Chapter 5

INTERNAL ANALYSIS

A. Functional Analysis

A1. Management
The management of the company holds all control to the various areas of function on
the company. The top level management decides on all corporate decisions to the
benefit of the company. ALMADECO’s management composes relatives engaged in
the business.

Key Management Findings / Sections Source

1. corporate structure company files
2.Corporate Culture
3.Comany Plans and Objective Compnay File
4.Current Strategies Interview

A1.1. Corporate Structure (Including Top Management and Leadership)

President/ General Manager: Luis M. Sanchez

Vice-President/Treasurer: Feliza Sanchez

Operations Manager: Arnel M. Sanchez

Marketing Manager: Jerrilyn A. Sanchez

Corporate Secretary: Maribeth F. Salem

 Professional Mechanical Engineer: Norland C. Roman

Engineering Department Manager: Eric M. Sanchez

Technical Consultant: Leo B. David

Production Manager: Marie S. Maigue

ALMADECO’s President/ General Manager is the same person who founded the
company from merely giving heating, ventilation, and air-conditioning services. The
other top managers of the company are relatives of the founder. Focused on being a
family-owned business, ALMADECO employs their relatives and friends who helped the
founder established the company.

A1.2. Corporate Culture

A1.3. Company Plans and Objectives

The only initial objective of ALMADECO is for the improvement of the construction
industry. Besides catering to the needs of its clients, no further plans are established by
ALMADECO in furtherance of its business.
A1.4. Current Strategies
The current strategy done by ALMADECO is low-cost strategy. Pricing its products and
services extremely low compared to well-known brands makes them demanded by their
current clients and establishes to them affordability of the products and services.
Alongside the low-cost strategy is the negotiation as to the term of the contractual
services they do for the clients. Prices for the ventilation services are negotiated
depending on the demand of the client and the workforce of the employees of
ALMADECO. Most of ALMADECO’s clientele demands fast track services and
immediate availability of supplies. Because ALMADECO’s products are manufactured
by them already, except for few distinct products demanded by the client, ALMADECO
is able to easily furnish the needed products for their clients. However, without large
machineries, ALMADECO relies on the hands of its workers to finish the tasks.

Legal Advice: [– 3 quality sentences]

Analysis of the Management of the Company

A2. Marketing
Strategic marketing planning is considered as a creative process in its right.
Here, the management and operations teams strive to come up with and implement
practical marketing strategies that can guarantee a stable flow of business for the
company. The plan informs management decisions, the behavior of the employees
towards the institutional goals and also the response among current and potential
clients.

Key Marketing Findings/ Sections Source

1. Product Description and Planning Company Files
2. Customer Analysis or Target Market Company files
3. Selling, Advertising, Distribution of Products/Services Interview with the Owner
4. Marketing Research Interview with the Owner

A2.1. Product Description and Planning (or Service Description and Planning)
 1The Products of ALMADECO are differentiated into 3 categories:
Ventilating Equipment, Duct Terminal Devices, and Air Conditioning Pre-
Filter. Ventilating equipment are a motorized damper that automatically
keeps out light, air and moisture;
it promote even air distribution
and help improve the
performance of HVACR
systems with corrosion-resistant
vent grilles and heat resistant
fabricair ducts. Duct Terminal
devices, on the other hand, are
conduits or passages used in
heating, ventilation, and air conditioning (HVAC) to deliver and remove air.
While Air Conditioning Pre-Filter 2 are filters whose purpose was to keep
the indoor system parts from clogged with dusty and other foreign material.
As these products are sold, they are governed by the Philippine Laws on
Sales.

A2.2. Customer Analysis or Target market

The construction industry is the target market of ALMADECO.
Regardless of the specific industry of the client, so long as they may need
the heating ventilation and air-conditioning service, ALMADECO considers
them as future possible clients. The current categories of their clientele
include: Hotels, Restaurants, Malls and Boutiques, Hospitals, Call Centers,
Airlines, Manufacturing Companies, and Semi-Conductors. With the
urbanization efforts of business tycoons in the Philippines, there is an
increase of highly commercialized areas all over the Metro, giving
construction companies an advantage in their market. According to a report
by London-based Timetric’s Construction Intelligence Center (CIC) it

1
http://www.industrial-machineries.com/photo/industrial-machineries/editor/20150629105331_27798.jpg
2
http://www.filt-air.com/wp-content/uploads/images/Finedust_Filter_G90.jpg
showed that the Philippine construction industry is seen to grow to $47
billion by 2020 from $30.2 billion last year on a compound annual growth
rate of 9.22 percent, this is because it is fueled by greater focus on
infrastructure improvement and the continued expansion of residential and
commercial buildings.
 A2.3. Selling, Advertising, Distribution of Products/Services
During the early years of ALMADECO, they had advertised their
wares through the Yellowbook which listed local businesses with their
company name and contact details. However, as the times changed and
the yellowbook had already phased out due to technological advancements,
the company had started joining local Business Expos where they had set
up booths to accommodate future clientele. Through this effort, the
company had acquired its biggest client ever: McDonald’s Philippines.
Though, it is also important to know that ALMADECO still had its
shortcomings: the company lacked a proper marketing strategy that would
introduce them to more clientele, it lacked a name in the World Wide Web
by not having a website and even an active and manageable Facebook
Account3. These days, an individual wants everything as easy as a press of
a button, so the lack of this could be difficult for the company at the end.

A2.4. Marketing Research

3
https://www.facebook.com/Alfaj-Marketing-Development-Corporation-1449241698739455/
 ALMADECO’s has been planning to invest more time on their
marketing research as this will assist them in maintaining their competitive
stance in the local market. For now, they have focused on expanding the
quality of their products to match as those of international brands like its
competitors Kruger Ventilation and Niagara Fan. They will do this whilst
balancing out their promise to their customers of having affordable and fast
service.

Legal Advice: With the internet as an easy and affordable access to all, the company may
use it to its advantage. However, it must first comply with provisions of Republic Act No.
8792 or the Electronic Commerce Act of 2000 which promotes e-commerce in the
country, particularly in business-to-business and business-to-consumer transactions
whereby business relations are enhanced and facilitated and consumers are able to find
and purchase products online. It is also important to note that the transactions of the
company to its clientele is also governed under the Philippine Law on Sales which
consists of provisions that punish unlawful and deceitful transactions.

Analysis of the Marketing of the Company

Resources S1. Existence of increased target market of the construction
industry
W1. Lack of advertising to compete against the company’s
competitors
Capabilities S2. Fast installment of products upon demand of the consumer
W2. Quality of the products being sold by the company are
being compromised for fast services

A3. Finance / Accounting

The finance or accounting principle of the internal analysis of the company depicts the
profitability standing of the company. This profitability is with reference to the company’s
operations and management. Without analysis of the finance or accounting sector, the
company may not be using their assets to the full extent or the company may be
wasting their assets without them even knowing it.

Key Finance / Accounting Findings/ Sections Source

1. increase of assets in 2014 due to land acquisition and car interview
acquisition
2.
3.
4.
5.
6.

The detailed Financial Ratios are shown below.

A3.1. Liquidity Ratios

Liquidity ratio is used to determine if the company is able to profit and be able to answer
all of its liabilities. Divided in to two, the current ratio is used to determine if the company
is able to answer its current liabilities—those immediately needed to be paid out of the
current assets—those readily available which is in terms of cash; and the quick ratio is
used to determine the ability of the company to address or meet its short-term liabilities
based on the current assets lees the inventories.

Year ( 2013 ) Year ( 2014 ) Year ( 2015 ) Observations

Current ratio =
4,841,434.75/ 8,036,229.95/ 8,774,022/ Decreasing
Current Assets/ 45, 843. 30 47,297.09 295,850
Current Liabilities 105.6083 169.9096 29.6569
10560.83% 16990.96% 2965.69%
Quick (or acid-test)
ratio = (4, 841, 434.75 (8,036,229.95 (8,774,022 Decreasing
(current assets – -4, 577, 911.37)/ -7, 800, 718.00)/ -7, 800, 718.00)/
inventories) / current 45, 843. 30 47, 297. 09 295,850
liabilities 5.7483 4.9794 3.1884
574.83% 497.94% 318.84%
Analysis:
Although decreasing, the ALMADECO’s assets and liabilities indicate its positive
liquidity ratio with the current ratio from 10,560.83% in 2013 to 2965.69% in 2015 and
the quick ratio from 574.83% in 2013 to 318.84% in 2015. To elaborate, ALMADECO is
able to meet its short term liabilities however the rate of decrease indicates that the
assets of the company if left constant, would in a few years turn negative.

A3.2. Leverage Ratios

The leverage ratio indicates how much of the capital are in form of debt to be able to
meet its financial liabilities.

Year (2013 ) Year (2014 ) Year ( 2015 ) Observations

Debt-to-total-assets ratio
3,895,843.30 7,047,297.09 7,295,850 Decreasing
Total liabilities 4,904,438.75 8,531,229.95 9,121,025
Total assets =0.7943 =0.8260 = 0.7998
79.43% 82.60% 79.98%
Debt-to-equity ratio
3,895,843.30 7,047,297.09 7,295,850 Decreasing
Total liabilities 1,008,595.45 1,483,932.86 1,825,175
Shareholder’s Equity =3.8626 = 4.7490 = 3.9973
386.26% 474.90% 399.73%

Long-term debt-to-equity ratio 3,850,000 7,000,000 7,000,000 Decreasing

1,008,595.45 1,483,932.86 1,825,175
Long-term Debt =3.8171 =4.7171 =3.8352
Shareholder’s Equity

Times-interest-earned (or coverage) (21,404, 230.75 (21,849,140.74 – (19,590,001- Constant

ratio -19,477,449.21) 15, 595, 407.72) 15,976,235)
0 0 0
(Sales Revenuw-Operating =0 =0 =0
Expense)
Interest Expense
Analysis:
The student must assess here the observations, the trend in the computed financial
ratios and must also explain the possible reason for such information.[– 1 or 2 quality
sentences] Check page 142 of the book for analysis.

A3.3. Activity Ratios

Define and discuss the importance of Activity Ratio. [– 1 or 2 quality sentences]

Year (2013 ) Year ( 2014 ) Year ( ) Observations

Inventory turnover
19,477,449.21 15, 595, 407.72 15,976,235 Decreasing
Cost of Goods Sold ((4136384+4577911.3 ((4577911.37+7800718)/2) ((7800718+8688217_/2)
Average Inventories 7)/2) =2.5197 =1.9378
=4.4702
Fixed assets turnover
1926781.54 5880733.02 3613766 Is the final value
Net Revenue 63004 495000 377003 increasing, decreasing
Average Fixed Assets = = = or constant?
Total assets turnover 21404230.75 21840140.74 19590001 Is the final value
4904438.75 8531229.95 9121025 increasing, decreasing
Net Sales = = = or constant?
Average Total Assets
Accounts receivable NO ACCOUNTS NO ACCOUNTS NO ACCOUNTS CONSTANT
turnover RECEIVABLE RECEIVABLE RECEIVABLE

Net Credit Sales

Average Accounts
Receivable
Average collection N/A SINCE NO A/R N/A SINCE NO A/R N/A SINCE NO A/R N/A SINCE NO A/R
period

(Show Formula)

Analysis:
The student must assess here the observations, the trend in the computed financial
ratios and must also explain the possible reason for such information.[– 1 or 2 quality
sentences] Check page 142 of the book for analysis.

A3.4. Profitability Ratios

Define and discuss the importance of Profitability Ratio. [– 1 or 2 quality sentences]

Year ( ) Year ( 2014 ) Year ( ) Observations

Gross profit margin
Gross Profit 1926781.54 5880733.02 3613766 FLUCTUATING
Net Sales 21404230.75 21840140.74 19590001
= 0.0900 =0.2692 =0.1844
9% 26.92% 18.44
Operating profit margin
Operating Income 463,372.90 679,053.45 3613766 INCREASING
Net Sales 21404230.75 21840140.74 19590001
=0.0216 =0.0310 =0.1844
2.16% 3.1% 18.44
Net profit margin 324361.03 475,337.41 487,488 INCREASING
(Show Formula) 21404230.75 21840140.74 19590001
=0.0151 =0.0217 =0.0248
1.51% 2.17% 2.48%
Return on Total Assets 324361.03 475,337.41 487,488 DECREASING
(ROA) 4904438 8531229.95 9121025
Net income = 0.0661 =0.0557 =0.0534
Total Assets 6.61% 5.57% 5.34%

Return on stockholders’ 324361.03 475,337.41 487,488 DECREASING

net income 1008595.45 1483932.86 1825175
Equity = 0.3215 = 0.3203 =0.2670
32.15% 32.03% 26.7%
Earnings per share (EPS) N/A N/A N/A Is the final value increasing,
decreasing or constant?
Total Earnings
outstanding shares

Price-earnings ratio N/A N/A N/A Is the final value increasing,

decreasing or constant?
(Show Formula)

Analysis:
The student must assess here the observations, the trend in the computed financial
ratios and must also explain the possible reason for such information. [– 1 or 2 quality
sentences] Check page 142 of the book for analysis.

A3.5. Growth Ratio

Define and discuss the importance of Growth Ratio

Year ( 2013 ) and Year Year (2014 ) and Year ( Observations

(2014 ) 2015)
Growth Ratio on Sales
(Show Formula) (21404230.75- (21840140.74- INCREASING
21840140.74)/ 19590001)/ 19590001
21840140.74 = 1.1486
= -0199 114.86%
-1.99%

Growth Ratio on Net Income (324361.03-475,337.41)/ (475,337.41-487488)/

(Show Formula) 475,337.41 487488 INCREASING
= -3176 = -0249
-31.76% -2.49%

Growth Ratio on Earnings N/A N/A Is the final value increasing,

per share decreasing or constant?
(Show Formula)

Analysis:
The student must assess here the observations, the trend in the computed financial
ratios and must also explain the possible reason for such information.[– 1 or 2 quality
sentences] Check page 142 of the book for analysis.

A3.6. Other Finance / Accounting Concern

Legal Advice: The LM students must discuss business laws here related to Finance.
This can be a reminder to the company about a particular R.A. or an Article, just to
remind the company to follow this. The LM students must lightly discuss this so that it
will not appear to be threatening to the friend that is working in that company. [– 3
quality sentences]

After discussion of each section, ANALYSIS will follow. In the analysis, the student will
conduct resource and capability identification. Specifically the student must identify 2
strengths and 2 weaknesses under resource. Then, 1 strength and 1 weakness under
capabilities will be identified as well.

In the identification of strengths and weaknesses, the student may use the concept of
Resource-Based View (RBV) in which the presence or absence of resource and
capabilities are being evaluated as a basis for company’s assets and determining
whether they can provide the foundation necessary for competitive success in the
marketplace.

Analysis of the Finance / Accounting of the Company

Resources Identify 1 Strength and 1 Weakness that is connected to
Resources found under Finance / Accounting Component.
Check the observations and financial analysis.
S1. (Resource)
W1. (Resource)
Capabilities Identify 1 Strength and 1 Weakness that is connected to
Capabilities found under Finance/Accounting Component.
Check the observations and financial analysis.
S2. (Capability)
W2. (Capability)
Resource is a productive input or asset that is owned or controlled by the firm. Strength
here can be presence of the resource while weakness can be limitation of that resource.

Capability is the capacity of a firm to perform some activity proficiently. Strengths can be
proficiency of the skill or capacity. Weakness can be a limitation or absence, or poor
performance of that capability.

Legal Advice: [– 3 quality sentences]

(security clause)
Analysis of the Finance / Accounting of the Company

A4. Productions / Operations

Efficient production management will give benefits to the various sections of
society. Production and operations management talks about applying business
organization and management concepts in creation of goods and services. They include
a good reputation within a specific market and the ability to develop new products and
bring them to the market quickly.

Key Productions/ Operations Sources

Findings/ Section
1. Product and Process  Interview

2. Capacity  Interview

3. Inventory and Supply Chain  Interview

4. Workforce  Interview
5. Quality  Interview

A4.1. Product and Process

ALMADECO’s products such as their heating, ventilation and air-
conditioning products and equipments offers their services to well-known
Hotels, Restaurants, Malls, etc,. The products and services of
ALMADECO is to provide air-conditioning to its valid customers and
provide its maintenance to its product. The head office of the company is
located at Pasay, METRO MANILA, since it is a family business and it all
started there. Also, it is easier for them to supply the customers since the
location is within NCR and they have various transportation to deliver the
products. Generally, the day after the contract of order is made, the
company will set the ordered equipments and they are install it up the
arrival of the heating, ventilation and air-conditioning products.
A4.2. Capacity
ALMAADECO has no plans on expanding their company yet. They
have another priority set for the company, because they want to focus
more on the quantity rather than the quality in a good way. For example
more ventilation, heating and air-conditioning products in a certain area
will result to a quality products because it provide the services needed by
the consumers to provide ventilation, heating and air-conditioning. Their
plan is to make the operation inside more efficient.

A4.3. Inventory and Supply Chain

ALMADECO can give the orders of the customers such as
Mcdonald’s Philippines, since they are already our regular customers that
we provide our products and services anytime for maintenance. The
payment term is depending on the contract agreement between the
customer and the company. ALMADECO has a track record and hand
checks the collection of payment through banks. There is no minimum
 order since our business is to provide the customer their needs or
maintenance on heating, ventilation and air-conditioning.

A4.4. Workforce
ALMADECO employees are given precise salaries, benefits and
give their needs because they are the body of the company. The
employees are well trained to give the customer’s needs and wants to our
products and services. It is a monthly basis on their collection of their
salaries. The employees of ALMADECO are trained and skilled who have
been in their business for years.

A4.5. Quality
ALMADECO is precise with regards to providing their products and
services. Providing the heating, ventilation and air-conditioning of
ALMADECO is not more on quality but more on quantity, because
providing more of its products and services will result to good quality
products to the customers. They are always precise in installation of the
heating, ventilation and air-conditioning to make a good quality products to
their customers.

They offer maintenance service such as free inspection of their products and
they have quality control.

Analysis of the Productions/ Operations of the Company

Resources S1. The delivery process and installation of the ventilation,
heating and air-conditioning is on time.
W1. Not yet into globalization of their products and services.
Capabilities S2. ALMADECO have trained and skilled workers who have
been in their business for years.
W2. ALMADECO has limited employees.
A5. Research and Development
1st paragraph [– 3 quality sentences]

Key Research and Development Findings/ Sections Source

1. Product and Process Interview
2. Capacity Interview
3.Inventory and Supply Chain Interview
4.Workforce Interview
5.Quality Interview

A4.1. Product and Process

The heating, ventilation and air-conditioning equipment and services of
ALMADECO are manufactured by them. Depending on the demands of the clients,
ALMADECO is open to importing equipment needed to accommodate the demands of
the client. Their own-manufactured products are then delivered on site for the
installation on the premises of the constructed buildings, stores and/or office spaces.
A4.2. Capacity

A4.3. Inventory and Supply Chain

A4.4. Workforce

A4.5. Quality

[– 5 quality sentences for each section in narrative paragraph, with relevant tables,
charts &/or figure, whenever data are available]
Legal Advice: [– 3 quality sentences]

Analysis of the Research and Development of the Company

A6. Others (MIS, HR, CSR & Other Analysis)

1st paragraph [– 3 quality sentences]

Key MIS, HR, CSR and Others Findings/ Sections Source

1.
(Mention the source if
2. based on company
employee interview,
actual observation in the
3. manufacturing plant or
office, customer
4. interview, or assumption)

5.
6.

(Min of 2 sections, Max of 6 sections)

Two Standard sections under
A5.1. Developing New Products/ Services (Future Plans)A5. Research and Development

A5.2. Improving Existing Product and its Quality

A5.3. Other Research and Development Programs and Innovations

ALMADECO does not have any other established plans regarding further
development of their products and innovations.

[– 5 quality sentences for each section in narrative paragraph, with relevant tables,
charts &/or figure, whenever data are available]

Legal Advice: [– 3 quality sentences]

Analysis of the Other Aspect of the Company

B. Value Chain Analysis
1st paragraph [– 3 quality sentences]
Diagram of Value Chain Analysis with Rate
Table of Value Chain Analysis with Rate and Comments

Legal Advice: [– 3 quality sentences]

Analysis of the Value Chain of the Company

C. Summary of Internal Analysis

C1. List of Strengths and Weak Identified

Table of List of All Strengths and Weaknesses

C2. Summary of Key Strengths and Weaknesses

Table of Top Strengths and Weaknesses