A strategic management plan for Commercial Centers Group

Date of Publication

2001

Document Type

Oral Comprehensive Exam

Degree Name

Master of Business Administration

College

Ramon V. Del Rosario College of Business

Department/Unit

Decision Sciences and Innovation

Abstract/Summary

Ayala Land Inc. (ALI) is reputed to be the leading real estate developer in the country today. It has its roots to Ayala Corporation, the oldest business house in the Philippines. Today, ALI has grown to be a full line real estate developer with a diverse mix of products including residential and office buildings, middle-income housing, hotels and resorts, infrastructure, and shopping center development. This term paper will focus on the strategic planning for the company's strategic business units- the Commercial Center Group (CCG).

Commercial space leasing is one of the many sectors of the real estate industry. Malls belong to one industry as together they satisfy one common set of needs- shopping, dinning, entertainment and business.

Despite the economic crisis that hit the country since middle of 1997, mall developers still reported strong sales growth. Commercial space leasing is greatly influenced by retailing as most tenants are into this business. Economic indicators such as Gross Domestic Products (GDP), Personal Consumption Expenditure (PCE), inflation and exchange rates which are prerequisites to retailing also affects commercial space leasing.

In view of the expected slowdown in the retail sales, retailers are not expected to expand as quickly as the mall developers. New malls are expected to experience a slower take-up of space and vacancies are expected to increase over 30% in 2000 as a result of the oversupply.

The industry is characterized by a low threat of entry due to capital intensity entry barriers. However, despite of this entry barrier, the intensity of rivalry among players is considered high due to the expansion of the existing developers and the entry of new ones. Because of the oversupply, the bargaining power of buyers (tenants and shoppers) are high. The expected increase in vacancy rates would eventually lead to reduce rental rates, thus giving the merchants a higher leverage. Similarly, because of the rising land costs, suppliers' bargaining power is also high. Presently, minimal pressure is felt from on-line shopping, a substitute product because of the delivery of the malling experience.

On the corporate level, ALI's major strengths lie on its experience in planning, developing and managing large-scale integrated developments, its business reputation and established track record, its strategic location in the Makati commercial business district, its captured market and its skilled management team. However, it has a narrow market segment (with focus on the AB), it does not have its own anchor stores that are large crowd drawers. It has inefficient operations support and it does not have a large kand bank for its future expansion projects.

Ayala's vision is to establish and maintain preeminence among real estate companies in Asia by enriching land and enhancing life. CCG's missio is to build and operate lifestyle centers- a setting for quality commerce, rest and recreation. For the next five years, CCG shall aim to : (1) Achieve a 15% annual incremental rental revenues (2) Achieve an annual average return on fixed assets ((ROA) of 29%-31% versus the historical ROA average of 28% (3) maintain leadership of 16% in operational market share within the primary trade area.

To realize these objectives, CCG shall adopt a differentiation strategy as its generic strategy. Proposed specific strategies would be: (1) Forward integration into anchor operations that would set the tone and style for Ayala centers by capitalizing their brand equity to counter intensity of rivalry due to new entrants (2) Expand the tenant mix to cater to broader market by utilizing the competent marketing management team to counter intensity of rivalry due to shift in consumer demand and (3) Exoand land bank in key growth areas tagged as ecozones by utilizing its strong balance sheet to counter intensity of rivalry due to economic ecozones.

To ensure an effective implementation of the proposed strategies, the McKinsey 7S Framework was used to determine and analyze the company's capability to carry out activities with its existing set-up and resources. CCG's capability was assessed in terms of its strategy, structure, system, style, staff, skills and shared values.

Abstract Format

html

Language

English

Format

Print

Accession Number

OCE1054

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

103 leaves ; ill. ; 28 cm.

Keywords

Real estate business--Philippines; Commercial Centers Group

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