Chapter 3A:

Market Opportunity Analysis: Consumer Analysis

Strategic Marketing vs. Tactical Marketing

Marketing strategy is commonly referred to as a core strategy. It is composed of market segmentation,
targeting, and brand positioning - collectively known as ST. Marketing tactics, on the other hand, are more popularly
known as the 4Ps for marketing. The 4Ps are composed of product, place, price, and promotions. They are put together
or influence consumer's or buy the company's brand rather than the competitions.

Exhibit 3A-2: Marketing Process

Marketing Analysis — Marketing Planning — Marketing Implementation — Marketing Control

Marketing strategy formulation must begin by analyzing external factors of the business, focusing on seeking
opportunities first rather than on the marketing mix. This looks into environmental analysis, assumptions and capability
building that can help its ability to serve its market. This process will be discussed further in chapters 5 and 6. In the
meantime, this chapter will focus on situational marketing, or the marketing analysis of the external environment, to help
the firm determine if it has the chance to win in the marketplace.

The Marketing Environment

Marketing environment includes the forces outside of marketing, consisting of macro-environment
(national issues) and micro-environment (company issues). both of which can influence marketing decisions. For macro-
environment, 3 popular frameworks are PESTLE trends, Industry Analysis, as well as Key Factors for Success. For the
micro environment, a popular framework is the 6Cs.

Macro-Environment

Macro Analysis Tool 1: PESTLE Trends

For the organizational factors in macro-environment, one popular type of macro- environment analysis is
called PESTLE. The acronym PESTLE stands for Political, Economic, Social, Technological, Legal, and Environmental
forces. Assisted exhibit 3A-3, these external forces can offer opportunities or threats, and affect how a firm can start
and/or stay in a relationship with their customers.

Exhibit 3A-3: PESTLE Trends

1. Political factors
2. Economic factors
3. Social factors
4. Technological factors
5. Legal factors
6. Environmental factors

1. Political factors (how and ot what degree do government policies affect the economy)

Tax policy - The Philippines has one of the highest tax structures in Asia. For instance, corporate income tax in the
Philippines six to 30% and value-added tax is at 12%, compared to 12.5-25% and 10% respectively in Indonesia, and
20% and10% respectively in Vietnam. President Rody Duterte and Finance Secretary Sonny Dominquez have committed
to exempt those earning P250,000 and below annually from paying compensation tax effective in 2018 and the Congress
have approved House Bill 5636 on May 31, 2017 to this effect. A higher exemption puts more money in the consumer's
pocket that they can spend to help grow the economy. The next round will be lowering corporate income tax rate to be
more competitive to neighboring countries and
attract more investment.

Labor law – Kasambahay’s (house helps, estimated to be numbering some 2.5 million in the Philippines) are entitled to a
contract, pay slip, minimum wage, paid leaves and benefits in social security and PhilHealth since 2013. Company
employees are entitled to additional 5 days of vacation leave on top of their regular rest day. There are also benefits for
paid maternity and paternity leaves. Providing benefits to kasambahay’s mean a more secure future for these workers.
Environmental law - Black sand mining, among others, is not allowed by the Department of Environment and Natural
Resources (DENR). This prevents erosion of land and depletion of fisheries.

Trade restrictions - President Donald Trump of the United States of America expressed a protectionism viewpoint
criticizing U.S. companies that outsource jobs outside the U.S., as well as escaping tax liability in the United States. This
includes manufacturing, and even information technology and business process outsourcing companies (IT-BPO), many
of which are located in the Philippines (65% of service contracts comes from the U.S.). This also contributed some US$25
billion to the economy of the Philippines while generating over 13. million jobs as of2016, and six projected to grow by
17% perineum (2017 forecast = nearly US$29 billion). The sub-sector on call centers contributed US$12.8 billion,
projected to grow at about 8% per annum while generating over 750,000 jobs as of 2016. The IT-BPO industry has
overtaken remittance of the Overseas Filipino Workers (OFW) as the biggest dollar earner industry the Philippines since
2017 with the Philippines overtaking India as the leading call center service provider of the world. More jobs in IT-BPO in
the Philippines mean earning money locally, and not needing to work abroad and be separated from the family a s OFWs.
The incentive of making IT-BPO a vat-exempt industry was i n the right direction.

Tariffs - As agreed by the Philippines with the ASEAN Trade in Goods Agreement (ATIGA), dressed chicken can be
imported at a low 5% import duty since 2010, down from an earlier 30%. This made Bounty Fresh launch over 1,000
Chooks-to-Go, and Using Roasters cooked chicken kiosks as part of their defense strategy against potential new entrants
since tariff barriers have practically been lifted.

Political stability - A 2013 siege in Zamboanga by the MNLF faction of Nur Misuari put the Zamboanga economy on a
standstill for 3 weeks. President Rody Duterte declared Martial Law in Mindanao on May 23, 2017 due to another siege,
this time in Marawi City. These events have affected the safety image of the Philippines as a whole even fi Marawi and
Zamboanga are only a small part of the entire Philippines. Tourism, and foreign direct investments (FDI) were directly
affected in each political crisis.

Health - Senior citizens 60 years old and above get 20% discount in drugstores (for prescribed drugs) and restaurants.
Patients cannot be refused reasonable treatment or asked advance payment before being admitted in a Philippine
hospital. As per Republic Act 9439 of 2007, patients who did not stay in a private room cannot be held against their will
inside the hospital if they have no money to pay. They can execute a promissory note and get a medical certificate. This
creates social justice in society and protects the marginalized.

Education -President Benigno Aquino I signed into law the K12 education system, adding 2 more years (grade 1 and
grade 12) in 2015 before students can be allowed to enroll in the collegiate level. While this was intended to raise the
competitiveness of graduates and have hirable skills even before entering college, the change in policy affected the
operations of many colleges without 1st and 2nd year college students. On the other hand, the K12 program became an
opportunity for authors to tap into the high school market. in 2017, President Rody Duterte signed into law providing for
free college education in State universities.

Infrastructure - Secretary Ramon Lopez of the Department of Trade and Industry (DTI) encouraged big businesses to
support. Small and Medium Enterprises (SME) by making sure they have more SMEs as part of their supply chain. This
creates more inclusive growth to benefit more small Filipinos entrepreneurs.

2. Economic factors (the impact of a country’s financial indicators on how businesses operate and make
decisions)

Economic growth - A higher economic growth means more goods and services, expressed national product (GNP)
gross domestic product (DP) in a country. out date, the term of President Benigno Aquino I registered the highest growth
rate of the Philippines, taking cue from the economic policies during the term of President Gloria Macapagal-Arroyo. The
momentum will continue under President Rody Duterte, who directed much heavier investment in infrastructure to sustain
high economic growth of the Philippines.

Interest rates – A higher interest rate means more interest expense to be paid and higher cost of capital. This lowers the
profitability of a firm and affects the extent a business grows and expands. For individuals, it affects savings rate and
reduces discretionary income. An increase in a bank's reserve fund will lead to higher interest rates, which is not as
welcomed by those in the real estate sector such as Ayala Land, Federal Land, and Mega world, as it will increase the
amount to be paid by the buyers, the extra amount of which will not go to them but to the banks. A much higher interest
rate may even discourage buyers as they may postpone buying until interest rates goes down. The assassination of
Senator Nino Aquino in 1983 during the term of President Ferdinand Marcos triggered a financial crisis, which led to a
high interest rate environment in the Philippines, with interest rates rising as high as 45% per annum range. While
excessively high, it would be noteworthy to share that the first mall of SM, SM North EDSA, was built during this difficult
time. Indeed, opportunities exist in crisis. Today, SM patriarch Henry Sy Sr. is the richest man in the Philippines with his
property company, SM Prime Holdings, becoming the first Philippine company to be worth over P1 trillion in market
capitalization in the stock market.

Exchange rate - A higher foreign exchange rate has two meanings: exporters get more peso when they ship out goods
while imported products become more expensive to buy due to more peso for every dollar. Since Overseas Filipino
Workers (OFWs) are paid in US dollars, OFW families get higher purchasing power for each devaluation, while BPO and
Tourism industries become more competitive. The unfortunate Nino Aquino assassination event in 1983 spiked up the
official exchange rate from US$ 1= Php 8.54 in 1982 (the year prior to Aquino assassination) to US$1 = Php 16.70 in
1984. The real exchange rate in the black market was much, much higher. A formal black-market operation (known then
as Binondo Central Bank) had to be set up and supervised by the government (then under Finance Secretary Roberto
Ongpin) to control dollar outflow and stabilize both exchange rate and inflation. Some of the companies with dollar
denominated loans defaulted since they needed more peso to pay for each dollar they loaned. Many fortunes exchanged
hands in the Philippines then.

Inflation rate - Higher prices means higher inflation rate, affecting the purchasing power, which will lead to, or warrant a
wage increase. The most ideal country environment is to have high economic growth, low interest rate, stable exchange
rate, and low inflation rate.

3. Social factors (how the demand for a company's products and how firms should operate are affected by social
demographics, attitudes, and opinions on issues like careers and culture, education and ethics, health and
safety, housing and fashion, immigration and diversity, among others)

Careers - The increasing number of nightshift workers from the business process outsourcing (BPO) industry has given
way to 24/7 convenience stores and fast-food catering to the millennial force. The fast rise of BPOs also comes with pain
points. For instance, for call centers, multiple job stressors exist such as fast-paced workloads, nightshift schedules
interfering with family and social life, and even safety issues.

Culture - Attracted to earning in dollars and providing a better future for the family, Filipinos have a culture of migration
among the middle- and lower-income working class. In fact, these OFWs have been referred to as "Bagong Bayani" (new
heroes) for sacrificing their freedom to provide for their families while helping the Philippines gain a stable dollar source.
This migration however, led to about a third of Filipino homes without a complete set of parents, potentially disturbing
family identities and stability, as family is the most fundamental unit of society. Filipinos also have higher social
acceptance of the 35s (single parenthood, separation, and sexual orientation) that are not as acceptable in other cultures.

Education - Most of young, educated career women prefer late marriages. In fact, the number of marriages in the
Philippines dropped from 492,666 in 2006 to 414,325 in 2015, a 16% drop in almost a decade. Young career women also
do not know how to cook while those who know, cannot cook as well as their moms. This gave rise to culinary equalizers
like Del Monte and UFC recipe mixes. An increasing trend is home schooling where a parent decides to be the private
teacher of his or her own child, complemented with periodic revalidate by an institution. With rise in education and career
among women, over 30% of shoppers are now men. Known as 'mansumer', they value efficiency compared with women
shoppers.

Ethics - The subject of genetically modified genetic make-up of orgeria as some people do not agree e with altering the
genetic make-up of organism, 54ohnis plants or animals inside a laboratory. Some agricultural crops such a rice. have be
end modifies to contain bela-carotene which is good eyesight reopen a bacterium added counterplea insects. While some
scientists chain that these foods are safe, some quarters claim that the consequence so the environment as well as to the
health of people in the future are something o watch out for.
Health - The malling trend has given rise to health clinics such as Heathway, located inside malls since most visits to
emergency rooms are for outpatient services. More and more homes are starting to see the health importance of drinking
alkaline water than the acidic water being sold in most water refi stations.
Safety - The perceived safety of households has negatively affected het popularity of knock-on-your-door type of direct
sales like from Lux Marketing selling vacuum cleaners and floor polishers. Instead, multi-level marketing (MLM) type of
selling that caters first to friends and relatives has become more popular. Even membership in the Direct Selling
Association of the Philippines (DSAP), the official organization composed of legitimate direct sales and MLM companies,
has practically shifted to all MLM companies.

Housing - Real estate companies like Mega world are building communities and one-stop solutions like Eastwood, where
condominium living cater in got smaller families is complemented with shopping and dining environment within a particular
complex. Low-cost housing developer 8990 bundles investment (mutual fund) and protection (insurance) with housing,
and teaches its housing installment applicants financial literacy to avoid unnecessary consumption, specially of high-
priced gadgets, as well as to do thorough budgeting.

Fashion and Lifestyle - Popular bloggers are now the go-to source d information for fashion and lifestyle. Company
websites' visits, as a primary source of information, has been experiencing decline since social media blogs of bloggers
like Tricia Gosingtian, and Vincent Golangco are more fun to read than company's websites.

Immigration -The Philippines is adverse country with a mixture of many races and people from different countries,
adopting the country as their new home Chinese and Koreans, to name a few, are examples.

Diversity - Companies are becoming more sensitive to gender equally consciously including more women executives
their workforce and in the management team. In fact, some multinational companies are required to report gender
diversity in their regular human resource report.

4. Technological factors (how technological aspects affect innovation, productivity, investment, and cost)

R&D - A higher quantity of patents indicates the extent of innovation of a country. Patent also affects entry in a particular
industry. in entertainment, internet, YouTube, remote controls, video players, and Netflix's on-demand movies have
affected not just the viewing behavior, but also the way people think; this is making advertising an even more difficult task
for advertisers and advertising agencies.

Automation - An automated factory can increase production efficiency and productivity, meaning more output in less time
and less cost. ATMs have been added by banks to respond to the increasing mobility of people and the rising cost of
manpower while reducing cost of operation.

Technology incentives - Having incentives affects investment decision, so the frequency of upgrading technology may
be sooner than later. Many countries have given incentives for factories, buildings and car manufacturers to go green or
environmental-friendly, influencing their purchasing behavior.

Rate of technological change - Each change in technology can affect cost, innovation mindset, and product life cycle
decisions, as well as influences outsourcing decisions. A training company offering programming language will find itself
obsolete unless they continuously update themselves with the latest technology.

5. Legal factors (how the laws of a country can affect how companies adopt policies as to its operation, cost
structure, and the demand for its products)

Discrimination Law - An employer in the Philippines cannot discriminate an employee on account of age, gender,
marriage or joining a union. Call centers catering to health industries can hire senior citizens to take calls from senior
citizens - they can be more alert and give more empathy knowing they may have actually experienced the same issues in
the past.

Law - "No return, no exchange" policies of stores are prohibited in Consumer in the Philippines. Some stores like Marks
&Spencer have a more liberal policy as long as the clothing products bought are unused, since consumers may have
bought early in January and only gave the product bought as a gift in December as a Christmas present. Another
example: prepaid platform companies that supply many companies operating pyramid-like operation. If the government
will suddenly enforce and crack down on pyramiding companies, which rely on fees paid by subsequent recruits to pay
the recruiters, these platform companies may lose substantial revenue sources immediately.

Antitrust Law - The Philippine Competition Law passed in 2015, provides a fair playing field among competition read in
www.josiahgo.com the Q&A with Senator Bam Aquino on Philippine Competition Act). The first major test case for the
Philippine Competition Commission (PCC) was its questioning of the non. approval of the PCC of the sale of Liberty
Telecom, owned by the San Miguel Group, to a consortium of Globe and PLDT.

Employment Law - An employee is deemed regularized after 6 months of service, unless otherwise specified and agreed
upon. The Department for Labor and Employment (DOLE) issued an end to ENDO (End of Contract) in 2017, making it
mandatory for manpower agencies supplying companies to regularize their hires, provide retirement benefits and
separation pay to these employees who have always been on contractual status. Companies using manpower agencies
must audit these agencies or they will end up absorbing these costs when the agencies are found to be violating this law.

Health and Safety Law - The Generic Drug Law of 1988 mandated doctors to write the generic name of their prescribed
medicines. A branded prescription can be added in parenthesis but can be changed by consumers at the drugstore level,
who in turn are mandated to provide a full list of medicines per category, arranged from lowest to highest price and to
provide a full-time pharmacist inside each drugstore so patients can get free consultation. This means even fi a branded
medicine is prescribed; patients can tell the drugstores they want its generic (and more affordable) equivalent. This led to
the rise for generics drugstores like The Generics Pharmacy (TGP), and Generika; generic medicines like RiteMED,
Watson's, and Rhea Generics. With the popularity for generics stores, demand for pharmacists went up, as drugstores
are required by government to have their own pharmacists in case customers need to inquire about the medicine they
need.

6. Environmental factors (ecological and environmental aspects that can affect businesses such as insurance,
tourism, farming)

Weather - The number of visitors of Enchanted Kingdom can go up with God weather or drastically go down due to bad
weather forecast as it affects in enjoyable experience.

Climate, and Climate Change - According to the United Nations University Institute for Environment and Human Security
and the German Alliance Development Works, the Philippines has been ranked 3rd in the list of countries that are most
vulnerable to climate change, with a 24.32% disaster risk. A growing awareness of the potential impact of climate change
is affecting how companies operate and the products they offer. This is creating opportunity for new markets, as well as
diminishing or destroying existing ones. Non- biodegradable materials will suffer increasing environmentalist moves
against them. For instance, plastic bottles take 600 years to decompose on landfill while Styrofoam takes 2,000 years.
Knowing this, Quanta Paper is the only Green Choice Philippines-certified paper manufacturing plant in the Philippines
with an international ISO 9001 certification, having the unique advantage of also being a recycling plant.

Another popular framework for understanding macro-environment is called the Five Forces of Industry Analysis,
which shapes industry's and firm's profitability.

Macro Analysis Tool 2: Industry Analysis

Exhibit 3A-4 identifies the 5 interacting forces that affect the profitability of an industry. These forces
enable firms to identify competitive pressures (those with high threat) as well as opportunities in the marketplace. The
force that has the most impact in the industry of the firm should be watched closely, with one's corporate and marketing
strategy formulated accordingly. The framework is unique because profit is affected not just by competitive activities but
also by the extent of bargaining power of suppliers and customers. Take the airline industry as an example: the
profitability of Philippine Airlines is affected by suppliers (fuel and labor) and not just by competitors such as Cebu Pacific
Air, which have lower prices. In fact, Philippine Airlines reported a net loss in 2017 brought about by increased fuel price
per barrel from US$63.38 in 2016 to US$75 per barrel in 2017, despite rise in number of passengers and revenues.

Exhibit 3A-4: Industry Analysis

1. Threat of New Entrants
2. Threat of Substitutes
3. Rivalry among Existing Competition 4. Bargaining Power of Customers
5. Bargaining Power of Suppliers

1. Threat of New Entrants

An example of threat of new entrants and the eventual strategy adopted was in the dressed chicken
market. In their 2007 strategic plan, the management of Bounty Fresh, one of only two national dressed chicken
manufacturers in the Philippines with efficient plants nationwide, Thailand was deemed to have across advantage, and
the lowering of tariff would have given Thailand an easier time to come in. The senior officials of Bounty Fresh al have
known, with some of them having personally witnessed, the decline of the sugar industry in the Philippines in the alert
1970’s due to a similar situation, which affected the livelihood of many families and major communities. As a response,
Bounty Fresh test-marketed My Manok rotisserie chicken in 10 outlets in Visayas and after tweaking, decided to launch
this nationwide and rebranded it as Chooks-to-Go ("Chooks" being the Australian slang for chicken).

The threat of new entrants can be affected byany of the following factors:

Economies of scale - We can observe this in the car market where some newer entrants could not fare as well due to
lack of volume to do marketing campaigns. This can also be seen in the fashion industry, were neophyte fashion
designers without a competitive and established supply chain, would need to go against established international brands
like Uniqlo, Zara, and H&M.

Product differentiation - Competition in the beauty salon market has somehow changed since the likes of David's Salon,
and Ricky Reyes opened their chain stores using the popularity of their names and positive image, thus increasing the
industry's entry barrier.

Capital requirements - In 2017, 7-Eleven launched an all-time low capital o P300,000 for its convenience store
franchising; previously priced at P1 million, which was then originally P3.5 million. Of course, each of these schemes has
different risks-versus-rewards scheme as well. The lowering of capital can attract more people who may be interested to
invest in a business.

Switching costs - The ability to change suppliers from one to another affects new entrants. In the telecom industry,
customers are made to sign a 2-year contract where penalties for pre-termination are defined to prevent theorem
switching brands midway.

Access to distribution – All chain stores are known not have a revenue model in just based on margin of traded items
but also based on "other income" such as listing fee, product highlight, anniversary support, store opening support and
over two dozen similar opportunities to earn. Without paying a listing fee, it is practically impossible to be carried by big
chains of supermarkets. Makro, the Netherlands-based megastore, started this practice when it opened its first outlet in
March 1996. It required suppliers to pay a listing fee of P20,000 per company with another P20,000 support fee charged
per supplier as they opened each branch. The practice was not just widely followed, but was even expanded by big chain
retailers, eventually charging fees not based per company but per product launched. (Note that Makro has already been
taken over by SM) Today, listing fees for all major chains may run near the P15-20 million mark, just for companies to get
their products on the shelves. Other big international retailers are known to carry only the top 3 leading brands and
negotiate with multinational suppliers on a regional basis, thus increasing their bargaining power tremendously.

Cost disadvantage independent of scale - National Book Store gets not just preferential rental rate but preferential
location as an anchor store of SM Malls. This advantage is hard to replicate by competition.

Government policy - The Philippine government, for instance has allowed new competition to enter several industries
such as in telecommunications, banking, and automotive. It has also required doctors to include generic names when
prescribing medicines, leading to the mass acceptance of generic drugs. While government policies may encourage new
entrants, inconsistent implementation of these policies may discourage new entrants as well. An example is when the
government has already signed contracts with foreign firms, but gets delayed or cancelled after an eventual investigation
to review such contracts by Congress, which may send an inconsistent signal to foreign investors.
2. Threat of Substitutes
In the previous case of Chooks-to-Go, there are unlimited substitutes for their rotisserie chicken. These
include charcoal-cooked chicken like Andok's, Baliwag, and Sr. Pedro; fried chicken from Jollibee, McDonalds, Wendy's,
and KFC; as well as other types of food choices like sandwiches, rice meals and the like. When a firm is affected with
high degree of substitutes, it can also affect others by being a substitute itself. After launching rotisserie chicken brand
Chooks-to-Go, Bounty decided to launch their own charcoal-cooked chicken named Uling Roasters. This example of
identification of industry structure can lead to a firm creating many opportunities and sources of competitive advantage
within the industry to which it belongs. Substitutes should be considered from the perspective of buyers and how they
make purchase decisions. Examples of substitutes are marble for wood, mobile, firms, whose products are deemed as
substitutes, must emphasize their key differentiating advantage to create preference over the substitute. For example,
East West Seeds, the market leader in vegetable seeds, can convince planters of rice that it can provide comparatively
better yield and better profit over rice and other crops. JobStreet.com, the market leader in the online recruitment industry,
can convince companies it has been serving that ti has the huge advantage of having the biggest jobseeker database
versus printed classified advertisements. The examples of threat substitutes can also be found in the alcoholic beverage
market. During good economy, people tend to buy more beer. In bad times or with higher prices (resulting from higher
taxes) however, people tend to buy more hard liquor. San Miguel Corporation thus bought controlling shares in La
Tondeña Distilers (later renamed Ginebra San Miguel Inc.), known for its popular Ginebra San Miguel gin, which has
ranked as the #1 gin brand in the world, outselling several other internationally renowned brands. Within the local hard
liquor market, with an estimated per capita consumption of 15 liters per annum among qualified drinkers, there is also the
rhum category, led by dominant leader Tanduay. Brandy, on the other hand, led by Emperador Light, has been making
headway into the market as well; grabbing category shares from the rhum group, thus making the hard liquor market an
interesting industry to watch.

3. Rivalry Among Existing Competition

Rivalry among existing competition is described to be the most intense in a price war, followed by a
promo war, which can significantly lower profitability. Rivalry among existing competition is considered high when prices
are adjusted downward frequently. When San Miguel launched Hungry Juan chicken franchise in the Philippine Franchise
Association annual expo in July 2010, Chooks-to-Go launched a local stole marketing campaign, offering a free 15. liter
bottle of Coke for every whole chicken bought in selected stores. This increased the rivalry in the stores where a Hungry
Juan exists nearby, exploiting Chooks-to-Go's advantage of owning their stores versus the slower response expected in a
franchise set up.

Rivalry is affected by the following factors:

Number of major or equally balanced competition - In the banking industry many players are perceived to be
undifferentiated, and compete using the same business model. The depositors who have no loyalty to a bank will invest
their excess fund based on which bank can offer them better returns.

Industry growth - Solar energy is fast growing in the Philippines since it is more environmental-friendly and offers lower
prices versus electricity. Many companies are starting to emerge in this market with companies trying to compete to be
the dominant player. Solar Philippines appears to have the edge with their high-profile installation of solar panels in SM
Malls, with their large solar farm utility models in Calatagan, Batangas, and Tarlac, to name a few.

Fixed costs - Five-star hotels have expensive properties and operating costs; thus, they do heavy promotions to increase
consumer patronage and lower their per unit fixed cost. Taken together, all of the promotions in an industry will lead to
fierce competition.

Product differentiation - Major schools like De La Salle, Ateneo De Manila University, University of Asia and the Pacific,
and the University of the Philippines have a lot more applicants than what they can accept. The low number of
educational institutions of equivalent quality, in the perception of the students as well as their parents, makes these
schools the early "aspirational" favorites of graduating high school students who need an early advantage after
graduation. For schools, therefore, to enjoy a similar demand, they should start refocusing from being a generalist to a
specialist school, consistent with their school mission. For instance, would the Polytechnic University of the Philippines
(PUP), which has one of the highest enrolment rates in the marketing course, consider refocusing in the field of sales and
sales management rather than marketing by overhauling some of their subjects and offering specialized sales subjects
like direct selling skills, distribution selling, key account corporate selling, powerful presentation skills, sales negotiation,
channel management, category management, sales planning, direct response marketing, and similar subjects? What is
the key differentiating feature that is important to the school's target employer? What is the key differentiating feature that
can be exploited, assuming that they have chosen the right segment? tI is important to state here that PUP graduates are
ranking high in the employability scale in a job street. com survey of 2016 among employers, mainly for their attitude
towards work and their drive to succeed. Increasing their competencies further will make them even more competitive
with a combination of attitude and aptitude.
Switching costs - The airline industry invented the Frequent Flyer Program (FFP) to create a barrier to switching
carriers. Instead of shopping for the best price, customers added a new dimension in their purchase decision - the
benefits associated with a FFP, like free upgrades, free flights and other perks. In the case for Philippine Airlines, the
benefit associated using the shorter business class line as well as use of lounge.

Unused plant capacity or enlarged new capacity – In the cement industry, the demand of cement was as is peak when
the outgoing government tried to complete the remain, infrastructure projects by frontloading expenditures, but the new
government was cautious in infrastructure spending in 2011. The delay in implementation caused the cement plants to
operate at below the past year's level, with capacity utilization at 60-65%, leading to price war. In the telecom industry,
Sun Cellular launched their popular unli calls in 2011; since they were new and had mostly unused capacity. The PLDT-
Smart gorge eventually bought them in 2011. Another example is when Asia Brewery us the excess capacity of their beer
factory ot produce a new beverage category - Cobra Energy Drink, affecting other energy drink categories.

Diversity of competition - Firms will tend to protect their "cash cows" that big in positive cash flow and profit versus
relatively smaller competitors. Smaller companies without much advantage to highlight tend to offer a lower price thus,
leading to more rivalry.

Strategic stakes - This explains why firms will defend a brand at all cost. The Magnolia name, for instance, enjoys
tremendous goodwill since 1925, have a successfully produced diverse product lines like ice cream, chocolate drinks
cheese, chicken and other food brands. Selecta was bought by RFM from the Arce family in 1990 and was relaunched
aggressively using then-young superstars, Aga Mulach and Sharon Cuneta, as endorsers. Losing the it creams market it
once dominated would spell disaster as the Magnolia name has multiplying effects to other product lines. Nestlé of
Switzerland entered the ice cream market in the Philippines by buying into Magnolia from 1 San Miguel group in 1994,
eventually renaming the ice cream brand Nestles Magnolia, then Magnolias' Nestlé, and finally as Nestle a good case
study
on the transition of branding. It helped revitalize the Magnolia brand with net technology, new products, relaunches, and
newer advertising campaigns reverse some of their market share losses to Selecta in the early1905.WaWh the non-
compete clause expired, the San Miguel group relaunched Magnolia Ice Cream in 2005, creating a3-way fighting the ice
cream industry: this 30 years Selecta.

Exit barrier - Major appliances and automotive vehicles need after-sales services. These prevent manufacturers from
leaving or exiting that particular market or risk permanently damaging their brand, as consumers may believe their
suppliers have abandoned them. Inability to leave ramps up competitive rivalry.

4. Bargaining Power of Customers

Chooks-to-Go offered pricing that si a bit lower than Andok's, and Baliwag. This is because of two
realities - they were the manufacturer, and they had the ability to choose chicken weight appropriate to their lower pricing
strategy. This lower price offset the bargaining power of price-sensitive customers. The bargaining power of customers
are affected by the following factors:

Volume purchase by customers - SM Supermarket, and Puregold dominate supermarket food retailing in the
Philippines; Mercury Drug dominates the retailing of medicines. With the exceptions of brands with high customer loyalty
such as infant formula and cigarettes, these few buyers control and dictate the price and support level. The strategy for
the seller, therefore, is to find more customers for the same line or expand to a new product line to target new customers,
to spread the risk of possible purchase withdrawals while trying to form a good relationship and an alliance with the
volume customer.

Buying price vis-à-vis product cost - With small margins, industrial buyers would have to constantly negotiate for better
deals, better terms, and better concessions. Jollibee, and McDonald's- affected by their inability to adjust prices upward
due to fixed price points acceptable to consumers- will certainly leverage their large volume to try to drive raw material
costs lower and improve margins.

Number of suppliers in an industry - A look at the number of banks in the Philippines would make one easily conclude
that they would compete for the savings of the same customers. It is with this in mind that banks aggressively promote
themselves to attract multiple patronage knowing fully well that most Filipinos would do business with more than one
bank, especially after the 1983-84 bank run fiasco where the confidence level of bank customers was at its lowest.

Actual or perceived differentiation – Well-known brands enjoy a higher stature than unknown brands, as they become
simplifiers of choice. Take Coca Cola or Colgate as examples. Higher brand stature or loyalty gives, bargaining power to
brand owners. They enjoy higher recall and recognitions of the Philippines - a result of decades of advertising and
consistent barring promotion. Dealers of car manufacturers, on the other hand, are at the mercy of their customers,
especially their fleet accounts, as their customers' bargaining power is extremely high. Having the same product, they
normally complete on the basis of connections, service, and "bonus gifts".

Switching costs - When a business relationship is converted into a friendship. Suppliers make it more difficult for their
customers to change to other suppliers that's why golf tournaments are getting more popular in the corporate world due to
psychic rewards.

Threat of backward integration - in the animal feeds market, some of the major customers are large poultry farm
owners. Attaining economies of scale would put manufacturers like San Miguel's B-Meg at risk since they would be
challenged by another brand that can supply their own requirements at lower cost. The big feeds manufacturers,
therefore, try to form alliances with their major customers where they not only supply them with feeds, but also provide
them with technical assistance, which these major customers would not enjoy fi they went on their own.

Quality of the seller - In the same feeds industry, Purina pioneered an upscale feeds formulation that is much more
expensive but is more cost efficient, thus reducing the bargaining power of their target customers until comparable quality
could emerge. MarkProf Foundation Inc. has been offering its 7-weekend free training in its annual search for the Top 25
Marketing Management Trainees of the Philippines, from among outstanding student leaders, athletes or working
students. With valuable guidance from top speakers and business mentors usually inaccessible in ordinary school events,
graduating students of many schools actually look forward to compete for inclusion in this annual search. where only 25
people are chosen from a thousand applicants every year.

Full information - Online stores give greater bargaining power to consumers. They do not have to visit brick-and-mortar
stores, and are even given aces to customer's feedback as well. In the case of bookstores, even sample chapters,
ranking of books, and other related purchases are published for the convenience of the customers.

Seller's ability to influence their customer's purchasing decisions - In the appliance market, customers can be
influenced by the store's sales personnel on what brand ot purchase as they rely on the salesperson's experience will
variously brands, particularly items from a new product category on the shelves. Major consumer durable retailers, like
Abenson, have higher bargaining power with their suppliers since manufacturers need good displays and wide coverage
in the several dozen retail stores they own. By taking advantage of their economies of scale and volume discount, they
further improve their industry competitiveness

5. Bargaining Power of Suppliers

Chooks-to-Go buys their chicken from their mother unit Bounty Fresh, and thus has good bargaining
power compared with their competitors who have not invested in their own manufacturing plants nationwide. Bounty
Fresh's bargaining power as a supplier even extends to negotiation with key customers like Andok's because stopping
purchase from Bounty may actually encourage Bounty to put up a kiosk beside or near Andok's since there is no need to
protect them from sales cannibalization anymore. Bounty Fresh had a good execution of their forward integration to
Chooks-to-Go outlets. Instead of threatening existing bulk customers like Andok's, it started in the Visayas and Mindanao
area where Andok's presence is minimal. The bargaining power of suppliers is affected by the following factors:

Industry dominance - Ajinomoto, Mercury Drug, and Nescafé coffee are examples of dominant brands with high
bargaining powers. However, dominance as well as bargaining power as a supplier can be compromised when strong
challengers or substitutes gain acceptance and market share. In the case of coffee, Kopiko gained popularity through
their brown coffee, while Great Taste made a big comeback via their Great Taste White Coffee. Mercury Drug's
bargaining power will be affected fi Robinson's South Star Drug and TGP combined can gain a critical mass in volume
from their dominance in store count, numbering over 2,000 stores.

Availability of substitutes - Ajinomoto's dominance in the MSG market, as well as the dominance of Knorr in the
flavored cube market, are affected by the increasing popularity of another category, Maggi Magic Sarap.

Importance of buyer to seller - Beer is an important item in the sari-sari store with high purchase size (together with
"pulutan") as well as the frequency of usage. Highly advertised and promoted brands like Red Horse can ask for better
payment terms from their trade customers as the brand gives these retailers very high store traffic and turnover,
especially in the Luzon area where per capita consumption of beer is about 40 liters a year versus only 5 liters in Visayas
and Mindanao.

Importance of input to buyer - The soft drinks market uses a lot of sugar as a key ingredient. However, the availability
of lower priced high fructose corn syrup as a sugar substitute has compromised the standing of sugar as an ingredient,
this was further affected with health concerns leading to the popularity of diet drinks. The plan of the Duterte government
to tax sugar beverages will further impact the role of sugar, a key ingredient in soft drinks, in the marketplace.

Product differentiation - The Apple brand is known to have a cult-like following. with loyalty levels reinforced with the
regular introduction of new products and new product categories, each one better than the previous. The key was not just
in functional benefits but in the social benefit Apple gives to the users of its product - a cool and differentiated image.

Switching costs - Strong direct selling companies have exclusive arrangements with many of their sales leaders. Called
independent distributors, these high earning "foot soldiers" are prohibited from selling competitive products or they risk
being dropped from the company's active dealers list, and suffer loss of earnings and/or exclusive privileges as a result of
their disloyalty.

Threat of forward integration - Suppliers or lessors to tenants like SM Malls have tremendous resources to expand.
Aside from selling clothes and fashion items in SM Department Stores, they have forward integrated by having tie-ups
with the likes of Uniqlo of Japan.

The role of government or political situations, as well as of PESTLE trends should be considered in analyzing the industry
and how it can affect the five forces of industry profitability. For instance, the imposition of generic drugs in the early
1990s has affected rivalry among competition. Various pharmaceutical companies have incorporated in their marketing
plan the role of the counter sales clerks in the drug stores because they are able to substitute generics for prescription
drugs. It also led to the creation of many generic drugstores like The Generics Pharmacy (TGP), Gamot Publiko, and
Generika Drugstore, as well as the introduction of generic brands like RiteMed and RHEA Generics. Another example of
bargaining power of suppliers are movie, TV and recording stars (labor is classified as supplier). Those with large and
loyal followings like Sarah
Geronimo, Kim Chiu, Judy Ann Santos, Anne Curtis, Kathryn Bernardo, Nadine Lustre, Liza Soberano, Kris Aquino,
James Reid, and Daniel Padilla are in a good position to ask for their price as their presence gives high ratings and/or
high attendance to the VT network. Bloggers with a loyal following, much like celebrities, can receive benefits in the same
manner. Tricia Gosingtian, as an example, was invited to cover international events like the New York Fashion Week,
Malaysia Tourism Wek, Indonesia Fashion