Case Study: Robin Co. Ltd.

Nielbert de Leon Jedrek Estanislao Ariel Gumabon Erle Lope Rod Rojas Rachel Ronquillo BA 291.1 Strategic Management I Professor Art Ilano August 4, 2011 Case Study: Greatwall Promotionals Co Ltd and Robin Co. Ltd

I.

Introduction

Greatwall Promotionals Co. Ltd (GPCL), Robin Co. Ltds Philippine packaging arm and leading the food packaging supplier in the country with customers such as Jollibee Foods Corporation, Yum! Brands Inc. (KFC), Dunkin Donuts, Starbucks (Philippines), Wendys International and San Miguel Corporation, is having difficulty in meeting delivery commitments for both their existing and new accounts due to various backlogs and delays in their operations. Taking matters in his own hands, the company president, Mr. Robin Co, personally gave the management team his marching orders, We have to catch up and keep up with the agreed schedules whatever happens. Our clients are our top priority and we cannot afford to lose anyone of them at this point and during this coming peak period with the holiday season fast approaching. We were fortunate that we have good relations with our clients for some years now so theyve been very understanding and forgiving regarding our backlogs but we need to address this ASAP as I cannot keep giving promises and excuses for our delays. The Lucky Me account has been a fortunate opportunity for us but we also need to deliver to the others because a client is still a client, whether big or small. They all give us business that keeps us running until now. II. Problem Statement

What are the possible issues that led to the delays and backlogs GPCL experienced? What solution can management provide to fulfill their commitment to their clients? What strategies can they put in place to prevent the problem from occurring again, such as in terms of structure and internal control, as well as between the sales and marketing, and the manufacturing functions?

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III. Analysis

SWOT Analysis

STRENGTHS INTERNAL ADVANTAGES

INDUSTRY LEADERSHIP: Leading promotions, food packaging and sourcing supplier in Asia with over 21 years of experience in QSR and FMCG industries. The company is globally competitive (have warehouses and raw material sources in China) REPUTATION: Robin Co. Ltd. has gained a credible reputation in the QSR industry as providing quality and innovative products and at the same time passing on the savings to their clients. QUALITY and VARIETY: RCL offers a onestop-shop customer-centric solution where production processes are done in-house and outsourcing is only an afterthought when capacity has almost reached its limit. Thus, quality is controlled and ensured from every product. RENEWED FOCUS: Renewed focus in Packaging division allowed for improved and more consistent sales R&D: Strong R&D focus New Customers: Sales team is highly competitive:

WEAKNESSES INTERNAL DISADVANTAGES

PRODUCTION PROCESS: Production line is currently under fire Erratic operation flow with plenty of unplanned changes in production schedule No first come, first served rule, but with limited time allowance INFORMAL STRUCTURES: Hands-on management style of owner often becomes deterrent to efficiency INFORMAL STRUCTURES: Organizational command flow and role assignments not professionally carried out LOW MARGINS: Margins for packaging is fairly low

OPPORTUNITIES EXTERNAL ADVANTAGES

RESOURCES: Resources are available for further expansions ECONOMIC GROWTH: Opportunities for clients within and outside of the Philippines (Free-trade policies); such as SMEs and other businesses.

THREATS EXTERNAL DISADVANTAGES

COMPETITION: Increased level of competition (Free-trade policies). Also, order failures may lead to loss of existing clients

S-O Strategies Probably, the most significant limitation of expansion is the ability to sell. In GPCLs case, sales volume has increased exceptionally, to an extent that production is already having difficulty catching up. One strategy is to use available resources to increase production capacity. If possible, they can temporarily outsource some services to address the current situation. Another option is to have a schedule allowance that could give way to special orders; however, this might not be very cost effective. For further growth, the company should capitalize both on network and R&D strengths to maximize potential market share both locally and abroad.

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W-O Strategies First things first. The production line needs the support of the President. The fast-growing and erratic production requirements need to be overcame. To keep them in track, the information flow between production and sales should be supervised by the President so that increases in sales volume could be anticipated and production would have ample time to cope. Mr. Robert should focus more on bigger things like capacity expansion and production efficiency and allow Mr. Cardios team to do their job. The flow of command should be streamlined such that the production team is given liberty to advise if changes in job orders are feasible and if not, what could be the possible compromise. If production-sales imbalance is not addressed promptly, potential clients may not be served leading to substantial opportunity loss. S-T Strategies The most likely strategy is to keep doing what they are doing right to overcome competition. Focus on sales has dramatically improved the companys revenue and will likely allow them to continuously grow. R&D strength should be enforced as well. This should be coupled with W-O strategies to overcome production difficulties. W-T Strategies There should be a directive for preemptive damage control. The President and Manufacturing director must consider renegotiating terms and possible discounts or penalties for clients who will have delayed orders. Reinforcement for the sales team could help save the contracts of most if not all these clients. Porters 5 Forces

Porters Five Analysis for Food Packaging Industry in the Philippines Packaging has served the Philippine economy by helping preservation of the quality and lengthening the shelf life of innumerable products - ranging from milk and biscuits, to drugs and medicines, processed and semi-processed foods, fruits and vegetables, edible oils, electronic goods etc., besides domestic appliances and industrial machinery and other hardware needing transportation. To the extent that any consumer product is packaged in a manner that meets the criteria of safety, convenience and attractiveness, it gains market share. In the aggregate, packaging as a sectoral activity boosts consumption and economic growth.

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Threat of New Entrants Low Barriers to new entrants include high capital investment due to industrial machineries and equipments needed for production. Customers are more sensitive to pricing; it is necessary for this business to generate more sales for faster ROI. Also, huge value addition and employment is needed to these activities in order to meet the requirements of the clients and to carry out its operations. Bargaining Power of Buyers High Buyers are concentrated - there are a few buyers with significant market share. Buyers purchase a significant proportion of output - distribution of purchases or if the product is standardized. Buyers possess a credible backward integration threat - can threaten to buy producing firm or rival. In the case of Robin Co., once you supply a client, business with that client becomes regular unless there are concerns on quality, price and product availability. Its major customers include Jollibee Foods Corporation, KFC and Lucky Me - these clients have major influence on the price of the products and services the company is offering. Threat of Substitutes High There is a high threat of substitute products especially for the packaging industry like Robin Co. Given the growing trend of being Eco-Friendly, the company was able to convince a lot of clients to shift to using paper cups, bowls and buckets. The packaging industrys growth has led to greater specialization and sophistication from the point of view of health (in the case of packaged foods and medicines) and environment friendliness of packing materials used. So the trend and price of the products impact the threat of substitutes. Bargaining Power of Suppliers Low Most of the paper stock and other raw materials used for packaging are directly imported. Materials like these do not really require uniqueness or differentiation. Hence, the cost of switching is low. Moreover, suppliers cannot easily drive up prices because of competition. Like with what happened to their account KFC China, they can easily dismiss RCL with the reason that there is no full-time sales person to handle the account despite their long time partnership. Determinants of Rivalry among Existing Competitors High Customers here can freely switch their brand preference without incurring any costs, which is an unfavorable factor for the industry. Though entrance barrier may seem low, this industry could have many competitors, which are sometimes of different sizes. Sometimes they could be foreign competitors, too, and they can offer equally attractive products and services. Hence, buyers will go elsewhere if they don't get a good deal. Exit barriers are also high in the industry due to the high overhead cost mostly due to investment in technology.

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Case Study: Robin Co. Ltd.

There is a high intensity of rivalry even though the industry is pretty small. The companies have their own means of diversification, but they all converge in competition for food packaging, particularly in Quick Service Restaurants (QSRs) and Fast Moving Consumer Goods (FMCG) industries. Competition is quite stiff with most of the transactions and negotiations happening in Metro Manila where all of the players main offices are located in proximity to their clients. IV. Summary of Recommendations

Major points in our recommendation reflect changes in the management control structure of the business. The group believes that RCL must be structured to take full advantage of its 2 businesses not only for the short-term but also for the long-term as well. Central to this is to treat the packaging and premium/promotions businesses as separate responsibility centers with their own managers that are ultimately responsible for performance. Next the group recommends that the organization be re-aligned to maximize the potential of each business unit. And finally, the performance measurement systems for these business units must be developed specifically reflect the nature and objectives of the businesses. Proposed Organization Chart

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The BCG Matrix

Responsibility Center Assignment and Performance Measurement Systems Packaging Business

RCL is a major player with major market share. In fact this particular business has been the bread and butter of the company for some time. The market share somewhat declined when the focus was shifted to the premiums sector but RCL was quick to recover what they lost. The packaging industry is also capital intensive because of the need to invest in equipment and capital goods. Our analysis puts the packaging business within the Star sector on the BCG matrix. Recommendations: A Star business needs to develop a Hold strategy for this business. This means that it should protect its market share and competitive position. The outlook is long-term. The group recommends that this unit be assigned as an Investment Center. Main performance measure would be Return on Investment (ROI) or Economic Value-Add (EVA). Using EVA aims to prevent the business from making investments decisions that might have negative long-term consequences for the firm.

Premiums Business
The premiums business has experience rapid growth in the last few years. There is much more market share to be grabbed out there. Highly dependent on outsourcing the production of its offerings. This business has more of a design and marketing thrust than manufacturing. On the BCG matrix, our analysis shows that the premiums business falls more within the Question Mark category than in the Star category.

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Case Study: Robin Co. Ltd.

Recommendations: A Question Mark business needs to develop a Build strategy. This implies a strategy of increasing its market share, even if this comes at the expense of short-term earnings. The group recommends that the premiums business be assigned as a Profit Center. Net Profit is therefore the primary criteria for performance measurement. By focusing on profit, the business is free to make quick decisions that can further increase its market share in a short span of time.

Standardization of Business Processes

- Interaction between Sales and Manufacturing Teams - Formalizing Escalation Procedures One issue that was apparent in the case was the owners penchant for unsettling the production schedules in order to favour some clients. While it can be justified in certain circumstances, it does not bode well in the long run as frequent production disruptions can only lead to increased operating costs retooling, start-up and changeover procedures take time and costs money. Recommendations: The group recommends that a robust forecasting and production process be implemented. That process is called the Sales and Operations Planning (S&OP) process. Having a robust, well thought-out S&OP process should smoothen out the information flow from sales to production so that disruptions are minimized. They can hire outside consultants to help them with this if in-house expertise is lacking. The owner should also try to hold back his instinct for micro-managing the business. This is not to say that the group is asking that the owners right to his business should be taken away. Rather we recommend that the owner should try to work within the agreed processes. The best way to achieve this is to formalize escalation procedures and educate customers regarding this.

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