1

A Strategic Management Paper for the First Philippine Holdings Corporation (FPH)

Karlo Jennuel R. Antonio

IBE 18 | BLM | 4
th
Year

March 6, 2014




































2


Brief Introduction of the Company

First Philippine Holdings Corporation (FPH) is a management and investment company
whose major business is clean power generation and distribution, with strategic initiatives in
manufacturing and property development. In its 50 years, it has pioneered and managed some of
the country's best companies, who are market leaders in their key industries. FPH is a member of
the Lopez Group of Companies.

Its power generation subsidiary, First Gen Corporation (First Gen), is a renewable energy
producer, with power plants that use geothermal, hydro, and natural gas for fuel. Today, it has a
total installed capacity of 2,832.6 MW, or 18.2% of the countrys total installed capacity. First
Gen manages the world's second largest geothermal power producer, Energy Development
Corporation, which searchws for indigenous, low-carbon energy alternatives.

FPH's manufacturing subsidiary, First Philippine Electric Corporation (First Philec), operates the
country's first large-scale silicon wafer-slicing facility called First Philec Solar Corporation
(FPSC), which supplies some of the world's leading photovoltaic companies. FPSC is a joint
venture of First Philec and SunPower Corporation, an established global technology leader in the
solar industry.

In property development, FPH expands its reach through Rockwell Land Corporation (Rockwell
Land) and First Philippine Industrial Park (FPIP). Rockwell Land has raised the bar for
residential and commercial development in the country, by developing brands unparalleled in
luxury and innovation. FPIP is the countrys market leader in industrial parks, hosting prominent
multinational companies in the consumer, electronics, and technology industries.

FPH maintains its corporate headquarters at the 4th floor of the Benpres Building in Ortigas
Center at Pasig City, Philippines. The firm is currently headed by the following key executives:


Chairman Federico R. Lopez
Co-chairman Oscar M. Lopez
Vice Chairman Augusto Almeda Lopez
Chief Executive Officer Federico R. Lopez
Managing Director Arthur A. Guia










3


Mission Statement Analysis

1. Mission Statement of FPH

We will leverage our competencies and experience from energy, infrastructure, real
estate, and industry to drive business strategies and solutions for the benefit of our
customers and other stakeholders.

2. Analysis

Component Remark/Comment
Customers It is understandable that FPH refers their
customers in a generic sense. This is to
provide flexibility for the firm to diversify
and cater to other sectors
Product/Services Since FPH is a holding/managing firm,
leverage our competencies already speak
of their offering to the market that is to
muster everything and anything they have
in their machineries to generate profit.
Markets Again, FPH intentionally made it in a
generic since, so that they may diversify in
the future.
Technology There was no mention as to the level of
acquired technologies, or whether or nor
are these at par.
Concern for Survival, Growth, &
Profitability
No mention as to their financial goals.
Philosophy FPHs values were not mentioned.
Self-concept FPH has the most technologically advanced
facilities in the utilities sectors, and yet
such advantaged was not mentioned.
Concern for Public Image FPH corporate social responsibility was not
mentioned.
Concern for Employees No mention as well with regards to FPHs
employees welfare.









4


Proposed Adequate-Appropriate Mission Statement


Guided with the values of unity, integrity, and excellence, we aim to leverage our
competencies and experience from the energy, industrial, infrastructure, and real estate
industries, equipped with the most advanced and up-to-date technologies, to drive
business strategies and solutions for the continued and sustained increase of our
shareholders value; for the benefit of our customers, community stakeholders, as well as
for the wellness and welfare of our employees.




































5


PEST Analysis

Political Economic
Political Stability of the Government
Taxing Policies and Incentives on
engaged sectors
Governments view on renewable
energy
Government Regulations
Public Pressure on the Government to
address environmental issues
Implementation of Feed-in Tariffs on
Renewable Energy

Countrys Gross Domestic Product
(GDP) growth
Global Economy
Reduced Interest Rates
Inflation and Exchange Rates of
Foreign Currencies
Strength and Performance of the Stock
Market
Urbanization = Increased Demand for
Energy
Expanding Middle Class
Social Technology
Societys Growing Trend to a
Greener Future
Lifestyle Changes (leaning to a
Consumerist Lifestyle)
Increased consumption of electricity-
dependent items
Level of Research & Development
Speed of Technology Transfers


Caption: The political climate that FPH operates in is in its favor, as well as the economic and
social factors are also in complement to the firms operations.





















6


Porters 5 Forces Analysis




















Caption: As the leader in the renewable energy sector and as an owner of huge chunks of the
market in other industries, FPH faces little to no competition and pressure, both from other firms
and consumers. Threat of entry is relatively low. However, there is a high pressure coming from
the suppliers, since the government has the sole discretion to allow a firm to harness and
distribute energy. Materials for photovoltaic are rare and produced by few firms. Land,
especially in the urban areas, is becoming scarcer.

Threat of Substitute
Products: Low Pressure
-Few firms offer the same
services/products of FPH.
Moreover, switching cost
can be really taxing in terms
of amount and corporate
time.
Bargaining Powers of
Suppliers: High Pressure
-The government is the
sole supplier of the
renewable source of energy
harnessed by FPH, through
authorizations to conduct
business.
-Also, materials needed to
manufacture photovoltaic
are only supplied by few
firms in the world.
-Land acquisition efforts
are also affected by price
and scarcity of available
land spaces for business,
whether in real estate or
energy.
Rivalry Among Existing
Firms: Low to Median
Pressure
-Currently, FPH is facing
only a handful of
competitors. This is due to
the fact that it requires
massive economies of scale
to be able to engage in the
utilities and real estate
sectors. However, these
competitors are inferior in
terms of financial,
technological, and corporate
machinery compared to FPH.
(FPH has been absorbing
financially-down
competitors).
Bargaining Power of
Buyers: Low Pressure
-Individual buyers have
no pressure on FPH.
- Switching cost is high
and only few firms over
the same
products/services.
-Society, in fact,
applauds and support
efforts to increase the
productions of renewable
energy
Threat of New
Entrants/Potential
Competitors: Low Pressure
-Entry barriers are relatively
high. A firm will have to
undergo an intricate process
of acquiring a license to
harness renewable energy
and to distribute it.
-The energy, industrial,
infrastructure, and real estate
industries require massive
amount of capital and
economies of scale.
7


Industry Analysis: EFE Matrix
External Factor Evaluation (EFE) Matrix
Opportunities Weight Rating Weighted Score
1. Societys growing trend to a
greener future
0.1 3 0.3
2. Upward energy demand 0.25 3 0.75
3. Unexploited sources of
renewable energy
0.09 4 0.36

4.
Increasing purchasing power of
consumers and an expanding
middle class
0.15 3 0.45
5. Increasing global demand for
photovoltaic technology
0.08 4 0.32

Threats Weight Rating Weighted Score
1. Gas and oil are still relatively
more affordable than
renewable energy

0.141 2 0.282
2. Fluctuations in foreign
currency trade
0.025 3 0.075
3. Increasing competition 0.039 4 0.156
4. Increasing acquisition price of
materials for operations
0.025 3 0.075
TOTALS 1 2.768

Caption: FPH has been efficient in capitalizing on opportunities that have appeared in its years
of operation, as well as in averting, and in some instances, mitigating the effects of various
threats that it faces.






8


Competitive Profile Matrix (CPM)
Aboitiz
Power
Corporation
Alsons
Consolidated
Resources, Inc.
SPC Power
Corporation
Ayala Land,
Inc.
Critical Success
Factor
Weight Rating Score Rating Score Rating Score Rating Score
Market Share 0.2 2 0.4 2 0.4 2 0.4 3 0.6
Financial
Position
0.15 3 0.45 2 0.3 2 0.3 4 0.6
Product/Service
Quality
0.15 3 0.45 2 0.3 2 0.3 4 0.6
Production
Capacity
0.05 3 0.15 3 0.15 3 0.15 3 0.15
Price
Competitiveness
0.09 3 0.27 3 0.27 3 0.27 4 0.36
Consumer
Loyalty
0.05 2 0.1 1 0.05 1 0.05 3 0.15
Customer
Service
0.09 3 0.27 2 0.18 2 0.18 3 0.27
Organization
Structure
0.09 3 0.27 3 0.27 3 0.27 4 0.36
Management
Experience
0.07 3 0.21 2 0.14 2 0.14 4 0.28
Global
Expansion
0.06 1 0.06 1 0.06 1 0.06 1 0.06
TOTALS 1 2.63 2.12 2.12 3.43

Caption: FPH has been marginally outperforming its competitors, except for Ayala Land the
industry leader in real estate. But still, the firm is still able to own a relatively large market share
and generates more than enough profit from real estate.








9


McKinsey 7S Analysis





















Caption: FPH has been able to institutionalize its corporate values in the various areas and
operations of the business. Hence, consistency is maintained across the firm.
Structure: A holding firm of
other firms engaged in
various industries, FPH has a
vertical chain of command,
from the Board of Directors
down to specific Board of
Directors of the respective
subsidiary firms. Each
subsidiary is independent
from each other, in terms of
operations.
Strategy: With a strong
financial position, FPH has
been acquiring distressed
competitors, so as to close
in on the market.
Moreover, FPH has been
engaged in exploration
projects in Latin America
and Indonesia. This is part
of their global expansion
strategies.


Shared Values: Basically,
FPH was created out of the
goal of securing a
sustainable future. With the
values of unity, integrity, and
excellence, Through its
competencies and experience
in the various industries it is
engaged in, FPH seeks to
increase their shareholders
value, delivery quality
service to their customers,
and create benefits for the
community stakeholders as
well as their employees.
Systems: There is
nothing unique with
FPHs day-to-day
operations. The same is
comparable to any other
firm. However, the
difference lies on the
execution of even the
simplest task. FPH
committed to excellence.
Skills: FPH hires only the
most experienced and
academically excellent
employees. Even after
hiring, FPH still requires
their employees to undergo
a continuous series of
trainings.
Style: The management
of FPH has adopted a
clairvoyant style in
leadership. They make
sure that they see first the
trends and other
movements in the market
before their competitors
do.
Staff: FPH employees and
staffs have been carefully
chosen to deliver the value of
excellent, which the firm has
adopted as its core values.
10


Summary of Financial Ratios
1. Liquidity Ratio
a. Current = 2.4
b. Quick = 1.7
2. Leverage Ratio
a. Debt to Total Assets = 59.5
b. Debt to Equity = 115.7
3. Activity Ratio
a. Inventory Turnover = 3.7
b. Fixed Assets Turnover = 1.2
c. Total Assets Turnover = 0.3
d. Accounts Receivable Turnover = 4.5
e. Average Collection Period = 62.3 days
4. Profitability
a. Gross Profit Margin = -37.26%
b. Operating Profit Margin = -82.69%
c. Net Profit Margin = -25.53%
d. Return on Total Assets (ROA) = 3.20%
e. Return on Stockholder Equity (ROE) = 2.01%

5. Year over year, First Philippine Holdings Corporation has been able to grow revenues
from Php 69.8B to Php 72.6B. Most impressively, the company has been able to reduce
the percentage of sales devoted to cost of goods sold from 82.16% to 80.63%. This was a
driver that led to a bottom line growth from Php 2.1B to Php 9.6B.

Although debt as a percent of total capital increased at First Philippine Holdings
Corporation over the last fiscal year to 39.13%, it is still in-line with the Electric Utilities
industry's norm. Additionally, there are enough liquid assets to satisfy current
obligations. Cash Collection is a strong suit as the company is more effective than most
in the industry. As of the end of 2012, its uncollected receivables totaled $14.2B PHP,
which, at the current sales rate provides a Days Receivables Outstanding of 62.52. Last,
First Philippine Holdings Corporation is among the most efficient in its industry at
managing inventories, with only 48.44 days of its Cost of Goods Sold tied up in
inventory.




11


SWOT Analysis

Strengths:
Diversified Business Operation
Quality Standards
Power Generation Capability
Financial Resources
Economies of Scale
Newly Acquired Technologies
First Mover Advantage: Experience
and Knowledge of the Industry
Strong Brand
Reputation

Weaknesses:
Increasing Non-Cash Component
Dependent on Large Sale Volume
Dependent on Constant Cost
Reduction
Long Project Lead Time
Geographically Constrained
Opportunities:
Societys Growing Trend to a
Greener Future
Upward Energy Demand
Unexploited Sources of Renewable
Energy
Increasing Purchasing Power of the
Consumers
Expanding Middle Class
Increasing Global Demand for
Photovoltaic Technology

Threats:
Gas and Oil are still relatively more
affordable than renewable energy
Fluctuation in Foreign Currency
Trade
Increasing Competition
Increasing Acquisition Price of
Materials for Operations

Caption: The weaknesses and the potential threats to FPH are only incidental to trends
that the economy is experiencing in status quo. More so, such were not direct causes of
the firms incompetence or unstrategic business moves. However, the current strengths
and opportunities outweigh the weaknesses and threats, and the formers can neutralize
the latters with proper strategy and execution.








12


Internal Factor Analysis (IFE)

Internal Strengths Weight Rating Score
1. Diversified Business Operations 10% 4 0.4
2. Quality Standards 10% 4 0.4
3. Power Generation Capability 12% 4 0.48
4. Economies of Scale 10% 4 0.4
5. Newly Acquired Technologies 10% 3 0.3
6. First Mover Advantage: Experience and
Knowledge of the Industry
13% 4 0.52
7. Strong Brand 10% 3 0.3
8. Reputation 10% 3 0.3

Internal Weaknesses Weight Rating Score
1. Increasing Non-Cash Component 5% 2 0.1
2. Dependent on Large Sale Volume 2% 2 0.04
3. Dependent on Constant Cost Reduction 2% 2 0.04
4. Long Project Time Lead 3% 1 0.03
5. Geographically Constrained 3% 1 0.03
TOTALS 100% 3.34

Caption: As already enunciated in the earlier observations, the weaknesses of FPH are
but mere incidents of the industries, i.e. factors that can be mitigated but cannot averted.
However, the existing strengths of FPH can marginally outweigh and neutralize its
weaknesses.














13


TOWS Analysis

External Opportunities (O)
1. Societys Growing Trend
to a Greener Future
2. Upward Energy Demand
3. Unexploited Sources of
Renewable Energy
4. Increasing Purchasing
Power of the Consumers
5. Expanding Middle Class
6. Increasing Global
Demand for Photovoltaic
Technology

External Threats (T)
1. Gas and Oil are still
relatively more
affordable than
renewable energy
2. Fluctuation in Foreign
Currency Trade
3. Increasing Competition
4. Increasing Acquisition
Price of Materials for
Operations
Internal Strengths (S)
1. Diversified Business
Operation
2. Quality Standards
3. Power Generation
Capability
4. Financial Resources
5. Economies of Scale
6. Newly Acquired
Technologies
7. First Mover Advantage:
Experience and
Knowledge of the Industry
8. Strong Brand
9. Reputation

SO
Maxi-Maxi Strategy
1. Increased Research &
Development efforts
2. Increased marketing
efforts
3. Engage in more activities
in promoting
environmentalism
4. Start distribution efforts
in soon-to-be urbanized
areas
5. Invest on exploration
projects in newly
industrializing countries.
ST
Maxi-Mini Strategy
1. Cut-down on unnecessary
expenditures so as to
decrease price passed on
consumers.
2. Acquire locally produced
materials instead of
importing
3. Acquire distressed
competitors
4. Implement innovative
services/products
Internal Weaknesses (W)
1. Increasing Non-Cash
Component
2. Dependent on Large Sale
Volume
3. Dependent on Constant
Cost Reduction
4. Long Project Lead Time
5. Geographically
Constrained
WO
Mini-Max Strategy
1. Offer sale discounts on
large volume purchases
2. Find alternative sources
of renewable energy in
other geographical
locations
WT
Mini-Mini Strategy
1. Create a strategic
management paper
every year, so as to asses
every move of the firm.
2. Avoid engaging in over-
diversification, so as not
to be exposed to too
many risks.

Caption: The current strengths and opportunities, if harnessed properly, can directly
neutralized or, at least, mitigate the harms of the lingering threats and weaknesses.







14



SPACE Matrix

Conservative Aggressive











Defensive Competitive
Caption: (+3, +6) FPH is a financially strong firm that has achieved major competitive
advantages in the growing and somehow stable industries of energy, industrial, infrastructure,
and real estate. Moreover, FPHs financial position has been a dominating factor in the industry.










7



6



5


4


3


2
1



6 5 4 3 2 1 1 2 3 4 5 6

1
2
3
4
5
6
7

15


Boston Consulting Group (BCG Growth Share) Matrix
Question Marks
1. Expanding Middle Class
2. Increasing Purchasing Power of the Consumers


Stars
1. Unexploited Sources of Renewable Energy
2. Increasing Global Demand for Photovoltaic
Technology


Dogs

Cash Cows
1. Societys Growing Trend to a Greener Future
2. Upward Energy Demand


Caption: None of the opportunities FPH are classified as dogs. This is due to the fact that FPH
is an industry leader with a huge market share, massive financial machinery, and well-equipped
with the latest technologies















16

Internal-External (IE) Matrix
IFE TOTAL WEIGHTED SCORES

EFE TOTAL
WEIGHTED
SCORES

STRONG
3.0 TO 4.0
AVERAGE
2.0 TO 2.99
WEAK
1.0 TO 1.99
HIGH
3.0 TO 4.0
1 2 3
MEDIUM
2.00 TO 2.99
4 5 6
LOW
1.0 TO 1.99
7 8 9

Caption: EFE falls under average/medium, while IFE shows strong/high impact on the firm.

















17

Grand Strategy Matrix
Rapid Market Growth

Quadrant 2 Quadrant 1
(3,6)


Weak Competitive Position Strong Competitive Position



Quadrant 3 Quadrant 4


Slow Market Growth
Caption: For FPH, continued concentration on current markets and product is but wise for a
strategy. It can be taxing on the firm if it will suddenly shift from its current competitive
advantages.








18


Quantitative Strategic Planning Matrix

Caption: The option of expanding the firm domestically is seen to be more lucrative given its
0.74 margin against international expansion.





Key Factors Alternative 1
Expand Domestically
Alternative 2
Expand Internationally
Strengths Weight Attractiveness Score Weight Attractiveness Score
Diversified Business Operations 0.10 4 0.4 0.10 1 0.1
Quality Standards 0.10 4 0.4 0.10 4 0.4
Power Generation Capability 0.12 4 0.48 0.12 2 0.24
Economies of Scale 0.10 4 0.4 0.10 3 0.3
Newly Acquired Technologies 0.10 3 0.3 0.10 3 0.3
First Mover Advantage: Experience and
Knowledge of the Industry
0.13 4 0.52 0.13 4 0.52
Strong Brand 0.10 3 0.3 0.10 2 0.2
Reputation 0.10 3 0.3 0.10 3 0.3
Weaknesses Weight Attractiveness Score Weight Attractiveness Score
Increasing Non-Cash Component 0.05 2 0.1 0.05 2 0.1
Dependent on Large Sale Volume 0.02 2 0.04 0.02 2 0.04
Dependent on Constant Cost Reduction 0.02 2 0.04 0.02 2 0.04
Long Project Time Lead 0.03 1 0.03 0.03 1 0.03
Geographically Constrained 0.03 1 0.03 0.03 1 0.03
Sum Weights 1.00 1.00
Opportunities Weight Attractiveness Score Weight Attractiveness Score
Societys growing trend to a greener
future
0.1 3 0.3 0.1 3 0.3
Upward energy demand 0.25 3 0.75 0.25 3 0.75
Unexploited sources of renewable energy 0.09 4 0.36 0.09 4 0.36
Increasing purchasing power of
consumers and an expanding middle class
0.15 3 0.45 0.15 3 0.45
Increasing global demand for
photovoltaic technology
0.08 4 0.32 0.08 4 0.32
Threats Weight Attractiveness Score Weight Attractiveness Score
Gas and oil are still relatively more
affordable than renewable energy
0.141 2 0.282 0.141 2 0.282
Fluctuations in foreign currency trade 0.025 3 0.075 0.025 3 0.075
Increasing competition 0.039 4 0.156 0.039 4 0.156
Increasing acquisition price of materials
for operations
0.025 3 0.075 0.025 3 0.075
Sum Weights 1.00 1.00
Sum Total Attractiveness Score 6.108 > 5.368
19


Balanced Scorecard
Objectives Measures Targets
(1 Yr.)
Initiatives
Financial Maximize returns
Profitable growth
Leverage asset base
Manage operating costs
Return of Capital Employed
Revenue growth
Asset utilization rate
Operating costs
14%
6%
80%
P150
Reduction of unnecessary
Customer Industry leading customer
loyalty
Customer Satisfaction Rating 80% Customer loyalty
program
Internal
Processes
Business Growth
Capitalize on deregulation
opportunities
Optimize trading opportunities
Develop innovative services
Use alliances and joint
ventures
Leverage cross-group R&D
% revenue from deregulated
products/services
% trading revenue
Revenue from brand new services
% customers serviced through
alliances/joint ventures
NPV product/service pipeline
% R&D projects meeting protocol gates
5%
10%
P500M
10%
P500M
90%
Telecom infrastructure
development
Trading risk assessment
Research alliance
program
Continued Public Support
Proactively manage
relationships
Ensure reliable services
Communicate/educate
customers
Effective customer service
Customer/partner satisfaction
Reliability index
% communication/education coverage
% communication/education plans
executed
4.0
90/100
100%
80%
Telecom infrastructure
development
Trading risk assessment
Research alliance
program
Customer Service Excellence
Seamless cross-group delivery
Understand customer drivers
Effective customer services
Promise delivery %
New product uptake rate
On-time market projects
Customer satisfaction rating C.S.D.
Problem resolution cycle time C.S.D.
90%
20%
90%
85%
6hr
Cross-selling marketing
program
Service dispatch
automation
CIS upgrade
Call center software
integration
Optimize Core Business
Optimize asset utilization
Max return on resource
allocation
Continued cost management
Enterprise-wide risk
management

% rate capacity attained
Employee productivity improvement
% cost reduction
Cost of disruption vs. plan
Time to recovery
80%
2%
4%
+/-15%
8hr
Fossil maintenance
benchmark
Shared service
benchmark/outsourcing
initiative
ERP Implementation
Learning &
Growth
Ensure market-driven skill
Leading employee satisfaction
World Class Leadership
Strategic skill coverage ratio
Hours in strategic skills training
Employee satisfaction rating
Leadership effectiveness ratio
65%
10
3.0
4.0
Competency profiling
Performance
compensation link
Leadership training
program

Caption: The following have been carefully chosen to compliment the earlier SWOT, PEST,
TOWS, IFE and EFE analyses.


20


Strategy Map
















Caption: An outline of the overall approach of the firm on how to achieve its goals.
Customer
Internal
Processes
Learning &
Growth











Financial
Improve Cost
Structure
Increase Asset
Utilisation
Enhance
Customer Value
Expand
Revenue
Opportunities
Price Quality Availability Selection Function Service Partnershi
p
Brand
Productivity Strategy Revenue Growth Strategy
Production Service Attributes Relationship Image
Optimize Core Businesses
Processes that produce and
deliver products and
services
Customer Service
Excellence

Processes that enhance
customer value
Business Growth
Processes that create new
products and services
Continued Public Support
Processes that improve
communities and the
environment
Human Capital
Skills
Training
Knowledge
Information Capital
Systems
Databases
Networks
Organisational Capital
Skills / Training
Knowledge
Teamwork
Sustained Shareholder Value
+ +
Customer Value
Proposition
Vision: Uplifting lives by creating value in key industries and infrastructure that advance national development.
21



Projected Income Statement
Current Year 1 Year 2 Year 3
Sales 59,997.0 61,508.0 69.753.0
Cost of Goods Sold 42.907.0 48.632.0 57,311.0
Operating Expenses -6,161.0 -4,389.0 -2,933.0
Net Income 8,731.0 24,850.0 2,117.0

Caption: Given the proposed strategies for FPH, the firm will be expecting a steady increase of
income for the next 3 years.