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CONFIDENTIALBUStrategicPlanTemplateBookTrainingmaterials8June2001Thisreportissolelyfortheuseofclientpersonnel.Nopartofitmaybecirculated,quoted,orreproducedfordistributionoutsidetheclientorganizationwithoutpriorwrittenapprovalfromMcKinsey&Company.ThismaterialwasusedbyMcKinsey&Companyduringanoralpresentation;itisnotacompleterecordofthediscussion.JimAyala–PHOMelissaGil–PHOReginaManzano–PHOSureshMustapha–PHOSteveShaw–HKOShellyYeh–PHOChoon-GinTan–SIOSTRATEGYPLANNINGINSTRUCTIONSTheobjectiveofthesetemplatesistoprovidecompletenessandconsistencyofBUstrategicplansubmissions.ThesetemplatesarenotintendedtoreplaceorconstrainBUstrategicthinkingandshouldbeadaptedtoreflectaparticularBU’ssectoralcontextasrequiredEachsectionbeginswithasummarythatisbasedonasynthesisofquestionsandanalysesthatfollow.Thesuggestedapproachwouldbetofirstcompletetherelevantback-upanalysesandthenworktowardstheoverallsynthesis2TABLEOFCONTENTSI. ExecutivesummaryII. EnvironmentalandinternalassessmentA. IndustrydynamicsanditsimplicationsB. CompetitiveassessmentC. InternalassessmentIII. StrategicdefinitionandimplicationsA. StrategyarticulationB. StrategicinitiativesC. FinancialprojectionD. Risks/contingenciesandstrategicalternativesIV. Exhibits3BUSTRATEGICPLANDEVELOPMENTIndustrydynamicsandimplicationsEnvironmentalandinternalassessmentCompetitiveassessmentInternalassessmentWhatarethemajorchangesinindustrydynamicsandresultingopportunitiesandrisks?Whatareyourcompetitivestrengthsandweaknesses?Howdoesyourcurrentbusinessemphasisfitwithindustryopportunityandcompetitivelandscape?StrategyarticulationStrategicdefinitionandimplicationsStrategicinitiativesFinancialprojectionsWhatstrategywillyourBUpursueoverthenext3years?Whatwillbetheimpactofmajorstrategicinitiatives?Whataretheexpectedfinancialreturnsofyourstrategy?++++Risk/contingen-cies&strategicalternativesWhatstrategicalternativeshaveyouconsidered?+4I.EXECUTIVESUMMARYInstructions:TheExecutiveSummary

providesasynthesisofthe

EnvironmentalandInternal

Assessmentsandthe

resultantBUStrategicPlans5II.ENVIRONMENTALANDINTERNALASSESSMENT6IIA.INDUSTRYDYNAMICSANDIMPLICATIONS–SUMMARYA.Whatarethemajorchangesinindustrydynamicsandtheresultingopportunitiesandrisks?A.2 Howisindustrystructurechanging(demand,supply,andindustrychaineconomics)?Whataretheresultingopportunitiesandrisks?A.3 Whatistheexpectedcompetitorconduct?Whataretheresultingopportunitiesandrisks?A.4 Whatarethepresentandfutureexternalfactorsthatcouldpresentnewopportunitiesandrisks?A.1 Whatindustryareyoucompetingin?Whatarethevarioussegmentsintheindustry?Instructions:

Theanswertothis

overarchingquestion

requiresarecapitulation

ofthesection’smain

findingsInstructions:

Thesesubsections

containa1-2sentence

summaryoftherelevant

findings7IIA.INDUSTRYDYNAMICSANDIMPLICATIONS–BACK-UP1A.1 Whatindustryareyoucompetingin?Whatarethevarioussegmentsintheindustry?IndustrydefinitionIndustrysegmentationDefinitionSizingInstructions:

Exhibit1couldprovide

ausefulframeworkfor

answeringthisquestionIndustrydefinition:Industrysegmentation:8IIA.INDUSTRYDYNAMICSANDIMPLICATIONS–BACK-UP2A.2 Howisindustrystructurechangingwithrespecttodemand,supply,andindustrychaineconomics?Whataretheresultingopportunitiesandrisks?EconomicsofdemandBysegmentSubstitutes,abilitytodifferentiateVolatility,cyclicalityEconomicsofsupplyProducerconcentrationanddiversityImportcompetitionCapacityutilizationEntry/exitbarriersCoststructure(fixedandvariable)IndustrychaineconomicsCustomerandsupplierbargainingpowerInstructions:

Exhibit2,3or4couldprovide

ausefulframeworkfor

answeringthisquestion9IIA.INDUSTRYDYNAMICSANDIMPLICATIONS–BACK-UP3A.3 Whatistheexpectedcompetitorconduct?Whataretheresultingopportunitiesandrisks?MajorindustrycompetitormovesMarketinginitiativesIndustrycapacitychangesM&As,divestituresVerticalintegration/disaggregationAlliancesandpartnershipsCostcontrolandefficiencyimprovementsInstructions:

Exhibit2,3or4couldprovide

ausefulframeworkfor

answeringthisquestion10IIA.INDUSTRYDYNAMICSANDIMPLICATIONS––BACK-UP4A.4Whatarethepresentandfutureexternalfactorsthatcouldpresentnewopportunitiesandrisks?ImpactandlikelihoodofmajorindustrydiscontinuitiesChangesinregulation/governmentpolicyTechnologicalbreakthroughsInstructions:Exhibit2,3or4couldprovide

ausefulframeworkfor

answeringthisquestion11IIB.COMPETITIVEASSESSMENT––SUMMARYB.Whatareyourcompetitivestrengthsandweaknesses?B.1Whatarethecapabilitiesrequiredtosucceedinthisindustry?B.2Howdoyoucompareagainstthesenecessarycapabilities?Instructions:Theanswertothis

overarchingquestionrequiresarecapitulation

ofthesection’’smainfindingsInstructions:Thesesubsections

containa1-2sentencesummaryoftherelevantfindings12IIB.COMPETITIVEASSESSMENT––BACK-UP1B.1Whatarethecapabilitiesrequiredtosucceedinthisindustry?Privilegedassetsthatcreatecompetitiveadvantage,e.g.physicalassets,location/””space”,distribution/salesnetwork,intangibleassets(intellectualcapital,network,brands,talents)Distinctiveskills/competenciesthatcreatecompetitiveadvantage,e.g.innovation,talentdevelopmentInstructions:Exhibit5couldprovideausefulframeworkfor

answeringthisquestion13IIB.COMPETITIVEASSESSMENT––BACK-UP2B.2Howdoyoucompareagainstthesenecessarycapabilities?Strengthsandweaknessesofyourcompetitivepositionvs.necessarycapabilitiesBenchmarkperformanceagainsttheindustry’srelevantkeyperformanceindicators(KPIs)*,withmarginandmarketshareastherequiredminimumStrengthsandweaknessesofyourcompetitivepositionvs.necessarycapabilities:Benchmarkperformanceagainsttherelevantindustry’sKPIs:Instructions:Exhibits6and7could

provideausefulframework

foransweringthisquestionInstructions:Exhibit8couldprovideausefulframeworkfor

answeringthisquestion*KPIsareahandfulofleversthatdrivethevalueoftheindustry/business14IIC.INTERNALASSESSMENT–SUMMARYC.Howdoesyourcurrentbusinessemphasisfitwiththeindustryopportunitiesandthecompetitivelandscape?C.1Whichsegmentsofthebusinessareprovidingthehighestreturns?C.2WhathavebeentheperformancetrendsalongmajorBUKPIs?C.3Whichintangibleassets*couldbenear-termpotentialsourcesofvalue?Instructions:Theanswertothis

overarchingquestionrequiresarecapitulation

ofthesection’’smainfindingsInstructions:Thesesubsections

containa1-2sentencesummaryoftherelevantfindings*PleaserefertoExhibit12forfurtherdescription15IIC.INTERNALASSESSMENT–BACK-UP1C.1Whichsegmentsofthebusinessareprovidingthehighestreturns?*RelevantBUsegments(basedoncustomer,product,geography,channel)OperatingcontributionestimatesforeachsegmentInstructions:Exhibit9couldprovideausefulframeworkfor

answeringthisquestion*Basedonlatestavailable,1-2yearhistoricalfinancialstatements16IIC.INTERNALASSESSMENT–BACK-UP2C.2WhathavebeenperformancetrendsalongmajorBUKPIs?KPIperformancetrendsoverthelast3-5years,e.g.returnoncapitalemployed(ROCE),operatingincome,margins,capitalemployedAssessmentofunderlyingtrenddriversExpectedevolutionInstructions:Exhibits10and11couldprovideausefulframeworkforansweringthisquestionROCE=Operatingincomex(1-taxrate)Allinterestbearingdebt(shortandlong)+minorityinterest+stockholders’’equity17IIC.INTERNALASSESSMENT––BACK-UP3C.3Whichintangibleassetscouldbenear-termpotentialsourcesofvalue?Identificationofin-houseintellectualproperty,talent,networks,brand/imageConversionintosouInstructions:Exhibit12couldprovideausefulframeworkforansweringthisquestion18III.STRATEGICDEFINITIONANDIMPLICATIONS19IIIA.STRATEGYARTICULATION––SUMMARYA.WhatstrategywillyourBUpursueoverthenext3years?A.1Wheretocompete?A.2Whatisyourcustomervaluepropositionforthedifferentsegmentsyouaregoingtoserve?A.3Whatisyourbusinessmodel?Instructions:Theanswertothisoverarchingquestionrequiresarecapitulationofthesection’’smainfindingsA.4Howdoesyourchosenstrategyexploitindustryopportunitiesandaddressindustry/competitivethreats?Instructions:Thesesubsectionscontaina1-2sentencesummaryoftherelevantfindings20IIIA.STRATEGYARTICULATION––BACK-UP1A.1Wheretocompete?Whereareyougoingtocompetealongthesedimensionsandwhy:TargetmarketDistributionchannelsProduct(breadthanddepth)GeographicscopeInstructions:Exhibit13couldprovideausefulframeworkforansweringthisquestion21IIIA.STRATEGYARTICULATION––BACK-UP2A.2Whatisyourcustomervaluepropositionforthedifferentsegmentsyouaregoingtoserve?TargetcustomerdefinitionBenefitsthatyouwillofferthecustomersProductpricingPositionagainstcompetitionvis-à-visthebenefitsprovidedandthepricechargedWhoisyourtargetcustomer?Whataretheexplicitbenefitsyouprovidetoyourcustomers?Whatperceivedvaluedoyouprovidetothecustomerbetterthancompetition?Howmuchvaluedoyourcustomersattachtothebenefitsyouprovide?22IIIA.STRATEGYARTICULATION––BACK-UP3A.3Whatisyourbusinessmodel?Deliveryandcommunicationofcustomervalueproposition(valuedeliverysystem)CompetitiveadvantageindeliveringthesebenefitstothecustomerHowwillthevaluepropositionbeprovidedandcommunicated?WhichofyourBU’’sexistingstrengthscanbeleveraged?Whatskills/capabilitiesdoyouneedtobuild?Instructions:Exhibit15couldprovideausefulframeworkfor

answeringthisquestion23IIIA.STRATEGYARTICULATION–BACK-UP4A.4 Howdoesyourchosenstrategyexploittheindustryopportunitiesandaddresstheindustry/competitivethreats?IndustryattractivenessandimplicationreviewAlignmentofstrategyandenvironmentalrealitiesInstructions:

AreviewofthesectiononIndustryDynamicsandImplications,togetherwiththeframeworksused(Exhibit2,3or4)isusefulforansweringthisquestion24IIIB.STRATEGICINITIATIVES–SUMMARYB.Whatwillbetheimpactofmajorstrategicinitiatives?B3. Howmuchvaluewillbecreatedfromeachstrategicinitiative?B4. Whatresourceswill

eachstrategicinitiativerequire?Instructions:Theanswertothis

overarchingquestionrequiresarecapitulationofthesection’’smain

findingsB1. Whatmajorstrategicinitiativesarerequiredtosuccessfullyimplementyourselectedbusinessmodel?B2. Whatarethesourcesofvaluecreatedfromeachstrategicinitiative?Instructions:Thesesubsections

containa1-2sentencesummaryoftherelevantfindings25IIIB.STRATEGICINITIATIVES–BACK-UP1B.1 Whatmajorstrategicinitiativesarerequiredtosuccessfullyimple-mentyourselectedbusinessmodel?Possiblestrategicinitiativeslist26IIIB.STRATEGICINITIATIVES–BACK-UP2B.2 Whatarethesourcesofvaluecreatedfromeachstrategicinitiative?Sourcesofvaluefromeachstrategicinitiative(e.g.,EBIT,capitalemployed)CategoryofinitiativesVolumeincreaseEBITimpactviaPriceincreaseCostreductionOtherInvest-mentCapitalemployedimpactviaDivest-mentCapital

efficiency*Other*E.g.improvedworkingcapitalemployment,increasedassetutilization,changestoassetownershipSpecificactionableinitiatives27IIIB.STRATEGICINITIATIVES–BACK-UP3Operatingincomeongoingimpact2001-2004PhPmillionsCapitalemployedongoingimpact2001-2004PhPbillionsPresentoperatingincomeVolumeincreasePriceincreaseCostreductionbenefitAdditionalcostsTotalongoingoperatingincomePresentcapitalemployedImprovedcapitalefficiencyDivestmentsInvestments(capexandacquisitions)TotalongoingcapitalemployedB.3 Howmuchvaluewillbecreatedfromeachstrategicinitiative?one-timeEBITimpact=one-timecosts=FinancialimpactfromeachstrategicinitiativeExpectedfinancialoutlayforeachinitiative+++–=+–=–28IIIB.STRATEGICINITIATIVES–BACK-UP4B.4 Whatresourceswilleachstrategicinitiativerequire?ResourcesrequiredtomakestrategyworkAvailabilityofresourcesintheorganizationPlanforfillingresourcegapsCategoriesofinitiativesSpecificactionableinitiativesPeople/skillsResourcerequirementsFundingEx-Cominvolvement29IIIC.FINANCIALPROJECTIONS–SUMMARYC.Whataretheexpectedfinancialreturnsofyourstrategy?C.3 Whatisyourexpectedcashgenerationabilityoverthemediumterm?C.4 Whatisyourexpectedcapitalproductivity?C.2 Whatisyourprojectednetincomeinthenextfewyears?C.1 Whatarethekeyassumptions?Instructions:Theanswertothis

overarchingquestionrequiresarecapitulationofthesection’’smain

findingsInstructions:Thesesubsections

containa1-2sentencesummaryoftherelevantfindings30IIIC.FINANCIALPROJECTIONS–BACK-UP1C.1 Whatarethekeyassumptions?Profitandloss(e.g.revenues,costs,margin)BalancesheetCorporatecenterdirectivesCorporatecenterassumptionsBASECASEBusinessunitassumptionsRevenues?Marketsize?Marketshare?PriceCosts?Inputcosts?Productioncosts?Othercosts(e.g.SG&A)Margins?Grossmargin?OperatingmarginCapital?Plannedinvestments/divestments?Changesinworkingcapital2002KEYFORECASTASSUMPTIONS20032004GrowthrateCorporatecenterassumptions200220032004Keyeconomicindicators?GDPgrowth?Consumerpriceindex?Exchangerate(PhP/USD)?91-dayT-billrateCorporatetaxrateInstructions:Thesearetheminimumrequiredassumptions.FeelfreetoaddotherassumptionsrelevanttoyourBU31IIIC.FINANCIALPROJECTIONS–BACK-UP2C.2 Whatisyourprojectednetincomeinthenextfewyears?IncomestatementforecastBASECASEHistoricalSalesCostofgoodssoldGrossprofitOperatingexpensesOperatingprofitOtherexpensesTaxesNetprofit1999FORECASTEDINCOMESTATEMENT2000InPhPmillionForecast2001**200220032004CAGR1999-2004GrowthanalysisSales(%)Grossprofit(%)Operatingprofit(%)Netprofit(%)MarginanalysisGrossmargin(%)Operatingmargin(%)Netmargin(%)***Keyassumptionsnotlistedearliershouldbedetailedatthebottomofthechart.TheimpactofplannedinitiativesontherevenuesandcostsshouldbeestablishedclearlywithadditionalattachmentsifrequiredBestestimatesonpossibleactualresultsInstructions:Thesearetheminimumrequiredincomestatementaccountsandanalyses.FeelfreetoaddotheraccountsandanalysesrelevanttoyourBU32IIIC.FINANCIALPROJECTIONS–BACK-UP3C.3 Whatisyourexpectedcashgenerationabilityoverthemediumterm?CashflowforecastInstructions:Thesearetheminimumrequiredcashflowstatementaccounts.FeelfreetoaddotheraccountsrelevanttoyourBUBASECASEOperatingprofitDepreciationandamortizationOthernon-cashoperatingexpensesNetoperatingcashflowIncrease/(decrease)inworkingcapitalOtheroperatingcashflowTotaloperatingcashflowFORECASTEDCASHFLOWSTATEMENTHistorical19992000Forecast2001**200220032004CAGR1999-2004CapitalexpenditureOtherinvestingcashflowitemsTotalinvestingcashflowIncrease/(decrease)indebtDividendsOtherfinancingcashflowTotalfinancingcashflowInPhPmillionKeyassumptionsnotlistedearliershouldbedetailedatthebottomofthechart.TheimpactofplannedinitiativesonthefixedandworkingcapitalinvestmentsshouldbeestablishedclearlywithadditionalattachmentsifrequiredBestestimatesonpossibleactualresults***33IIIC.FINANCIALPROJECTIONS–BACK-UP4C.4 Whatisyourexpectedcapitalproductivity?BalancesheetforecastROCEcomputationROCE=Operatingincomex(1-taxrate)Allinterestbearingdebt(shortandlong)+minorityinterest+stockholders’equityInstructions:Thesearetheminimumrequiredbalancesheetaccountsandanalyses.FeelfreetoaddotheraccountsandanalysesrelevanttoyourBUBASECASECashAccountsreceivablesInventoriesOthercurrentassetsTotalcurrentassetsNetfixedassetsOtherassetsTotalassetsFORECASTEDBALANCESHEETHistorical19992000Forecast2001*200220032004CAGR1999-2004AccountspayableOthercurrentliabilitiesTotalcurrentliabilitiesShort-termloansLong-termloansOtherliabilitiesTotalliabilitiesMinorityinterestTotalstockholders’equityInPhPmillionCapitalemployedROCETotalliab.&stockholders’equityRatioanalysisWorkingcapitalturnoverDebt-equityratioBestestimatesonpossibleactualresults*34IIID.RISKS/CONTINGENCIES&STRATEGICALTERNATIVES–SUMMARYD.Whatstrategicalternativeshaveyouconsidered?D.1 Whataretheassociatedriskstoyourchosenstrategy?D.2 Re-examiningindustryopportunitiesandindustry/competitivethreats,whatalternativesexisttoyourchosenstrategy?Instructions:Theanswertothis

overarchingquestionrequiresarecapitulationofthesection’’smain

findingsD.3 Beyondthe3-yeartimeframe,whatbreakthroughstrategicoptionsmaybepossible?Instructions:Thesesubsections

containa1-2sentencesummaryoftherelevantfindings35IIID.RISKS/CONTINGENCIES&STRATEGICALTERNATIVES––BACK-UP1D.1 Whataretheassociatedriskstoyourchosenstrategy?IdentificationofsignificantpotentialrisksandplanstomitigateSensitivity/scenariofinancialanalysisPotentialrisksBusinessriskRegulatoryriskTechnologyriskIntegrityriskMacroeconomicriskImpacLikelihoodContingencyOther36IIID.RISKS/CONTINGENCIES&STRATEGICALTERNATIVES––BACK-UP2D.2 Re-examiningindustryopportunitiesandindustry/competitivethreats,whatalternativesexisttoyourchosenstrategy?Wheretocompete?ValuepropositionBusinessmodelAlignmentwithexternalrealitiesWheretocompete?:Alternativevalueproposition:Alternativebusinessmodel:Alignmentwithexternalrealities:Instructions:

BasedonareviewofthesectiononEnvironmentalandInternalAssessment,StrategyArticulation,andtheframeworksused(Exhibit2-4,13-15),determineotherpotentialstrategicalternatives37IIID.RISKS/CONTINGENCIES&STRATEGICALTERNATIVES––BACK-UP3D.3 Beyondthe3-yeartimeframe,whatbreakthroughstrategicoptionsmaybepossible?“Out-of-the-box”ideasInstructions:Thinkradical!Thinkout-of-the-box!38IV.EXHIBITSInstructions:

Pleaseincludeallrelevantsupportingdocumentationinthissection39SEGMENTANALYSISExhibit1ILLUSTRATIVEIndustryboundariesSegmentsIndustrysegmentsRelativelydistinctsub-groupingswithintheindustryMarketisrelativelysimilarwithinthesegmentbutdifferentacrosssegmentsDifferentindustrydynamicsmayvaryinimportanceindifferentsegments40ProducersIndustrySTechnologybreakthroughsChangesingovernmentpolicy/regulationsDomesticInternationalEconomicsofdemandAvailabilityofsubstitutesDifferentiabilityofproductsRateofgrowthVolatility/cyclicalityEconomicsofsupplyConcentrationofproducersImportcompetitionDiversityofproducersFixed/variablecoststructureCapacityutilizationEntry/exitbarriersIndustrychaineconomicsBargainingpowerofinputsuppliersBargainingpowerofcustomersMarketingPricingVolumeAdvertising/promotionNewproducts/R&DDistributionCapacitychangeExpansion/contractionEntry/exitAcquisition/merger/divestitureVerticalintegrationForward/backwardintegrationVerticaljointventuresLong-termcontractsInternalefficiencyCostcontrolLogisticsProcessR&DOrganizationeffectivenessFinanceProfitabilityValuecreationTechnologicalprogressEmploymentobjectivesExternalshocksFeedbacktructureConductPerformanceSTRUCTURE-CONDUCT-PERFORMANCE(SCP)MODELExhibit241Exhibit31.DeterminantsofsupplierpowerDifferentiationofinputsSwitchingcostsofsuppliersandfirmsintheindustryPresenceofsubstituteinputsSupplierconcentrationImportanceofvolumetosupplierCostrelativetototalpurchasesintheindustryImpactofinputsoncostordifferentiationThreatofforwardintegrationrelativetothreatofbackwardintegrationbyfirmsintheindustry2.DeterminantsofbarrierstoentryEconomiesofscaleProprietaryproductdifferencesBrandidentitySwitchingcostsCapitalrequirementsAccesstodistributionAbsolutecostadvantagesProprietarylearningcurveAccesstonecessaryinputsProprietary,low-costproductdesignGovernmentpolicyExpectedretaliation5.RivalrydeterminantsIndustrygrowthFixed(orstorage)cost/valueaddedIntermittentovercapacityProductdifferencesBrandidentitySwitchingcostsConcentrationandbalanceInformationalcomplexityDiversityofcompetitorsCorporatestakesExitbarriers3.DeterminantsofbuyingpowerBargainingleverageBuyerconcentrationvs.firmconcentrationBuyervolumeBuyerswitchingcostsrelativetofirmswitchingcostsBuyerinformationAbilitytobackwardintegrateSubstituteproductsPull-through4.DeterminantsofsubstitutionthreatRelativepriceperformanceofsubstitutesSwitchingcostsBuyerpropensitytosubstitute2.Newentrants3.Buyers4.SubstitutesIntensityofrivalry1.SuppliersPricesensitivityPrice/totalpurchasesProductdifferencesBrandIdentityImpactonqualityperceptionBuyerprofitsDecisionmakers'incentives5.Industrycompetitors"FORCESATWORK"FRAMEWORK42Opportunities/ThreatsHowaredemandandsupplyexpectedtoevolve?Howdoyouexpecttheindustrychaineconomicstoevolve?Whatarethepotentialmajorindustrydiscontinuities?Whatcompetitoractionsdoyouexpect?YOURBUSWOTANALYSISExhibit4CONVERTOPPORTUNITIESBUILDONSTRENGTHSNEUTRALIZETHREATSADDRESSWEAK-NESSESStrengths/WeaknessesWhatareyourBU’’sassets/competenciesthatsolidifyyourcompetitiveposition?WhatareyourBU’’sassets/competenciesthatweakenyourcompetitiveposition?CanbeusedasathoughtstarterforcompetitiveanalysisandinternalassessmentSurfacespotentialopportunities/threatsarisingfromfactorsexternaltotheBU43PhysicalassetLocation/"space"Distribution/salesnetworkBrand/reputationPatentRelationshipwith"license"allocatorBHP’slow-costminesTelecomm/mediacompanywithrightsradiospectrumAvon’’srepresentativesCoca-ColaPharmaceuticalcompanywitha"wonderdrug””"Favorednation"statuswithakeyministerinliberalizingeconomyInnovationCross-functionalcoordinationMarketpositioningCost/efficiencymanagementTalentdevelopment3MwithnewproductsMcDonald’’swithQSC&VJ&JwithbrandedconsumerhealthproductsEmersonElectric’’sBestCostProducerprogramP&GbrandmanagementprogramPrivilegedassetsDistinctivecompetenciesNecessarycapabilitiesinordertosucceedintheindustryExampleCAPABILITYPLATFORM:ASSESSMENTOFSOURCESOFCOMPETITIVEADVANTAGE(1/2)Exhibit544CAPABILITYPLATFORM:ASSESSMENTOFSOURCESOFCOMPETITIVEADVANTAGE(2/2)ILLUSTRATIVEStep1:Ensurethatthesearethecapabilitiesrequiredtosucceedintheindustry.Usethislistasathoughtstarter,addanddeleteasyouseeappropriateBUOverallSegmentsABCStep2:Assessyouroverallpositionrelativetothecapabilitiesrequiredtosucceedintheindustry.Also,determineifthesecapabilitiesarerelevanttothesegmentsyouservePhysicalassetLocation/"space"Distribution/salesnetworkBrand/reputationPatentRelationshipwith"license"allocatorInnovationCross-functionalcoordinationMarketpositioningCost/efficiencymanagementTalentdevelopmentPrivilegedassetsDistinctivecompetenciesNecessarycapabilitiesinordertosucceedintheindustryExhibit6ExtremelyrelevantSomewhatrelevantIrrelevant45COMPETITORCAPABILITYCOMPARISONBUOverallCompetitorsABCStep3:Comparethestrengthsandweaknessesofyourcompetitivepositionvs.thenecessaryskillsPhysicalassetLocation/"space"Distribution/salesnetworkBrand/reputationPatentRelationshipwith"license"allocatorInnovationCross-functionalcoordinationMarketpositioningCost/efficiencymanagementTalentdevelopmentPrivilegedassetsDistinctivecompetenciesNecessarycapabilitiesinordertosucceedintheindustryExhibit7ILLUSTRATIVE46BENCHMARKPERFORMANCEAGAINSTRELEVANTINDUSTRYKPIsExhibit8ILLUSTRATIVEKPIs(examples)FinancialindicatorsMarginNetincomeROCEOperatingindicatorsAdvertisingeffectivenessUtilizationrateStrategicindicatorsMarketsharePercentofrevenuefromnewproductsWorkingcapitaltrendExternalindicatorsMarketpricesofrawmaterialsBUCompetitorACompetitorBCompetitorC47SEGMENTANALYSISRevenueGrossprofitOperatingprofitAssetsemployedPeopleemployedOperating

profitmarginGrossprofitmarginROCEStep1:IdentifytherelevantsegmentsStep2:Provideasegmentanalysisbasedonthefollowingminimumfinancialmetrics:revenue,grossprofitandmargin,operatingprofitandmarginStep3:Totheextentassetsandpeoplecanbedisaggregatedbysegment,deploymentofassetsagainstreturnscanbeanalyzed%PhP%oftotalSegment1PhP%oftotalSegment2PhP%oftotalSegment3PhP%oftotalSegment4PhP%oftotalTotalExhibit9%%%%Segment1Segment2Segment3Segment4Total48TRENDANALYSIS–RETURNONCAPITALEMPLOYED(ROCE)NOTEXHAUSTIVETheROCEtreecanbedisaggregatedtoshowtheotherrelevantKPIsofaBUROCEPercentOperatingincomex(1-taxrate)PhPmillionCapitalemployedPhPmillion÷RevenuePhPmillionOperatingmarginPercentx(1-taxrate)PercentxMarketsharePercentIndustrysalesPhPmillionxExhibit1049TRENDANALYSIS–CASHNOTEXHAUSTIVEThecashflowtreecanbedisaggregatedtoshowtheotherrelevantKPIsofaBUExhibit11CashflowgeneratedPhPmillionOperatingcashflowPhPmillionInvestingcashflowPhPmillion+NetincomePhPmillionNon-cashexpensesPhPmillion+ChangeinworkingcapitalPhPmillion+FinancingcashflowPhPmillion+50Exhibit12INTANGIBLEASSETCHECKLISTIntangibleassetsWaystoextractnear-termvalueTalentHighlymotivatedandcompetentworkforceleveragingspecificskillsetstoGenerategrowthImprove/increasecompanyintangiblesIntellectualpropertyPatentsgeneratinglicensingfeesUnderstandingofcustomerbehaviorRiskmanagementSoftwareILLUSTRATIVENetworkInterconnectedwebsofpartiesNon-exclusiveAdditionalmemberlowerscosts,increasesbenefitsBrand/imageInherentimageorbrandbuiltuponexcellentserviceandproductofferingsLowersearchcostsforcustomers51WHERETOCOMPETE?Exhibit13CustomersChannelsProductsGeographicmarketsTargetcustomersandsegmentsWhichcustomersareyoutryingtotargetorattract?Whichareyouwillingtoserve,butwillnotspendresourcestoattract?Whichwouldyouprefernottoserve?HowdoestheentityreachitstargetcustomersWhichdistributionchannelswillyouuse?Whatcustomersegmentscantheyreach?GeographicalscopeofbusinessactivitiesGeographiclimitstothebusiness?Local,regional,multi-local,national,international,orglobalplayer?Iflocal,whichlocalities?QualityandbreadthoftheproductlineBreadthoftheproductline?Qualityoftheproductline?Productbundlesoraseriesofunrelatedproducts?52VALUEPROPOSITIONAcompany’sspecificpromisetoitstargetcustom