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

Reaction Paper: OPEMAN Forum by Rocky Gabatin Spentrep AGSB H de la Costa,

Rocky Gabatin

S09 - ENTREP

     The OPEMAN forum was very enlightening and informative. Despite this, I wished that Atty. Layugan had shared more concrete examples and/or personal experiences in relation to the status of the Energy sector. This would have been more appealing for me rather than focusing her lecture on the regulations. For me, the role of ERC is very critical in energy prices, as depicted in the recent intervention of ERC on WESM, so I find it important to understand the current energy issues in relation to how ERC is helping in solving those issues.

Special Report by Rocky Gabatin

 #special report, slideshare

Hi Prof. Jorge,

Please find the slideshare link to my special report:

http://www.slideshare.net/rgabatin1/blue-ocean-strategy-31262616

Regards,

Blue ocean strategy from Rocky Angelo Gabatin

Factors Paper by Rocky Gabatin

Rocky Gabatin

SPENTREP – S09

Prof. Jorge Saguinsin, MBA

Factors Paper:

What factors I do / don't posses that make / do not make me a Business Entrep (not more than 3 pages). You can do a self assessment available from the internet. Do a thorough self analysis.

     Using an online "Entrepreneur Self-Test (see Appendix)," there were 5 factors considered in order to assess my entrepreneurial potential. These were motivation, capacity related to business skills, capacity related to networking and partnership, support from family and friends, and support from the community. Out of the possible score of 100, I scored 81.25 which was considered as "High Potential." This result was not very surprising for me because I always wanted to start my own business.

     In terms of motivation, I never doubted myself when it comes to putting up a business. Although there were times as I grew up that I swung back and forth between several business ideas, I was also motivated and certain to build my own business. In fact, I recall myself saying to myself and to others when I was younger that I will never be satisfied being an employee for the rest of my life. I knew that I needed something more; I knew that I can be an entrepreneur.

     Under the motivation section, there was one factor in which I scored myself low—"creative." I can be honest that I am a work-in-progress in terms of creativity. I cannot cite any instance where I can say that I made a breakthrough about something. Despite this, I can recall several occurrences where I demonstrated resourcefulness; I believe that resourcefulness is part of being creative. Yet again, creativity is coming up with something out of nothing; I still have to achieve that feat for me to be confident to say that I am creative enough.

     My capacity related to business skills, I believe, is adequate and is continuously improving as I mature. A huge parcel of this is attributed to my education. I can say that both my undergraduate degree in Psychology and my current pursuing of MBA are a good combination in being a good entrepreneur or businessman. After all, business is chiefly run by people (link to psychology) and tools (link to MBA). In addition, I grew fond of reading books related to both psychology and business. In a span of only 5 years, I realized that I have read a lot of leadership books to fill an entire bookshelf. Not to mention that I also have been acquiring and reading e-books regularly.

     I must admit that my capacity related to networking and partnership can still be improved. I am innately an introverted person who goes out of my shell every now and then. I am not an extroverted person who is sometimes reflective. I understand that networking and partnership is crucial in any business, so I need to learn to be more comfortable dealing with people from all walks of life. My experience in middle management in my current employment gives me a good opportunity to hone this characteristic.

     When it comes to support from family and friends, I can say that I have more support from my closest friends than from my family. I could say that both my parents are risk averse, so they cannot fully support me in my business ventures. However, my friends have always been pushing and motivating me to start as soon as I can because they believe that I will excel at it. I remember telling one of my friends that I am finally setting up my business this year, and he said "Bakit ngayon lang?" (Why only now?). For me, this kind of support enables me to push myself harder and work smarter as I go along.

Appendix