A strategic management paper: Magnate Food & Beverage Incoporated

• Main Author: Chua, Marilou
• Format: text
• Language: English
• Published: Animo Repository 2006
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/4542
• Institution: De La Salle University

Bottled water industry still has room for growth yet branded water are Oligopolized by existing big brands such as Absolute, Wilkins, Nestle, Viva and Nature's Spring produced by multi-million dollar companies. Small entrepreneurs wanting to enter the business should not compete head on with these firms because profit will be sacrificed to maintain a brand name. It would be much wiser if small entrepreneurs can capture the niche market via going on with trend of OEM (original equipment manufacturer) or subcontracting. More and more food chains and store chains are having their own bottled water for one main reason, is that OEM bottled water can give these establishments higher profit due to lesser marketing cost on the part of the subcontractors. But then one big problem faced by these big firms is that if they accept small quantity toll-packing business from small chains, this would greatly affect their production schedule therefore OEM production is not their priority. The above situation posts an opportunity for small bottlers who are in the verge of closing down business. This paper begins with an evaluation of the external environment. The following factors are considered: economic, social, technological, and political/legal innovations. Porter's Five Forces are also used to assess other pertinent issues. And the result of the analysis base on the given fact is that while entry to water refilling station business has been easier, sustainable profit is hard to achieve because the market has already been saturated by the mushrooming water station fad. Also, while the water bottling business shows potential in growth due to rising population and consumer awareness, the existing barrier to entry is quite high due to the fact that top bottlers has already achieved economies of scale and are already stable and is flexible in this consumer business industry. Small bottlers without sufficient capital will find it hard to penetrate the market. The internal environment includes the nature of the company's business, company's history, an analysis of the company's competitive advantages/disadvantages using the value chain, strength and weaknesses and its financial statements and business ratios. The result of the analysis indicates that the company is not at a position of strength and weaknesses and its financial statements and business ratios. The result of the analysis indicates that the company is not at a position of strength due to the fact that it's not deploying any of the Porter's generic strategies, they're second-rate company in their field of industry, no focus, no differentiation with a come what may hard sell attitude. Business ratios also indicate inefficiencies in managing receivables and slowing turnover of inventory. At the same time, the company's ability to use its current asset to pay its current liabilities is declining annually as a result of the current ratio lowering value. With the execution of proposed strategies, MFDI intends to achieve its vision of becoming the leading bottled water subcontractor in the Philippines by 2008. Other proposed objectives are: to increase annual growth rate of net sales by 5% and to sustain net income annually starting fiscal year end 2006. As shown in the result of this paper's financial projection, we can actually turn a losing water bottling plant to a moderately growing bottling plant by slightly shifting focus to toll-packing or subcontracting instead of competing head on with the giants. Tapping the untapped will be the best move for Magnate F&B, Inc.