A Case Study on Gokongwei’s Success

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JOHN GOKONGWEI JR.’S SUCCESS STORY: A VIEW ON HIS CHALLENGES AND RISKS
THAT LED TO SUCCESS

John Gokongwei Jr. was once a scion of a wealthy Filipino-Chinese clan. He was born
with a silver spoon and their family was known to be one of the richest in Cebu. Unfortunately,
one day, all these things he enjoyed were taken away from him when his father died leaving his
family with nothing. At 15, Gokongwei Jr. had to work to provide for his family. His mother had to
sell her jewelries. His siblings were sent to China where the cost of living was cheaper. He sold
roasted peanuts and opened up a small stall in the market, where he had to compete with other
vendors to sell his goods. He sold soap, candles, and threads to earn money. Determined as he
was, Gokongwei Jr. knew he had an advantage as he was younger, therefore he used this as a
strength in his job.

When the World War II ended, he saw this as an opportunity to trade goods in the
Philippines. He put up Amasia Trading with his brother which helped bring back his siblings home
to help out with the business. He then went on to pursue other business ventures: from cornstarch
manufacturing, to food production, to purchasing shares in San Miguel Corporation, the then
leading business in the 70s. He had a vision to make every Filipino fly thus the creation of the
low-cost carrier Cebu Pacific, in 2003 he established a mobile company, in 2004 he introduced
C2 beverage, and all that comprise Gokongwei Jr.’s empire, the JG Summit holdings.

It didn’t always go smoothly—in between these success come failure. He had a hard time
to get a loan, but fortunately one bank trusted him. He started getting recognized at the business
scene but before that he had to fight for a position. His loss and failures were broadcasted. But
still he succeeded—and is now considered as a key player when it comes to the powerful business
sector.

1. What are the factors that contributed to its success?

In lieu of Gokongwei Jr.’s success story, it can be said that challenges in one’s life should be
taken as an opportunity rather than a mere deprivation. Gokongwei used those challenges for
him to start anew and start to build up his dreams. What URC now is the fruit of the determination
and hardwork of Gokongwei. The factors that led URC to success are:
a. Strategic focus – In the present day, change is indeed inevitable. Thus, businesses
should adapt to these changes and meet what the consumers need and want. URC
has proven to be one of the key players in the business sector by producing
necessities such as food and beverages. Businesses should strategize and focus the
organization’s resources on the great opportunities.

b. Operations management - The persons behind the end products to create value to
customers and to earn the company’s income is one important factor whether one
succeed or fail. Effective operations ensure that customers expectations are met by
 giving them products that have the right price and right quality. Operations are largely
internally-oriented, so it entails constant effort. Effective communication also is key to
be able to run the operations smoothly, and URC seems to balance all these.

c. Physical resources – Facilities, finances and equipment are the main physical
resources of a firm. After all the years of operating of URC, they have generated a
good amount of money to facilitate all the needs of the company. Because of the great
strategy and operations, it all came about for URC. \

d. Customer relations – Answering to the needs and wants of the customers are what
the company should target to capture their loyalty to a firm’s products. Effective sales
and marketing begins with asking existing and potential customers what they need.
By keeping in touch with customers and asking questions and suggestions often, a
company is in good hands in keeping up with the competition. URC has always
executed good customer relations for the past years.

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

Gokongwei has been known as one of the game-changers in different industries. Although
there is a big competition in the Philippines and the whole of Asia due to the growing market
base, Gokongwei still managed to succeed. His tactic to compete with other businesses is to
offer products that have good quality with an affordable price.

3. Based on Gokongwei’s words of wisdom, how can the Philippines compete

globally?

As Gokongwei quoted, “Don’t be afraid to take on the big boys”. The Philippines is capable
to have its own brand. One of the factors that contribute to a firm’s success is human resources
and manpower. Having said that, we know that the Philippines is rich in those aspects. Filipinos
should be business-minded to be able to compete globally. We already have the resources,
hardwork and determination, we now only need the ideas and innovation to reach our goals.

4. Are there hindrances for the Philippines’ inability to have on global brand? Explain.

Yes, there are. The biggest hindrance that we are facing is that a great part of our
population does not trust and patronize the quality of our own local products. Filipinos often
prefer to buy imported products. For our country to be able to compete globally, we should first
learn to patronize and buy our own products for it to be known to many consumers in and out of
the country.

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

 Gokongwei became successful in his business because he didn't let uncertainty and
potential failure to stop him from doing what needs to be done. Instead, he looked at challenges
and risks as opportunities, not as problems. After what he has experienced when he was still
young, it didn’t hinder him to soar high, instead he worked harder and harder, beating his best
and pushing beyond limits. It is also because Gokongwei is a risk taker in his field.

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

The deal was structured this way: PLDT is buying 51.55% of Digitel and the latter's debts,
including a bond convertible into Digitel shares, for P69.2 billion.It is paying the transaction cost
with new PLDT shares priced at P2,500 each, making the deal a share exchange. In other
words, the Gokongwei’s will not be laughing all the way to the bank at the close of this cashless
transaction. Some say cold cash is what the Gokongweis should have demanded for a business
that successfully carved a niche in the market through its popular bucket-priced offerings.

PLDT is the number one telecommunication’s company and upon acquisition of the Sun
Cellular, it solidifies its position as the dominant telecommunications player in a capital-intensive
and highly competitive industry. The Gokongwei’s, as the owner of Digitel, one of the dominant
telecommunications player and one of the formidable competitor of PLDT will only have a once
in a lifetime offer to be given a seat in another telecommunications company, PLDT. To maintain
quality and competitive pricing, PLDT have redesigned their organizational structures and
strategies, so they bought the competing network such as Sun Cellular to lessen the competitors
in the industry.
My personal opinion is that the Gokongwei’s did make a risky decision, but in all cases
aside, although PLDT got the controlling interest (51.55%), they will still earn profit both ways in
this industry. It was a good decision since, SunCellular will greatly help PLDT in boosting sales
without having to change the promos offered to the consumers by SunCellular.

7. Is Gokongwei’s move a strategic one, with Sun being number 3 in the

telecommunications industry?

I do think Gokongwei made a strategic decision. PLDT Group Chairman Manuel V.

Pangilinan mentioned “The brand equity of Sun Cellular will enhance our mobile offerings, so
we wish to preserve this forward,” and “We will also retain the unlimited products and services
of the group, so that consumers are able to continue benefitting from them.”. They said
Gokongwei's true gain now lies in its ownership of PLDT, whose valuation is seen to increase
significantly following the Digitel buyout. Another cited important benefit from the acquisition is
capital expenditure savings. It was said that aside from improved margins, Digitel has become
a significantly more profitable unit for PLDT. "For Digitel, we will see immediate step change
function in terms of the marketing structure of the company as it leverage a lot of PLDT's in-
house systems. We'll also see a drastic reduction in interconnection payments paid by Digitel to
PLDT on a consolidated basis. We see vastly improved margins for both companies moving
forward.” said the head of Asia Telecom Research. So, I think it is a win win situation for Digitel.