Introduction
Organizations are powerful nowadays. One reason behind this is the complexity of the surroundings they participate in and the necessity to constantly react to this intricacy. Environment consists of various factors that impact how organization runs. These components include both inner and external factors that can either make or break the business's success. Furthermore, they have to react to various trends in which they are subject matter, for example the emerging environmental knowing of the public. To put many of these into point of view, one company will be used to demonstrate how these factors influence the functions of the business.
SM Best Holdings (SMPH) is the mall procedures arm of SM Investments Corporation which is today's one of the Philippines' biggest conglomerates, occupying a dominating position in the majority of its lines of business, particularly stores; retail merchandising; banking and money; and property. Everything started with a straightforward perspective of its founder and chairman, Mr. Henry Sy, to sell shoes to every Filipino (SMIC, 2009).
Today, SMPH is the Philippines' most significant shopping mall operator that possesses and works world-class department stores over the country, providing an incredible number of square meters of floor area for a fully integrated shopping, dining, and entertainment experience (SMIC, 2009). In addition, it handles the parking area and the enjoyment facilities of the shopping center such as SM Cinemas, SM Glaciers Skating and SM Science Discovery Middle.
As of Dec 2008, there are 36 SMPH malls - 33 here in the Philippines and 3 in China - which calendar year it is expected that three new SM department stores are starting. By the end of 2009 the full total gross floor area (GFA) of all SM department stores would total to 4. 5 million square meters, a 5% increase from 2008's GFA. Most importantly, SMPH documented a good financial performance time this past year as it shipped a seven percent increase in net profit to Php6. 4 billion, from a 12% development in revenues well worth Php17. 8 billion (SMPH, 2008).
Overview of the inner Environment
Every organization varies in one another. Each has its unique characteristics that donate to the over-all success of the company. These unique characteristics tend to be called the internal environment, which is composed of elements within the business. These elements include employees, management, and corporate and business culture (Cliffs Notes, 2009). Out of all of the elements, there are two distinctive traits that are essential to a corporation and these are its composition and culture. Both of these provides background about how the company runs.
SMPH's Internal Environment
For SMPH, focusing on how their internal composition and culture operates allows them to arrange, to take benefit of their strengths, to improve their weaknesses, also to develop a host that breeds and stimulates success among its employees (Organizational Culture 101, 2007). Moreover the success of the complete SM Group is attributed to its creator, Mr. Sy, whose conviction and passion is considered exceptional. His affect has remained strong and obvious both in its organizational composition and culture.
Organizational Structure
According to Drucker it's the right design of structure which is of the most significant in deciding organizational performance (Mullins, 2005. p. 597). In SMPH, they made sure that the framework is well-defined such that it will lessen dilemma for their employees as it restricts and manages what they do, for the organization is organized around high levels of formalization and specialty area. Also the business has a strict adherence to string of control that helps employees to identify their position in the business. Finally, it is highly centralized wherein all decisions have to be made by better ranking officials (Robbins, 2003, p. 575). Quite simply, the organizational structure of SMPH describes the management beliefs of Mr. Sy which is traditional yet with fine tuned instincts.
Organizational Culture
Like every specific, organizations likewise have their own personality that arranged them apart from others. In case there is SMPH, their work ethics is dominant. To them everything is a significant business. Furthermore, these are guided by traditional Confucian ideals that are highly influenced by Mr. Sy who is an immigrant from mainland China. Effort, frugality, discipline, love of review, self-sacrifice for the family welfare and harmonious public relationships will be the Confucian values included to the company. They are the anchor ideals of SM Group which will be the building blocks of these success (Flores, W. L. , 2007).
Overview of the Alternative Environment
Aside from handling its resources, organizations operate in a larger level called the exterior environment. But unlike their interior resources wherein they have got a complete control of, the external environment suggests in any other case and sometimes may be looked at as a risk. The number of the external environment factors is nearly unlimited for there are many macro factors which could impact organization's production. The only difference between these factors is the amount of its impact to the business (NetMBA, 2007).
SMPH's Alternative Environment
SMPH, being the main shopping mall operator in the Philippines, regularly reviews its external environment. Within their perspective, understanding the surroundings they belong is vital to the planning function of management for it influences the company's success rate. They identify and examine the key fads, pushes, and phenomena creating a potential effect on the formulation and implementation of their strategies. In place, the environmental examination attempts to prepare the organization to acclimatize to environmental changes to take good thing about opportunities and minimize the undesireable effects of hazards (Appelbaum, 1991).
Politics
The Philippines is a democratic republic with an elected bicameral legislature, and a multiparty system. Filipinos exercised their right to vote every three years and despite the rumors to the contrary that the existing President, Ms. Arroyo wouldn't normally step down from office; there would be an election next season (US Team of Talk about, 2007). This issue is very important to the business enterprise sector as another country's leader may have an impact on the operations with their organizations. This can influence them because of the reforms the new general population officers would take. For SMPH, the results of the upcoming election would greatly have an effect on them since it may affect the stableness of the united states and may undermine their assurance in their extension plans.
Economics
The country's monetary system is blended economy wherein almost all of the companies are owned or operated privately; however, government can control when the need for it arises. One of the features of the Philippine overall economy, it is consumer motivated and the sales at the country's biggest malls have been a measure of developments in consumer spending. Almost 70% of the country's gross local product (GDP) is added by consumer spending. Furthermore the 30% of the total consumer spending happens inside department stores, and two-thirds of the cut of the pie is accounted to SM by itself (Balea, 2009).
But according to the Fitch Ratings Inc. the country's GDP is predicted to be at its most affordable at 2. 5%, which is leaner than the 1998 Asian Crisis (Burgonio, 2009). Given this forecast, this may predict how SMPH would perform this season. This financial downturn will almost certainly affect the business and would be visible in its financial statements.
Social-Cultural
One social-cultural factor that influences organizations is the consumer buying behavior. Individuals are the source of revenue of the business and that's the reason they are researching in great details to learn the buying action with their consumers in order to trail consumer tendencies and respond to it. Understanding the purchasing habits right answers what consumers' buy, where they buy, how much they buy, when they buy and why they buy (Kotler & Armstrong 2007. p. 129).
In a recently available review conducted by the global market research organization Synovate, it uncovered that through the six month stretch of Dec 2008 to Apr 2009, 92% of residents in Metro Manila, which is comprised of all social brackets and where malls are concentrated, have lower their spending, while 61% did less impulsive buying. Furthermore 55% said they've focused on food and other essentials and spent less on entertainment as well as luxury items. In a nutshell, Filipinos are still spending however they are spending for the cheaper and basic things (Balea, 2009). Although SMPH may well not be directly damaged by this buyer habit, this may influence its tenants' total sales. Since tenants' rentals fees are driven through a percentage with their income or through a set monthly lease basis, SMPH's total income may squash (Narciso, 2009).
Technology
The ongoing improvement of technology has considerably evolved every organization's process; for example new marketing programs were launched like the internet. Within the united states, internet penetration is still low. As of 2008, only 14. 6% of the Philippine populace is internet surfers; nonetheless it is forecasted to record a 23% development on a yearly basis. If this trend continues it'll revolutionize just how Filipinos live. Among this is e-commerce, wherein market segments, that have been once unreachable because of distance and costs, are now open through cyberspace (Internet World Stats, 2009).
Although e-commerce continues to be an unfamiliar place here in the country wherein only 3% in Country wide Urban Philippines made online purchase, it offers a strong guarantee especially in the coming years because of the increasing ease of access of the internet, better Personal computer penetration and enactment by the federal government of correctly strong e-commerce legislation (Internet World Stats, 2009). With this implication SMPH may find a fresh competitor by means of the so-called e-malls. This is often a serious threat for the business since this brings many benefits to consumers such as convenience, availability, interactivity and immediate response.
Legal
The current legal system of the Philippines is based on the 1987
Constitution but there can be an on-going trend that is directed to revise the existing system. According to several lawmakers the business enterprise sector would be the number one beneficiary of the constitutional change as the proposed amendments include creation of a more efficient and competitive business environment amongst others (Rubio, 2009). SMPH is highly subjected to this change. If this would motivate through, all commercial regulations may be modified which would affect the way the SMPH manages - taxes may go up, new labor codes may be enacted, ownership take action may be amended.
Eco-Environment
The Philippines is a expanding company and consequently of the is the degradation of the natural environment. That's the reason there's environmental legislation and provision that shields welfare of the surroundings. Hence these should be used strictly by both private and open public business sectors. For SMPH, this is very much indeed applicable since they are mall developers. They have to be in compliance with the guidelines and standards or else they would be penalized (Kirk, 1998, p. 83).
A particular example of an environmental legislation that needs to be accompanied by SMPH is to secure an Environmental Conformity Certificate (ECC) during the conceptualization stage of the expansion plans. Getting an ECC certifies that the task under consideration won't produce an unacceptable environmental impact and the proponent has complied challenging environmental legislation - avoiding and controlling normal water, air and land pollution. Securing an ECC is important for SMPH because if indeed they fail to achieve this task all their growth plans will be put over a halt (Kirk, 1998, p. 83).
Competition
Here in the Philippines, malls have grown to be a huge trend in the country. Frequently than not, whether for recreational, eating or shopping purposes, Filipinos go to mall. With this popular for stores, this translates competition for SMPH and as of this moment there are three key players in the retail center industry and these are Ayala Land, Robinson's Land and undoubtedly SMPH.
Although the industry seems attractive with only 2 competition for SMPH, the rivalry is still high since both Ayala Land and Robinson's Land are also broadening and has its own faithful customers. But an advantage being in the mall operations business is that it has high obstacles to entry due to the huge capital needed to begin up a mall, to find strategic locations and also to draw in reputable anchor tenants. With regards to SMPH's stand against its competitors, SMPH, with a 51 calendar year experience under its belt, is still the mall of preference for tenants given that they can enjoy heavy consumer traffic with almost 2. 5 million ft. traffic. This substantial volume of SMPH's customers is because of their mall's convenience, affordability and diversity, and these translate to high customer power. But there's also threat for substitutes like no-fuss shopping complexes (e. g. Tutuban Centermall, Greenhills) that is now a serious peril because of its cheaper prices.
Knowledge Management
In our daily lives, knowledge is recognized as power. Same goes into businesses. But knowledge management is not merely gathering all the data, for this is more involved with processing all these information into a cohesive knowledge. Being useful with the sourcing, studying, dissemination and storage space of knowledge can be considered a way to obtain competitive edge for a business. With the case of SMPH, knowledge management is essential especially during times of extension wherein they collect all information - demographics of the area, spending capacity, competitive environment degree of commercial and retail activities in the encompassing area and distance from other SM malls to help them in decision-making (SMPH, 2008).
Financial Management
The whole world's economical system depends upon the exchange rate. The currency exchange rates effect global businesses like a thermometer, it steps the fitness of global economics (JD Data, 2009). This past year the Philippine Peso (php) was one of the most detrimental performing currencies in Asia, closing at 47. 52 php to a dollar. That is a 15% drop from the 2007's 41. 29 php. (James, 2008)
This can affect SMPH, since most of the Abroad Filipino Individuals' remittances are put in by their beneficiaries in shopping malls, travel and leisure and entertainment. In the event the peso weakens, it does increase the worthiness of money remittances which translates to more OFW beneficiaries spending in their malls.
International Market Entry
Many companies effectively operate in a niche market without ever before widening into new marketplaces. However, some businesses could achieve increased sales, brand understanding and business balance by entering a new market (My Business, 2009). For instance, the company could review new geographical market to serve and at the moment of globalization, many companies make an effort to penetrate the international market as a source of their progress.
Relating this to SMPH, the company expanded internationally through an acquisition of three SM stores in China by way of a share swap contract. This move allowed SMPH to get a foothold in China's fast-growing current economic climate and use this as a platform for long-term development beyond your Philippines where it is clearly the prominent player in the mall business (SMPH, 2007).
Ecology
According to Cary Institute of Ecosystem Studies, ecology means the scientific study of the procedures influencing the distribution and plethora of organisms, the connections among organisms, and the relationships between organisms and the transformation and flux of energy and matter. (n. d) Quite simply, ecology is approximately environmentalism.
Today, one of the biggest issues in ecology is the increasing aftereffect of global warming. Global warming as its name suggest is the continuous upsurge in the temperature within earth. This is caused by carbon dioxide (CO2) and other air pollution that is collecting in the atmosphere just like a thickening blanket, trapping the sun's warmth and causing the planet to warm-up (NRDC, 2009). Major sources of CO2 emissions are deforestation and getting rid of of fossil fuels.
This global matter is alarming for it may create natural disasters which could have an effect on people's health, bring ecological imbalance, rise in sea levels and change in crop and food source. Here in the state, the consequences of global warming are now felt. Relating to GLOBALLY Basis (WWF), "The Philippines is extremely susceptible to the ravages of weather change. Food and freshwater shortages, receding coastlines and a rise in politics and financial turmoil will be the bleak picture that climate change paints for the country. (Burgonio, 2007)
With these implications organizations have taken additional methods to react to these impending catastrophes given that they have leverage to start out the change and besides also, they are the biggest offenders. In addition to this, various pressure teams, like WWF, are negotiating the firms to adopt energy-efficient saving procedures in their procedures to assist in the global effort to cut CO2 emissions, the leading reason behind global warming. (Burgonio, 2007)
Ecology and SMPH
SM CARES aims to unify and combine all SMPH's CSR initiatives that are geared towards caring their customers and nurturing NATURE. Under SM CARES, the company has therefore taken an aggressive stance in protecting the surroundings through four major initiatives: Sturdy Waste Management, Water Conservation, Energy Efficiency, and QUALITY OF AIR Efficiency. Below are a few of SM CARES programs (SMPH, 2008).
SM Cares Activities
Solid Waste material Management - SM Supermalls contains Garbage to Cash, a recycling market every first Friday and Saturday of the month in all SM Prime malls in the united states. Here, the general public can convert their recyclable garbage into cash. Up to now, Trash to Cash has generated over Php10 million in recyclable items which is estimated to obtain saved practically 11, 000 seven-year-old trees. Mall tenants are also informed on the benefits associated with waste segregation. As a result, solid waste material in the malls' garbage depots has been reduced by as much as 20% per month and two tons of garbage per mall is diverted away from landfills every week.
Water Conservation - Since its inception a few years again, SM Supermalls now saves about 2. 4 billion liters of important water each year through tertiary treatment vegetation that recycle drinking water for use in the cooling down towers of the malls' air-conditioning systems, toilet flushing, and landscape irrigation. Add to that, the use of waterless urinals in men's toilets save another 315 million liters of drinking water annually.
Energy Efficiency - SM malls control their air-conditioning systems through the Concentrate Venture Building Management System. This computerized process closely monitors the building temperatures to optimally balance source versus demand for cool air. Consequently, mall areas that are full of people are created much cooler while those less congested are left a bit warmer. The system saves almost 50 million kilowatt hours of electricity per season. All tertiary treatment vegetation mentioned earlier utilize a device known as a sequential batch reactor that will save up to 500, 000 kilowatt time annually. To reduce the utilization of lights during the day, the new SM malls are designed to have glass surfaces and ceilings to light up the mall with natural light. Lighting has also been substituted from fluorescent to energy conserving lights and has saved the malls a great deal of kwh annually. SM CARES also avidly facilitates Earth Hour, an gross annual global movement that encourages homeowners and establishments to shut down all power sources for an hour, thereby heightening awareness for energy conservation.
Air Quality Efficiency - SM strictly enforces the no-smoking plan inside the malls, and requires all general population utility vehicles entering and parking in its mall terminals and depots to present certificates of experiencing exceeded smoke emission assessment. They also encourage the use of bicycles by providing safe parking areas to them.
Green Bags - Pioneering work to market eco-shopping in the Philippine retail industry, SM Supermalls just lately launched the new SM Supermalls Greenbag. The SM Supermalls Greenbag permits shoppers to take part in the global cause to lessen the use of plastic shopping handbags. The SM Supermalls Greenbag which comes in all SM department stores is manufactured out of 100-percent polypropylene (PP) materials. It is recyclable, non-toxic, allergy free and nonreactive to human epidermis. The Greenbag's size is equivalent to two regular SM Supermarket shopping hand bags and has an estimated life time of two years. It's very light, helpful and can be folded into a small load up. The SM Supermalls Greenbag comes in four exclusive designs by world-renowned designer Manuel Baldemor, turning this energy item into a valued art part.
Another contribution of SMPH to ecology is through renewable architecture. Early this year SMPH unveiled their first mall to turn "renewable, the SM North EDSA via the Sky Garden. It uses roof structure gardens that help in neutralizing global warming for rooftop gardens are known to reduce the effects of urban warmth islands' and are energy efficient that cut down up to 20% air-conditioning costs. In addition, it catches rainwater, which is released into a surprise drinking water infrastructure that is subsequently recycled for landscaping and carpark maintenance. Lastly roof covering gardens also reduce the plumbing design and systems expenditure. With all of these green features, the Sky Garden is an example of what sort of large-scale property creator can donate to the improvement of the environment (The Philippine Superstar, 2009).
Policies and Decision Making
Since SMPH is a shopping center builder, ecological factors like global warming are always part of these discussion. To be a matter fact protecting the environment is part of SMPH's objectives and that is to ensure environmental sustainability through various programs on energy, drinking water and air conservation. For the kids more than just complying with the legal specifications (e. g. environment legislation), there is also the duty to the community since their company is the position to produce a difference (SMPH, 2008).
The management regularly retains meetings to go over their result to the surroundings as well as to discuss the potency of their programs and their up-and-coming activities. One situation wherein SMPH considers the environment in their decision-making is each and every time they expand and wide open new malls. During the conceptualization level, SMPH constantly explores breakthrough architectural models for its malls that are environment-friendly. The Sky Garden at SM City North EDSA, which really is a first in the Philippines, is a noteworthy display of the company's innovative thinking. Using the latest in inexperienced architecture, the Sky Garden brings their customers closer to nature and at the same time plays a part in environmental conservation (The Philippine Superstar, 2009).
To stress even more SMPH's integration of ecology in its company, they placed a conference on Sustainability, Energy, and Green Design Initiatives. The seminar was aimed at providing a fresh view on how inexperienced design initiatives can effect sustainability and promote environmental preservation. A number of the country's seasoned architects and engineers shared their views on the subject with SM's executives to bring more consciousness about how these timely content can impact their shopping mall functions (Manila Bulletin, 2008). Through this meeting, the management reassessed its insurance policies regarding the environment and identified the hyperlink between a healthy economy and a wholesome ecology.
Evaluation and Recommendation
With all these initiatives on responding to the ecological issues, it seems that SMPH is responding well but actually these are kind of late already. Their rival, Ayala Malls, has been the pioneer to the trend and is successful in incorporating ecology programs in their system. Ayala Department stores was the first to retrofit the prevailing structure with their malls to a far more eco-friendly one. Furthermore all of their department stores show a close-to-nature result; as opposed to SMPH wherein the majority of their malls appear to be a concrete jungle.
As a recommendation, SMPH may restructure all of their malls. But this may be done little by little so it will not interrupt the mall's activities. Another precaution is that this can be very costly but if SMPH is very established to be environment-friendly in all their malls this is the best methods to show it. An alternative method is to place more in-door vegetation and garden to make their department stores at least look as eco-friendly.
Another first by Ayala Malls is their integration with its mall tenants through "Greenology that bolsters the mall's environment recognition campaign. Through Greenology, Ayala Department stores mark the trend of being an eco-friendly and eco-chic establishment by showcasing exceptional events that is designed to capture the hearts of concerned mall patrons and environmentalists (Ayala Land, 2008). Although SMPH also offers their own mall-wide activities such as Trash to Cash and their Green carrier, they don't have monthly pursuits like the Ayala Malls. Furthermore their tenants do not actively participate up to those in the Ayala Malls.
A likely proposal for SMPH is to make an earth-friendly school of thought encompassing all mall activities that are related to conservation of the surroundings. Then make an apt title to it so that it will create recognition to the people, like the Ayala Mall's Greenology. SMPH should also talk to its tenants to support and take part in the activities. Along they can brainstorm and produce ideas that are appropriate with the aim. For example, on a monthly basis all the shopping center tenants would feature a product that could help in preserving the environment or are created with environment-friendly materials.
But the good thing for SMPH is the fact that even though they aren't proactive in responding to ecological factors, what matters most is that they are trying to maintain and do almost all their best to preserve the environment. All of their programs are actually well-thought of and practical. Their advocacies for Stable Waste Management, Normal water Conservation, Energy Efficiency, and Air Quality Efficiency are properly executed. As a matter of fact, SMPH has received some accolades for these activities including a superb Success in Energy Efficiency and Conservation from Don Emilio Abello Honors for Energy Efficiency and Conservation GUIDELINES for Structures (SMI, 2008).
However with many of these good strategies what's missing to SMPH is promotion. They do not create very much hype about their environmental concern and activities that makes the public feel that they are not doing anything with regard to the environment. That is why Ayala Department stores remains to be the very best of brain of the clients as it pertains to being eco-friendly shopping mall.
To counter-top this SMPH should utilize public relations showing their strategies in connection to greener lifestyle. They must utilize the various kinds of media to create consciousness they are good corporate citizen. Also they can sponsor incidents including the yearly celebration of Earth Day showing their support for character as well as to use this event to market the earth-friendly facilities with their mall.
All in all, SMPH has been reasonable with all its action plans towards the growing environmental awareness and it would probably have a 65% marking since there's still an area for improvement.
Conclusion
Through the years, SM department stores is becoming synonymous to the phrase one-stop shopping. You can ask any Filipino in what shopping mall comes first to their imagination and without batting an eyelash, they will reply and say SM. This is how great the impact SM has to the Filipinos. It really is more than just the shopping, eating out or entertainment experience - it is part of the culture already. But before SM became an icon in the country, it began like any other rags to riches story.
Its success can be tracked back to its creator, Mr. Henry Sy. Even at his era, Mr. Sy is still very hands-on with the business. The country's retail center magnate is a contrarian who not only survived but prospered after every political and economical crisis in the last five decades. This is because he studies the environment perfectly and handles every downturn as an issue to seek new opportunities. These work ethics of Mr. Sy is noticeable in the business and are the primary individuals for the constant achievement of SM. (Tan-Co, 2001)
Also contributing to the success of SM Group is its respond to ecology. Though it continues to be lagging behind its competitors, SMPH does its share to save Mother Nature. They may have opened up their first inexperienced mall and also have conducted various activities to counter their great carbon footprint. All these attempts towards being environment-friendly, shows the commitment of SMPH to be the shopping mall of choice that cares to maintain the type.
