Thesis (Master in Management) -- University of the Philippines Mindanao, July 2022

Construct Inc. Group of companies is a trading firm with operations in Southern Mindanao. Established in 2010, the company is involved in the wholesale of construction materials with products ranging from cement, cement boards, plywood, plumbing, and steel products. The company has a workforce of approximately 60 employees with an annual revenue of approximately PHP 850 million in 2021. The organization is composed of three independent companies: Construct Inc., which handles cement and steel products; Board Enterprises which specializes in cement boards, gypsum boards and plumbing; and MTruck Distribution which caters to plywood supplies serving at the same time, as the logistical arm of the group of companies. In 2016, this group of companies attained its highest total revenue of more than PHP 1.5 billion. However, heightened competition reduced revenues for Construct Inc., which only had total sales of PHP 845 million by end of 2021. This earning represented a 46% drop of its total revenues from 2016 to 2021. However, on an actual volume of cement from 4.8 million bags annually to 3.6 million bags in 2021. This dramatic decrease in total revenues was due to the decline in market prices of cement which is the firm's core product. In turn, the downward spiral in the price of cement could be attributed to the rise of importation which, in 2013, only had a 0.2% share of the market but burgeoned to an estimated 15% in 2017. this development attracted new competitors into the industry. Nevertheless, the company has remained steadfast in offering locally produced or manufactured cement products despite offers by various importers. The groups trucking arm, MTruck Distribution, currently experiences an overcapacity in its logistical assets due to unmet sales forecast in 2019. This overload has strained the company's working capital. Along with this oversight, a sizable turnover in employees has been observed since 2020, particularly in the sales department, owing to their transfer to competitors alongside tightened controls. Moreover, a reorganization that took place in 2018 evoked tension between the management and its stakeholders, with some of them disengaging from day-to-day business operations. These issues and problems need to be addressed by Construct Inc. for it gain a sustain competitive advantage. A modified Analysis Formulation Implementation (AFI) strategy framework was utilized to guide the strategic plan. This modified framework incorporated an Evaluation phase and utilized tools developed by the Fred David strategic Management Model. Under the structure, the strategic planning model is comprised of four distinct groups: Analyze, Formulate, Implement, and Evaluate. It is a six-step cycle with an ultimate goal of gaining and sustaining competitive advantage. An assessment of the external and internal environments was conducted in the first part of the analysis stage. Information derived from the external assessment was then expressed quantitatively using the External Factor Evaluation matrix, while the identified strengths and weaknesses were summarized using the Internal Factor Evaluation Matrix. In the formulation stage, strategic options were generated using the Strengths-Weaknesses-Opportunities-Threats matrix. These choices were further drilled down and clarified employing the Grand Strategy Matrix. The shortlisted strategies were then evaluated quantitatively with the aid of the Quantitative Strategy Planning Matrix to identity a chosen strategy. The evaluation stage applies the Key Results Areas (KRAs) to monitor and control the goals and tasks that individuals or departments must undertake in order to apply the strategy. The chosen strategy opening a retail or hardware component to the business. This strategy helps reduce the weaknesses of the company, positioning the organization in a level at par with competitors in terms of retail sales. Specifically, it helps the organization to: 1) cater to the retails or end-user segment that the company has not tapped previously; 2) increase total gross margins since retail sales amount for 5% to 8% extra margins on majority of construction material products; 3) elevate the visibility of the company to the general populace and improve brand recognition as a leading distributor of construction materials in Davao City; 4) reduce total accounts receivable by converting a portion of revenue to cash transactions since most hardware purchases are not offered on credit; and 5) allow the company to carry a variety of product lines that are not offered previously by the company, thereby opening new revenue streams. Presently, the multidivisional structure of construct Inc. allows it to accommodate the retail arm by adding a new retail division or company to handle the hardware store. The financial projections for the next five years (2023-2027) indicate a positive performance. The hardware store will account for 13% of gross revenues on its first year and increase its contribution to 17% by 2027. The total revenues of Construct Inc. are projected to be at PHP 1.11 billion by 2023 and is expected to increase by 16.4% by end of 2027 to PHP 1.29 billion. Gross profit for the 2023 to 2027 period will range from 10.67% to 10.77%, while net income will improve from 1.69% in 2023 to 2.18% by the end of 2027. Total equity will also increase from PHP 256 million in 2023 to PHP 33 million by the end of 2027.