Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5
PROBLEM STATEMENT
Mrs. Illuminada San Juan is adamant to expand her then reigning family bakeshop
branch in San Mateo, Primablend Bake Shop, despite intense competition as several
fast food chains, local bakeshops and franchise bakeshops entered its territory.
Although aware of the threats brought about by said competitors, Mrs. San Juan is
hesitant towards further expansion and franchising proposals. Mrs. San Juan is risk
averse by nature and lacks confidence in delivering comparable results if expansion is
to be pursued. In defense of her resolute position towards expansion, the following are
Mrs. San Juans main concerns: (1) quality maintenance; (2) management control; and
(3) financial constraints. Since the single-proprietor bakeshop will then evolve to a
corporation as Mrs. San Juans daughters soon take over the business, it is essential
for the company to formalize and standardize existing processes as well as the need to
shift business level to corporate level strategies fueled by a market-driven vision in
order to maintain the position of Primablend in the industry and survive the many
challenges brought about by the competition.
ANALYSIS
INDUSTRY ANALYSIS
I.

PORTER'S FIVE COMPETITIVE FORCES

1. Threat of New Entrants
The threat of new entrants is relatively HIGH. Since San Mateo has
been converted into a major residential area, it attracted investors, among
them are bakeries. With this, the area will be attractive for various investors.
Even local major players such as Goldilocks and Red Ribbon have shown
interest in the area on their search for new locations to set up branches. For
those who would plan to put up a business, the food sector would be a good
choice to explore. Food is easily consumable so the turnover of products
would be faster than in most businesses. It is even a better decision to focus
on bread products since it has been the demand for bread and the value of
pastries and cakes has increased through the years. Bread is very famous to
Filipinos which explains emerging bakery businesses.
2. Bargaining Power of Buyers (Customers)
The bargaining power of buyers is HIGH. There are numerous types of
bakery businesses that gives the consumers a wide range of options to
choose from. Consumers can put pressure on the bakery businesses and
choose that which will meet their criteria. On top of the list of standards are
taste, quality, price, proportions, service, and location. Bakery businesses
should be mindful on how they can satisfy their consumers. It would be very
beneficial for the bakery business if they could have consumers loyalty.
However, this can only achieved if they consistently meet and satisfy the
standards set by consumers. Like a romantic relationship, the consumers
give their trust and in return, the bakery business should provide the product

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]

Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5
that the consumers have bargained for. Otherwise, the consumers will be
disappointed and run to a competitor or a substitute product.
3. Bargaining Power of Suppliers
The bargaining power of suppliers is HIGH. Wheat and some other
ingredients for bakeshop products are imported since the Philippines cannot
grow wheat due to its tropical climate. Suppliers are aware of their value to
the bakery industry in the Philippines which enables them to give demands.
There are several costs incurred on top of the cost of ingredients. Unless a
business places a big enough order to give demands to the supplier, the
supplier still has the upper hand, especially to those who are looking for high
quality ingredients. Primablend only caters a small portion of the whole
market demanding bakery products, therefore their order is low for suppliers
to prioritize. There are bigger bakeries that give the suppliers bigger
businesses, and naturally will have more priority. However, the supplier still
has the upper hand in negotiations since the demand is greater than the
production of most ingredients. As a result, there is much pressure for the
businesses in the bakery industry. It also causes businesses to shut down
their operations.
4. Threat of Substitute Products
The threat of substitutes is LOW. Fast food chains have introduced
substitute products but bread has already been a popular food for Filipinos.
One of the examples of a Filipino breakfast is combining coffee and bread.
Other food such as hotdog, bacon, and egg can even be served with bread.
As for cakes and other pastries, Filipinos love celebrations and these events
cannot be without yummy cakes and mouth-watering desserts. No substitute
can fully devour Filipinos cravings for bakeshop products.
5. Intensity of Rivalry within the Industry
The rivalry within the industry is INTENSE with an estimate of over
20,000 operational small bakeries as of to date. There are several kinds of
bakery businesses: industrial bakeries, retail bakery shop chains, retail
bakeries in supermarkets, small neighborhood bakeries, chains of caf
bakery outlets, and specialized outlets, which intensifies the competition.
Since bakery products has been recognized as one of the most sold food in
the Philippines, a high number of small bakeries are scattered around
neighborhoods and villages sell products at a much lower cost than other
bakery businesses. These small bakeries may be more appealing to the
lower income market. A bakerys proximity, small or big bakery business, is
of value to the consumers. As a result, bakery businesses compete with good
location to set up their branches before even competing in selling their
products. Moreover, bakery food producers have been creative in introducing
new flavors and combining foreign flavors with the traditional Philippine
recipes that will entice the market.

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]

Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5
Primablends difficulties on high threat for new entrants, high bargaining power
of consumers, high bargaining power of suppliers, and intense rivalry among
competitors toughen the competition in the bakery industry, but there are still
other opportunities that they have not explored yet which could surely alleviate
their stature in the business.
II.

INDUSTRY LIFE CYCLE ANALYSIS

The bakery sector in the Philippines has been expanding, evident to the
increasing sales of pastries and cakes, with sales increase of 30% and 20%
respectively. Thus, we analyzed that the bakery industry is under its GROWTH
stage. The rapid growth in demand will enable the bakeshops to expand their
revenues without taking the market share away from competitors but
Primablend must be fully prepared for the intense competition once the market
becomes saturated. Also, the bakery industry is HIGHLY FRAGMENTED, and the
product that it is offering is a commodity-type. The more commodity-like an
industrys product is, the more vicious price war will be among the companies.

SWOT ANALYSIS
Strengths

Established Brand
Primablend has been successful in establishing their business for several
decades in the industry. It has been recognized as the first and largest bakeshop
in San Mateo, Rizal. Primablend can be perceived by the people of San Mateo as
their own; it is considered as part of San Mateos culture.

Quality Product
Mrs. San Juan is committed to offering product of quality sold at reasonable
prices. She has been referred to by the Provincial Health Office of the provincial
government of Rizal as the Most Outstanding Owner-Manager and Primablend is
awarded by the Philippine Health Promotion Program the first honor as a
Healthy Food Store.

Customer Loyalty
Through its established brand and quality product offerings, they have created
good relationships with customers. Thus, creating customer loyalty.

Strategic Location
The bakery is located in front of the San Juan residence which is along the main
road of San Mateo, Rizal. First, the area is a strategic place for the operations of
the business especially for exposure to the consumers. Second, Mrs. San Juan
closely manages the business.

Flexibility

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]

Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5
Provides products made with hotel quality ingredients that are cooked, baked,
assembled and packaged right in the premises. First, consumers can be assured
of quality products. Second, Primablend has become flexible in taking orders
especially that of last minute orders.

Employee Loyalty and Competency

Primablend is able to maintain loyal and skilled employees who can multi-task
and does not require heavy supervision. The attrition rate for employees is very
minimal. Some of them even employed for than 20 years already.

Healthy Financial Position

The business has a healthy financial position. It does not have any outstanding
loan obligations and sales are on a cash basis.

Second Generation
Mrs. San Juans daughters good educational background and valuable
experience in helping with the operations and management of Primablend are
useful in the further development of the business.

Weaknesses

Lack of Other Branches

Primablend has only one branch which is in the original area where it started in
San Mateo. Some customers find it inaccessible especially those from Metro
Manila who complain about the long travel distance coupled with heavy traffic.

Risk Aversion
Mrs. San Juan responds to the demand and trends of the consumers but is
sometimes limited by her beliefs. First, she did not explore fondant products
even if it was becoming popular in the industry. Second, she is not confident
that she can effectively facilitate an expansion of the business outside San
Mateo.

Lack of Promotional Campaign

They do not have any promotional campaign for the company. Primablend solely
relies on word-of-mouth to spread the goodness of its products.

Opportunities

Increased Market Coverage

San Mateo has been converted into a major residential hub east of Metro Manila
which will widen the market coverage for the business.

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]

Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5

Growing Industry
The Food industry is continuously growing in the Philippines along with the
economy since employment centers have been a target for food businesses.
Demand for food, especially bakery products is increasing and there are more
market opportunities outside of San Mateo.

Company Evolution
Primablend is on its way to transitioning from a sole proprietor business to a
corporation.

Threats

Competition
The Bakery sector is composed of many types of businesses: industrial bakeries,
retail bakery shop chains, retail bakeries in supermarkets, small neighborhood
bakeries, chains of caf bakery outlets, and specialized outlets. Primablend has
to put up its guard for competition.

Suppliers
There is threat in the power of suppliers to demand higher costs for resources.
In addition, it only has minimal credit terms with suppliers, which may pose a
financial problem. In case there will be interruptions in the cash flow, payments
may be affected and damage the relationship between Primablend and its
suppliers.

Conservative Financial Strategy

The business may have a healthy financial position not having pending bank
loans but there could also be lost opportunities for growth because Mrs. San
Juan is hesitant to loan from banks.

RECOMMENDATION
Primablend Bakeshop should review several expansion proposals for the business and
pick out the direction where they could work together.
Short-Term:
Promotion
Since Primablend does not have advertisement campaigns and only relies on the wordof-mouth method, they should also utilize social networking sites such as Facebook
and Instagram. These channels will showcase its store and products to a wider range
of audience and prospective customers.
Product Accessibility

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]

Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5
On the other hand, to address the issue of their products being inaccessible, they can
offer delivery services with minimum purchase order to cater to customers outside San
Mateo.
Procurement
To reduce the product cost, Primablend should do bulk purchasing so they can bargain
discounts from its suppliers on raw materials, specifically on non-perishable inputs.
Minimizing the cost is the best strategy for a company under a highly fragmented
industry.
Transition
It is a great advantage for the company to have Mrs. San Juans daughters be involved
in the operations of the business since they were young. With the transition of
Primablend from a sole proprietor business to a corporation, Mrs. San Juan should let
her daughters take specific roles in the plans for development. Lea, being skilled in
office management, should be put in-charge of internal affairs of the business. While
Millet, who has added external training and experience in food business ventures,
could be assigned to external operations. However, it must be clear to them that
Primablend is a bakeshop offering high quality products. They should be cautious in
being consistent on their brand image, positioning, and target market. This will serve
as a guide for them in making plans for their business. They must also research on
their existing competition and the competition they are about to enter with the plan
for expansion.
Long-Term:
Expansion
The plan for the expansion for Primablend should be supported by a bank loan. A good
amount for capital will be utilized to improve the business and set up branches to
strategic locations. It may also be a good idea to allow franchising of Primablend.
Feasibility studies and cost-benefit analysis should also be conducted prior to choosing
strategic locations and accepting franchising requests. Primablend should target
setting up branches near major subdivisions or residential areas with middle to upper
class market within key cities in Metro Manila. These areas may be along Mckinley or
in prominent subdivisions in Quezon City. However, all products will still be cooked,
baked, assembled and packaged in the main branch in San Mateo.
If the expansion tends to be successful, Primablend can enter on a large scale in an
attempt to obtain economies of scale, however, it must raise a relatively large amount
of capital required to build large-scale production facilities.
Human Resources
Mrs. San Juan and her daughters can take advantage of their loyal and skilled
employees by distributing some of them to the new branches. Tenured employees
need less supervision since they are already familiar with the business so they will be
able to aid in leading and directing new employees on ground. As the business grows,

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]

Case 3: PRIMABLEND BAKESHOP

BA 291.1 - Group 5
they will also have to hire or promote employees to help Mrs. San Juan and her
daughters manage the internal and external operations of the business.
Marketing
Primablend should strengthen its core competency of producing high quality bakery
goods. Then, they could arrange for an outsourced market research for growth
purposes. They could add more branches if they find that there is higher demand for
the products. As additional promotion, prominent individuals and food bloggers can be
invited to the branches in order to promote the business further.
Sales
Primablend must also look into being a supplier for large businesses such as hotels,
airlines, or prominent cafes. If they would be able to secure big orders from these large
businesses, there would be high returns for the overall business. Likewise, Primablend
would not have to put as much effort in supplying products relative to operating
several branches. The more thoughts invested on the growth of the business, the
better for Primablend.

Zia Irra Alegre | Shiela Marie Apalis | Denise Justine Divino | Ruby Lauren Manuel | Chelnani
Pinza
[Squid Goals]