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: Firm’s existing vision, mission, objectives and strategies

COMPANY HISTORYBuguis 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 wasn’t 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 it’s 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.

VISIONTo expand Buguis Merchandise to other parts of the country and to be able to develop

innovative ways in selling products.

MISSIONBuguis 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.

STRATEGIESThe 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

VISIONTo 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: Company’s External Opportunities and Threats

Opportunities Threats:

Adding a new branch Adding a bakery in the business

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 ADB JPC Multi victory

Weight Rating Score Rating Score Rating Score

1. Advertising2. Product Quality3. Price4. Competitiveness5. Management6. Financial Position7. Customer loyalty8. Global Expansion9. Market Share

.05

.30

.20

.10

.02

.05

.10

.01

.17

343343212

.151.20.60.30.08.15.20.01.34

232332211

.10

.90

.40

.30

.06

.10

.20

.01

.17

334423232

.15

.90

.80

.40

.04

.15

.20

.03

.34

Total 1.00 3.03 2.24 3.01

STEP 5: External Factor Evaluation Matrix

Key external factors Weight Rating Weighted Score

Opportunities

Adding a new branch Adding a bakery in the business

.20

.1543

.80

.45

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

322

1211

.45

.10

.20

.05

.20

.05

.05Total 1.00 2.35

STEP 6: Company’s Internal Strengths and Weaknesses

Strengths Weaknesses

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 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 it’s a big advantage for retail.

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

STEP 7: Internal Factor Evaluation Matrix

Key external factors Weight Rating Weighted Score

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

.3

.2.03.02

.01

.02

.05

4322

11

3

.12

.60

.06

.04

.01

.02

.15

Weaknesses

a) Products

Prices changes 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 then uneasy to bring large amounts of money with them

Lack of security

.03

.02

.20

.05

.10

32

3

2

1

.09

.04

.60

.10

.10

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

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)

Weaknesses- W

a) Products

Prices change all the time (w1)

Large quantity selling to customers results to bad debts (w2)

b) Positioning

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)Opportunities- O

Expansion (O1) Adding a bakery

in the business (O2)

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)

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)

Threats- T

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)

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)

SPACE Matrix

Internal Strategic Position +1 (worst) to +6 (best) External Strategic Position -1 (best) to -6 (worst)

Financial Strength (FS) Environmental Stability (ES)

Working Capital +3 Price Range of Competing Products -3

Earnings Per Share +3 Competitive Pressure -5

Return On Investment +4 Ease of Exit From Market -3

Price Earnings Ratio +2 Risk Involved in Business -5

Average: 3 Average: -4

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

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

-1

-2

-3

-4

-5

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

CA ISIS

FS

ES

Aggressive

Diversification

Competitive

Backward Integration

Conservative

Market Penetration

Market Development

Product Development

Defensive

Retrenchment

Internal Strategic Position +1 (worst) to +6 (best) External Strategic Position -1 (best) to -6 (worst)

Competitive Advantage (CA) Industry Strength (IS)

Product Quality +4 Growth Potential -2

Customer Loyalty +2 Profit Potential -3

Market Share +2 Financial Stability -4

Technological Know-How +2 Resource Utilization -3

Average: 2.5 Average:- 3

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

BCG Matrix

Medium

.50Low

0.0

High

1.0

Indu

stry

sal

es G

row

th R

ate

Low-20

Medium0

High +20

Question Marks IStars II

Cash Cows III Dogs IV

Backward integration –RICE

Market development – RICE, FLOUR, SUGAR

Diversification - GROCERY Retrenchment - GROCERY

Market development

Retrenchment Divestiture

IE Matrix

The IFE total weighted scores

Strong Average Weak

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

I1 - 44%

II2- 33%

III

IV V3- 22%

VI

VII VIII IX

Division Sales % Sales Profits % Profits IFE Scores EFE Scores

1 154,189.12 56.2% 127,597.07 44% 3.4 3.3

2 51396.38 18.8% 63,978.53 22% 2.7 2.5

3 68,528.5 25% 95,697.80 33% 2.8 3.0

Total P274,114.00 100.00 P287,093.40 100.00

Grand Strategy Matrix

High3.0 to 4.0

3.0

Medium2.0 to 2.99

2.0

Low1.0 1.99

1.0

The

EFE

tota

l wei

ghte

d sc

ores

Rapid Market Growth

Quadrant IQuadrant II

Quadrant IV

WeakCompetitive

Situation

StrongCompetitive

Situation

Slow Market growth

1. Market development

2. Horizontal integration

3. Divestiture

4. Liquidation

1. Market development

2. Backward integration

3. Horizontal integration

1. Retrenchment

2. Horizontal diversification

3. Liquidation

1. Horizontal diversification

2. Joint ventures

Quadrant III

Quantitative Strategic Planning Matrix

QSPM Strategic Alternative

Expansion Diversification Backward Integration

Key Factors rating AS TSA AS TSA AS TSA

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

.20

.15

.15

.05

.10

.05

.10

.05

.05

44

---

3211

.80

.60

---

.15.20.05.05

34

---

--22

.60

.60

---

--

.10

.10

--

--2

3224

--

--

.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

.03.02

.20

.05

.10

3333

2

2

-

12

-

3

-

.90

.60

.09

.06

.02

.04

-

.03.04

-

.15

-

----

4

2

-

--

-

-

-

----

.04

.04

-

--

-

-

-

33--

4

-

-

4-

-

-

-

.90

.60--

.04

-

-

.12-

-

-

-

Total 2.00 3.78 1.48 2.51

Expansion Diversification Backward integration

Advantage

Allows to experience new possibilities and overall growth

Form of development in the business

Improves the quality and quantity of the product

Essential pace for more profits and overall improvement

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

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 complimenting products

Control of inputs leading to continuity and improved quality

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

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.

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

Step 9 and 10

Income Statement Prior year Projected year Remarks

Revenue P658, 300 P987, 450 50% increase

Cost of Goods Sold Sales (274,114) 691,215 70% of salesGross Profit 384,186 296,235 Selling expense (28,681) ( 148,117.50) 15% of sales

Earnings before interest and taxes 355,505 148,117.50Tax Expense (113,761.60) (47,397.60) 32% rate

Net Income 241,743.40 100,719.90(Beginning of Year) 61,350 287,093.40

Dividends (16,000) _ (16,000)Retained Earnings P 287,093.40 P371, 813.30

Buguis Merchandising CompanyBalance sheet

As of December 31 2009

ASSETS Prior year Projected year RemarksCURRENT

Cash P20, 000 P157,750.50 25% AssetsAccounts Receivable 44,833 126,200.40 20% AssetsInventory 15,657 23,485.50 50% increase

Prepaid Expenses ---- 2,205Total current Assets 80, 490 309,641.40

Plant and Equipment 37,247 184,042.25 175%AssetLess Depreciation (12,570) (78,875.25) 75% AssetTotal Fixed Assets 24,677 105, 167

Total Assets P105,167 P414,808.40

LIABILITIESAccounts Payable P19, 343 P 17,100 10% decreaseNotes Payable 9,474 10,895.10 15% increase

Total Current Liabilities 28,817 27,995.10

Additional paid in capital 15,000 15,000Retained Earnings 61,350 371, 813.30Total Liabilities and Net Worth P105,167 P414,808.40

STEP 11: Annual objectives and Policies

ANNUAL OBJECTIVE

LONG-TERM COMPANY OBJECTIVEThe company should generate an increase

of 50% in revenues in a year through expansion, diversification, and backward

integration.

ProductionAnnual Objective

Increase the inventory by 50% this year

MarketingAnnual Objective

Increase the sales by 75%

FinanceAnnual Objective

A decrease in the accounts payable by 10%

PersonnelAnnual Objective

Reduce late deliveries

Purchasing

Quality Control

Promotion

Public Relations

Payments Logistics Management

Time Management

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 Responsibility

Measure of Target

Time expectation

Primary Responsibility

1. Financial Performance

2. Customer Knowledge

3. Internal business processes

4. Learning & Growth

50% increase in revenues

Increase in sales by 70%

Increase in inventory by 50%

Adding new branches

1 year

1 year

1 year or more

2 or more years

Entering into a new field of business

Public relations

Add at least 2 suppliers

Conduct a feasibility study