CASE THREE: TOTO, LTD,, LEADING MANUFACTURER OF BATHROOM TOILET & FIXTURES \"A STRATEGIC ALLIANCE GOING GLOBAL TO THE PI-HLIPPINES\" In 1992 with the new transition of Philippine government elected President Fidel V. Ramos, The rst three years of his administration were characterized by an economic boom, technological development, political stability and efcient delivery of basic needs to the people (Presidency FVR, 1992). Had in his agenda to help improve the Philippine economy among the highlights by inviting more foreign direct investment to come in to the Philippines business sector. With its ASEAN Economic Integration Community, Siam Cement Group Public Ltd. from Thailand had its ways of a humble beg'nning with the interest and pledged to the Philippines towards Foreign Direct Investment. The Siam Cement Group Public Company Limited (SCG; SET: SCC) is the largest and oldest cement and building material company in Thailand and Southeast Asia (Global Cement, 2013) , In 2016, SCG was also ranked as the second largest company in Thailand and the 604th largest public company in the world by Forbes (F orbes, n.d.). Consolidated revenues were 450 billion baht (US$14 billion) in FY2017 (PDF, Annual Report 2017), SCG, a leading business conglomerate in the ASEAN region, has committed itself to conducting business in line with good corporate governance and sustainable development principles throughout 100 years The Group's longstanding tradition of learning, adjustment and development in all areas has enabled SCG to survive the wave of crises and challenges and earn widespread recognition as a role model for other businesses, both locally and internationally. SCG was established in 1913 following a royal decree of His Majesty King Rama VI to produce cement, the main building material for infrastructure projects that greatly contributed to the progress of the country during that period, Since its founding, SCG has grown continually and diversied into three core businesses, namely SCG Cement-Building Materials (cement, steel, roong, gypsum board, ceramic tile, sanitary ware toilet, lavatory, urinal, accessory, sanitary tting, bathtub, faucet, shower tting, pipes, kitchen sink, valve, sensor, washlet, glass, mirror, water heater, others); SCG Packaging and SCG Chemicals. Throughout the past 102 years, SCG has been relentless in organizational and employs 54,000 employees for development which helps drive innovation in products, services, processes, and business models to create higher value and address the needs of all parties concerned. Moreover, the Group is committed to contributing to the sustainable progress of the communities where SCG operates and pledges to become ASEAN's business leader as well as a role model in corporate governance and sustainable development. While to the years until 1995, its pursuing success doing international trade in the Philippine In those years Mariwasa Manufacturing, Inc. is the market leader of vitreous ceramic floor tiles market exclusively to Mariwasa Manufacturing, Inc. up to the birth of Mariwasa Siam Ceramics, and wall tiles in the Philippines. Adapting to Foreign Market Entry Modes, SCG's had their Inc. had been a passageway through Siam Cement Group Public Lid ways discreetly and tactfully in buying their mutual interests from getting shareholdings with Mariwasa Manufacturing, Inc. Getting inside to the Board seat and manifesting the managerial Furthermore, Philippines have been a potential feasible market in the SouthEast Asian region. and administrative positions in the Mariwasa Manufacturing, Inc. that gave way to the There are studies expanding of water-saving project toward other Asian nations. In developing Diversification Marketing Strategy of the company to carry bathroom related product lines such countries, progress of urbanization and modernization increases per capita water & energy as Bathroom Fixtures: Toilet, Lavatory, Accessory, Faucets, Showers & Fittings to add on with demands greatly ( Yasutoshi, 2014) the present market distribution set up of MMI Year MMI Imports Approx. With the two of TOTO Lid.'s principal subsidiaries in Thailand, The Siam Sanitary Fittings Co., Revenue MMI/SMTI Bathroom Lid. (Thailand) and Siam Sanitary Ware Co., Lid. (Thailand). The two companies manufacture YoY Philippine Gross Revenue Related Imports sanitary ware and faucet & fitting products. The company was founded in 1986 and is based in Peso (,000) YoY Philippine % Sales Bangkok, Thailand. Both companies operate as a subsidiary of The Siam Cement Public Peso (rounded in Percentage Company Limited and with the direct technical affiliation of TOTO, Lid. of Japan. With TOTO Millions) Increase/Decrease Group of Japan's shares in Siam Sanitary Ware Co Lid (SSW), and Siam Sanitary Fittings Co Lid (SSF) has been sold to SCG. This has boost SCG's stakes in the two companies to 71.4 per 1993 581,681 *55 9% cent (from 35.7 per cent) and 90.6 per cent (from 44.8 per cent), respectively (The Nation, 2013). 1994 742,688 *88 1% 1995 924,450 120 2% The best recommendation and to offer nonetheless to import TOTO brands bathroom related 1996 ,306,930 *200 5% product lines from TOTO Lid. of Japan and COTTO brands from SSW and SSF of Thailand. 1997 *400 1998 *604 TOTO Ltd. is the world's largest toilet manufacturer. It was founded in 1917, and is known for 1999 *642 manufacturing of ceramic plumbing products, developing the Washlet and derivative products. 2000 *694 The company is based in Kitakyushu, Japan, and owns production facilities in nine countries. Its 2001 *904 revenues amounting to Yen432B (US$3.9B) annually with 38,000 employees with area served worldwide and especially Asia (Financial Results, Ended December 31, 2018) (Figure 1. Data Consolidated, Source Taken from Philippine Business Profiles and Perspectives, Inc. and Center for Research Communications, Top 5000 Corporations Growth Leaders While in 1993, Mariwasa Manufacturing, Inc., considering its diversification of its product lines Copyright @1993-2000) *Actual data should be taken from SEC, however as per slides SMT, mainly from Ceramic Floor and Wall Tiles had been eventually, doing importation of exclusive Inc. Net Sales Taken. product lines brand from TOTO, Lid. in order to compete locally produced Philippine known brands, (American) Standard, Goldvest, Royal Tern and anticipation upcoming of HCG SMT, Inc. Net Sales Hoecheng Taiwan Group) in the Philippines Php Peso 700 Further overseas expansion came in the 1990's. U.S. communities that were instituting 600 regulations mandating water-saving low-flush systems. TOTO's 1.6 gallons/6 litters-per-flush 500 toilets perfectly filled this increasing need and market demand. 400 For this reason, TOTO Lid. of Japan had been with Strategic Alliance with SCG together with 300 their existing The Siam Sanitary Fittings Co., Ltd. (Thailand) and Siam Sanitary Ware Co., Ltd. 200 (Thailand) both international and global business operations manufacturing & producing sanitary 100 faucets & fittings and bathroom sanitary wares product lines were successful enough exporting 0 to the Philippines. '96 '97 '98 '99 00 01 02 '03 Years Figure 2. Source Taken, Slide 24 microsoft/powerpoint, Bilog BOD Reports, 2000, New World Hotel, Makati Philippines)References: The ceramics and sanitary ware industry in the Philippines have surged in recent years. Market 1. https://en.wikipedia.org/wiki/Fidel Ramos, 19 February 2019, at 18:44 (UTC). demand and construction projects immensely has grown in the SouthEastern regions. Philippine 2. https://en. wikipedia.org/wiki/Siam_Cement_Group, 21 February 2019, at 15:54 (UTC). government began implementing economic reforms intended to open up the once-closed national Annual Report 2017 (PDF). The Siam Cement Public Company Limited. n.d. Retrieved 6 economy, encourage private enterprise, invite more foreign and domestic investment, and reduce August 2017. corruption. 4. "Top 75 global cement companies". Global Cement. 2013-12-09. Retrieved 16 January 2017. Former then newly elected Pres. Ramos was also known as the most-traveled Philippine 5. "The World's Biggest Public Companies". Forbes. n.d. Retrieved 2017-08-06. President compared to his predecessors with numerous foreign trips abroad, generating about 6. https://en.wikipedia.org/wiki/Foreign_market_entry_modes. Foreign Market Entry US$20 billion worth of foreign investments to the Philippines. To ensure a positive financial Modes. outlook on the Philippines, Ramos even led the 4th Asia Pacific Economic Cooperation (APEC) 7. http:/www.nationmultimedia.com/business/SCG-strengthens-presence-in-sanitary-ware- Leaders' Summit in the Philippines on November 1996. Under his administration, the Philippines market-30207188.html. SCG strengthens presence in sanitary ware market business, May enjoyed economic growth and stability. The Philippine Stock Exchange in the mid-1990s was 29, 2013 00:00 By The Nation 4,341 Viewed one of the best in the world and his visions of 'Philippines 2000' that led the country into a newly 8. Siam Cement Group is spending Bt2.6 billion to buy shares in two subsidiaries from industrialized country in the world and the "Tiger Cub Economy in Asia" (Zaide, 2004). TOTO Group of Japan, May 29, 2013 00:00 By The Nation 4,341 Viewed 9. TOTO: Environmental strategy for water by Yasutoshi Shimizu, Published on Jan 20, 2014. After two years of doing international business trade in the Philippines, the ceramics and sanitary 10. Gregorio F. Zaide; Sonia M. Zaide (2004), Philippine History and Government, Sixth ware industry should continue and prosper in the coming years. Yet TOTO, Lid. must make a Edition, All-Nations Publishing Co. (Quezon City), p. 180 decision on whether for them to join with the invitations. Point in time, TOTO Lid. of Japan may 1 1. https:/jp.toto.com/en/company/ir/reference/results/pdf/18_3q_result.pdf. Summary of have the need to use foreign market entry modes other than exporting to operate effectively in Consolidated Financial Results for the Nine Months Ended December 31, 2018(Based on international and global business. Japanese GAAP) January 31, 2019. While exports have performed well so far, TOTO Lid. is concerned that some of his decisions could jeopardize the company. TOTO Lid. decision to go global to the Philippines is not an easy one. TOTO Lid. is not only has a home country corporate perspective, TOTO Lid. also has a deep knowledge of Philippine's economic, political, and cultural environment. Questions: 1. What specific step has TOTO Ltd. should take to benefit from this global tra 2. Would TOTO Ltd have to stick with its present international export business or rather make a higher degree for foreign direct investment? 3. What are the benefits of acquiring collaborative alliances or arrangements instead 4. How about other forms of Market Entry Modes? Or participation strategies that differ in the degree of risk they present, the control and commitment of resources they require, and the return on investment they promise