1. ANALYSIS OF INTERNAL ENVIRONMENT

1.1. History, Products/Services, and Profile of the Company

One Renewable Energy Enterprise, Inc. (OREE) is a system integrator of renewable

energy systems that was founded in 2008 as a sole proprietorship and is currently

composed of the former staff of Shell Solar Philippines. After Shell scaled down its

renewable energy segment and diverted its investments in Canada, many members of

the Shell Solar Philippines team moved to other segments of the Shell Group while a

number of employees opted to continue the solar energy business with the permission

of the company in order to maximize the company’s investment. One Renewable

Energy was formed with the help of Shell’s current network and started with small solar

panel systems targeted to consumers in provinces and barangays without electricity,

mostly located in Visayas and Mindanao. The company has gone a long way since its

inception; in 2011, One Renewable Energy was incorporated and has continued to grow

and develop new products of varying sizes and capabilities fit for the needs of its

consumers.

Besides serving communities that do not have access to electricity, the company also

wants to change the public’s perception that solar energy does not work. Mr. Erel

Narida, president and CEO of One Renewable Energy, states that this has become the

common perception because sellers of solar energy devices do not always provide the

necessary after-sales service and maintenance, causing these devices to become

inoperative after one year. Thus, One Renewable Energy’s business model does not

only focus on making sales but also provides after-sales support to all its clients. The

management team finds people in the areas they are serving and trains these people

themselves.

The company’s management team has been working together for 11 years and has

been able not only to preserve the original Shell solar energy segment’s skill set but

also maintain its networks and introduce solar energy products to a wider audience,

especially to consumers in rural areas without access to electricity. One Renewable

Energy was able to do this through rural business development, a system where the

company establishes a partnership with different organizations and directly goes to the

barangays they are targeting to orient people about its products. These same people in

the barangays are the ones spreading the use of solar energy in their respective

communities. With this, they are giving chance and opportunities to the people they

serve to become their business partners.

Although the company mainly targets rural areas and households, it also serves

industrial and residential clients in the urban setting. Some of the company’s most

notable projects in the urban setting include the Ayala Land Nuvali and the Zuellig

Building in Makati City.

One Renewable Energy currently offers solar desk lamps (micro SHS systems), solar

home systems, solar street lights, solar pumps (DC/AC), and on-grid solar PV systems

for households located in rural areas and high-capacity systems for residential and

industrial use in urban areas. Moreover, the company also trains technical staff in the

provinces it serves to ensure that excellent after-sales maintenance service is provided

to its customers as quickly as possible.

1.2. Mission Statement

A mission statement describes a company’s present business and purpose in a

language specific enough to give the company its own identity. One Renewable

Energy’s mission statement is:

“One Renewable Energy’s mission is to provide efficient and responsive services via

state-of-the-art research and development by proactively adapting to the continuous

changes in technology and manpower requirement in order to ensure customer

satisfaction across all market segments and be continuously financially viable for the

benefit of all stakeholders.”

One Renewable Energy’s mission statement is divided into four main statements, which

are as follows:

● To provide efficient and responsive technical services via state-of-the-art

research and development

The company is very faithful to its commitment to provide excellent after-sales

service to all its clients. Continued research and development also enables the

company to be more efficient in delivering technical services. Lastly, the

company wants to use these technological advancements to develop better

products to offer to the market.

● To proactively adapt to the continuous changes in technology and manpower

requirements

Technological changes drive the company to look for better products that have

higher capabilities and will cater to the needs of the communities it serves. When

the company gets to serve the basic needs of these clients and communities and

make them utilize these products well, they aspire for something bigger and

better, and the company ensures that they will be able to provide products that

will be able to fulfill these new aspirations and, in turn, make the industry

progress.

● To ensure customer satisfaction across all market segments (i.e. rural retail and

commercial/industrial clients)

The company’s products cater to both rural and commercial/industrial urban

clients and are designed to fit their specific needs. Thus, this statement’s generic

idea is that when the company sells a product to someone, the client should be

satisfied, no matter which market segment the customer belongs to. The

company’s management does not distinguish between the rural and the urban

consumer because they believe that these consumers deserve the same

treatment and level of commitment from the company.

● To continuously be financially viable for the benefit of all stakeholders

The company is responsive to all the needs of its clients, whom it also considers

its stakeholders. However, the company cannot become responsive without

financial well-being. Thus, the company treats profit as a means to continue the

business and sees it as an obligation to its customers, employees, and other

stakeholders who depend on them. Without financial well-being, the company is

doing a disservice to all its stakeholders.

1.3. Vision Statement

The company’s vision statement describes the course and direction management has

charted and the company’s future product-consumer-market-technology focus. One

Renewable Energy Enterprise, Inc. operates under this vision:

“Our vision is to become the Philippine’s most trusted and leading systems integrator in

the renewable energy sector that will supply sustainable solar energy products that are

accessible and affordable to everyone and in the process thereof, empower the lives of

people especially all those in the remote rural communities.”

It has been noted by the company management that people still need to be educated on

the capabilities of solar energy and that many programs did not become successful

because of lack of maintenance. Thus, the impression is that if the system does not

work, solar energy does not work. The company’s main goal is to become the most

trusted in the solar energy business; meaning, they will become the leader in the solar

energy business and change the public’s perception on solar energy because the

technology is still not recognized as an efficient energy source despite going through

significant developments since the 1980s.

Systems integrator has been defined by the company management as a provider of

customized or differentiated solar energy products that are made to fit the customers’

individual needs while addressing the price sensitivity of the market.

While the company operates for profit, it also aims to create positive social impact.

Social responsibility is incorporated in the way the company engages in its business.

Thus, the company seeks to become socially responsible and help enrich other people’s

lives through its business operations.

1.3.1. Effective Elements

An effective and well-conceived vision statement must be able to relay to the

stakeholders what the management wants its business to look like. Also, a vision

statement should serve as a framework or reference point of the management in

crafting and executing strategic management decisions. The following are the

effective elements present in One Renewable’s Vision Statement:

● Graphic

Graphic vision statement paints a picture of the kind of company that

management is trying to create and the market position(s) the company is

striving to stake out.

The vision statement of the company is not graphic.

● Directional

Directional vision statement is forward looking. It describes the strategic

course that management has charted and the kinds of product-market-

customer-technology changes that will help the company prepare for the

future.

The vision statement of the company is directional. The management

envisions that the company becomes the most trusted and leading

systems integrator in the renewable energy sector.

● Focused

Focused vision statement is specific enough to provide managers with

guidance in making decisions and allocating resources.

The vision statement of One Renewable is focused enough to provide the

management a framework for the strategy they want to implement, moves

and projects they want to pursue and decisions they want to make.

Flexible

Flexible vision statement is not so focused that it makes it difficult for

management to adjust to changing circumstances is the markets,

customer preferences, or technology.

The company’s vision statement is not flexible.

● Feasible

Feasible vision statement is within the realm of what the company can

reasonably expect to achieve.

The vision statement provides a time frame of when they want to realize

the vision, and the company can reasonably expect to achieve the vision

given its capabilities.

● Desirable

Desirable vision statement indicates why the directional path makes good

business sense.

The vision statement of the company embodies the effective characteristic

of being desirable. It indicates why the directional path makes good

business sense. It incorporates the goals of the company.

● Easy to communicate

Easy to communicate vision statement is explainable in 5 to 10 minutes

and ideally, can be reduced to a simple, memorable “slogan”

The vision statement of the company is brief and specific enough that it

can be explained in a short span of time.

1.3.2. Shortcomings

While the company crafted a relatively effective vision statement, there are some

shortcomings that need to be addressed. The following are the shortcomings in

One Renewable’s vision statement:

● Vague

Vague vision statement is short on specifics about where the company is

headed or what the company is doing to prepare for the future.

The vision statement of company is vague for it is short on specifics about

where the company is heading. Also it falls short in stating what the

company is doing to prepare for the future.

Not forward looking

Vision statement that is not forward looking doesn’t indicate whether or

how the management intends to alter the company’s current product-

market-customer-technology focus

This shortcoming does not apply to the company’s vision statement

Too broad

A vision statement that is too broad is so all-inclusive that the company

could head in most any direction, pursue most any opportunity, or enter

most any business.

Having the characteristic of being focused, this particular shortcoming

does not apply to the company’s vision statement.

Bland or uninspiring

Bland or uninspiring vision statement lacks the power to motivate

company personnel or inspire shareholder confidence about the

company’s direction.

This shortcoming does not apply to the company’s vision statement.

Not distinctive

A vision statement that is not distinctive provides no unique company

identity. It could apply to companies in any of several industries including

rivals operating in the same market arena.

Being not distinctive does not apply to One Renewable’s vision statement.

● Too reliant on superlatives

Vision statement that is too reliant on superlatives doesn’t say anything

specific about the company’s strategic course beyond the pursuit of such

distinctions as being a recognized leader, a global or world-wide leader, of

the first choice of customers.

The vision statement of One Renewable, although states clearly its pursuit

of being the most trusted and leading company in the industry, fails to say

anything about the company’s strategic course.

1.4. Values, Philosophy, and Ideology

Company’s values are the beliefs, traits, and behavioral norms that company personnel

are expected to display in conducting the company’s business and pursuing its strategic

vision and mission. One Renewable’s core value revolves around delivering social good

to the community. The company’s very existence is dedicated to creating an impact to

the community and at the same, seizing the opportunities tied in doing so. From this

core value roots the following values that the company practices and inculcates not only

in the management but also in the employees:

● Social awareness

Everyone in the team should be able to identify with other people and understand

their plights, and should work from there to provide what they need in order to

address their problems. Employees need to have the desire to help others, and

social awareness is where their commitment to serve and help people begins.

● Passion

Employees and managers alike should be passionate in their work all the time.

When things become too difficult to handle, passion is what keeps everyone on

the team motivated to provide the best products and services, and help other

people in the process. Passion is what makes everyone achieve a sense of

fulfilment when goals are accomplished, no matter how difficult the process has

been.

● Fair treatment and respect for people

Company employees do not distinguish between clients, no matter which market

segment they belong to. All clients are important. Everyone is treated equally and

is given the same level of commitment and care.

● Innovation

Being able to adapt to fast-paced changes in the environment is an important

part of the organization, and everyone in the company is expected to be

innovative and creative enough to be able to incorporate these changes to

provide the best products and services suited to the needs of the clients.

Business philosophy is the theory that is used to determine how a business handles

different areas of operation - accounting, management, training, public relations,

marketing and business operations. One Renewable believes that if you are faithful to

your obligations, the business will grow and evolve on its own. While it is very important

that you handle the business in a way that it will generate and maximize profit, it is of

equal importance that companies do not stray from their original purpose and in the

case of One Renewable that is to do more good in the community. The management of

the company believes that the business will not grow if it is handled and run in a rigid,

corporate manner (i.e if the purpose is just to grow the business and earn profit). A

business has to start somewhere and from there, it will eventually grow larger. But

amidst it all, you always have to look back to where you started.

Business ideology is the system of ideas that explains and lends legitimacy to actions

and beliefs of the corporate entity. As mentioned earlier, the company, while believing

the profit maximization is important for they see it as their obligation to their

stakeholders, fulfilling their social obligation is of equal importance. More than just being

an entity devoted to the primary essence of a profit organization, the company exists

also because they believe that the products and services that they offer can really

change the lives of the people especially those people in rural areas. The company

believes that a single light could really spark hope to these people which will leave them

aspiring more for their lives, families and communities.

1.5. Goals (long-term)

Goals are the long-term intentions for operating the business. Below are the strategic,

financial and social goals that One Renewable aims to achieve:

1.5.1. Strategic (Corporate)

The company management’s basic goal for the business is to sustain it for the

coming years; however, they do have goals for the company that they hope to

achieve in the long-term.

One of the long-term goals of company management is to expand the business

to other regions that it currently has no presence in. This includes the eastern

Visayas region, where they plan to train personnel and set up additional

distribution centers. While growing and retaining the rural market, the company

management would also want the business to increase its presence in the urban

regions and make its operations more sustainable, because the future potential

profitability of the business lies in the urban areas.

The management team also aims to extend its product selection according to the

changing needs and wants of its consumers. The company president has pointed

out that once the basic needs of the company’s clients have been served, they

move up to higher aspirations and expect better products to come soon for them.

Thus, future products that the company would like to able to provide these

consumers would include a solar-powered freezer and refrigerator, a telecom

system package, and computer system package, among others.

1.5.2. Financial

The management team’s long-term goals for the company in terms of financial

position are to increase its net income to the P6 million mark by 2016 and

generate additional sales by 7% of total households presently being served. But

most importantly, the company aims to attract more social impact investors that

will put in more funds to support its operations.

1.5.3. Social

The company’s social goal is basically to increase the number of households

they serve in the rural area. Currently, they are serving about 8,000 households

and by 2016, their goal is to increase this number to about 26,000. This goal

goes hand-in-hand to their core value of creating and delivering social good to

the community. Having this goal and fulfilling it, they know that they can change

so many people’s lives for the better.

1.6 Objectives (short-term)

Objectives are basically the company’s performance targets or the results that the

management wants to achieve in the short term. Same as goals, objectives have three

distinct types namely strategic (corporate), financial and social objectives.

1.6.1 Strategic (Corporate)

Strategic objectives relate to target outcomes that indicate a company

strengthening its market standing, competitive vitality and future business

projects. The following are the strategic objectives of the company:

● Expand business to Legazpi area in 2 years

● Conduct 14 new community engagements in ARMM

● Complete 10 new urban-based projects in 2013

● Introduce 3 new products to existing distribution locations in 2014

● Employ civil engineers that will form part of their technical team

1.6.2. Financial

Financial objectives relate to the financial performance targets management has

established for the organization to achieve. The following are the financial

objectives of the company:

● Increase service revenues by 300% in 2013

● Increase turn-key sales revenues by 14%

● Increase net income by 300% by 2014

● Sell a total of 12,268 units in 2014

1.6.3 Social

Social objectives are aspirations of positive intentions which aim to promote

prosperity and develop a strong relationship with the community in order to co-

exist harmoniously. The social objectives of the company are:

● Serve 956 additional beneficiaries in 2013

● Acquire 5 new retail business partners (non-government organizations

and microfinance institutions) in North Luzon

● Increase the number of scholars being supported in the Solar Lighting for

Learning project

1.7 Financial Analysis

Financial analysis is the selection, evaluation and interpretation of financial data, along

with other pertinent information, to assist in investment and financial decision-making.

1.7.1 Financial Ratios

Profitability Ratios provide information on the amount of income from each peso

of sale. Table 1.1 shows that the commonly used profitability ratios and their

individual analysis/interpretations (insert table)

Table 1.1 Profitability ratios

Ratios 2012 2011 2010 Interpretation

Gross profit margin 0.1541 0.2106 0.3727

Gross profit margin shows the percentage of revenuee available to cover operating expenses and yield a profit. Gross profit margin in 2012 has decreased because the increase in cost of goods sold is higher than the increase in sales revenue

Operating profit

margin 0.8705 -0.0296 0.3686

Operating profit margin or return on sales shows the profitability of current operations without regard to interest charges and income taxes. Operating profit margin in 2012 has significantly increased thereby implying that the operating in 2012 has been profitable as compared to the 2011 operations.

Net profit margin 0.0246 -0.5733 -0.2781

Net profit margin shows the after-tax per peso of sale. Net profit margin has also increased in 2012. This means that the sales are large enough to cover all expenses and still earn profit.

Total return on

assets n/a n/a n/a

No data available for the interest

Net return on total

assets 0.0982 -0.2821 -0.8505

Net return on total assets (ROA) measures the return earned by stockholders on the firm's total assets. In 2012, company ROA has increased significantly which means that as compared to 2011, the company assets were able to provide a higher and positive return to their stockholders.

Return on

stockholder's equity 0.2907 -0.5097 -903.5399

Return on stockholder's equity (ROE) shows the return stockholders are earning on their capital investment in the enterprise. Company ROE has increased in 2012 which means that during the year, the company was able to give value on their stockholders' by giving them a positive although below average return on their investments.

Return on invested

capital 0.1336 -0.3347 -903.5399

Return on invested capital (ROIC) or return on capital is a measure of the return shareholders are earning on the long-term monetary capital invested in

the enterprise. The ROIC of the company has also increased significantly from that of 2011 which means that the shareholders are earning.

Earnings per share n/a n/a n/a

No data available for the number of outstanding common shares.

Based on the table, it is notable that aside from the slight decrease in the

company’s gross profit margin, all other profitability ratios have shown that the

company has been profitable during 2012 thus they were able to provide more

value to their customers

Liquidity Ratios provide information on the company’s ability to meet its short-

term, immediate obligations. Table 1.2 shows two common liquidity ratios that

are used to evaluate company’s liquidity.

Table 1.2 Liquidity ratios

Ratios 2012 2011 2010 Interpretation

Current ratio 3.4574 6.3649 0.8464

Current ratio shows a firm ability to pay current liabilities using assets that can be converted to cash in the near term. While the current ratio in 2012 has decreased from that of 2011, the positive ratio still implies that company current assets can meet the

company current obligations.

Working capital 8001557 5042775 -389601.12

The working capital in 2012 has increased which means that the company has more internal funds to pay its current liabilities and finance inventory expansion, additional accounts receivable, and a larger base of operations without resorting to borrowing or raising more equity capital.

The liquidity ratios show that the company is liquid enough to meet its short-term

or current obligations when they are due. Also they show that company is

capable of financing its activities without having to resort to external financing.

Leverage Ratios provide information on the degree of the company’s fixed

financing obligations and its ability to satisfy these financing obligations. Table

1.3 presents the commonly used leverage ratios as well as the interpretation of

such.

Table 1.3 Leverage ratios

Ratios 2012 2011 2010 Interpretation

Total debt-to-assets ratio

0.6620 0.4464 0.9991

Total debt-to-assets ratio measures the extent to which borrowed funds have been used to finance the company operations. The total debt-to-asset ratio has increased in

2012. This indicates that the company has incurred more debt compared to the previous year.

Long-term debt-to-capital ratio

0.5403 0.3432 0.0000

Long-term debt-to-capital ratio is an important measure of the creditworthiness and balance sheet strength. It indicates the percentage of capital investment in the enterprise that has been financed by both long-term lenders and stockholders. 2012's long-term debt has increased and resulted to a ratio of around 55%. This number indicates that the company has been relying excessively on its long-term borrowing. It also indicates lower creditworthiness and a weak balance sheet strength.

Debt-to-equity 1.9584 0.8063 1061.3367

Debt-to-equity ratio shows the balance between debt and the amount that stockholders have invested in the enterprise. The 2012 debt-to-equity ratio has increased as compared to 2011 The increase posed a lower ability for the firm to

borrow additional funds. Also, the high debt-to-equity ratio means that the company creditors are at a greater risk as compared to the previous year. Like long-term debt-to-capital ratio, this signals a weak balance sheet strength and lower credit ratings.

Long-term debt-to-equity ratio

1.1753 0.5225 n/a

Long-term debt-to-equity ratio shows the balance betweem long-term debt and stockholder's equity in the firm's long-term capital structure. The long-term debt-to-equity ratio during 2012 has increased significantly from that of 2011. This high ratio indicates company's low ability to borrow additional funds if needed.

Times-interest-earned ratio

n/a n/a n/a No data available for interest

The leverage ratios show that the company has been relying too much on

external financing through incurrence and accumulation of both short-term and

long-term debt. These ratios indicate that the company has been overusing its

debt and as a result, the creditworthiness of the company is lowered, the balance

sheet strength becomes weak and the company creditors might be put on a

greater risk. In the long-run the company might find itself in the risk of

bankruptcy.

Activity Ratios relate information on the company’s ability to manage its

resources efficiently. The following activity ratios presented in table 1.4 are used

to find out if One Renewable is able to manage its assets efficiently.

Table 1.4 Activity ratios

Ratios 2012 2011 2010 Interpretation

Days of inventory 16.3832 720.515528

2 n/a

Days of inventory ratio measures the inventory management efficiency of the company. As compared to 2011, 2012 resulted to fewer days of inventory which suggests that the company has been managing its inventory efficiently.

Inventory turnover 22.2789 0.50658172

6 n/a

Inventory turnover ratio measures the number of inventory turns per year. The inventory turnover ratio of the company during 2012 has increased compared to 2011 which reflects strong sales and better turnover rate during the year.

Average collection period

42.6549 n/a n/a

Average collection period indicates the average length of time the firm must wait after making a

sale to receive cash payment. The ratio during 2012 shows that it takes approximately 43 days before the company receives cash on its on-account sales.

Activity ratios during 2012 suggest that the company has experienced improved

sales. Also it reflects that the ability of the company to convert different accounts

(i.e inventories and accounts receivable) to cash or sales is higher as compared

to that of the previous year.

1.7.2 Horizontal Analysis

Horizontal analysis looks at the amounts on the financial statements over the

past years. This allows the users of the financial statements to see and evaluate

the trend situations of each item in the financial statements. Table 2.1 shows the

partial horizontal analysis of the company’s income statement while Table 2.2

shows the partial horizontal analysis of the company’s balance sheet.

Table 2.1 Partial horizontal analysis of income statement

2010 as base year

2011 2012

Increase

(Decrease) Increase

(Decrease)

2012 2011 2010 Amount Percentage Amount

Percentage

Revenues 49175969.0

0 2944442.0

0 7766281.4

0

-4821839.

40 -0.62 41409687.

60 5.33

Cost of sales

41598220.00

2324354.00

4871864.00

-2547510.

00 -0.52 36726356.

00 7.54

Gross profit 7577749.00 620088.00

2894417.40

-2274329.

40 -0.79 4683331.6

0 1.62

Operating expense 6369231.00

3031491.00

4903877.77

-1872386.

77 -0.38 1465353.2

3 0.30

Net income (loss) 1208518.00

-2411403.0

0

-2009460.3

7

-401942.6

3 0.20 3217978.3

7 1.60

Income tax expense 362556.00 150000.00

Benefit from deferred tax 362556.00 723421.00

723421.00 362556.00

Net income after taxes 1208518.00

-1687982.0

0

-2159460.3

7 471478.3

7 -0.22 3367978.3

7 1.56

Table 2.2 Partial horizontal analysis of the balance sheet

2010 as base year

2011 2012

Increase

(Decrease) Increase

(Decrease)

2012 2011 2010 Amount Percen

tage Amoun

t Percenta

ge

ASSETS

Current assets

Cash and cash equivalents

1291058.00 78543.00

681104.57

-602561.5

7 -0.88 60995

3.43 0.90

Trade and other receivable

6845121.00 289184.00

1451765.89

-1162581.

89 -0.80 5393355.11 3.72

Inventory 1867157.

00 4588310.0

0 4588310.

00 1867157.00

Other current asset

1254301.00

1026688.00 14123.10

1012564.90 71.70

1240177.90 87.81

Total current

11257637.00

5982725.00

2146993.56

3835731.44 1.79

9110643.44 4.24

assets

Non-current assets

Property and equipment

1043333.00

391991.87

-391991.8

7 -1.00 65134

1.13 1.66

TOTAL ASSETS

12300970.00

5982725.00

2538985.43

3443739.57 1.36

9761984.57 3.84

LIABILITIES

Current liabilities

Trade payable

3132448.00 898387.00

2500000.00

-1601613.

00 -0.64 63244

8.00 0.25

Other current liabilities

123632.00 41563.00 36594.68 4968.32 0.14

87037.32 2.38

Total current liabilities

3256080.00 939950.00

2536594.68

-1596644.

68 -0.63 71948

5.32 0.28

Non-current liabilities

Advances from stockholders

1886906.00

1730755.00

1730755.00

1886906.00

Other payable

3000000.00

3000000.00

Total non-current liabilities

4886906.00

1730755.00

1730755.00

4886906.00

Total liabilities

8142986.00

2670705.00

2536594.68

134110.32 0.05

5606391.32 2.21

EQUITY

Share capital 5000000.

00 3125000.0

0 2390.00 3122610.

00 1306.5

3 4997610.00 2091.05

Advances 1875000.0 1875000.

from future subscription

0 00

Deficit

-842018.0

0

-1687981.0

0

-1687981.

00

-84201

8.00

Total equity 4157982.

00 3312019.0

0 2390.00 3309629.

00 1384.7

8 4155592.00 1738.74

TOTAL LIABILITIES AND EQUITY

12300968.00

5982724.00

2538984.68

3443739.32 1.36

9761983.32 3.84

The complete tabular presentation of the horizontal analysis for One

Renewable's income statement may be found at Appendix A, Chapter 6 of this

paper. It shows significant changes in certain key income statement accounts.

Using 2010 as the base year, the increase in revenues is very notable. From -

62% in 2011, the revenues of the company boosted to a whooping 530% of

2010's revenues. The cost of sales also increased to match this increase in

revenues. From -52% during 2011, the cost of sales went up as high as 750% of

2010's cost of sales. Because of the greater increase in cost of sales than the

increase in revenue, it follows that the increase in gross profit would be relatively

smaller than what is expected. The operating expenses of the company also

increased. From -38% during 2011, the company incurred more operating

expenses in 2012 which is 30% more of the 2010's operating expenses. The net

income of the company also increased. From a negative increase in net income

of 20% during 2011, the company experienced profit during 2012 which is 160%

of 2010's net income. With this increase follows the increase in the company's

after-tax income during 2012. From -22% during 2011, the increase in

percentage of net income after tax with 2010 as the base year amounted to

156%. The same observations may be drawn if the horizontal analysis is done

per year. While he same increase (decrease) in percentage can be noted during

2011, there are differences in percentage of increase (decrease) in 2012 as 2011

becomes its base year. However, while the numbers change, the trend remains

true and that it is the accounts in the income statement go upward.

Appendix B, Chapter 6 of this paper is a table that presents the complete

horizontal analysis of the balance sheet accounts of the company. Just like the

previous analysis, it also proves to be upward trending for most of the items. With

2010 base year, it can be noted that all of the company's assets increased in

2012 as compared to 2011. Cash and cash equivalent during 2012 increased

from -88% to 90% which in total is an increase of more than 200%. Trade and

other receivables also increased from -80% to a whooping 372%. Other current

assets as well as the company's non-current assets during 2011 has also

increased in 2012. All these increases brings the total assets of the company to

384% increase during 2012. The next segment of the balance sheet would be

the company liabilities. The horizontal analysis also reveal that the incurrence of

the liabilities by the company is also increasing. In total, the current liabilities of

the company during 2012 increased from -63% during 2011 to 28% with 2010 as

the base year. The total liabilities of the company is reported to increase from 5%

to around 220% still with 2010 as the base year. Of course, it follows that due to

all these increases, the company's total liabilities and equity will also increase. As

percentage of 2010, the total liabilities and equity during 2012 increased from

136% to 384%. Doing a per year analysis, although would result to different

numbers will still result to the same conclusion and that is the values of all the

accounts in the balance sheet of the company are trending upward.

1.7.3 Vertical Analysis

Vertical analysis, also known as common-size analysis, is a useful tool that

shows each item on a statement as a percentage of a base figure within the

statement. This analysis can be used for inter-company comparison of

enterprises with different sizes because all items are expressed as percentage of

some common number.

Table 3.1 Vertical analysis

2012 2011 2010

Amount Percent Amount Percent Amount Percent

ASSETS

Current assets

Cash and cash equivalents 1291058 0.1050 78543 0.0131 681104.6 0.268259

Trade and other receivable 6845121 0.5565 289184 0.0483 1451766 0.57179

Inventory 1867157 0.1518 4588310 0.7669

Other current asset 1254301 0.1020 1026688 0.1716 14123.1 0.005562

Total current assets 11257637 0.9152 5982725 1.0000 2146994 0.845611

Non-current assets

Property and equipment 1043333 0.0848 391991.9 0.154389

TOTAL ASSETS 12300970 1.0000 5982725 1.0000 2538985 1

LIABILITIES

Current liabilities

Trade payable 3132448 0.3847 898387 0.3364 2500000 0.985573

Other current liabilities 123632 0.0152 41563 0.0156 36594.68 0.014427

Total current liabilities 3256080 0.3999 939950 0.3519 2536595 1

Non-current liabilities

Advances from stockholders 1886906 0.2317 1730755 0.6481

Other payable 3000000 0.3684

Total non-current liabilities 4886906 0.6001 1730755 0.6481

Total liabilties 8142986 1.0000 2670705 1.0000 2536595 1

EQUITY

Share capital 5000000 1.2025 3125000 0.9435 2390 1

Advances from future subscription 1875000 0.5661

Deficit -842018 -0.2025 -1687981 -0.5097

Total equity 4157982 1.0000 3312019 1.0000 2390 1

TOTAL LIABILITIES AND EQUITY 12300968 5982724 2538985

Table 3.1 above presents the vertical analysis of One Renewable's Statements of

Financial Position as at December 31 2010, 2011 and 2012. The table shows

that during 2010, a huge part (about 57%) of the company's total assets was its

trade and other receivables. Cash and PPE followed suit which were about 27%

and 15% of the total assets respectively. During 2011, there were drastic

changes to the composition of the total assets. While inventory during that year

boosted up and took up 77% of the total assets, cash and cash equivalent as

well as trade and other receivables drop as compared during 2010. Cash and

cash equivalent on 2011 was now only 1.30% of the total assets while trade and

other receivables went down from 57% to 4.83% of the company's total assets.

Also during 2011, the company did not report any non-current assets (PPE). On

2012, the company underwent to more changes in the composition of their total

assets. Most or about 56% of the company's total assets during that year was its

trade and other receivables. The amount of cash and cash equivalent that the

company possesses also increased and now formed close to 11% of the

company's total assets. Inventory at the end of the 2012 went down from 77% of

2011's total assets to only 15% of 2012's total assets. During 2012, it can also be

noted that only a small percentage (about 8%) of the total assets was company's

PPE. 0.6%, 17% and 10% are attributable to other current assets as part of

2010, 2011 and 2012's total assets respectively.

The vertical analysis also reveals that during 2010, 100% of company's liabilities

was all current liabilities (i.e. 99% trade payables and 1% other payables). When

the company incorporated during 2011, it began to incur non-current liabilities.

Majority or about 65% of company's liability during 2011 was now attributable to

advances from stockholders. Trade payables and other current liabilities during

2011 were now only 34% and 2% of the company's total liabilities respectively.

During 2012, there were not any significant changes on the composition of the

total liabilities. Current liabilities of the company formed 40% of the total liabilities

which was close to 35% during 2011. As advances from stockholders went down

to from 65% to 23%, the company incurred other non-current other payable

which made up 37% of the total liabilities. Non-current liabilities in total made up

60% of 2012's total liabilities which was close to 2011's 65%.

During 2010, the total equity was 100% made up of share capital. This

percentage dropped to 94% during 2011. Also during 2011, company's total

equity was 57% advances from subscription and -51% deficit. During 2012, share

capital went up to 120% of the total equity. There were no longer reportable

advances from subscription and the deficit went down to -20%.

2. ANALYSIS OF EXTERNAL ENVIRONMENT

2.1 Definition of the Industry

An industry is a group of companies engaged in the same nature of business that

satisfies the needs and wants of the customers.

The renewable energy industry promotes the use of energy sources that can be

continually replenished in a relatively short amount of time. Renewable energy sources

include solar, geothermal, wind, and hydroelectricity, among others. Concerns on

declining energy sources such as fossil fuels has brought about the development of

experiments dedicated to finding alternative sources of energy. In the Philippines,

renewable energy sources power 30% of the country’s power generation. The country is

also the second largest generator of geothermal energy and was the one of the first

Southeast Asian countries to invest in large-scale solar and wind energy technologies.

The number of projects utilizing renewable energy is currently rising, with residential

buildings, commercial buildings and infrastructure employing devices and power

systems to reduce the cost of electricity from power lines.

The renewable energy industry in the Philippines mostly consists of companies offering

products that utilize solar, hydro, geothermal, and wind energy. Companies in this

industry engage in manufacturing, retailing, design, or a combination of these functions.

Some of the products being offered by companies in the industry include small battery

packs, electric generators, air conditioners, and lighting systems, among others.

Companies also offer services such as system design, system installation, and

consulting services.

Common target consumers of industry members are commercial and residential clients

from both rural and urban regions. The products being served come in different

specifications and are applicable for use in industrial buildings and projects. However,

only few companies target the unserved segments of the population, defined as the

households that have no access to electricity.

2.2 Analysis of Macro-environment components

The macro-environment includes all relevant factors and influences that exist outside

the company’s internal boundaries. These factors are important for they shape

management’s decisions regarding the company’s long-term direction, objectives,

strategy, and business model

● Political

The company may be able to benefit from the standpoint of the Philippine

government regarding renewable energy, stating that the Philippines must be

100% powered by renewable energy sources in 10 years.

However, the company might also be adversely affected by the unstable

political conditions in the Mindanao region since its main target consumers

reside in those areas. If political unrest occurs in this region, the company

may not be able to go on with its normal operations in the area and reach out

to other potential consumers.

● Economic

Despite the recent investment grade given to the Philippines, the country is

still considered a developing country; thus, a significant number of citizens

are still living on the poverty line. This can cause the company’s target

consumers to be more conscious about the price of the goods they are

buying. In turn, this can affect the pricing of the company’s products.

Company management should ensure that their products are priced at levels

the target market considers as affordable.

● Societal Values and Lifestyles

Urban and rural markets, especially the unserved segments, have different

values and lifestyles. The company acknowledges that different approaches

must be used to attract consumers from these segments given these

contradicting factors. The unserved communities perceive lighting as a basic

need, and are thus more willing to pay the company to acquire this. On the

other hand, urban clients, especially those considering solar energy for

residential use, are more reluctant to pay a premium for solar energy devices.

Solar energy is more commonly perceived as an alternative source of energy

that would help save costs on electricity from the power lines. However, given

the higher capacity needs of these kinds of consumers, the price of the units

and installing these systems is also higher. They might be more inclined to

divert their expenses to other objects or services of their desire.

● Technological

The company’s business is highly reliant on technological advancement, and

the rise of more advanced solar panels and batteries and electrical devices

geared towards low power consumption can give the company opportunities

to grow its product selection and product capabilities.

● Environmental

The growing concern on the decline of fossil fuel supply gives the company,

and the industry as a whole, an opportunity to increase its presence in the

energy sector. Other environmental concerns like reducing carbon emissions

and green business practices are also factors that can affect the business in a

positive way.

● Legal

The Renewable Energy Act of 2008, which aims to accelerate the growth of

the use of renewable energy sources and encourage its application in both

commercial and residential usage, can have a positive impact on the

company since it encourages businesses engaged in offering renewable

energy products to form a partnership with the government in providing

electrification services to areas with no access to electricity. However, it may

also pose a problem if the government decides to form projects that gives out

solar energy panels or devices for free to the communities that One

Renewable Energy is serving or is hoping to serve.

● Demographics

Urban population in the Philippines is 49% of the total population, which

means that the rural population is still the larger segment of the company’s

market. Furthermore, the households with no access to electricity in rural

areas comprise 48% of the whole unserved market. Thus, the company still

has a large market for its products and services in these areas. However, the

rising rate of urbanization can help the company increase its profitability and

expand in more areas if it starts to allot more resources and pay attention to

its urban segment.

2.3 Competitive Environment

Figure 1.1 Competitive environment of One Renewable

2.4 Five Forces Analysis

The five forces analysis is a tool for assessing the strength of the industry’s competitive

forces, which are the competitive pressures stemming from the rivalry among competing

sellers, threat of new entrants, companies in other industries offering substitute

products, supplier bargaining power, and buyer bargaining power.

2.4.1 Factors affecting Strength of Rivalry

Rivalry is generally stronger when:

Competing sellers are active in making fresh moves to improve their

market standing and business performance

Buyer demand is growing slowly

Buyer demand falls off and sellers find themselves with excess capacity

and/or inventory

The number of rivals increases and rivals are of roughly equal size and

competitive capability

The products of rival sellers are commodities or else weakly differentiated

Buyer costs to switch brands are low

Outsiders have recently acquired weak competitors and are trying to turn

them into major contenders

On the other hand, rivalry is generally weaker when:

Industry members aren’t aggressive in drawing sales and market share

away from rivals

Buyer demand is growing rapidly

The products of rival sellers are strongly differentiated and customer

loyalty is high

Buyer costs to switch brands are high

There are fewer than 5 sellers or else so many rivals that any one

company’s actions have little direct impact on rivals’ business

Given these factors affecting the strength of competitive rivalry, it can be noted

that the competitive strength of rivalry among competing sellers is weak because

there are few competitors and distributors in the industry that One Renewable

Energy is operating in. Only one company, HSSi, can be described as a rival with

One Renewable Energy in that its focus is the same, which is serving off-

grid/unserved communities and niche markets. Other firms, such as government

partners in its electrification projects, may also be considered as rivals since they

also serve the same target market. However, these firms only comprise a small

number of industry members. Thus, majority of industry members are not

focusing on these regions and the company can easily become well-known in the

geographical markets that it is serving, and this focus on unserved markets

enables the company to become profitable without competing head-to-head with

larger firms in the industry.

2.4.2 Factors affecting Threat of Entry

Entry threats are stronger when:

The pool of entry candidates is large and some have resources that would

make them formidable market contenders

Entry barriers are low or can be readily hurried by the likely entry

candidates

Existing industry members are looking to expand their market reach by

entering product segments or geographic areas where they currently do

not have a presence

Newcomers can expect to earn attractive profits

Buyer demand is growing rapidly

Industry members are unable (or unwilling) to strongly contest the entry of

newcomers

Entry threats are weaker when:

The pool of entry candidates is small

Entry barriers are high

Existing competitors are struggling to earn good profits

The industry’s outlook is risky or uncertain

Buyer demand is growing slowly or is stagnant

Industry members will strongly contest the efforts of new entrants to gain a

market foothold

With these factors affecting the threat of entry, it can be concluded that the threat

of new entrants in the industry is weak because there is no significant number of

new entrants in the market. Besides the small pool of entry candidates, the entry

barriers, mainly the capital requirement for starting the solar energy business is

very high. Potential new entrants can start with P1 million to P5 million, but this

cost only covers the development of networks. A complete business setup along

with starting hardware inventory would require a minimum of P10 million.

Companies that are interested to set up this kind of business would also need to

invest in manpower, mainly teams that have technical skills to design and review

products, as well as assess the current market conditions and needs. After the

initial setup, firms would still need a large amount to cover for operating

expenses. In the first and second years, it is highly likely that the business would

suffer a loss.

2.4.3 Factors affecting Competition from Substitutes

Competitive pressures from substitutes are stronger when:

Good substitutes are readily available or new ones are emerging

Substitutes are attractively priced

Substitutes have comparable or better performance features

End users have low costs in switching to substitutes

End users grow more comfortable with using substitutes

On the other hand, competitive pressures from substitutes are weaker when

Good substitutes are not readily available or don’t exist

Substitutes are higher priced relative to the performance they deliver

End users have high costs in switching to substitutes

After enumerating the factors that affect competition from substitute products, it

can be concluded that the competitive force stemming from companies offering

substitute products is strong. Substitutes to solar energy include oil and firewood

lighting in rural areas, and electricity lines in more upscale locations. These

substitutes are readily available to consumers, and consumers have already

grown more comfortable with using these substitutes as opposed to solar energy.

Costs of using solar energy is also more expensive than using substitutes.

Startup costs may entail high costs especially in installing high-capacity panels,

both in industrial and residential uses. In addition to startup costs, using solar

energy also requires yearly maintenance to ensure full functionality.

2.4.4 Factors affecting Bargaining Power of Suppliers

Supplier bargaining power is stronger when:

Industry members incur high costs in switching their purchases to

alternative supplier

Needed inputs are in short supply (which gives suppliers more leverage in

setting prices)

A supplier has a differentiated input that enhances the quality,

performance, or image of sellers’ products or is a valuable or critical part

of sellers’ production processes

There are only a few suppliers of a particular input

Supplier bargaining power is weaker when:

The item being supplied is a “commodity” that is readily available from

many suppliers at the going market price

Seller switching costs to alternative suppliers are low

Good substitute inputs exist or new ones emerge

There is a surge in the availability of suppliers (thus greatly weakening

supplier pricing power)

Industry members account for a big fraction of suppliers’ total sales and

continued high volume purchases are important to the well-being of

suppliers

Industry members are a threat to integrate backward into the business of

suppliers and to self-manufacture their own requirements

These factors affecting the strength of supplier bargaining power suggest that the

competitive force of supplier bargaining power for One Renewable is relatively

strong. One Renewable Energy’s supplies come mainly from Barefoot, an

Australian company with product certification by international organizations.

Thus, this attribute makes the supplies differentiated from others and the

company is willing to pay a premium on these supplies because of the product

certifications. However, the supplier’s bargaining power is eroded by the fact that

high-volume purchases by the company are entitled to a discount; so, despite a

price increase on the part of the supplier, the company can still get supplies at a

good price without any difficulty. Other suppliers from different countries also

exist, and the company also has ties with these suppliers in case the Australian

supplier is unable to deliver the supplies it needs.

2.4.5 Factors affecting Bargaining Power of Buyers

Buyer bargaining power is stronger when:

Buyer switching costs to competing brands or substitute products are low

Buyers are large and can demand concessions when purchasing large

quantities

Large volume purchases by buyers are important to sellers

Buyer demand is weak or declining

There are only a few buyers – so that each one’s business is important to

sellers

Identity of buyer adds prestige to the seller’s list of customers

Quantity and quality of information available to buyers improves

Buyers have the ability to postpone purchases until later if they do not like

the prices offered by sellers

Some buyers are a threat to integrate backward into the business of

sellers

Bargaining power of buyer is weaker when:

Buyers purchase the item infrequently or in small quantities

Buyer switching costs to competing brands or substitutes are high

There is a surge in buyer demand that creates a “sellers’ market”

A seller’s brand reputation is important to the buyer

A particular sellers’ product delivers quality or performance that is not

matched by other brands.

With these factors, it can be noted that the competitive force of buyer bargaining

power is relatively strong. One Renewable Energy creates products according to

consumers’ specifications and changing needs and wants. Oftentimes, the

consumers themselves are the ones telling the company what they need from

their products. Moreover, the prices of the company’s products are highly

dependent on consumers’ ability and willingness to pay. In fact, the company

does research on what consumers consider a reasonable price for its products

and does not charge a price higher than P10,000 for its smaller units so that

consumers will be encouraged to buy their products. Thus, the company also

does not increase prices easily so as not to discourage buyers from patronizing

its products.

3. RESOURCES

Company resources are competitive assets that are owned or controlled by the

company. They may either be tangible resources or intangible assets. Below are the

resources of One Renewable Energy:

3.1 Tangible Resources of Organization

Tangible resources of the organization are those assets that have physical forms.

These tangible resources are sub-classified into four categories: physical, financial,

technological and organizational resources. Below is the enumeration of the tangible

resources that are owned by One Renewable:

● Physical resources

Physical resources are state-of-the-art manufacturing plants and equipment,

efficient distribution facilities, attractive real estate locations, or ownership of

valuable natural resource deposits. The following are the physical resources

owned by One Renewable Energy:

○ Equipment

○ Inventory

○ Setup vehicles

○ Safety equipment/gears

○ Warehouse

○ Tools

○ Transportation vehicles

● Financial resources

These are cash and cash equivalents, marketable securities, and other financial

assets such as company’s credit rating and borrowing capacity. The following

financial resources are currently owned by One Renewable Energy:

○ Cash

○ Investments

● Technological assets

Technological assets include patents, copyrights, superior production technology,

and technologies that enable activities. One Renewable Energy’s technological

assets are:

○ Production technology

○ Product designs

● Organization resources

These are company’s information and communication systems, proven quality

control systems, and strong network of distribution or retail dealers. Among

others, the following are the organization resources of One Renewable:

○ Quality control systems

○ Network of retailers and distributors

3.2 Intangible Resources of Organization

Intangible resources are those assets that are not physical in nature. Intangible

resources could be human assets and intellectual capital, brand, image and reputational

assets, relationships or even the company culture. Below dissects the intangible

resources that One Renewable takes hold of.

● Human assets and intellectual capital

This type of intangible assets can include an experienced and capable

workforce, talented employees in key areas, collective learning embedded in

the organization, or proven managerial know-how. One Renewable’s human

assets and intellectual capital are as follows:

○ Good team that understands the market well

Figure 2.1 Organizational chart of One Renewable

○ Technical skills

○ Rural business development skills

○ Logistics skills for determining most effective ways to deliver on time

and reduce costs

● Brand, image and reputational assets

Erel B. Narida

President /CEO

Lillian G. Narida

VP/ Treasurer

Dennis Argonza

Accounting Officer (1)

Gregorio M. Corruz

Managing Director - Technical

Jim M. Venezuela

Asst. Technical Manager (1)

Wilson T. Mechure

Technical Asst. (1)

Elmer Napawit / Geomar Villanueva

Technical Specialist (2)

Pennsylvania B. Neo

Managing Director- Opn & Logistics

Marvin Thad Nacionales

Logistics Asst. (1)Ma

Philip Loyd Emmanuel / Efren Andia

Utility / Driver (2)

Arnel Evangelista

Commercial Sales & Marketing Director

Reuben T. Quejas

CBRES Business Devt Director

Paul Dingcong

Regional Sales & Operations Manager -

Visayas

(Vacant)

Sales & Operations Coordinator - Negros (1)

Elrey Tapangan

Technical Specialist (1)

Aldo Kohoyan

Sales & Operations Coordinator BASULTA

Pennsylvania B. Neo

Corporate Secretary

Atty. Juan Rodom Fetiza

Legal Consultant

Joel Valdes

Financial Adviser

These are brand names, trademarks, product or company image, buyer

loyalty, and reputation for quality, superior service. One Renewable

Energy possesses these brand, image, and reputational assets:

○ Reputation for quality sales

○ Excellent after-sales services

● Relationships

Relationships include alliances or joint ventures that provide access to

technologies, specialized know-how, or geographic markets, and trust

established with various partners. One Renewable’s relationship

resources include the following:

○ Local and foreign social impact investors

○ Strong network relationships

○ Long-standing ties with clients

● Company culture

Company culture is defined as the norms of behavior, business principles,

and ingrained beliefs within the company. The company has these

company culture resources in the organization:

○ Team driven to deliver social impact to community

○ Sustainable business model

3.3 SWOT Analysis

A SWOT analysis zeroes in on the strengths, weaknesses, opportunities, and threats of

a company. It evaluates the company’s overall situation by examining the company’s

resources and competitive capabilities in terms of the degree to which they enable it to

pursue its best market opportunities and defend against the external threats to its future

well-being.

Table 4.1 SWOT (TOWS) matrix

IND

US

TR

Y

THREATS OPPORTUNITIES

● Government electrification projects

that give solar energy for free

● Political climate in chosen market

regions

● New companies may enter in the

urban setting

● Rise of social impact investors

● Technological changes geared

towards low-consumption electrical

devices

● Expansion to other regions

● Large market

● Renewable Energy Act of 2008

CO

MP

AN

Y

WEAKNESSES STRENGTHS

● No civil engineers in the company’s

team

● Interests may not be 100% aligned

with retail partners such as

microfinance institutions

● No direct control over retail side

● Excellent after-sales service

● Strong network of 32 service

centers, 54 full-time technicians,

and 12 distribution partners

● Well-organized “first-responder”

teams in rural areas

● Technical expertise

● “Solar System Concept” that

serves as logistics and operations

plan for the company

Based on the SWOT matrix, the strengths of the company are sufficient to enable them

to pursue market opportunities, especially on the technical aspect. The team’s technical

expertise will be helpful in developing new products and upgrading existing ones to

accommodate new technologies that are geared towards low power consumption. Its

strong network of distributors and clients will also be able to help the company expand

to other regions where it currently has little or no presence. This, coupled with the

company’s excellent after-sales service and first responder teams, can attract the

attention of more social impact investors who are looking for businesses that create

positive social transformation in their communities.

However, the benefits that may be brought by the market opportunities are eroded by

the market threats. First, the industry may be affected by the government electrification

projects that give out solar energy for free. Thus, consumers in the areas being targeted

by the government will not anymore be inclined to pay for the products and services of

the industry. Instead of making money in the unserved rural regions, industry members

such as One Renewable Energy will have to find other markets to serve once these

projects materialize. The political climate in the Mindanao region may also have a

negative impact on the industry since a large part of the unserved markets in the

Philippines reside in this region, but setting up or maintaining stable operations may

prove to be difficult because of the frequent political unrest in the region. Thus, the

potential consumers of the solar energy products will not be reached and the company

will not gain any revenue from the large market in this part of the country.

At the same time, the company’s strengths may be eroded by its weaknesses,

especially in the case of its dependence on retail partners, mostly microfinance

institutions, for distribution. Microfinance institutions grant loans to individuals to aid in

purchasing the company’s products, but there may be times when these institutions

prioritize normal loans over loans for solar devices. These situations in the retail side

cannot be controlled by the company and may cause it to lose potential revenues from

sales. Moreover, the staff’s technical expertise needs to be complemented by a civil

engineer that would help in designing and managing the solar panels as part of

infrastructure in the urban areas.

4. STRATEGY FORMULATION

4.1 Definition and Size of the Market

● Positioning

A positioning statement states how the company wishes to be perceived. It is the

core message that the management wants to deliver in every medium to

influence the perception of the products and services they offer. Typical

positioning statements indicate the company’s products, how consumers will

benefit from these products, and what makes the company different from the

others. Ultimately, the positioning statement of the company brings its mission

and vision to life.

One Renewable Energy provides solar energy products which are customized or

differentiated to suit consumers’ needs. It is different from other companies in

that it not only operates for profit but also delivers positive social impact to every

community it serves through its business operations.

● People

People are those that bring impact to the company each and every day. In the

case of One Renewable Energy, the people that impact the company are the

managers and employees since they are the ones who come up with ways to

offer better products and services to the customers.

Besides the managers and employees, the social impact investors also impact

the company every day because they are the ones who evaluate the

performance of the company and give recommendations based on their analysis.

They are very helpful to the company management because they point out which

areas they need to improve on and they also set performance targets and goals

for them to work on in a specific amount of time.

But the most important people in the company are the customers, whom it also

considers as stakeholders in the company. They invest their money into the

company by buying its products; thus, the company regards them as the most

important people in the business. All their products and services are about

bringing good value to customers, and all the business activities being done

inside the company are meant to improve the way these products and services

are delivered to them.

● Process

Process is the evaluation of the way the company does its business. The way the

management handles the business should better support the goals of the

company.

One of the company’s main goals is to become financially viable to all its

stakeholders, and the process or system of developing the products and

delivering these to consumers are able to support the goals of the company. It

emphasizes the initial decision-making process because being involved from the

start and getting things right during the early stages will save a significant amount

of time, money, and other resources for the company.

● Plan

A plan helps every member of the organization or company to be proactive.

Companies that write down their plans have a higher chance of putting those

plans into action compared to those that do not. A brief plan can contain the

analysis of the situation, marketing overview, marketing tactics and forecasts.

The company’s planning stages include market research with its technical and

distribution teams, analysis of the situation in its target regions, setting

performance targets, and creating forecasts for the company’s future financial

position.

● Product

Product determines the product and/or services that the company offers. It also

describes how the products are packaged; what are the solutions and benefits

that they provide; and who the products are for.

One Renewable Energy offers solar energy devices and products such as solar

home systems, solar desk lamps (micro SHS systems), solar street lights, solar

pumps (DC/AC), and on-grid solar PV systems for households located in rural

areas and high-capacity systems for residential and industrial use in urban areas.

Products can also be customized according to consumer specifications and

needs. As for services, the company offers after-sales services such as

maintenance and repairs. These products and services mainly provide basic

energy and lighting needs in households that do not have access to electricity in

rural areas. As for industrial and residential clients in urban areas, they mainly

serve to save on costs of electricity. Using these products also serves as a way

for some companies and establishments to start implementing green business

practices (i.e. Zuellig and Ayala Land Nuvali)

● Place

Place determines whether or not the company is in the right place to best target

their customers. It also determines the touch points that the company needs to

have in a place to be able to reach their potential customers.

One Renewable Energy serves industrial and residential clients in urban regions.

However, the company’s largest target market is the unserved segment in the

rural areas of the Philippines, specifically the Visayas and Mindanao regions,

which make up 22% and 52% of the whole unserved segment, respectively.

Translated to number of households, this segment comprises of more than 2

million households. To be more specific, the company’s major target segment as

of the moment is the Autonomous Region of Muslim Mindanao (ARMM), which

makes up for 37% of the whole unserved Mindanao market.

In order to reach potential consumers in these geographical markets, One

Renewable Energy distributes products through retail and community partners in

its local distribution centers that help households get access to the products of

the company. These local distribution centers are readily accessible; they are

located near the communities to encourage people to buy the company’s

products. The company is in the best place to target these customers because

they have a strong network of retail distributors that can help them reach out to

potential customers. It also has large industrial partners that can help them in the

technical aspect of the business regardless of location; thus, the products and

services of the company are readily accessible wherever the clients may be.

● Price

This determines the price that the company need to set for their products or

services. It also evaluates the pricing models that work best in the industry and

considers as well the price that would work best for their customers.

One Renewable Energy’s product prices depend on the design and customer

specifications, especially if the product being priced is a high-capacity solar

device or system. However, the company’s design and logistics processes helps

them reduce costs and, in turn, offer affordable prices to consumers. Managers

also conduct research on the ideal price ranges of different consumers,

especially the rural households that make up majority of the company’s market.

Products for this market segment are always less than P10,000 because

research indicates that people will no longer be willing to pay for the company’s

products if the prices reach that level.

● Promotion

Promotion deals with the campaigns and/or tactics the company should put

together in order to promote the products and/or services that they offer to the

market. Promotion may be done in various of ways including media advertising,

direct mail, word-of-mouth or direct sales.

One Renewable Energy primarily relies on word-of-mouth and direct sales as a way

of promoting its products and services. Direct sales is especially useful when selling

to the unserved market regions since they live far from the cities and are not easily

accessible. The company goes to the geographic areas that they are targeting and,

with the help of the heads of the communities, conduct product orientations and

seminars. They engage directly with household members to find out what kinds of

products they need and how much they can afford to pay.

● Proposal

Proposal demonstrates the company’s knowledge of the customers’ needs and

being able to match those needs with solutions that are priced right.

One Renewable Energy offers different product designs that best suit the needs

their existing consumers and potential buyers. In the rural areas where the needs

of the market are not so much demanding, the company has low-capacity

systems that are enough to light a household. These low-capacity systems may

be upgraded should the consumers demand the kind of product that will enable

them to watch televisions or charge their cellular phones. On the other hand, the

market of the company in the urban areas will mostly likely demand systems with

higher capacity. Such market includes high-rise commercial and industrial

buildings that require larger solar panels that will better support their needs. One

Renewable is not only able to address the varying needs of their consumers but

also subject their products to reasonable prices.

● Please (aka Ask)

Please simply means asking for the job, project and/or donation in a polite and

professional way.

One Renewable Energy’s management team has always been professional in

everything they do - be it closing deals with their social impact investors,

engaging with non-government organizations, partnering with the people in the

rural communities and delivering their products and services to their consumers.

Their professionalism has enabled them to build new connections and maintain

and even expand their existing network.

● Project Management

Project Management is following through. The best way of penetrating the market

in the future is by providing good services today.

More than just being a company that needs to earn profit for its shareholders,

One Renewable Energy by default is a socially responsible corporation and this

fact pushes them to offer products and services that will give value to their

consumers who they also consider as their stakeholders. With their present and

even improving quality products and excellent services, the company is heading

in a direction that is very much in line to their vision of becoming the Philippine’s

most trusted and leading systems integrator in the renewable energy sector that

will supply sustainable solar energy products that are accessible and affordable

to everyone and in the process thereof, empower the lives of people especially

all those in the remote rural communities

● Punctuate

Punctuate is about the company being able to leave a good impression. They

may do this by sending thank you notes, maintaining communication with their

customers and being proactive in up-selling, cross-selling, retention, etc.

After the sales transactions, One Renewable Energy maintains communication

with their customers mainly through visits and constantly checks if the products

are able to deliver quality performance and if the products are being utilized to

their full potential. This also enables the company to be updated on the features

that customers want on their new products, and the management team takes

note of every feedback generated from these after-sales visits. Then, when the

company is able to develop new products with higher capabilities, the distribution

team also gets to sell these to the clients who first asked for these features.

4.2 Definition of the Present Generic Strategy

A company’s competitive strategy concerns the specifics of management’s game plan

for competing successfully and securing a competitive advantage over rivals in the

marketplace. There are five generic competitive strategies classified according to the

breadth of the target market and the competitive advantage: low-cost provider strategy,

broad differentiation strategy, focused low-cost strategy, focused differentiation strategy,

and best-cost provider strategy.

Among the five generic competitive strategies, One Renewable Energy employs the

focused differentiation strategy, which means that the company is concentrating on a

narrow buyer segment and outcompeting rivals by offering niche members customized

attributes that meet their tastes and requirements better than rivals’ products.

4.3 Chosen and Proposed Strategy

After analysing both external and internal environments of One Renewable Energy, it is

best for the company to retain its current strategy, which is the focused differentiation

strategy. This strategy is the best fit for the company because the target market niche,

which is the unserved rural markets, is big enough to be profitable and offers good

growth potential. Industry leaders have also chosen not to compete in the niche so the

company can avoid battling head-to-head against the industry’s biggest and strongest

competitors. In addition, few, if any, rivals are attempting to specialize in the same

target segment. It is also costly or difficult for multisegment competitors to meet the

specialized needs of niche buyers and at the same time satisfy the expectations of

mainstream customers. Finally, the industry has many different niches and segments,

thereby allowing the company to pick a niche suited to its resource strengths and

capabilities.

Employing this kind of strategy comes with several risks like the chance that

competitors will find effective ways to match the company’s capabilities in serving the

target niche and the potential for the preferences and needs of niche members to shift

over time toward the product attributes desired by the majority of buyers. The first risk

can be countered through strengthening the company’s core competencies and

increasing its presence in the chosen target market. By further enhancing the

capabilities of the company, they will be able to deeper penetrate their target market

that it would be almost impossible for their competitors to create adverse effects to the

company. Enhancing capabilities would also enable the company to provide better

services that niche members will recognize the company as an excellent provider of

solar energy products for the segment. The second risk can be mitigated through

addressing the customers’ specific needs. The company already has an advantage in

this aspect because of its continuous engagement with its clients, where the customers

themselves are the ones who suggest new product offerings that will suit their new

preferences.

Maintaining this strategy can help the company achieve its goals and objectives since

focusing on a market segment that few, if any, rivals are competing in will ensure that

the company becomes well-known in that niche as an excellent provider of solar energy

products. Focusing on and expanding to other unserved market regions also enables

the company to serve more households. Coupling brand recognition in the niche with

the company’s capability to offer differentiated products to customers will help generate

additional sales for the company, and higher unit sales will also translate into higher

service revenues for the coming years. Thus, the company’s strategic, financial, and

social goals and objectives will be achieved.

4.4 Description of the Competitive Environment

A focus strategy delivers competitive advantage either by achieving lower costs than

rivals in serving buyers comprising the target market niche or by offering niche buyers

an appealingly differentiated product or service that meets their needs better than rival

brands. A focused strategy becomes increasingly attractive when the target market

niche is big enough to be profitable and offers good growth potential, when it is costly or

difficult for multisegment competitors to put capabilities in place to meet the specialized

needs of the target market niche and at the same time satisfy the expectations of their

mainstream consumers, when there are one or more niches that present a good match

with a focuser’s resource strengths and capabilities, and when few other rivals are

attempting to specialize the same target segment.

Ever since its inception, One Renewable Energy has strived to become the leading

systems integrator especially in the Visayas and Mindanao regions where its market

mostly comes from. The market in the rural area is large enough that even if there are

rivals and potential new entrants in the industry, they will still be profitable in the specific

market they choose to focus on since few industry members are competing in this

market. As mentioned earlier, this makes a focused strategy attractive - being able to

avoid battling head-to-head against the leaders of the industry and allowing focusers to

pick a niche suited to their resource strengths and capabilities.

4.5 Elements of Company’s Strategy

● Actions to gain sales and market share by adjusting pricing, product features,

product styling, quality, customer service, product selection, or other product or

service attributes

One Renewable Energy mainly provides customized or differentiated products

that are made according to the needs, specifications, and even the ability to pay

of each client. The company also takes the extra measure to provide after-sales

service to all customers, regardless of their location. These after-sales services

are meant to maintain the units to ensure the full functionality of the product for

each year. The company management believes that this brings value to

customers since their investment in the solar energy products of the company

are being utilized to their fullest. This excellent service and customer relations

are also factors that contribute to repeat purchases by customers, thus

increasing sales and service revenues.

● Actions to upgrade, build, or acquire competitively important resources and

capabilities

The company’s competitively important resources are its strong networks and its

technical expertise. Company management improves its technical expertise

through research, training, and conceptual studies since the information garnered

through these methods reveal new technologies that can be further studied and

utilized in future product offerings. On the other hand, the company expands its

networks through continuous engagements and referrals.

● Actions and approaches used in managing R&D, production, sales and

marketing, finance, and other key activities

One Renewable Energy is adopting a logistics system that enables it to use its

resources efficiently and ensure on-time delivery to all its distribution centers.

This system is called the “Solar System Concept” and begins in the initial

decision-making process in the design of the products being offered.

First, the team comes up with conceptual studies that take into account existing

and upcoming electronics technology. This is also where the consumer

specifications are considered. The members’ extensive experience on the

technology makes them highly qualified to offer solutions to consumers’ concerns

regarding the product and these solutions may become the basis for subsequent

cost savings.

The preliminary design and detailed design stages are concerned with integrating

consumer specifications with state-of-the-art technology, while keeping in mind

the need for the products to be reliable and easy to use. One Renewable Energy

emphasizes these initial decision-making processes to save costs for both the

company and the clients.

Once the designs have been completed, these are forwarded to suppliers to be

manufactured. In this implementation stage, adequate tools and clear co-

operating procedures allow One Renewable Energy to complete orders or

projects on time, within budget, according to specifications, and in compliance

with quality requirements. All components and systems are thoroughly tested and

documented before delivery to clients. Installation supervision services are

provided by the company to ensure that everything will be mounted in the right

place in the right way.

After-sales services, such as maintenance, inspection, and operating procedures

are an integral part of the system. Frequency of visits based on the type of

system is very well established with corresponding procedures and

documentations are in place. These frequent after-sales services are more cost

efficient than one-time repair services, thus bringing in savings to consumers.

● Actions to strengthen competitiveness via strategic alliances and collaborative

partnerships

One Renewable Energy is continuously building its network to accommodate its

continuous growth and expansion to different regions. The company seeks out

microfinance institutions and non-government organizations (NGO) to make its

products more accessible to isolated target markets, and the company is

constantly seeking for additional distribution and industrial partners to aid in its

expansion. The company also arranges meetings with barangay officials to

conduct community engagements; after these engagements, the barangay

officials also become partners in distributing the products to different consumers

and people are sent to the company to be trained in the technical, sales, and

marketing aspects of the company’s operations. The company does this to make

after-sales service and maintenance work easier and more accessible to

consumers, regardless of their location.

● Actions to strengthen market standing and competitiveness by acquiring or

merging with other companies

This element is not applicable to One Renewable Energy since it does not seek

to acquire or merge with other companies as part of its strategy.

● Actions to capture emerging market opportunities and defend against external

threats to the company’s business prospects

The company captures emerging market opportunities such as the large

unserved segments needing access to electricity by conducting product

orientations and community engagements in partnership with barangay officials

and/or its retail distribution networks. However, external threats include

government electrification projects that give out solar energy for free. To mitigate

the risks brought about by external threats, the company does research on the

next regions and the number of households that the government is aiming to

electrify. Furthermore, since the company has an extensive network of industrial

partners and retail distributors, it can utilize the knowledge of these networks to

find out where the government plans to conduct electrification projects. With the

right research, the company avoids the areas that the government is targeting

and only focuses on other regions that have potential profitability.

● Actions to enter new geographic or product markets or exit existing ones

Entering new geographic markets is one of the company’s primary goals since

expanding geographically will help the company extend its reach to more

households and fulfill its social goals of helping other people get access to

electricity. One Renewable Energy’s method of entering new geographic markets

is through expanding its network of retail distributors or going to the provinces

and communities firsthand to introduce its products to residents of the area.

● Actions to respond to changing market conditions or other external factors

One Renewable Energy addresses changing market conditions by continuous

research and development in order to incorporate upcoming technologies to its

products. These new technologies also enable the company’s products to

perform more efficiently and power more devices. The company’s relationship

with its clients also enables the management team to find out from the customers

themselves what they need next from their products. The management team is

also proactive in finding potential threats to the company’s profitability. Thus, they

have already formulated solutions to these potential problems before they arise.

4.6 Corporate Social Responsibility Practices

Corporate social responsibility refers to a company’s duty to operate in an honorable

manner, provide good working conditions for employees, encourage workforce diversity,

be a good steward of the environment, and actively work to better the quality of life in

the local communities where it operates and in society at large.

One Renewable Energy’s corporate social responsibility practices are already

incorporated in its operations and strategy since its target market includes the unserved

markets in rural areas, or those who don’t have access to electricity. The company

engages with NGOs and different microfinance institutions and gives discounts to these

organizations for wholesale products. Then, these organizations distribute the

company’s products to families and households who need them.

In addition to the company’s strategy that helps bring solar energy products to poor

families in the rural regions, One Renewable Energy also helps in educating children

through its “Solar Lighting for Learning” project. This project started as a means of

support to the learning center of an unspecified partner NGO that availed of solar

pumps from the company. In order for the students to remain on the learning program,

they have to maintain a certain grade point average. However, a large number of

students are unable to maintain their grades, resulting in their dismissal from the

program. The company president has proposed that the students’ inability to maintain

their grades might stem from the fact that they have no electricity at home. This was

proven after monitoring the students’ study habits. Thus, the company president

decided to help the students get access to solar lighting in order to enable them to study

at home and stay on the learning program. Now, One Renewable Energy, in partnership

with NGOs, campaigns for sponsors to donate small lighting systems to the students’

homes and charging stations for these systems.

5. CONCLUSION AND RECOMMENDATION

One Renewable Energy envisions itself as the Philippine’s most trusted and leading

systems integrator in the renewable energy sector that will supply sustainable solar

energy products that are accessible and affordable to everyone and in the process

thereof, empower the lives of people especially all those in the remote rural

communities. With this vision in mind, the company identifies its mission which involves

providing efficient and responsive services via state-of-the-art research and

development. One way of doing this is proactively adapting to the continuous changes

in technology and manpower requirement. This move will not only ensure customer

satisfaction across all market segments but will it also help the company to be

continuously financially viable for the benefit of all stakeholders.

Since it started operations in 2008, the company has been pursuing its vision and has

established itself as a strong player in the renewable energy industry, particularly in the

rural development aspect of the industry. This is evident not only in its geographic

expansion but also in its financial growth; the company has been generating higher

sales compared to other periods and is profitable and liquid enough to meet its short-

term obligations.

Given One Renewable Energy’s macro-environment, competitive environment, and

resources, the best measure for achieving its goals and objectives would be to retain its

current strategy, which is the focused differentiation strategy. The company’s focus on

the unserved markets enables it to serve more households and expand to other regions

without competing directly with industry leaders, thus fulfilling its strategic and social

goals and objectives. Differentiation through offering customized products according to

customer specifications enables the company to generate sales and bring value to

customers since they are not forced to pay a premium for products that exceed their

needs or features that they do not have a use for.

6. REFERENCES AND APPENDICES

Gamble, J., & Thompson, A. A. (2009). Essentials of strategic management: the

quest for competitive advantage. Boston: McGraw-Hill Irwin.

Congress of the Philippines. (2008). Republic Act No. 9513: Renewable energy

act of 2008. Retrieved November 2, 2013 from

http://www.doe.gov.ph/doe_files/pdf/Researchers_Downloable_Files/EnergyPres

entation/renewable_energy_act.pdf

Financial ratio analysis. (2003). Financial Ratio, 1. Retrieved November 10,

2013, from http://educ.jmu.edu/~drakepp/principles/module2/fin_rat.pdf

History of sustainable energy. (n.d.). History of sustainable energy. Retrieved

November 10, 2013, from http://sustainablehistory.wordpress.com

Horizontal analysis (trend analysis) of financial statements. (n.d.). Accounting For

Management RSS. Retrieved November 10, 2013, from

http://www.accountingformanagement.org/horizontal-analysis-of-financial-

statements/

Vertical analysis of financial statements. (n.d.). Accounting For Management

RSS. Retrieved November 10, 2013, from

http://www.accountingformanagement.org/vertical-analysis-of-financial-

statements/

Intangible asset. (n.d.). Investopedia. Retrieved November 10, 2013, from

http://www.investopedia.com/terms/i/intangibleasset.asp

MANIEGO, P., & WEISCHER, L. (2011, July 3). The Right Mix: The Philippines

Achieving Its Renewable Energy Goals. Manila Bulletin, p. 1.

Tangible asset. (n.d.). Investopedia. Retrieved November 10, 2013, from

http://www.investopedia.com/terms/t/tangibleasset.asp

The 12 Ps. (n.d.). The 12 Ps. Retrieved November 10, 2013, from

http://www.slideshare.net/ChiefBeeKeeper/the-12-ps

What are the social objectives of business?. (n.d.). - Blurtit. Retrieved November

10, 2013, from http://business-finance.blurtit.com/131939/what-are-the-social-

objectives-of-business

Business philosophy. (n.d.). BusinessDictionary.com. Retrieved November 10,

2013, from http://www.businessdictionary.com/definition/business-

philosophy.html

Ideology. (n.d.). BusinessDictionary.com. Retrieved November 10, 2013, from

http://www.businessdictionary.com/definition/ideology.html