Group 5 - BA 190 THX - 1 April 4, 2017

Diaz, Gancayco, Garcia, Geronimo, Miranda, Toribio, Viernes Case # 8

KSK Food Products

EXECUTIVE SUMMARY

KSK Food Products is a Philippine FMCG company and sole proprietorship managed by
Michael Kho. It started in the 1980s by repacking fried corn snacks from manufacturers in
Bulacan. After almost 20 years, these products were rebranded as Boy Bawang; one of the
country’s best known snacks today. Currently, KSK has been exporting to 45 countries. It has
also introduced new affordable product lines such as Banana Chips, Choco Crunch, and Butter
Coconut, after it acquired Foodfab, a biscuit manufacturer. In addition, KSK recently put up a
plant in Cagayan de Oro to satisfy the demand in the Mindanao region.

While all these have allowed KSK to gain a foothold in the competitive snack food
industry, it still faces several challenges. After the massive restructuring of its distribution
system in 2007 to organize their sales efforts, clients who used to enjoy direct service from KSK
were no longer offered the same discounts. This disappointment caused a major boycott of
KSK’s products that lead to the rise of their competitor’s market share. Although sales were able
to recover after 3 years, they have already lost several key strategic regions to their
competitors. Another challenge they face is the lack of formal decision making processes for
their internal operations. Michael Kho leads based on his own instincts and knowledge as a
businessman and rarely gets his department heads on board in strategic planning. Meanwhile,
KSK’s operations side, handled by Paul Kho, experiences frequent and various tweaks to the
machinery and plant setup made based on the younger Kho’s whims, causing a lot of
unnecessary expenses. Last, as KSK seeks to expand globally, it also faces fierce competition
locally as URC (runaway winner in terms of value share with 34% in 2015) enters joint venture
with foreign snack companies Danone and Calbee.

Given these challenges, the group has proposed both short term and long term solutions
to address the lack of structure and formal decision making processes within the company’s
internal operations, regain sales being lost to competitors, and establish a stronger brand
identity as the top brand for delicious and affordable Filipino snack foods.

I. Problem Statement

Although KSK, with Boy Bawang as its flagship product, is a continuously growing
company, they lack a clear direction and position for the company. This is a result of their
reliance on trial and error and no brainstorming from the top management. On top of this, the
distribution program they implemented had not been thoroughly thought through, and had
adverse effects on their client relationships. With the decline in sales in North Luzon, KSK’s
biggest area of responsibility, and with their Marketing head sitting idly, even the two newly
appointed Eport Managers doubt whether Boy Bawang will be able to make it as the top corn
snack in the world. The question now is, with these impending challenges and hurdles, how can
KSK strategically improve its local operations, at the same time refine itself to effectively
compete in global markets?

II. Analysis

STRENGTHS WEAKNESSES

- Strong brand recognition for Boy
Bawang
- Multiple plant locations in major areas
of the Philippines
- Foothold in 45 countries
- Frequent plant restructuring that are
only done at the vice president’s
whims
- Poor distribution planning lead to lost
sales

OPPORTUNITIES THREATS

- Positive trends in FMCG Market as - URC’s attempt to bring in more

indicated by increased consumption of
Filipino Households
- Expanded global reach as indicated
by the success of its initial expansion
- Existence of potential and former
customer bases in Northern Luzon
products from abroad to Philippine
shelves
- Potential policies on banning savory
snacks in school canteens by the local
government
- Dissatisfied clients due to the
attempted Distributorship Program

Planning and Decision Making Framework

MISSION

To be a globally renowned brand that delivers Filipino snacks of the highest quality

GOALS

1. Raise North Luzon sales to at least its former level

2. Optimize local and global distribution networks for an expanded reach and increased
market share
3. Improve plant efficiency to produce products of high quality
4. Identify strategic markets abroad to enter, and other possible product line acquisitions

ORGANIZATIONAL STRATEGIES

High Quality Assurance: consistency of output, up-to-date production processes

Finance Marketing Operations

 FUNCTIONAL Invest in Increase purchase Defect rate must be
GOALS improvements to frequency and win aligned to the Six
capital assets back lapsed users Sigma standard

Invest in profitable Increase presence

acquisitions across local and
global distribution
channels

TACTICS Use the cost-benefit Launch nationwide Fine-tune machines

analysis to evaluate ads in major media to KSK’s specific
plant improvements outlets. needs and evaluate
and product line processes with the
acquisitions before Focus on industry’s best
investing in them. strengthening practices.
distribution in key
strategic regions

III. Recommendations

Short-Term Recommendations

Make Smart Investment Decisions

Plant restructurings need to be properly evaluated if the benefits outweigh the costs.
Paul Kho may remain as the main decision maker for operations but he must realize that
frequent tweaks in the machinery and plant layout for instance may subject KSK to significant
amounts of unnecessary costs. The company needs to be wiser in how it spends its resources
and it should not change its operations based solely on whims because it can disrupt processes
that may already be effective. Experts must weigh in on what improvements are necessary by
quantifying its benefits in terms of units produced, product consistency and quality, and the
overall cost of the proposal. Mr. Kho can then use these information to make smarter and more
strategic decisions. Moreover, KSK can continue its streak of acquiring or creating new product
lines through through thorough analysis of their potential.

Shared Management

It may be a wise decision for Michael Kho to get more out of his department managers
because these people have more experience in the day-to-day dealings of their respective
areas. He can start by organizing meetings with the relevant heads of each department every
month for planning and strategizing the future action steps of KSK. This move not only expands
the perspective of Mr. Kho to make better decisions but it also serves as an effective motivator
for his employees because they will have a direct say in what the company aims for. This covers
KSK’s problem of not having a defined strategy that can help it reach its goal of being a global
brand.
Win Back the Market

Considering the plunge in sales and market share due to the restructuring of KSK’s
distribution, the company can win back their former clients if it chooses to be proactive in
marketing their brands. KSK must attempt to increase their consumer’s purchase frequency and
reclaim its lapsed users by beginning a major marketing campaign. Boy Bawang ads may place
the brand back on the minds of the consumers, bumping up their demand for it. Retailers then
will feel the need to stock their shelves with KSK’s products.

Separate Managers for Regional and Export Sales

Both the regional and export arms of KSK require a manager’s undivided attention
especially when the goal is to solidify their products’ foothold in foreign markets. The regional
sales manager’s main responsibility is to recover the opportunities that were lost in the
aftermath of the restructuring by aggressively securing new accounts and proactively
maintaining good relations with existing clients. On the other hand, the export sales manager’s
objectives are to ensure sustained demand in the 45 countries they are already in and to
explore new territories to enter.

Long-Term Recommendations

Become a Hero Brand for Philippine Snacks

KSK has met success in taking well-loved Filipino snacks and developing them into
affordable and delicious snack foods. Moving forward, this is the identity that we envision for
KSK - to be the foremost brand for Filipino snack foods. In line with this, the company should
continue to explore different variants of local delicacies that will be marketable here and abroad.
It may choose to produce its own product formulations of familiar Filipino snack foods, or
continue to acquire profitable existing brands.

Start Exporting Banana Chips

Given the popularity of their Banana Chips, as well as their related biscuit brands, KSK
can start exporting these products to the countries where Boy Bawang has already been well-
received. They can start by launching Banana Chips in the markets with the most similar tastes
to Filipinos, and export to more countries as they gain footholds in those markets. This will
increase their presence abroad, as well as reinforce their new image as the go-to brand for
delicious Filipino snacks.
Attain Six Sigma and ISO Certification

In order to consistently meet high product quality standards and increase production
efficiency, KSK should start investing in equipment and process improvements. They can
employ the Six Sigma standards to minimize occurrences of errors as well as pursue ISO
certification to ensure that they deliver goods of the highest quality.

IV. Insights

1. Good planning can lead to good execution

It is essential to plan well before pursuing any action. KSK’s lack of thought and their trial
and error approach in implementing changes proves that intuition is not a wise basis for
decisions. To plan well, there must be a meeting of the minds of the top management
and the organization’s essential leaders. Planning saves up costs and cushions the risk
of having a failed strategy. As a quote from Benjamin Franklin says, “If you fail to plan,
you are planning to fail!”

2. A good organizational structure can lead to good decisions.

The success of a company is highly dependent on how decisions are made, and that is
dictated by the company’s organizational structure. In KSK, decision-making is highly
centralized, and instructions basically come from only one person. This is likely their
downfall. Because of the lack of input and insight from the company’s other leaders,
there is an absence of a strong strategy formed. It is important to realize that no matter
how brilliant someone can be, no one person has the monopoly of knowledge. It is also
important to put not just the right people, but the best people on the job-- people who
deliver, people are competent to immediately take action when need be, and not people
who sit and watch as the company fails (ie. KSK’s Marketing Head). You need the best
people in a good working system and structure.

3. Good customer relationships leads to good performance.

When implementing new strategies, it is important to thoroughly consider how they will
affect your customers. KSK’s lack of foresight in making a new distribution scheme led
their clients to prefer their competitors, which incurred them huge losses. Customer
relationships are crucial, just like any; treat them well and they will love you. Wounded
relationships are hard to mend, and those who leave are less likely to come back. This
also affects the company’s reputation, and relationships with potential clients.