Universal Robina Corporation

I. Background of the Study

Organization is a social unit of people that is structured and managed to meet a need or to pursue collective goals. Any operating organization should have its own structure in order to operate efficiently. For an organization, the organizational structure is a hierarchy of people and its functions. The organizational structure of an organization tells the character of an organization and the values it believes in. Organizational structure determines how the roles, power and responsibilities are assigned, controlled, and coordinated, and how information flows between the different levels of management.

It consists of activities such as task allocation, coordination and supervision, which are directed towards the achievement of organizational aims.

Therefore, when you do business with an organization or getting into a new job in an organization, it is always a great idea to get to know and understand their organizational structure. Organizational structure affects organizational action in two big ways. First, it provides the foundation on which standard operating procedures and routines rest.

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Second, it determines which individuals get to participate in which decision-making processes, and thus to what extent their views shape the organization’s actions. Depending on the organizational values and the nature of the business, organizations tend to adopt one of the following structures for management purposes.

Although the organization follows a particular structure, there can be departments and teams following some other organizational structure in exceptional cases. Sometimes, some organizations may follow a combination of the following organizational structures as well.

To further understand the concept of organizational structure, the group will research on the organizational structure of a known company, Universal Robina Corporation, and analyze how this organizational structure helped in the success of the company.

II. Company Profile

Full Name: UNIVERSAL ROBINA CORPORATION
Head quarters: 43/F Robinson-Equitable Tower ADB Ave cor Poveda St Ortigas Ctr; Pasig; National Capital Region; 1600 Legal Address: 110 E Rodriguez Ave Bagumbayan; Quezon City; National Capital Region; 1110 Legal Form: Public Limited Company

Operational Status: Operational
Financial Auditors: SGV & Co. (2011)
Incorporation Date: September 28, 1954
Total Employees: 8,938
Tel: (63 2) 6337631

Universal Robina Corporation (URC) is among the Philippines' pioneers in the food manufacturing business having been operating in the country for over 40 years. URC is engaged in manufacturing, marketing and the distribution of a wide range of consumer food products such as snacks, candies, biscuits and crackers, instant coffee, instant noodles, tomato sauces, pasta, and ice cream, among others. Universal Robina Corporation (URC) traces its beginnings all the way back to 1954. John Gokongwei was doing very well then as a trader/importer. He had learned the trade when his father died before the war, and had worked hard through the war and postwar years to prosper. However, while he thrived, he took a long hard look at his company, and correctly predicted that trading would remain a low-margin business.

On the other hand, a successful manufacturer controlling its own production and distribution would command more profitable margins. Mr. John decided to construct a corn milling plant to produce glucose and cornstarch, Universal Corn Products (UCP), the first linchpin of the company that would become the URC we know today. For a time, business was good. However, Mr. John was still looking ahead, working with an eye towards the future. While the business was doing very well, it was producing essentially a commodity, which a customer could easily access elsewhere. To stay ahead in the game, Mr. John had to diversify by producing and marketing his own branded consumer foods, similar to the multinational companies in the country like Nestle and Procter & Gamble.

Thus, in 1961, Consolidated Food Corporation was born. Their first ‘home run’ product was Blend 45, the first locally-manufactured coffee blend, dubbed as the “Pinoy coffee”. This became the largest-selling coffee brand in the market, even beating market leaders Café Puro and Nescafe. After coffee came chocolates. Nips, a panned chocolate was a staple of Filipino childhood.

In 1963, Robina Farms started operations, beginning with poultry products. This was also the beginning of the vertical integration of the Gokongwei businesses, as the farms would be able to purchase feeds from UCP in the future. Later that decade, Robichem Laboratories would be put up, to cater to the veterinary needs of the farms businesses. Robina Farms expanded as it entered the hogs business in the latter part of the 70s.

1966 saw the establishment of Universal Robina Corporation, which pioneered the salty snacks industry through Chiz Curls, Chippy, and Potato Chips, under the “Jack ‘n Jill” brand. Other snack products would follow over the years, as the company successfully introduced market leaders like Pretzels, Piattos, and Maxx.

The coming decades saw more acquisitions and expansion. In the early 1970s, the family entered the commodities business through the formation of Continental Milling Corporation, for flour milling and production. The late 1980s brought the acquisition of three sugar mills and refineries, under URC Sugar. These two businesses provided stable cash flows, and allowed for further vertical integration in the supply chain, to help URC weather any volatility in the cyclical commodities markets. In line with this strategy, the late 1990s saw the entry of URC into the plastics business, through URC Packaging.

While the businesses became more diversified, the companies were slowly integrated in order to streamline and minimize costs. In 2005, the present structure of the group was completed. All the different companies are now organized under the Universal Robina Corporation umbrella, divided into 3 focused groups: * the Branded Consumer Food Group, comprised of BCFG Domestic (including packaging) and International * the Agro-Industrial group, comprised of Universal Corn Products, Robina Farms, and Robichem * and the Commodities group, with the Sugar and Flour divisions

Company Analysis:

According to the Consolidated - Non-Audited financial statement for the first three cumulated quarters of 2012, total net operating revenues increased with 6.92%, from PHP 50,577,625 thousands to PHP 54,080,025 thousands. Operating result increased from PHP 5,454,074 thousands to PHP 6,801,796 thousands which means 24.71% change. The results of the period increased 24.45% reaching PHP 5,745,104 thousands at the end of the period against PHP 4,616,296 thousands last year. Return on equity (Net income/Total equity) went from 10.93% to 11.11%, the Return On Asset (Net income / Total Asset) went from 6.57% to 7.42% and the Net Profit Margin (Net Income/Net Sales) went from 9.13% to 10.62% when compared to the same period of last year. The Debt to Equity Ratio (Total Liabilities/Equity) was 52.88% compared to 66.48% of last year. Finally, the Current Ratio (Current Assets/Current Liabilities) went from 1.68 to 2.15 when compared to the previous year.

III. Body of the Report

Being one of the top food manufacturing businesses, Universal Robina Corporation has the following goals:
* To Lead among world-class brands
* To be Customer-focused
* To be the lowest cost organization
* To have innovative new products and processes
* To have inspired and competent Human Resources
* To be a responsible business and community partner
* To give superior return to shareholders

In line with these goals are the core values the Company believes each member must have in order to attain the set objectives and standards. These core values are innovation, proactivity, professionalism, responsibility and cost leadership. * Innovation- open to changes and respectfully challenges the status quo. * Proactivity- ability to act with a sense of urgency and make a difference, and take responsibility for and ownership of the quality of our work. * Professionalism- pursue excellence and self improvement while possessing integrity and discipline. * Responsibility. We team up with our co-workers, and together seek mutually beneficial long-term partnerships with the trade suppliers and service providers, government and community. * Cost leadership- a culture that safeguards resources against wastage and rewards efficiency. Pursuing growth and development opportunities ensuring responsibility in maximizing cost and resource effectiveness.

Top Officials of URC

John L. Gokongwei, Jr. founded URC in 1954 and has been the Chairman Emeritus of URC effective January 1, 2002. He had been Chairman of the Board until his retirement and resignation from this position effective December 31, 2001. He continues to be a member of URC’s Board and is the Chairman Emeritus of JG Summit and certain of its subsidiaries. James L. Go is the Chairman and Chief Executive Officer of URC. He had been President and Chief Executive Officer and was elected to his current position effective January 1, 2002 upon the resignation of Mr. John Gokongwei, Jr. as Chairman. He is also the Chairman and Chief Executive Officer of JG Summit and as such, he heads the Executive Committee of JG Summit. Lance Y. Gokongwei is the President and Chief Operating Officer of URC. He had been Executive Vice President and was elected President and Chief Operating Officer effective January 1, 2002. Patrick Henry C. Go is a director and Vice President of URC.

Frederick D. Go has been a director of URC since June 2001. He is the President and Chief Operating Officer of RLC. He received a Bachelor of Science degree in Management Engineering from the Ateneo de Manila University. Johnson Robert G. Go, Jr. was elected director of the Company on May 5, 2005. He is the President and Chief Operating Officer of Litton Mills, Inc. effective August 28, 2006, the textile manufacturing business of JG Summit. He received a Bachelor of Arts degree in Interdisciplinary Studies (Liberal Arts) from the Ateneo de Manila University.

Robert G. Coyiuto, Jr. - director of URC. He is also an independent director of RLC. He is Chairman of Prudential Guarantee & Assurance, Inc., PGA Cars, Inc., and Nissan North Edsa, and Vice-Chairman of First Guarantee Life Assurance Company, Inc. He is also President and Chief Operating Officer of Oriental Petroleum and Minerals Corporation and President of PGA Sompo Japan Insurance, Inc. He is Chairman of Pioneer Tours Corporation and a director of Canon Marketing (Philippines) Inc. and Destiny Financial Plans.

Senior Officers

Cornelio S. Mapa – Executive Vice President, URC BCFG Philippines Patrick O. Ng – Executive Vice President, URC International Eugenie M.L. Villena – Senior Vice President – Chief Financial Officer BJ M. Sebastian – Senior Vice President – Chief Strategist Constante T. Santos – Senior Vice President – Corporate Controller Nicasio L. Lim – Senior Vice President – Corporate Human Resources Geraldo N. Florencio – First Vice President – Controller Ester T. Ang – Vice President – Treasurer

Rosalinda F. Rivera – Corporate Secretary

IV. Conclusion

Every organization needs a structure in order to operate systematically. The organizational structures can be used by any organization if the structure fits into the nature and the maturity of the organization. In most cases, organizations evolve through structures when they progress through and enhance their processes and manpower. It is important to deal with structure early in the organization's development. Structural development can occur in proportion to other work the organization is doing, so that it does not crowd out that work. And it can occur in parallel with, at the same time as, your organization's growing accomplishments, so they take place in tandem, side by side.

This means that you should think about structure from the beginning of your organization's life. As your group grows and changes, so should your thinking on the group's structure. URC has a strong market position in the Philippines. The company is a dominant player with leading market shares in savory snacks, candies and chocolates, and is a significant player in biscuits market, with leading positions in cookies and pretzels, and tea. It is the second largest player in the coffee and noodle business. The company has built strong market positions in different segments based on its strong brand portfolio. Strong market position combined with well known brands provides the company with competitive advantage and also enables it to foray into new markets with ease.

URC focuses on R&D for developing new products, line extensions for existing products and also to introduce improvements in production and quality control processes. It also emphasizes on improving packaging and carries out R&D to customize products to meet the local needs and tastes in the international markets. In addition, the company hires experts from all from different parts of the world to assist its R&D staff. Strong focus on R&D enables URC to develop innovative products, leading to strong sales. In spite of the company having operations in China, Indonesia, Vietnam, Thailand and other countries the company is heavily dependent upon Philippines market.

The company's small scale of operations may turn out to be a disadvantage in the fiercely competitive market. Lack of scale also reduces the bargaining power of URC. Also, high dependence on Philippines makes URC highly sensitive to the demand dynamics of this region and restricts its income growth to the local economy. Moreover, the company is also exposed to risks associated with the economy, while its competitors with significant operations in other countries are guarded against such a risk. The company has recorded strong performance in all its segments. The performance of URC reflects the financial stability and growing economy of the company, which is due to the excellent performance of its people and their innovative ways of thinking.

V. Recommendation

The greatest challenge facing business leaders in their drive for growth is complexity. As a business grows it finds it hard to avoid becoming more complex; and complexity ultimately makes a business less competitive. The process of increasing complexity was worst during the good times, when firms and management were faced with so much opportunity for growth that it was convenient for them to ignore (or hide) the organizational inefficiency they were creating by growing. Organizational structures with too many layers (tall structures) are an indication of firms that have grown too complex: “Layer upon layer of management resulting in bottlenecks, which create a detrimental effect not only on the financial operations of the organization but also for human resources.

Of course organizations need rigorous standards and cross-checks in their systems and processes, but they also need room for discretion, innovation, creativity and empathy - that very real human element which makes the most tremendous difference in successful companies.” Keep things simple and avoid organizational complexity at all costs. “Coordination, collaboration and communication are the key elements of radical simplification….delegate, hire, eliminate” Therefore the following recommendations are made.

The organizational structure should be made clear. When it comes to improving the structure of a company it is important to communicate the proper flow of information to everyone in the organization. Develop and distribute departmental hierarchy flow charts to everyone so that the managers and their responsibilities are clearly understood by everyone. When the company develops a decision making process it should be made sure that the process is understood by the entire organization, and training classes on work flow must be held if needed. Communication is one of the most powerful tools an organization has to work with, and communication regarding the flow of information and the structure of the company can help to reduce confusion and streamline the process.

Next, the organization must use management as support. Decision making for a company is usually reserved for the executives of the company. Middle managers should take on more of a support role to the decisions made by the company, rather than trying to dictate anything to employees. When managers are handed a task, they should pool the resources necessary to assist their employees to get the job done. An effective manager should be the go-between for employees and executives, and a facilitator that is assigned a task to complete.

Lastly, the organization must put checks in place. It is one thing to create an effective flow of information, and it is another thing to ensure that the information is being properly received and instructions are being carried out. When implementing a work flow plan it is essential to include a feedback portion, and a check on progress. Avoid creating systems that point blame at one group or one person, but rather look to improve the structure that broke down and created the problem in the first place. A constant system of checks and feedback can help to ensure that the corporate structure is working properly and that all information is being received.