Reference no: EM132231288

ABC Food Inc. is a start-up business with initial capitalization amounting to PhP5 million. Its owners consist of three friends who met in the MBA program they attended. During their time in the graduate program, they fondly meet after work to do group studies. They shared dinner at a humble diner Apu Sangag famous for serving dishes with fried garlic rice. They frequent the Apu Sangag because it is generally quiet that made it conducive for group studies, the price is justifiable for a nightly dine-out, and the staff is friendly.

Three years past after earning their MBA degree, they decided to meet for a quick catching up. They agreed to meet in Capital Commons in Pasig City on a Friday night. Traffic and difficulty finding a parking space almost ruined the reunion, a regretful feeling started to creep in eating up the anticipation for the reunion. At the exact moment, the idea of opening a diner came to life. A place where they can meet, enjoy good food, and relax, an idea that created ABC Food Inc.

ABC Food Inc., owns and operates Talyasi, a Filipino-inspired restaurant serving native dishes. The owners take the time to travel to different regions of the country to discover unique dishes, like the adobo of Pampanga, pancit of Lucban, chicharon of Bulacan, among others, all prepared with a twist. The kitchen trade secret of Talyasi is mango wine. All the dishes have mango wine as its essential ingredient.

The first Talyasi restaurant is on Aguirre Street, Legaspi Village, Makati City. The location is accessible by foot to the employees and the graduate students of Asian Institute of Management. It accommodates 20 customers and enjoys full capacity daily, peaking at lunch breaks and late afternoon.

The growing popularity of Talyasi caused the inaccessibility of the service due to lacking seating area, and customers started to demand reservation and delivery services. The customer demand opened an opportunity for them to provide delivery services. A significant volume of their daily sales come from the delivery services. For delivery services, a customer calls the landline number and dictates the order. The volume of calls peak at 10:30 am to 2:30 pm and from 5:00 pm to 7:00 pm.

The Filipino Consumers

The research conducted by Nielsen identified Filipinos' changing food buying habits caused by the rising prices. Most affected food buying habits are dining out, and snack food spending. Spending on meals at home is not affected and would spend more on fish and seafood, followed by fresh or frozen fruits, and organic food. There is a marked decline in the buying of meat, poultry, bread, bakery goods, and dairy products. Expect less buying of chips and other snack foods, carbonated beverages, candies, cookies, and other sweets.

Filipino consumers are inclined to buy more from stores that offer discounts, fresh food supermarkets, warehouse club stores, supermarkets; and hypermarkets, in this order.

Filipinos are also considering growing their food, and prefer their local suki store.

Concerning the volume of products, Filipinos are looking for sale priced items, considering stocking with larger pack sizes to save and some would serve smaller food portions.

The other 21 percent would consult the Internet for sale deals while 20 percent said that they would use social media to look for rice specials.

The Nielsen Global Survey study examined online respondents across 58 countries from February to March this year, coming up with the conclusion that 85 percent of the total 29,000 participants from around the world are likely to be affected in their consumer spending and grocery habits because of rising food prices.

The Business Environment

Economy and Risks

According to the report of The World Bank, the country ranked number three economic growth performance next to Vietnam and China. Strong exports propelled the 6.7 percent year-on-year growth in 2017, with imports growing at double-digits. Investments are significantly slower and consumption moderated due to rapid expansion, sharp inflation rise slowing real wage growth, moderating private consumption growth.

Poverty reduction caused by the employment movement from agriculture, the inflow of remittances, and the government's conditional cash transfer is likely under the assumption that poverty rate to economic growth follows the projected decline from 27.0 percent in 2015 to 22.9 percent and 21.7 percent in 2018 and 2019, implying a continuing trend of one million Filipinos being lifted out of poverty each year.

The country’s medium-term growth outlook is positive. The country's economy is projected to grow at an annual rate of 6.7 percent in 2018 and 2019, and 6.6 percent in 2020. The government is investing in physical and human capital necessary to sustain the current growth trajectory.

Domestic risks are apparent. Inflation will intensify due to domestic and external factors.

External risks are present due to policy normalization, and protectionist sentiments in advanced economies are triggering financial volatility and disrupting trade and investments.

Unemployment is at its low rates, but underemployment remains high. Filipinos who moved from agriculture end up in low-end service jobs resulting in stagnant mean wages, four percent growth in real terms.

Socio-Political

The Duterte administration is initiating a series of economic reforms to accelerate development, decentralizing governance and a controversial fight against corruption and drugs.

There is a strong opposition emanating from local political rivals and pro-US oppositions pushing for destabilization campaign against the seating government.

Geopolitics has been using human rights and non-governmental organizations (NGOs) as geopolitical weapons.

The opposition is using the war on drugs to portray Duterte as a "mass murderer" undermining the real public support to the government. Duterte's public support remains high in the lower income classes comprising 60 percent of the population.

Beijing supports the stability of the country and expresses confidence over the leadership of Duterte, committing to support the government.

ICT Technology

Today the information, communication, and transportation (ICT) technology is a force affecting the Filipino way of life. It is cited as “…the technology of freedom” (The Economist Intelligence Unit, 2018, p.8) because of the empowering effect on individuals, transforming even the purchase behavior that brands today give greater weight on shoppable content online (Zenith Media, 2018).

GSMA Intelligence introduces new market segments described according to mobile engagement index and predicts a shift in the consumption patterns based on the amount of engagement through an available network and web platform (GSMA, 2018).

The evolution of online digital technology has commoditized communication with significant commercial value. According to the Global Intelligence 2018, there is a projected 11 percent annual growth in the use of the mobile internet that will drive growth in the overall media consumption (Zenith, 2018). The mobile technologies and services in 2017 accounted for 4.5 percent of GDP globally or USD3.6 trillion of economic value (GSMA, 2018).

The narrowing of the digital divide is apparent today more than ever according to the GMEI (2017). The growing mobile internet usage across countries, economies, and even generations.

Older segments Baby Boomers and Generate X has registered higher online purchases than the Millennial (Gen Y) and Post-Millennial groups. The digital natives or post-millennial generations are predominantly using mobile technology for searching purpose and looking for ways to experience traditional products and services.

Using only the facts in the case answer the questions.

1. Formulate a SWOT Analysis for Talyasi that is responsive to relevant macro environment data provided in the case

2. Using Porter’s Five Forces Model, assess the microenvironment of ABC Food, Inc.