Table of Contents

I. INTRODUCTION 4

II. RESEARCH DESIGN & METHODOLOGY 7

III. VISION & MISSION 9

3.1 Current Vision & Mission Statement 9

3.1.1 Current Vision 9
3.1.2 Current Mission 9
3.1.3 Review of the Current Vision and Mission Statements 9

3.2 Revised Vision & Mission 11

3.2.1 Revised Vision 11
3.2.2 Revised Mission 12
3.2.3 Review of the Revised Vision and Mission Statements 12

IV. EXTERNAL ASSESSMENT 13

4.1 Economic Forces 13

4.1.1 Opportunity: GDP growth in Philippines is to remain strong in 2016 with higher
investments and consumptions 13
4.1.2 Opportunity: Increasing number of Overseas Filipino workers (OFW) 14
4.1.3 Threat: Economic Recession 14

4.2 Economic Forces 15

4.2.1 Opportunity: Philippine Population Increases 15
4.2.2 Opportunity: Between 2015 and 2030, middle class household in the Philippines is set to
grow by 41.8% and to reach 8.4 million by 2030 16
4.2.3 Opportunity: From 2014 to 2019, the number of outlet in the consumer is forecasted to
increase by 4.7% 17
4.2.4 Opportunity: Growing healthy and wellness lifestyle trend towards nutrition 18
4.2.5 Opportunity: The rise of Retail Industry in the country 18
4.2.6 Opportunity: Millennials have spending power 19
4.2.7 Opportunity: Consumer confidence increased significantly in 2016 20

4.3 Technological Forces 21

4.3.1 Opportunity: Technological advancement for products and service 21

4.4 Political, Legal and Government Forces 23

4.4.1 Opportunities: Government's Budget for project KALSADA (Konkreto at Ayos na
Lansangan at Daan Tungo sa Pangkalahatang Kaunlaran) in 74 Provinces 23
4.4.2 Threat Taxation 25

4.5 Ecological Aspects 25

1
 4.5.1 Threat: Impact of Climate Change 25

V. INDUSTRY AND COMPETITIVE ANALYSIS 26

5.1 Industry Analysis 26

5.1.1 Market Size 27

5.2 Competitor Analysis 28

5.2.1 SM Markets 28
5.2.2 Puregold Price Club 29
5.2.3 Industry Ratio 30

5.2 Portes Five Forces 36

5.2.1 Threat of New Entrants: HIGH 37
5.2.2 Bargaining Power of Buyers: HIGH 37
5.2.3 Threat of Substitutes: HIGH 37
5.2.4 Bargaining Power of Suppliers: LOW - MODERATE 38
5.2.5 Rivalry among Competing Firms: HIGH 38

5.3 Competitive Profile Matrix (CPM) 39

5.2.1 Critical Success Factor 39
5.2.2 Critical Success Matrix 41

VI. EXTERNAL FACTOR EVALUATION (EFE) MATRIX 46

6.1 Opportunity 47
6.1.1 Growing market in the country, especially for middle class which is set to grow by 41.8%
between 2015 and 2030 to reach 8.4 million by 2030 47
6.1.4 Government's Budget on Infrastructures and transportation projects rehabilitation in 74
Provinces49
6.1.5 Favorable government policies and skill development have led to a robust modern
technology 49

6.2 Threats 50
6.2.1 Aggressive increase of substitute stores offering the same products 50
6.2.2 FOREX volatility 50
6.2.3 Climate Change has an impact around the life cycle of food products 50
6.2.4 The unemployment rate increased to 6.6% in January 2017 higher than the 5.7%
recorded in January 2016 50
6.2.5 Power Rates it the Philippines is the 3rd highest in Asia according to International Energy
Consultants (IEC) 51

VII. INTERNAL ANALYSIS 51

7.1 McKinsey 7s Framework 51

7.1.1 Structure 51
7.1.2 Systems 52
7.1.3 Style 52
7.1.4 Staff 52
2
 7.1.5 Shared Values 53

7.2 David’s Internal Audit Analysis 53

7.2.1 Management Audit 53
7.2.2 Marketing Audit 53

7.3 Finance Audit 54

VIII. INTERNAL FACTOR EVALUATION (IFE) MATRIX 55

8.1 Opportunity 56
8.1.1 30 years industry experience with over 140 stores located nationwide and branded as
one of the leading supermarket in the Philippines 56
8.1.2 Only retailer that has an active partnership with a food and nutrition research institute
(FNRI) to evaluate the nutritional contents of the food offerings to promote health &
wellness 57
8.1.3 Investing heavily in upgrading front- and back-end systems in a bid to enhance the
customer experience years industry experience 57
8.1.4 Merchandising and Rewards Program increases customer loyalty 57
8.1.5 Good customer relationship services due to absence of union 57

8.2 Weaknesses 58
8.2.1 Stores are mostly can be found in the mall, they are discriminating in choosing locations
58
8.2.2 Less aggressive of advertising campaign 58
8.2.3 Target market is not defined, each branch has its own target market 58
8.2.4 Variety of products is less versus to competitors where they offer small size products and
cheaper that cater for those who has sari sari store like business 58
8.2.5 The choice of leasing partners is not that attractive to gain more new customers 58

8.3 Summary 58

IX. STRATEGY FORMULATION 59

9.1 Opportunity 59

9.2 SPACE Matrix 60

9.3 Boston Consulting Group (BCG) 62

9.4 IE Matrix 62

9.5 Grand Strategy Matrix 63

X. SUMMARY OF STRATEGIES 63

XI. QUANTATIVE STRATEGIC PROFILE MATRIX (QSPM) 64

XII. PROPOSED STRATEGY 66

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 12.1 Strategic Objectives 66

12.2 Financial Objectives 66

12.3 Market Development 66

12.4 Product Development 66

12.5 Market Penetration 67

XIII. ACTION PLANS 67

XIV. STRATEGY EVALUATION AND CONTROL 69

14.1 BALANCED SCORE CARD 69

XV. STRATEGY EVALUATION AND CONTROL 71

15.1 PROJECTED INCOME STATEMENT 71

15.2 PROJECTED BALANCE SHEET 77

15.3 PROJECTED CASH FLOW 82

XVI. RSC FINANCIAL STATEMENTS 83

I. INTRODUCTION

4
 A feasible strategy for Robinson’s Supermarket Corporation (RSC) is what this strategic
management paper aims to develop. RSC was established in 1985, the first supermarket
was opened in Cebu Fuente. The supermarket is operated under Robinson’s
Supermarket Corporation which was incorporated in August 21, 1990. It is 100% owned
by Robinsons Retails Holdings (RRHI), a subsidiary of J.G Summit Holdings. With over
30 years of retail experience, RRHI is known as one of the leading multi-format retail in
the Philippines that was incorporated on February 4, 20021.

There are six business segments under RRHI, the Robinsons Department Store in Metro
Manila in 1980, the supermarket business in 1985, the Do It Yourself (DIY) business in
1994, the convenience store and specialty store businesses in 2000 and the drug store
business in 2012. RRHI operations capture the continuing macroeconomic growth in the
Philippines, mostly the growth in disposable income and consumption of the middle-
income segment, one of its key target markets. Further, RRHI other well-known stores
are Handyman Do it Best, True Value, Topshop, Topman, Toys “R” Us and Ministop2.

In year 2013 and 2014, as part of the expansion plans, RSC acquired 100% ownership
of Eurogrocer Corp. (EC), operator of a six store supermarket chain and JAS 8 Retailing
Mngt. Corporation (JRMC) operates of 3 store supermarket chains under the name of
Jaysmith Supermarket to penetrate Northern Luzon. RSC has contributed the highest
percentage contribution revenues to the company as shown on below table.

In the recent years, due to domestic economic growth and the desire of the population to
upgrade their way of life, the retail food market has experienced robust growth. The
supermarket industry has become competitive. Robinsons Supermarket main
competitors are SM Markets and Puregold Price Club which are also established
company known in the Philippines

1
http://www.cepal.org/deype/noticias/noticias/7/43417/101110_ICP-OM_OutletDefinitions.pdf

2
www.robinsonsretailholdings.com.ph/download.php?.../RRHI%2017A%20WITH%20A

5
Robinsons Supermarket and its rival competitors continue to open retail store in the
same cities and neighborhood in the country. These companies compete on the basics of
location, store ambiance presentation, price, and additional benefits. Robinsons
Supermarket has a total of 140 stores nationwide in the Philippines ended in 2016. They
are still expanding in all regions - South & Northern Luzon, GMA and Vismin.

Picture 1 Robinsons Supermarket Company Overview

Most of its stores are strategically located in Luzon area with 59 stores followed by Metro
Manila with 42 stores, Visayas with 19 stores and 11 stores in Mindanao area. The
biggest store is located in Metro East, Pasig that was established in 2001 while the
latest branch that recently opened early this December 2016 is located at the Island
Central Mactan, Lapu Lapu City.

The marketing strategy of Robinson supermarket focuses to promote healthy living,

known for choice for fresh and healthy food with the partnership of Department of
Science and technology’s Food and Nutrition Research Institute (DOST-FNRI) to provide
up-to-date information on food and its nutrient contributions. RSC campaign is “I Love
Wellness” and carries philosophy “Eat well, Spend less”. The supermarket provides
consumers with a wide selection of high quality health and wellness products. They
partner with the suppliers in providing high quality fresh food. Most goods in the
supermarket are on consignment basis with the sales representing 26% of the revenue
of the supermarket. As of 2014, there are over 2,000 suppliers coming from local and
multinational corporations. However, the company believes that it is not dependent on
any single supplier and it relies not on one customer but the buying public in general.
These suppliers are San Miguel Corp., Universal Robina Corporation (URC), Nestle
Philippines, Unilever and Procter & Gamble.
6
 RSC make it easier for the shoppers to distinguish which of its products are healthy and
with price discounts by using a colour-coded price tags or known as “Shop Smart” labels.

RSC is run by Robina Y. Gokongwei-Pe, President, Chief Operating Officer & Director.
She is the daughter of business tycoon John Robinson Lim Gokongwei, the founder of J.
G Summit. The General Manager of RSC is Justiniano “Jody” S. Gadia, who has been in
the company for several years.

Number of Employees:
RRHI had 9,967 employees as of Dec 31, 2015. The Robinson’s Supermarket is manned
by 2,749 employees. This is a significant figure in terms of labor employment in the
Philippines. And as of Oct 2016, no strikes had been experienced with the Supermarket
employees.

II. RESEARCH DESIGN & METHODOLOGY

The construction of this research paper needed several facts and information, which
were obtained through public and private sources alike.

Also, information was obtained through interview with the company’s key officer and
people in the retail supermarket industry.

Summary of Framework, Tools, Activities and Outputs For this strategic management
paper:

7
 Framework Tools Activities Output

Ten Essential
Mission Statement Mission and Vision
Components of a
Evaluation/Formulation Statements
Mission statement

External Factor
General Environment
Evaluation (EFE)
Analysis Opportunities and
Matrix
Threats
Porter’s Five Competitive Profile
Industry Analysis
Forces Model Matrix (CPM)

Internal Factor
David’s Functional Strengths and
Evaluation (IFE) Company Analysis
Analysis Weaknesses
Matrix

Internal-External
Matrix (IE)
David’s Matching TOWS Matrix Objectives and
Strategy Formulation
Tools SPACE Matrix Strategies
Grand Strategy
Matrix

Quantitative
David’s Matching Prioritization of Recommended
Strategic Planning
Tools Strategies Strategies
Matrix (QSPM)

Market Segmentation Action Plans

Implementing
and Product Proforma Financial
Strategies
Positioning Statements

Norton and
Strategy Evaluation Performance
Kaplan’s Balanced
and Control Measures
Scorecard

Scope and Delimitations:

The study is about the supermarket industry in the Philippines that focuses on how
Robinsons supermarket sustain its number 3 position in the industry. Only top 2
competitors will be discussed through obtaining information from available annual reports
and online articles.

III. VISION & MISSION

8
3.1 Current Vision & Mission Statement

3.1.1 Current Vision

“To be the supermarket of choice known for fresh and healthy food, clean hygienic
stores, competitive prices and excellent customer service.”

3.1.2 Current Mission

“To educate and empower its customers on their choice of food and products that
promotes healthy living.”

3.1.3 Review of the Current Vision and Mission Statements

Robinson’s Supermarket existing vision is design to be the choice known for fresh
and healthy products. It states that the company wants to be known not just in terms
of healthy products but also by having clean hygienic stores and competitive prices.
Further, current vision also expresses the importance of its consumers by providing
excellent customer service that will deliver growth to the industry and provide
exceptional quality products at competitive prices.

On the other hand, the current mission statement of RSC lacks some components
that need to be presented following David’s framework on what makes a mission
statement good/effective. Mission statement is the reflection of the commitment on
what the company plans to do.

David’s 9 essential components is being evaluated for RSC’s current mission

statement:

Currently
Factors Guidelines Evaluation
Present?

Who are the firm’s RSC mission statement is

Customers Yes
1 customers? for all people

RSC mission statement

What are the identifies its products by
firm’s major using fresh and healthy
Products/
products and Yes products with competitive
2 Services
services? prices and provided
excellence services.

9
 Geographically,
Markets where does the No
3
firm compete?

Is the firm
Technology technologically No
4
current?

Is the firm
Concern for
committed to
survival,
growth and
5 growth, No
financial
profitability
soundness?

What are the

basic beliefs,
values,
Philosophy No
6 aspirations, and
ethical priorities of
the firm?

What is the firm’s

distinctive
RSC mission major
competence or
Self-concept competitive advantage is
7 major competitive Yes
it promotes healthy living.
advantage?

Is the firm
responsive to
Concern for social,
8
public image community, and No

environmental
concerns?

Are employees’
Concern for
valuable assets of No
9 employees
the firm?

10 Nation- No

10
 building

3.2 Revised Vision & Mission

3.2.1 Revised Vision

“To maintain being no. 3 supermarket in the Philippines through expansion and
continuous delivery of organic and healthy products.”

3.2.2 Revised Mission

“In Robinson’s Supermarket Corporation (3), we commit to:

- Encourage customers (1) to embrace healthy living by providing a healthy reflection

of products at costumers convenience (2,7)

- Use most current technology (4) available to increase the speed of our daily
operations with the help of having the most qualified employees (9) to ensure that our
customers receive the best service available (2).

- Support all kinds of social, community and environmental projects through personal
engagement (8).

- Involve in social and economic progress (10) to act at the highest levels of ethics
and compliance to corporate governance (6).

- Devote the highest standard of stewardships for our shareholders (5).”

3.2.3 Review of the Revised Vision and Mission Statements

Vision
The revised vision has a clear focused concept where it wants to maintain being the
top 3 supermarket in the Philippines by expanding additional branches. This has
plausible chance of success as Robinsons supermarket is already known brand and
has a financial capabilities to expand its stores.

Mission
The revised mission has corresponding number where the 10 David’s criteria’s are all
applicable.

The vision and mission statements of the company should be constantly reminded by
doing the following:

11
 1. Posting posters and audio facility that play time to time in RSCs offices and
stores
2. Putting up billboards on busy road such as EDSA, C5, SLEX, NLEX
3. Campaigning using advertisement from media resources such as radio
stations, newspapers, magazines, lifestyle blogs, feature on TV local station (ABS
CBN, GMA, TV5)

IV. EXTERNAL ASSESSMENT

4.1 Economic Forces

The external analysis is important to identify and know the opportunities and the threats to
Robinsons Supermarket Corporation. Some common external factors are political,
economic, social, technological, environmental and legal, known as PESTEL. With this
analysis, shareholders will be able to decide what changes should be made to business
operations to respond to external environmental changes. These several factors can
influence RSC’s to matches customer’s expectations and fulfill their demands.

4.1.1 Opportunity: GDP growth in Philippines is to remain strong in 2016 with higher
investments and consumptions

Asian economies in recent years are experiencing fast growth than the Euro area
and that of North America. The Philippines is most likely the fastest-growing economy
in Asia at present, followed by China at 6.7%, Vietnam at 5.5%, and Indonesia at
4.9%, and Malaysia at 4.2%. According to retail analyst IGD, Philippines GDP growth
hitting 6.9% in the 1Q of 2016 and real GDP growing by 6.2% at the end of 2016
after gains of 5.9% in 2015.

Figure 1: Real GDP Growth in the Philippines 2010 - 2016

Strong economic environment brings about domestic growth which results in

increase in income.

12
 The Philippines is experiencing a continuing macroeconomic advancement. There is
an increase in disposable income and consumption of the middle income group. The
general public is the supermarket’s target market. Therefore economic growth is
good for the industry because more money means more spending and the goods in
the supermarket are essential to the households.

Due to its 30 years of retail experience, Robinsons Supermarket is well-positioned to

benefit from strong economy of the country. Robinson’s Supermarket revenue
exceeded the other segments of the company.

4.1.2 Opportunity: Increasing number of Overseas Filipino workers (OFW)

An increasing number of OFW is significant because this will be an opportunity to a
supermarket industry like Robinsons supermarket to get new shoppers. Mr.
Tetangco, BSP governor said that the total cash remittances are usually coming from
Germany, Hong Kong, Japan, Kuwait, Qatar, Saudi Arabia, Singapore, the United
Arab Emirates, the United Kingdom and the US. It shows that 96.4 percent Filipinos
are spending to buy food and other household items from the remittances they
received.

BSP also projected cash remittances to increase yearly by 4 percent and reach $27.7
billion by 201 in the Philippines. Further, according to World Bank, low and middle
income countries were likely to increase remittance flows 0.8 percent higher than
previous year’s $438.6 billion.

One of the biggest sources of foreign exchange in Philippines is remittances. It

boosts the country’s economy by making sure steady supply of dollars.

4.1.3 Threat: Economic Recession

Recession is when a country operates below its potential GDP and any industry sees
it as potential threat as it affects the demand and supply of the business. It can result
to increase unemployment and lower real income where consumption expenses can
go down. If GDP is above potential, it means that prices of goods will increase faster
where it will be very challenging for poor people to meet. Also, net export can go
down if recession is global.

In Philippines, recession happened the past two decades. First is the 1997 Asian
Financial Crisis. Second is the 2009 US recession which started late 2007 and ended
mid-2009. As we know USA is a powerful country and a major player in trading and
financial aspects. As a result, most of the countries including Philippines were greatly
affected where it slow the income flow of money.
13
 Below graph shows the effect on global retail industry. (Mykyta,2012).

Figure 2: Significant downturn in the global retail industry

Source: Mykyta (2012)

Retail is part of supermarket industry, if recession will happen, supermarket industry

will be affected in terms supply and demand of products, pricing, working conditions
and cost cutting.

4.2 Economic Forces

4.2.1 Opportunity: Philippine Population Increases

The country’s population is 102,250,133 million. It is statistically second largest in

Southeast Asia and ranks 12th in the world. Sixty (60%) of the total population are
ages 15 and 59 years. The figures show the increase in population thus an increase
in people’s consumption. According to the interaction.com it is observed that all fast –
groceries in Asia have big population upward to go million. Larger population means
more entrepreneurs and workers, mere producers and consumers. More consumers
mean growth for the supermarket industry such as for Robinsons supermarket.

Figure 3: Philippine Population

14
4.2.2 Opportunity: Between 2015 and 2030, middle class household in the
Philippines is set to grow by 41.8% and to reach 8.4 million by 2030

Figure 4: Top 5 Emerging Markets with Best Middle Class Potential

According to Hodgson of Euromonitor International, In relation to the booming

economy of the Philippines, the middle class households will grow by at least 40%
from 2015 to 2030 and may nearly reach up to 8.4 million by 2030. This is an
opportunity for retailers such as for supermarket as this means that there is a higher
rate of spending for consumers.

One of the biggest contributors for the increased sales in retail industry is the middle
class households. The rising purchasing power of Filipino will continue to grow their
spending particularly on foods, health goods, leisure and recreation and medical
services. This forecast growth make the Philippines belong to the top ten countries

15
 with the fastest rates of middle class expansion. Further, demand for supermarket
industry often coming from the middle class.

4.2.3 Opportunity: From 2014 to 2019, the number of outlet in the consumer is
forecasted to increase by 4.7%

On an average of 4.7% from 2014 to 2019 according to Euromonitor International,

the consumer in retail industry will increase. New malls will be established both in
rural and urban cities such areas in Roxas City, Capiz, Cavite, Laguna, Davao, and
more. For every new infrastructure built, consumer food service will follow such as
supermarket industry.

Table 1: Level of Urbanization by Region 2007-2010

Source: https://psa.gov.ph/content/urban-barangays-philippines-based-2010-cph

Based on the level of urbanization by region shown above, you can see that four
regions experience growth in commerce and infrastructure where it has a higher level
of urbanization than for the country. 45.3% in year 2010 and 42.4% in year 2007.

These regions are Central Luzon, CALABARZON, Davao, and SOCCSKSARGEN.

Furthermore, according to Kantar Worldpanel, world leader in consumer knowledge
and insights based on consumer panels, modern trade has been progressively
increasing in the past 3 years.

16
4.2.4 Opportunity: Growing healthy and wellness lifestyle trend towards nutrition

According to Euromonitor, Filipinos are now becoming more conscious on their

health mainly coming from the middle and high income groups. The demands of
healthy products continue to increase since Filipinos prefer natural way of living
healthy lifestyle rather than having treatments. There will be increase income for
health industry.

In 2013, Food and Nutrition Research Institute (FNRI) of the Department of Science
and Technology (DOST) recognized Philippines that obesity is rampant growing. 3
out of 10 adult Filipino ages 20 years old above are reported obese on the study of
the Philippine Association regarding the Study of Overweight and Obesity Inc.
(PASOO).

Nowadays, people are now wiser and making health as their top priority and look for
preventive measures to avoid getting sick. Supermarket industry is one of the
distribution channel provides healthy products. And one of this is Robinsons
supermarket where they focus on promoting healthy you products at cheaper prices.

Table 2: Distribution of Consumer Health by Format: %Value 2011-2016

4.2.5 Opportunity: The rise of Retail Industry in the country

There’s a growing economy in the retail industry especially for supermarket retailers
who continues to lead Philippines retail landscape. We have witnessed Robinsons
Retail Group, SM Retail Inc and Puregold Price Club Inc acquiring smaller and single
propriety, within supermarket retailers, to minimise competitions with small players
who operates most especially in provinces where their existence is still minimal.

17
 SM Retail bought the pioneer supermarket known as Cherry Foodarama last June
2015. Puregold bought number of smaller supermarkets, known as BudgetLane,
Parco, Unilane, and Sioland located in various Luzon. While for RRHI, they bought
Jaynith’s Supermarket located in Metro Manila, Rizal and Laguna. RRHi also
acquired hardware business known as A.M. Builders Depot with 17 outlets based in
Visayas and Saver’s Appliance Depot with 24 outlets located in several North Luzon
provinces.

With the continuous growing number of supermarkets branches across the country
help cater to the needs of Filipinos. This will help further develop the rise of
supermarkets in distributing consumer non and non-food products.

On a study of FMCG, Filipino spending grew by 5 percent during Q3 of 2016. The

shoppers were identified came from NCR, North Luzon and Visayas while South
Luzon and Mindanao maintains. The sales came some from Sari-Sari Stores, which
has stable 3% which is higher than last quarter. However, the most sales came from
Hyper Supermarket, Drug Stores and Direct Selling.

Figure 5: FMCG Performance by Region

Source: An Update of the Philippine FMCG market MAT September 2016 National PhilippinesFMCGMONITOR

4.2.6 Opportunity: Millennials have spending power

According to FMCG, millennials will give a “massive opportunity” for retailers and
manufacturers. More than 45% millennials represents Asia Pacific’s population, and
with 60% expected to live by 2020 in Asia. They will dominate the spending across
the region. The spending power of Millennials in Asia improved compared to previous
years with estimated US $6 trillion which is expected to be spent in disposable
income by 2020.

18
4.2.7 Opportunity: Consumer confidence increased significantly in 2016

Based on tradingeconomics.com, Philippines consumer confidence has increased to

9.20 from 2.50 3Q last year, 2016. Consumer spending is expected to rise in the
future. In the study of Euromonitor for Philippines Consumers Lifestyle Report 2015,
it shows that many Filipinos consumption has increased and some moved to digital
online shopping.

Simon Kemp, a global consultant for We Are Social said that the online population is
now half of the worlds and still increasing. People believes that social media makes
their life easier. They find it the most convenient way to get information’s and even
share your own stories. Even marketing uses social media to advertise and promotes
businesses. Social networks such facebook, instragram, tweeter, agoda, and so on.

Further, in AC Nielsen survey for Filipinos advertising expenditures, it shows that

most were spent for personal products followed by household products.

19
4.3 Technological Forces

4.3.1 Opportunity: Technological advancement for products and service

Philippines is one of the highest mobile markets among Asia countries. It helps
boosts social networking and online shopping. According to Philippine Daily Inquirer,
there was 9.6 percent increase usage of mobile devices for online purchasing.
Filipino way of shopping is constantly evolving, as mobile applications are also being
available it make more convenient for the consumers to shop.

According to a study by Google and Temasek, Philippines e-market is forecasted to

grow by $19 billion (P918 billion) or 34 percent increase by 2025 as the middle class
and young professional increase.

20
 The market for online grocery already started in Philippines within top retailing
company such as Robinson’s supermarket, SM Markets and Puregold. This is to
provide options for shoppers to shop online if they are too busy to go in-store. This
will help to add revenue to the company.

4.4 Political, Legal and Government Forces

4.4.1 Opportunities: Government's Budget for project KALSADA (Konkreto at Ayos

na Lansangan at Daan Tungo sa Pangkalahatang Kaunlaran) in 74 Provinces

The Department of Budget and Management (DBM) launched the KALSADA project
(Konkreto at Ayos na LanSAngan ang DAan sa Pangkalahatang Kaunlaran) where it
target to help local government unit (LGU) in upgrading, improving and rehabiliting of
local road conditions such as linking national roads to areas of development like
agriculture, tourism, health and education.

21
Each year the road projects have been growing, in year 2017, DCM allocated P13.5
billion for KALSADA. Provincial government eye to maintain 32 000 km of road and
currently country has a 216, 016 km road network. Bohol was the first road project
implemented and still growing with 147 road projected approved from 53 provinces.

Philippines year the road projects have been growing, in year 2017, DCM allocated
P13.5 billion.

74 PROVINCES FOR THE KALSADA PROGRAM

REGION PROVINCE REGION PROVINCE

1 CAR ABRA 38 V SORSOGON

2 CAR APAYAO 39 VI AKLAN

3 CAR BENGUET 40 VI ANTIQUE

4 CAR IFUGAO 41 VI CAPIZ

5 CAR KALINGA 42 VI GUIMARAS

6 CAR MT PROVINCE 43 VI ILOILO

7 I ILOCOS NORTE 44 NIR NEGROS OCC

8 I ILOCOS SUR 45 VII BOHOL

9 I LA UNION 46 VII SIQUIJOR

10 I PANGASINAN 47 VII CEBU

11 II BATANES 48 NIR NEGROS ORIENTAL

12 II CAGAYAN 49 VIII BILIRAN

13 II ISABELA 50 VIII EASTERN SAMAR

14 II NUEVA VIZCAYA 51 VIII LEYTE

15 II QUIRINO 52 VIII NORTHERN SAMAR

16 III AURORA 53 VIII SOUTHERN LEYTE

17 III BATAAN VIII WESTERN

54
SAMAR/SAMAR

18 III BULACAN IX ZAMBOANGA DEL

55
NORTE

19 III NUEVA ECIJA IX ZAMBOANGA DEL

56
SUR

22
 20 III PAMPANGA IX ZAMBOANGA
57
SIBUGAY

21 III TARLAC 58 X BUKIDNON

22 III ZAMBALES 59 X CAMIGUIN ISLAND

23 IV-A BATANGAS 60 X LANAO DEL NORTE

24 IV-A CAVITE X MISAMIS

61
OCCIDENTAL

25 IV-A LAGUNA XI COMPOSTELA

62
VALLEY

26 IV-A QUEZON 63 XI DAVAO DEL NORTE

27 IV-A RIZAL 64 XI DAVAO DEL SUR

28 IV-B MARINDUQUE 65 XI DAVAO ORIENTAL

29 IV-B MINDORO OCC 66 XII NORTH COTABATO

30 IV-B MINDORO OR 67 XII SARANGANI

31 IV-B PALAWAN 68 XII SOUTH COTABATO

32 IV-B ROMBLON 69 XII SULTAN KUDARAT

33 V ALBAY 70 CARAGA AGUSAN DEL NORTE

34 V CAMARINES CARAGA AGUSAN DEL SUR

71
NORTE

35 V CAMARINES SUR 72 CARAGA DINAGAT ISLAND

36 V CATANDUANES 73 CARAGA SURIGAO DEL NORTE

37 V MASBATE 74 CARAGA SURIGAO DEL SUR

4.4.2 Threat Taxation

The progress of corporate taxation and consumer taxation regulated by government

of any country affects the businesses after tax income.

4.5 Ecological Aspects

4.5.1 Threat: Impact of Climate Change

Food is one of people’s key sensitivities to climate. Business can be affected

because of climate change especially for supermarket industry. The quality and
quantity of food produced supply chain is affected from climate change. Products in
supermarkets will be at risks.

23
 According to Global Climate Risk Index 2015, Philippines have long been mainly
vulnerable to extreme weather. El Niño is a natural phenomenon being worsened by
climate change. It happens during summer while La Niña brings strong rain falls and
typhoons later end of the year. Change of climate may reduce crop yields by year
2030.

Philippines, a growing population and consumers buying behavior are changing -

more people more supplies are needed. In order to meet the demand, a sustainably
produce 70% more food is needed to fulfill people needs.

V. INDUSTRY AND COMPETITIVE ANALYSIS

5.1 Industry Analysis

The Philippine supermarket industry is estimated to be contributing highest in total

GDP as it continues to lead in the retail. The big players of this industry found it easier
to penetrate the market and expand new stores because of the nature of the products
sold – basic necessities. While the small players in the industry competes in the market
by being offering basic commodities that is available 24 hours in neighborhood such as
convenience store and sari sari store.

The income and expenditures of usual Filipino household budget across all income
classes spent most of their earnings on food and education followed by with housing
and utilities. Below is a sample for a typical Filipino household distribution that earns
40,000 PHP a month.

Charts below will tell us how many % filipino spent by region.

24
5.1.1 Market Size

In 2016, SM Retail continued to lead grocery retailers with 7% market value share. SM
has the biggest store networks and adapts to the demands of consumers. It includes
its formats - SM Hypermarket, SM Supermarket, Save More Supermarket and
Alfamart. It sustained its strong position by opening new branches mainly through its
25
 Save More and Alfamart which were more accessible to consumers. Followed by
Puregold, Robinsons and Rustans Group.

5.2 Competitor Analysis

Major Player’s in supermarket industry in the Philippine was compared versus RSC in
terms of business portfolio. Rustan’s supermarket, Hi top, SM Markets and Puregold
Price Club Inc., is all similar to RSC in terms of portfolio, their net income, capital
expenditure, and scale of business operations. After narrowing down the list, the
closest competitors of RSC are identified to be to SM Markets and Puregold Price Inc.
RSC and its competitors have similar product portfolios, and all are listed companies in
the Philippine Stock Exchange (PSE). Thus, getting information on all three companies
was done by looking at publicly-available records.

1.1 SM Markets

SM Markets is a subsidiary of SM Investments Corps who is a significant player in

the Philippines today. The founder of SM is Henry Sy, Sr. He started into a shoe store
called Shoemart in Carriedo, Manila, 1958. Until then, his success continues as he
opens his 1st mall in North EDSA in 1985, a 125,000 sq. meters. Along with it is the
supermarket who became one of the anchor store in the mall.

SM has established its presence in retail, banking, and property in the Philippines.
SM Markets is part of the retail segment and has 3 categories - SM Supermarket, SM
Hypermarket and Savemore. This is to cater all various customers.

26
 SM Supermarket – this is the pioneer brand of the Food Retail Group offers a wide
array of food and non-food products and services located inside SM malls. As of
November 2016, SM supermarket had 47 stores. Tagline is "At Your Service, Yes!",
SM Hypermarket – this has a larger store with wide range of non-food and food
products located either inside SM malls or in strategic stand-alone locations with 45
stores. Tagline is "Happy To Serve”

Savemore – this is the youngest and fastest growing store with 150, where it offers a
mid-format supermarket that stands alone as a neighborhood store built to service
impulse markets and smaller communities that offers limited products. Tagline is
"Here To Serve”.

SM markets does not only offers grocery items but also offer additional services like
ATM banking, bills payment, remittances, money exchange, pharmacy, and even
laundry services in selected outlets, ensuring the one-stop shopping convenience
that the SM brand is known for – “We got it all for you”.
For the year 2015, SM markets ended the year with a net income of 2,215,355,377,
which is higher than the previous years, driven by SM hypermarket sales.

1.2 Puregold Price Club

December 8, 1998, Puregold Price Club, Inc. (PGOLD) opened its 1st store in
Mandaluyong City. PGOLD is known for trading consumer products on a wholesale
basis. They also launched their loyalty program, "Tindahan ni Aling Puring", in 2004.

There are 3 categories of operations in PGOLD and these are:

Puregold Price Club – this is a hypermarket where it offers various food and non-food
products for its consumers and its resellers.

Puregold Junior – this is a supermarket, a neighborhood store where it offers more of

food to non-food products vis-à-vis to its hypermarkets.

Puregold Exta – offers a more limited number of goods and discounted products.
This is the small store format.

Other than mentioned above, the popular S&R Membership shopping ‘S&R’ is also
owned by PGOLD where it offer imported good products both food and non-food.
PGOLD has 135 hypermarkets, 93 supermarkets, 28 extras and 10 S&R warehouse
as of end of December 2015 and still expanding.

In addition, PGOLD tied up to Ayala Land to launch a new brand of supermarket to

strengthen its position in the industry in Philippines.

27
1.3 Industry Ratio

Liquidity Ratios

a. Current Ratio

The current ratio measures how well the Company can pay current liabilities with its
current assets. It indicates the Company's ability to pay debts on time by measuring
how it can convert the current assets back to cash to cover or pay every peso of its
liabilities. The higher the ratio means a more liquid current position the Company
has. For retailers, normally the largest part of current assets is its inventory. RSC's
inventory accounts for 58% of its total asset, SM 51% and Puregold at 56% for 2015.

This ratio shows RSC is fall short behind the industry standards however it will still be
able to pay its current liabilities with their current assets. There is ₽1.01 peso of
current assets to cover every ₽1 of liabilities. Despite RSC's high % of inventories
against current assets, its liabilities increased due to short term loans payable availed
in 2015 amounting to ₽ 1.02 billion.

Among RSCs competitors, Puregold meets the industry standards and SM comes
last with less than 1 ratio. This means that SM does not have sufficient resources to
settle its short term obligations.

b. Quick Ratio
The quick ratio is more conservative than the current ratio because it excludes
inventory and other current assets which are more difficult to turn ito cash given a
short period of time.

28
 This analysis shows RSC will be able to pay 42% of its current payables with their
current assets (not including inventories). RSC is less liquid compared to Puregold
which has a ratio of 66% and SM is the least which has 39%. Compared to industry
standards, RSC has a shortfall of 3% (0.03) while Puregold exceeds the standards.
SM stands last.

c. Liquidity Risk:
Overall, the Company's exposure to liquidity risks relates to its short term obligations.
The Company shows it’s able to manage its liquidity position to be able to finance its
operations and capital expenses. In the notes to audited financial statements in
2015,the Company shows the maturity profile of each of its financial instruments for
both of its assets and liabilities. Cash and cash equivalents - on demand shows a
balance of ₽1.13 billion , trade receivables and non-trade receivables maturing within
one year ₽413 million, security and other deposits maturing more than one year at
₽373 million. On the other hand, trade and other payables, loans payable and other
current liabilities amounts to ₽6 billion which will mature within one year. On the
other hand, trade payables which will expire more than 1 year amounts to ₽10.9
million.

Profitability Ratios

a. Gross Profit Margin

The Gross Profit Margin shows the earnings of the organization after considering the
costs incurred by the Company in producing goods and services. A company’s gross
profit margin may also be viewed as a measurement of production efficiency. It can
be evaluated from the ratio analysis that RSC has better performance against
Puregold but still behind SM by 3.4%.
29
 However, it can be seen in the performance indicators that RSC is improving its
gross profit for the past 3 years. The improvement is due to robust sales growth due
to expansion and backed by strong performance of the existing stores. SM
Supermarket shows outstanding performance mainly due to intensified geographical
coverage which expanded in both urban and rural communities across the country.
The expansion is coupled by strategic partnership approach where in 2015, SM
Supermarket acquired Cherry Foodarama.

b. Operating Profit Margin

30
 This takes into account the costs of producing the product or services that are
unrelated to the direct production of the product or services, such as overhead and
administrative expenses. RSC took a plunge in net margin showing 3.7% which is the
lowest among its competitors. (SM reflects 7% while Puregold is 6.4%). RSC's
decline can be attributed to increase in Operating expenses from 2014 to 2015 by ₽1
billion (18% increase) which was primarily due to increase in personnel expenses as
a result of the company's funding of non-contributory, defined benefit pension plan
covering all regular and permanent employees, royalty fees, rental expenses and
depreciation costs. SM on the other hand has maintained its operating expenses
despite its continuous expansion plans.

c. Net Profit Margin

Net profit margin is a key financial indicator used in the assessment of the
Company's profitability. It measures how much of each peso earned by the company
is translated into profits. A low margin indicates a low margin of safety: higher risk
that a decline in sales will erase profits and result in a net loss.

The analysis shows RSC reflecting the lowest margin among its top competitors and
below the industry standards. RSC Net income for 2015 was at ₽1.1 billion which
was lower by ₽57 million versus 2014. This was primarily due to the net effect of
decrease in income before income taxes as result of increased operating expenses
discussed above which was knocked off by earning from dividend income.

SM ranks first in this analysis having 4.9% net profit ratio. Its net margin grew from
₽2 billion to ₽2.2 billion from 2014 to 2015. (8% increase). Despite SM's expansion
projects, SM has maintained to keep its operating expenses at bay and managed to
sustain and contain it at minimum growth from year to year. SM's gross margin
increased by 33% year on year as backed by its higher sales as a result of
combination of different operating strategies which turned to be successful.

31
d. Return on Total Assets

This financial ratio shows that the percentage of profit that a company earns in
relation to its overall total asset. The higher the ratio of the income against the
Company's asset, the better. The reason is because the company is earning more
money on less investment. This analysis shows RSC is a little short against the
industry standards where it reflects 7.3% versus 7.8% benchmark. SM shows 19%
efficiency in converting its investments (assets) to profit. The main contributors why
RSC is showing a lower ratio is because aside from SM having bigger net income
versus RSC, RSC has bigger total assets versus SM in which it recorded ₽15.2
billion while SM has ₽11.4 billion. Major items in RSC's balance sheets are
Investment to subsidiaries and Plant property and equipment.

e. Return on Stockholders’ Equity

The return on equity ratio or ROE is a profitability ratio that measures the ability of a
Company to generate profits from its stockholders investments in the company. The
return on equity ratio shows how much profit each peso of stockholders' equity
32
generates. This is an important measurement for potential investors because they
want to see how efficiently a company will use their money to generate net income.
This ratio is also a good indicator of how effective management is at using equity
financing to fund operations and grow the company. This analysis shows RSC ratio is
below the industry standards and is lowest among its competitors. RSC has a huge
amount of equity sitting it its balance sheet which amounted to ₽8.3 billion versus SM
stockholders equity amount to ₽1.8 billion in 2015. Additional paid in capital and
appropriated retained earnings make up the huge chunk in RSC's balance sheet.

Table Industry Ratios

33
5.2 Portes Five Forces

Porter’s five analyses the structure of the supermarket industry in order to find effective
sources of competitive advantage. Therefore, in order to analyze the competitive
environment of Robinsons Supermarket Corp., Porter’s five forces analysis has been
used by this research as follows:

34
2.1 Threat of New Entrants: HIGH

Philippines economy encourage competition as it implements trade liberalization,

deregulation, and privatization. Although putting up a grocery store needs huge
investment, Philippines is still cheaper compared to other countries which
international company sees an opportunity to enter the industry.

2.2 Bargaining Power of Buyers: HIGH

In cases where products have prices differences and are more commonly found in
other supermarkets such as the basic commodities. The buyers can easily switch for
one brand to another or they can opt to go to nearby supermarkets which offer
promotions and offer lower prices.

2.3 Threat of Substitutes: HIGH

Due to RSC’s a wide array of products which is composed of basic commodity

needs, household supplies, etc. the threat on the development of substitute products
is very low because RSC is very innovative and advanced when it comes to sudden
changes in the product line being introduced in the market. In the supermarket
industry, the substitutes of major retailers are small chains of convenience stores
which are more often than not have higher mark up on goods and commodities.
Moreover, supermarkets are a one stop shop where consumers can find everything
in one place and in one goes.

35
 Another possible substitute would be the wet markets in terms of fresh commodities.
However, we supermarkets do not offer the convenience of well-ventilated
environment such as air conditioning facility and payment methods such as paying
thru credit cards. This goes the same when buying in convenience stores.

2.4 Bargaining Power of Suppliers: LOW - MODERATE

In Philippines supermarkets, most of the suppliers are inclined towards major

commodities and offer similar products to their consumers. There are many suppliers
in retail industry and they have developed low switching costs over time, and are
supported by excruciating retail customer’s demand, have eventually developed low
bargaining power over the stores.

Hence, the bargaining power of the supermarket industry in Philippines is low to

moderate as the industry develops good relationship with their suppliers. Big players
in this industry such as RSC, Puregold and SM has been producing their own line of
products.

2.5 Rivalry among Competing Firms: HIGH

As the Philippines economy remains stable, the rivalry competition in retail
supermarket industry is enormously high. The growing numbers of competitors’
branches have intensified and have been in the industry for a long period of time.

Summary and Conclusion: Porter’s Five Forces

In a nutshell, the supermarket industry is proving to be competitive which is
demonstrated by the numbers of supermarkets popping up in all part of the
Philippines and carrying with it all sorts of gimmicks and promotions in order to cater
to all consumers with competitive prices.

This analysis also shows low - moderate bargaining power of suppliers due to
presence of other sources of supplies which the supermarkets could alternatively
source their products which also brings substitute products to relatively low.

5.3 Competitive Profile Matrix (CPM)

3.1 Critical Success Factor

Below is the table of critical success factors in the retail supermarket industry with the
corresponding weights.

36
 CRITICAL SUCCESS FACTORS WEIGHT
1. # of Branches 15%
2. Variety and Availability of Products 14%
3. Location 14%
4. Quality of Products 13%
5. Price Competitiveness 11%
6. Supply Chain Management 10%
7. Branding/Promotion Activities 9%
8. Technology 8%
9. Quality of Service 3%
10. Financial Position 3%
TOTAL 100%

1. # of Branches
# of branches plays an important role for a supermarket industry as it gives
convenience to its consumers. Customers will most likely to go to their nearest store
unless particular product is not available. Supermarkets should consider putting a
branch in the neighborhood and expand in provinces.

2. Variety and Availability of Products

Variety and availability of products in Supermarkets are important so consumers will
have wide selections to choose which product they want. Supermarkets should
always monitor and make sure to keep products in stock as the chances of
consumers of switching to its competitors are very high.

Aside from this, it is also important that the products are strategically properly
displayed in the store so it will be easier for the consumers to choose. Most of the
supermarkets show basic necessity in the last corner of the store so consumers will
be attracted and persuaded to buy other products.

3. Location
In retail supermarket industry, accessibility to market is one of the primary
considerations of a buyer. Stores should be strategically located in urban and
upcoming urban areas and rural areas. The location should consider the proximity to
public transportation such as terminals, MRT, LRT, etc. It is also important that
location has access for its consumers for parking spaces.

4. Quality of Products
Product quality is an important measure in a supermarket industry. In order for
supermarket to be successful, a consistent food safety and brand protection
practices are needed. In Philippines, products sold in supermarket should be
approved by Department of Agriculture to ensure food products are safe and
acceptable. Prepackaged processed food products must undergo to Food and Drug

37
Administration (FDA) and Bureau of Animal Industry (BAI) for meat and meat
products and Bureau of Plant Industry (BPI) for fresh fruits & vegetables.

Low prices products are important and so the quality of products. According to
Nielsen, value and price are essential elements of where to shop and what to buy,
consumers look for good products where they can maximize their money on a tough
economy.

As years passed, people are becoming more conscious on what they eat. Based on
Euromonitor, it showed that in year 2015, health and wellness in the Philippines
continued its positive development with the increase of sales compared to its
previous years. It made now easier for people to have a healthy lifestyle as
supermarkets is the leading key distribution channel promoting health and wellness
by offering packaged food and beverages products. A value share of 82% in health
and wellness packaged food, and an overall value share of 65% in health and
wellness beverages

5. Price Competitiveness
Consumers' awareness of supermarket prices is known for Filipino nowadays.
Buyers usually compare their preferred brand against to other supermarket retailer
and make an assessment of the quality of the product. Therefore, price is considered
as one of the major factor for consumers to switch to its competitors.

6. Supply Chain Management

Effective supply chain management on supermarket is very important as this will
make the revenue increase as to know what products should be produced.

7. Branding/Promotion Activities
An effective promotion activity helps Supermarkets to attract wider customers. It will
help the industry to ensure that the vision and mission is communicated accurately to
its existing and potential customers. These activities is a key to success for a
supermarket for its brand to be known and at the same the time for the costumers to
be aware on what the company has to offer such as discount prices or promotional
items, and so on.

8. Technology
Innovation technology is very important in a service retail industry such as in
supermarkets, it means convenience for consumers as well as for the employees.
This refers to the Point of Sales (POS),

9. Quality of Service

38
 Quality of service in the supermarket is vital. It differentiates and give advantage
among other competitors, hence, creates an important contribution to increase
revenue and productivity (Gronroos, 2001).

Most customers remember their experience in their shopping experience. Consumers

seek for convenience and they want to get response as quickly as possible such
ability to solve shopper problems, physical facilities and displays, helping the
customer, good assortment of products, cleanliness of the store, responsiveness-
dealing with complaints efficiently and effectively, appearance and surrounding
environment of the store and personal touch attention needs.

10. Financial Position

Supermarket industry need to have a strong financial income to survive the
competitive market most importantly if you to be known one of the leading in the
industry.

3.2 Critical Success Matrix

The Competitive Profile Matrix (CPM) is a powerful strategic analysis tool allows
identifying major competitors strengths and weaknesses. In Philippines, the known
retail giants companies in supermarkets industry are SM Markets, Puregold Price
Club Inc and Robinsons Supermarket Corp.

COMPETITIVE PROFILE MATRIX

Robinsons
SM Markets Puregold
Supermarket
CRITICAL SUCCESS
WEIGHT RATING SCORE RATING SCORE RATING SCORE
FACTORS
1. # of Branches 15% 2 0.30 3 0.45 4 0.60
2. Variety and
Availability of 14% 2 0.28 3 0.42 4 0.56
Products
3. Location 14% 2 0.28 4 0.56 3 0.42
4. Quality of Products 13% 4 0.52 3 0.39 2 0.26
5. Price
11% 2 0.22 3 0.33 4 0.44
Competitiveness
6. Supply Chain
10% 2 0.33 3 0.44 4 0.22
Management
7. Branding/Promotion
9% 2 0.20 4 0.40 3 0.30
Activities
8. Technology 8% 4 0.36 3 0.27 2 0.18
39
9. Quality of Service 3% 4 0.32 3 0.24 2 0.16
10. Financial Position 3% 2 0.06 3 0.09 4 0.12
TOTAL 100% 2.76 3.62 3.34
*Note: The ratings values are as follows: 1=major weakness, 2=minor weakness, 3=minor strength,
4=major strength

Below is an explanation of why each company ranks that way on the critical success
factors.

1. # of Branches

Rating Justification

RSC 2 RSC was given a 2 rating as they have 140 store locations
nationwide. As September 2016, 42 stores are located in
Metro Manila, 59 in Luzon, 19 in Visayas and 11 in
Mindanao areas. Most of its supermarkets can be found in
Robinsons Malls.

SM Markets 3 SM Markets was given a 4 rating as they are present in over

242 nationwide in Philippines where a total of 42 stores
located in Visayas and Mindanao. The most number of its
stores belongs to Savemore where it target to have 200
stores open by end of 2016.

PGOLD 4 PGOLD was given a 3 rating as they have most # of

branches in the Philippines nationwide with 270 stores end
of 2016 and still growing.

2. Variety and Availability of Products

Rating Justification

RSC 2 RSC ranks 2 as the variety and availability are limited of

SM Markets 3 choices compared to SM markets and Puregold. Since SM

40
 PGOLD 4 markets and Puregold offers wholesaler the supply is more.
Both competitors also market consumers who have
business like “sari sari store” where small size of products
are available.

3. Location

Rating Justification

RSC 2 RSC was given a 2 rating as their location is usually can be

SM Markets 4 found in the malls and in some neighborhood areas. Some

of the parking space is also not strategically positioned.
PGOLD 3
While SM Markets was given 4 because it has the most
strategic location place where it is near the public
transportation, wider space of parking, Savemore being
scattered all over the barangays and neighborhood areas.
Unlike Puregold where it ranks 3 because it has only
standalone store.

4. Quality of Products

Rating Justification

RSC 4 RSC was given a 4 rating as it offers more quality products

SM Markets 3 in terms of fresh and meat selections followed by SM

markets and PGOLD.
PGOLD 2

5. Price Competitiveness

Rating Justification

RSC 2 RSC ranks 2 as it has higher prices on consumer goods,

SM Markets 3 both SM markets and Puregold offer it at cheaper price as

they offer wholesaler products.
PGOLD 4

6. Supply Chain Management

Rating Justification

RSC 2

41
 SM Markets 3 RSC ranks 2 as they lack of bringing their products to

PGOLD 4 market unlike their competitors.

7. Branding/Marketing Activities

Rating Justification

RSC 2 Marketing skills of RSC ranks low versus to its competitors.

SM Markets 4 SM market is very aggressive when it comes promoting and

advertising their brand. SM tag line is “At your service, Yes!”
PGOLD 3
have known celebrity endorser – Kris Aquino, TV ads, Have
a very strong brand “SM” = we got it all for you. While for
Puregold marketing is also aggressive they giveaways
groceries products via the noon time show “Eat Bulaga”, It
also have a segment of “Puregold Tindahan ni Aling
Puring”.

8. Technology

Rating Justification

RSC 4 RSC was given a 4 rating as it continue to put invest on

SM Markets 3 technologies. They currently have Customer Relationship

Management (CRM) software where it able to monitor
PGOLD 2
consumers shopping behavior and purchase data.

9. Quality of Service

Rating Justification

RSC 4 RSC ranks 4, employees have good relationship to its

SM Markets 3 customers. Also, quality in terms of giving more convenient

to consumers to shop thru partnering to “HappyFresh” online
PGOLD 2
grocery. Responsive and active on social media in case of
complaints.

42
 10. Financial Position

Rating Justification

RSC 2 RSC ranks 2, they registered a Net Sales of ₽41.85 billion

SM Markets 3 for the twelve months ended December 31, 2015, a lift of
10.3% from ₽37.94 billion of the same period last year.
PGOLD 4
Compare to its competitors.

Summary and Conclusion: Competitive Profile Matrix

From the CPM analysis we can see that RSC CPM value is 2.76 which is the last among
its competitors with 0.58 behind to Puregold scoring 3.34. While SM markets scoring
3.62. It just shows that the competitors in supermarket industry are very competitive and
attractive. Robinsons supermarket needs to be more aggressive to maintain its position.

VI. EXTERNAL FACTOR EVALUATION (EFE) MATRIX

Robinsons Retail Holdings saw a 21.9% increase in net income of PHP 4.34 billion in
2015 due to its supermarket operations. The researcher/student has identified some
major opportunities and threats which could affect Robinson’s supermarket operation.

EXTERNAL FACTOR EVALUATION

Opportunity Weight Rating Score
Growing market in the country,
especially for middle class which is set
1-SC 0.17 4
to grow by 41.8% between 2015 and 0.68
2030 to reach 8.4 million by 2030
Overseas Filipino Workers Personal
2-SC Remittances are expected to grow 7% 0.14 4
0.52
from 2015-2017
Increasing consciousness trend of
3-SC health and wellness with focused on 0.09 4
0.40
nutrition

Government's Budget on Infrastructures

4-SC and transportation projects rehabilitation 0.09 3 0.27
in 74 Provinces.
5-T Favorable government policies and skill 0.08 4
development have led to a robust 0.24
43
 modern technology
Threat Weight Rating Score
Aggressive increase of substitute stores
1-SC 0.15 2
offering the same products 0.30

2-E FOREX volatility 0.10 2

0.20
Climate change has an impact around
3-EO 0.07 2 0.14
the life cycle of food products
The unemployment rate increased to
4-P 6.6% in January 2017 higher than the 0.06 2
0.12
5.7% recorded in January 2016
Power Rates it the Philippines is the 3rd
5-E highest in Asia according to 0.05 1
0.10
International Energy Consultants (IEC)

Total 1.00
3.00
E=ECONOMIC, P=POLITICAL, LEGAL, & GOVERNMENTAL ASPECTS, SC=SOCIO-
CULTURAL, DEMOGRAPHIC THRENDS, & LIFESTYLE CHANGES,
T=TECHNOLOGICAL, EO=ECOLOGICAL

The total weighted score of 2.97 indicates that the company is relatively responding well
to the external factors of the industry. The industry is also creating strategies that
capitalize on external opportunities and elude threats.

6.1 Opportunity

6.1.1 Growing market in the country, especially for middle class which is set to grow
by 41.8% between 2015 and 2030 to reach 8.4 million by 2030

The weight given is 15% with rating of 4. A supermarkets retailer in the Philippines
continuous to have a greater influence on country’s retailing landscape because of it
offer wide products that are essential to most consumers.

Robinsons Retail Holdings, Inc. (RRHI) is the one of the leading multi-format retailer
in the Philippines, and RSC has the highest percentage of sales in RRHI. They keep
expanding their stores not only Metro Manila but outside.

Half of the year 2015, RRHI grew its net income to P1.86 billion up to 36.2 percent
from P1.37 billion in the same period last year and that is because of the store
expansion.

44
6.1.2 Overseas Filipino Workers Personal Remittances are expected to grow 7%
from 2015-2017

Robinsons Supermarket rating is 4 because the company has already been taking
advantage of the OFW increase. It keep expanding in areas outside Metro Manila to
capture more consumers. Robinsons Supermarket is the # 1 tenant in Robinsons
Malls which they offer business center to cater OFW remittances. Some of the
branches are Ermita, Imus, Pioneer, Galleria, Metroeast, Davao, Calapan, Bataan,
Casilao, Palawan, Gapan, Angeles, Makati, Magnolia, Centrio and so on. With the
business service provided, the supermarket will have an opportunity to get more
customers.

6.1.3 Increasing consciousness trend of health and wellness with focused on

nutrition

A lot of people are opting for a healthier lifestyle. Food has always been a culprit for
the diseases we acquire. People are now taking charge of their health. Customers
now review the nutritional facts and the ingredients of the products. At Robinson’s
Supermarket they promote health and wellness. They offer smarter food choices.
They have the whole health section offering affordable and competitively priced
healthy food choices. Here, they categorize the products according to what they do
for the body: organic, sweet and healthy, healthy heart, healthy digestion, strong
bones, healthy mind, healthy body and healthy hearts. They also have a 4-color tag
system, with the green shelf tagged products that has food nutrition research institute
(FNRI). However, their marketing strategies is not successful as most people are not
aware of products are they offering and they still need to develop more products with
quality at a cheaper price that is why the rating is 3.

6.1.4 Government's Budget on Infrastructures and transportation projects

rehabilitation in 74 Provinces

The weight given is 9% and rated 3 knowing the Philippine government allotted a
budget for KALSADA project. The company has been expanding its branches to
provinces but it still lacks strategic location placing. Hence, with the help of
KALSADA project this will be an opportunity for Robinsons supermarket to grow
potential customers. This will also result helping to make it easier for suppliers to
reach company’s distribution.

45
6.1.5 Favorable government policies and skill development have led to a robust
modern technology
Customers who are not able to go to the grocery due to time constraints or others
prefer to do other things than grocery shopping. On-line shopping is now a big trend
in the Philippines. Thus, recognizing this need, Robinson’s supermarket had a
strategic partnership with HappyFresh to redefine grocery shopping experience in the
Philippines.

RSC’s is now on HappyFresh desktop and mobile application and customers can
now enjoy a wider variety of goods and services at their fingertips. In this way, it is an
opportunity for the supermarket to digitalize its services and reaches out to more
customers who are increasingly using digital platforms to shop household staples at
their convenience. Through this the supermarket is able to differentiate from their
competitors.

The service was launched May 15, 2016 and it allows customers to place an order
form within 5k radius of 20 selected Robinsons supermarket in Metro Manila under
the service, ordered goods are delivered within an hour right at the customers’
doorsteps.

The rating I gave is 3 because the supermarket is innovative this trend could mean
more sales and more profit.

6.2 Threats

6.2.1 Aggressive increase of substitute stores offering the same products

The supermarket industry is very attractive and high that is why the rating given was
2. Robinsons supermarket constantly do a research & engage in different activities to
attract solid patronage from suppliers and consumers. They currently do activities
such as journey to wellness festival filled with promotions and activities. They have
also gotten active lifestyle promoters like Daniel and Vanessa Matsunaga.

6.2.2 FOREX volatility

The rating I give is 2. If the forex is high the imports will be high and so the products
will be sold in the supermarket depends.

46
6.2.3 Climate Change has an impact around the life cycle of food products

Change of climate affects industry such as the supply of food produced supplied.
Climate change can reduce crop yields as soon as 2030. Food is the main source
why people go to a supermarket.

Also the distribution of products will be affected by climate change. The company’s
employee’s in charge for distribution and warehouse usually plans ahead of time
when there are typhoon warnings by press forward deliveries to its stores.

6.2.4 The unemployment rate increased to 6.6% in January 2017 higher than the
5.7% recorded in January 2016
Employees in the services sector continued to comprise the largest proportion of the
population who are employed. 94.2% employment rate recorded for Jan 2016. The
service sectors of employees were up to 56.3%. Among them are belong in
wholesale and retail trade or in the repair of motor vehicles and motorcycles
accounted for the largest percentage (33.5%) of workers in the services sector. The
laborers and unskilled workers still continued the biggest crowd making up 31.3% of
the total employed.

This was given a 2 rating because the company was recorded with no labor union
which translates to good employment system. This only slightly affects the company’s
performance.

6.2.5 Power Rates it the Philippines is the 3rd highest in Asia according to
International Energy Consultants (IEC)
According to businessmirror, The Philippines’s power rates, is recorded to be
the 16th highest in the world. Power costs are very expensive, that hurts business
competitiveness in business such as in manufacturing and retail industry. For
example, in supermarket industry, it requires 24 hours use of electricity for food
storage. Also, due to high rates foreign investors are challenge to build industries in
the Philippines compared with neighboring countries such as Indonesia, Thailand
and Malaysia.

This was given a 1 rating since RSC is a big corporation and that they were already
able to manage their electricity usage in the most effective way.

CONCUSION
RSC has multi formats store that caters for different markets, these are Robinsons
selections, Robinsons easymart and Jayniths same as its competitors. Whe it came
to evaluating RSC’s performance versus industry-wide critical success factors and
47
 comparing the results versus competitors with similar profiles in the CPM Matrix,
RSC performed the poorest with a CPM score of 2.76, while SM got 3.62 and
Puregold got 3.34.

Based on the EFE Matrix, RSC scored a 3 in terms of its responsiveness to external
factors. This score, which is about average, can be due to the conservative business
approach, meaning it is not fully maximizing the advantage of external opportunities
that can further its business.

VII. INTERNAL ANALYSIS

7.1 McKinsey 7s Framework

7.1.1 Structure

RRHI is a family business owned by Gokongwei Groip. Last year, March 18, 2016,
John Gokongwei the founder of all Gokongwei business passed his legacy to his son
Lance Gokongwei as Chairman and Chief executive officer. Most of its board of
directors is from family members.

48
7.1.2 Systems

Robinsons partnered with JDA Software group for long term. With that, RSC are
currently using the latest version for merchandising management system inventory
by JDA Software Group, Inc. (JDA MMS) and Retalix for frontend or POS. JDA will
help RSC to improve operational efficiencies and increase overall profitability. The
JDA MMS improves advanced pricing methods, joined financial and warehousing
capabilities and customer order management functionality to make the revenue grow.
It also allows to proactively implementing pricing based on rules like margin,
competitive prices, vendor incentives, and chain/zone/store overrides. It also has a
capability to automatically generate changes, so financial effects can be calculated
prior to implementing planned price events.

7.1.3 Style
The corporate culture of RSC is focus on values for good health and wellness. The
company follows corporate governance as they believe that this will make the
business stronger and strengthen awareness within the organization. Management
style is said to be traditional family corporation management style.

7.1.4 Staff

RSC is a family-owned business, executives are mostly family members. The

president and chief operating officer is his daughter, Robina Y. Gokongwei-Pe. The
General Manager is Justiniano Gadia. Employees in RSC are mostly Filipinos that
come from different region in the country. In 2015, 2,749 are employed in RSC and
still growing as the store expands. The majority of the employees ages 21 – 27 years
old then for supervisory level ages 28 – 34 years old while for the managerial ages
35 to 55 years old.

The company hires employees on a contractual basis and normally these are the
ones on the supermarket floor, cashiers, dockers personnel and stockroom
personnel. Reason for this is to cut cost and lesser benefits with the employees.
On the other hand, the company gives salary increase yearly and incentives to all
performing employees. Employees also enjoys pension plan covering all regular and
permanent employees. Benefits are dependent on years of service and respective of
employee’s final compensation. The benefits are paid in lump sum upon retirement or
separation in accordance with the terms of the Plan.

49
7.1.5 Shared Values

The shared values of the company is to deliver more than what is asked by
strengthen footprints. They believe in putting the customer first, give respect on one
another, be honest and ethical in everything they do and build teamwork to
strengthen relationships. The company also values promoting the Filipino families.

7.2 David’s Internal Audit Analysis

7.2.1 Management Audit

RSC management approach is traditional and conservative when it comes to

supermarket industry.

7.2.2 Marketing Audit

1. Product
RSC carries a wide variety of food and non-food products. The top supplier carry are
Procter & Gamble (P&G), Universal Robina Corporotion (URC) and Nestle. URC is also
owned by Gokongwei family which gives an advantage for Robinson’s supermarket to
sell products at cheaper cost.

2. Price
Pricing is important in supermarket industry. Some products of RSC is cheaper bit overall
products in RSC is higher than its competitors by 3 to 4 pesos.

3. Promotion
Promotions advertisement plays a big part in supermarket industry. An estimated 100
Million was used ended 2015. Promotions’ is an instrument to brand awareness and
what does the company offers.

4. Place
Having a strategic place will be very helpful for supermarkets.

7.3 Finance Audit

RSC registered a Net Sales of ₽41.85 billion for the twelve months ended December 31,
2015, a lift of 10.3% from ₽37.94 billion of the same period last year. The robust sales
growth was driven by the store expansion in 2015 with addition of 13 new stores
alongside with the strong performance of the existing stores.

Cost of merchandise sold grew by 10% year on year from ₽30.81 billion in 2014 to
₽33.87 billion in 2015. The increase was on the back of higher sales . As a result, gross
profit resulted to ₽8.2 billion, 11.8% higher compared to 2014 gross profit of ₽7.33 billion.
Gross profit includes rent income earned from lease of building to its affiliates which

50
amounted to ₽198.07 million and ₽196.48 million in 2015 and 2014 respectively. As a
percentage to sales, gross profit was 20% in 2015 versus 19.3% in 2014Below will show
the financial ratios of the industry.

Income before tax in 2015 amounted to ₽1.57 billion which was lower versus 2014 by
₽104 million or 6.2% year on year. The decline can be attributed to increase in
Operating expenses from 2014 to 2015 by ₽1 billion (18% increase) mainly brought
about by the following factors: (attach analysis in sheet 2 for operating expenses).

Another factor that contributed to the decline in income before income taxes is due to
Interest expenses which grew by ₽4.35 million in 2015. In 2015, the Company availed of
short term promissory notes amounting to ₽1.02 billion from local banks with interest
rates of 2.5% per annum. The short term loans were obtained to support working capital
requirements of the Company.

Despite the increase in operating expenses, the negative impact was diminished by the
dividend income amounting to ₽40 million which was recognized by the Company in
2015 for the share in its investment in subsidiaries on Robinson's Handyman Inc. The
Company owns 80% of Robinson's Handyman since it acquired 2,500,000 shares in
2014 and the Company's interest grew from 55% to 80% in 2015.

Net income for 2015 was at ₽1.1 billion which was lower by ₽57 million versus 2014.
This was primarily due to the net effect of decrease in income before income taxes as
result of increased operating expenses which was knocked off by earning from dividend
income.

Robinsons Supermarket Financial Ratios 2015 2014 2013

Liquidity
Current Ratio 1.01 0.92 0.75
Quick Ratio 0.42 0.32 0.30

Profitability Ratios
Gross Profit Margin = Gross Profit/Net Sales 20% 19% 19%
Oper Prof margin = Net Margin/Net Sales 4% 4% 6%
Net Prof Margin = Net Inc/Net Sales 3% 3% 4%
ROA = NI/TA 7% 9% 12%
ROE = NI/SHE 13% 17% 37%
Asset Turnover = SalesRev/AveTotalAsset 2.94% 3.26% 3.20%
Inventory Turnover = CostofGoodsSolds/AveInv 8.98% 9.52% 9.03%

Key Performance Indicators (KPIs) (In Php Billions) 2015

vs

51
 2014

Sales - net of sales discounts and returns

41.85 37.94 32 3.91
Gross Profit including Rent Income
8.20 7.33 6.14 0.87
% to sales 20% 19.3% 19.2%
Income before tax
1.57 1.67 1.78 -0.104
Net income
1.11 1.17 1.25 -0.057

VIII. INTERNAL FACTOR EVALUATION (IFE) MATRIX

The details presented below are the internal strengths and weaknesses of Robinsons
Supermarket Corp, presented using the Internal Factor Evaluation (IFE) matrix. The
scores are given as such with the weight as a way to value impact to the firm whether it
is major or minor

INTERNAL FACTOR EVALUATION

Strengths Weight Rating Score

30 years industry experience with over 140

1 stores located nationwide and branded as one 0.17 4 0.68
of the leading supermarket in the Philippines
Only retailer that has an active partnership with
a food and nutrition research institute to
2 0.17 4 0.68
evaluate the nutritional contents of the food
offerings to promote health & wellness
Investing heavily in upgrading front- and back-
3 end systems in a bid to enhance the customer 0.14 4 0.56
experience
4 Merchandising and Rewards Program 0.10 3 0.30
Good customer relationship services due to
5 0.08 4 0.32
absence of union
Weaknesses Weight Rating Score
Stores are mostly can be found in the mall,
1 0.12 2 0.24
they are discriminating in choosing locations
2 Less aggressive of advertising campaign 0.10 2 0.20
Target market is not defined, each branch has
3 0.05 2 0.10
its own target market
4 Variety of products is less versus to 0.04 2 0.08
competitors where they offer small size
52
 products and cheaper that cater for those who
has sari sari store like business
The choice of leasing partners is not that
5 0.03 1 0.03
attractive to gain more new customers
Total 1.00 3.19

8.1 Opportunity

8.1.1 30 years industry experience with over 140 stores located nationwide and
branded as one of the leading supermarket in the Philippines
Robinsons Supermarket celebrates being in its 30 years in the industry in the
Philippines, ending with 140 stores located nationwide in year 2016. RSC continue
to evolve to cater to the different needs of the markets expanding its two formats
known as Robinsons Easy Mart and Robinsons Selections. Being a long player in the
industry means that their service are being supported by the consumers, who trust
the industry to provide fresh, quality, variety and availability of products reason I gave
a 4 rating that weight 17%.

8.1.2 Only retailer that has an active partnership with a food and nutrition research
institute (FNRI) to evaluate the nutritional contents of the food offerings to
promote health & wellness
RSC was given a 4 rating because they are the only industry who has an active
partnership with FNRI to show their campaign towards wellness advocacy. FNRI will
tell consumers which of the products are certified healthy – low calories, rich in fiber,
low in fat, sodium and no trans-fat. RSC will showcase these products by putting a
green tags on it to help consumers identify easier which products passed the FNRI.
With the continuous growing awareness of wellness and healthy living, this will be
strength for RSC.

8.1.3 Investing heavily in upgrading front- and back-end systems in a bid to enhance
the customer experience years industry experience

RSC was given a 4 rating as they are heavily putting an investment in technology for
the last 5 years and still are. RSC systems ensure that they always have an up do
date front- and back-end systems in a bid to enhance the customer experience.
Currently they have new software called Customer Relationship Management (CRM)
which RSC uses to study consumers shopping and purchase behavior. They also

53
 have the business analytics software that we use to know trade partners information
in sales, inventory, and payments in real-time.

8.1.4 Merchandising and Rewards Program increases customer loyalty

RSC was given a 3 rating as its competitor’s loyalty program is close on what RSC
has to offer. RSC has loyalty program called “Robinsons Rewards” this will allow their
customers to earn points and can be used for any Robinsons stores. Aside from that,
they are also accepting cebupac card holders to earn points.

8.1.5 Good customer relationship services due to absence of union

RSC was given a rating of 4 because they treat their employees valuable where it
was reported that no absence of union happened for the past several years.

8.2 Weaknesses

8.2.1 Stores are mostly can be found in the mall, they are discriminating in choosing
locations

The weight given is 12% with rating of 2. Most of the RSC stores are found in the
mall unlike other supermarkets who can be found in every neighborhood be it small
or big community. Also, competitors are more strategically located with accessibility
of public transportation such as in SM in mandaluyong where you can find a bus
terminal.

8.2.2 Less aggressive of advertising campaign

The rating given is 2 as the Robinsons Supermarket Is not that known to its
products / service they offer compared to competitors. RSC doesn’t have a
memorable tag line, theme song and endorser.

8.2.3 Target market is not defined, each branch has its own target market

The rating given is 2 because even RSC has been in the industry for 30 years they
are not able to establish its own target market unlike competitors. RSC store target
market is depends on which store you go.

8.2.4 Variety of products is less versus to competitors where they offer small size
products and cheaper that cater for those who has sari sari store like business
The rating given is 2

54
 8.2.5 The choice of leasing partners is not that attractive to gain more new
customers
The weight given is 1 as the leasing partners of RSC store are not attractive for the
customers. Since most of its stores are found in the mall, it is important that the mall
stores / ambience / environment is lively and that includes those leaser in the mall. If
the brand store is present in the mall most customers looks for, chances are
customers will also visit the supermarket store.

8.3 Summary
The major strengths of the company lies on their 30 years industry experience and
known brand. The company has 140 stores nationwide ended in 2016, which make
their sales grow and compete against competitor. The consumer behavior changes
and keen towards healthier lifestyle which is good for RSC.

Even the company has a good merchandising and offers rewards program it still
lacks the aggressiveness to capture total market share.

IX. STRATEGY FORMULATION

9.1 Opportunity

TOWS ANALYSIS STRENGTHS WEAKNESSES

1. 30 years industry experience with
over 140 stores located nationwide
and branded as one of the leading
supermarket in the Philippines
2. Only retailer that has an active
partnership with a food and nutrition
research institute to evaluate the
nutritional contents of the food
offerings to promote health &
wellness
3. Investing heavily in upgrading
front- and back-end systems in a bid
to enhance the customer experience
4. Merchandising and Rewards
Program
1. Stores are mostly can be found in
the mall, they are discriminating in
choosing locations
2. Less aggressive of advertising
campaign
3. Variety of products is less versus
to competitors where they offer small
size products and cheaper that cater
for those who has sari sari store like
business
4. The choice of leasing partners is
not that attractive to gain more new
customers

5. Good customer relationship

services due to absence of union

55
 OPPORTUNITIES
1. Growing market in the country,
especially for middle class which is
set to grow by 41.8% between 2015
and 2030 to reach 8.4 million by 2030
2. Overseas Filipino Workers
Personal Remittances are expected
to grow 7% from 2015-2017
3. Increasing consciousness trend of
health and wellness with focused on
nutrition
4. Government's Budget on
Infrastructures and transportation
projects rehabilitation in 74 Provinces
5. IT Integration
THREATS
1. Aggressive increase of substitute
stores offering the same products
2. FOREX volatility
3. Climate change has an impact
around the life cycle of food products
4. The unemployment rate increased
to 6.6% in January 2017 higher than
the 5.7% recorded in January 2016
5. Power Rates it the Philippines is
the 3rd highest in Asia according to
International Energy Consultants
(IEC)
SO STRATEGIES
1. Continue to expand stores in rural
and urban areas especially with high
population growth rate such areas in
Central Luzon and LusVISMIN.
(O1,O2,O3,S1,S2,S5)
2. Develop and innovate more
“healthy you” quality products at a
cheaper price. (O1,O2,O3,O5,S2,S3)
3. Improve website and update social
media sites such as Instagram,
Facebook, and Tweeter). Provide
activity awareness/updates:
promotions-ongoing sale, CSR
activities). Add a section for customer
testimonials and live chat support.
Utilize placements in online classified
ads sites like
(O1,O2,O3,O5,S3,S4,S5)
4. Strengthen partnership to the
pioneered online grocery platform in
Southeast Asia as this will increase
customers especially for those who
are busy (O6,S4)
ST STRATEGIES
1. Expansion by opening more
branches
WO STRATEGIES
1. Uplift brand image and draw more
customers by contracting effective
prominent/famous celebrity. Get
more involvement in sponsoring
events (O1,O2,W2)
2. Locations should be carefully
planned and should focus on
demographics such as people traffic
and access to transportation (O4,
W1,W3)
3. Formulate promotions and
discounts for top retailers like
bundles and give away based on the
local knowledge of regional sites.
(O5, W3)
WT STRATEGIES
1. Invest on more research and
studies on the market trends in order
to understand and be more sensitive
on changing needs (T1,T2, W1,W3)
2. Unique management of lessors
56
 TOWS STRATEGIES
MARKET PENETRATION • MARKET DEVELOPMENT • PRODUCT DEVELOPMENT

9.2 SPACE Matrix

SPACE Matrix has a 4 quadrant framework focuses on strategy formulation
especially in relation to a firm’s competitive position. These factors are Conservative,
Aggressive, Defensive, or Competitive Strategies. Below table shows RSC’s
competitive advantage and financial strength versus industry strength and
environmental stability.

Plotting these points on a graph, the SPACE Matrix of RSC is shown below, making
the firm fall in the competitive quadrant. This quadrant suggests the use of integration
strategies Backward, forward, and horizontal, market penetration, market
development, product development.

57
9.3 Boston Consulting Group (BCG)
Before starting the BCG Matrix we have a look the business growth of the RSC in the
Philippines for year 2013/2014 & 2015 report.

58
9.4 IE Matrix

The result of the Internal-External Matrix of Robinsons Supermarket Corp. is to have

“Grow and Build strategies” position. The company's landed IV position in the IE
Matrix which includes strategies market penetration and product development, which
align with the company’s proposed strategies.

9.5 Grand Strategy Matrix

Before starting the BCG Matrix we have a look the business growth of the RSC in the
Philippines for year 2013/2014 & 2015 report.

Based on above table, Grand Strategy Matrix, RSC landed under quadrant 1. RSC is
still included in the top 3 leading supermarket. RSC is the third supermarket in terms
of income in the industry. The strategies are towards market development, market
penetration, product development, forward integration, backward integration,
Horizontal Integration and concentric diversification.

59
X. SUMMARY OF STRATEGIES

STRATEGY OPTIONS TOWS SPACE IE BCG GSM TOTAL

INTEGRATION STRATEGIES
1 Forward Integration X X X X 4
2 Backward Integration X X X X 4
3 Horizontal Integration X X X X 4
INTENSIVE STRATEGIES
4 Market Penetration X X X X X 5
5 Market Development X X X X X 5
6 Product Development X X X X X 5
DIVERSIFICATION STRATEGIES
7 Related Diversification 0
8 Conglomerate Diversification x 1
9 Horizontal Diversification 0

The supermarket industry is very competitive and attractive as there is potential of

increasing market share. Above on the summary table, it is recommended that the
company have intensive strategies - market penetration, market development and
product development.

XI. QUANTATIVE STRATEGIC PROFILE MATRIX (QSPM)

Market Market Product

KEY FACTORS WEIGHT Penetration Development Development
AS TAS AS TAS AS TAS
Opportunities
Growing market in the country,
especially for middle class which
is set to grow by 41.8% between 0.17 2 0.34 4 0.68 3 0.51
2015 and 2030 to reach 8.4
million by 2030
Overseas Filipino Workers
Personal Remittances are
expected to grow 7% from 2015- 0.14 2 0.28 4 0.56 3 0.42
2017

Increasing consciousness trend

of health and wellness with 0.09 2 0.18 3 0.27 4 0.36
focused on nutrition
Government's Budget on 0.09 3 0.27 4 0.36 2 0.18
Infrastructures and transportation

60
projects rehabilitation in 74
Provinces

Favorable government policies

and skill development have led to 0.08 2 0.16 4 0.32 3 0.24
a robust modern technology

Threats
Aggressive increase of substitute
0.15 2 0.30 4 0.60 3 0.45
stores offering the same products
FOREX volatility 0.10 2 0.20 4 0.40 3 0.30
Climate change has an impact
around the life cycle of food 0.07 2 0.14 3 0.21 1 0.07
products
The unemployment rate
increased to 6.6% in January
0.06 0 0 0 0 0 0
2017 higher than the 5.7%
recorded in January 2016
Power Rates it the Philippines is
the 3rd highest in Asia according
0.05 0 0 0 0 0 0
to International Energy
Consultants (IEC
Total Weight 100%
Strengths
30 years industry experience with
over 140 stores located
nationwide and branded as one 0.17 2 0.34 4 0.68 3 0.51
of the leading supermarket in the
Philippines
Only retailer that has an active
partnership with a food and
nutrition research institute to
0.17 2 0.34 3 0.51 4 0.68
evaluate the nutritional contents
of the food offerings to promote
health & wellness
Investing heavily in upgrading
front- and back-end systems in a
0.14 3 0.42 2 0.28 4 0.56
bid to enhance the customer
experience
Merchandising and Rewards
0.10 2 0.20 4 0.40 3 0.30
Program
Good customer relationship
0.08 2 0.16 4 0.32 3 0.24
services due to absence of union

Weaknesses
Stores are mostly can be found in
0.12 2 0.24 4 0.48 3 0.36
the mall, they are discriminating
61
 in choosing locations
Less aggressive of advertising
0.10 2 0.20 4 0.40 3 0.30
campaign
Target market is not defined,
each branch has its own target 0.05 2 0.10 4 0.20 3 0.15
market
Variety of products is less versus
to competitors where they offer
small size products and cheaper 0.04 2 0.08 4 0.16 3 0.12
that cater for those who has sari
sari store like business
The choice of leasing partners is
not that attractive to gain more 0.03 3 0.09 4 0.12 2 0.06
new customers
Total Weight 100%
Sum Total Attractiveness Score 4.18 6.95 5.67

XII. PROPOSED STRATEGY

The following are the recommended strategic objectives for RSC by 2019 to a line with
the RSC revised vision and mission statements, and as a result of an external and
internal analysis is to grow the retail: supermarket industry business at a sustainable rate
by enhancing the in-house marketing and advertisement team, strategically expanding
into up-and-coming middle-class cities, provinces, barangay’s and municipalities in the
Philippines through opening 20 to 30 branches yearly, and by setting up an in-house
research and development group.

NEW FINANCIAL OBJECTIVE: The Company’s financial objective is to increase net

sales by 15%, 20%, 25% and 30% yearly by end of 2019.

12.1 Strategic Objectives

a. Expand store to 20 to 30 branches yearly nationwide
b. Introduce new & existing organic products to new and existing markets
c. Improve marketing campaign by getting reliable endorser, strong promotions,
tie ups in TV shows and social community outreach/activities

12.2 Financial Objectives

a. Achieve net sales by 15%, 20%, 25% and 30% yearly by end of 2019
b. Achieve cash and cash equivalent and merchandise inventories to increase at
a rate of 15% to 30% respectively

62
 12.3 Market Development

It is important to have a strong market development to get the most out of products /
service of RSC can offer. As the store expands into new geographic area, RSC
should capture consumers to make them buy from them. A strong advertising
campaign should be established as this will help maximize the consumer insights of
the products being offered. Hence, this will help the stockholders’ investment have a
greater chance of getting the ROI of the company.

12.4 Product Development

As the market for supermarket sells mostly the same products, the company needs
to exploit opportunities towards organic products that are affordable. By developing
new products and services into all RSC store formats will attract new types of
consumers who inclined towards living a healthy lifestyle. This would also possibly
can increase the sales of the company and be known for its products. Also, this will
help to decrease the chances of new substitute products that will enter the markets

which can affect the external/internal environment of RSC.

12.5 Market Penetration

The Market Penetration strategy being proposed for RSC entails a highly aggressive
sales and marketing for its Products and brand image. The key account section will
be focusing of emerging different activities to promote opportunities towards organic
products that are affordable. This strategy is being put forward because the company
has major competitive advantage on economies of scale in production and
distribution.

To further attract the market, RSC will get new endorser that has a strong image align
with their vision. A sales promotion caravan will be also implemented in the area
throughout the duration of the market infiltration period. Join social activities that will
help brand awareness align with the company’s vision mission. Also, a tie up with
reality show where giving grocery for those who embrace healthy living.

XIII. ACTION PLANS

To achieve the strategic position for Robinsons Supermarket Corporation, there has to be a
couple of activities implemented, most of which about the whole organization to realize the
Vision of the company.

63
Strategy 1: Improve the Market Reach
# Key Activities Expected Output Target Completion Lead
1 Develop brand story, Brand Identity Q2 2017 Marketing Operations, AVP -
brand identity Guidelines, Brand Marketing, Marketing
guidelines, & a tagline Story, project Manager, Executive
implementation Management
plan
2 Create marketing plans Customer Q2 2017 Marketing Operations, AVP -
per customer segment; segmentation and Marketing, Marketing
Define & Identify target profile Manager
market per branch. Research Management
Evaluate areas wherein
competitors dominate
the market
3 To have an aggressive Get powerful Q2 2017 Marketing Operations,
marketing campaigns famous celebrity finance team, Research &
endorser Development

4 Massive promotions Cohesive RSC Q2 2017 Marketing Operation,

and advertising website including finance, R&D, Digital Team,
- Improve social links to subsidiary Advertising Team,
media and websites, new
online presence products, whats
- Revamp new, promotional,
website mission,
5 Expand existing food Q4 2017 Corporate Planning, HR
product range Manager, Chief Executives
Shelf Life Management Consumer end Q3 2017 Store Manager, Marketing
and Replenishment benefit Team
Planning
6 To check all the To make sure the Q1 2018 Corporate development
strategies applied and if company is in the
there is a need to re right decision
strategize again

Strategy 2: Expanding to Key Cities and Provinces

# Key Activities Expected Output Target Completion Lead

1 Determine capex Budget Q3 2017 Board of Directors,

budget Executives - finance

64
 2 Determine additional Decide whether to Q3 2017 Board of Directors,
sources of capex borrow from the Executives - finance
budget sub format of RRHI
or thru bank,

3 Determine priority List of priority cities Q4 2017 Chief Executive, VP -

cities Corporate Planning,
research executive,

4 Hire new employees Manpower Year round 2017 HR

5 Cascade business Departmental Q3 2017 VP - Corporate Planning,

objectives to new business plan Chief Executive
employee, determine
commission rates and
KPIs

6 Deploy to priority Leads Q4 2017 VP - Corporate Planning

cities

8 Build store New property for Year round 2017 VP - Corporate Planning,
development Chief Executive

XIV. STRATEGY EVALUATION AND CONTROL

Robert. Kaplan and David P. Norton are used to measure continued success of the company
for the proposed strategies. Financial perspective, customer perspective, internal business
perspective and innovation and learning perspective are the four main perspectives used.
The proposed strategy in this paper is geared primary importance on customer perspective
to increase market share by capturing and retaining new partners and customers.

14.1 Balanced Score Card

Below scorecard will help to see company’s objective strategy.

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 Objective Measures Current Target
Increase Net 2016- P 1.
Increase Net Income by 5% 2017- P 1.
Net Income Growth Rate
income year on year 2018- P 2.
2015: 1.1 B 2019- P 3.
FINANCIAL
Return on 2016- 11%
Stockholders Profits from its investments from its Increase yearly 2017- 16%
equity subsidiaries 3% – 5% 2018- 19%
(ROE)Investment 2019- 25%

Intensive pricing
Increase
Customers Feedback and add more discount. Marke
Customer
account management and business
Satisfaction
sustainability pr
Retain and add Number of existing and new customers
new Customerst buying products
Providing
CUSTOMER insightful Percentage
analysis of media of sales from
environment and new products Brand recall
Competitive Attractive pro
activities that Number of Brand loyalty
impact on employee
strength of the efforts
product or Brand

Online
Sales & Payment Shopping Mobile Applicati
Payment Methods
convenience website, In Improve queue
store cashier
Conduct and
Excellent service
audit weekly
INTERNAL & quality Quality check products and audit
updates of data
BUSINESS standards
base
PROCESSES
Early dispatch o
On Time 0 Late
Number of Late Deliveries delivery and adv
Delivery Deliveries
delivery to custo
Create
innovative Product development cycle
products

Periodic review
Highly Motivated Labor incentives/pay s
Provide incentives and improve pay scale
Employees disagreements benefits of emp
Succession Pla
LEARNING 100%
AND GROWTH Quarterly train
Highly attendance for
PERSPECTIVE private instituti
competitive and all training
Training and evaluation semiannual tra
competent development
government m
employees modules for all
training
employees

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XV. STRATEGY EVALUATION AND CONTROL

15.1 Projected Income Statement

Financial project is used to see the effects of the proposed. Data from the proposed
strategy was used for the assumptions of the financial projections to simulate the
results of the strategies.

1. Net Sales

Assumes the net sales will increase year on year with the Company's expansion
plans, (20-30 new stores per year), aggressive marketing campaigns and product
innovation/development.

2. Rent and Other Revenue

The Company has entered into operating leases on its building - Assumed no or flat
increase year on year for 4 years since this paper is only focused on the main source
of supermarket revenue which is revenue from sales of goods (food and household
products, etc).

3. Interest income

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 Pertains that interest income earned from savings and short-term investments.
Assumed a steady increase of 10% year on year following the run rate percentage
increase on actual interest income earned from 2013 to 2015.

4. Dividend income

Income derived from dividends on investments in subsidiaries. Projection assumed

an increase of 10% year on year on dividend income mainly coming from investments
in Robinson's Handyman, Inc and South Star Drug where in 2015; RSC recognized a
total of Php49M on dividends from these two subsidiaries in 2015.

Cost Assumptions

Cost of Merchandise Sold - Assumed an increase which is also directly proportional to

the increase in net sales. 15% is assumed increase on the first year, 20% in second
year (2017), 25% in third year (2018) and 30% in fourth year (2019).

Operating expenses Assumptions

1. Personnel costs and outside Services

Consists of salaries, allowances and benefits and contracted services. Salaries

include pension expense where the Company funded a non-contributory defined
benefit pension plan covering all regular and permanent employees. The projected 4
year personnel costs and outside services assumes a 15% growth per year. The
growth is directly related to the expansion plans of the Company to grow 20-30
stores each year thereby directly affecting the sales to go on an upward trend year
on year. The assumed increase year to year is also attributed to more hiring of
personnel and hire services in order get the plans of the company implemented in
areas of marketing and product development.

2. Utilities

Mainly represent water and electricity charges as well as communication costs (IT,
telephone etc). This is assumed to increase year on year at 10% per year since this
is mainly proportional to the increase in the number of stores per year.

3. Rental

The Company has entered into a lease agreement with a lessor for a term of 3 years
upto 15 years.

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4. Royalty fee

Royalty expenses pertain to a certain percentage of sales charged by the related

parties related to the management fo the Company's trademarks and licenses. A
historical rate of 2% of total net sales is applied in the 4 year projection.

5. Depreciation and amortization

Depreciation and amortization expenses pertain to leasehold improvements, store

furniture’s and fixtures, Office furniture’s and fixtures, Transportation equipment,
building and computer equipment. The projected depreciation expenses increase is
mainly attributable and proportionate to the increase in the stores per year which is
estimated at 20-30 stores per year. A historical rate of 16% yearly increase was used
to support the assumed expansion in next 4 years. The bulk of the Company's
property and equipment comes from Leasehold improvements and store furniture’s
and fixtures which are depreciated over useful life of 10 years or a rate of 10%.

The estimated useful lives (EUL) of the different categories of property and
equipment follows:

6. Freight and transportation

Projected at 0.6% of net sales. The increase is assumed to be directly proportional to

increase in net sales.

7. Supplies

Projected at 0.5% of net sales. The increase is assumed to be directly proportional to

increase in net sales.

8. Taxes and licenses

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 Projected at 0.2% of net sales. The increase is assumed to be directly proportional to
increase in net sales.

9. Others

Below table shows the breakdown of the projected other expenses where the bulk
expense will be coming from advertising and promotions and insurance expenses
which is aligned with the Company's strategy to have more aggressive marketing
campaigns and product innovation/development. Advertising and promotions
expenses are projected to balloon and increase at a rate of 30% per year due to this
strategy. Insurance expenses are also projected to increase at 35% per year which is
aligned with the expected expansion of stores.

10. Provision for Income Tax

The provision for income tax pertain to regular corporate income tax which is
assumed at 30%.

Vertical analysis of the projected income statement is illustrated below.

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Horizontal Analysis of the projected income statement below:

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15.2 Projected Balance Sheet

72
Projection is based on the following assumptions. Please note that the base where the
assumptions were applied is coming from the audited financial statements for years 2013 to
2015.

ASSETS

1. Cash and cash equivalents

This consists of cash on hand and in banks and short term investments. Cash in
banks earns interest at respective bank deposit rates same as short term
investments.

Cash and cash equivalent in the projected years 2016 to 2019 is assumed to
increase at a rate of 15%, 20%, 25% and 30% respectively. The increase follows the
projected increase in sales.

2. Trade and other receivables

Trade receivables are non-interest bearing and are generally 30 days payment
terms. Other receivables represent mainly of receivable from insurer on claims from
insurance companies from damaged merchandise/goods and property and
equipment during catastrophes such as fire and flood/typhoon. This section also
includes dividends receivable from investments, operational cash advances and
interest from banks.
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 The projected amounts from 2016 to 2019 are assumed to be at 1% of total net sales
which is derived from historical values. The increase also follows the increase in
yearly sales correspondingly.

3. Merchandise Inventories

Projected amounts from 2016 to 2019 is in direct proportion to the increase in Cost of
Merchandise Sold where it is projected to increase at the following rates: 15% is
assumed increase on the first year, 20% in second year (2017), 25% in third year
(2018) and 30% in fourth year ( 2019).

4. Other Current Assets

Mainly consist of input VAT. Input VAT is recoverable in the future period/ years.
Projected amounts from 2016 to 2019 is in direct proportion to the increase in Cost of
Merchandise Sold where it is projected to increase.

5. Property and equipment - net (Notes 7 and 11)

This account consist of the following:

Property, plant and equipment (please refer to the income statement, under
Depreciation and Amortization)

 Building
 Leasehold improvements
 Store furniture and fixtures
 Office furniture and fixtures
 Transportation equipment
 Computer equipment

It is projected that property, plant and equipment will increase year to year in relation
to the assumed expansion of the Company which is to grow the stores up to 20-30
year on year.

The projected increase is assumed at 15% is assumed increase on the first year,
20% in second year (2017), 25% in third year (2018) and 30% in fourth year ( 2019).
Ratio to Total Assets is between 30-35% which is aligned per historical figures.

Value of the building is also expected to increase since the Company also starting to
build stand-alone supermarkets which are independent from renting from its
subsidiary, Robinsons Land where most of the existing supermarkets are located.

6. Investment in subsidiaries and In associate (Note 10)

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 Below shows the Company's percentage of ownership in the shares of stocks of
subsidiaries:

7. Security and other deposits (Notes 13, 22 and 21)

Mainly consist of rental deposits which are refundable at the end of the lease term.
The rest pertains to utilitiy deposits and construction bond.

It is assumed that this account will have a flat increase of 1% year on year. This
account is approximately 1% of the total assets of the company.

8. Deferred Tax Asset

This pertains to an asset in the Company's balance sheet which may be applied or
used to reduce income tax payable. The deferred tax of the Company is mainly
attributable to pension expenses and deferred taxes on comprehensive losses.
Projected 4 year assumption for deferred taxes is at a decreasing trend since it is
expected to be offset in the projected income taxes of the Company due to projected
net income in the coming years. Historically, the decrease is at 30% from 2014 to
2015 and the same trend or factor has been applied to the 4 year projection.

LIABILITIES

9. Trade and other payables (Notes 14, 20 and 22)

15% is assumed increase on the first year, 20% in second year (2017), 25% in third
year (2018) and 30% in fourth year ( 2019). This is directly proportionate to the
increase in cost of merchandise sold.

This account primarily consists of the ff:

Trade payables - pertains to the payables the Company owes its suppliers in the
ordinary course of its business in obtaining merchandise inventory for resale. These
are non intereset bearing and are normally settled on a 30 day term

This loan was obtained to support the working capital requirements of the Company

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 Non trade payables consist of

a) Related party payables

The Company in its regular conduct of business has transactions with its related
parties such as rent and utilities payable,royalty payable,purchases of
merchandise for resale.

b) Other payables

Consists of taxes and licenses payable and salaries payable

10. Loans payable

Short term promissory note availed by the Company from local banks which is
renewable every 3 months at the option of the Company. This was first availed by
the Company in 2015 to support its working capital requirements.

This is assumed to increase on the 4 year projection since the Company will be
needing more funds to support its operations as well as the strategies laid out in
order to help grow the business 15% is assumed increase on the first year, 20% in
second year (2017), 25% in third year (2018) and 30% in fourth year ( 2019).

11. Income tax payable

This is the regular corporate income tax of the Company. This is assumed to
increase in proportion to the increase in the income before income taxes but offset by
the application of the deferred tax asset.

12. Dividends payable

Pertains to dividends that the Company's Board of Directors authorized to be payable

to its stockholders. In 2014, the board approved declaration of cash dividends
amounting to PHP 200M which were paid in 2015. There are no expected cash
dividends to be declared in 2016 to 2019.

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15.3 Projected Cash Flow

77
XVI. RSC FINANCIAL STATEMENTS

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