ENVIRONMENTAL BUSINESS ANALYSIS

CARMONA STEAM LAUNDRY

Written for Case Discussion
Dr. Victor C. Manabat

I – INTRODUCTION

Environmental Business Analysis is a component part in the process of Corporate

Planning or Strategic Management. It enables management to develop a working
perspective of the viability of a particular business activity as it conforms with the overall
mission and goals of the organization. Through its various phases, Environmental
Business Analysis seeks to achieve the following:

1. Assess the business’ environment – forces outside the business itself that may
be considered as an opportunity or threat.
2. Assess the business’ resources and capabilities --- those things within the
control of the business such as people, machinery, facilities, contracts, image
and goodwill --- that can be allocated to react to or take advantage of the
perceived opportunities and threats in order to achieve company goals and
objectives
3. From the analysis done above, develop a management decision making
structure that would use available evaluative tools that would allow for a more
logical selection of the proper alternative.
4. Develop an action plan that would specifically list down the activities
conceptualized to meet company goals and objectives.

Carmona Steam Laundry is a typical business that faces critical decisions as a result of
the movement of dynamic marketing forces within its environment. Like any other
business enterprise, Carmona Steam Laundry must always strive to maintain a vigilant
posture towards any external and internal development that would seek to affect its
operations and profitability. Forces that come within the company’s sphere of activity can
affect it positively or negatively depending on how well the company exerts efforts to
meet such forces.

II – COMPANY HISTORY AND PROFILE

First Carmona Steam Laundry was organized in 1998 by Mr. And Mrs. Eduardo
Manalang, who decided to become entrepreneurs after years of working as bank
employees. This decision to go into the laundry and dry cleaning business was prompted
by the result of a market survey which saw a great demand for the service in Carmona
and its environs. According to this study, a number of potential markets for laundry and
dry cleaning have begun to exist within the area as follows:

1. Due to their members’ busy lifestyle and their inability to hire proper help, a
number of households have found the need to hire the services of professional
 laundry and dry cleaning companies specially for big laundry needs such as
bedsheets and linens.
2. A number of organizations, companies and institutions have begun to
outsource their laundry and dry cleaning requirements in order to reduce
manpower requirements and cut operating costs.
3. The industrialization of Carmona and its surrounding area have seen the
increase in population and business activities. The improvement of road
networks and communication facilities over the last few years have allowed
business organizations in the municipality to expand its coverage.

In the early years, First Carmona Steam Laundry concentrated its marketing efforts on the
various hotels in Metro Manila. Encountering the initial difficulty experienced by
fledgling players entering a market, the company persevered and exerted their efforts to
gain a sizeable clientele. Soon, First Carmona Steam Laundry was able to build a base of
customers around the Carmona and Laguna area made up of hotels, restaurants, clubs and
resorts.

When asked about the success of their business, the owners pointed out that commitment
to deliver the best quality of service has been foremost in their minds. This commitment
was cascaded down to their employees. Quality service is the prime component in their
operation.. Employees . .specially those in the service counter area were trained to give
that “extra touch” that would strengthen loyalty of customers. Employees were required
to know they clients by name. Small gift tokens are given out during Christmas and
birthdays. Clothes and materials are never released unless complete customer satisfaction
is guaranteed.

Equipment and facilities are of high quality. The company is equipped with high
capacity, heavy duty machines that are regularly maintained to their optimum efficiency.
The price of their service is competitive to its competitors with additional fringe benefits
being thrown in such as free pick-up and delivery of laundry.

Currently, First Carmona Steam Laundry has the following list of primary clientele:

1. Manila Southwoods Manor

2. The Manila Southwoods Sports and Country Club
3. Sherwood Hills Golf Club
4. The Palms Country Club
5. Bellevue Hotel – Manila
6. Vivere Suites
7. Microtel Inn and Suites
8. HII Parque Espana Residence Hotel
III – A DYNAMIC NEW ENVIRONMENT

At the onset of 2004, the husband and wife team were full of optimism about the future
prospects of their business. However, they are mindful of the fact that a proper attention
to the various forces within the internal and external business environment must be
exerted in order to properly steer the firm to wards a more potential goal. Thus, one
evening, the two entrepreneurs sat down to analyze market conditions in order to
determine their next move for the company.

The morning newspaper of the day reported that the Peso to Dollar exchange rate has
been behaving erratically due to prevailing market forces. Current rate is P55.84 up from
the previous P55.60. The columnists and analysts point to the series of bombing incidents
in Makati, Davao and Zamboanga which has resulted in the inevitable decline in
customer flow in malls, resorts and hotels. The Association of Hotel and Restaurant
Managers (AHRMS) has reported an initial decrease of occupancy and service inflow of
30% during the first week after the bombing incidents.

The increasing cost of living as evidenced by the increasing price levels of basic
commodities and fuel may result in penny pinching for most industries. In the laundry
and dry cleaning industry, price will be a critical factors unless other aspects come into
play that will prevail customers to prefer one company over the other. This condition is
further being undermines by the VAT issue currently being debated on in the Senate. Mr.
Manalang is of the opinion that the VAT would affect prices of materials and ancillary
services to such products as Laundry and Dry Cleaning. An increase in this area would
also increase the cost of dry cleaning and laundry

On the other hand, Mrs. Manalang threw a number of points worth considering as
Filipino lifestyle continue to approximate Western standards.

Households will continue to be composed of working fathers and mothers. This will
mean less time involved in the accomplishment of menial chores. This can be an
opportunity for businesses involved in services such as laundry, gardening, janitorial and
the like.

Carmona and its environs has finished its transformation from an agricultural area to a
commercial/residential/industrial area. This means more people coming in to work or to
stay in Carmona. This means more households and people who will yearn for the many
services they are accustomed to in Manila.

The introduction of innovations in the area of Laundry and Dry Cleaning has resulted in
this menial work being relegated to machines. Specially for big and bulky laundry work,
many people have already gone away from the manual laundry methods and have gone to
Laundry Services.

Currently, three major companies have been identified to compete in the market :
 5.1 Kalinisan Steam Laundry – located in Pasig City
5.2 Booming Rose Steam Laundry: Quezon City
5.3 Kuff and Collar Laundry – Pasay City

Although other companies exist in the Laundry and Dry Cleaning industry, no other
company has the capacity nor the facility to compete with these 4 major players
First Carmona Laundry and Dry Cleaning is the only company of the four major players
who is located right in the heart of the Carmona and Laguna area. This makes the
company highly strategic in their location. In terms of coverage, the company lies in the
hub of the operations and market allowing it to cover a wider area than its competitors.
Additionally, the other three competitors’ location is blocked by the periodic traffic
problem of the Southern Luzon Expressway which makes their ability to service the
companies in the southern portion of Manila greatly impaired.

IV – THE MACHINES OF CHANGE

With the above conditions prevailing in the external environment, the couple realized the
need to also consider the various aspects of the operation as follows:

1. The company has a high capacity and heavy duty machine able to satisfy the
demands of the market. According to product specs, the main machine is currently
under utilized by about 50%. This is optimal in the sense that there is more than
enough downtime to maintain the machine and ensure its life. However, the
company is currently having difficulty in the processing of bed sheets submitted
for dry cleaning. This is specially true in the area of Pressing phase(the process
where sheets are folded and pressed neatly in preparation for packing), thus
necessitating the procurement of a bigger machine. Currently, bedsheets have to
be pressed 2 to 3 times. This is a big amount of downtime.Downtime is also
experienced if the boiler or the flatwork ironer (the presser for small items such as
barongs and evening gowns) breaks down. There is no reserve machine available.
Additional flatwork ironer would cost P 1.2 million.

2. The employees of First Carmona Laundry and Dry Cleaning number 15. They are
highly skilled and have been in the company since its inception. Employee
benefits and salary scale is competitive to other companies in the industry.

3. Price of First Carmona is competitive. Marketing is limited to 1 billboard along

the Carmona Highway and leaflets given as handouts. Promotion is mainly by
word of mouth or referral.

4. The company has limited capitalization as compared to its competitors. Since it

has only been in the market for 6 years, the owners have not had enough time to
generally develop a working capital sufficient to react to market forces.Any
expansion of business will have to be sourced through loans. There is no other
way that owners can acquire the needed capital for expansion.
In the midst of the above internal and external environmental forces, the owners are
contemplating on the viability of procuring a Flatwork Ironer that would cut the
downtime of pressing and increase their output.

The various aspects concerned with the purchase of the Flatwork Ironer are as follows:

1. The total cost of the Ironer is P1.2 million.

2. The proposal envisions the purchase of the ironer under the following terms:
2.1 300,000 downpayment.
2.2 The balance to be paid in one year at a monthly amortixation of
75,000 a month.
3. It should be noted that the P300,000 downpayment would also be sourced
through another loan from another bank using the owner’s residence as
collateral.

“Do we take the plunge and go for it ? or do we wait on the purchase of the flatwork
Ironer”