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BA291-1 Final Paper Company Case Draft

BA291-1 Final Paper Company Case Draft

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Published by Jed Estanislao
De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

The NCDL GROUP OF COMPANIES
The NCDL group of companies is a group of registered businesses which are yet to be incorporated. This was founded by Mr. Nilo M. de Leon and wife, Mrs. Cecilia P. de Leon. Currently, Mr. Nilo stands as president and eldest son Nielbert John de Leon stands as CEO and spearhead of operations. The company started in the 1980’s and has been a profit
De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

The NCDL GROUP OF COMPANIES
The NCDL group of companies is a group of registered businesses which are yet to be incorporated. This was founded by Mr. Nilo M. de Leon and wife, Mrs. Cecilia P. de Leon. Currently, Mr. Nilo stands as president and eldest son Nielbert John de Leon stands as CEO and spearhead of operations. The company started in the 1980’s and has been a profit

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

The NCDL GROUP OF COMPANIES
The NCDL group of companies is a group of registered businesses which are yet to be incorporated. This was founded by Mr. Nilo M. de Leon and wife, Mrs. Cecilia P. de Leon. Currently, Mr. Nilo stands as president and eldest son Nielbert John de Leon stands as CEO and spearhead of operations. The company started in the 1980’s and has been a profitable venture since. However, various changes and transitions lead to many present ordeals including conflict of interest, succession planning and growth prioritization.

Company History and Overview
NDL farms, the lead company and its sister companies had its humble beginnings in Binangonan, Rizal during the late 1980’s. Mrs. Cecilia Picones- de Leon, a midwife, started in the chicken trade business by selling live chickens hauled straight from independent farms to the local markets vendors using a rented jeepney. This is registered presently under the business name Celine’s Chicken. Cecilia’s husband, Mr. Nilo M. de Leon, a seaman, accrued some capital from his work abroad and retired early to concentrate on the trucking and chicken trading business. By 1988, the couple was able to purchase their first truck which can haul a capacity of 1,200 chickens per trip which meant they no longer had to rent out a hauling vehicle. This business presently works under the name Big C Chicken. Although the roles of both Cecilia and Nilo were not really defined this early stages of the business, it was relatively clear that Cecilia was the one responsible for the marketing and finance aspects of the business, while it was Nilo who was responsible for the logistics aspect. In a few years’ time, they were operating as a live chicken trader –with their own hauling vehicle –at full capacity. They realized that it was only logical to expand the business to create more opportunity. During the earlier part of the 1990’s, the couple explored the broiler farming industry, considering the market potential they established from trading. They decided to be in control of the situation by going further into the supply chain and into producing their own chickens. NDL Poultry Farms started operating with a 5,000 head capacity. The land and the facilities wherein the broiler farming operations took place were rented, and all supplies such as the day old chicks which they grew into chickens, and the feeds and vitamins required to make them healthy were bought from an external supplier. When everything seemed to be working well for Nilo and Cely, some of the chickens they grew started dying. Nilo soon realized that their feed suppliers and day old chick suppliers did not provide them with the quality feeds and chicks they need. The next move was for NDL poultry to put up their own feedmill to go for further independence. All the efforts allowed the company to operate a farm with a 12,000 head capacity just after a year. In a matter of 7 years, NDL Poultry Farms expanded to 70,000 heads capacity. And in 2003 NDL farms reached 100,000 broilers. From conducting broiler farm operations with a 70,000 head capacity which was 60% rented, capacity blew up to 100,000 heads using farming facilities that is now 80% owned in just a short time.

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

Traditionally, NDL Farms does not focus on marketing and advertising. Big C chicken was there top client marketing more than 80% of their production. Big C gets its customers by word of mouth and referrals from existing customers that the farm has developed a strong relationship with over the years. This relationship allowed two-way communication between the farm and its customers. By maintaining a few key accounts, the farm is able to forecast the demand for broiler birds. The company also makes use of its historical sales record to forecast demand. Some radical changes occurred when Cecilia studied at AIM in 2005. In one study, Cecilia, with the help of some classmates, learned that NDL Poultry Farms can improve profit margins by no less than 400% if it decides to sell dressed chickens instead of live chickens. Cecilia learned that chicken dressers charge dealers 4 times NDL’s profit margin when it sells live chickens to dealers. In order to get this additional profit margin, Cecilia installed a dressing plant near their house and three satellite dressing plants that are strategically located in Binangonan(2), Antipolo(1) wet markets. Via Big C chicken, several dealers buy live broiler birds from NDL farms ranging from 100 heads to 2,000 heads at a time which the farm delivers to them via their own trucks. With the strategically located dressing shops under Celine’s chicken, they were able to sell an additional 1,000 to 2,000 heads of dressed chickens daily at 4 times the profit margin from live broiler sales. By this time Celine’s chicken sales, Big C chicken and NDL poultry became 3 interdependent entities with separate functions and markets and shared management. In 2008, Nielbert de Leon with the guidance of her mother and mentor, Cecilia, started a trading business as a dressed and processed chicken distributor under the name ChickenWise trading. This was a project for Nielbert to be able to put up his own business and stretch the supply chain later on from day-old-chick to dressed and processed chicken. By this time the family business only sells live chicken to chicken dressers for wt market consumption. ChickenWise trading was able to sell dressed chicken from accredited plans not only to various wet markets, but also to hotels and restaurants in Metro Manila demanding higher margins. It was in the year 2008 when NDL Poultry Farm’s CEO and spearhead, Mrs. Cecilia Picones De Leon, contracted a fatal disease and had to gradually let go of her duties in the business. The position was turned over to their eldest son, Nielbert John P. de Leon who was then operations manager of NDL farms. He was a veterinarian managing farm operations and was studying MBA at UP Diliman that time. Cecilia believed that Nielbert is much more aligned with her business plans. As a result of the unexpected chain of events and because there was no succession planning, Nielbert had no choice but to step up to the plate and learn everything on his own, especially the marketing and finance side of the business. In addition, Nielbert’s personal venture, ChickenWise trading was starting to pick-up bringing forth a potential conflict of interest and attention. But despite the predicament, he chose to manage both concurrently. Nielbert considers the organization he inherited as being flat and relatively informal such that duties overlapped because there was no delineation of labor. In addition, it was difficult for him to earn the people’s trust as he was considered a newbie. He had to reach out to his employees and make ways to control the company in order to assert himself as CEO.

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

To put things in order and to be more manageable in his part, he started the following initiatives: 1. The company’s mission and vision was formalized using concrete statements he himself formulated together with some senior members of the company. His objective of doing this was to impart a guiding principle that ensured goal congruence amongst the employees. He had these displayed in all their offices in Rizal province, written in both English and Filipino. Mission: “Our Company in focused on efficiently producing high quality chicken through utilization of advancements in husbandry, poultry medicine and poultry nutrition. We keep our chickens free from chemical and physical adulteration to keep our birds healthy and fit for human consumption.” “It is also our endeavor to serve our chickens to our dear customers, on time, in good condition and at reasonable prices. This ability stands on the foundation of good, longterm relationships with clients and effective management of logistics and finance.” Vision: “Amidst the threat of a highly competitive market in lieu of globalization, we would see ourselves steadily growing and developing our operations. We would want to be known as a farm that markets good quality chicken at very reasonable prices.” “We want to further improve our client coverage and product line. We would eventually be able to serve clients outside of Rizal and Metro Manila, which are our present marketing domain. Also we would see ourselves engaging in dressing operations and being able to serve fresh dressed chicken, chicken cut-ups and processed chicken products.” 2. He also formalized the roles and responsibilities of his personnel using an organizational chart in order to streamline and to clarify the tasks and duties of their employees. The organizational chart also aimed to empower the employees in their respective roles by showing how their work and performance contribute to the totality of the company in the same way that a machine is composed of different functioning parts. The organizational chart also showed the proper escalation paths within the company. 3. Nielbert also improved employee benefits and compensation to persuade employees to help increase company profits and to encourage them to stay with the company. This was done in many ways such as by allowing employees to take loans with accompanying 2 – 5 year bonds or work contracts. Salaries of business unit coordinators were also increased. Nielbert’s dad, Nilo, who still worked as NDL’s president, did not like his methods. He believed in the use of fear and stricter controls such as by implementing penalties for not performing a job. On the other hand, Nielbert believed that if people are happy, the business will grow. He provided enough compensation to discourage employees from stealing and also justified the use of incentives in increasing sales.

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

At first, it was hard for Neilbert to convince his father to implement his methods in the company. But when results were delivered, he did not hear anything about this topic from his father again. 4. Neilbert also implemented the use of formal organizational procedures and the use of forms and other documentation in order to help him and his employees track the movement of inventory and cash flows. He started this with the farm, then with the trucking/hauling function, and lastly with the feed mill. From these organizational process assets, he claims to get the information he needs to run the company such as information needed for audit and for reexamining baselines. 5. Since both Nilo and Neilbert were not very immersed with the finances of the farm, Neilbert decided to employ a professional accountant as a finance liaison whose main duty was to extract financial information from company operations and reflect this on standardized financial statements. The use of these documents helped Nielbert and Nilo understand the performance of the firm from a financial perspective. Some important strategic decisions were based on this. There were also benefits in terms of income tax reporting. 6. Lastly, Neilbert encouraged employees to get involved in planning strategy. They were encouraged to give suggestions to improve company operations via formal town hall meetings and even through informal talks with his employees. A result of this was the establishment of rules for pricing chickens. For the past years, pricing was uniform on all satellite dressing shops. But now branches were empowered to price. If chickens can be priced higher at a particular dressing shop, the branch manager can opt to without approval from higher management allowing the shop to earn more revenue. At this point, the family businesses are in different development stages. The culls trading business and live broiler trucking are more or less in the mature stage and the farming business and dressed chicken trading of Nielbert de Leon are in their growth phase. To add to the mix, Nielbert also incorporated infantile businesses in lending, small scale real-estate and day-old-chick sales.

Brief outline of NCDL’s List of Registered Businesses
1. Celine’s Chicken Sales a. Business: Started in the late ‘80s - Trucking of culls and selling of dressed culls in wet market mini dressing plants i. Operation: breeder culls are bought from breeder farm companies (breeder culls that do not breed anymore are sold by the company as meat) b. Market: Baguio, Rizal, Bulacan, Pampanga Wet Markets i. Branches: Mini dressing plants where live culls are dressed and sold to wet market dealers (Binagonan and Antipolo)

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

2. BIG C Chicken a. Business: Started in the early ‘90s - chicken sales distribution i. Operation: live broiler chicken are trucked using the company’s 8 trucks sourced out from various farms (40% from NDL Farms, 60% from other farms) b. Market: Wet Markets c. Competitive Strength: i. Reach: North – Tarlac, South – Quezon ii. Pricing: Best Pricing of Chicken iii. We can pay in cash and go to the farthest farms to source out the chickens 3. NDL Poultry Farm a. Business: Started in the late ‘90s - poultry farming i. Operation: farm and feed mill b. Market: Big C and external viajeros (other middlemen/distribution channels) c. Competitive Strength: 4. Chicken Wise Trading a. Business: Opened 2008 exclusively as a distribution business; wholly owned by Neilbert and is being managed separately from the other NDL businesses i. Operations: Buys dressed chickens from dressing plants (Sustamina Agri-industrial Cavite, Bounty Agriventures Inc. of San Pablo, Bounty Fresh Foods Inc of Bulacan nd KFC San Pablo farms). b. Market: Wret Markets (Muntinlupa, Paranaque, Las Pinas, Rizal); Hoterls, Restaurants, Institutions (Metro Manila Area) c. Competitive Strength i. Extensive Marketing (4 Agents) ii. Empowerment in terms of pricing, orders 5. Other Investments a. Lending Business i. Operations: In its infantile stage. 50% funded by Big C; 50% funded by Nielbert. Nielbert calls it “bridge financing”. There is a marketing personnel who looks for clients who are experiencing the threat of foreclosures. The Lending business will pay the bank the loan and loans from the client will be paid to the lending business b. Day Old Chick Dealership i. Operations: Indirect agents book day old chick orders who are given a certain commission. (Minimum profitability) c. Small Scale Real Estate Business i. Operations: large lots are bought and retailed as smaller lots to D and E market.

Problem Statement
“Amidst the recent developments in the family company, what necessary steps should the CEO and management do to address recent challenges on conflict of interest, succession planning and growth prioritization.”

Frameworks for Analysis
I. Boston Consulting Group Matrix II. SWOT Analysis

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

III. Porter’s Five Analysis

Analysis
BCG Matrix
BCG STARS Stars are units with a high market share in a fast-growing industry. The hope is that stars become the next cash cows. Sustaining the business unit’s market leadership may require extra cash, but this is worthwhile if that’s what it takes for the unit to remain a leader. When growth slows, stars become cash cows if they have been able to maintain their category leadership, or they move from brief stardom to dogdom. BCG QUESTION MARKS Question marks (also known as problem child) are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash consumption. A question mark has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share.

BCG CASH COWS Cash cows are units with high market share in a slow-growing industry. These units typically generate cash in excess of the amount of cash needed to maintain the business. They are regarded as staid and boring, in a “mature” market, and every corporation would be thrilled to own as many as possible. They are to be “milked” continuously with as little investment as possible, since such investment would be wasted in an industry with low growth.

BCG DOGS Dogs, or more charitably called pets, are units with low market share in a mature, slow-growing industry. These units typically “break even”, generating barely enough cash to maintain the business’s market share. Though owning a break-even unit provides the social benefit of providing jobs and possible synergies that assist other business units, from an accounting point of view such a unit is worthless, not generating cash for the company. They depress a profitable company’s return on assets ratio, used by many investors to judge how well a company is being managed. Dogs, it is thought, should be sold off.

Page 6 of 12

De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER
Question Marks( High Growth but Low Market Share) Semi Real Estate Business -It requires huge capital investment since its inventory consist of large areas of lots -It is far beyond the poultry business where the company is known for so they need a lot of marketing strategies to get customers.

Stars ( High Growth and Market Share) NDL Poultry Farm - NDL has a lot of room for expansion, all they need is a business savvy and trustworthy partner whom they can share the business risk implied not only to the expansion but also on the technological and market know-how and financial resources to mitigate the burden of generating cash on the part of NDL alone

-Real estate is less liquid compare to live - It has a stable distribution channels such as chickens due to material price difference of the two products the Big C Chicken and the external viajeros. -There is also an option to integrate further to -Market share varies depending on the need or supplying for the ChickenWIse dressed urgency of need of a certain client since real estate is a form of investment rather than a operations to maximize the supply chain commodity. -It was able to maximize the capacity of its farm to its full potential. Lending Business -The growth will allow them to have more clienteles by having a perfect supply chain in -It also requires huge capital. -Collection process is the most critical. place. -On the onset, its customers are limited only to -Feeds produced at NDL can also cater other those who are experiencing financial distress. neighboring farms to add up in the revenues of -But later on, it can also extend its lending business to those people who want to establish the company. new businesses but with limited resources to do -No need for too expensive marketing so. However, have enough liquid assets to pay their borrowings. strategies to gain customers. -Risky because of its exposure to default in case the bank loans are not granted to the client.

Cash Cows ( Low Growth but High Market Share) Dogs ( Low Growth and Market Share) Celine’s Chicken Sales, Big C Chicken, Day Old Chick Dealership Chicken Wise Trading -Least profitable amongst all the business units. -Steady cash inflows from buying and selling live and dressed chickens. -Low growth since marketing is limited only to the indirect agents on a commission basis. -Established distribution channels such as wet markets, hotels, restaurants and other -Day old chick dealership has fewer institutions in provinces and in Metro Manila distribution channels compared to broiler areas. chickens.

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

-Supply chain is perfectly in placed that is why customers are guaranteed that their orders will be met. -Chicken is a basic commodity making it easy to market and to attain high profitability.

SWOT Analysis – NDL Poultry Farm group of businesses
STRENGTHS
Founders have build a thriving enterprise with a cadre of loyal and experienced employees Hands-on management style of the top leaders in the company - Neilbert and Nilo Decision making in centralized enabling the business to make quick decisions Better control over transfer pricing policies between business units Good knowledge about the poultry industry

WEAKNESSES
Neilbert practically is the only professionally trained manager in the company Possible goal incongruence between Neilbert (CEO) and Nilo (President) No clear succession planning beyond Nilo and Neilbert No clear long-term strategic plan for growth and sustainability of the enterprise

THREATS

OPPORTUNITIES

Backward or forward integration within the Poultry integrators, especially the big and poultry industry established companies like San Miguel, Swift, RFM, etc. Diversification and investment of excess funds Prices of poultry industry inputs (feeds, into non-related businesses breeders/chicks, equipment) Volatility of chicken prices Substitute products like beef and pork. S-O Strategies The hands-on management style of the enterprise leaders and their in-depth knowledge of operational intricacies as well as the industry in general should enable them to decide the proper opportunity when to expand their operations through forward or backward integration. Furthermore, if opportunities within the industry do not present themselves, then the decision to diversify or invest in other business may best be taken by the leaders. S-T Strategies NDL Farms can bank on the skills of its people and the hands-on approach by its managers to manage competition from more established and bigger integrators by keeping operational costs low and prices competitive.

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

W-O Strategies Nielbert as the only professionally trained manager in the enterprise might be able to discern by himself which opportunity to focus on. Being the sole decision-maker in the business, he can easily marshal resources to invest in whatever opportunity he sees fit. One area to look out for is the possibility of Neilbert and Nilo going on opposite directions as far as investing in opportunities goes W-T Strategies Nielbert has to dig deep into his managerial and leadership playbook in order to counter the triple threats stemming from competitors, input prices and selling prices. Threats from substitute products like beef and pork are largely driven by poultry industry costs and prices.

Porter’s Five Analysis
Poultry Farming Industry Analysis Threat of Entrants The barrier to entry is fairly moderate. Over time, there are a number of vacant poultry farms available in the market. And relative to other types of livestock, chicken has the shortest production cycle (2 months only) that is why there are a lot of people who try out poultry farming, some successful, many not quite. Also there are a lot of available technology now that allows the most inexperienced to run an efficient farm. This is where a lot of wealthy individuals are trying to invest/diversify on. Though there is no data given about capital investment for a poultry-processing plant, it was stated clearly that existing companies possess brand image. It will be difficult to for new entrant to create a brand image. Additionally, existing players have backward integrated with hatchers by entering into forward contracts. So, the new entrant may find it difficult to find a supplier and backward integrating will increase the capital investment requirement for the new entrant. The number of poultry dressing plants in an area or region is actually regulated by the National Meat Inspection Service (NMIS) and Bureau of Animal Industry (BAI), thus, permission to operate is limited in most areas.

Threats of Substitutes Since chicken is a commodity, there are a lot of poultry producers in the market due to high demand for this product. The presence of different local producers and chicken growers such as the San Miguel Corporation, Bounty Fresh Chicken , Sustamina and Vitarich poses a high threat for possible substitutes. Chicken is the cheapest meat protein source which makes it highly marketable. But beef and pork as substitutes are also showing an upward trend in the market. Bargaining Power of Supplier

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

Bargaining power is the ability to influence the setting of prices. In the case of NDL, it has many suppliers and sub-contractors to choose from making these suppliers less empowered when it comes to setting prices on their raw materials. However, a phenomenon in most of the staple products, when there is shortage, the suppliers control the prices, while when there is surplus, NDL can dictate. The wide network only alleviated this for the live chicken sales. For the dressed chicken this is the general rule. It is also weak because the poultry processors have already backward integrated by forward contracts. But this forward contract is applicable to existing players only. Any new entrant may not enjoy this type of power. But still the cheaper cost of raising poultry may enable new entrants to develop their own supply of poultry. Bargaining Power of Buyer Bargaining power varies, but in general, bigger clients can dictate prices and terms because of heavy competition. There is no organization regulating uniformity of the prices. Not unlike in wet market vendors where Standard retail price (SRP) is implemented by area. NDL has to give buyers best terms and prices if they want to book the client. There fore, the bargaining power of buyer may be high especially if exercised on small enterprises. Industry Competitors Competition is fairly weak. Though there are a lot of established brands in the market, the growth of the industry due to high demand is one reason for less rivalry. This growth rate reduces the rivalry among the existing competitors. The presence of branded and established local producers as well as small scale producers weakens the rivalry because of fragmentation. Additionally, most of the firms have differentiated their product by brand image.

Recommendations
On the issue of conflict of interest… When the issue on conflict of interest was initially discussed, the group was torn whether this issue would fall into a managerial problem or a personal problem. One can claim that this issue really lies on Nielbert’s upbringing and discretion. He can choose to think about his family—his siblings and his father, or he can just focus on himself and his soon-to-be family. Although this issue was a difficult one to tackle since this basically lies in the hands of the CEO, the group has come up with management controls to help prevent the issue to arise. 1. NDL can hire an accountant to ensure that finances are well-recorded and that transparency can be seen within the organization. CEO can also opt to exclude his own personal business in the record. It is also suggested that NDL hires an external auditor to audit financial statements of the company in accordance with specific laws or rules.

2.

Future direction for the Chicken Wise business: Chicken Wise is a sole proprietorship business of the CEO. As such, this is a prime candidate for the classic "conflict of interest" problem. A potential solution is to integrate Chicken Wise into the NDL Farm group by allowing NDL to buy a majority holding into the Chicken Wise (split can be 55:45 with 55% held by NDL and 45% held by Neilbert). This way Chicken Wise will be managed as part

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

of the NDL group and not as a separate project by the CEO. Chicken Wise can contribute to the growth targets of NDL Farms as a means of forward integration. Chicken Wise, in turn, benefits from shared management and access to a pool of resources that only NDL Farms can provide.

On succession planning…

On succession planning problem, the group has come up with the following three-tiered recommendation: i. Management succession concerns can be integrated on a continuous basis into strategic planning and in particular into mission statements. Nielbert, at an early age has to educate his siblings on family business succession and ownership transition planning. He has to make his siblings “sold” to the possibility of running the business later on. They have to understand the advantages of them running their own business than to trust it to other people. A case in point was when their partner sold their chicken without their knowledge. It does not require any experience to do the planning, immersion and engagement process to his siblings. In fact, Nielbert is in a much better position to do this as his siblings look up to him and sees him as their parent. It could start with knowing their personal and career goals and wishes, asking what they like and understanding their strengths and competence to better understand where they can be placed in their diversified business. Family businesses may not provide opportunities that fit all family members' strengths. The current generation but more importantly the next generation may have strengths not applicable to the business. Opportunities should be provided to the siblings. After all, employment outside the family business may provide essential perspective, maturity and experience necessary for success in the family business. If the siblings show no interest to the business at all, Nielbert can opt to buy their shares and run the business himself. Nielbert who is now engaged can also leverage his fiancé to help him out run the business. Learning from MBA, it is always good to have a partner who understands and supports an entrepreneur with his business goals. This would be a good step should his fiancé agree to help him out as Nielbert will no longer have to run the business by himself. If this happens, his soon-to-be-wife can step up once Nielbert is not available especially during unexpected circumstances, and vice versa. Each family with a business faces the reality that the business will eventually end or have new managers. This reality is independent of the founding and previous managers' successes in building the business and their current success and stature in the community. The last option the group recommends is for NDL Poultry Farms to professionalize. However, based on previous experiences, and as Nielbert puts it, their business is relatively small that anyone who has a bigger capital can easily replicate it, having new managers for NDL will require more management controls in place. Nielbert has already institutionalized some controls such as bonds when an employee makes a loan, he can also extend this to a surety bond, say sending the manager, the principal, to trainings or providing educational assistance and let the principal sign a contract to render certain years of service and perhaps the oblige can restrict the principal not to work for a competitor or limit the types of industry the principal can work with after the contractual obligation has been served. In particular, Nielbert can place stricter contracts especially for staff that have substantial inside

ii.

iii.

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De Leon, Estanislao Gumabon, Lope Ronquillo, Rojas

Group 5 BA291.1 - Strategic Management Professor Art Ilano FINAL PAPER

info about the company, e.g., they cannot transfer to other related companies within 2 years after resignation. There are also other ways to keep your staff loyal aside from placing bonds. The very important elements to succession planning and management control are the employee’s satisfaction and strong morale. As the company grows, the staff personnel working closely with Nielbert recognize that growth and would yearn to gain from it themselves. Nielbert should consider compensation and incentives for these business unit coordinators and other supervisory posts. Nielbert can consider giving out a quarterly profit sharing for their hard work. This would eliminate the agency problem and lower the risk of piracy from competitors. If in the future, these highly trained staff may eventually be the management team that would help the future owners of the company. The main challenge would be putting up superior controls and incentive programs. Nilo and Nielbert must come to realize that for them to continue to grow, they must learn to trust.

On the growth and direction of the business… Referring to the analysis using BCG matrix, it is important for NDL to focus on their Poultry Farm as the group believes this to have a high market share in a fast-growing industry. If the CEO focuses more on this, NDL Poultry farm has the potential to become the next cash cow. The CEO must also analyze carefully whether Semi Real Estate Business and Lending Business, business which the group believes to be question marks, they are worth the investment required to grow market share. These businesses require huge amount of capital and thorough study should be made whether the investment should indeed be put in these businesses or other businesses such as the Poultry Farm which seemed to promise a better return. The group also believes that the Day Old Chick Dealership is the least profitable among all businesses therefore the NDL should direct its effort more to businesses with high growth and market share. NDL has to maintain its market share in its cash cows which are the Celine’s Chicken Sales, Big C Chicken and Chicken Wise Trading. Financial/Investment management… The CEO may opt at determining an internal opportunity cost of capital (OCC). This can be an important tool when deciding whether to invest in backward or forward integration, invest in expanding internal capacities rather than contracting or even when deciding whether to expand investments into or divest from non-related businesses (lending, real estate). Only trained businesseducated managers like Neilbert can do this (maybe he can ask help from his financial consultant on this as well).

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