FUNDAMENTAL ANAYLYSIS OF ALLIANCE GLOBAL GROUP, INC.
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Submitted to:
Prof. Cruz
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Submitted by:
REMORIN, Dominique D.
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March 2015
Table of Contents
A. Economic Analysis * Philippines’ economic forecast……………………………………………………..1
B.Industry Analysis - Background - Porter’s Five Forces of Competitive Strategy
C. Company Analysis - Company Background - Board of Directors - Low cost or Differentiation? - SWOT Analysis - Financial Statement
D.Recommendation and Conclusion - Conclusions - Recommendations - Buy or do not buy?
E. References
Economic Analysis
Philippines’ Economic Forecast
In the Philippines, recovery in exports and expanded private consumption and investment generated gross domestic product (GDP) growth of 6.0% in the first half of 2014. Government expenditure decelerated sharply and public construction fell, partly reflecting cautious spending by government agencies amid concerns over the misuse of government funds.Slightly stronger economic growth is projected through the rest of this year and in 2015 on expectations that post-typhoon reconstruction accelerates, government fiscal disbursement improves, and exports benefit from brighter prospects in the major industrial economies. Nevertheless, growth forecasts are trimmed since April owing to the unexpectedly low government spending coupled with higher inflation and associated monetary tightening.Inflation accelerated to 4.9% in August as the impact of typhoons on food supplies pushed up prices. Rising inflation and strong growth in liquidity prompted the monetary authorities to raise policy interest rates in July and again in September, and to increase reserve requirements for banks. Inflation is now projected at 4.4% this year, the highest in 3 years, and the forecast for 2015 is also edged up.Higher remittances from overseas Filipinos together with increases in exports of goods and services will underpin current account surpluses this year and next. However, the current account forecasts are trimmed since April as imports are projected to rise significantly when reconstruction speeds up.
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Industry Analysis
Background
Alliance Global Group, Inc. is an investment holding company, which engages in the food and beverage, real estate, and quick service restaurant businesses. It operates through the following segments: Food and Beverage, Real Estate, and Quick Service Restaurant. The Food and Beverage segment manufactures and distributes distilled spirits, glass containers, potato snack products, and other consumer products. The Real Estate segment involves the investment in and development of real estate, lease of properties, hotel development and operations, and integrated tourism development. The Quick Service Restaurant segment represents the company's investment in the McDonald's brand. The company was founded on October 12, 1993 and is headquartered in Quezon City, Philippines.
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Porter’s Five Forces of Competitive Strategy
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The main products of Alliance Global Group are McDonalds, Emperador light, and Megaworld Corporation. McDonalds is a highly competitive fast food restaurant and has good reputation in terms of fast food service. Emperador light is a dominant product in its market and a trusted brand of the Filipinos. Megaworld Corporation has the Forbes town center that is prestigious condominium that is worth 15 billion pesos.The products offered by the Alliance Global are highly competitive but it still needs to watch the competitors around them. The Bodega San Bruno is now owned by Emperador light Inc. This means that cost of making the products of Emperador will be less than before. It was acquired last 2013 and it is the largest and oldest wine and liquor conglomerates in Spain that cost 5.8 Billion pesos. The supplier for McDonalds serves the fresh picked vegetables and raw meat. There is this report that McDonald PH was outsourcing the raw meats for China. But the company defended that don’t have ties with the said company. The company that supplies raw meat of other fast food chains was accused of a scandal mixing expired meat and fresh meat. But McDonalds reassured its customers that they don’t get their raw meats from the said company in china. Alliance Global offers products that are family oriented. Their business interest, food and beverages, liquors and condominiums constitutes to one market target. They want to target the market of the families here. Since the Philippines have these long family ties, they focused on it and bought companies that will help them achieve what they want. Almost everywhere, there are families those bonds together. When there are parties they can use McDonalds’ venue or make the event happen on Forbes Town center and to savor the occasion they will buy liquor, that’s right Emperador Light. But there are new kids on the block that wanted to capture the hearts of the Filipino families. There is Companero Light that offers lower price. At a local store Emperador light’s price is 110-125 pesos while Companero Light offers 94.75 pesos only. The red ribbon now also offers fast food but with an exciting dessert. One meal at red ribbon is catered with a cake. Avida towers might be a threat to them too because it is near the city plus it is newly built in the area.
4 The competitors of Alliance Global will be a substitute once they offer much lower prices. Everybody loves Jollibee that has a good reputation because of its fried chicken and burgers. KFC offer 11 herbs and spices for their fried chicken. If they don’t improve their products, their target market will consider these fast foods more. Also the Red Horse brand is a substitute to Emperador light because it is like a soft drink but will make you drunk, in short a beer. Plus it is very enjoyable to drink because it can be drunken bottoms up. Another one is Manila Hotel that is very luxurious and good place to celebrate. Foreigners like it here because it is a 5 star hotel and gatherings are planned here also because it has large function rooms.
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Company Background
Alliance Global Group, Inc. is one of the Philippines' largest conglomerates, with interests in the food and beverage industry, real estate development and quick service restaurants. AGI is a holding company for a group of companies controlled by the Tan Family. Through its subsidiaries, associates and other investments, the Company operates a diversified range of businesses in the Philippines that focus on developing products and services that cater to the growing Philippine middle class.
Board of Directors
Andrew L. Tan
Mr. Tan, Filipino, has served as director since 2003 and Chairman of the Board since September 2006. Previously, he was Vice-Chairman of the Board from August 2003 to September 2006. He has broad experience in the real estate, food and beverage, and quick service restaurants industries.
Sergio R. Ortiz-Luis, Jr.
Mr. Ortiz-Luis, Jr., Filipino, has served as Vice-Chairman and Independent Director since September 2007. He is concurrently the President of the Employers’ Confederation of the Philippines ("ECOP") and the Philippine Exporters Confederation, Inc. ("PHILEXPORT") and a Commissioner of the Social Security System. He is also an Honorary Chairman of the Philippine Chamber of Commerce & Industry. 6
Kingson U. Sian
Mr. Sian, Filipino, has served as President and Director of the Company since February 2007. He is currently a member of the Board of Megaworld Corporation and is its Executive Director.
Winston S. Co
Mr. Co, Filipino, has served as Director since 1998. He previously served as Vice-Chairman of the Board from November 1999 to August 2003 and Chairman from June 1998 to October 1999. His field of expertise is finance and marketing of consumer products.
Katherine L. Tan
Ms. Tan, Filipino has served as Director and Treasurer since February 2007. She has also served as a member of the board of Megaworld Corporation since 1989 and likewise served as its Treasurer from 1989 to 1994.
Kevin L. Tan
Mr. Tan, Filipino, was elected as a Director on 20 April 2012 to serve the unexpired term of Mr. Renato M. Piezas. Mr. Tan, has over 11 years of experience in retail leasing, marketing and operations.
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Low cost or Differentiation?
Alliance global uses differentiation strategy. Mr. Tan once said that “There is no single formula for success in business. Making it good in a highly competitive business arena requires considerable creativity—creativity in making decisions that matter, creativity in planning projects that will make a difference, and creativity in managing people effectively to allow them to live up to their potential.” He wanted the company to be a “pioneer” in every plan and projects he makes that will give the company the reason to retain its title and dignity. We can see this competitive strategy on the McDonalds. We can see that the products offered there really define what the company wanted it to be. They improved their products that made them different from their competitors.
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SWOT Analysis
Strengths * Handled by the Family of Tan. * Products are dominant in their industry. * Above average net profits | Weaknesses * Larger liabilities than equity * Scandals about the supplier raw meats of McDonalds * Lack of online presence | Opportunities * Acquisition of Bodega San Bruno * Their newest member, Global Estate Resort * Future plans for new malls | Threats * Jollibee and KFC * The entrance of New liquors * Rising Condominium Towers in Manila city. |
