Case Analysis for 3 Entrep Clans by Rocky Gabatin Spentrep

Rocky Gabatin
SPENTREP – S09

Case analysis: Three Entrepreneurial Clans in Asia

THE ADDITION PROCESS

Raiva Siblings and Spouses

     Adding significant complementary businesses to the core business entails maximization or monopolization of the supply chain. Using the by-product (egg yolk) of the bakery business, for example, Raiva siblings and spouses were able to come up with another product line for their business as they are able to produce Thai desserts. What seemingly is a “waste” of another business function becomes a profitable venture for the company. Furthermore, the group was also able to implement forward integration by distributing finished goods as well as raw materials to other businesses. This approach enabled the Raivas to expand and grow very rapidly because they are able to exercise more control over the supply and value chain. They have better command of the prices because the raw materials are also within their control. As a result, this allows the company to be more cost-effective by eliminating excessive markups generated by resellers or suppliers. Eliminating the “middle-man” entails huge cost savings. More importantly, the company is able to generate profits from each point in the supply chain—upstream, core business, and downstream. The Raivas, in effect, expand its core competency.

Melawar Group

     Melawar Group’s strategy revolves around acquiring as many businesses as possible. It adds businesses regardless of the industry—making the group as diverse as possible. Diversity is an important component in risk management, so the more companies it acquires and the broader the range of industries, Melawar Group effectively reduces risks from unexpected events, economic downturns, and even the losses from bankruptcies. Adding different companies from different industries to the mix also allows Melawar Group to flex its muscle in terms of sheer size. Economies of scale reduces the cost of production by adopting a larger scale of production. Melawar Group now has the capability to develop the added companies in order to maximize their profitability.

Blue Bird

     Blue Bird implements both the supply chain integration of the Raivas and the establishment of a business different from the core business. The Holiday Inn nicely complements the taxi business of Blue Bird because it ensures a steady stream of customers. That is, taxis can drive people to the hotel, for example, from an airport. Meanwhile, adding brake and clutch assembly manufacturing to the business allows Blue Bird to reap the benefits of cost-effectiveness because it takes care of the maintenance of the taxis.

THE MULTIPLICATION PROCESS

Raiva Siblings and Spouses

     Since the Raivas were able to vertically integrate their supply chain, they have the capabilities to multiply their numbers in terms of branches and bakery shops. This entails broader geographical reach, and thus would improve overall profitability of the business by establishing its presence on a much wider scale. This multiplication process can result to penetrating new markets and even acquiring customers from competitors.

Melawar Group

     Melawar Group’s multiplication process came into play when it clustered similar industries into groups. This way, each industry can grow substantially through economies of scale, but more importantly, through synergy. The businesses can enjoy natural growth by combining best practices of each “company.” It is also effective in acquiring a larger market share because the customers of the each company are consolidated under Melawar Group.

Blue Bird

     There is one key element for Blue Bird in implementing the multiplication process—achieve economies of scale. Multiplying the number of taxis would ensure that the business will generate more income, and thus, allow them to purchase more vehicles. More importantly, this has a dramatic effect on the bargaining power of Blue Bird because it can negotiate for lower prices for raw materials, and this is particularly beneficial for the clutch and brake assembly line of the business: It can further reduce cost on maintenance of the vehicles and maximize both profit and market share.

THE SUBTRACTION PROCESS

Raiva Siblings and Spouses

     Holding back on the idea of franchising the business maintains the quality of operations. This means that the Raivas remains in control of the entire business. Furthermore, rather than adding potential outside ownerships through public offerings, the S&P Group effectively avoids “contamination” of the business when “new blood” comes into the mix. The sheer success of its addition and multiplication strategies, there is no pressure on the business to remove anything.

Melawar Group

     The aggressiveness of the Melawar Group in acquiring companies will eventually result to failed businesses. These failed projects had to be subtracted from the entire conglomerate. However, subtraction does not necessarily mean a disadvantage because selling the business can also yield profits, just as when Melawar sold the TV broadcasting company.

Blue Bird

     Similar to Melawar, the subtraction process made by Blue Bird entails removing businesses that do not complement its core competency. The agribusiness venture did not last long because it does not seem to be relevant to the taxi business of the family. Divesting this venture is important in mitigating losses for the entire business before it can damage it further.

THE DIVISION PROCESS

     This process is virtually the same for the three family conglomerates. The theme revolves around prevention of conflict among the family members in the future.

Raiva Siblings and Spouses

     It becomes an important element in business to place executives or managers where they can exercise their core strengths or capabilities. It can be in a form of a skill, a geographical location, or even a specific product line. The Raivas implemented this very well, so there is very little room for organizational conflict among the family members—because they are where they belong.

Melawar Group

     In this case, the division approach is necessary for the Melawar Group to be able to multiply. It divided the entire company into industry groupings, a move which also complements the fact that the members of the family are coming from different marriages. This division also acts as a precaution if any family dispute arise in the future: The company can be split simply among the siblings.  

Blue Bird

     Ibu Mutiara is working towards being able to provide her children and grandchildren with a “fair piece of the pie.” This ensures that there will be no conflict that will arise from each member of the family.   3

Pranav New York Case Analysis by: Rophele Ocampo

Prof Jorge,

Please see my assigment on the Pranav New York case analysis SPADA.

SPADA Case Analysis: Pranav New York

Situation:

Karlo Nisce and Mark Orbos, MBA students at AIM opened a first male spa business (inspired in New York) in the Philippines last quarter of 2004 at Robinsons Galleria as part of their course requirement for graduation.

Problem:

The business incurred immense losses after its 3 months of operations due to the following:

A. Wrong Location

·         The spa's stall is located in the body senses section at the 3^rd floor where mostly females' market concept stores are open and is not an easy access.

·         The body senses section is located at the opposite of the foot traffic.

·         The mall's demographic mix is dominated by the female segment.

B. Poor Quality of Service

·         Employees are all females where needs of men are not properly delivered such as shaving and strength/pressure for massage.  

·         Chairs used are not barber's chairs which the effect is that simultaneous service process is suffered.

·         Spacing of chairs is too narrow and not conducive for working.

·         Air conditioning of the spa is too cold which customers might not like the experience of shivering while having a massage.

C. Poor Marketing

·         Due to net loss, marketing was taken for granted and was removed from their solutions since it they have considered it as an additional expense.

D. Business was not systematically studied

·         The partners rushed in opening the business due to their considerations of rent expense, season's demand, excitement of their venture concept, and requirement for their graduation without carefully studying it.

Alternatives:

A.  Close the Shop

·         Since the business is not profitable and to further not incur additional losses and waste money.

B.  Re-locate

·         Since the location is a mistake, better find another location to which the business is more suitable. Location preferably on the Fort area or Makati CBD area since these area is also a good marketplace. Place should be of easy access preferably not a stall in the mall but in a standalone commercial establishment which is dominated by their primary target market.

C. Re-position

·         Remove the spa services since this is the service that occupies a lot of space and has the lowest revenue and focus on the strength of the business which is their salon services.

D. Improve Quality of Service/Re-branding

·         Undergo employees with an intensive training to produce quality service. With quality service brings word of mouth advertising which is the most powerful promotional marketing.

·         Consider male crew to create additional market and address other needs of the customers which also understands the male segment needs.

·         If to maintain the all female crew strategy, make sure to train and delight the service that the men segment needs.

·         Chairs to be changed to the appropriate barber's chair.

·         Temperature of the spa room should be suitable for massage.

·         Interior of the spa and spacing should be conducive to working and favourable for their primary target market.

E. Re-positioning

·         Changing the concept from an all male spa to a unisex spa to widen the market and generate more income. Revenues over anything else.

F. Marketing

·         Strengthen the Marketing of the business, Pranav has remove its marketing since the business

Decision:

With the alternatives mentioned, alternative B and D will be the most recommended in my opinion. Maintaining the concept of an all male spa is a very appropriate move since this concept creates originality and uniqueness. This is actually one of the strengths of the business but the wrong location and quality of service is the reason why the outcome of revenues is not what is expected.

A good Location is a very important consideration when opening a business because it is where the need and demand is being conceptualized. Improving the quality of service on the other hand also plays an important role in generating customers, maintaining their loyalty and loyal customers to help you market new customers.

Action:

The business is really feasible. As indicated in the study and as mentioned by the professors at AIM, the concept is actually a good business venture.  Applying the recommended alternative decisions with an excellent marketing strategy will help the business eradicate its losses and incur profit; the business will eventually have its place in the market. Marketing has always been an essential tool in having the business become profitable.  As Marketing major, you see to it that in every business you always analyse the SWOT (Strength, Weakness, Opportunities, Threat) of the company, turn the Weakness and Threat to Strength and Opportunities.

Submitted By:

Rophele Louie C. Ocampo

AGSB – Clark Campus

Pranav case analysis by Roman Cruz AGSB Clark Entrep

Good evening Sir!

Sending you my case analysis on the PRANAV CASE

ROMS

PRANAV CASE STUDY

by: Roman M. Cruz

SITUATION

Pranav New York was envisioned as the first male spa in the Philippines and the fulfillment of the need of the Filipino market for an integrated grooming and wellness services for men. It is situated at the third level, west wing of Robinsons Galleria. Something that is uniquely different from its direct competitor, Roberto’s barbershop who is located at the ground floor of the mall.

The business was a product of Mark Orbos and Karlo Nisce inspiration of their own experiences as patrons of barber shops, salons and spas, to which they are convinced that there should be one stop shop that will cater all these needs of the male population for grooming and wellness services. In starting the business concept, they had made their homework in conducting different market study to test the potentiality and success rate of their new venture. However, some data gathered were left unstudied and or unfinished, even their professor has noted disparaging comments on  their ventured idea. In effect, after the third month of operation, the business is losing money.

PROBLEMS AND ANALYSIS

Identifying these data that were left unstudied by the two budding entrepreneurs are the following:

1.     Demographics- though their conviction ofestablishing the first all male one stop shop that provides grooming services and wellness to the male populace is good, it has been noted that for theirselected location, the Robinsons Galleria, the foot traffic are skewed towards female segment which comprised about 60% of the mall goers. More so, this was further highlighted when they had found out thru the gender composition andmarket share, there was a dominant incidence of the female market in Robinson’s unisex salon, while only an average of 13.28 % of females was observed at Pranav. This should had been greatly considered during the initial stages of the business concept to which the wrong market reading as created a spiral effect on the output and structure of the business. In essence, there is lack of critical mass ( male segments ) that will be crucial in sustaining the business in which taking into consideration their Mission and Vision which is concentrated as the first all male one stop shop in the Philippines.

2.     Location- the selection of the location of Pranav was a result of eagerness and without proper planning and study. Initially, Robinsons Galleria itself has a great potential in terms of having a big chunk on the catchment rate considering its high foot traffic characteristic. But locating Pranav at the 3^rd level of the west wing of the mall is totally slashing its business potential because from the study itself by the leasing department, most male traffic are coming in from the east wing and on the center floor of the mall. Infact, its main competitor, Roberto’s barbershop is located at the ground level. Male segments will not exert a lot of effort on going in the third level only for Pranav especially if they are with their female partners, wives or girlfriends.

3.     Price sensitivity- basing on the results of their further study, it has been revealed the leaders in the industry are those with a fairly affordable and competitive pricing. On the other hand, those high-end position brands are lagging behind. Pranav pricing is categorized in this set of high-end positioned brand.

4.     Dominance of the female segment and higher spending level- on their study, female spent on the average, 91% more than the males. Thus females were certainly a market that was too profitable to exclude and overlook in the micro market of Robinson’s Galleria. Consequently, these female markets are often seen on unisex salons.

5.     Structure and processes failure- as noted by their professors, there are all female crew that were to attend and appeal to the “macho” psychographic target customer of Pranav. Training was also an issue. Example of which is that the owners had failed to realize that these all female crew were not taught on shaving men. The choice of chairs were confined on immovable black lounge chairs rather than a barber’s chair which limits the potentiality to offer other services to its clients because, customers would always feel uncomfortable on hopping in to different chairs/area while availing of the services. The spaces between chairs are too narrow. The Spa was too cold. Air conditioning units could not be adjusted to a higher temperature. The office space block some of the frontal window which can contribute a negatively in the store visibility.

RECCOMENDATIONS AND ACTION PLANS

After identifying the problems, it has highlighted that the problem of the business was largely concentrated on the failure of proper strategic study before conducting the business.In effect, a weaker top line has been achieved that has causing the bleeding in the bottom line of the business PnL. The thought of being the first in the country in their offerings overshadowed the science of market study and interpretation, which is so much critical in putting up a business. However, in order to solve the problem and trouble shoot Pranav and realign it to make it a profitable business, here are the following recommendations:

1.     Revision of its business objectives and realigning it to accommodate the female market in which it has a promising great potential for sales and market share growth just like of the industryleaders, which are commonly unisex salons.

2.     Rationalize service offerings by removing services that are not contributing much but covers a bigger space in the salon. Instead, focus on its core services that are driving sales and attracting customers.

3.     In relation to the rationalizing of service offerings, realigning of the structure of the salon is needed to accommodate the entry of the new market segment, which are female. This means also leveraging on their strength of having a large floor area that could handlelarge capacity or volume of customers in a given period of time.

4.     Relocate the business into high traffic areas if its possible catering to both male and female market.