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What should be the appropriate corporate portfolio structure for Phinma ?

Philippines Environment
Population
101.8M
81.1M

Age Structure Urbanization


growth in urban area Around 25% of population in Philippines consists of 05-20 age group with increasing percentage

Philippines Environment
Population below Poverty Line %
7.3% 2.9% 41% 32.9%

GDP Real Growth %

Unemployment Rate %
9.6%

Job Prospects Optimism

7.3

Capital Intensive Industry Risks 1960s

BUSINESS MED

POLITICAL MED

CAPTIAL INTENSIVE INUSTRY

ECONOMICAL HIGH

FINANCIAL LOW

OPERATIONAL LOW

Capital Intensive Industry Risks 1990s

BUSINESS HIGH

POLITICAL LOW

CAPTIAL INTENSIVE INUSTRY

ECONOMICAL HIGH

FINANCIAL HIGH

OPERATIONAL LOW

Service Industry Risks

REGULATIONS

TECHNOLOGICAL

SERVICE INDUSTRY

ECONOMICAL

OPERATIONAL

Business & Industry Factor Energy Sector


Economical
Infrastructure Industry Growth

Social High skilled labor

Business Strength
Diversified Business Technological Position Intl Collaboration Streamline Opt Margins

Technology High End Tech

Political Import heavy tech

Business & Industry Factor Weights Energy Sector


Factor Market Attractiveness Raw Material Heavy Engineering/Infrastructure Profitability High Skilled Labor Growth Size Total Business Strength Diversified Portfolio Margins Technological Position International Collaboration Streamlined Operation 0.15 0.2 0.25 0.3 0.1 1 4 1 4 3 5 0.6 0.2 1 0.9 0.5 3.2 0.2 0.15 0.2 0.1 0.2 0.15 1 3 3 5 3 4 3.5 0.6 0.45 1 0.3 0.8 0.525 3.675 Weight Rank Weighted Score

Total

Business & Industry Factor Tourism Sector


Economical
Tourism / GDP Infrastructure

Social/Env Pristine Nature Hospitality

Business Strength
Operation Management No of Hotels/ Critical Mass International Exposure Lowest Rates Margins Important Sites

Technology Reachability via Tech

Political Government Support

Business & Industry Factor Weights Tourism Sector


Factor
Market Attractiveness Size 0.3 0.2 0.1 0.15 0.1 0.15 1 5 4 3 4 3 4 1.5 0.8 0.3 0.6 0.3 0.6 4.1

Weight

Rank

Weighted Score

Government Support Infrastructure Reachability via Technology Pristine Nature of Tourism


Growth Total Business Strength People/ Operations Management No of Hotels/ Critical Mass International Experience Lowest Rates Margins Presence at Important Sites Total

0.1 0.15 0.05 0.15 0.3 0.25

4 2 2 2 1 1

0.4 0.3 0.1 0.3 0.3 0.25

1.65

Business & Industry Factor Roofing Sector


Economical
Housing Needs

Social Low Skill Labor

Business Strength
Distribution Economies of Scale Capital Intensity Margins Technology

Technology Technology Availability

Political
Government laws/Compe tition

Business & Industry Factor Weights Roofing Sector


Factor
Market Attractiveness Low Skill Labor 0.3 0.2 0.2 0.2 0.1 1 4 3 2 4 3 1.2 0.6 0.4 0.8 0.3 3.3

Weight

Rank

Weighted Score

Technological Availability
Foreign Competition Growth of Housing Needs

Market Size
Total Business Strength Distribution Economies of Scale Capital Intensity Margins Technology Total

0.25 0.3

2.5 3.5

0.625 1.05

0.15
0.15 0.15

3
4 3

0.45
0.6 0.45

3.175

Business & Industry Factor BPO Sector

Economical Low Price High Unemploy ment

Social English Quotient Low Wage Rate

Business Strength Niche Sector Operational Efficiency Margin


Political

Technology

Connectivity

Tax Holiday

Business & Industry Factor Weights BPO Sector


Factor Market Attractiveness Growth Rate Government Policies Human Resource Infrastructure Pricing Total Business Strength Market Size Margins Sector Intangible Assets Technology Total 0.3 0.25 0.15 0.2 0.1 1 1 3 5 4 3 0.3 0.75 0.75 0.8 0.3 2.9 0.2 0.25 0.35 0.1 0.1 1 5 5 4 3 4 1 1.25 1.4 0.3 0.4 4.35 Weight Rank Weighted Score

Business & Industry Factor Education Sector

Economical
Unemploya bility Rising Economy

Social
Job Prospects

Business Strength Infrastructure Spending Job Focus Additional Revenue Marketing

Technology Job Restructuring

Political Govern Competiti veness

Business & Industry Factor Weights Education Sector


Factor Market Attractiveness Student Enrollment Growth Job Prospectus Primary Education Teachers Government Competiveness Total Business Strength Economies of Scale Job Alignment Management 0.25 0.35 0.20 2 4 3 0.50 1.40 0.60 .25 .35 .20 .10 .10 1 3 3 3 4 4 0.75 1.05 0.60 0.40 0.40 3.2 Weight Rank Weighted Score

Infrastructure
Marketing Total

0.10
0.10 1

4
3

0.40
0.30 3.2

Business & Industry Factor Real Estate Sector

Economical Rising Economy Interest Rate

Social Preference Spending Power

Business Strength Government Network Fund Raising Capacity Niche Segment

Technology New Architecture

Political Laws Regulations

Business & Industry Factor Weights Real Estate Sector


Factor Market Attractiveness Demand Home Loan Availability of Land Connectivity Cost Government Regulations Total Business Strength Fund Available Political Network Operational Efficiency Sector Competition Marketing Total 0.20 0.30 0.20 0.15 0.15 1 5 5 4 4 4 1.00 1.50 0.80 0.60 0.60 4.5 0.35 0.1 0.15 0.1 0.05 0.25 1 4 4 4 4 3 5 1.4 0.4 0.6 0.4 0.15 1.25 4.2 Weight Rank Weighted Score

Mckinsey Multi-Factor Matrix


Industry Attractiveness High Medium Low

B i z
S t r e n g t h

High (3.33 5) Medium (1.66 3.33 Low (0-1.66)


Philma Edu

BPO

Next Step ?

What should be the next step for Phinma ?

Strategic Options
Strengths
1) 2) 3) 4) 5) Investment Acumen Operational Skills International Collaboration Strong government relations Diversified energy business 1) 2) 3) 4)

Weakness
Globally non-diversification Decentralized Management Limited funds Historic problem with high debtequity ratio

Opportunity
1) 2) 3) 4) Weak Exchange Rate Growing Economy High English Quotient Energy supply less than demand 5) Increasing hotel investment

1)
2) 3) 4)

Invest in energy sector (S1,O2, O4) Invest in BPO Sector (S2, O1, O3) Invest in hotel management (S2, O5) Invest in real estate business (S4, O2)

Threat
1) Increasing Financial Leverage 2) Global supply/market 3) Raw material availability 4) Less profit in hotel building

1) Status Quo on hotel retail construction (S2, S3, T4)

1) Status Quo on roofing industry ( W4, T1, T4)

Future Investment Strategy for Philma

Industry Attractiveness

Biz & Economic Considerations


Growing Philippines Economy Energy Supply less than energy demand Diversified energy business . Invest in Trans Asia
B i z

High

Medium

Low

High

S t Medium r e n g Low t h

BPO

Philma Edu

Future Investment Strategy for Philma

Industry Attractiveness

Biz & Economic Considerations


Growing Philippines Economy High English Quotient Excellent Operational Skills . Invest in BPO
B i z

High

Medium

Low

High

S t Medium r e n g Low t h

BPO

Philma Edu

Future Investment Strategy for Philma

Industry Attractiveness

Biz & Economic Considerations


Excellent Operational Skills Increasing hotel investment Declining profit in hotel construction Less risky operational business . Invest in Hotel Management but the money generated from business only not in hotel construction
B i z

High

Medium

Low

High

BPO

S t Medium r e n g Low t h

Philma Edu

Future Investment Strategy for Philma

Industry Attractiveness

Biz & Economic Considerations


Growing Economy Align with Philma Philosophy Economies of scale Operational excellence . Invest in Education
B i z

High

Medium

Low

High

BPO

S t Medium r e n g Low t h

Philma Edu

Next Step ?

Our Framework ?

Framework 1 Risk Profile ?


BPO TA Energy

OPERATIONAL RISK

DEMAND/SUPPLY RISK

TECHNOLOGICAL SHIFT

FINANCIAL LEVERAGE

INTERNATIONAL EXPOSURE

RAW MATERIAL VOLATILITY

DOLLAR EXPOSURE

NEGATIVE DOLLAR EXPOSURE

Framework 1 Risk/Reward Profile

BPO

R e w a r d

Philma Edu

Risk

Framework 1 R-Square Balancer

TA ENERGY

BPO

REAL ESTATE

TOURISM

ROOFING

EDUCATION

Framework 2 Problems with existing frameworks

1) They are very objective in nature 2) They do not consider the inter-relation among SBUs

Framework 2 Portfolio Correlation Balancer

Correlation (r) Step 1: Multiply Biz Strength & Industry Attractiveness Weight Step 2: Find multiple correlation between the SBUs. Add 1 to r i.e. make r positive Step 3: Map the values on graph . Now decide High (2)
T o t a l

Medium ( 1)

Low (0)

High (11-25) Medium

S t (2.75 11) r e Low n (1-2.75) g t h

Thank You