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Buguis Merchandising A Case Analysis Submitted to the Business Management Department For Partial Fulfillment for the Subject

Strategic Management (STRAMAN) M71 Submitted by: Sato, Hiroyuki Tiburcio, Dan Jason Villanueva, Quennie Joyce Submitted to: Dr. Nestor Nisperos

STEP 1: Firms existing vision, mission, objectives and strategies


COMPANY HISTORY Buguis Merchandise was built and started operation of business on September 1991. The operation of business began when Mrs. Buguis had the idea of building a baking goods shop since there wasnt any available bakery supplies shops around Las Pinas City area during that time. The company started with a capital of P20, 000.00 and chose the area of Zapote since this was the area they used to live also. The place is very convenient because the shop was located in front of their house and its nearby to bakeries. Years later they expanded the business and established another branch in Binakayan, Cavite. Las Pinas and Cavite area are their main target market and started delivering goods around the said area using three trucks. Later on they bought the available lot beside the shop in Zapote and started a partnership with a relative in which they built a grocery store and operated three shops all at the same time. However, due to weak management they had to close down the grocery store because it was too much to handle. Currently, the business is operating two shops of baking goods where one is in Cavite and the other in Zapote. VISION To expand Buguis Merchandise to other parts of the country and to be able to develop innovative ways in selling products. MISSION Buguis Merchandise is committed to promote and distribute affordable and quality wise products throughout the area of Las Pinas and Cavite. Dedicated to good service, honesty and loyalty to all the customers. OBJECTIVES To gain recognition as a major distributor of baking goods throughout the Las Pinas Area. STRATEGIES The company past strategies that was implemented is diversification. The company invested into to fields, one is the to start being a rice distributor and secondly, start a grocery store in Zapote area. Furthermore, the rice distributing business was a success while the grocery business went bankrupt due to bad management.

STEP 2: Developing a vision- mission for the organization


VISION

To be able to continue expanding the business by establishing more branches in areas where operation will boom with the aid of proper and well-built management in the business. MISSION Buguis Merchandise is fully committed in serving its customers to a bigger and better quality of service through dedication of maintaining its smooth relationship with not only its customers and clients but with its employees too.

STEP 3: Companys External Opportunities and Threats


Opportunities Adding a new branch Adding a bakery in the business Threats: Hold-ups Theft Bankruptcy due to bad debts made by the customers New competition Non-moving stocks Loss of customers Price hike

STEP 4: Competitor Profile Matrix


Critical success factors Weigh t 1. 2. 3. 4. 5. 6. 7. 8. 9. Total Advertising Product Quality Price Competitiveness Management Financial Position Customer loyalty Global Expansion Market Share .05 .30 .20 .10 .02 .05 .10 .01 .17 1.00 ADB Ratin g 3 4 3 3 4 3 2 1 2 Scor e .15 1.20 .60 .30 .08 .15 .20 .01 .34 3.03 JPC Ratin g 2 3 2 3 3 2 2 1 1 Scor e .10 .90 .40 .30 .06 .10 .20 .01 .17 2.24 Multi victory Ratin g 3 3 4 4 2 3 2 3 2 Scor e .15 .90 .80 .40 .04 .15 .20 .03 .34 3.01

STEP 5: External Factor Evaluation Matrix


Key external factors Opportunities Adding a new branch Adding a bakery in the business .20 .15 4 3 .80 .45 Weight Rating Weighted Score

Threats Hold-ups Theft Bankruptcy due to bad debts made by the customers New competition Non-moving stocks Loss of customers Price hike .15 .05 .10 .05 .10 .05 .05 1.00 3 2 2 1 2 1 1 .45 .10 .20 .05 .20 .05 .05 2.35

Total

STEP 6: Companys Internal Strengths and Weaknesses


Strengths a) Product Good Quality Low Price Large Quantity of Sales Different Varieties of Products such as sugar, flour, margarines, lard, baking soda, cocoa, basic kettle, coconut oil. b) Positioning Major branch in Zapote (since 1991), deliveries are free on board around Cavite, Las Pinas and Paranaque area. Old customers and trusted new ones Weaknesses a) Products Prices change all the time Large quantity selling to customers results to bad debts

b) Positioning Zapote areas are easily flooded because goods that are damaged by flood cannot be sold. The business is far from the bank which makes them uneasy to bring

may be given terms for two weeks or a month in maximum. Main branch near the well known Zapote-Wet Market. The streets of Zapote area always crowded so there are many customers all the time especially weekend and peak seasons. The back of the store is a village so its a big advantage for retail.

large amounts of money with them. Lack of security

STEP 7: Internal Factor Evaluation Matrix


Key external factors Strengths
a) Product Good Quality Low Price Large Quantity of Sales Different Varieties of Products

Weight

Rating

Weighted Score

.3 .2 .03 .02

4 3 2 2

.12 .60 .06 .04

b) Positioning Major branch in Zapote attracts customers since near wet market. Deliveries are free on board around Cavite, Las Pinas and Paranaque area. Gives terms for two weeks or a month in maximum for new and trusted customers

.01 .02 .05

1 1 3

.01 .02 .15

Weaknesses a) Products Prices changes all the time Large quantity selling to customers results to bad debts .03 .02 3 2 .09 .04

b) Positioning Zapote areas are easily flooded because goods that are damaged by flood cannot be sold The business is far from the bank which makes then uneasy to bring large amounts of money with them

.20 .05 .10

3 2 1

.60 .10 .10

Lack of security

Total

1.00

1.93

STEP 8: SWOT Matrix

Strengths- S a) Product Good Quality (S1) Low Price (S2) Large Quantity of Sales (S3) Different Varieties of Products (S4) b) Positioning

Weaknesses- W a) Products Prices change all the time (w1) Large quantity selling to customers results to bad debts (w2) b) Positioning

Opportunities- O

Major branch in Zapote attracts customers since near wet market. (S5) Deliveries are free on board around Cavite, Las Pinas and Paranaque area. (S6) Gives terms for two weeks or a month in maximum for new and trusted customers (S7) SO Strategies Expansion of business in
Zapote wet market (O1S5) Adding a bakery since large quantity of sales (O2S3) Expansion of different varieties of products (O1S4)

Zapote areas are easily flooded because goods that are damaged by flood cannot be sold. (w3) The business is far from the bank which makes them uneasy to bring large amounts of money with them. (w4) Lack of security (w5)

WO Strategies Expansion to areas were flood is not easily affecting the business (O1W3) Expansion to areas near the bank (O1 W4) Adding a bakery without changing the prices at all times instead seasonally (O2W1)

Expansion (O1) Adding a bakery in the business (O2)

Threats- T

ST Strategies Good quality of products for the new competition arising (S1T4) Gives terms to customers to avoid bad debts by the customers (S7T3) Free deliveries to nearby areas to avoid hold ups (S6T1)

WT Strategies Large quantity sold to customer leads to bankruptcy (W2T3) Lack of security causes thefts and hold ups (W5 T1T2) Price change at all time results to loss of customers (W1T6)

Hold-ups (T1) Theft (T2) Bankruptcy due to bad debts made by the customers (T3) New competition (T4) Non-moving stocks (T5) Loss of customers (T6) Price hike (T7)

SPACE Matrix
FS

Conservative CA
+ 1 + 2

+6 +5 +4 +3 +2 +1

Aggressive Diversification

Market Penetration Market Development Product Development


+ 4 + 5 + 6

+1 +5 -3 -2
-1 -2 -3 -4 -5 -6

+2 +6

+3

+4 IS IS

-6 -5 -1Defensive

+ 3

-4

Competitive Backward Integration

Retrenchment

ES Internal Strategic Position +1 (worst) to +6 (best) Financial Strength (FS) Working Capital +3 Earnings Per Share +3 Return On Investment +4 Price Earnings Ratio +2 Average: 3 External Strategic Position -1 (best) to -6 (worst) Environmental Stability (ES) Price Range of Competing Products -3 Competitive Pressure -5 Ease of Exit From Market -3 Risk Involved in Business -5 Average: -4

Internal Strategic Position +1 (worst) to +6 (best) Competitive Advantage (CA)

External Strategic Position -1 (best) to -6 (worst) Industry Strength (IS)

Product Quality +4 Customer Loyalty +2 Market Share +2 Technological Know-How +2 Average: 2.5

Growth Potential -2 Profit Potential -3 Financial Stability -4 Resource Utilization -3 Average:- 3

X-Axis = 0.5 Y-Axis = -1 An organization that is competing fairly well in an unstable industry.

BCG Matrix
Medium .50

High 1.0
High +20

Low 0.0

Backward integration RICE Market development RICE, FLOUR, SUGAR

Market development

Industry sales Growth Rate

Stars II

Question Marks I

Medium 0

Diversification GROCERY Retrenchment GROCERY

Retrenchment Divestiture

Cash Cows III


Low -20

Dogs IV

IE Matrix
The IFE total weighted scores
Strong Average Weak

3.0 to 4.0 I 1 - 44%

2.0 to 2.99 II 2- 33%

1.0 to 1.99 III

The EFE total weighted scores

High 3.0 to 4.0 3.0 Medium 2.0 to 2.99 2.0

IV

V 3- 22%

VI

Low 1.01.99 1.0

VII

VIII

IX

Division 1 2 3 Total

Sales 154,189. 12 51396.38 68,528.5 P274,114. 00

% Sales 56.2% 18.8% 25% 100.00

Profits 127,597. 07 63,978.5 3 95,697.8 0 P287,093. 40

% Profits 44% 22% 33% 100.00

IFE Scores 3.4 2.7 2.8

EFE Scores 3.3 2.5 3.0

Grand Strategy Matrix

Rapid Market Growth


1. 2. 3. 4. Market development Horizontal integration Divestiture Liquidation 1. 2. 3. Market development Backward integration Horizontal integration

Weak Competiti ve

Quadrant II

Quadrant I

Strong Competiti ve

1. 2. 3.

Retrenchment Horizontal diversification Liquidation

1. 2.

Horizontal diversification Joint ventures

Quadrant III

Slow Market growth

Quadrant IV

Quantitative Strategic Planning Matrix QSPM Strategic Alternative


Expansio n Diversificatio n AS 3 4 TSA .60 .60 Backward Integration AS TSA -

Key Factors
Opportunities Adding a new branch Adding a bakery in the business Threats Hold-ups Theft Bankruptcy due to bad debts made by the customers New competition Non-moving stocks Loss of customers Price hike

rating
.20 .15

AS 4 4

TSA .80 .60

.15 .05 .10 .05 .10 .05 .05

3 2 1 1

.15 .20 .05 .05

2 2

.10 .10

2 3 2 2 4

.20 .15 .20 .10 .20

Strengths
a) Product Good Quality Low Price Large Quantity of Sales Different Varieties of Products b) Positioning Major branch in Zapote attracts customers since near wet market. Deliveries are free on board around Cavite, Las Pinas and Paranaque area. Gives terms for two weeks or a month in maximum for new and trusted customers. Weaknesses a) Products Prices change all the time Large quantity selling to customers results to bad debts b) Positioning Zapote areas are easily flooded because goods that are damaged by flood cannot be sold. The business is far from the bank which makes them uneasy to bring large amounts of money with them. Lack of security

.30 .20 .03 .02 .01 .02 .05

3 3 3 3 2 2 -

.90 .60 .09 .06 .02 .04 -

4 2 -

.04 .04 -

3 3 4 -

.90 .60 .04 -

.03 .02

1 2

. 03 .04

4 -

.12 -

.20

.05 .10

3 .15 -

Total

2.00

3.78

1.48

2.51

Expansion Advantage Allows to experienc e new possibilitie s and overall growth Form of developm ent in the business Improves the quality and quantity of the product Essential pace for more profits and overall improvem ent Takes the high road and sets up more places to expand clientele and reach Disadvantage Focuses on slow and steady growth Difficult to judge the success of the growth Propels your business ahead but fortunate to find a certain market niche Leads to bankruptcy Warned against seeking rapid or widespread change

Diversification Advantage Achieve their potential in a developing economy by taking advantage of existing expertise such as expanding into new activities (Concentric) help in leveraging the new products to that brand which helps in spreading their customer base Enhances the product portfolio of the company by introducing complimentin g products Control of inputs leading to continuity and improved quality Disadvantage Achieve their potential in a developing economy by taking advantage of existing expertise such as expanding into new activities (Concentric) help in leveraging the new products to that brand which helps in spreading their customer base Enhances the product portfolio of the company by introducing complimenting products Control of inputs leading to continuity and improved quality and markets by guaranteeing sales and distributions Provides better risk control and movement away from declining activities and spread risks.

Backward integration Advantage Generates cost savings Potential to reduce cost Suppliers have sizable profit margins Resource requirements are easily met Reduces risk depending on suppliers Disadvantage Competence to undertake Boost resource requirements Locks firms into same industry Reduces flexibility to make changes in component parts Requires radically different skills

Provides better risk control and movement away from declining activities and spread risks.

Step 9 and 10
Income Statement Remarks
Revenue increase

Prior year
P658, 300

Projected year
P987, 450 50%

Cost of Goods Sold Sales (274,114) Gross Profit 384,186 Selling expense (28,681) 15% of sales Earnings before interest and taxes 355,505 Tax Expense (113,761.60) rate Net Income (Beginning of Year) Dividends Retained Earnings 241,743.40 61,350 (16,000) _ P 287,093.40

691,215 70% of sales 296,235 ( 148,117.50) 148,117.50 (47,397.60) 100,719.90 287,093.40 (16,000) P371, 813.30

32%

Buguis Merchandising Company Balance sheet As of December 31 2009 ASSETS Prior year Projected year Remarks CURRENT Cash P20, 000 P157,750.50 25% Assets Accounts Receivable 44,833 126,200.40 20% Assets Inventory 15,657 23,485.50 50% increase Prepaid Expenses ---2,205 Total current Assets 80, 490 309,641.40 Plant and Equipment 175%Asset Less Depreciation Total Fixed Assets Total Assets LIABILITIES Accounts Payable Notes Payable increase 37,247 184,042.25

(12,570) (78,875.25) 75% Asset 24,677 105, 167 P105,167 P414,808.40 P19, 343 P 17,100 10% decrease 9,474 10,895.10 15%

Total Current Liabilities

28,817

27,995.10

Additional paid in capital 15,000 Retained Earnings 61,350 Total Liabilities and Net Worth

15,000 371, 813.30 P105,167

P414,808.40

STEP 11: Annual objectives and Policies


ANNUAL OBJECTIVE

LONG-TERM COMPANY OBJECTIVE The company should generate an increase of 50% in revenues in a year through expansion, diversification, and backward integration.

Production Annual Objective Increase the inventory by 50% this year

Marketing Annual Objective Increase the sales by 75%

Finance Annual Objective A decrease in the accounts payable by 10%

Personnel Annual Objective Reduce late deliveries

Purchasin g Quality Control

Promotion Public Relation s Payments

Logistics Manageme nt Time Manageme nt

POLICIES To purchase more inventory through the suppliers To gain one or more suppliers To establish high or low safety stock of inventory To promote certain products Gain more connections to the suppliers and clients Provide logistics training to the delivery employees Provide time management training to the delivery employees

Step 12: Balance Score Card


Area of Responsibil ity 1. Financial Performance 2. Customer Knowledge 3. Internal business processes 4. Learning & Growth Measure of Target 50% increase in revenues Increase in sales by 70% Increase in inventory by 50% Adding new branches Time expectatio n 1 year 1 year Public relations 1 year or more Add at least 2 suppliers 2 or more years Conduct a feasibility study Primary Responsibil ity Entering into a new field of business