HYBRID AGREEMENT Business Project Management Report

For the fulfillment of LS127 Ateneo de Manila University March, 2009 Kin Gatmaytan Andrei Postrado Jeff Gonzales Marianne Bellosillo Sunhyung Shin Gavie Cecillo Mark Lim 1

TABLE OF CONTENTS

TITLE/TOPIC EXECUTIVE SUMMARY BUSINESS PLAN Highlights of Business Plan Deviations/Plan Revisions Key MileStones/ TimeTable Key Results/Areas BUSINESS IMPLEMENTATION Actual vs. Projected Key Results/Accomplishments Variance Analysis Major Challenges/ Problems Encountered and Management Response Actual Financial Statements STRATEGY EVALUATION Fred Davids Strategy Evaluation Framework Rumelts Criteria Porters 5-Forces Model Lessons Learned Future Prospects Growing Your Business: Improved Business Plan Projected Financial Statements Funding Plan

PAGE 3 6

17 19 20 20 20

22 22

23 26

28 29 31 33 33

42 44

EXECUTIVE SUMMARY
Gist of Business Concept The companys business, Hybrid Agreement shirts, is like the Spoofs brand, but instead of doing hilarious renditions of logos of popular designer brands, movies, and TV shows, we do hilarious and entertaining renditions of popular figures ( People, Things, real or virtual). But behind the hilarious appearance of the design of the shirts, we also try to imply the connection of the cultures of the world through our shirts and its designs. Other than the good possibility for steady quantitative growth seen in the research, our company would like to go into this business because we believe in the capabilities of each member to produce good ideas, innovations, and connections for this Shirt business. The company believes that the attractiveness of this business depends on the connection between the ideas and innovations of the businesses and the tastes and preferences of the people. The main factors for success are the design of the shirts and its SEE-ABILITY (Able to be seen by the customers) since it will be these designs that we will be selling. Given this bold statement, this industry is very attractive for new entrants who are ideas-and-innovations-rich. On the other hand, there are risks that one has to put into consideration like quantity of disposable income, consumer preferences and expectations, prices, costs, competitors, legal restrictions, taxes, culture, piracy, etc. Hence, for a newcomer to succeed, here are some of the factors to consider: affordable prices, wide and good relationships with distribution networks, design, high quality and low cost inputs, advertising and promotions, suitable target market, and most importantly, customer satisfaction. In the companys research, they saw that industry has been experiencing growth, though the growth rates are decreasing. This is due to the consumers' behavior of buying clothing. The consumers purchasing of these products are mainly because of impulse purchasing, very-low brand loyalty of consumers (buying a product depends mainly on the price, quality and trendiness aspects of it), and other factors like preference. Even though there are forecasts of strong competition, weak economy and weak growth, it is optimistic that the product will survive these external factors for as long as the flexibility and capabilities of the internal aspect of the company is in tact.

FINANCIAL FEATURES (at Php 249.99/shirt)

Year 2009 2010 2011 2012 2013 Profit Margin 20% 25% 30% 33% (Spread to Cebu) 32% (Davao)
Php 249.99 Financial Ratios: (without rental fess) Total Assets Turnover Gross Profit Margin Net Profit Margin Return on Total Assets Return on Stockholder's Equity 3.205246557 1 0.31198848 1 1

* For January 31, 2011, the company expects to have established a good relationship with its suppliers and thus, will reduce expenses.

Financial Requirements
For financial requirements, the company shall initially invest Php 59, 178 to be able to purchase raw materials (shirts), printing, provide for transportation, personnel, and royalty fees. As the company expects the business to grow, it will have to invest more to generate more income.

Major Achievements/Key Milestones

Given the companys commitment statement (the companys mission/vision), it plans to abide by it and use it as a measure to highlight its major achievements and milestones. So here are the companys expected milestones and achievements: 1. Establish the business as a sustainable and profitable business with a market share that is at par with the 2 direct competitors (Team Manila and Spoofs). 2. Expand the reach of our products to the Metro Areas in the Philippines (Manila, Cebu,

Davao) to promote connecting cultures. 3. Establish an accessible listening arm of the company to acknowledge the needs, wants, queries of the consumers (Assessment of our product, comments, suggestions, etc.). 4. Establish a rock-solid company composed of every single member and part of it. 5. Establish the image of the firm not only as a firm that connects cultures, but also as a strong advocate of Corporate Social Responsibility and Social Development.

BUSINESS PLAN (Original)

HIGHLIGHTS OF BUSINESS PLAN Business Model Value Proposition Fear to wear the same type and design of shirt as others do= Limit quantity per design and size of the shirt (10 pieces per shirt) Stand out, look good and fashionable o Business concept (mixing cultures through figures)

Market Segment Variable Region Age Gender Family Size Income Class Target Market Information NCR 13-24 Male and Female Average of 4 Top 2 classes of the Disposable Income Bracket (Php 225, 401 ++, and Ps 200,401-225,400) Occupation Education Social Class Use Occasion Students High School, College, and Post- Graduate Middle to Upper Class Any Occasion (depends on what our customers want to wear) Benefits Sought Individualism, Nice Designs, High Quality, Quality Prices Readiness Stage Attitude Toward Product Interested Enthusiastic

Value Chain Structure

SUPPLIER OF BLANK T-SHIRTS

ART DESIGNS

TRANSPORTATION

DESIGN PRINTING

STORAGE COST

SALES, MARKETING, AND DISTRIBUTION COSTS

Position in Value Network Competitors : Spoofs Limited, Team Manila Complementors : handful for men and women (accessories, other fashion garments) Suppliers : tie-ups with the blank shirt supplier Shirt Designers : tie-up with the design artists Customers : values which make the shirt valuable

Competitive Strategy 1. Overall cost leadership: The lowest production and distribution costs 2. Focus: Focus on serving a few market segments 3. Operational excellence: Leading the industry in price and convenience 4. Customer intimacy by segmenting the markets and continuous customer communication 5. Niche Strategy by trying to find one or more market niches that are big enough to be safe and profitable

Commitment Statement (Mission-Vision)

We are committed to being a leader in the fashion industry for the young generation beginning at the National Capital Region and then later expanding to the regional and national level for the next consecutive years. We advocate connecting cultures worldwide and how it influences our lives as well as others.

We are committed to listening to the needs and wants of our customers and we value their opinions to further improve ourselves to better serve them. We continuously delight them by offering quality shirts embodying the best trendy designs in the fashion industry and representing the best fads at best value.

We are committed to efficiently manufacture our products using technological improvements to maintain high quality. We, as a team, promote personal and professional enrichment through innovation, professionalism and respect.

We are committed to building a sustainable and profitable business with a secure share in the market. We nurture a team with shared values and corporate social responsibility. Objectives: To be able to develop, expose, and saturate the Metro Manila target market in 3 years To be able to acquire equipment for designing and printing shirts to cut down costs in the value chain network To be able to establish the listening arm of the businesss consumers through social networks To be able to distinguish more niches inside the area of our target market to hit the spot of what our target customers want and need

 To be able to develop the company itself as a company that will be efficient enough for the business. To establish the company as an advocate of corporate social responsibility and social development Design and Development Rationale Always try to be at par with the needs and wants of customers. The customers have to know that Hybrid Agreement is here.

Product Development Goals and Procedures

GOALS

PROCEDURE(S)

WHEN?

WHO SHALL GATHER DATA?

Continuous gathering of ideas for designs of shirts

Preferences (FGDs, Surveys, communication through social networks, comments and suggestions, etc.)

FGDS and SurveysAnnually (Starting Jan. 31, 2009) Communication through social networksPerpetual

The company

To be able to adapt to new developments in fashion (especially in shirts in terms of texture of material, forms of shirts like sleeveless, tight-fitted shirts, etc.)

Survey fashion trends (reading fashion magazines, watching fashion channels, secondary sources like Euromonitor, etc.)

Annually (Starting Jan. 31, 2009)

The company

To be able to adapt to new trends in culture in the Philippines

Look at the youth scenery in the Philippines through the various media (TV, Broadsheets, Magazines, Music, Films, etc.)

Annually (Starting Jan 31, 2009)

The company

Supplier and Distribution Network Our company will employ Selective distribution which will involve using a limited number of outlets in a geographical area to sell our shirt products. Choose the most appropriate or outlets that would make noise for our product and company and focus our effort on them. We will try our best to establish BRAND PREFERENCE as soon as possible so that consumers are prepared to "shop around" - in other words since they have a preference for our brand and price, they will search out the outlets that carry our products. Suppliers and Retailers For the initial stages of the companys product (October- January 31, 2009), we will outsource our shirts (raw materials and printing) from a garments company (CY Garments). For the launch period of the company (first week of October to January 31, 2009), Other than transacting through our family, friends, and through social networks, we will distribute and sell our product through the following schools and their corresponding events: Ateneo, La Salle, Miriam.

10

Market Testing and Development Diagnostic Test Market (DTM): For the period starting October to January 31, 2009, this time will be used to assess the success/failure of the firm for its first few months. By investing a relatively small capital at Php 70,000, this will serve as the Market Testing for the company.

11

Scheduling Market and Industry Business Concept, Future, Model, JuneSeptember, 2008 Formulation of Business Plan etc. Strategies Competitive Analysis Design and Devt Plan Selling Through Family and Friends October, 2008 Start of DTM/Trial/IMPLEMENTATION Generating initial revenues Assessment Selling Through Social Networks, Family, Friends, and Ateneo Christmas Bazaar on November 27-29 November, 2008 Continuation Generating revenues Assessment Personnel Hiring Selling through social networks, December, 2008 Start of retailing through the three schools/six events Assessment family, friends, Miriam, La Salle,

12

Selling through social networks, family, friends, Miriam Fair, Kabihasnan (La Salle), Ateneo HS Fair Assessment Evaluation Changes for the business and implementation for the subsequent years

January, 2009

Evaluation

Cost Structure 2008 300 units Raw Material Art Designs Transportation Design and Printing Storage Costs 90 10% royalty 40 33.33 0

Sales, Marketing, and Distribution 90 Personnel Total Cost per unit Php 16.00 Php296.26 (with rental, Php 197.26 without rental)

Risk Assessment Technical Risks Design Piracy CONTINGENCY PLAN: We will try to put our trademark logo into every shirt we produce. Designs are not accepted well CONTINGENCY PLAN: Penetrate another market to increase the

13

chances of that design to be purchased. Possibility of Copyright issues CONTINGENCY PLAN: First, check the image/text if it does violate copyrights, or not. If it does, abolish the design, even if it means cutting profits or gaining loses (NOTE: Use cost-benefit analysis to know which is better: court or not to court). If it does not, fight with the accuser. Economic Risks Priority of Buyers and Propensity to Spend CONTINGENCY PLAN: PLAN A-Lower prices, look for cheaper processes to produce, distribute, etc. PLAN B- Niche on a meaty market (Class A, etc.) Low growth rate in the Clothing and Footwear industry (and consequently the Specialized Shirts Sector) Forecast period to see weak constant value CAGR (Compound Annual Growth rate) of less than 5% in the industry CONTINGENCY PLAN: Make our products and company known. Establish brand image and loyalty, even though it can be hard in this industry (Euromonitor). Financial Risks Competing against well established competitors (Team Manila and Spoofs) and numerous unestablished competitors (Tiangge, bazaar, small stall shops, boutiques, etc.) CONTINGENCY PLAN: Build image through effective but low-orno cost advertisements and promotions like social networks. The company should let Manila know: Hybrid Agreement is here. Show that you agree.

14

Marketing Strategies and Competitive Analysis Marketing Objectives To increase sales by: Promote consumer awareness of the business and its product Establish company and product image Acquaint customers with our new product

Advertising Upon entry, the company will initially rely on low-cost advertising through social networks such as Friendster and Multiply, which the members of our target market are most likely to be familiar with Personal Promotion and Selling The company members will be assigned to personally promote the product to retailers and to consumers Competitive Strategy To achieve competitive advantage by: Offering our products at competitive prices Add value to our product by coming up with creative designs and using high quality materials Selling lower quantity of design and size

15

Management and Financial Plan Organizational Structure

BOARD OF DIRECTORS

Chief Strategy Officer

Chief Finance Officer

Chief Operating Officer

Director of Sales

Director of Marketing / Promotion s

Director of Creative and Design

Director of Customer Relations

16

Manpower Requirement Designers (our connections which can make our requirement of 10 designs) and Personnel for the 6 events (at least 4 people)

Overhead Budget Initial: Rent for the 6 events Given that the company wants to penetrate the bazaars and stalls in malls, it would require authentication from BIR/ DTI, and rental fees from the malls and other places stated above.

Capital Budget The initial stages will not require us to procure equipment because we outsourced our designing and printing (CY Garments) In the stage after January 31, 2008, the company would begin to plan to purchase printing equipment to cut costs significantly. After evaluation and assessment of the companys performance during the initial stages, it will decide whether to buy or not to buy. DEVIATIONS December 1-18, 2008 Given the insufficient funds that the company has (Php 14,000), it has decided to cancel the rentals and focus first on word-of-mouth and free social networks (Multiply). The business actually started December with a production of 28 shirts as a test market assessment and evaluation. Because of this, the total cost of the shirt will increase to Php340 New price= Php389.99 to be at par with the profit margins the company has set. Given that we produce more in quality than in quantity (Value proposition), the company believes that a higher price should be imposed to make up for the opportunity cost of not making lots of stocks of each design.

17

CY garments currently has insufficient requirements for the business to pull through. Insufficient available raw materials (black and white shirts) Designs have been hard for them to print RESULT= 30 shirts (3 designs, 2XL, 3L, 3M, 2S)

Beginning December 29, 2008, the company has changed its supplier from CY garments to Signs and Designs which is owned by the Wenceslao family. Changes in the cost structure are shown below (Figure 2-1) Due to the lower costs in raw material and design and printing, the company decided to lower the quantity per design to 6 (4 designs: 1XL, 2L, 2M, 1S) 2008 30 units Raw Material Art Designs Transportation Design and Printing Storage Costs 90 2009 24 units 80

10% royalty 10% royalty

0
250 0

0
200 0 0 0 Php 280

Sales, Marketing, and Distribution 0 Personnel Total Cost per unit 0 Php 340

Transportation expense continues to be zero because: The shirts are delivered to the company first hand. Given our testing stage, the company sold its shirts to the members family and friends during the Christmas season.

18

KEY MILESTONES/TIMETABLE The key milestones stated in the executive summary are still used by the company. Because the bazaar plans were cancelled and actual selling started December 2008, we formulated a new timetable: New Scheduling Selling Through Family and Friends December, 2008 Start of DTM/Trial/IMPLEMENTATION Generating initial revenues Assessment Selling through social networks, family, friends (word of mouth) January, 2009 Continuation of DTM Assessment

Continuation of selling through social networks, family, friends (word of mouth) Assessment February, 2009 End of DTM, EVALUATION Evaluation Changes for the business and implementation for the subsequent years

19

KEY RESULTS/AREAS For the key results and areas, the company based it on two criteria: the financial numbers (revenues and profits), and the targets set by the company (milestones, goals, and long term objectives)

BUSINESS IMPLEMENTATION (November 1, 2008- January 31, 2009) ACTUAL VS. PROJECTED KEY RESULTS -Shirt Breakdown: Period 1 from Dec. 1-18,2008: 30 shirts (3 designs= 2XL, 3L, 3M, 2S) Period 2 from Dec. 19, 2008- Jan. 14, 2009: 24 shirts (4 designs= 1XL, 2L, 2M, 1S) Period 3 from Jan. 14-31, 2009: 18 shirts (3 designs= 1XL, 2L, 2M, 1S)

Hybrid Agreement income statement

FIGURE 2-2

Php 389.99

Php 349.99

Php349.99 Php349.99

From Projected From Dec 1-18, 2008 December 19, 2008 to January 14, 2009

From January 15. 2009 to January 31, 2009

Total for the three periods

Revenues Gross Sales Sales Returns and Allowances Net Sales Cost of goods Raw materials shirts Printing Cost of goods sold TOTAL -27000 -9999 -36999 37998 -2700 -7500 -10200 1499.7 -1920 -4800 -6720 1679.76 -1440 -3600 -5040 1259.82 -6060 -15900 -21960 4439.28 0 74997 0 11699.7 0 8399.76 0 6299.82 0 26399.28 74997 11699.7 8399.76 6299.82 26399.28

Expenses

20

Transportation Rental Personnel TOTAL

-12000 -27000 -4800 -43800

0 0 0 0

0 0 0 0

0 0 0 0

0 0 0 0

Earnings Before Royalty Less: Royalty (10%) NET INCOME

24198 -2419.8 21778.2

1499.7 -149.97 1349.73

1679.76 -167.98 1511.78

1259.82 -125.98 1133.84

4439.28 443.93 3995.35

STATUS OBJECTIVES (Should be done within 3 years) In the 1. To be able to develop, expose, and saturate the Metro Manila target market in 3 process years.

Not yet 2. To be able to acquire equipment for designing and printing shirts to cut down costs in done the value chain network. Done 3. To be able to establish the listening arm of the businesss consumers through social networks (Multiply, friendster, facebook, etc.) In the 4. To be able to distinguish more niches inside the area of our target market to hit the process spot of what our target customers want and need. This can be done through constant communication of the company to its consumers. Not yet 5. To establish the company as an advocate of corporate social responsibility and social done devt through some of the designs of the shirts and through promotions and marketing. In the 6. To be able to develop the company itself as a team that will be efficient enough for the process business. This objective will be done by continuous assessment and evaluation of the company weekly and monthly. 7.

STATUS In the process In the process Done, but

LONG TERM GOALS To establish the business as a sustainable and profitable business with a market share that is just below the 2 direct competitors (Team Manila and Spoofs). Expand the reach of our products to the Metro Areas in the Philippines (Manila, Cebu, Davao) Establish an accessible listening arm of the company to acknowledge the needs,

21

should be

wants, queries of the consumers (Assessment of our product, comments,

developed suggestions, etc.). and expanded In the process Not yet done Maintain the internal firmness of the firm through various organization building sessions. Vigorously train the organization to integrate corporate social responsibility inside and outside the company.

VARIANCE ANALYSIS The deviations were made because: There were currently insufficient funds to meet the expected revenues, profits, and the planned activities (bazaars). CY garments had to process the shirts for one month so the business/Diagnostic Test Market started December 2008. Since Signs and designs provided lower costs (raw materials and printing) and their processing time is shorter (one week), the company switched suppliers/outsourcers

MAJOR PROBLEMS/ PROBLEMS ENCOUNTERED

One major problem seen by the company is the uncertainty of when the designs would be complete. The company does not pressure the artists to get their creative juices coming. But of course, the negative side of this is the delay of finishing designs for deadlines. For this problem, the company suggests to provide: Ideas Research materials Exposure to the Philippine Culture which is a diversity of cultures in itself. (With sufficient income) incentives for people who give designs early.

Another problem encountered was not being able to give more than the quantity provided per design. Some of our customers wanted to get more of a particular design (eg. Bomberman), but since our unique selling proposition is selling less quantities per design, we just tell our customers: Sorry but we will now make shirts of that design

22

anymore, but please do wait for our other designs. In the meantime, what popular and/or virtual figure would you suggest we do? With this statement, the company would be able to: Provide the we want more from you effect from customers. We establish the listening arm of the company to provide ideas, comments, and suggestions regarding our product.

The last problem that we had was trying to establish the company as a brand which mixes cultures. The team noticed that the designs were more memorable than the name of the business itself. What we intend to do is continuously try to expose our product through word of mouth (HA shirts!), putting logos on the t-shirt (the back of the shirt), and through the social networks. ACTUAL FINANCIAL STATEMENTS

Actual breakdown: 72 shirts

Hybrid Agreement Income statement From November 1, 2008January 31, 2008

Php349.99

Total for the three periods

Revenues Gross Sales Sales Returns and Allowances Net Sales Cost of goods Raw materials shirts Printing Cost of goods sold TOTAL -6060 -15900 -21960 4439.28 0 26399.28 26399.28

Expenses

23

Transportation Rental Personnel TOTAL

0 0 0 0

Earnings Before Royalty Less: Royalty (10%) NET INCOME

4439.28 443.93 3995.35

Hybrid Agreement Balance Sheet As of January 31, 2009

Assets Cash

1895.41 2099.94

Inventory

Liabilities NONE

Owner's Equity Hybrid Agreement, Capital

3995.35

24

Initial
Hybrid Agreement

From Dec. From From Dec. 118, 2008 19, 2008Jan. 14, 2009 Jan. 1431, 2009

Statement of Cash Flows (Direct Method)

Php389.99 Php349.99

Php349.99

Cash Flows from operating activities Cash receipts from customers Cash paid to suppliers Cash paid for printing Cash paid for transportation Cash paid for rental Cash paid for personnel Cash paid for royalty Net Cash Flows From Operating Activities Net Increase (Decrease) in Cash and Cash Equivalents Cash and cash receipts, beginning Cash and Receipts 0 -10200 -10200 4829.73 -10200 -5370.27 2141.81 -5370.27 -3228.46 5123.87 -3228.46 1895.41

0 -2700 -7500 0 0 0 0 -10200

11699.7 -1920 -4800 0 0 0 -149.97

7349.79 -1440 -3600 0 0 0 -167.98

5249.85
0 0 0 0 0 -125.98

4829.73

2141.81

5123.87

25

STRATEGY EVALUATION
Fred Davids Strategy Evaluation Framework 1. Review Underlying Bases of Strategy- Since the business does not have a point of comparison in terms of EFE and IFE, the team would just formulate the two matrix for future evaluation references.

EFE Matrix Key External Factors Opportunities 1. Industry growth 2. New trends in culture in the Philippines 3. Wide relationship with distribution networks Threats 4. Strong competition 5. Weak growth rate 6. Legal restrictions 7. Decrease in disposable income 8. Worsening economic conditions Total

Weight

Rating

Rated score 0.6 0.45 0.1

0.2 0.15 0.05

3 3 2

0.15 0.1 0.05 0.1 0.2 1

3 1 3 2 1

0.45 0.1 0.15 0.2 0.2 2.25

Total weighted score of 2.25 indicates that the company has mediocre external position. The company needs to take advantage of strong relationships with suppliers, adjust to the upcoming financial crisis, and the anticipated slower growth rates found through Euromonitor studies. IFE Matrix Key Internal Factors Strengths 1. Limited quantity per design and size of the shirt 2. Affordable price 3. Creative designs 26 0.1 0.15 0.2 3 3 4 0.3 0.45 0.8

Weight

Rating

Rated score

4. Advertising and promotion Weaknesses 5. Financial incapability 6. The length of time printing the shirts 7. The uncertainty of when the designs would be complete Total

0.1 0.2 0.1 0.15 1

2 2 2 2

0.2 0.4 0.2 0.3 2.65

Total weighted score of 2.65 indicates that the company has average internal position. The company has to stay firm with its USP, increase marketing efforts, and double efforts of standardizing processes for a more efficient and faster processing time.

2. Measure Organizational Performance

Given the Actual vs. Projected key results stated above especially the projected revenues and profits, it can evidently be seen that there is a significant difference (only 12% of the projected income was met).

3. TAKE CORRECTIVE ACTIONS

Given the three major problems stated above and the 12% meeting of the projected income, these are the corrective actions which are suggested: Increase productivity of the artists, the company would provide them: o o o o Ideas through communication and external environment analysis Research materials Exposure to the Philippine Culture which is a diversity of cultures in itself. (With sufficient income) incentives for people who give designs early. Appease the profit maximization problem (shortage of stock per design to maximize revenue), the company will: o o Employ the we want more from you effect from customers. We establish the listening arm of the company to provide ideas, comments, and suggestions regarding our product.

27

Establish the company as a brand which mixes cultures, what the team intends to do is continuously try to expose our product through word of mouth (HA shirts!), putting logos on the t-shirt (the back of the shirt), and through the social networks.

Establish a strong bond with our supplier, Signs and Designs.

Rumelts Criteria

Consistency

Hybrid Agreements strategies are consistent with the objectives and core values of the company. The strategies are patterned to meet the companys expected milestones and achievements. Although it wasnt able to meet the expected revenues and profits, the firm was able to establish the listening arm of the businesss consumers through social networks such as Friendster, Multiply, Facebook etc., was able to lessen the costs (from the switch of supplier from CY Garments to Signs and Designs), and members of the firm are continuously striving for improvement towards efficiency and success.

Consonance

Strategies that the company takes are also in accordance to the set of popular culture trends in the market. The designs are patterned according to the leading trend or popular icons in the industry in order to capture the attention of potential customers. Organization-building sessions are also conducted in order to maintain the internal firmness of Hybrid Agreement.

28

 Feasibility

The company also considers the availability of money and capital in pursuing their strategies. Also, time span and skills of the companys personnel are also taken into consideration in managing the business. Designers /Artists hired by the company are given ample time to complete their designs and Hybrid Agreement follows their plans according to the schedule created in the implementation of their strategies.

Advantage

Hybrid Agreement gains competitive advantage due to their unique and trendy designs. The companys monetary resources are invested in their shirt business and the skills of the company members are improved and put into good use by coming up with interesting designs that captures the attention of their target consumers. The companys positioning is targeted to people with the same age bracket that members of Hybrid Agreement belong which enhances their ability to interact and relate to their consumers.

Porters 5 Forces Rivalry Among Existing Competitors

There is high rivalry between Hybrid Agreement and its competitors due to the industrys low entry barriers. There are also large number of firms in the industry that compete with the same customers and resources. The competitors

29

in the industry are also highly diversified which also increases rivalry simple because predicting the rivals moves becomes more difficult. Thus, the pressure of competition increases. Among the companys competitors are Team Manila and Spoofs.

Threat of Substitute Products or Services

There is medium threat of substitute products for Hybrid Agreement. Although there are many competitors in the industry that produces originaldesigned shirts, the designs that the company produced are unique and one of a kind. The designers or the artists of the t-shirt designs are liable to Hybrid Agreement so that all the designs that they make solely belongs to Hybrid Agreement alone.

Bargaining Power of Buyers

Bargaining power of buyers is weak because of the unique products that Hybrid Agreement sells. They cannot easily find another product that has the same unique design that the company offers to them. Aside from that, the company also limits the number of shirts printed with the same design.

Bargaining Power of Suppliers

The bargaining power of suppliers is low due to large number of suppliers available in the industry. The costs for switching to other suppliers are low and suppliers provide commodity products or unspecialized services which does not

30

give them an edge or power over the companies that need them. To prove this point, Hybrid Agreement was able to switch from CY Garments to Signs and Designs relatively easy.

Threat of New Entrants

Hybrid Agreement also encounters high threat of new entrants because of low entry barriers in the industry. There is low capital needed in order to compete in the industry. There are also inadequate measures from the authorities in the Philippines to stop piracy. Aside from that, there is also easy access to

distribution channels and there are common technology available to start a business and compete in the industry.

Lessons Learned: Throughout the teams experience, these were the most important lessons that we have learned: 1. Our business intuitions and instincts should always be backed up by market research and analysis before the actual implementation of our project. This has been important to us because knowing which segment of the market to target and their needs is the actual driving force behind the shirt designs that we have created. 2. There can be unexpected events that may occur and lead to changes in our business plans such as the change of the supplier, insufficient capital, financial crisis, etc. With these unexpected events, the company must learn how to adapt and react to trends and movements in the world. 3. Another lesson that we have learned from our experience is that results of our project

31

may deviate from the results that we have been expecting. Expectations are really incentives for the company to achieve, but it is also a measure of how the company should adjust its present situation to reach its expectations and even surpass it. 4. Another important lesson that we have learned is the value of customer loyalty and satisfaction. We have noticed that the people who liked our designs not only purchased more from us, they also spread the word to their family and friends, further increasing our customers. 5. We have learned the value of teamwork. Our success as a team would not have been possible without the inputs and contributions of each member. Each of us have unique skills that have been combined to produce the best results. 6. Money is King. Without money, a business cannot move. 7. Our business seems to not maximize our profit because of the limited quantity per design and price-setting at a cheaper price than our competitors. Because we wanted to to be a different company, it entails a lot of sacrifices like giving up the maximum profit possible and potential customers. As time passes by, the company hopes to establish itself as a T-Shirt Giant because of our innovative but risky project. The lesson here is to take risks. 8. Time for thinking and coming up with designs really vary. The artists think of ideas suddenly at times and too long at times. It takes patience to let out the creative juices. But of course, patience should be backed up with motivation.

32

FUTURE PROSPECTS
Growing Our Business: IMPROVED BUSINESS PLAN To further take our business to the next level as a sustaining entrepreneurial venture, here is our improved business plan:

Business Model Value Proposition Fear to wear the same type and design of shirt as others do= Limit quantity per design and size of the shirt (6 pieces per shirt) Stand out, look good and fashionable o Business concept (mixing cultures through figures)

Market Segment- Same

Value Chain Structure- Same

In the subsequent months and years, we expect that transportation will incur a cost on the business and so as storage. But for these initial stages, we will take advantage of no costs of transportation (shirts are delivered to us, and we sell through word of mouth, through family and friends, and through social networks), and storage (relatively small number of stocks).

Position in Value Network Competitors : Spoofs Limited, Team Manila (the company will survey the external environment looking for other competitors which are on the rise [eg. Analog Soul]) Complementors : handful for men and women (accessories, other fashion garments) Suppliers : tie-ups with the blank shirt supplier Shirt Designers : tie-up with the design artists Customers : values which make the shirt valuable

33

Competitive Strategy Overall cost leadership: Trying to achieve lower production and distribution costs than our competitors for further exposure of our products and brand. AFTER we have established our brand and product in 3 years, a further evaluation will take place to assess the next move of the company Focus: Focus on serving a few market segments (See Market Segment) Operational excellence: Leading the industry in price and convenience Customer intimacy by segmenting the markets and continuous customer communication Niche Strategy by trying to find one or more market niches that are big enough to be safe and profitable

Commitment Statement (Mission-Vision)- Same Objectives: Same

Design and Development Rationale Always try to be at par with the needs and wants of customers. The customers have to know that Hybrid Agreement is here. After establishing presence, the company will establish its dominance.

Product Development Goals and Procedures

GOALS

PROCEDURE(S)

WHEN?

WHO SHALL GATHER DATA?

Continuous gathering of ideas for designs of shirts

Preferences (FGDs, Surveys, communication through social networks, comments and

FGDS and SurveysQuarterly (Starting Apr.

The company

34

suggestions, etc.)

1, 2009) Communication through social networksPerpetual

To be able to adapt to new developments in fashion (especially in shirts in terms of texture of material, forms of shirts like sleeveless, tight-fitted shirts, etc.)

Survey fashion trends (reading fashion magazines, watching fashion channels, secondary sources like Euromonitor, etc.)

Quarterly (Starting Apr. 1, 2009)

The company

To be able to adapt to new trends in culture in the Philippines

Look at the youth scenery in the Philippines through the various media (TV, Broadsheets, Magazines, Music, Films, etc.)

Quarterly (Starting Apr 1, 2009)

The company

Supplier and Distribution Network Suppliers and Retailers For the initial stages of the companys product (December 1, 2008December 1, 2011), we will outsource our shirts (raw materials and printing) from a garments company (Signs and Designs). If time and money will permit, the company will examine other options on or before December 1, 2011). For the first year of the company (December 1, 2008 to December 1, 2009), Other than transacting through our family, friends, and through social network.,

35

 On the second year, will distribute and sell our product through the following NCR schools and their corresponding events:

SCHOOLS

EVENTS La Salle Greenhills Christmas Fair, DLSU Christmas Fair

COSTS Php 4500 each event

ADMU Blue Christmas 2008, AHS Fair

Php 4500 each event

MC Christmas Fair, MC High School Fair

Php 4500 each event

On the third year, we will target the bazaars in the malls which are frequently visited by our target market. Proper research will be done to verify our intuitions (Eastwood, Greenhills, Greenbelt, etc.) At this time, we will be able to develop, saturate, and expose the NCR target market of the company

Market Testing and Development The Diagnostic Test Market might be done, but that doesnt mean we will not

36

monitor the market anymore. We will continuously follow the product development goals and procedures to be at par with the market trends.

37

New Scheduling Selling Through Family and Friends (word of mouth), Social networks Feb 1, 2009 Continuation of Business Generating revenues Assessment Selling through social networks, Continuation of Business, April 1, 2009 Research and Development (also on July 1, October 1, and January 1) Assessment family, friends (word of mouth)

Continuation of selling through social networks, family, friends (word of mouth) December 1, 2009 Continuation of Business, Start of School saturation (Ateneo, La Salle, Miriam etc.) Evaluation Assessment

Continuation of selling through social networks, family, friends (word of mouth) December 1, 2010 Continuation of Business, Start of School Saturation Assessment Evaluation Changes for the business and

38

implementation for the subsequent years

Cost Structure 2009 2010 600 shirts 75 10% royalty 40 150 0 (rent for 6 20 100 2 100 (rent+ 2011 1200 shirts 70 10% royalty

432 shirts
Raw Material Art Designs 80 10% royalty Transportation Design and Printing Storage Costs 0 200 0

Sales, Marketing, and Distribution 0

events)45 authentication from DTI, etc.) Personnel 0 (2 persons per event) 15.28 Total Cost per unit Php280 Php 325.28 Php307.28 15.28

Risk Assessment- Same

Marketing Strategies and Competitive Analysis Marketing Objectives To increase sales by: Promote consumer awareness of the business and its product Establish company and product image Acquaint customers with our new product

39

Advertising Upon entry, the company will initially rely on low-cost advertising through social networks such as Friendster and Multiply, which the members of our target market are most likely to be familiar with (December 1, 2008- December 1, 2009) In the subsequent year, the company would rely on advertising within school affairs (December 1,2009- December 1, 2010) In the final projected year, the company would rely on advertisements within the bazaars (December 1, 2010- December 1, 2011) Personal Promotion and Selling This activity will always be part of the company with every employee and member. The company members will be assigned to personally promote the product to retailers and to consumers. Competitive Strategy To achieve competitive advantage by: Offering our products at competitive prices Add value to our product by coming up with creative designs and using high quality materials Selling lower quantity of design and size

Management and Financial Plan Organizational Structure- Same Manpower Requirement Designers Personnel for the school events (12 people) on the second year and the bazaars on the third year Overhead Budget First year: None Second Year: School Events

40

 Third Year: Malls/ Bazaars (Given that the company wants to penetrate the bazaars and stalls in malls, it would require authentication from BIR/ DTI, and rental fees from the malls and other places stated above.)

Capital Budget The initial stages will not require us to procure equipment because we outsourced our designing and printing (Signs and Designs) In the stage on or before December 1, 2011, the company would begin to plan to purchase printing equipment to cut costs significantly. After evaluation and assessment of the companys performance during the initial stages, it will decide whether to buy or not to buy equipment and materials on its own.

41

Projected Financial Statements 2009: 432 shirts (72 designs= 2XL, 3L, 3M, 2S) 2010: 600 shirts (100 designs= 1XL, 2L, 2M, 1S) 2011: 1200 shirts (200 designs= 1XL, 2L, 2M, 1S) Year 2009 2010 2011 2012 2013 Profit Margin 20% 25% 30% 33% (Spread to Cebu) 32% (Davao)

NOTE: To get the number of shirts for 2009, the team estimated the shirts sold per month for two months (72x6=432)

Hybrid Agreement income statement

Php 349.99

Php 349.99 432 shirts

Php 409.99 600 shirts

Php385.99 1200 shirts

From December 1, 2008- January 31, 2009

As of December 1, 2009

As of December 1, 2010

As of December 1, 2011

Revenues Gross Sales Sales Returns and Allowances Net Sales Cost of goods Raw materials shirts Printing Cost of goods sold TOTAL -6060 -15900 -21960 4439.28 -34560 -86400 -120960 30235.68 -45000 -90000 -135000 110994 -84000 -12000 -96000 367188 0 26399.28 0 151195.68 0 245994 0 463188 26399.28 151195.68 245994 463188

42

Expenses Transportation Rental Personnel Storage TOTAL 0 0 0 0 0 0 0 0 0 0 0 27000 9168 0 36168 0 120000 18336 2400 140736

Earnings Before Royalty Less: Royalty (10%) NET INCOME

4439.28 443.93 3995.35

30235.68 -3023.57 27212.11

74826 -7482.6 67343.4

226452 22645.2 203806.8

From Jan. Hybrid Agreement 14- 31, 2009 Statement of Cash Flows (Direct Method)

As of Dec. 1, 2009

As of Dec. 1, 2010

As of Dec. 1, 2011

Php349.99 Php349.99

Php409.99

Php 385.99

Cash Flows from operating activities Cash receipts from customers Cash paid to suppliers Cash paid for printing Cash paid for transportation Cash paid for rental Cash paid for personnel Cash paid for royalty Net Cash Flows From Operating Activities 245994 -84000 -12000 -2400 120000 18336 -7482.6

5249.85 151195.68 -34560 -86400 0 0 0 -125.98 -45000 -90000 0 -27000 9168 -3023.57

463188 0 0 0 0 0 -11845.2

115836.13 -22995.89 451342.8

43

Net Increase (Decrease) in Cash and Cash Equivalents

115836.13 -22995.89 -3228.46 119064.59 119064.59 142060.48

1775.4 142060.48 140285.08

451342.8

Cash and cash receipts, beginning

-140285.08

Cash and Receipts

311057.72

Hybrid Agreement Balance Sheet

As of Jan. 31, 2009

As of Dec. 1, 2009

As od Dec 1, 2010

As of Dec. 1, 2011

Assets Cash

1895.41 2099.94

27212.11

67343.4

203806.8

Inventory

Liabilities NONE

Owner's Equity Hybrid Agreement, Capital

3995.35

27212.11

67343.4

203806.8

Funding Plan For the first year, the team will use its own investments to continue on with the business. For the second year, to get financial leverage, we will assess the best way to further enhance the company (loan or not to loan). And for the final year of the initial stage, it would really depend on whether the company is able to meet its own objectives and expectations.

44

Sources: David, Fred. An Introduction to Strategic Management: Eleventh Edition. Previous pass (Hybrid Agreement Business Plan Formulation of the first semester) Discussions and consultations in class

45