1. Read the story about PHINMA Corporation.

PHINMA Corporation
(Links to an external site.)
2. Then identify the following:
a. reasons behind their "not so" related diversification from "hard" industries (construction, steel
manufacturing and electrification) to "soft" industries like education, hotels, etc.)

Value-Creating diversification
● Financial Economies (to increase efficiency through restructuring) ->main point
● Economies of Scope (production of one good reduces the cost of producing another
related good)
● Market Power (company's relative ability to manipulate the price of an item in the
marketplace by manipulating the level of supply, demand or both)
JON - Value-Neutral diversification
● Risk Reduction (synonymous to diversifying capital into a portfolio of assets)
● Synergy (value created by the two together > value created by the two independently)
● Tangible Resources (sharing of such resources “may” induce diversification)
● Intangible Resources (sharing of such resources “further” induce diversification)

b. strategies they implemented in diversification

—----------------------------------------------------------------------------------------------------------------------------
1956- nag start, PHINMA Inc got incorporated
1957- under PHINMA Inc, Bacnotan Cement Industries Inc was granted its corporate charter,
foremost producer of Cement, SEC / Bought Cement Plant
1958- BCII got publicly listed
1963- (BOCR) Galvanizing company (iron), first steel plant, Bacnotan Steel Corporation
1969- (RLD) Trans Asia Oil and Mineral Company, ventured into coal Mining and Energy
generation // Renaming of cement, Bacnotan Cement Industries Inc -> Bacnotan Consolidated
Industries, Inc.
1971- (UD) Paper and packaging business with United Pulp and Paper Company
1987- (RCD) Merged with low cost housing -> to address housing needs
1989- (UD)Asian bank // phinma foundation (to make lives better)
1990- focussed on low cost housing
1996- (BOCR)vertical urban housing
1997-(BOCR)joint venture project ->power plant // transferred all shares and had strategic
partnership with the world’s largest
1999-second paper mill -> biggest and most advanced paper manufacturer // joint venture with
thailand
2000- three cement companies merged -> developed several communities
2001- new headquarters
2003- infused new equity and bought out interest
2004- (UD) sold investment in cement // acquired Araullo University
—------------------------------------------------------------------------------------------------------------------------MJ
2005- (BOCR) Phinma Cagayan College
2006- (BOCR) Acquired CDO college // lead affordable housing// prioritized support programs
(scholarships)
2008-(UD)Invested in animation // employee opportunity
2009-(RCD) partnered with victory liner and five star // acquired U of Pangasinan and U of Ilo-Ilo
2010- Bacnotan Consolidated Industries Inc was renamed PHINMA CORPORATION
2011 - (UD) PHINMA Corp acquired 85% in a business research and consulting company.
Acquired 100% a Philippine knowledge processing outsource firm. Developed Asia Enclaves
Alabang for upper mid-income earners
2012 - (RCD) Launched affordable mid-rise condominiums in Muntinlupa, opened its second
campus college cagayan de oro
2013 - (BOCR) more mid-rise condominiums in Davao (first in mindanao)
2014 - (BOCR) Socialized Housing Projects , south campus (nueva ecija)
2015 - (UD) PHINMA Southern University was acquired and affiliates Sacred Heart Hospital,
became Southwestern University Medical Center
—------------------------------------------------------------------------------------------------------ TRISH—---------
(BOCR) PHINMA University of Pangasinan
(BOCR) PHINMA Education Holdings Inc.
2016 - (BOCR)Trans Asia Oil and Energy renamed into PHINMA Energy Corporation
Opened PHINMA Training Center (Education) in partnership with Victoria Hospital
2017 -(BOCR) (BOCR) Fuld and Company Inc to Integrative Competitive Intelligence Asia to be
more responsive to the needs of government, donor agencies, corporation and non profit
organizations
2019 -(BOCR) Acquired republic college, partnered with Yayasan to manage a network of
schools in Indonesia
(BOCR)Acquired controlling interest in PHINMA Energy Corporation allowed to expand
investments and operations in education and construction materials sector
(BOCR)PHINMA returned to cement industry through Philcement Corporation
2020 - (BOCR)first state of the art cement facility
Acquired Rizal College
2021 -(BOCR) acquires Union College of Laguna
—------------------------------------------------------------------------------------------------------ DARS—---------

___________________ DOCUMENT PROPER________________________

Competition is a normal stream in the commerce industry. It is inevitable not to witness any
competition when a certain business penetrates the industry. In line with this there are resorts
that companies opt to use in order to thrive in their chosen arena. One of the most common
resorts is diversification. It is when companies pool their resources in order to launch a new
product or innovate the existing ones. Companies take 180 degrees turns on their business at
times to provide business that is in line with their purpose. As in this case, Phinma have
diversified their business with numerous strategies. In their early years they have opted to
strategize (Economies of scope) in producing related goods with the use of the same with
almost identical production of their original goods – cements to production of iron. It is at the
same time a strategy of Market Power diversification as they are the first to establish a steel
plant. That being said, they have the relative authority to manipulate the price of an item in the
marketplace by manipulating the variables of supply and demand or in some cases both. It is
unquestionably a good move for Phinma as they can expand their market share in different
facets of the commerce industry, especially in the hard/construction arena.

However, despite their triumphant penetration in different hard industries, they still took a turnt in
1989 when they launched their first bank and their foundation as well. On a personal note, the
trajectory of their “not so” related diversification is their purpose and objective as a company in
general. They have taken a value of being humane by providing accessible yet quality homes
for the masses. The foundation also provides assistance in education through the form of
scholarships. This purpose has then been manifested by the succeeding action taken by
Phinma merging in 1987 to address housing needs of the struggling citizens. To make this more
feasible, they have resorted to financial economies to increase the firm’s efficiency through
restructuring. Above all, despite the economic reasons, they cannot deviate the fact that it is an
act of corporate social responsibility to serve the masses. As the adage, a business run by the
people, and service for the people.

Aside from the traditional business strategies that satisfy profit-seeking motives, Phinma also
ventured into diversifications which led to both the creation and reduction of firm value.
Offsetting these can be underwhelming but it shall not be deemed as a futile attempt to achieve
its organizations goals. To all intents and purposes, this gave an avenue to improve its stance in
the market. The central point of this strategy is to reduce the overall business risk through
spreading resources and capabilities in a defined portfolio with sufficient depth and breadth to
eliminate company-specific risks among investments. Phinma started to sparingly diversify
around 1960s with related-industries materials manufacturing and energy-generation. Most of
the “not so” diversification took place around 2000s with emphasis on the education industry.
Contrary to popular belief, the axiom that high risk yields high rewards is grossly misleading.
Phinma knew this as it was able to form a low-volatility portfolio that decreased the sustained
risk without a commensurate decrease in returns. A factor to its success is exploiting the
synergy between the industries through sharing of tangible and intangible resources and
capabilities among. The significant events along with the degree of operational and corporate
relatedness will be tackled in the succeeding sections.
B. strategies they implemented in diversification
Started from 1957, a successful business venture today called PHINMA Corporation
became the foremost producer of cement in the Philippines. The prosperity of the company can
be traced back to its well-thought corporate level strategy. This approach allowed PHINMA to
diversify; venture into different geographic markets, offer new business’ products, and select
unique strategic positions that may increase the firm’s value.
The corporate level strategy of PHINMA Corporation revolves around the combinations
of four (4) diversification strategies; both operational and corporate relatedness (BOCR), related
linked diversification (RLD), related constrained diversification (RCD), and unrelated
diversification (UD).
For the business to be considered to apply both operational and corporate relatedness
(BOCR) diversification, a new business of the organization must have related activities and
have the same required competencies with any of its existing businesses. As PHINMA
corporation continuously ventured into different sectors, some of its new businesses
successfully applied BOCR diversification. Some of these include furthering the cement
business of the company, its housing projects, its educational, and energy sector. The BOCR
diversity is evident in PHINMA cement business at the time the company ventured into the
manufacture of galvanized iron in 1963, at the moment the organization returned to the
cement industry through Philcement Corporation in 2019, and in 2020 when it launched its first
state of the art cement facility. Meanwhile, its BOCR diversification in lined with housing projects
can be traced from 1996 when PHINMA Corporation also started to shift into vertical urban
which is related to the housing projects of the business in 1987, providing medium-rise
housing in Metro Manila with more than 4,000 condo units in 2006, more mid-rise
condominiums in Davao in 2013, and building socialized housing projects in 2014. On the other
hand, the organization also triumph the educational sector after expanding its operations in the
field of education from 2004 in by acquiring Phinma Cagayan De Oro College in 2005 as a way
of providing accessible quality education to the people of Mindanao and Cagayan De Oro
College, Inc in 2006, opening Araullo University South Campus in 2014, opened PHINMA
University of Pangasinan and established PHINMA Education Holdings Inc. both in 2015,
introduced PHINMA Training Center (Education) in partnership with Victoria Hospital in 2016,
acquired republic college in 2019 and partnered with Yayasan to manage a network of schools
in Indonesia at the same year, and when PHINMA acquires Union College of Laguna in 2021.
Lastly, the BOCR diversification in energy sector is apparent in advancing its operation in coal
mining and energy generation in 1969 by forming a joint venture called Trans-Asia Power
Generation Corporation which commissioned its 52 MW power plant in Bulacan in 1997, and
purchasing controlling interest in PHINMA Energy Corporation in 2019.
The related linked diversification (RLD) refers to the businesses that have the same
required competencies but the operational activities are different from one another. On the
part of PHINMA, it only has one (1) business which it applied related linked diversification
and it was in 1969 when it opened Trans Asia Oil and Mineral Company which allowed the
company to begin coal mining and energy generation. This can be considered RLD since the
core competence from the previous endeavors can be linked but the activities and operations
between these businesses are completely different.
On the other hand, related constrained diversification (RCD) was shown when
PHINMA Corporation launched a new business that requires the same operation but different
competencies. PHINMA launched three (3) businesses that used related constrained
diversification. First is in 1987 when the company merged into PHINMA Property Holdings
Corporation which focused on developing low-cost, medium-rise housing projects. Second is at
the time the company partnered with Victory Liner and Five Star Transport Groups to acquire
University of Pangasinan and University of Iloilo. Though the operating schools can be related
to its existing businesses, the partnership with transport groups required different competence.
Lastly is in 2012 when PHINMA first started building affordable mid-rise condominiums in
Muntinlupa which need unique competence compared to its existing housing projects.
Finally, the unrelated diversification (UD) is evident when PHINMA Corporation
entered into a new business that has no relation to its existing business. Some of these
include; in 1971 when the organization entered into the paper and packaging business with
United Pulp and Paper Company, in 1989 at the time the company became one of the partners
to launch Asia Savings Bank and subsequently established PHINMA Foundation, Inc, at the
moment the company first entered into the education sector by acquiring Araullo University in
2004, on the point the business invested in Toon City Animation in 2008 which is its first ever
foray in business process outsourcing, in 2011 when PHINMA acquired 85% interest in Fuld &
Company Inc. which is a business research and consulting firm focusing on business and
competitive intelligence, and 100% interest in Business Back Office, Inc., and at the time in
2015 when the Phinma Southwestern University was acquired and its affiliate Sacred Heart
Hospital became Southwestern University Medical Center.
To put it briefly, Phinma Corporation diversified its operations with the intention of
creating value and improving its foothold in the market. In consideration of economies of scope
and market power along with an emphasis on financial economies, the company focused on
building a portfolio that yields above-average returns with reasonably low risk. The synergy
between the different invested industries had been the manifestation of the numerous strategies
it had employed. It ensured that relevant resources and capabilities had been shared between
its ventures to closely maintain operational and corporate relatedness. The company may have
concentrated its operations in a single industry around 1950s but it gradually diversified its
operations in the next decades. During this time, most of its diversification strategies had been
both operational and corporately related (BOCR) with the occassional related linked
diversifications (RLD). Almost once every decade thereafter, Phinma started to shift to unrelated
diversifications (UD) such as financing companies, educational institutions, animation studios,
and hospitals. It also partnered with transportation industries and other housing projects as a
form of related constrained diversifications. (RCD) As it amassed different tangible and
intangible resources and capabilities from a diverse collection of industries, it was able to
implement BOCR diversification strategies in its succeeding investment decisions. Up until now,
Phinma had continued to strengthen and expand its reach in the market. This indicates that
Phinma had accomplished organizational success through its intricate diversification strategies.

After making a great mark in the field of education, Phinma Corporation further
continued to expand its operations in 2005 by acquiring Phinma Cagayan De Oro College as a
way of providing accessible quality education to the people of Mindanao. In 2006, it acquired
Cagayan De Oro College Inc. This movement led to the creation of projects that support
education, as well as scholarships, mentorship, and leadership opportunities for the youth. In
the same year, Phinma Property Holding Corp. further advanced its business by providing
medium-rise housing in Metro Manila with more than 4,000 condo units. All of these ventures
constitute both operational and corporate relatedness (BOCR), considering that Phinma
previously acquired Araullo University in 2004, and has been involved in housing operations
since 1987, these ventures undeniably show that they have related activities with the existing
businesses and have the same required competencies from the former ones.
In 2008, Phinma invested in Toon City Animation which is its first ever foray in business
process outsourcing. This is considered as an unrelated diversification (UD) as this has different
activities and competencies required compared to its existing business. And in 2009, together
with its partners Victory Liner and Five Star, Phinma acquired University of Pangasinan and
University of Iloilo. This venture falls under related constrained diversification (RCD) since it
requires the same operation for the school but different competencies for the partnership with
the transport groups. Meanwhile, unrelated diversification (UD) was also evident when Phinma
entered into a new business that has no relation to its former ones, by acquiring 85% interest
in Fuld & Company Inc., a business research and consulting firm focusing on business and
competitive intelligence, and 100% interest in Business Back Office, Inc., in 2011. Moreover, in
2012, 2013, and 2014, both operational and corporate relatedness (BOCR) was apparent when
Phinma’s new ventures have related activities with its existing businesses and have the same
required competencies. This includes launching affordable mid-rise condominiums in
Muntinlupa, Pasig, and Quezon City, opening its second campus college in Cagayan De Oro
College, providing its first mid-rise condominium in Davao, building socialized housing projects,
and opening its south campus in the southern part of Nueva Ecija, respectively. And in 2015,
Phinma Southwestern University was acquired and its affiliate Sacred Heart Hospital became
Southwestern University Medical Center, which falls under unrelated diversification (UD)
because PHINMA Corporation’s existing operations and businesses have no relation to this
new venture.

Furthermore, the firm proceeds in delving to forge value from economies of scope
through incessant utilization of the two basic kinds of operational economies. For the
subsequent years of their business pursuits they pursue in practicing both shared activities and
transferred competencies. The firm seeks to build sustainable advantage through continuously
expanding their scope in health and education sectors. Moreover, as the company went through
rapid expansion, the firm renamed their business under oil and energy for the reason that their
previous name may no longer accurately reflect their current growing state. In 2017, the firm
dwells in a research and consultancy unit to be more responsive to the needs of the public and
their market. But in the succeeding part, the firm focused more on growing their core businesses
in education and construction materials sectors. Although the firm sold their investment in the
cement industry back in 2004 to acquire an educational institution and start a business under a
soft industry. The firm decided to return to the industry in 2019 without pooling any of their
resources from their existing investments. This indicated that their diversification strategy was
effective either from soft or hard industries. The cement industry is still an essential and
profitable investment for the firm as it continues to expand, particularly vital in their businesses
under hard industry.
 To put it briefly, Phinma Corporation diversified its operations with the intention of
creating value and improving its foothold in the market. In consideration of economies of scope
and market power along with an emphasis on financial economies, the company focused on
building a portfolio that yields above-average returns with reasonably low risk. The synergy
between the different invested industries had been the manifestation of the numerous strategies
it had employed. It ensured that relevant resources and capabilities had been shared between
its ventures to closely maintain operational and corporate relatedness. The company may have
concentrated its operations in a single industry around 1950s but it gradually diversified its
operations in the next decades. During this time, most of its diversification strategies had been
both operational and corporately related (BOCR) with the occassional related linked
diversifications (RLD). Almost once every decade thereafter, Phinma started to shift to unrelated
diversifications (UD) such as financing companies, educational institutions, animation studios,
and hospitals. It also partnered with transportation industries and other housing projects as a
form of related constrained diversifications. (RCD) As it amassed different tangible and
intangible resources and capabilities from a diverse collection of industries, it was able to
implement BOCR diversification strategies in its succeeding investment decisions. Up until now,
Phinma had continued to strengthen and expand its reach in the market. This indicates that
Phinma had accomplished organizational success through its intricate diversification strategies.