypermarket and supermarket retailer in the Philippines in
terms of net sales. They made history for opening as much as 38 new Puregold stores.
8
They maintain the quality of their products and the competitiveness of their strategies so
they have already opened 156 stores in just the period of 14 years.
II. RESEARCH DESIGN AND METHODOLOGY
The data used in this research came from various internet sources, journals,
newsletters, news articles, blogs, books, law books, and different government agency
sites. Some on=f the personally visited websites are referred by other researchers who
have conducted a research with the same company nature and background. Some of
the sites visited are as follows: National Statistics Coordination Board (NSCB), National
Statistics Office (NSO), Asian Development Bank, Bangko Sentral ng Pilipinas,
Department of Labor and Employment (DOLE), and Philippine Overseas Employment
Administration (POEA). Official websites of Philippine Securities and Exchange
Commission (SEC), World Bank, creditcard.com, Business World, Business Mirror,
Development Bank of the Philippines (DBP), Euromonitor International, Philippine Star,
Department of Budget Management (DBM), Department of Foreign Affairs, Commission
on Filipinos Overseas and Asia Pacific Economic Cooperation (APEC). These sites
were used as primary source of data to be used in this study.
Most of the data used are from the site of the company whose data is visible to
the pubic. The financial statements used herein came from the Securities and Exchange
Commission. The data in this research came from these sources. The data used for the
competitor companies came from the sites of the latter and the financial statements
readily available on the internet. The assessment of the company as regards to its
competitors is supported by data that came from the companies’ websites.
Other data and information came from the textbook prescribed by the professor
which is The Introduction to Strategic Management 12th edition (2009) by Fred David.
The textbook was used as a reference material for data and computations.
The formulas, implications, different strategies, different strategy formulation,
strategy formulation tools, and the step-by-step process and guide used in this research
9
was adapted from the textbook and sample thesis papers and research papers
available in the San Beda College of Arts and Sciences Library.
SCOPE AND LIMITATION
This research paper is only limited to Puregold and its top competing
competitors. Since there are only a few players in this field of business with the
relatively same market share and market size, we only chose 2 other leading players
who are respective models and material companies to be studied in this research.
III. EXTERNAL ENVIRONMENT ANALYSIS
General Environment
This external analysis is detrimental to the discovery and identification of the
opportunities and threats of the company. With regards to the macroenvironmental
forces and factors, that is to the socio-cultural, demographic, lifestyle changes,
technological developments, economic developments and advancements, ecological
aspects, and political and governmental-legal aspects.
Economic factors
Economic Advancement
Both developed and emerging markets of Asia are seen to grow faster than the
Euro area and North America. Expected to have the fastest growth in 2013 and 2014
are China (7.7 and 7.3 percent, respectively), the Philippines (7 and 6.7 percent), India
(4.9 and 6 percent), Indonesia (5.6 and 5.5 percent) and Vietnam (5.5 and 5.6 percent).
10
All fast-growers in Asia have big populations upward of 90 million. The banks polled
recognize that a larger population means more entrepreneurs and workers, more
producers and consumers.1
Source: The Economist
The projections by the global vanguard of macroeconomic and external account
stabilization, the International Monetary Fund (IMF). Its most recent and most
comprehensive report is the World Economic Outlook (WEO) released last October.2
We arranged the grouping of countries to be similar as that by
1
2
http://www.interaksyon.com/business/77802/fat-free-economics--happy-2014-for-philippine-economy
The Economist, December 21, 2013
11
The Economist for
easier comparison of projections.3
3
http://www.economist.com%2Fnews%2Feconomic-and-financial-indicators%2F21591899-output-pricesand-jobs&sa=D&sntz=1&usg=AFQjCNEwA8Sta9dv-OpGsEqjuVTtONQEbw
12
Source: IMF, World Economic Outlook Database
Belgium, Italy, Netherlands and Spain are among Europe's biggest economies,
and they are either crawling or backsliding. The US and Canada are performing better
than those in Europe but their expansion not fast enough to compensate for sluggish
growth on the other side of the Atlantic Ocean.4
Asian economies -- led by China, Japan, India and South Korea, plus the other
tiger and emerging markets of the continent -- continue to hum and push the world
economy to modest growth. The Philippines is projected to be second to China in pace
of growth this year and next year.5
Favorable Economic Environment
4
http://www.imf.org%2Fexternal%2Fpubs%2Fft%2Fweo%2F2013%2F02%2Fweodata%2Findex.aspx&sa
=D&sntz=1&usg=AFQjCNGssnYcL-GURUK1jOnToGg5o32k2w
5
IMF, World Economic Outlook October 2013 Database
13
Strong GDP growth is being supported by stability in the economic environment,
especially low consumer inflation and interest rates that encourage consumption and
investment. While we forecast an uptick in headline inflation this year as a result of
natural calamities in 4Q13, we expect it to ease by 2H14 as supply shocks recede.
Indeed, January headline inflation of 4.2% is still low versus a 10-year average of 4.7%
(Figure 16). Similarly, interest rates are low with the benchmark 91-day Treasury bill
currently below 1.0% compared with a 10-year average of 3.8% (Figure 17). This
virtuous cycle enhances domestic growth prospects that ultimately result in rising
incomes. In addition, stability in personal spending is supported by a large number of
overseas Filipino workers who regularly remit supplemental income to their families and
the rise of the business process outsourcing (BPO) industry.
14
Relevance:
The economy of the Philippines has been continuously growing, but with it grows
too, the economy of other countries. The economic crisis has surely affected the
financial status and buying power of the consumers. Decision to buy or not, what to do
with their money and whatnot is greatly affected by these changes. The company’s
target market is the general public, with the data collected and stated above, we can
say that this is good news, thus, an opportunity for the company. With a growing
economy, more consumers would have more money to spend. Products offered by the
company are staple to households.
Positioned to benefit from strong Philippine economy PGOLD should be among
the main beneficiaries of the strong Philippine economy as it is being driven mainly by
robust domestic growth. 2013 GDP growth of 7.2% YoY was already among the highest
in Asia (Figure 9), even as domestic demand (GDP without net exports) slowed down
sharply in 4Q13, attributable mainly to the natural disasters in Oct and Nov of last year.
The slowdown in 4Q13 domestic demand growth to 5% from 11% in 9M13 was not
enough to detract from it being the main engine of growth last year. Even better is that
robust domestic demand is happening within the context of underleveraged corporates
and households, and declining fiscal debt ratios. That means there is space for growth
to continue.
15
Young and expanding population
Growth in domestic demand is supported by a population estimated at 97m
(Figure 10), the second largest in Southeast Asia and the 12th largest in the world. It is
estimated to be rising 1.7% annually, faster than the 1.6% average for Southeast Asia
(Figure 11). It is young, with an average age of 22.5 years. By 2015, it is estimated that
the working population (ages between 15 and 59 years) would account for more than
60% of the total populace (Figure 12). Such demographics support the country’s healthy
growth in personal consumption.
16
17
18
Steady Growth in Personal Consumption
Consumer spending is the cornerstone of the Philippine economy, accounting for
the largest portion of real GDP at 69% (Figure 13) in 2013. Because of its size, growth
in private consumption usually sets the pace for overall economic growth. In the past 10
years, real private consumption expenditures (PCE) grew an average 4.7% annually.
On a per-capita basis, nominal GDP grew 11.8% CAGR in 2003-13 to USD2,716
(Figure 15). We forecast PCE will grow at around 6% this year and next from 5.6% in
2013. Robust PCE growth will be complemented by investments. With the government’s
fiscal consolidation over the past years, there are now resources to address the
country’s inadequate infrastructure. In the process, other sources of demand are
19
expected to open up from which Puregold will eventually benefit through sales in all its
store formats.
Global Competitiveness
20
The Philippines ranked 65th (out of 144 countries) in the 2012-2013 Global
Competitiveness Report.6 This year, the country improved by leaping to number 59. As
noted in a previous post in this blog, competitiveness is relative. The overall ranking
does not really matter much. What is more significant is to compare the Philippines
against its neighbors in Southeast Asia. This time, the World Economic Forum makes it
easier to see this comparison. The new report, 2013-2014 Global Competitiveness
Report7 has the following table and figure:
Source: 2013-2014 Global Competitiveness Report
6
World Economic Forum
6
7
http://philbasiceducation.blogspot.com/2013/09/philippines-global-competitiveness.html
21
Source: 2013-2014 Global Competitiveness Report
In this table and figure, it is much clearer where the Philippines really stands.
Infrastructure, health and education remain very weak especially when compared
against its real competition, the other members of the Association of Southeast Asian
Nations (ASEAN).8
Relevance:
If the Philippines is globally competitive, the company would most probably have
more opportunities to establish new market schemes or maybe a new store format. The
idea is to expand the business to other countries and build an exclusive market among
Filipino citizens abroad, as well as other prospective customers.
Unemployment Rates
8
World Economic Forum, The Global Competitiveness Report
22
Jobless rate rose to 7.5 percent, up from 6.5 percent in the previous period and
7.1 percent a year ago. There were nearly 3 million unemployed in the Philippines, up
from 2.8 million in January 2013.
Among the unemployed persons, 63.9 percent were males. Of the total
unemployed, the age group 15 to 24 years comprised 48.2 percent, while the age group
25 to 34, 29.9 percent. By educational attainment, about one-fifth (19.8 percent) of the
unemployed were college graduates, 13.3 percent were college undergraduates, and
34.0 percent were high school graduates.9
The employment rate is estimated at 92.5 percent. Workers in the services sector
continued to comprise the largest proportion of the population who are employed. These
workers made up 54.1 percent of the total employed in January 2014. Employed in
agriculture sector comprised the second largest group making up 30.0 percent, while
workers in the industry sector made up the smallest group registering 15.9 percent.
Among the major occupation groups, the laborers and unskilled workers remained the
largest group making up 31.3 percent of the total employed.10
Relevance:
Job layoffs are brought about by bad economic status. With a bigger
unemployment rate, the employees of the companies may have decreased and could
lead to less efficiency and effectivity both in service and productivity. Also, the
consumers would probably be affected too and less income means less spending and
this would gravely affect sales records of the company for the year.
Economic, Political-legal, and Governmental aspects
Plastic Bag Ban
9
http://www.philstar.com/headlines/2014/03/12/1299885/unemployment-rises-p7.5-january
http://www.tradingeconomics.com/philippines/unemployment-rate
10
23
Manila City Ordinance 8282, once implemented, will ban the use of plastic bags
for dry goods and regulate their use for wet goods, and altogether bans polystyrene
(Styrofoam) as container for food, produce and other products.11 To date, at least 90
cities and towns have passed ordinances banning or regulating the use of plastic bags,
with several more local government units (LGUs) poised to follow suit before the end of
the year, according to EcoWaste Coalition.12
Senate Bill No. 2759 – Total Plastic Bag Ban
March 8, 2011
“AN ACT PROHIBITING THE USE OF PLASTIC BAGS IN GROCERIES,
RESTAURANTS, AND OTHER ESTABLISHMENTS, AND PROVIDING PENALTIES
FOR VIOLATIONS THEREOF “13
Relevance:
The Senate Bill No. 2579 or the Total Plastic Bag Ban aims to prohibit the use of
plastic bags in establishments. The company has been using plastic bags to package
the customers’ purchases. It is both a threat and opportunity for the company. One bad
thing this would do to the company is how the company would dispose of the remaining
plastic bags unused prior to the passed laws. Also, the source of new manufacturers for
their paper bags or ecobags. Although the law only covers some cities, it still affects the
company because most cities covered by the law are in the NCR. Most branches of
Puregold are within this area and surely there would be drastic measures to be taken to
surpass this. The good side is they can minimize garbage wastes. This is an opportunity
for the company to inculcate new marketing schemes to increase profit.
11
http://ecowastecoalition.blogspot.com/2013/07/supporting-manilas-plastic-bag-ban.html
http://newsinfo.inquirer.net/438011/environmentalists-seek-nationwide-plastic-ban
13
http://lorenlegarda.com.ph/senate-bill-no-2759-total-plastic-bag-ban/
12
24
Technological development
Credit Card trends
Though cash remains heavily used in day-to-day transactions, ATM cards
continued to be the most important type of financial card in the Philippines, as cash
remained heavily used in day-to-day transactions due to the large unbanked population
and low acceptance of financial cards in retail stores. Nonetheless, cashless payments
further gained popularity due to banks’, telecommunication companies’ and card
operators’ aggressive advertising and marketing campaigns. As a result, financial cards
recorded moderate growth in terms of the number of cards in circulation, and also
volume and value transactions in 2013.14
Relevance:
This trend is a great opportunity for the company. Most consumers would use
cash as a medium of exchange but with the rapid development of technology, and if this
trend would expand to more and more Filipinos, transactions would go faster and
relatively could increase sales due to the faster service.
Credit card frauds and scams
2013 was certainly not a shrinking violet in terms of card skimming and
associated card fraud scams. With 2013 card compromise data in hand, I thought I’d
share the latest year-over-year trend breakdowns and offer a few predictions for the
year ahead (an update to my post last year on ATM fraud trends).
14
http://www.euromonitor.com/financial-cards-and-payments-in-the-philippines/report
25
The chart above reflects ATM points of compromise within the United States that
were analyzed by FICO® Card Alert Service. Looking at overall volume of activity, we
instantly see a continued increase in card skimming at bank-owned ATMs over the past
couple years. As this segment increases each year, point-of-sale (POS) card and PIN
skimming has somewhat diminished in comparison.
You might wonder: “How is it possible that POS is contributing less towards card
and PIN skimming when we are staring down on one of the largest retail data breaches
in history?” Keep in mind that the data used to create this chart is reflective of fraud
spend at ATMs only. Most of the recent publicized data intrusions did not develop into
wide-scale PIN fraud, aside from some isolated social engineering scams that may have
netted criminals access to consumer PIN data.
In 2014, increasingly, risk on payment cards will develop in two phases. Fraud
spend may initially be signature-based, and then, after a significant time has elapsed,
the same group of affected cards could see PIN fraud develop on cards that were not
previously reissued. This criminal strategy points out the danger when we focus only on
26
the risk at-hand without considering the potential exposure of other data elements, like
PIN numbers, that might have previously been ignored.
Another growing threat: Carders will continue to sell and purchase cards based
on bank identification number or BIN. This will dilute the detection of data breaches by
making the fraud appear to be specific to a certain financial brand.15
Relevance:
The rising number if credit card scams and frauds is a threat to the company’s
operations. The payment of those defrauded cards could possibly be refunded and
could decrease the income and profit of the company.
Socio cultural trends and lifestyle changes
Online Marketing
Internet marketing, or online marketing, refers to advertising and marketing
efforts that use the Web and email to drive direct sales via electronic commerce, in
addition to sales leads from Web sites or emails.16 Internet marketing and online
advertising efforts are typically used in conjunction with traditional types of advertising
like radio, television, newspapers and magazines. Internet marketing can also be
broken down into more specialized areas such as Web marketing, email marketing and
social media marketing: Web marketing includes e-commerce Web sites, affiliate
marketing Web sites, promotional or informative Web sites, online advertising on search
engines, and organic search engine results via search engine optimization (SEO). Email
marketing involves both advertising and promotional marketing efforts via e-mail
messages to current and prospective customers. Social media marketing involves both
15
16
http://bankinganalyticsblog.fico.com/2013/02/card-fraud-trends-and-predictions.html
http://www.webopedia.com/TERM/I/internet_marketing.html
27
advertising and marketing (including viral marketing) efforts via social networking sites
like Facebook, Twitter, YouTube and Digg.17
Relevance:
Online marketing is very much helpful nowadays. Filipinos are using the internet
for averaging from 4-8 hours a day, give or take. The internet is an inexpensive way of
promoting business and increasing profitability.
Online Shopping
The Nielsen report found that among consumers who engaged in e-commerce
activities, 72 percent of online consumers in the Philippines indicated using the Internet
for grocery shopping research over the past month.18
The study also showed that online Filipino consumers were also the most active
in Asia-Pacific to search online for deals. Sixty-one percent of Filipino consumers have,
in fact, done online deal searches during the past month, compared to only 39 percent
in the Asia-Pacific.
The study exposed the Achilles heel of Filipino online consumers, however,
showing that when it comes to online purchase conversion, only 34 percent have made
purchases online in the past month compared to 62 percent in the Asia-Pacific and 49
percent globally.
Relevance:
This trend would be a big opportunity for the company to establish a store format
on the internet. Filipinos nowadays are very fond of buying stuff from the internet. It is
17
http://www.smallbusinesscomputing.com/emarketing/article.php/3939561/10-Inexpensive-Ways-toAdvertise-Your-Small-Business.htm
18
http://technology.inquirer.net/16152/filipinos-top-in-online-shopping-research-but-lag-inpurchases#ixzz30C4ZbgEb
28
very convenient for the consumer and there is less hassle in transacting especially most
online shopping sites have payment methods through online banking, Paypal, and
whatnot. The main point here is to be the first online supermarket to cater to all states of
life in the Philippines. Another aim is to sell products and deliver them to the
convenience of the customer’s doorsteps.
Go organic. Healthy living trend
Filipinos are venturing into the healthy living lifestyles. People are spending more
on gym memberships, organic food, and the like. Organically-grown vegetables are only
available in select stores. Since more and more people are getting into this new kind of
diet, people tend to rush to organic hippie groceries and only buy their food there.
Or from the side effects of packaging. Let me add this, I am a fanatic when it
comes to food storage, I buy every kind of storage container and baggie (my father was
the co inventor of a lot of canning and packaging like the plastic ham can and zip lock
baggies), but I feel this article has hit the nail on the head with packaging deriving
chemical reactions to things like acid from canned tomatoes leeching the polymers from
the inside of tin cans into the product. I am not used to the markets here keeping foods
unrefrigerated or in the open for creatures to land on like flies and the like and I have a
fit when our kids put food in the refrigerator uncovered but I honestly feel my health
improvements may just be related to these primitive actions as well as having almost all
of my foods organic, without the high price tag I might add.
I love it here in the Philippines, it isn’t paradise, it’s dirty, in some places it’s
dangerous. It’s not where I’m from but I have come to see what our esteemed editor in
chief along with a myriad of others have come to love about Living in the Philippines19
Relevance:
19
http://liveinthephilippines.com/content/healthy-living/
29
The new lifestyles of Filipinos are inspired by their local celebrity idols who have
been promoting healthy living and healthy diet plans to get a better physique and to stay
healthy. This factor is a threat to the company because some products of the company
are now being substituted by a few products offered by specialty stores. Although only a
few percentage of the company’s market are following this trend, it is still important to
look at all the factors that would affect the company.
IV. INDUSTRY AND COMPETITOR ANALYSIS
Market Segments
PUREGOLD Price Club Inc. plans to double its grocery and hypermarket chain
over five years as it challenges its only bigger rival, SM Investments Co., by targeting
low-income shoppers and neighborhood stores. The nation’s second-biggest
supermarket operator plans to spend P10 billion to boost the network to 200 stores by
2016, its chairman, Lucio Co, said in an interview.
20
The outlets will target “market segments that the existing players aren’t serving,”
Co said. “We want to be everywhere.” The retailer plans to have 150 stores by 2013 as
it intends to lure customers from the hyper markets and groceries in billionaire Henry
Sy’s 163-outlet SM retail chain, which includes 41 department stores.
Co has already doubled the number of stores since last year as a rebate of as
much as 3 percent on purchases and a program offering to improve the stores of top
buyers with signage and merchandising jars attracted low-income shoppers and owners
of so- called sari-sari stores, aka variety or convenience stores.21
Pricing
20
21
http://businessmirror.com.ph
Puregold Plans To Invest P10B to Double Branches / IAN SAYSON / BLOOMBERG NEWS
21
30
Puregold Price Club, Inc. (PGOLD) is engaged in the business of buying, selling,
distributing, and marketing wholesale or retail goods and commodities throughout the
Philippines. Unlike its top competitors, Shopwise and SM Investments, Co., Puregold’s
prices are far more economical and for the mass.
Especially to the members of the club in the company, the prices are discounted
and members are more privileged. The company’s membership is called the Aling
Puring membership. What are the benefits of this membership? AP members earn up to
3% rebate through points accumulation in his/her Aling Puring card whenever he/she
shops at any Puregold Branch (excluding Puregold Jr.) Points earned are equivalent to
rebates which can be redeemed at any Puregold Branch (excluding for Puregold Jr) and
can be used as tender in shopping.
Other benefits are: Instant Ka-Asenso Welcome Kit, Points – Rebate
Redemption Program, Free Delivery *with minimum purchase and distance requirement
of store, Call – Order – Pick-up Service via call/text/e-mail, Wireless and COD
Transactions, Kitang-Kita Packs and Kitang-Kita Case for added savings and points,
Special Ka-Asenso events, promos and text blast updates, Bi-annual Ka-Asenso
Booklet with exclusive Kalendaryo ni Aling Puring discount coupons22
Advertising and Promotions
The company advertises itself through its online website, general and local
publications and through social networking sites. They are currently in partnership with
a noon time show television program aired through GMA 7. There are also printed ads.
SM though, has a bigger advertising scheme. The Co-owned corporation is very
advanced in this aspect.
22
http://puregold.com.ph/aling_puring.do?id=7772
31
Unlike Shopwise and SM, Puregold has more promotions and antics. They have
been introducing more and more promotions like raffles, packages, discount items,
freebies, and the like. Also, they do not only give out free stuff but they also give out
medical check-ups for free.
The advertising and promotions department of Puregold is very much good but
they could develop more, on so many levels.
Buyer / Customer’s Profile
PGOLD is the second largest modern grocery retailer in the Philippines by sales.
Its estimated market share was 11.7% in 2013, according to Euromonitor. It operates
hypermarkets, supermarkets and discounters carrying the flagship Puregold brand. Its
target markets are low and middle income consumers, and resellers that operate
traditional neighbourhood outlets known as sari-sari stores. PGOLD also operates S&R
Membership Shopping stores, the only warehouse membership club in the Philippines
that services middle to higher income consumers.
Porter’s Five Forces of Competitive Analysis
32
LOW
LOW
MODERATE
HIGH
LOW
Potential development of substitute products – LOW
33
Puregold offers a wide variety of products and mainly composes of basic
household grocery items and staple household needs. The development of substitute
products does not affect the company much because Puregold is very flexible when it
comes to adapting to sudden changes in the new products being introduced in the
market. Since most products are not exclusive to only one hypermarket, the possibility
of one company having a monopoly of hat certain product is very vague, though
feasible, it still doesn’t affect the firm much.
Bargaining power of Suppliers – MODERATE
Developing good ties with their suppliers, the company is not prone to
suppliers haggling with regards to their product offers. Recently, Puregold has been
producing their own line of products just like what SM is doing. With these all said, the
bargaining power of their suppliers is only moderate and will only affect the profitability
and productivity of the company if PGOLD will not contain such shortcomings. SM
Hypermarkets is the leading competitor of Puregold. Bargaining with suppliers could be
at a strong factor if SM would try to buy the suppliers of Puregold.
Rivalry among Competing Firms – HIGH
As aforementioned in the preceding chapters, it is well established that the
rivalry among the competitors in this field of business is very high. Though Puregold is
branded as one of the leading hypermarkets in the Philippines, we cannot ignore the
fact that SM is still the leading hypermarket in the country and both companies are
doing very well in their fields. They are both competitive and upgrading.
Bargaining power of Consumers – LOW
It is evident that the general public is the target market of the company.
The bargaining powers of the latter are very low. A good subject to support this
34
statement is that the price of the commodities offered by the company is very
inexpensive. PGOLD offers affordable and quality products, other than that, they are
giving out numerous promotions, discounts, and the like for the consumers to have and
enjoy. The company sells at the suggested retail price or less, and this is because they
do not only sell in retail but also in wholesale (not applicable to Puregold Jr. And
Puregold Extra).
Potential entry of new competitors – LOW
Puregold, SM Hypermarkets, Rustans, and Robinsons Supermarkets are
amongst the top key players in the game. The entry of new competitors would be very
low because it is very hard to enter into this line of business since the former companies
have already established a good reputation in the society. Also, consumers prefer an
established company over a new one especially if it is not in a large scale business.
Competitive Profile Matrix (CPM)
The competitive profile matrix is based on the variables of marketing operations
and finance of three hypermarkets in the Philippines. The CPM categorizes a firm’s
main rivals and its particular strengths and weaknesses in relation to a design firm’s
strategic position. In CPM, an organization asses itself as well as its rivals by giving
rating and weights to key success factors. It recognizes its strategic competitive place
with its major rivals.23
23
David, Fred
35
Critical Success
Weight
Factors
(%)
Puregold
Rating
Price
SM Hypermarket
Weighted
Score
Rating
Robinson
Supermarket
Weighted
Ratin
Weighted
Score
g
Score
.10
3.0
.30
4.0
.40
3.0
.30
.10
3.0
.30
4.0
.40
3.0
.30
.20
4.0
.80
2.0
.40
2.0
.40
.15
4.0
.60
4.0
.60
3.0
.45
.15
3.0
.45
4.0
.60
2.0
.30
.20
3.0
.60
2.0
.40
2.0
.40
.10
3.0
.30
2.0
.20
2.0
.20
Inventory
management
Products: Variety
and Availability
Quality of Service
Facilities,
Equipment, etc.
Accessibility to
market
Number of
branches
TOTAL
1.00
3.35
3.00
2.35
We gave a 20 % weight on the variety of the products and the accessibility of
their facilities because hypermarkets serve as source of common household products
and items and they should be easily accessible to their market. Since all of these
companies’ primary business is to sell groceries, it is given that weight to emphasize
36
their manner of introducing and maximizing it to their market. We differentiate the
companies through analysis of how they use these factors.
Other factors are not given much weight for it does not contribute a major
percentage in the share of the profits. As interpreted in the matrix, the company has a
good rating because it is a good company if you look at the overall appearance and
appeal of the company to the general public.
External Factor Evaluation
Below are the identified major opportunities and threats which would affect the
industry of the company. The Weights, level of responsiveness, and Ratings to and/or
for the company are given.
Opportunities
Opportunity 1: Online Marketing is a big trend in the Philippines.
Internet marketing, or online marketing, refers to advertising and marketing
efforts that use the Web and email to drive direct sales via electronic commerce, in
addition to sales leads from Web sites or emails.24
Rating
We gave the company a rating of 4 because they are very much aware of such
new innovations. They are using social networking sites like Facebook to advertise their
products and services.
24
http://www.webopedia.com/TERM/I/internet_marketing.html
37
A weight of 20% is given to this external factor because this innovation is a very
inexpensive way of advertisement. Internet is being used by a huge majority of Filipinos
everyday. Advertisement and promotions in social-networking sites like Facebook and
Twitter would affect the company’s profitability and could possibly generate more sales,
thus, more income.
Opportunity 2: Eco bags are becoming a trend
Since the launch of the ‘I am not Plastic bag’ movement, more and more
industries are starting to use reusable canvas tote bags for their shopping. In the
company store formats,you are more likely to bring your own reusable shopping bag
unless you want to pay for the plastic bags.This is part of the recently passed bills as
regards to the regulation and banning of plastic bags in certain cities and industries.
Rating
We give this a 3 rating because this moderately affects the company and the
company responds to this with various marketing approaches such as venturing into the
eco bag business and complying with the
A weight of 10% was given because this moderately affects the company.
Following the ongoing global movement to steer consumer culture away from excessive
plastic bag consumption (banning plastic bags in San Francisco, Hong Kong and
Melbourne) we are pleased to see reusable tote bag make big gains in popularity.
We’ve covered eco-chic tote bags of all shapes and sizes (Envirosax, Trash Bags, Sea
Bags), but the hype and excitement surrounding Anya Hindmarch’s trendy “I am Not A
Plastic Bag” design (which sold out of London stores just hours after being released) is
somewhat baffling, even if we are only too happy to see “eco” becoming trend.25
25
http://inhabitat.com/i-am-not-a-plastic-bag/
38
Opportunity 3: Puregold Membership: Aling Puring Card gives out more benefits
than its competitors.
AP members earn up to 3% rebate through points accumulation in his/her Aling
Puring card whenever he/she shops at any Puregold Branch (excluding Puregold Jr.)
Points earned are equivalent to rebates which can be redeemed at any Puregold
Branch (excluding for Puregold Jr) and can be used as tender in shopping. Other
benefits are: Instant Ka-Asenso Welcome Kit, Points – Rebate Redemption Program,
Free Delivery *with minimum purchase and distance requirement of store, Call – Order
– Pick-up Service via call/text/e-mail, Wireless and COD Transactions, Kitang-Kita
Packs and Kitang-Kita Case for added savings and points, Special Ka-Asenso events,
promos and text blast updates, Bi-annual Ka-Asenso Booklet with exclusive Kalendaryo
ni Aling Puring discount coupons.
On the otherhand, SM advantage card only offers Points rewards system and
New and renewing members will receive the Value Perks booklet filled with coupons
from our retail partners, fun partners, restaurants, boutiques, health & beauty
establishments and many more.26
Rating
We give this a 4 because the customers are benefiting from this marketing
scheme and the company responds to their needs with regards to the benefits and
privileges brought out by this membership card.
A 20% weight is given for only the company provides their members with such
benefits. The company has this as an advancement to its competitors.
Opportunity 4: Free check-ups at selected branches
26
http://www.smadvantage.com.ph/value-perks
39
A promotion by the company was recently launched. Other than the usual sales
promotions, they are now conducting free medical check-ups in partnership with Rite
Med. 27
Rating
We give this a rating of 4 because the company is pushing more projects inline
with this. Also, a 15% weight is given because its top competitors: SM and Shopwise,
do not conduct these kinds of promotions.
Though SM gives out free checkups as well, it is only conducted in their malls,not
in their hypermarkets.
Threats
Threat 1:Credit card frauds
The risk on payment cards will develop in two phases. Fraud spend may initially
be signature-based, and then, after a significant time has elapsed, the same group of
affected cards could see PIN fraud develop on cards that were not previously reissued.
This criminal strategy points out the danger when we focus only on the risk at-hand
without considering the potential exposure of other data elements, like PIN numbers,
that might have previously been ignored.
Rating:
We give this a rating of 2. The company does not respond much to this because
most of its customers pay in cash. The weight of 15% is given to this matter. Although
they are not very much concerned with this issue, the company should focus on this too
since using credit cards is a becoming a big thing today in the Philippines from the good
offers of local and international banks.
Threat 2: Unemployment rates are relatively rising.
27
https://www.facebook.com/puregold.shopping?sk=wall
40
The employment rate is estimated at 92.5 percent. Workers in the services sector
continued to comprise the largest proportion of the population who are employed. These
workers made up 54.1 percent of the total employed in January 2014. Employed in
agriculture sector comprised the second largest group making up 30.0 percent, while
workers in the industry sector made up the smallest group registering 15.9 percent.
Among the major occupation groups, the laborers and unskilled workers remained the
largest group making up 31.3 percent of the total employed.28
Rating:
We give this a 2 for the rating. The company is not much concerned of the effects
of unemployment because they have a good employment system. Employees are
always considered and are taken good care of the company. A 10% weight is given to
this because this only mildly affects the company’s performance.
INTERNAL ANALYSIS
Key
Weight
Rating
Score
.20
4
.80
External
Factors
Opportunities
72 percent of
online consumers
in the Philippines
indicated using
28
http://www.tradingeconomics.com/philippines/unemployment-rate
41
the Internet for
grocery shopping.
Eco bags are in
.10
3
.30
.20
4
.80
.15
4
.60
.10
3
.30
.15
2
.30
since the launch
of the ‘I am not a
Plastic Bag’
campaign as of
2013
Puregold
Membership:
Aling Puring Card
gives out more
benefits than its
competitors.
More promotions
and Free checkups at selected
branches
6.7% increase in
the Gross
Domestic Product
of the Philippines
in 2013
Threats
10% increase in
Credit card frauds
as recorded by
42
FICO Banking
Analytics Blog in
the first w=quarter
of 2014
Unemployment
.10
2
.20
rates are relatively
rising. There is 7.5
% increase in the
unemployment
rate as of January
2014.
TOTAL
1.00
3.40
V. COMPANY ANALYSIS
INTERNAL ENVIRONMENT ANALYSIS
Leading player in modern grocery retail
PGOLD is the second largest modern grocery retailer in the Philippines in terms
of sales with an estimated 11.7% market share in 2013, according to Euromonitor.
Based on our estimates, it also had the second highest 2012 net sales among storebased retailers in the country at PHP57.5b, behind SM Investment Corp’s (SM) SM
Retail with PHP159.5b and at par with Robinsons Retail Holdings Inc’s (RRHI)
PHP57.4b. PGOLD is mainly in grocery retailing, namely hypermarkets, supermarkets
and discounters. It also operates warehouse membership shopping stores. As of 9M13,
PGOLD had 201 stores nationwide with 341,056 sqm of net selling space.
43
44
The company is majority-owned by the Co family through a 16% direct equity
stake and an effective 37% stake through Cosco Capital Inc’s (COSCO) 51% interest in
PGOLD. COSCO is the holding company of the Co family and is also engaged in liquor
distribution, real-estate development, and oil and mining exploration
45
PGOLD primarily conducts its operations through hypermarkets, supermarkets
and discounters carrying the flagship Puregold brand. Throughout the years the brand
has been associated with low prices and a wide assortment of value-for-money
offerings. Puregold focuses on two customer segments, namely retail consumers in the
low- and middle-income classes, and resellers who are small business owners.
The company has uniquely positioned itself against other grocery retailers by
specifically targeting resellers, mainly the sari-sari stores or mom-and-pop outlets
through its customer loyalty programme Tindahan ni Aling Puring. Resellers account for
around 35% of PGOLD’s revenue. PGOLD also operates S&R Membership Shopping
stores, the only warehouse membership club in the Philippines, which services higherincome consumers.
46
From only 34 stores at end-2009, PGOLD has since opened 117 new stores via
organic expansion as of 9M13 and acquired 50 others that were operating under four
different brands; namely Puregold Jr, Parco, S&R and Company E. In a span of less
than four years the company was able to almost triple total net selling space. PGOLD’s
expansion strategy focused on both existing and new markets. Smaller store formats
were opened within the vicinity of the hypermarkets, which resulted in deeper
penetration of highly-populated areas. The company’s store network also widened to
include other parts of Luzon, and last year, the Visayas and Mindanao regions.
PGOLD acquired Kareila Management Corp in 2012, operator of S&R
Membership Shopping stores. With the S&R brand catering mainly to the upper income
segment, the strategic acquisition helped PGOLD address all segments of the market.
The company acquired 19 Parco supermarkets in 2012 and 15 Company E stores in
2013, most of which have already been rebranded to Puregold stores. Last December,
wholly-owned subsidiary Entenso Equities bought a 49.34% stake in San Roque
supermarkets, operator of nine grocery stores in Metro Manila.
47
48
Weaknesses
Intensifying competition among industry players
Competition among Philippine modern grocery retailers has further intensified in
recent years as the industry consolidates. Key players are expanding their store
networks and acquiring or forming strategic partnerships with independent store chains.
They compete on the basis of price, product availability and quality, customer service
and store location, among others. Aggressive expansion, particularly in Metro Manila,
has contributed to softening SSSG over the past year. As retailers expand into areas
outside Metro Manila, securing key locations and opening new stores ahead of others
may also be the subject of competition.
Execution risk
The company’s ability to deliver on its target number of store openings each year
depends on its success in securing prime store locations in a timely manner and on
favorable terms. Availability of sufficient cash flows to support capital expenditures is
another important factor in successfully executing its store network expansion plans.
Sensitivity to rising prices
49
PGOLD’s customer base is composed mainly of low- to middle-income
consumers, which are most sensitive to rising prices. There is no guarantee the
company will be able to pass on all cost increases to customers. A significant rise in
suppliers’ selling prices may either negatively affect PGOLD’s SSSG or result in lower
margins.
Key Internal
Weight
Rating
Score
Factors
STRENGTHS
Very Low Price
.14
4
.56
Strategic Location
.12
3
.36
.13
4
.52
.12
4
.48
.13
4
.52
due to
accessibility to
target market
Branded as one of
the leading
supermarket in the
Philippines
Leading
distribution
channel of goods
to sari sari
stores/small
businesses
Numerous
branches
50
WEAKNESSES
Outdated
.12
3
.36
.13
3
.39
.11
4
.44
technology
Intensifying
competition
among industry
players
Sensitivity to
rising prices of
customers
TOTAL
1.00
3.63
VI. STRATEGY FORMULATION
SWOT Matrix
SO Strategies
Strengths
S1) Very Low Price
S2) Strategic Location due to accessibility to target market
S3) Branded as one of the leading supermarket in the Philippines
S4) Leading distribution channel of goods to sari sari stores/small
businesses
51
S5) Numerous branches
Opportunities
O1) 72 percent of online consumers in the Philippines indicated using the
Internet for grocery shopping.
O2) Eco bags are in since the launch of the ‘I am not a Plastic Bag’
campaign
O3) Puregold Membership: Aling Puring Card gives out more benefits
than its competitors.
O4) More promotions and Free check-ups at selected branches
O5) 6.7% increase in the Gross Domestic Product of the Philippines
SO1. Establish a new store format to their distributors (S1,S2,S3,S4,O1,O3,O5) The gradual increase of Filipinos using the internet as a medium for buying their
needs is a good opportunity to start a new strategy of online shop as a new store
format. It is a win-win situation for the company and its distributors. The success of the
proposed strategy would increase sales of Puregold and benefit the distributors through
the membership card. This is a good marketing strategy because having affordable
groceries with the convenience of it being delivered to your own home would be very
convenient especially to busy households.
SO2. Integrate free check-ups promotion in more branches (S2,S5,O4)
-
Puregold should put more free check up booths in more stores. With the very
accessible locations of the stores, the company could reach out to more customers by
introducing new promotions to other branches and this is to hopefully help in increasing
sales.
52
SO3. Use eco bags to create more revenue (S1,S3,S4,O2,O3)
-
Since the
launch of the ‘I am not a plastic bag’ movement, eco bags have been widely used in
various malls, supermarkets, boutiques, and the like. This is a good marketing scheme
to sell more products through inculcating the use of eco bags as freebie when reaching
a certain amount on a single purchase.
SO4. Strengthen the web presence more by finding more sites or social networking
sites, other than its current advertisers to advertise in. (S1,S3,O1,O3,O5) Puregold should strengthen its web presence more by utilizing other marketing
media channels and sites or social networking sites, other than the company’s current
advertisers to advertise itself. It is a very good strategy because it is a very inexpensive
way of advertising the business.
WO Strategies
Weaknesses
W1) Outdated technology
W2) Intensifying competition among industry players
W3) Sensitivity to rising prices of customers
Opportunities
O1) 72 percent of online consumers in the Philippines indicated using the
Internet for grocery shopping.
O2) Eco bags are in since the launch of the ‘I am not a Plastic Bag’
campaign
53
O3) Puregold Membership: Aling Puring Card gives out more benefits
than its competitors.
O4) More promotions and Free check-ups at selected branches
O5) 6.7% increase in the Gross Domestic Product of the Philippines
WO1. Invest on information technology specialists (W1,W2,O1,O5) -
The
company is very outdated on technology. The company should invest on specialists to
upgrade their equipment and sites.
WO2. Develop new promotions involving the membership card (W2,W3,O3)
-
Puregold is currently at the upper hand when it comes to giving out freebies and
promotions through its membership card. The company provides more benefits to its
valued customers compared to its top competitor, SM. The company can use this
strategy to lure more loyal customers, and lessen the agitation of consumers when it
comes to sudden changes in prices.
WO3. Launch an exclusive and unique type of eco bag. (W2,O2,O4)
-
Puregold can devise a new eco bag design to promote sales. An innovative
design would hopefully beat the growing number of sales produced by the competitors.
ST Strategies
Strengths
S1) Very Low Price
S2) Strategic Location due to accessibility to target market
S3) Branded as one of the leading supermarket in the Philippines
54
S4) Leading distribution channel of goods to sari sari stores/small
businesses
S5) Numerous branches
Threats
T1) 10% increase in Credit card frauds as recorded by FICO Banking
Analytics Blog
T2) Unemployment rates are relatively rising. There is 7.5 % increase in
the unemployment rate as of January 2014.
ST1. Develop the system for the use of credit card machines (S1,S3,S4,T1)
-
With Credit card frauds relatively rising, the company should be more cautious of
the credit cards. The target market of Puregold is the general public who most of the
times use cash to pay for their purchases.
WT Strategies
Weaknesses
W1) Outdated technology
W2) Intensifying competition among industry players
W3) Sensitivity to rising prices of customers
Threats
T1) 10% increase in Credit card frauds as recorded by FICO Banking
Analytics Blog
55
T2) Unemployment rates are relatively rising. There is 7.5 % increase in
the unemployment rate as of January 2014.
WT1. Invest on upgrading the internal system and machines (W1,W2,T1) -
With
the increasing crime as regards to fraudulent use of credit cards, it is good for Puregold
to invest in a secure operational system to protect the company and its customers.
★
Market Penetration
★
Backward Integration
★
Market Development
★
Related Diversifications
★
Unrelated Diversifications
SPACE MATRIX
The researcher evaluates different variables and assigns them their weight
based on how important they are for the company. It is a matching tool which is an hour
quadrant framework that indicates whether aggressive, conservative, defensive, or
competitive strategies are the most appropriate for a give organization. 29 It analyzes
four area; two internals and two externals which will represent the quadrants in the
graphic. The purpose of SPACE matrix is to position the company in one of these
quadrants to determine which type of strategies is advisable for them.
29
David, Fred
56
SPACE MATRIX
FS
Conservative
9
Aggressive
8
Market Penetration
7
Backward, forward, horizontal int.
Market Development
6
Market Penetration
Product Development
5
Market Development
Related Diversification
4
3
Product Development
Puregold
Diversification (related/unrelated)
CA
IS
-7
-6
-5
-4
-3
-2
-1
0
1
2
3
4
5
6
7
-1
Retrenchment
-2
Backward, forward, horizontal int.
Divestiture
-3
Market Penetration
Liquidation
-4
Market Development
-5
Product Development
Defensive
-9
Competitive
ES
X Axis: 3.0
Y Axis: 1.4
According to the results from SPACE matrix, the company is in the agressive
quadrant. Thus, the organization is in an excellent position to use its internal strengths
to take advantage of external opportunities, overcome internal weaknesses, and avoid
external threats. Diversification is feasible depending on the specific circumstances that
face the firm; forward, backward and horizontal integration; market penetration; market
development; and product development are appropriate strategies for these divisions to
consider for the company has in a very ideal status.
Financial Position (FP)
Return on Investment (ROI)
The ROI increased by 58%.
(6)
57
Net Income
The net income increased by 248.39%
(7)
Liquidity
The liquidity ratio increased by 0.6 .
(3)
Working Capital
The working capital increased by 192.20%
(6)
Cash Flow
The cash flow increased by 338.60%.
(6)
Financial Position Average
5.4
Industry Position (IP)
Growth Potential
The growth potential increased by 23.31%
Financial Stability
The financial stability increased by 48.39%.
Ease of Entry into Market
Resource Utilization
The resource utilization increased by 155.57%
Profit Potential
The profit potential increased by 23.32%
Industry Position Average
(5)
(6)
(7)
(6)
(6)
6.0
Competitive Position (CP)
Market Share
Product Quality
Customer Loyalty
Technological Know – How
Control over Suppliers and Distributors
Competitive Position Average
(-2)
(-2)
(-4)
(-5)
(-2)
(-3.0)
Stability Position (SP)
58
Rate of Inflation
Technological Changes
Price Elasticity of Demand
Competitive Pressure
Barriers to Entry into Market
Stability Position Average
(-4)
(-5)
(-5)
(-2)
(-5)
(-4)
SPACE Matrix Axes Conclusion
Financial Position (FP) Average: 5.4
Industry Position (IP) Average: 6.0
Stability Position (SP) Average: (-4.0)
Competitive Position (CP) Average: (-3.0)
IE Matrix
This is a strategic management matching tool used to analyze working conditions
and strategic position of a business. It is based on an analysis of internal and external
business factors which are combined into one suggestive model.
59
TOTAL IFE WEIGHTED SCORE
EFE Rating
Strong
Average
Weak
3.40
3.0 to 4.0
2.0 to 2.99
1.0 to 1.99
I
II
III
IV
V
VI
VII
VIII
IX
IFE Rating
3.60
High
3.0 to 4.0
TOTAL
EFE
WEIGHTED
Medium
SCORE
2.0 to
2.99
Low
1.0 to
1.99
60
BCG
Quadrant II – It represent the organization’s best long – run opportunities for
growth and profitability. Divisions with a high relative market share and a high industry
growth rate should receive substantial investment to maintain or strengthen their
dominant positions. The following strategies are recommended: Forward, backward and
horizontal
integration;
market
penetration;
market
development;
and
product
development are appropriate strategies for these divisions to consider.
61
GRAND STRATEGY MATRIX
RAPID MARKET GROWTH
Quadrant II
Quadrant I
1. Market development
1. Market development
2. Market penetration
2. Market penetration
3. Product development
3. Product development
4. Horizontal integration
4. Forward integration
5. Divestiture
5. Backward integration
6. Liquidation
6. Horizontal integration
7. Concentric diversification
WEAK
STRONG
COMPETITIVE
COMPETITIVE
POSITION
POSITION
Quadrant III
Quadrant IV
1. Retrenchment
1. Concentric diversification
2. Concentric diversification
2. Horizontal diversification
3. Conglomerate
3. Horizontal diversification
4. Conglomerate diversification
diversification
4. Joint ventures
5. Divestiture
6. Liquidation
SLOW MARKET GROWTH
62
Quadrant I: Firms located in this quadrant are in an excellent strategic
position. These firms continued concentration on current markets such as market
penetration and market development and product developments which is an appropriate
strategy. The following are recommended strategies are: market development, market
penetration, product development, forward integration, backward integration, horizontal
integration, and related diversification.
SUMMARY OF STRATEGIES
The summary of strategies counted which strategies were recommended
by the strategy formulation tools utilized earlier using the various information drawn from
external and internal analysis.
SUMMARY OF STRATEGIES
STRATEGY OPTIONS
SWOT
Forward Integration
Backward Integration
X
Horizontal Integration
SPACE
IE
BCG
GSM
TOTAL
X
X
X
3
X
X
X
4
X
X
X
3
Market Penetration
X
X
X
X
X
5
Market Development
X
X
X
X
X
5
Product Development
X
X
X
X
X
5
Concentric Diversification
X
X
Conglomerate Diversification
X
X
X
3
2
63
QUANTITATIVE STRATEGIC PLANNING MATRIX
64
KEY FACTORS
MARKET
PENETRATION
MARKET DEVELOPMENT
PRODUCT
DEVELOPMENT
0.15
AS
4
TAS
0.6
AS
4
TAS
0.6
AS
4
TAS
0.6
0.08
4
0.32
4
0.32
0
0
Increasing number sari sari
stores
4
Shifting consumer behavior due
to price
5
Stronger consumption of
households
6
Government oversight is
minimal
EXTERNAL THREATS
0.1
4
0.4
4
0.4
4
0.4
0.12
4
0.48
4
0.48
4
0.48
0.18
4
0.72
4
0.72
4
0.72
0.05
2
0.1
0
0
0
0
1
Free Trade Agreements
0.05
0
0
2
0.1
3
0.15
2
Entrants of new players
0.1
4
0.4
4
0.4
3
0.3
3
Foreign exchange rates changes
0.07
2
0.14
0
0
0
0
Smaller players are furious
competitors
INTERNAL STRENGTHS
0.1
4
0.4
3
0.3
4
0.4
1
Very Low Price
0.09
4
0.36
4
0.36
4
0.36
2
Strategic Location due to
accessibility to target market
0.08
4
0.32
4
0.32
4
0.32
3
Quality of service to customers
0.07
3
0.21
4
0.28
4
0.28
4
Established company brand
name
Strong relationship to suppliers
0.08
4
0.32
3
0.24
3
0.24
0.07
0
0
4
0.28
0
0
Leading distribution channel of
goods to sari sari stores/small
businesses
One of the leading retailers in
the hypermarket format
0.07
4
0.28
3
0.21
4
0.28
0.08
2
0.16
3
0.24
4
0.32
EXTERNAL OPPORTUNITIES
1
Shifting consumer behavior due
to proximity
2
Growing population
3
4
5
6
7
WEIGHT
INTERNAL WEAKNESSES
1
Customer Loyalty
0.08
4
0.32
4
0.32
4
0.32
2
Outdated technology
0.04
4
0.16
4
0.16
4
0.16
3
Physical facilities
0.07
0
0
3
0.21
2
0.14
4
0.04
0
0
3
0.12
3
0.12
0.08
2
0.16
4
0.32
3
0.24
6
Arrangement of goods is not
proper (e.g. soap brands are
stacked beside food items)
Inability to adapt to changing
customer’s needs
Inventory management
0.07
0
0
2
0.14
3
0.21
7
Lack of Bayad Centers
0.08
4
0.32
4
0.32
4
0.32
5
TOTAL ATTRACTIVENESS SCORE
2
6.17
6.84
6.36
Rating Score: 4=Most Acceptable, 3=Probably Acceptable, 2=Possibly Acceptable, 0=Not Acceptable
65
VII. OBJECTIVES AND STRATEGY RECOMMENDATIONs
Vision and Mission Statements
A. Analysis of Company’s Vision
VISION
To be the Most Customer-Oriented Hypermart offering a One-Stop
Shopping convenience and Best Value to our Customers.
Sa PUREGOLD, Always Panalo.
Parameter
Yes / No
Evaluation
1. Does it clearly answer
the question, “What do we
want to become?”
Yes
The statement shows what
the company wants to
become. It is concise as
regards to its content.
2. Is it concise enough yet
inspirational?
Yes
The Vision of the company
is very much brief and
concise. The idea of
having such statement is
for everyone to
understand. The statement
mentions “Sa Puregold,
always panalo.” This is
inspirational to both
employees of Puregold
and their customers.
3. Is it aspirational?
Yes
The vision very much
contains a meaning to lead
them to future
advancement. They aim to
be the ‘most customeroriented’ supermarket and
66
to give the ‘best value’ to
their customers.
4. Does it give a clear
indication as to when it
should be attained?
No
The statement does not
contain any indications of
time or time frame as to
when the vision should be
achieved.
The table above is an evaluation of Puregold’s Vision Statement. It is shown that
the company lacks an essential component to complete a proper vision statement. This
paper proposes to revise the vision of the company in order to fill-out the necessary
components. Thus, this will hopefully make the company more organized and be more
competitive in their field of business.
Proposed Vision Statement
VISION
To be the Most Customer-Oriented Hypermart offering a One-Stop
Shopping convenience and Best Value to our Customers from
beginning to end.
Sa PUREGOLD, Always Panalo.
Parameter
Yes / No
Evaluation
1. Does it clearly answer
the question, “What do we
want to become?”
Yes
The statement shows what
the company wants to
become. It is concise as
regards to its content.
2. Is it concise enough yet
inspirational?
Yes
The Vision of the company
is very much brief and
concise. The idea of
having such statement is
for everyone to
understand. The statement
67
mentions “Sa Puregold,
always panalo.” This is
inspirational to both
employees of Puregold
and their customers.
3. Is it aspirational?
Yes
The vision very much
contains a meaning to lead
them to future
advancement. They aim to
be the ‘most customeroriented’ supermarket and
to give the ‘best value’ to
their customers.
4. Does it give a clear
indication as to when it
should be attained?
Yes
The statement contains a
time frame as to when the
vision should be achieved.
IT aims to fulfill its vision
from the moment the
customer starts shopping
to the end.
This is the proposed Vision statement for the company. As projected in the
table, the vision has complied with all the necessary factors for a more suitable, more
efficient and effective vision statement that will be the company’s guide or medium for
its personal growth as regards to its financial and developmental progress.
Analysis of Company Mission
MISSION
Our Mission is to Provide Products, Services and Business
Opportunities to Every Filipino Family.
We Establish Lasting Relationship with Our Suppliers and Business
Partners.
We Strive to Promote the Personal and Professional Development of
our Employees.
68
We Commit Profitable Results to the Stockholders.
Sa bawat araw, PUREGOLD, kasama mo!
Component
Yes / No
Evaluation
1. Customers
Yes
The Mission states that
Puregold’s mission is to
cater to every Filipino
Family. This is addressed
to the general public that is
of the citizens of the
Philippines. Also, it is
mentioned that it is in their
mission to build a good
relationship with their
suppliers and business
partners which is also their
customers, one way or
another.
2. Products and Services
Yes
The Mission Statement
mentioned “provide
products, services and
business opportunities”.
They do not only sell
products, but also they
provide quality service to
customers, stockholders of
the company, and their
business partners.
3. Markets
Yes
The company operates
more than 150 stores
nationwide, mostly in
Luzon, its target market is
the general public. Their
business is concerned with
every age group. The term
‘every Filipino family’ coins
out that they are targeting
households as their
primary market.
69
4. Technology
No
Although the Mission
Statement is very much
flexible and innovative
patterned to the needs of
their customers and
stockholders, it did not
mention technologies that
can be used to serve the
former and the latter.
5. Concern for survival,
growth, & profitability
Yes
Though it is not stated that
the growth, survival, and
profitability is for them, the
statement has a concern
for such because with the
successful profitability and
progress of their
stockholders and the good
bond they establish with
their business partners, it
will lead to their own
advancement.
6. Philosophy
Yes
Puregold’s philosophy is
“Sa bawat araw, Puregold
kasama mo.” This
statement reaches to the
Filipino citizens. Unlike
other companies, they
used Filipino language to
make their company more
appealing to the public
7. Self-concept
No
Although Puregold has
been operating in most
cities in Metro Manila,
Northern and Southern
Luzon, the company failed
to include in their mission a
self concept of being the
top 3 hypermarkets in the
Philippines despite being
the 2nd best hypermarket
in the country.
8. Concern for Public
No
Although Puregold has
70
Image
received various awards,
the Mission statement
does not contain any
words or phrases that
shows their concern for
their public image
9. Concern for Employees
Yes
Their mission statement
indicates their healthy
relationship with their
employees and their drive
to promote their
employees’ development
both professionally and
personally.
In the current Mission statement of the company, it lacks the method of
what they would use to be innovative and should be patterned to the needs and wants
of their customers and stockholders that they should serve with just competence. The
statement also lacks a self-concept in which they should establish a self identification as
to what they want to project in the public. Their public image was not concerned if you
would study the statement. The company should have an awareness and
consciousness to their public image. The current mission statement is very promising
but it lacks merit for it lacks a few factors necessary to a proper mission statement, that
is stated in the step-by-step formulation of a strategic management paper textbook by
Fred David.
Proposed Mission Statement
MISSION
Our Mission is to be the leading Hypermarket in the Philippines and
to Provide Products, Services and Business Opportunities to Every
Filipino Family in the aid of Innovation and Technology.
We Establish Lasting Relationship with Our Customers, Suppliers,
and Business Partners.
71
We Strive to Promote the Personal and Professional Development of
our Employees.
We Commit Profitable Results to the Stockholders.
Sa bawat araw, PUREGOLD, kasama mo!
Component
Yes / No
Evaluation
1. Customers
Yes
The Mission states that
Puregold’s mission is to
cater to every Filipino
Family. This is addressed
to the general public that is
of the citizens of the
Philippines. Also, it is
mentioned that it is in their
mission to build a good
relationship with their
suppliers and business
partners which is also their
customers, one way or
another.
2. Products and Services
Yes
The Mission Statement
mentioned “provide
products, services and
business opportunities”.
They do not only sell
products, but also they
provide quality service to
customers, stockholders of
the company, and their
business partners.
3. Markets
Yes
The company operates
more than 150 stores
nationwide, mostly in
Luzon, its target market is
the general public. Their
business is concerned with
every age group. The term
‘every Filipino family’ coins
72
out that they are targeting
households as their
primary market.
4. Technology
Yes
It is mentioned in the
proposed mission
statement that it aims to
provide services and
products with the aid of
technological
advancement and growth
and innovation.
5. Concern for survival,
growth, & profitability
Yes
Though it is not stated that
the growth, survival, and
profitability is for them, the
statement has a concern
for such because with the
successful profitability and
progress of their
stockholders and the good
bond they establish with
their business partners, it
will lead to their own
advancement.
6. Philosophy
Yes
Puregold’s philosophy is
“Sa bawat araw, Puregold
kasama mo.” This
statement reaches to the
Filipino citizens. Unlike
other companies, they
used Filipino language to
make their company more
appealing to the public
7. Self-concept
Yes
The statement provides a
clear thought of Puregold
aiming to be the leading
Hypermarket in the
Philippines.
8. Concern for Public
Image
Yes
Puregold’s mission
statement wants to
establish a relationship
with it’s customers and that
is the general public. This
73
coins out a certain hint that
they have concern for their
public image and they are
doing this approach to
appeal to the mass
population.
9. Concern for Employees
Yes
Their mission statement
indicates their healthy
relationship with their
employees and their drive
to promote their
employees’ development
both professionally and
personally.
The statement above is the proposed mission for the company. As
projected in the lattest table, the factors and terms necessary for an improved and more
proper version of the mission statement are complied therein. This statement aims to
help in the development and growth of the company.
FINANCIAL OBJECTIVES
Profits to increase at 26% CAGR from 2012-2015F
We are aiming for the company’s net income to go up 22% this year to PHP4.56b
after an estimated 37% rise in 2013 to PHP3.7b. In 2015F, earnings are expected to
grow 19% to PHP5.4b. This translates to a three-year profit CAGR of 26% from 2012 to
2015F to be driven by higher revenues from new store openings and improving
operating margins.
Store network expansion to drive revenue growth
74
From an estimated 28% growth in 2013 revenues to PHP73.6b, total net sales
are likely to go up 18% this year to PHP87.1b and 14% in 2015F to PHP99b. Revenue
growth would come mainly from new store openings, which we aim, it would be 30
Puregold stores this year and 26 stores next year, comprising 25 Puregold stores and
one S&R warehouse club. From 213 stores as of end-2013, we are expecting PGOLD’s
total store count to reach 243 by end-2014F and further grow to 269 by end-2015F. In
terms of net selling space, we forecast this would increase 9% this year and 7% next
year, or from an estimated 352,006 sqm as of end-2013 to 382,656 sqm by 2014F and
410,806 sqm by 2015F. Our forecasts have not factored in PGOLD’s potential
acquisitions.
Higher margins from improving economies of scale
Puregold has still room to improve in terms of the operating margins because the
company reaps economies of scale from opening additional stores in areas outside
Metro Manila that have considerably lower rental, manpower and other operating costs.
Operating profit margin likely reached 7.2% in 2013 and we estimate this would further
improve to 7.4% in 2014F and 7.7% 2015F. Likewise, we forecast overall gross margins
to expand to 17.8% this year and 17.9% next year from our projected 17.4% gross
margin in 2013. This would be driven by the bigger contribution to sales from the highermargin S&R warehouse membership shopping business, which we estimate would
account for 22% of total revenues this year and 24% next year from our 19% estimate in
2013.
Operating cash flows to support capex requirements
One of the proposed objectives for the company is to make the total capex
allotted for new store openings to be PHP3.2b- 3.3b in 2014F and 2015F from our
PHP3.8b estimate for 2013. We believe PGOLD’s operating cash flows of PHP5.4b6.5b in the next two years will be sufficient to support its expansion needs. The
company also has existing unused credit lines it may use in the case of additional
capital requirements.
75
STRATEGICAL OBJECTIVES
Focus on modern grocery retail
Puregold is the second largest modern grocery retailer in the Philippines by
sales. Its estimated market share was 11.7% in 2013, according to Euromonitor. It
operates hypermarkets, supermarkets and discounters carrying the flagship Puregold
brand. Its target markets are low- and middle-income consumers, and resellers that
operate traditional neighbourhood outlets known as sari-sari stores. PGOLD also
operates S&R Membership Shopping stores, the only warehouse membership club in
the Philippines that services middle- to higher-income consumers.
Key player in industry consolidation
We expect PGOLD to remain a key player in the modern grocery retail business
through rapid store network expansion, especially in areas outside Metro Manila where
modern retail penetration is considerably lower. As competition in these areas is less
intense and operating costs are lower, we believe same-store-sales growth will improve
and overall margins widen. In the next 3-5 years PGOLD expects to open at least 25
Puregold stores, mostly in Luzon, and one S&R Membership Shopping store annually.
Traditional retail to remain a major growth driver
Traditional trade accounts for 73% of the country’s grocery retail industry. Given
the high level, we think traditional grocery retailing will remain a significant driver of
PGOLD’s revenue growth for some time. PGOLD derives about 35% of its revenue from
approximately 300,000 reseller members of its loyalty programme out of more than 1m
traditional retail channels in the country. Traditional grocery retail is forecast to expand
76
8.1% CAGR in the next five years, while modern grocery retailing is projected at 8.9%
CAGR until 2018F.
Earnings CAGR of 26% from 2012-2015F
We forecast PGOLD’s net income to rise 26% CAGR in 2012 to 2015F, driven by
higher revenues from new store openings and improving operating margins. From 213
stores as of end-2013, we expect PGOLD’s total store count to reach 243 by end-2014F
and further grow to 269 by end-2015F. In terms of net selling space, we forecast this will
increase 9% this year and 7% next year, or from an estimated 352,006 sqm as of end2013 to 382,656 sqm by 2014F and 410,806 sqm by 2015F. Our forecasts have not
factored in PGOLD’s potential acquisitions.
RECOMMENDED STRATEGIES
Market Penetration
It is important to seek and achieve increase in market share for present products
or services in present markets through greater marketing efforts because the firm needs
to embrace its market to surpass the sustainable competitive advantage. By introducing
new marketing and sales promotion to entice customers to patronize the services of
Puregold by introducing discount cards to really show their mission-vision to provide low
cost in their products that are inside their establishments.
Market Development
It is important to introduce present products and services into new geographic
area because maximizing the stockholder’s investment through expansion will have a
greater chance of getting back the ROI and profit of the company. Moreover, by
reaching out to the sub urban areas by establishing Puregold or PuregoldJr branches
depending on the availability in the target area to capture the market.
77
Product Development
The company should develop their products and services into all their store
formats to increase sales and possibly attract new types of customers, thus, increasing
their scope of market. By doing so, they are not only creating diversity and offering a
wider variety of products but this also helps the company to lessen the chances of new
substitute products entering the markets which can affect the company’s external and/or
internal environment
FINANCIAL PROJECTIONS
78
79
80
81
IX. APPENDICES
82
83
84
85
86