Apr 8, 2019 in Business

Magnolia

Description of Organization and My Relation to It

The chosen organization for this paper is Magnolia, which is a leading brand of ice cream and dairy products in the Philippines. Magnolia was introduced in the Philippines by American cook named William J. Schober in 1899. Schober was a volunteer who created the magnolia pie, magnolia ice cream, and magnolia ice-drop and sold them to the Filipinos. His products caught the attention of the San Miguel Corporation, which bought the name and the rights of owning the brand in 1925. San Miguel Corporation established its facility in Quiapo, Manila and transferred later to Aurora Boulevard, Quezon City. The brand was successful; therefore; the variety of products manufactured by Magnolia expanded, including margarine, butter, desserts, and cheese, among others.

In 1996, the Magnolia brand was transferred from San Miguel Corporation to Nestle Corporation. Due to some conflicting interests, San Miguel withdrew from Nestle in 1998 and it did not interfere with its operation for five years. Magnolia was managed again by San Miguel in 2010 and distributed ice cream products. Indeed, the Magnolia brand had a whirlwind experience when it came to its ownership. In fact, the Philippine Dairy Products Corporation formerly managed it until San Miguel finally obtained its full ownership in 2002. Moreover, Magnolia was a division of San Miguel until 1996 but its operation had stopped during 1996-1998 for some business reasons. When the brand surfaced again in 2004, it was already owned by San Miguel Pure Foods Company.

Nowadays, the company is manufacturing and distributing not only ice cream products but also butter, margarine, cheese, jelly snacks, cooking oil, salad aids, and milk products. The brand is still trying to recover from the debacle that it encountered with the ambivalent ownership of San Miguel in the past years. Luckily, Magnolia has already established a strong brand name in the market. Therefore, even despite the products had been hibernated and resurfaced for several times, its captured market in the Philippines still exists. 

Magnolia Ice Cream is attempting to actualize its vision, which is to become the “preferred and trusted name in the dairy industry”. San Miguel is implementing the vision by introducing new packaging design and materials. It has even decreased its prices from its original ones to revive the interest of the consumers in its products. The new packaging and the low prices are strategies that intend to announce to the public that Magnolia has recovered after the past few years. 

The rebranding strategy of San Miguel Corporation regarding Magnolia Ice Cream brand has generated income for the company. In fact, the market share has changed from 2% to 10% since its resurrection in 2008. Currently, Magnolia is considered the third largest manufacturer of ice cream products in the country. As a proof of its success, the company has opened a new plant in Laguna for its larger operation and it eventually regains the top spot in the local market.

I have been an avid consumer of the products of Magnolia for many years, which is one of the reasons for my interest in the company. I admire its ice cream flavors, especially during the summer time. I am also fascinated with the brand since it came from the Philippines, which is known for its hospitable people. There is no wonder that a company like Magnolia that has touched the lives of many people would originate from a country like the Philippines.

Moreover, my family and friends have also purchased Magnolia products in the Philippines. They say that the company is one of the most established ones in this country, which is the reason I asked them to provide some information about the company for this paper. Though I admit that I am not directly involved in the Magnolia operations, I could say that through this paper, I would be able to assess its performance objectively. I used the literature available on the Internet to have an accurate overview of the company. I would have a great experience scrutinizing one of my favorite brands, which has satisfied my tastes in ice cream products. With this paper, I have learned much about examining the organization and, at the same time, I have uplifted my knowledge in managing a company. Thus, I consider it an intellectual endeavor to come up with an essay about the organization.

Identification of Strengths and Problems in the Organization

To conduct an overall analysis, it would be appropriate to underline both drawbacks and factors that led to the success of Magnolia in the market. First, it has a strong brand name because of its long years of operation and is certainly an asset. Magnolia has proven its worth by hiding from the public for many years and resurfacing again with the lesser negative impact on its sales, which shows the durability on the part of its branding strategy. Magnolia has always regained the trust of the consumers every time it returned to the market. The products’ ability to recapture the consumers is a trademark of Magnolia not because of San Miguel. 

It is also worth illuminating the high quality of the ice cream products of Magnolia. When the products were introduced in the Philippine market several decades ago, they immediately satisfied the tastes of the consumers. Since then, Magnolia Ice Cream has already been one of the options of the consumers when it comes to desserts. It can be attributed to the high quality of the ice cream products due to its tasteful ingredients.

Moreover, Magnolia is fortunate enough to be managed by large companies in the Philippines, including Nestle, San Miguel, and its former owner Philippine Dairy Products Corporation. It would prove that the products have strengths regardless of what company is managing them. The ingredients of Schober have an innate tasteful quality, which has captured the interest of the public. Consequently, the financial stability of San Miguel has even strengthened the image of Magnolia in the eyes of the consumers.

Though Magnolia is in a good position in terms of cost since its operation is not as expensive as compared with other large companies, it has to consider other areas of concern. It has been manufacturing ice cream products in the Philippines for many years now with a limited cost spent on ingredients and facilities. If it expanded to other countries, it would become one of the low price ice cream products because the country has the ingredients and facilities that are necessary for ice cream production with limited cost.

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In addition, Magnolia has an excellent position in the aspect of uniqueness. Its long-standing reputation in the ice cream industry is distinct and is especially applicable in other countries where ice cream frozen desserts are in demand. Although there are other frozen products sold internationally, Magnolia has a wide range of flavors such as vanilla, chocolate, cookies, and cream. Moreover, Magnolia also has tropical fruit flavors, particularly avocado, sweetened taro, mango, coconut, jackfruit, mangosteen, and others. These flavors would make Magnolia a leader in differentiation.

Of course, the company has also encountered problems in its long years of operation. One of them is the instability of the management and ownership. Though Magnolia products have stability in the eyes of the consumers, the regular change of ownership has affected negatively the operations of the brand. In particular, the performance of the top officials and employees is naturally affected by the transfer of ownership from one organization to another. This change has resulted in the regular hibernation that has deprived the company of the costs it could have gained in the years that it disappeared. 

Second, the trademark disputes have also adversely affected the brand’s operation. It is too expensive to make rebranding strategy to introduce the product again. The cost of marketing strategy to recreate the brand is larger than the immediate sales. Thus, the company has to find ways to make the trademark dispute settled to stabilize eventually the operation of the business.

Furthermore, the competition between Magnolia and the leading ice cream brands in the Philippines and other international companies like Selecta is presenting serious problems to the company. Particularly, when Magnolia was busy with the ownership disputes, Selecta managed to capture the market through its effective marketing strategy. It would take a while for Magnolia to have some competitive advantages over Selecta since the public does not know how to distinguish between brands of ice cream. 

In addition, there is no longer a demand for ice cream as a form of dessert because there are other food products, including yogurt, a wide range of drink products, and cakes, which filled the market, hence threatening the existence of ice cream. Additionally, ice cream products are seasonal. Their sales usually decrease during the rainy season, which takes four to six months in the Philippines. This condition is threatening for the company since ice cream is the center of its operation.

Identification of Frames of Analysis Relevant to Problems Identified 

The problems encountered by Magnolia are similar to those faced by another large corporation in the country, which is the Jollibee Foods Corporation (JFC). Just like Magnolia, JFC is also one of the largest fast food companies in the Philippines based in Pasig City. Its branches have reached to almost 2000 stores locally and internationally. It has competed successfully against other multinational companies, particularly McDonalds. Now, the mentioned company has acquired other local business organizations that were formerly its competitors, such as Burger King Philippines, Red Ribbon, Greenwich Pizza, and Mang Inasal. It was a necessary strategy for JFC to buy its competitors to emerge as one of the dominant business corporations in the Philippines. Its success would not only be observed regarding the number of stores but, most especially, the retail sales reaching almost 82 billion pesos during 2011 alone. The company has allowed franchising while managing some stores. 

JFC has capitalized into its core foundations in constantly obtaining a large share of the local market. For one thing, the McDonalds or American style of food products and services has been the main strength of JFC. The introduction of McDonalds into the Philippine market has made it possible for JFC to emulate some of its dishes particularly spaghetti, burgers, chicken, and fries. In addition, the products of Coca-Cola have helped in increasing the popularity of JFC in the Philippine market. Luckily, the Filipinos are food lovers and they tend to eat much regardless of the dishes. In addition, the quick services of fast food chains are quite suitable for the modern Filipino lifestyle that JFC has offered throughout the years. Consequently, the above factors have contributed to capturing other markets in Asia, such as Saudi Arabia, Hong Kong, Vietnam, Indonesia, Singapore, Qatar, and Brunei. Undoubtedly, JFC has enormous potentials to become more successful in the future.

The JFC management also has the capacity to search for locations that have a high demand for the fast food products, which are usually populated areas. This strategy is necessary since the prices of JFC products are quite affordable or less expensive than its competitors. However, JFC has entailed flaws, particularly the long period of product development for the new offering. Although JFC tends to update its products, it takes too long. In most cases, the company is lazy enough in introducing new products. Though it is a regular strategy to modify its products, the process of developing them does not match its competitors. It is a weakness because fast food industry in innately competitive and product innovation is the key to success.

Another problem of JFC is that it has been providing products that are unhealthy. Burgers, fries, chicken, and the like are known sources of illnesses such as diabetes, heart illness, and others. Actually, the cases of obesity in the United States and in Europe have been attributed to the fast food products. The regular serving of these products to the customers in the Philippines might have contributed to the unhealthy lifestyle of the customers. 

The last identified flaw of the JFC is the high turnover of employees. The JFC operates on a contractual basis with its service crews or staffs. The company ensures that the crews would not reach six month period to avoid the permanent status. It also employs employees who are younger than 25 years old. This makes the company guilty of age discrimination. It tries to project that the company is supported by young, energetic, and agile employees only. This strategy is beneficial to the company, but the customers tend to suffer in the long turn because of new staffs taking over after six months. In other words, the operation is relatively unstable for a certain period. Moreover, the company receives criticisms from hiring underage workers and prohibiting employees to attain permanent status, which leads to labor disputes.

Magnolia and JFC have similarities in its success and problems. More specifically, they both encounter problems in the regular updating of their products. Though they are both upgrading their products, they are not fast enough in doing so. Moreover, their products are considered unhealthy according to the experts. Therefore, they would not expect any support from the experts in terms of endorsements. Thus, the changing of leaderships of the two companies is also a serious problem along with the employee dissatisfaction, which is common in the Philippines.

Recommendations for Solution of Problems

To improve the operation of Magnolia, the company can implement some solutions. First, the brand has to narrow its targets and make efforts to ensure its distinctiveness. The competition is stiff in terms of other frozen products, but the ice cream industry does not show any threat. Therefore, Magnolia should increase its uniqueness. For that matter, the company has to hire food experts from other countries to study thoroughly different flavors that would successfully satisfy the tastes of the consumers. For instance, Magnolia can introduce vegetable flavors to ensure the differentiated status of the ice products. In other words, Magnolia ice cream products would be profitable because of various factors. One of them is the conducive climate for the production and selling of frozen products like ice cream. 

Another recommendation is to expand the operation of Magnolia to other countries, especially western states.  The company can take the risk of exploring the western market since the products meet international standards of quality. The expansion strategy would give Magnolia the chance to be known globally and, eventually, the company can earn more from its operation in foreign countries that only in the Philippines. Although such strategy is quite risky, the possible return is immeasurable. As of now, it has some stores in the United States, particularly in California. However, its attempt to become international is quite hesitant. Perhaps, its top officials are having second thoughts on whether the western consumers would accept Filipino products or not. Optimistically, western consumers are fond of trying new things. In other words, they are experimental and they like to try foods that come from Asia.

In addition, Magnolia has to come up with the appropriate marketing strategies to capture effectively not only the local but also the international market. For its products, Magnolia has to offer a mixture of Asian and European flavors. The target market of Magnolia in the Philippines comes from the lower to middle-class families and may direct its marketing strategies to upper class, as well. Indeed, the lifestyle in western countries is lucrative and their foods are quite expensive. In this sense, Magnolia can offer the ice cream products with higher prices than in the Philippine market.

Consequently, to compete with other big companies, Magnolia has to formulate strategies that concern its products. First, the brand has to introduce new products aside from its primary products offered in the Philippines. Consumers around the world, especially in the western countries, also eat chicken, spaghetti, and burgers. However, they prefer eating fruit and seafood. They are also coffee drinkers. As a result, to satisfy the preferences of the western consumers, Magnolia has to create new food products that would include fruit, seafood, and customized coffee. 

In short, Magnolia can also operate as a restaurant offering not only ice cream products but also burgers, chicken, and fries, among others. Indeed, fast food restaurants are in demand in the western countries in which the company may also engage. For that matter, Magnolia may operate as a fast food offering its ice cream products. In this manner, western consumers would be able to taste the ice cream products because of their attraction with fast food products.

To explore the western market, Magnolia has to recruit chefs and food experts who are westerners. The personnel would be tasked to generate or create new food products that satisfy western tastes. It is not enough to offer only the classic menu of Magnolia in other countries since there is not enough demand for it. Moreover, other companies have already captured the market, producing ice cream, burgers, and chicken products. The food experts would innovate food products that combine fruit and seafood. They would also introduce different flavors of coffee products to be offered in Magnolia.

In terms of price, Magnolia can increase its prices but not higher than other leading brands. Increasing the prices is not necessary in the western context. Consumers are more concerned with the quality of products rather than their price. However, the prices should not exceed those offered by the competitors. As a new entry, Magnolia has to introduce itself with modesty through its lower prices that can meet the purchasing power of consumers. Promotional activities should be emphasized since the competition is stiff. Magnolia has to start with the design of the stores, which should suit the tastes of the western customers. Furthermore, it should have Wi-Fi because westerners are gadget users. 

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