View
119
Download
1
Category
Tags:
Preview:
Citation preview
MERALCO
Submitted to:
Mr. Dean Dela Paz
113304-001106
1
Table of Contents
I. Recommendation
II. Brief History
III. Awards and Citations
IV. Mission and Vision
a. Company’s original version.
b. My version.
V. External Factor Evaluation (EFE) Matrix
VI. Porter’s Five Forces Model
VII. Internal Factor Evaluation (IFE) Matrix
VIII. Financial Ratios
IX. Strengths-Weaknesses-Opportunities-Threats (SWOT)
Matrix
X. Strategic Position and Action Evaluation (SPACE) Matrix
XI. References
2
I. Recommendation
Meralco has already established itself as among the oldest and biggest
companies to have survived in the Philippines. The company has more than a
hundred years of experience to show it and they are sure to remain for even
longer. My recommendation is solely based on my own personal opinion that I
based on everything I have researched, learned and analysed about the
company.
I recommend that Meralco should start to regain market share in power
generation. The company is very vulnerable to its suppliers. The company is very
dependent on the Independent Power Producer’s that supply them electricity.
Without these suppliers Meralco is sure to have closed down a long time ago.
Before Meralco became a distribution company it also owned generating
plants. These plants, under state policy, had to be given up to the government.
As times and laws have changed I think that it is high time Meralco started to
bring back their old business tandem, generating and distributing electricity. This
will be very costly but even more so will benefit the company. Having their own
generating plants would mean that they would not depend a lot on suppliers that
at any time can raise their prices and Meralco would not have any choice but to
pay. This backward integration strategy could possibly bring Meralco to even
greater heights. Meralco’s customers could also very much benefit from this.
Imagine if Meralco did not have to pay so much for their supply of electricity?
3
This means lesser costs because everything would be under the same company.
Having shared costs would mean lesser generating charges for its customers.
Meralco doesn’t have to acquire everything all at once. Although it is given
that they have a lot money to work with it wouldn’t be wise for them to spend all
at once. They could just set a goal to buy or build at least 2 generating plants
every 5 years and in time they would have enough to sustain their own power
distribution. They could start little by little to become the best in the electricity
industry. Given, however, that they are first and foremost known as the best in
distributing energy it is their duty to be able to maintain that name and rank. They
can spend on investing on power plants but they must also continue to invest in
continuously enhancing their distribution system.
A lot should be taken into consideration but I believe that with the proper
investment team that can manage their investments it will work out well. They
should also make their risk management programs better. Money is not the only
deciding factor in taking big steps as starting to generate their own electricity.
The employees of Meralco should be also very willing to accept big changes and
share their own efforts to support the company’s endeavour to be better.
The company could start by buying shares from Independent Power
Producers and little buy little buy their way up to become majority stock holders.
This means that they don’t have to shell out a huge amount of money at one time
but instead they’ll still be able to earn little by little from their investment as well.
Another step that I think they could take would be to build their own generating
4
plants. It will be a very demanding feat but very rewarding in the end. Still, they
don’t need to give out a big amount of money right away for this. They could just
spend whatever the company has to spend that is extra until it is fully functioning.
By extra I mean the money that will be in excess of their money having payed
everything that needs to be payed for first. Either way they will spend and it might
become stressful as well but more than likely to be very rewarding for Meralco in
the future.
5
II. Brief History
MERALCO is an investor-owned utility serving roughly a quarter of the
estimated 94 million population of the Republic of the Philippines. It is by far the
largest distributor of electrical power in the country.
It started as a provider of electric light and power and an electric street
railway system to Manila and its suburbs 109 years ago in 1903. It was then
named Manila Electric Railroad and Light Company. The facilities that Meralco
built to provide these two services represented for many years the largest single
investment of American capital in the whole of East Asia.
6
In 1904 the company acquired a firm that operated public transportation and
ran Manila’s horse-drawn and steam-operated tramways. For a little more than
four decades, Meralco provided Manila with its first modern mass public
transportation system with these electric streetcars. It was a fleet of 170
streetcars before they switched to buses. The tram line was 52 miles long. World
War II destroyed the railway system beyond rehabilitation which then caused the
company to shut it down and began to concentrate on power generation and
distribution instead.
Meralco also opened a retail store that sold electric home appliances but they
decided to give it up. As time passed the company decided to sell their
transportation business to Halili Transport before it became Filipino owned in
1961. Eugenio Lopez Sr. bought Meralco from its American owners and thus it
became the first major American enterprise to be “Filipinized.” During the decade
that followed, the new management built electric generating and distributing
facilities in a pace that had never happened before to be able to cater efficiently
to their franchised area; this was made possible by earning the confidence of
international credit institutions, and other banks, insurance companies, and major
American, German, and Japanese suppliers.
During Martial Law, Meralco was taken away from Don Eugenio Lopez and
was renamed Meralco Foundation Inc. and was controlled by government owned
NAPOCOR. When Cory Aquino assumed the position as President of the
Republic of the Philippines she returned Meralco to the Don and it competed with
NAPOCOR.
7
Meralco was the first to issue mortgage trust indenture bonds successfully in
the US financial market on Wall Street. In 1969, Meralco became the first billion-
peso company in the Philippines. This was all the more remarkable because they
did not get any government guarantees.
In the 1970’s the Philippine Government issued a state policy for the
government to own all major generating facilities. Meralco sold its generating
plants to the National Power Corporation, and electric distribution became its
core business. In the first half of the 1980’s, Meralco’s franchise tripled in size,
mainly because consumers preferred their rates and service.
8
Upon the request of the government Meralco organized, started and operated
the country’s first elevated light rail transit which we now are more familiar with
as the LRT in the 1980’s. The system ran from Baclaran to Caloocan and was
very much like that of the city’s old streetcar system. At the end of the decade
Meralco turned over the efficiently functioning system to the government. Since
the same year state policy on private investments in electric generation also
changed.
9
Meralco continued its status in being one of the oldest and biggest Philippine
company’s. It has gone through so many changes as to names and slogans but
they made sure to retain the company’s core values. This effort was greatly
recognized by others and the company earned numerous awards.
Major stock transactions in 2009 allowed Meralco to form synergistic
partnerships with two other giant Philippine companies such as the PLDT and the
San Miguel groups. These partnerships led not only to increased business
opportunities and cost reductions, but also to new, expanded and more
affordable service to the public.
10
Based on what I have research the ownership of the Manila Electric
Company is as follows: 43% belong to the San Miguel Corporation, 34.8% to
Beacon Electric Asset Holding Inc., 6.7% to the First Philippine Holding
Corporation after selling its 26.6% share to Manny Pangilinan’s MPIC and Piltel,
6.1% belongs to the PLDT Communications and Energy Ventures, Inc. which is
also owned by Pangilinan, and the remaining 8.9% are public stocks.
11
III. Awards and Citations
2012
Awards/Citations
Asia's Best CFO (Investor Relations) - Rafael Andrada
Best Investor Relations Company (Philippines)
Anvil Award of Excellence for:
The Meralco Twitter Experience - Using Social Media to Address and
Engage Customers on a Personal Level
Anvil Award of Merit for:
Bio Intensive Gardening (environment/science and technology/sustainable
development)
Lighting Up Lives through the Isang Litrong Liwanag (social responsibility)
Meralco's Water Lily for LIFE Project: Community Building for Wealth
Creation (entrepreneurship/ job generation)
One Meralco Foundation, Inc. Launch (special events)
"Two Days of Ultimate Basketball, One Magical Experience: A Fan's
Upclose and Personal Account of the Ultimate All-Star Weekend"
Powering Up to Success: Shaping the New Meralco through Corporate
Values and Employee Engagement
12
2011
Awards/Citations
Nominee for Best Investor Relations for Philippine Company in Singapore
Market IR Magazine
Best in Asia on Corporate Governance
Best Investor Relation by Corporate Governance Asia
Philippine Quill Awards
Award of Excellence ("Maliwanag ang Pasko" Christmas Campaign)
Special Events Finalist (The Lighter Side of Meralco: Bringing Energy
Efficiency Tips Closer to the Customer)
Brand Communication Finalist (New Meralco Brand Architecture - Gearing
towards the Future)
Employee/Member Communication Award of Merit (Powering up to
Success: Shaping the New Meralco Through Corporate Values and
Employee Engagement)
Media Relations Finalist (Empowering Partnerships: The Advantages
gained by Meralco's Corporate Business Group through a Strategic Media
Campaign)
Social Media Award of Merit (The Meralco Twitter Typhoon Response
Experience - Managing customer concerns during typhoon crisis
situations)
13
Media Relations Finalist (Pailaw Naman! How Meralco's Proactive
Dissemination of Information on the Generation Charge is Helping
influence Media Reportage)
Community Relations Award of Merit (Meralco Community Electrification
Program/MCEP)
Special Events, Internal or External (One Meralco Foundation, Inc.
Launch)
Community Relations Finalist (Bio Intensive Gardening)
Employee/Member Communication (Makabayan Employee Volunteerism)
Economic, Social and Environmental Development (Meralco's Water Lily
for Life)
Community Relations (Meralco Sibol School Project: Providing Access to
Education)
Press Releases
Meralco romps off with 13 Quill awards (Philippine Daily Inquirer)
Meralco's communication flair soaring higher (Manila Bulletin)
Meralco grabs 13 Quill awards (Business Mirror)
Business Communication Excellence (The Philippine Star)
14
2010
Awards/Citations
Nominee for Best Investor Relations IR Magazine South East Asia
Conference and Awards 2010
Recognized in Platts Top 250 Global Energy Company Rankings
2009
Press Releases
Meralco clinches Three Quills
Meralco hailed the best Corporate/Financial Institution in Southeast Asia
Meralco cited as one of the Philippine's Best Performing Companies
Awards/Citations
Oct. 22 - Awards of Excellence in the Philippine Quill Awards
Sept. 4 - Gold Award in the Regional Quality Circles Project Competition
Sept. 1 - Recognized as Top Employer by the Social Security System
Aug. 14 - Best Corporate/Financial Institution of the Year 2008-2009
Jul. 23 - Recognition as one of the country's Best Companies
Safety Awards
Oct. 29 - Perfect Safety Record
Oct. 29 - Award of Honor
Oct. 29 - Award of Distinction
15
ISO Certifications
ISO 9001
Sub-transmission Services (Mar. 2, 2009 ' Nov. 2010)
Distribution Services (Mar. 2, 2009 ' Nov. 14, 2010)
ISO 14001 & OHSAS 18001
South Distribution Services (Mar. 2, 2009 ' Mar. 1, 2012)
2008
Press Releases
Meralco execs named top UP Eng'g alumni
Meralco recognized for good Corporate Governance
Awards/Citations
Mar. 3 - CEO EXCEL Award for 2008
Recognition for Best Investor Relations
Award for Corporate Governance
Safety Awards
Nov. 5-7 - Safety Recognition Awards
Oct. 4 - Winner in the 18th National Industrial & Commercial First Aid &
CPR Team Competition
Apr. 15 - 5S Best Solid Waste Management Implementation - 5S Sector
Category
16
Apr. 15 - 2008 5S Best Solid Waste Management Implementation -
Business Center Category
Apr. 15 - 2008 5S Best File Management System
Apr. 15 - 2008 5S Best File Management System
Apr. 15 - 2008 Most 5S Compliant Canteen Business Center Category
Apr. 15 - 2008 Most 5S Compliant Canteen Office Category
Apr. 15 - 2008 Most Improved in 5S Implementation Sector Category
Apr. 15 - 2008 Most Improved in 5S Implementation Business Center
Category
Apr. 15 - Special Safety Awards Award of Merit
Apr. 15 - Award of Honor
Apr. 15 - Award of Distinction
Apr. 15 - Perfect Safety Record
ISO Certifications
ISO 9001
HRD - Training & Development Administration (Jan. 2008 - Jan. 2011,
Recertification)
Metering Services (Mar. 11, 2008 - 2011, Certified)
ISO / IEC 17025:2005
Corporate Meter - Meter Testing (Aug. 13, 2008 - Aug. 13, 2013, Re-
accreditation)
17
2007
Press Releases
Meralco bags 2 Philippine Quill Honors
Awards/Citations
Nov. 23 - Plaque of Appreciation from Ateneo de Manila
Nov. 23 - Plaque of Appreciation from Ateneo de Manila
Mar. 16 - Gold Quill Award of Merit
Safety Awards
Oct. 18 - Award of Honor - Sta. Rosa Sector, given by SOPI, DOLE &
BWC
Oct. 18 - Award of Merit - Central Branches, given by SOPI, DOLE & BWC
Oct. 18 - Award of Distinction - South Branches, given by SOPI, DOLE &
BWC
Oct. 18 - Award of Commendation
Sep. 3 - Gawad Kalikasan ng Pasig
Aug. 25 - Safety Recognition Awards
May 21-22 - Outstanding Road Safety Program for the Private Sector
ISO Certifications
ISO 9001
System Control Center (Feb. 16, 2007 - Feb. 15, 2010, Certified)
Call Center (Feb. 23, 2007 - Feb. 19, 2010, Certified)
18
Corporate Information Office (Jan. 26, 2007 ' Jan. 25, 2010, Certified)
2006
Safety Awards
Nov. 8-10 - National Industrial Convention Perfect Safety Record
Nov. 8-10 - National Industrial Convention Award of Merit
Jun. 6-7 - The MARS Level 2B audit Founders Award
Feb. 7 - Perfect Safety Record Award - For achieving no lost time accident
for the year 2006
ISO Certifications
ISO / IEC 17025:2005
Corporate Meter - Meter Testing (Aug. 13, 2006 - Aug. 13, 2008, Re-
accreditation)
Testing - Calibration & Repair (Dec. 2006 - Dec. 2009, Re-accreditation)
Testing - Mechanical (Nov. 20, 2006 - Nov. 19, 2009)
2005
Press Releases
National agency cites Meralco civic programs
ECOP names Meralco the 2005 Grand Kapatid winner
Asiamoney acclaims Meralco among the best managed in the region
Meralco sets example of Good Corporate Citizenship
19
Awards/Citations
December - Gawad Kalinga, Bayani Nation Builder Award
May 18 - Grand KAPATID Award
Safety Awards
Oct. 27 - 38th National Industrial Convention Perfect Safety Record
Oct. 27 - 38th National Industrial Convention Award of Honor - Valenzuela
Sector, awarded by SOPI
ISO Certifications
Telecommunications (Feb. 23, 2005 - Feb. 17, 2008, Recertification)
HRD - Training & Development Administration (Jan. 16, 2005 - Jan. 9,
2008, Recertification)
Corporate Information Office (Jan. 26, 2007 - Jan. 25, 2010, Certified)
IV. Mission and Vision
20
a. The company’s original Mission and Vision statement.
Mission
is to provide our customers the best value in energy, products and services.
Vision
is to be a world-class company and the service provider of choice.
Meralco’s Corporate Values
Our Corporate Values move us to respond more effectively to the requirements
of our dynamic business environment, and propel us to create a bright future for our
Company and its stakeholders. Our Corporate Values manifest in the following
attributes:
21
22
Objective
is to protect and enhance the interests of its stakeholders by committing itself to the
following principles:
1. The Customers are its reason for being, and therefore, they should always be
treated with dignity. The Company must be fully responsive to their needs. The
Company has the responsibility to:
Provide the customers with the highest quality products and services,
consistent with their requirements and with international standards;
Treat the customers fairly, courteously and with integrity in all of its
business transactions;
Act promptly on their immediate concerns and be receptive to their long-
term needs and interests; and
Make every effort to ensure that the health, safety and general well-being
of its customers are enhanced by its products and services.
2. The Employees are its most valued asset, and therefore, they should always be
treated with dignity and with full consideration of their interest. The Company has
the responsibility to:
Provide its employees with incentives and opportunities for professional
growth and advancement;
23
Provide its employees with just and competitive compensation, and
benefits that improve their living conditions and incentives
Guarantee fairness, equal treatment and opportunity, and avoid
discriminatory practices; and
Provide suitable and safe working conditions to protect employees from
avoidable injury and illness in the workplace.
3. Its Investors are its principals, and therefore, the trust they have placed in the
company must be honored. The Company has the responsibility to:
Apply professional and diligent management to ensure the financial
viability of the company and maintain a fair and competitive return for its
investors; and
Conserve and enhance its investors' assets, and fulfill and safeguard their
interest.
4. The Suppliers and Creditors are its business partners and, therefore, the
relationship with them must be based on mutual respect and benefit. The
Company has the responsibility to:
Foster long-term stability, direct relation and continuous development with
suppliers to attain quality, competitiveness, process efficiency and
performance reliability;
Seek fairness, truthfulness, integrity and transparency in all of its business
dealings with them; and
24
Seek, encourage and prefer suppliers whose business practices respect
human dignity and the environment.
5. The Competitors are its catalyst toward continuing service excellence and,
therefore, the competition with them should be fair and honest, a basic
requirement for national development in the distribution of products and services
to the community. The Company has the responsibility to:
Promote behavior that demonstrates mutual respect among competitors;
and
Maintain the highest level of business ethics and integrity.
6. The Community is its business environment and the society it serves. The
Company has the responsibility to:
Uphold and maintain at all times the highest standards of business ethics;
Fulfill with dedication and commitment its social responsibilities;
Undertake activities that support and contribute to the economic and
social development of the country;
Undertake activities that support and contribute to the economic and
social development of the country;
Employ proactive measures and cooperate with the government and non-
government institutions in activities to serve society towards a collective
benefit.
25
7. Employ proactive measures and cooperate with the government and non-
government institutions in activities to serve society towards a collective benefit.
Help the government in its efforts and programs towards raising investor
confidence, developing the capital market, and ensuring high sustained
economic growth through good corporate governance.
Observe and comply at all times with the orders, rules and regulations of
the government, its agencies and instrumentalities, in the pursuit of its
utility objectives and other corporate endeavors;
Institutionalize sound environmental practices in collaboration with the
concerned government agencies and encourage other
corporations/organizations to support all programs for an effective
environmental management system.
b. My own version of what the Mission and Vision should be.
Mission
1. Customers
We are where we are because of who we serve. MERALCO’s customers are the
energy that drives us to do our job efficiently and effectively. We will increasingly gain
our customers loyalty through giving them a good value for their money.
26
2. Products or Services
As part of the MERALCO family, each and every one of us is accountable for our
promise to supply uninterrupted and stable power to their homes and to all others that
require it. We shall keep to this promise the best way we can.
3. Markets
It is MERALCO’s calling to provide a service incomparable to any other in Metro
Manila, the entire provinces of Bulacan, Rizal and Cavite; parts of the provinces of
Laguna, Quezon, Batangas and Pampanga.
4. Technology
It is our duty to make sure that MERALCO’s facilities are apt and continually
enhanced. These facilities should always be capable of producing what is expected and
more but never less.
5. Concern for Survival, Growth, and Profitability
It is our responsibility to ensure that we are able to take care of each and every
one of MERALCO’s customers. As MERALCO provides its customers with light, they in
return enlighten its future. In this respect, MERALCO will conduct its operations
deliberately and will provide the profits and growth that will benefit our customers,
employees, other investors and our society.
27
6. Philosophy
We willingly commit to MERALCO’s corporate values of: Customer Service,
Performance, Accountability/Empowerment, Integrity/Transparency,
Teamwork/Collegiality, Malasakit and Makabayan.
7. Self-concept
We strive to maintain an electrification level in the franchise area of MERALCO at
99%. Maintain good relationships with our customers through exceptional customer
service.
8. Concern for Public Image
MERALCO is more than honoured to also take part in good corporate social
responsibility by which we take part of through Sports and Youth Advocacies, Disaster
Relief and Emergency Preparedness, Grassroots Partnership, and Rural and
Missionary Electrification.
28
29
9. Concern for Employees
MERALCO ultimately has high regards for all of those that make this mission
possible. These are the loyal employees that make up the MERALCO FAMILY.
Vision
To be the first to provide innovative solutions in the line of electric distribution that
will benefit our customers, employees and the environment, and become the first and
only choice of every Filipino family to provide electricity.
30
V. External Factor Evaluation (EFE) Matrix
Key External Factors Weight Rating Weighted Score
Opportunities:
1. Sole provider of electricity to franchised area of 9,337 sq. km.
0.19 4 0.76
2. Serves a little more than a quarter of the country’s population.
0.11 3 0.33
3. Increasing demand for electricity. 0.13 3 0.39
4. El Nino caused temperature to rise and resulted to higher electric consumption.
0.12 4 0.48
5. Customer loyalty. 0.08 3 0.24
Threats:
1. Equipment failure 0.10 3 0.30
2. Improvement of on-line services 0.05 2 0.10
3. Narrow bargaining power with suppliers 0.15 2 0.30
4. Development of substitute products 0.04 1 0.04
5. Damages caused by adverse acts of nature 0.03 3 0.09
TOTAL 1.00 3.03
I gave the first opportunity I cited a weight of 0.19, highest of all, because I believe
that it encompasses Meralco’s purpose. I then gave it a rating of 4 because given that
31
Meralco solely provides to such a huge area they have been doing a good job and us
such their response to this opportunity is superior.
Of all places in the Philippines the City of Manila is the most crowded. This is
brought about by it being our country’s national capital. With a population of a little over
20,000,000, Manila is the fifth-most populous city in the world. The city’s electricity is
32
solely being provided by Meralco along with the places surrounding the metro. The
Philippines has an estimated population of a little over 90,000,000 which means that
more or less a quarter of the entire country is dependent on Meralco for electricity. I
placed 0.11 as this opportunities weight in the matrix. I ranked it lower than compared to
the first opportunity because I think that it is less important than the first but still more
important than the others. I gave it a weight of 3 because I think that Meralco could do a
better job in providing a better customer relations programs.
My third opportunity is about the increasing demand for electricity. This is highly
influenced by our weather. With the rising of temperature energy consumption also goes
up. This is an advantageous opportunity for Meralco that’s why I gave a weight of 0.13. I
33
gave it a rating of 3 because I think Meralco has only responded to this opportunity
averagely.
The fourth opportunity I stated is in relation to the third. It is just that my fourth
opportunity is very much supported by the charts of Meralco. It is because of the El Nino
phenomena that Meralco was able to earn a record breaking amount of sales through
energy consumption. I gave this opportunity a weight of 0.12 because of how this
opportunity benefitted the company. It may not be a stable basis of yearly sales
increase but even normal Philippine weather nowadays are getting to the people. I gave
it a weight of four because Meralco took every ounce of advantage from the situation. It
even might have been a surprise to Meralco but nevertheless they were able to provide
their service effectively and efficiently.
The last opportunity I cited is of Meralco’s customer’s loyalty. I see this as an
opportunity because given the quality of service they provide it is highly unlikely that if
ever there would be new players in the market will Meralco’s customers risk taking a
34
chance to try them out. I gave this opportunity a weight of 0.08 and a rank of 3. I gave it
a 0.08 because of the fact that it’s not like Meralco’s customers have a choice in the first
place but nevertheless it still is an important aspect. I ranked it at 3 because I think
Meralco can develop more customer oriented programs that will maintain their
customers’ loyalty.
The first threat I cited is how sometimes Meralco’s equipment become faulty. I see
this as a threat because being focused mainly on power distribution any malfunctions
may cause them a great deal. The weight I gave this threat is 0.10 and I gave it a rank
of 3. I gave it a 0.10 because of how the company depends on its equipment to be able
to deliver their service effectively. I gave it a rank of three because I think that the
company has been doing a good job but they should still continue to improve their
equipment.
The second threat I cited in the improving of their on-line facilities. It has been a
trend now for most people and businesses to settle bills through the internet. It saves
customers from going out of their way to settle their bills where they would still have to
fall in line. With on-line services paying bill can now be easily done at the most
35
convenient time and even wherever you are. I gave this threat a weight of 0.05 and a
rank of 2. I gave it a 0.05 because although it will prove to be a big help in terms of
collection and customer satisfaction it is not that important as the others. I gave it a rank
of 2 because there have been efforts already of improving this threat although I think
that Meralco can be more aggressive about it.
The third threat I cited is how Meralco has a narrow bargaining power with its
suppliers. I see this as a threat because having to depend entirely on Independent
Power Producer’s is very risky. Being privately owned Meralco has no control over them
and there would also be circumstances that these suppliers may not be able to provide
the electricity Meralco requires. A lot of things can happen like a probable mishap in a
certain plant that would then mean no electricity for Meralco to distribute. Also, at any
point in time these suppliers may also deny Meralco of their electric supply and this will
greatly affect the company. I gave this threat a weight of 0.15 and a rank of 2. I gave it a
0.15 because it is a very important threat that may affect Meralco gravely if worse
comes to worst. I ranked it 2 because Meralco could take more precautions with this
threat. They could and they should have contacts with their major suppliers so that they
can be secured.
The fourth threat I cited is of the development of substitute products. As we are in
a third-world country the effects of the world’s economy is greatly felt here. As the cost
of living continues to soar some people have started to look for less costly alternatives.
A perfect example would be the recycling of used plastic soda bottles and making them
36
a make-shift light bulb to light people’s homes. It may be a small threat to Meralco but
eventually it will cost them because regardless if people are using electricity or not
Meralco cannot shut down their services. I gave this threat a weight of 0.04 and a rank
of 1. I only gave 0.04 because it is not big of a threat yet for Meralco. I ranked it as one
because although it is not that big of a deal yet it in time I believe it will be something
that the company would most likely be facing.
The last threat I cited is the damage caused by the adverse acts of nature. I see
this as a threat for Meralco because of how the company’s facilities are exposed to
nature. All of their cables are in the open as well as their main plants which are also not
covered. Nature is very unpredictable given Meralco’s product it is best that they take
every precaution in dealing with this threat. I gave this threat a weight of 0.03 and a rank
of 3. I only gave it a 0.03 because it is a threat that is not in anyone’s hands. I ranked it
three because Meralco has done a great job in reacting to this threat. A perfect example
would be when most of Manila was flooded by Ondoy. Meralco was able to react to the
situation by switching off their power in certain locations so as to not cause any more
damage.
37
38
VI. Porter’s Five Forces
1. Rivalry Among Competing Firms
Meralco is by law the sole distributor of electricity in its franchised area.
Moreover, 54% of the total electricity usage in the entire country is being consumed
within the Meralco service area. Electricity is indispensable and as such consumers
that are within the franchised area of Meralco are left with no choice. This is a very
big advantage for Meralco that is even made even greater by the fact that the
demand for electricity is still on the rise as proven by Meralco’s rate of increase in
customers as well as increase in energy consumption. Having no competitor
Meralco need not be burdened with having to constantly develop strategies that aid
in gaining competitive advantage. This in turn gives Meralco more time and a much
more flexible budget to enhance its facilities.
2. Potential Entry of New Competitors
With Meralco having legal hold of its franchised area it would be near
impossible for new competitors to share in its market. Although, I also think that
given certain circumstances there might come a time when this might change. A law
might be passed that would promote and require competition among businesses in a
certain industry. This is most likely to happen when the costs of living have probably
gone too high. Given such an opportunity there are probably a lot of hopefuls out
there that have thought and hungered to have a piece of the market that Meralco
solely caters to. When this happens I think that those that dare compete with
Meralco will eventually fail. It’s hard to beat a company that has been providing this
39
service for a little over a hundred years already. And with their continuous
investment in improving their facilities by the time that such an opportunity could
arise Meralco is most probably going to be a lot farther from where they are now.
Even if new firms would offer a lower price than that of Meralco it will still be very
hard for them to gain advantage. They may be able to gain customers because of
their low price but it would be impossible for them to compete with Meralco’s
facilities that have been, are still and will still be enhanced through time.
3. Potential Development of Substitute Products
Electromagnetic induction is the most common process used by Power
Plants to generate electricity. It may be done through burning of fossil fuels as well
as from power that can be taken from the natural forces of water or wind. This
process makes use of generators that are driven by heat engines fuelled by
chemical combustion or through turbines driven by the force of falling water or the
wind. After electricity has been produced it is then transmitted to distribution
companies like Meralco which is the one that retails it to consumers.
Ours is a finite earth. This means that there is an end to everything that is
here. The depletion of our natural resources is a well-known fact all around the
globe. Through the years that we have been inhabiting this world and discovered
how to generate electricity we have unrelentingly and carelessly abused our role as
stewards of this planet. We have taken advantage of resources to the point that
maybe sooner than later will take its toll on our existence. Not only have we been
40
depleting these natural resources but with how we make use of it we have also
affected our atmosphere.
Coal-Fired Power Plant
Hydroelectric Power Plant
Wind-Powered Turbines
41
Because of the posing environmental threats that we face with the
continuous depletion of our natural resources other alternatives have been
developed. An example of which would be solar panels. Solar panels are designed
to capture energy from the heat of the sun and transform it to electricity that is ready
to use. These panels, although seen rarely, are already available here in the
Philippines. They are a little expensive and have limited capacity as to power output
compared to the stability and capacity of electricity from power plants. Given the
rate, however, at which costs of living have gone so high, only time will tell when
which proves to be the best option that one should spend on.
Solar Panel
42
4. Bargaining Power of Suppliers
Meralco is mainly an electric distribution company that purchase electricity
from IPP’s or Independent Power Producers that operate generating plants. It is safe
then to say that Meralco is at the mercy of its suppliers. If by any cruel chance that
the suppliers refuse to sell their electricity to Meralco it would automatically put the
company out of business.
Since Meralco’s distribution business has been consistently earning higher
and higher profit I think it is high time that they start investing on a new but related
product. Acquiring a substantial amount of electric generating plants is highly
plausible. It does not have to be a huge number that can support all of Meralco’s
franchised area but enough to ensure that if ever a minor glitch might happen it will
not affect their customers. It is also possible for Meralco to form strategic
partnerships with its suppliers so as to ensure that the flow of supply is stable.
Meralco Facility
43
5. Bargaining Power of Consumers
Again, since Meralco is the sole provider of electricity to a wide franchised
area this force does not greatly affect the company. Meralco being deregulated
from government control also aids to not being affected by this force. Although,
given that the company’s customers are the ones that provide their business it
would be wise for Meralco to exhibit the sense of value towards them.
Happy Customer
Sample of Meralco Bill
44
VII. Internal Factor Evaluation (IFE) Matrix
Key Internal Factors Weight Rating Weighted Score
Strengths:
1. Frequent employee development programs.
0.08 3 0.24
2. Revenue increased by 25%. 0.15 4 0.60
3. Outstanding company operational performance.
0.10 3 0.30
4. Continued investment in distribution system.
0.12 4 0.48
5. Long-term bilateral power purchase contracts.
0.13 4 0.52
Weaknesses:
1. Customer service facilities. 0.10 1 0.10
2. Re-entry into power generation. 0.09 2 0.18
3. Risk management program. 0.07 3 0.21
4. Initiative to reduce generation charge on customers’ bills.
0.06 1 0.06
5. System reliability. 0.10 3 0.30
TOTAL 1.0 2.99
45
The first strength I cited is about how Meralco puts its employees through
continuous developmental programs. These are programs that help the company’s
employees to enhance their skills needed for them to perform their job efficiently. I
see this as a strength because nothing is permanent in this world except for change.
As changes occur it is wise for Meralco to invest in aiding its employees to cope up
with everything around them. I gave this strength a weight 0.08 and a rank of 3. I
weighted it at 0.08 because I think that it is near as important to the other strengths I
listed down. I ranked it at 3 because Merlaco has been and still continues its efforts
to sustain this strength.
46
The second strength I cited is on the 25% increase in Meralco’s revenue. I
see this as a strength because not only are they proving to be very efficient in what
they are doing but they are also showing that they have enough to finance improving
their efficiency even more. I gave this strength a weight of 0.15 and a rank of 4. I
gave it a high weighted score because I think that the revenue they earned is a
guarantee that they are able to become more and more better in the service they
provide. I gave it a rank of 4 because it shows in their annual report that they have
used their earnings wisely through major investments in improving their facilities.
The third strength I cited is of Meralco’s operational performance. Aside
from favourable circumstances as when El Nino hit our country which caused
customers of Meralco to increase their power consumption, none of their successes
in the past year would have been possible without the participation of the people
behind the business. I gave this strength a weight of 0.10 and a rank of 3. I gave it a
weight of 0.10 because this is a very critical aspect in any business. I gave it a rank
of 3 because of issues within the company about “power struggle”. They are
currently going through an adjustment period that is the result of Mr. Manny
Pangilinan’s buying of the majority of the company’s stocks. He has now gained
controlling power over Meralco.
The fourth strength I cited is about how Meralco’s continuous efforts in
improving their distribution system. I see this as a strength because it means that
they will continue to provide quality service regardless of how times change. I gave
this strength a weight of 0.12 and a rank of 4. I gave it a rank of 0.12 because
although it is very important it is not as important as the company’s high revenues
47
that fund this strength. I gave it a rank of 4 because of the company’s strong efforts
towards this aspect of their business.
The fifth and final strength I cited is of Meralco’s efforts in closing bilateral
power purchase contracts. I think that this is a strength because of the nature of the
company’s business. Given that they are only concentrated is distributing electricity
they rely very much on their suppliers. Having legal contracts with these suppliers
lessen the risk of Meralco having to face risks such as price hikes within the contract
period as well as it provides the company a reliable source of power for a certain
period of time. I gave this strength a weight of 0.13, the highest of all, and a rank of
4. I gave it the highest weight because of why I see this aspect as a strength. I gave
it a ranking of 4 because Meralco has superb efforts to keep this strength.
The first weakness I cited is about Meralco’s customer service facilities. I
think that this is a weakness because of personal experience. Since being held
responsible by parents to take of the bills at home I have noticed that the company
only has a few establishments that their customers may go to. This means that
customers at some vicinities would have to go to those places that do have Meralco
establishments. I gave this weakness a weight of 0.10 and a rank of 1. I gave it a
weight of 0.10 because I believe that Meralco should make themselves available
and easy to reach by their customers. I also think that this is essential in maintaining
customer satisfaction. I gave it a rank of 1 because the company has been
improving on this but they should put more effort in it.
48
The second weakness I cited is how Meralco has begun its efforts in re-
entering power generation. Meralco did not start as a distribution company only.
They were also in to power generation. In the 1970’s a state policy was issued that
required all generating plants be owned by the government. This event led Meralco
in concentrating solely on power distribution. Since the downfall of NAPOCOR,
Meralco has now taken efforts in rebuilding their generating business. I see this as a
weakness because they could have taken steps in gaining this a long time ago. I
gave this weakness a weight of 0.09 and a rank of 2. I gave it a weight of 0.09
because this could have helped them in major ways had they taken it into
consideration. I gave it a rank of 2 because efforts are already being done by the
company towards this weakness.
49
The third weakness I cited is how the company has now given importance
to their risk management programs. I see this as a weakness because this should
have been a major aspect in running their business. They have too many risks at
hand that are due to the nature of their business. I gave this weakness a weight of
0.07 and a rank of 3. I gave it a weight of 0.07 because I think that this is essential to
the operation of the company. I gave it a rank of 3 because of the efforts that they
have made towards this weakness. They have started to develop programs that will
help them in lessening the risk involved in their operation. This is also discussed in
their annual report and they have already seen improvements towards it.
50
The fourth weakness that I cited is how Meralco has been taking efforts to
reduce the generating charges on their customers’ bills. They have observed how
much their customrs’ bills were high because of their generating charges. This is
primarily due to the price at which Meralco buys their supply of energy from their
suppliers. I see this as a weakness because in their more than 100 years of service
it is very impossible that they only saw this now. I gave this weakness a weight of
0.06 and a rank of 1. I gave it a weight of 0.06 because although it is of importance
to maintaining customer satisfaction it is also where most of the company’s revenues
come from. I gave it a rank of 1 because they have only showed efforts of intending
to take action regarding this weakness. There have been talks and planning on how
to do it but no action has been done yet.
The fifth and last weakness I cited is of Meralco’s system reliability.
Nothing is and will never be perfect, a statement which is true for everything as well
as everyone. At some point something or someone is bound to fail from delivering
what is expected from it or him/her. Meralco’s facilities are very reliable as a result of
how they are putting major investments for its betterment. Regardless of this
however, they cannot be assured that it will work as expected all of the time. I gave
this weakness a weight of 0.10 and a rank of 3. I gave it a weight of 0.10 because I
think that is a very important issue for the company. I gave it a rank of 3 because
Meralco has been taking efforts in improving their systems regularly and as often as
needed.
51
VIII. Financial Ratios (based on 2011 Year End Financial Statement)
A. Liquidity Ratios
Current Ratio_84,043,000,000_108,331,000,000
= 0.78
Quick Ratio_70,250,278,643.53_
108,331,000,000
= 0.65
B. Leverage Ratios
Debt-to-Total-Assets Ratio_24,400,000,000_210,388,000,000
= 0.12
Debt-to-Equity Ratio_24,400,000,000_
68,501,000,000
= 0.36
Long-Term
Debt-to-Equity Ratio
_20,650,000,000_68,501,000,000
= 0.30
Times-Interest-Earned
Ratio
18,699,000,0003,093,000,000
= 6.05
52
C. Activity Ratios
Inventory Turnover_256,808,000,000_
205,674,000,000
= 1.25
Fixed Assets Turnover_256,808,000,000_
105,510,000,000
= 2.43
Total Assets Turnover_256,808,000,000_
210,388,000,000
= 1.22
Accounts Receivable Turnover_3,499,000,000_29,108,000,000
= 0.12
Average Collection Period
53
D. Profitability Ratios
Gross Profit Margin18,699,000,000256,808,000,000
= 0.07
Operating Profit Margin24,602,000,000256,808,000,000
= 0.10
Net Profit Margin13,227,000,000256,808,000,000
= 0.05
Return on Total Assets
(ROA)
13,227,000,000210,388,000,000
= 0.06
Return on Stockholders’ Equity
(ROE)
13,227,000,00068,501,000,0000
= 0.19
Earnings Per Share
(EPS)
13,227,000,0001,127,119,432
= 11.74
54
Price-Earnings Ratio4.10
11.73
= 0.35
E. Growth Ratios
Sales 1.1%
Net Income 37%
Earnings Per Share 37%
Dividends Per Share 12%
55
IX. Strengths-Weaknesses-Opportunities-Threats (SWOT)
Matrix
Strengths Weaknesses1. Frequent employee
development programs.2. Revenue increased by
25%.3. Outstanding company
operational performance4. Continued investment in
distribution system.5. Long-term bilateral
power purchase contracts.
1. Customer service facilities.
2. Re-entry into power generation.
3. Risk management program.
4. Initiative to reduce generation charge to customers’ bills.
5. System reliability.
Opportunities SO Strategies WO Strategies1. Sole provider of
electricity to franchised area of 9,337 sq. km.
2. Serves a little more than a quarter of the country’s population.
3. Increasing demand for electricity.
4. El Nino caused temperature to rise and resulted to higher electric consumption.
5. Customer loyalty.
1. Expand franchised area to cover the whole of Laguna.
2. Frequently develop promotions that will entice customers.
3. Add more programs to enhance the skills of employees.
1. Opening of multiple business centers around the franchised area.
2. Gain ownership of 2 generating plants that will help lessen customers’ generating charges on their bill.
3. Stronger efforts in making Meralco a customer-centric company.
Threats ST Strategies WT Strategies1. Equipment failure.2. Improvement of on-line
services.3. Narrow bargaining power
with suppliers.4. Development of
1. Continued enhancement of facilities.
2. Establish long-term contracts with suppliers.
1. Improve on-line services for customers.
2. Venture out and invest on new products related to the core line of the business.
56
substitute products.5. Damages caused by
adverse acts of nature.
3. Continue investment on distribution service.
4. Develop further risk management programs.
X. Strategic Position and Action Evaluation (SPACE) Matrix
Internal Strategic Position External Strategic Position
Financial Strength (FS) Environmental Stability (ES)
Cash Flow
Earnings Per Share
Price Earnings Ratio
Year End Revenue
Working Capital
5
4
3
6
5
Technological Changes
Demand Variability
Barriers to Entry into
Market
Competitive Pressure
Risk Involved in business
-1
-1
-1
-1
-5
23 -9
Competitive Advantage (CA) Industry Strength (IS)
57
Market Share
Product Quality
Customer Loyalty
Technological Know-
How
Control Over
Distributors
-1
-3
-3
-2
-4
Growth potential
Profit Potential
Financial Stability
Resource Utilization
Productivity and Capacity
5
6
5
3
4
-13 23Conclusion:
Environmental Stability (ES)
Average is -9 / 5 = -1.8
Industry Strength (IS)
Average is 23 / 5 = 4.6
Competitive Advantage (CA)
Average is -13 / 5 = -2.6
Financial Strength (FS)
Average is 23 / 5 = 4.6
Directional Vector Coordinates:
x-axis: -2.6 + (4.6) = 2
y-axis: -1.8 + (4.6) = 2.8
58
0
0.5
1
1.5
2
2.5
3
Meralco should continue their efforts of pursuing Competitive Strategies.
XI. References
a. Title of Article: Meralco
Name of Site: Wikipedia
Date Accessed: March 17, 2012
Online URL: http://en.wikipedia.org/wiki/Meralco
b. Title of Article: Electricity Generation
Name of Site: Wikipedia
Date Accessed: March 17, 2012
Online URL: http://en.wikipedia.org/wiki/Electricity_generation
c. Title of Article: Meralco Main Site
Name of Site: Meralco, Ang Liwanag ng Buhay
59
Date Accessed: March 17, 2012
Online URL: http://www.meralco.com.ph/index.html
d. Title of Article: The Company
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 17, 2012
Online URL: http://www.meralco.com.ph/company-index.html
e. Title of Article: Corporate Profile
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March, Ang Liwanag ng Buhay
Online URL: http://www.meralco.com.ph/company/page-about-
corporateinfo-corpprofile.html
f. Title of Article: Corporate Mission, Vision, Values and Principles
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 17, 2012
Online URL: http://www.meralco.com.ph/company/page-about-
corporateinfo-misvis.html
g. Author of Article: Roberto M. Paterno
Title of Article: At the Threshold of Fresh Synergies: Meralco in
2010
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 17, 2012
60
Online URL: http://www.meralco.com.ph/company/page-about-
corporateinfo-history.html
h. Title of Article: Awards and Citations
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 17, 2012
Online URL: http://www.meralco.com.ph/company/page-about-
corporateinfo-awards.html
i. Title of Article: Quarterly Report
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 18, 2012
Online URL: http://www.meralco.com.ph/company/page-about-
investor-quarterlyreport.html
j. Title of Article: INVESTORS’ BRIEFING & TELECONFERENCE -
Yearend 2011 FINANCIAL & OPERATING RESULTS
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 18, 2012
Online URL:
http://www.meralco.com.ph/pdf/aboutmeralco/YE_2011_Meralco_R
eports.pdf
k. Title of Article: Re-Energized – Meralco 2010 Annual Report
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 18, 2012
61
Online URL: http://www.meralco.com.ph/resources/pdf/Meralco
%2010%20Annual%20Report.pdf
l. Title of Article: The Corporate Social Responsibility Arm of Meralco
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 18, 2012
Online URL: http://www.meralco.com.ph/company/page-csr-
sports.html, http://www.meralco.com.ph/company/page-csr-
disaster.html, http://www.meralco.com.ph/company/page-csr-
grassroot.html, http://www.meralco.com.ph/company/page-csr-
rural.html
m. Title of Article: The Consumer
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 19, 2012
Online URL: http://www.meralco.com.ph/consumer-index.html
n. Title of Article: Meralco Bill Components
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 19, 2012
Online URL: http://www.meralco.com.ph/customer/page-cusCare-
billcomponents.html
o. Title of Article: Electric Tips
Name of Site: Meralco, Ang Liwanag ng Buhay
62
Date Accessed: March 19, 2012
Online URL: http://www.meralco.com.ph/customer/page-cusCare-
tipsElectrical.html
p. Title of Article: Causes of Electrical Accidents
Name of Site: Meralco, Ang Liwanag ng Buhay
Date accessed: March 20, 2012
Online URL: http://www.meralco.com.ph/customer/page-cusCare-
tipsCEA.html
q. Title of Article: Meralco Appliance Calculator
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 20, 2012
Online URL: http://www.meralco.com.ph/customer/page-cusCare-
toolsCalculator.html
r. Title of Article: Meter Deposit Refund
Name of Site: Meralco, Ang Liwanag ng Buhay
Date Accessed: March 20, 2012
Online URL: http://www.meralco.com.ph/customer/page-
cusProduct-MDR.html
s. Name of Site: Flickr
63
Date Accessed: March 20, 2012
Online URL:
http://www.flickr.com/photos/15693951@N00/878260084/sizes/z/in/
photostream/
Recommended