Group 1:

Adel, Floradel

Espinosa, Retiza

Mina, John Paul

Rondina, Joel Jr.

Sison, Gladys Joyce Triplis,

Maan

Villaester, Gabrielle

Program & Year:

BSBAOM – 3A

Date:

May 07, 2024

I. Company Background

Company History

The Manila Electric Railroad and Light Company (Meralco) was established in 1903 to
provide electric light, power, and an electric street railway system to Manila and its suburbs. Over
the years, Meralco played a significant role in the development of modern mass public
transportation with electric streetcars and buses.

The aftermath of World War II led to the destruction of the railway system, prompting
Meralco to exit the transportation business and focus on providing electricity. The electric service
played a crucial role in the postwar rehabilitation and early industrialization of the newly
independent Republic of the Philippines.

In 1961, a group of Filipino investors, led by Eugenio Lopez Sr., acquired Meralco from its
American owners, marking the first major American enterprise to be 'Filipinized.' The new Filipino
management expanded electric-generating and distributing facilities rapidly, earning the
confidence of international credit institutions.

By 1969, Meralco became the first billion-peso company in the Philippines, achieved
without government guarantees. In 1970, the Philippine government mandated state ownership of
major generating facilities, leading Meralco to sell its plants to the National Power Corporation,
focusing solely on electric distribution.

During the 1980s, Meralco's franchise area tripled, and the company organized and
operated the country's first elevated light rail transit (LRT) system, later turning it over to the
government at the end of the decade.

In 1995, Meralco emphasized customer satisfaction, world-class efficiency, good corporate

citizenship, and human resource development. In 2009, major stock transactions and partnerships
with PLDT and San Miguel groups brought about increased business opportunities, cost
reductions, and the introduction of new, expanded, and more affordable services. Throughout its
history, Meralco has adapted to changing environments while remaining one of the oldest and
largest Philippine companies.

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 Mission

To be a world-class energy solutions provider, powering our nation and empowering our people today
and for generations to come.

Vision

To provide our customers the best value energy solutions—reliably, affordably, superbly, and
sustainably.

Company Objectives

 EXCELLENCE

To strategize brilliantly, decide resolutely, and execute flawlessly.

 CUSTOMER CENTRICITY

Our power comes from our customer who is our reason for being. We deliver outstanding
customer experience. We live for our customer, the community, and our country.

 SUSTAINABILITY

Sustainability is core of all we do. We work to preserve our planet, to empower our people, to
power our communities, and to create prosperity for all.

 INTEGRITY

We value ethical behavior and employ good governance practices that meet global standards.

 INNOVATION

We are passionately innovative, leveraging technology to constantly improve our operations

and to provide better customer and employee experiences.

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  MALASAKIT

Sa lahat ng aming tungkilin at gawain, lubos ang pagbibigay ng sarili. Tunay na malasakit ang
nasa puso namin, bilang mga tagapaghatid ng liwanag.

 BAYANIHAN

Mahal namin ang aming kapwa at kababayan. Sa lahat ng oras, handa kaming tumugon,
tumulong, at maglingkod.

Company Policies

Meralco has established a comprehensive set of corporate governance policies to ensure ethical
conduct, transparency, and accountability. Key policies include:

1. Manual of Corporate Governance (Revised): Foundation of governance policies,

aligning with SEC regulations and outlining responsibilities to stakeholders. Last amended
and submitted to the SEC in April 2017.

2. Standards of Business Conduct and Ethics (Code of Ethics): Prescribes ethical values
and behavior for directors, officers, and employees, with revisions in 2003 focusing on risk
management and internal control.

3. Conflict of Interest Policy: Requires transparency and integrity, effective from August 23,
2004, and later amended in 2012.

4. Policy on Disclosure of Relatives: Aims to prevent conflicts of interest and ensure fairness
in decision-making, implemented on February 1, 2010.

5. Insider Trading Policy: Regulates trading by executives with access to unpublished

information, effective from July 16, 2010.

6. "Be Right" Communication Policy: Encourages open communication between

management and employees, providing a framework for reporting violations without fear
of retaliation, approved on August 10, 2010.

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 7. Policy on Solicitation and Acceptance of Gifts: Regulates the acceptance of gifts to
prevent conflicts of interest, approved on December 13, 2010.

8. Suppliers' Business Conduct Policy: Ensures suppliers adhere to corporate governance

standards and business ethics, approved on September 24, 2012, and amended on June 15,
2016.

9. Management Control Policy: Emphasizes internal control processes as integral to

governance and risk management.

10. Related Party Transactions (RPT) Policy: Ensures fair transactions with related parties,
with reviews conducted by the Audit and Risk Management Committee.

11. Board of Directors' Orientation and Continuing Education Policy: Provides orientation
and ongoing education for board members to support their oversight role.

12. Social Media Policy: Prescribes standards for the company's use of online platforms to
safeguard interests.

13. Nomination and Election Policy: Establishes procedures for director selection, including
acceptance of nominations and evaluation of nominees.

These policies, compiled in the Corporate Governance Handbook, are available

through Meralco's Corporate Governance Intranet Portal and HR Express Portal, ensuring
accessibility for all employees and stakeholders. The company's commitment to governance is
reaffirmed through annual compliance certifications to the SEC by the Compliance Officer.

II. Internal Environment

MERALCO, the Manila Electric Company, is one of the largest electric

utility companies in the Philippines. In terms of resources, MERALCO possesses a vast
infrastructure network including power plants, substations, transmission lines, and
distribution facilities, allowing it to efficiently supply electricity to millions of customers. Its
capabilities lie in its extensive experience in the energy sector, strong brand reputation, and
skilled workforce. Key competencies in marketing are demonstrated through effective

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 customer outreach and engagement strategies, while in finance, MERALCO exhibits sound
financial management practices, leveraging its stable revenue streams to support investment
in infrastructure and technology upgrades. Operationally, MERALCO excels in maintaining
reliable electricity supply, managing grid operations, and responding to customer needs
promptly, reflecting its operational excellence in the industry.

III. External Environment

Porter’s five forces

Threat of New Entrants

• High capital expenditure: Building and maintaining a power distribution network requires
significant upfront investment.

• Government regulations: The Philippine government tightly regulates the power industry,
making it difficult for new entrants to obtain licenses and permits.

• Economies of scale: Meralco benefits from economies of scale, allowing them to generate
electricity at a lower cost per unit compared to a new entrant.

Bargaining Power of Suppliers

• Multiple suppliers: Meralco has contracts with various independent power producers, reducing
reliance on any single supplier.

• Standardized product: Electricity is a fungible commodity, limiting suppliers' ability to

differentiate their product and command higher prices.

• Importance of Meralco as a customer: A stable contract with Meralco provides a guaranteed

revenue stream for power generation companies.

Bargaining Power of Buyers

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• Limited alternatives: In Meralco's franchise areas, there are no readily available alternative
electricity providers for most customers.

• Switching costs: The cost and inconvenience of switching to alternative energy sources like
solar power are high for many consumers.

• Essential service: Electricity is a necessity, limiting customers' ability to negotiate lower prices.

Threat of Substitutes

The threat of substitutes for electricity is generally low, as there are few viable alternatives
for most electricity applications. However, with the growing emphasis on renewable
energy sources, including solar and wind power, coupled with advancements in energy
storage technology, there is a potential for increased competition in the future.

Competitive Rivalry

Competitive rivalry in the electric utility industry in the Philippines is moderate. While
MERALCO holds a dominant position in the market, there are other players, both public and
private, operating in the industry. Regulatory changes, technological advancements, and the
entry of new players could heighten competitive pressures in the future.

IV. Analysis of Strategic Factors

SWOT Analysis

Strengths:

1. Top Electric Utility: Largest private sector electric distribution utility company in the
Philippines.

2. Versatile Services: Diversified service offerings through subsidiaries.

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 3. Steady Growth: Consistently increasing strong revenues from past 5 years..

4. Customer-centric: Highly customer-focused organization.

5. Award-Winning: Recipient of many prestigious awards.

Weaknesses:

1. Regulatory Dependence: Meralco's operations are heavily regulated by government

authorities, which can limit its pricing flexibility and profitability.

2. Infrastructure Challenges: Despite its extensive network, Meralco faces challenges in

upgrading and expanding its infrastructure to keep up with growing demand, especially in
rapidly developing areas.

3. Vulnerability to Natural Disasters: The Philippines is prone to natural disasters such as

typhoons and earthquakes, which can disrupt Meralco's operations and infrastructure.

4. Dependency on Fossil Fuels: Meralco's reliance on traditional fossil fuels for power
generation exposes it to price volatility and environmental concerns.

5. Customer Complaints: Meralco has faced criticism in the past for issues such as billing
disputes and perceived poor customer service, which can affect its reputation.

Opportunities:

1. Sustainable Transition: Opportunity to move towards sustainable future in the wake of

energy crisis.

2. Online Growth: Expansion of the online self-service business.

3. Data-Driven: Harnessing the power of data to drive business success

4. Capex Expansion: High investments for its capex program to meet growing demand.

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 Threats:

1. Regulatory Changes: Changes in government regulations or policies could impact

Meralco's operations, pricing structure, and profitability.

2. Competition: Meralco faces competition from both traditional rivals and emerging players
in the energy sector, which could erode its market share and margins.

3. Economic Volatility: Economic downturns or fluctuations in currency exchange rates can

affect consumer spending patterns and demand for electricity services.

4. Cybersecurity Risks: As Meralco relies more on digital technologies, it becomes

increasingly vulnerable to cybersecurity threats such as hacking and data breaches.

5. Climate Change: Climate change-related events, such as extreme weather conditions and
sea-level rise, pose long-term risks to Meralco's infrastructure and operations.

V. Strategic Alternatives

a. Growth
Strong growth in energy sales and higher earnings from its power
generation businesses were the main drivers of THE Manila Electric Company's
(Meralco) reported 34% increase in net income to P38 billion in 2023 from P28.4
billion in 2022. The utility company also reported higher Consolidated Core Net
Income (CCNI) from P27.1 billion in 2022 to P37.1 billion in 2023. 64 percent of
Meralco's CCNI came from its power distribution division, while 26 percent came from
its power generation division under Meralco PowerGen Corp. (MGen). MGen's P9.7
billion contribution to Meralco's CCNI was eighty percent higher than the P5.4 billion
reported in the same period in 2022, largely due to Pacific Light Power Pte's sustained
strong performance. Ltd.Pacific Light), Global Business Power Corporation's (GBP)
comeback, and the solar power projects of MGen Renewable Energy, Inc. (MGreen)
contribution. By the end of 2023, MGen's combined power generation capacity in

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 Singapore and the Philippines was 2,240 megawatts (MW).

b. Stability
The function of a distribution stability to extends beyond providing
households with steady and dependable electrical service. It is also essential for
sustaining enterprises, particularly at this pivotal time of economic expansion and
recuperation following two years of rigorous lockdowns brought on by the pandemic.
The economy will eventually implode without a dependable power supply.

The Manila Electric Company (Meralco), aware of the important role

it plays, made sure that, in spite of obstacles brought about by the ongoing COVID-19
epidemic and environmental and climate dangers, the lights remained on for its 7.6
million consumers throughout 2022 as the economy began to recover.No natural
calamity or worldwide health emergency may prevent Meralco from providing its
clients with exceptional service. Meralco's system average interruption frequency index
(SAIFI), which measures how frequently customers encounter a sustained power
outage, increased by 15% in the first nine months of 2022 to 1.052 times from 1.154
times during the same period the previous year.

In the meantime, the average length of interruptions per customer, as

indicated by the system average interruption duration index (SAIDI), increased by 7%
to 102.507 minutes from 109.892 minutes during the same period in 2021.Meralco's
application processing time decreased by 30% to just 2.27 days from the average of
3.23 days reported in 2021, staying true to its goal to provide exceptional customer
service. Although call center performance improved by 10.5%, the average time to
connect was reduced by 6% to 1.65 days from 1.76 days.

c. Retrenchment
A turnaround strategy refers to a comprehensive plan to transform a
company's operations and finances in response to a decline in performance or
profitability. It may involve a combination of measures, including cost-cutting, asset

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liquidation, and revamping business models, to reverse the trend and restore
profitability.
The objective of a turnaround strategy is to address the root causes of
performance decline and identify opportunities for growth. It often involves a thorough
analysis of the company's operations, including its products, services, processes, and
finances. The turnaround strategy aims to improve efficiency, reduce expenses, and
increase revenue, while also addressing any structural problems that may have
contributed to the decline.

Meralco, a Philippine electric company, recently introduced a state-of-

the-art facility known as the PIXL (Phils. Innovation eXpression and Experience Lab).
According to the company, PIXL is designed to accelerate innovation and improve
business operations. PIXL provides a host of advanced functions, including technology
scanning, proof of concept, prototype development, previews of vital facilities,
simulations of critical incident resolutions, distant learning, knowledge transfer, and
remote support. These functions will help Meralco achieve its goal of delivering
reliable and stable power to its customers. The company sees PIXL as a key investment
in its vision for digital transformation. The introduction of this cutting-edge technology
is in line with Meralco's commitment to customer-centricity and its commitment to
staying ahead of emerging trends to proactively meet customers' evolving needs. The
PIXL facility will allow the company to accelerate its innovation capabilities and
explore new and relevant technologies to enhance its operations.

It is crucial to note that a turnaround strategy is not a quick fix. It

usually involves significant changes in the way a company operates, and it may take
time to see positive results. The success of a turnaround depends on the ability to
implement the strategy successfully, which requires effective leadership, teamwork,
and a commitment to the long-term success of the organization.

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d. Best Alternative
Among the given alternative strategies, the best strategy for Meralco is
the growth strategy. Meralco's focus on maintaining a steady and dependable electrical
service, as well as its commitment to exceptional customer service during the ongoing
COVID-19 pandemic and economic recovery, is an important strategy for the company.
As a leading electric distribution company, Meralco recognizes the essential role it
plays in sustaining businesses and ensuring a stable economy. A reliable power supply
is crucial for economic growth and recovery, particularly in the current environment,
where many businesses are still rebounding from the effects of the pandemic.

Meralco's focus on distribution stability, as evidenced by the increased

SAIFI, is critical for maintaining a continuous and dependable power supply. The
company has made significant strides in reducing the frequency and duration of
sustained power outages, which demonstrates its commitment to providing an
exceptional customer experience. The reduction in processing times for its applications
and improvement in call center performance indicate that Meralco is focused on
delivering timely and efficient customer service, which is essential for maintaining
customer loyalty and satisfaction.

Meralco's commitment to distribution stability and exceptional

customer service is essential for the maintenance of a steady and dependable power
supply, as well as the continued success of the Filipino economy. As the Philippines
continues to recover from the impacts of the COVID-19 pandemic, it is crucial that
businesses and households have access to reliable and stable power, which Meralco is
dedicated to providing. Through its ongoing efforts to improve distribution stability,
reduce application processing times, and deliver exceptional customer service, Meralco
is ensuring that the lights remain on for its 7.6 million consumers and supporting the
continued growth and recovery of the economy.

12 | P a g e S T I C o l l e g e A n g e l e s
VI. Recommendation
Meralco's strong financial position, supported by significant growth in net
income and Consolidated Core Net Income (CCNI), highlights its preparedness for growth.
Meralco PowerGen Corp. (MGen) contributes greatly to the company's earnings,
demonstrating the benefits of diversification in the energy sector with its strong power
generation division. Meralco is well positioned to pursue a growth strategy due to its
diversification, strong presence in the Philippines, and investments in technological
innovation like the PIXL facility. By using its strong finances, diversifying income sources,
and prioritizing innovation and customer happiness, Meralco can effectively maneuver the
competitive energy industry and maintain lasting prosperity.

By focusing on growth, Meralco can leverage its strengths and address

weaknesses to optimize opportunities for growth and innovation. Its dedication to outstanding
customer service is in line with this approach, promoting customer loyalty and aiding in
continuous growth. By focusing on operational excellence and strategic growth efforts,
Meralco can strengthen its role as a top player in the energy sector, generating value for both
shareholders and stakeholders.

VII. Implementation Program

a. Management plan
Meralco Group has established a risk governance structure to ensure
successful implementation of ERM. This structure aims to provide an integrated view
of risks across different categories, enabling stronger independent advice to
management and the Board. The Board of Directors oversees risk management
activities and policies through the Risk Management Committee (RMC). Meralco's
Executive Management, led by the CEO, is responsible for implementing risk
management procedures and activities within business processes, setting direction, and
making strategic decisions.

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b. Marketing plan
Gcash is a popular mobile wallet in the Philippines that allows users to
perform various financial transactions, including sending money, paying bills, and
purchasing goods and services.

By including Gcash in their marketing plan, Meralco is likely

leveraging the widespread usage and convenience of Gcash to offer customers an
additional payment method for settling their electricity bills. This aligns with Meralco's
efforts to enhance customer convenience and accessibility by providing multiple
payment options.

Integrating Gcash into their payment options can benefit both Meralco
and its customers. For Meralco, it can streamline the payment process, reduce
administrative costs, and potentially increase on-time bill payments. For customers, it
offers a convenient and cashless way to pay their electricity bills using their mobile
phones, without the need to visit physical payment centers or banks.

c. Financial plan
Meralco is considering the possibility of borrowing funds in the third
quarter of this year to finance its power projects. The company has a consolidated
interest-bearing debt of P86 billion, which includes P33.9 billion that will mature
within one year. The proposed Annual Revenue Requirement (ARR) and Performance
Incentive Scheme (PIS) for the Fifth Regulatory Period (5RP) amount to P149.66
billion. Meralco has also stated that the capex program is essential to comply with
regulatory requirements, maintain the integrity, reliability, and efficiency of the electric
system, and ensure continuous improvement in service quality and performance
measurement for the benefit of its consumers. The capex projects will be utilized for
the replacement, refurbishment, and relocation of aging and obsolete assets, the
purchase and construction of non-network assets, and the deployment of automation
and technology projects. Additionally, Meralco's Advanced Metering Infrastructure
(AMI) program for over 2 million customers is aimed at achieving a reliable, efficient,

14 | P a g e S T I C o l l e g e A n g e l e s
 and intelligent distribution grid during the 5RP.

d. Operational plan
The operational plan entails several overarching strategies and specific
initiatives aimed at enhancing the efficiency and sustainability of operations within the
organization. Key components include clear communication to foster organizational
buy-in, establishing robust project management frameworks, implementing
performance measurement mechanisms, and ensuring adequate resource allocation.
Specific initiatives encompass optimizing power procurement through dedicated teams
and diversified sourcing, expanding and upgrading networks based on demand
forecasting and risk prioritization, reducing losses through advanced metering
infrastructure and public awareness campaigns, enhancing customer relationship
management via digital channels and personalized engagement strategies, integrating
technology for improved grid management and automation, and advancing
sustainability through renewable energy integration, energy efficiency programs, and
environmental management planning.

e. Human resource plan

Meralco's HR strategy prioritizes employee development, engagement,
talent management, and succession planning to enhance personnel management and
foster a customer-centric workforce. The company conducts talent reviews at various
organizational levels, evaluates leaders' strengths and career goals, and focuses on
employee development and involvement. Meralco provides health and safety
initiatives, competitive pay, and learning opportunities to its employees, administered
by the Benefits and Employee Services Associate. Additionally, Meralco offers an
Employee Stock Ownership Plan (ESOP) named "Ilaw ng Kinabukasan" (Light of the
Future) since 1988, aiming to provide employees and their families with an additional
income source.

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 XI. Management Lessons Learned

Meralco's historical trajectory serves as a testament to its adeptness in navigating

dynamic market landscapes. Transitioning from its roots in transportation services to a
specialized focus on electricity distribution, Meralco has consistently evolved its operational
frameworks to remain agile and competitive. This adaptability underscores the critical
importance of responsiveness to changing environments and market conditions, illustrating a
key management lesson in organizational resilience.

Central to Meralco's enduring success is its unwavering commitment to prioritizing

customer satisfaction and service excellence. Evident in its mission, vision, and overarching
objectives, this customer-centric approach has been instrumental in fostering strong customer
relationships and sustaining market relevance. This underscores the significance of aligning
organizational goals with customer needs, demonstrating a pivotal management lesson in
fostering enduring customer loyalty.

Furthermore, Meralco's strategic management practices underscore the foundational

importance of governance, ethics, and forward-thinking planning. By instituting robust
corporate governance frameworks and conducting comprehensive SWOT analyses, Meralco
proactively identifies and addresses internal and external factors that impact its operations.
These strategic initiatives, coupled with investments in innovation, sustainability, risk
management, and employee development, underscore essential management lessons in
fostering long-term organizational resilience and competitiveness.

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 XII. Bibliography

References:

Agrawal, V. (2023, April 23). The Manila Electric Company (Meralco) SWOT, PESTLE and
Porter's Five Forces analysis. SWOT, PESTLE &Porter's Five Forces Analysis .com.
https://www.swotandpestle.com/the-manila-electric-company/

Lenie Lectura. (May 03, 2022). Meralco eyes loans to bankroll projects. Retrieved from
https://businessmirror.com.ph/2022/05/03/meralco-eyes-loans-to-bankroll-projects/

Meralco. (2021). Key Financial and Operational Highlights. Metro Pacific Investments.
Retrieved from https://tinyurl.com/bdzy5xtb

Meralco Company. (2023). Corporate Governance in Meralco.

https://company.meralco.com.ph/corporate-governance/corporate-governance-in-meralco

Meralco Sustainability Report (2019): https://meralcomain.s3.ap-southeast-

1.amazonaws.com/2020-06/2019_meralco_sustainability_reportmobile_1.pdf

Pddm, I. R. M. |. (2014). Porter Five Forces Analysis – (Industry Analysis) definition,

advantages, and criticism. Aou-lb.
https://www.academia.edu/7771291/Porter_Five_Forces_Analysis_Industry_Analysis_Defini
tion_Advantages_and_Criticism

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Pooja Chandak. (October 30, 2023). Meralco Surpasses 1,500 MW Renewable Energy
Capacity Milestone. Retrieved from https://solarquarter.com/2023/10/30/meralco-surpasses-
1500-mwrenewable-energy-capacity-milestone/

Republic Act. No. 9209. (2003). An act granting the Manila Electric Company a franchise to
construct, operate, and maintain a distribution system for the conveyance of electric power to
the end-users in the Cities/Municipalities/Barangays in Batangas, Laguna, Quezon and
Pampanga. https://www.officialgazette.gov.ph/2003/06/09/republic-act-no-

9209/?fbclid=IwAR1VjxuuVqYC7H4Iko60C6PEDvJOLgsWNvMU9uNIGNhwZHzSqNOjz
T1 5pbY

Richmond Mercurio. (April 29, 2023). Meralco future-proofs business operations. Retrieved
from https://www.philstar.com/business/2023/04/29/2262365/meralco-future-proofs-
business-operations

TimesPro. (April 03, 2024). What is Retrenchment Strategy, and What are its Types?. Retrieved
from https://timespro.com/blog/what-is-retrenchment-strategy-and-what-are-its-types

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