1. CONFIDENTIAL BU Strategic Plan Template Book Training materials 8 June 2001 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion. Jim Ayala – PHO Melissa Gil – PHO Regina Manzano – PHO Suresh Mustapha – PHO Steve Shaw – HKO Shelly Yeh – PHO Choon-Gin Tan – SIO

2. 1 STRATEGY PLANNING INSTRUCTIONS The objective of these templates is to provide completeness and consistency of BU strategic plan submissions. These templates are not intended to replace or constrain BU strategic thinking and should be adapted to reflect a particular BU’s sectoral context as required Each section begins with a summary that is based on a synthesis of questions and analyses that follow. The suggested approach would be to first complete the relevant back-up analyses and then work towards the overall synthesis

3. 2 TABLE OF CONTENTS I.Executive summary II.Environmental and internal assessment A.Industry dynamics and its implications B.Competitive assessment C.Internal assessment III.Strategic definition and implications A.Strategy articulation B.Strategic initiatives C.Financial projection D.Risks/contingencies and strategic alternatives IV.Exhibits

4. 3 BU STRATEGIC PLAN DEVELOPMENT Industry dynamics and implications Environmental and internal assessment Competitive assessment Internal assessment What are the major changes in industry dynamics and resulting opportunities and risks? What are your competitive strengths and weaknesses? How does your current business emphasis fit with industry opportunity and competitive landscape? Strategy articulation Strategic definition and implications Strategic initiatives Financial projections What strategy will your BU pursue over the next 3 years? What will be the impact of major strategic initiatives? What are the expected financial returns of your strategy? + + + + Risk/contingen- cies & strategic alternatives What strategic alternatives have you considered? +

5. 4 I. EXECUTIVE SUMMARY Instructions: The Executive Summary provides a synthesis of the Environmental and Internal Assessments and the resultant BU Strategic Plans

6. 5 II. ENVIRONMENTAL AND INTERNAL ASSESSMENT

7. 6 IIA. INDUSTRY DYNAMICS AND IMPLICATIONS – SUMMARY A. What are the major changes in industry dynamics and the resulting opportunities and risks? A.2How is industry structure changing (demand, supply, and industry chain economics)? What are the resulting opportunities and risks? A.3What is the expected competitor conduct? What are the resulting opportunities and risks? A.4What are the present and future external factors that could present new opportunities and risks? A.1What industry are you competing in? What are the various segments in the industry? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings Instructions: These subsections contain a 1-2 sentence summary of the relevant findings

8. 7 IIA. INDUSTRY DYNAMICS AND IMPLICATIONS – BACK-UP 1 A.1What industry are you competing in? What are the various segments in the industry? Industry definition Industry segmentation –Definition –Sizing Instructions: Exhibit 1 could provide a useful framework for answering this question Industry definition: Industry segmentation:

9. 8 IIA. INDUSTRY DYNAMICS AND IMPLICATIONS – BACK-UP 2 A.2How is industry structure changing with respect to demand, supply, and industry chain economics? What are the resulting opportunities and risks? Economics of demand –By segment –Substitutes, ability to differentiate –Volatility, cyclicality Economics of supply –Producer concentration and diversity –Import competition –Capacity utilization –Entry/exit barriers –Cost structure (fixed and variable) Industry chain economics –Customer and supplier bargaining power Instructions: Exhibit 2,3 or 4 could provide a useful framework for answering this question

10. 9 IIA. INDUSTRY DYNAMICS AND IMPLICATIONS – BACK-UP 3 A.3What is the expected competitor conduct? What are the resulting opportunities and risks? Major industry competitor moves –Marketing initiatives –Industry capacity changes –M&As, divestitures –Vertical integration/disaggregation –Alliances and partnerships –Cost control and efficiency improvements Instructions: Exhibit 2,3 or 4 could provide a useful framework for answering this question

11. 10 IIA. INDUSTRY DYNAMICS AND IMPLICATIONS – BACK-UP 4 A.4What are the present and future external factors that could present new opportunities and risks? Impact and likelihood of major industry discontinuities –Changes in regulation/government policy –Technological breakthroughs Instructions: Exhibit 2,3 or 4 could provide a useful framework for answering this question

12. 11 IIB. COMPETITIVE ASSESSMENT – SUMMARY B. What are your competitive strengths and weaknesses? B.1What are the capabilities required to succeed in this industry? B.2How do you compare against these necessary capabilities? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings Instructions: These subsections contain a 1-2 sentence summary of the relevant findings

13. 12 IIB. COMPETITIVE ASSESSMENT – BACK-UP 1 B.1What are the capabilities required to succeed in this industry? Privileged assets that create competitive advantage, e.g. physical assets, location/”space”, distribution/sales network, intangible assets (intellectual capital, network, brands, talents) Distinctive skills/competencies that create competitive advantage, e.g.innovation, talent development Instructions: Exhibit 5 could provide a useful framework for answering this question

14. 13 IIB. COMPETITIVE ASSESSMENT – BACK-UP 2 B.2How do you compare against these necessary capabilities? Strengths and weaknesses of your competitive position vs. necessary capabilities Benchmark performance against the industry’s relevant key performance indicators (KPIs)*, with margin and market share as the required minimum Strengths and weaknesses of your competitive position vs. necessary capabilities: Benchmark performance against the relevant industry’s KPIs: Instructions: Exhibits 6 and 7 could provide a useful framework for answering this question Instructions: Exhibit 8 could provide a useful framework for answering this question * KPIs are a handful of levers that drive the value of the industry/business

15. 14 IIC. INTERNAL ASSESSMENT – SUMMARY C. How does your current business emphasis fit with the industry opportunities and the competitive landscape? C.1Which segments of the business are providing the highest returns? C.2What have been the performance trends along major BU KPIs? C.3Which intangible assets* could be near-term potential sources of value? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings Instructions: These subsections contain a 1-2 sentence summary of the relevant findings * Please refer to Exhibit 12 for further description

16. 15 IIC. INTERNAL ASSESSMENT – BACK-UP 1 C.1Which segments of the business are providing the highest returns?* Relevant BU segments (based on customer, product, geography, channel) Operating contribution estimates for each segment Instructions: Exhibit 9 could provide a useful framework for answering this question * Based on latest available, 1-2 year historical financial statements

17. 16 IIC. INTERNAL ASSESSMENT – BACK-UP 2 C.2What have been performance trends along major BU KPIs? KPI performance trends over the last 3-5 years, e.g. return on capital employed (ROCE), operating income, margins, capital employed Assessment of underlying trend drivers Expected evolution Instructions: Exhibits 10 and 11 could provide a useful framework for answering this question ROCE = Operating income x (1- tax rate) All interest bearing debt (short and long) + minority interest + stockholders’ equity

18. 17 IIC. INTERNAL ASSESSMENT – BACK-UP 3 C.3Which intangible assets could be near- term potential sources of value? Identification of in-house intellectual property, talent, networks, brand/image Conversion into sources of value Instructions: Exhibit 12 could provide a useful framework for answering this question

19. 18 III. STRATEGIC DEFINITION AND IMPLICATIONS

20. 19 IIIA. STRATEGY ARTICULATION – SUMMARY A. What strategy will your BU pursue over the next 3 years? A.1Where to compete? A.2What is your customer value proposition for the different segments you are going to serve? A.3What is your business model? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings A.4How does your chosen strategy exploit industry opportunities and address industry/competitive threats? Instructions: These subsections contain a 1-2 sentence summary of the relevant findings

21. 20 IIIA. STRATEGY ARTICULATION – BACK-UP 1 A.1Where to compete? Where are you going to compete along these dimensions and why: –Target market –Distribution channels –Product (breadth and depth) –Geographic scope Instructions: Exhibit 13 could provide a useful framework for answering this question

22. 21 IIIA. STRATEGY ARTICULATION – BACK-UP 2 A.2What is your customer value proposition for the different segments you are going to serve? Target customer definition Benefits that you will offer the customers Product pricing Position against competition vis-à-vis the benefits provided and the price charged Who is your target customer? What are the explicit benefits you provide to your customers? What perceived value do you provide to the customer better than competition? How much value do your customers attach to the benefits you provide?

23. 22 IIIA. STRATEGY ARTICULATION – BACK-UP 3 A.3What is your business model? Delivery and communication of customer value proposition (value delivery system) Competitive advantage in delivering these benefits to the customer How will the value proposition be provided and communicated? Which of your BU’s existing strengths can be leveraged? What skills/capabilities do you need to build? Instructions: Exhibit 15 could provide a useful framework for answering this question

24. 23 IIIA. STRATEGY ARTICULATION – BACK-UP 4 A.4How does your chosen strategy exploit the industry opportunities and address the industry/competitive threats? Industry attractiveness and implication review Alignment of strategy and environmental realities Instructions: A review of the section on Industry Dynamics and Implications, together with the frameworks used (Exhibit 2,3 or 4) is useful for answering this question

25. 24 IIIB. STRATEGIC INITIATIVES – SUMMARY B. What will be the impact of major strategic initiatives? B3.How much value will be created from each strategic initiative? B4.What resources will each strategic initiative require? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings B1.What major strategic initiatives are required to successfully implement your selected business model? B2.What are the sources of value created from each strategic initiative? Instructions: These subsections contain a 1-2 sentence summary of the relevant findings

26. 25 IIIB. STRATEGIC INITIATIVES – BACK-UP 1 B.1What major strategic initiatives are required to successfully imple- ment your selected business model? Possible strategic initiatives list

27. 26 IIIB. STRATEGIC INITIATIVES – BACK-UP 2 B.2What are the sources of value created from each strategic initiative? Sources of value from each strategic initiative (e.g., EBIT, capital employed) Category of initiatives Volume increase EBIT impact via Price increase Cost reduction Other Invest- ment Capital employed impact via Divest- ment Capital efficiency* Other * E.g. improved working capital employment, increased asset utilization, changes to asset ownership Specific actionable initiatives

28. 27 IIIB. STRATEGIC INITIATIVES – BACK-UP 3 Operating income ongoing impact 2001-2004 PhP millions Capital employed ongoing impact 2001-2004 PhP billions Present operating income Volume increase Price increase Cost reduction benefit Additional costs Total ongoing operating income Present capital employed Improved capital efficiency DivestmentsInvestments (capex and acquisitions) Total ongoing capital employed B.3How much value will be created from each strategic initiative? one-time EBIT impact = one-time costs = Financial impact from each strategic initiative Expected financial outlay for each initiative ++ + – = +–=–

29. 28 IIIB. STRATEGIC INITIATIVES – BACK-UP 4 B.4What resources will each strategic initiative require? Resources required to make strategy work Availability of resources in the organization Plan for filling resource gaps Categories of initiatives Specific actionable initiatives People/skills Resource requirements Funding Ex-Com involvement

30. 29 IIIC. FINANCIAL PROJECTIONS – SUMMARY C. What are the expected financial returns of your strategy? C.3What is your expected cash generation ability over the medium term? C.4What is your expected capital productivity? C.2What is your projected net income in the next few years? C.1What are the key assumptions? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings Instructions: These subsections contain a 1-2 sentence summary of the relevant findings

31. 30 IIIC. FINANCIAL PROJECTIONS – BACK-UP 1 C.1What are the key assumptions? Profit and loss (e.g. revenues, costs, margin) Balance sheet Corporate center directives Corporate center assumptions BASE CASE Business unit assumptions Revenues Market size Market share Price Costs Input costs Production costs Other costs (e.g. SG&A) Margins Gross margin Operating margin Capital Planned investments/ divestments Changes in working capital 2002 KEY FORECAST ASSUMPTIONS 20032004Growth rate Corporate center assumptions 200220032004 Key economic indicators GDPgrowth Consumer price index Exchange rate (PhP/USD) 91-day T-bill rate Corporate tax rate Instructions: These are the minimum required assumptions. Feel free to add other assumptions relevant to your BU

32. 31 IIIC. FINANCIAL PROJECTIONS – BACK-UP 2 C.2What is your projected net income in the next few years? Income statement forecast BASE CASE Historical Sales Cost of goods sold Gross profit Operating expenses Operating profit Other expenses Taxes Net profit 1999 FORECASTED INCOME STATEMENT 2000 InPhPmillion Forecast 2001**200220032004 CAGR 1999-2004 Growth analysis Sales (%) Gross profit (%) Operating profit (%) Net profit (%) Margin analysis Gross margin (%) Operating margin (%) Net margin (%) * ** Key assumptions not listed earlier should be detailed at the bottom of the chart. The impact of planned initiatives on the revenues and costs should be established clearly with additional attachments if required Best estimates on possible actual results Instructions: These are the minimum required income statement accounts and analyses. Feel free to add other accounts and analyses relevant to your BU

33. 32 IIIC. FINANCIAL PROJECTIONS – BACK-UP 3 C.3What is your expected cash generation ability over the medium term? Cash flow forecast Instructions: These are the minimum required cash flow statement accounts. Feel free to add other accounts relevant to your BU BASE CASE Operating profit Depreciation and amortization Other non-cash operating expenses Net operating cash flow Increase/(decrease) in working capital Other operating cash flow Total operating cash flow FORECASTED CASH FLOW STATEMENT Historical 19992000 Forecast 2001**200220032004 CAGR 1999-2004 Capital expenditure Other investing cash flow items Total investing cash flow Increase/(decrease) in debt Dividends Other financing cash flow Total financing cash flow InPhPmillion Key assumptions not listed earlier should be detailed at the bottom of the chart. The impact of planned initiatives on the fixed and working capital investments should be established clearly with additional attachments if required Best estimates on possible actual results * **

34. 33 IIIC. FINANCIAL PROJECTIONS – BACK-UP 4 C.4What is your expected capital productivity? Balance sheet forecast ROCE computation ROCE = Operating income x (1- tax rate) All interest bearing debt (short and long) + minority interest + stockholders’ equity Instructions: These are the minimum required balance sheet accounts and analyses. Feel free to add other accounts and analyses relevant to your BU BASE CASE Cash Accounts receivables Inventories Other current assets Total current assets Net fixed assets Other assets Total assets FORECASTED BALANCE SHEET Historical 19992000 Forecast 2001*200220032004 CAGR 1999-2004 Accounts payable Other current liabilities Total current liabilities Short-term loans Long-term loans Other liabilities Total liabilities Minority interest Total stockholders’ equity InPhPmillion Capital employed ROCE Total liab. & stockholders’ equity Ratio analysis Working capital turnover Debt-equity ratio Best estimates on possible actual results *

35. 34 IIID. RISKS/CONTINGENCIES & STRATEGIC ALTERNATIVES– SUMMARY D. What strategic alternatives have you considered? D.1What are the associated risks to your chosen strategy? D.2Re-examining industry opportunities and industry/competitive threats, what alternatives exist to your chosen strategy? Instructions: The answer to this overarching question requires a recapitulation of the section’s main findings D.3Beyond the 3-year time frame, what breakthrough strategic options may be possible? Instructions: These subsections contain a 1-2 sentence summary of the relevant findings

36. 35 IIID. RISKS/CONTINGENCIES & STRATEGIC ALTERNATIVES – BACK-UP 1 D.1What are the associated risks to your chosen strategy? Identification of significant potential risks and plans to mitigate Sensitivity/scenario financial analysis Potential risks Business risk Regulatory risk Technology risk Integrity risk Macroeconomic risk ImpactLikelihoodContingency Other

37. 36 IIID. RISKS/CONTINGENCIES & STRATEGIC ALTERNATIVES – BACK-UP 2 D.2Re-examining industry opportunities and industry/competitive threats, what alternatives exist to your chosen strategy? Where to compete? Value proposition Business model Alignment with external realities Where to compete?: Alternative value proposition: Alternative business model: Alignment with external realities: Instructions: Based on a review of the section on Environmental and Internal Assessment, Strategy Articulation, and the frameworks used (Exhibit 2- 4, 13-15), determine other potential strategic alternatives

38. 37 IIID. RISKS/CONTINGENCIES & STRATEGIC ALTERNATIVES – BACK-UP 3 D.3Beyond the 3-year time frame, what breakthrough strategic options may be possible? “Out-of-the-box” ideas Instructions: Think radical! Think out-of-the-box!

39. 38 IV. EXHIBITS Instructions: Please include all relevant supporting documentation in this section

40. 39 SEGMENT ANALYSIS Exhibit 1 ILLUSTRATIVE Industry boundaries Segments Industry segments Relatively distinct sub-groupings within the industry Market is relatively similar within the segment but different across segments Different industry dynamics may vary in importance in different segments

41. 40 ProducersIndustry S Technology breakthroughs Changes in government policy/regulations –Domestic –International Economics of demand Availability of substitutes Differentiability of products Rate of growth Volatility/cyclicality Economics of supply Concentration of producers Import competition Diversity of producers Fixed/variable cost structure Capacity utilization Entry/exit barriers Industry chain economics Bargaining power of input suppliers Bargaining power of customers Marketing Pricing Volume Advertising/promotion New products/R&D Distribution Capacity change Expansion/contraction Entry/exit Acquisition/merger/ divestiture Vertical integration Forward/backward integration Vertical joint ventures Long-term contracts Internal efficiency Cost control Logistics Process R&D Organization effectiveness Finance Profitability Value creation Technological progress Employment objectives External shocks Feedback tructure C onduct P erformance STRUCTURE-CONDUCT-PERFORMANCE (SCP) MODEL Exhibit 2

42. 41 Exhibit 3 1.Determinants of supplier power Differentiation of inputs Switching costs of suppliers and firms in the industry Presence of substitute inputs Supplier concentration Importance of volume to supplier Cost relative to total purchases in the industry Impact of inputs on cost or differentiation Threat of forward integration relative to threat of backward integration by firms in the industry 2.Determinants of barriers to entry Economies of scale Proprietary product differences Brand identity Switching costs Capital requirements Access to distribution Absolute cost advantages –Proprietary learning curve –Access to necessary inputs –Proprietary, low-cost product design Government policy Expected retaliation 5.Rivalry determinants Industry growth Fixed (or storage) cost/value added Intermittent overcapacity Product differences Brand identity Switching costs Concentration and balance Informational complexity Diversity of competitors Corporate stakes Exit barriers 3.Determinants of buying power Bargaining leverage –Buyer concentration vs. firm concentration –Buyer volume –Buyer switching costs relative to firm switching costs –Buyer information –Ability to backward integrate –Substitute products –Pull-through 4.Determinants of substitution threat Relative price performance of substitutes Switching costs Buyer propensity to substitute 2. New entrants 3. Buyers 4. Substitutes Intensity of rivalry 1. Suppliers Price sensitivity –Price/total purchases –Product differences –Brand Identity –Impact on quality perception –Buyer profits –Decision makers' incentives 5. Industry competitors "FORCES AT WORK" FRAMEWORK

43. 42 Opportunities/Threats How are demand and supply expected to evolve? How do you expect the industry chain economics to evolve? What are the potential major industry discontinuities? What competitor actions do you expect? YOUR BU SWOT ANALYSIS Exhibit 4 CONVERT OPPORTUNITIES BUILD ON STRENGTHS NEUTRALIZE THREATS ADDRESS WEAK- NESSES Strengths/ Weaknesses What are your BU’s assets/competencies that solidify your competitive position? What are your BU’s assets/competencies that weaken your competitive position? Can be used as a thought starter for competitive analysis and internal assessment Surfaces potential opportunities/threats arising from factors external to the BU

44. 43 Physical asset Location/"space" Distribution/sales network Brand/reputation Patent Relationship with "license" allocator BHP’s low-cost mines Telecomm/media company with rights radio spectrum Avon’s representatives Coca-Cola Pharmaceutical company with a "wonder drug” "Favored nation" status with a key minister in liberalizing economy Innovation Cross-functional coordination Market positioning Cost/efficiency management Talent development 3M with new products McDonald’s with QSC&V J&J with branded consumer health products Emerson Electric’s Best Cost Producer program P&G brand management program Privileged assets Distinctive competencies Necessary capabilities in order to succeed in the industry Example CAPABILITY PLATFORM: ASSESSMENT OF SOURCES OF COMPETITIVE ADVANTAGE (1/2) Exhibit 5

45. 44 CAPABILITY PLATFORM: ASSESSMENT OF SOURCES OF COMPETITIVE ADVANTAGE (2/2) ILLUSTRATIVE Step 1: Ensure that these are the capabilities required to succeed in the industry. Use this list as a thought starter, add and delete as you see appropriate BU Overall Segments ABC Step 2: Assess your overall position relative to the capabilities required to succeed in the industry. Also, determine if these capabilities are relevant to the segments you serve Physical asset Location/"space" Distribution/sales network Brand/reputation Patent Relationship with "license" allocator Innovation Cross-functional coordination Market positioning Cost/efficiency management Talent development Privileged assets Distinctive competencies Necessary capabilities in order to succeed in the industry Exhibit 6 Extremely relevant Somewhat relevant Irrelevant

46. 45 COMPETITOR CAPABILITY COMPARISON BU Overall Competitors ABC Step 3: Compare the strengths and weaknesses of your competitive position vs. the necessary skills Physical asset Location/"space" Distribution/sales network Brand/reputation Patent Relationship with "license" allocator Innovation Cross-functional coordination Market positioning Cost/efficiency management Talent development Privileged assets Distinctive competencies Necessary capabilities in order to succeed in the industry Exhibit 7 ILLUSTRATIVE

47. 46 BENCHMARK PERFORMANCE AGAINST RELEVANT INDUSTRY KPIs Exhibit 8 ILLUSTRATIVE KPIs (examples) Financial indicators Margin Net income ROCE Operating indicators Advertising effectiveness Utilization rate Strategic indicators Market share Percent of revenue from new products Working capital trend External indicators Market prices of raw materials BUCompetitor ACompetitor BCompetitor C

48. 47 SEGMENT ANALYSIS Revenue Gross profit Operating profit Assets employed People employed Operating profit margin Gross profit margin ROCE Step 1: Identify the relevant segments Step 2: Provide a segment analysis based on the following minimum financial metrics: revenue, gross profit and margin, operating profit and margin Step 3: To the extent assets and people can be disaggregated by segment, deployment of assets against returns can be analyzed % PhP % of total Segment 1 PhP % of total Segment 2 PhP % of total Segment 3 PhP % of total Segment 4 PhP % of total Total Exhibit 9 %% Segment 1Segment 2Segment 3Segment 4Total

49. 48 TREND ANALYSIS – RETURN ON CAPITAL EMPLOYED (ROCE) NOT EXHAUSTIVE The ROCE tree can be disaggregated to show the other relevant KPIs of a BU ROCE Percent Operating income x (1 - tax rate) PhP million Capital employed PhP million ÷ Revenue PhP million Operating margin Percent x (1 - tax rate) Percent x Market share Percent Industry sales PhP million x Exhibit 10

50. 49 TREND ANALYSIS – CASH NOT EXHAUSTIVE The cash flow tree can be disaggregated to show the other relevant KPIs of a BU Exhibit 11 Cash flow generated PhP million Operating cash flow PhP million Investing cash flow PhP million + Net income PhP million Non-cash expenses PhP million + Change in working capital PhP million + Financing cash flow PhP million +

51. 50 Exhibit 12 INTANGIBLE ASSET CHECKLIST Intangible assets Ways to extract near-term value Talent Highly motivated and competent workforce leveraging specific skill sets to –Generate growth –Improve/increase company intangibles Intellectual property Patents generating licensing fees Understanding of customer behavior Risk management Software ILLUSTRATIVE Network Interconnected webs of parties Non-exclusive Additional member lowers costs, increases benefits Brand/image Inherent image or brand built upon excellent service and product offerings Lower search costs for customers

52. 51 WHERE TO COMPETE? Exhibit 13 Customers Channels Products Geographic markets Target customers and segments Which customers are you trying to target or attract? Which are you willing to serve, but will not spend resources to attract? Which would you prefer not to serve? How does the entity reach its target customers Which distribution channels will you use? What customer segments can they reach? Geographical scope of business activities Geographic limits to the business? Local, regional, multi- local, national, international, or global player? If local, which localities? Quality and breadth of the product line Breadth of the product line? Quality of the product line? Product bundles or a series of unrelated products?

53. 52 VALUE PROPOSITION A company’s specific promise to its target customers of the benefits it will provide at an explicit price It answer the following questions: Who is your target customer? What are the explicit benefits you provide to your customer? What perceived value do you provide to the customer better than competition? How much value do your customers attach to the benefits you provide? Exhibit 14

54. 53 BUSINESS MODEL Exhibit 15 Understandvaluedesires Selecttarget Chose the value Value proposition Designproduct/processProcure,manu-facture Distri-bute Provide the value ServicePrice Define benefits/ price Salesmessage Communicate the value Business model: Integrated set of actions to provide and communicate the value proposition to customersIntegrated set of actions to provide and communicate the value proposition to customersSegmentationValueproposition Adver-tisingPromo-tional/PR Value delivery system (VDS) Each BU must address these 2 issues to define their business model Illustration of how the value proposition will be provided and communicated Identification of existing strengths that can be leveraged and required capabilities that need to be built to be distinctive in chosen value delivery system 1 2

55. 54 Categories of initiatives 1.Capture greater market share Volume increase EBIT impact via Price increase Cost reduction Other Invest- ment Capital employed impact via Divest- ment Capital efficiency* Other 2.Cost reduction (e.g., effective channel management) 3.Obtain higher prices 4.Create new market demand 5.Form strategic alliances/ partnerships * E.g. improved working capital employment, increased asset utilization, changes to asset ownership Specific actionable initiatives STRATEGIC INITIATIVES: SOURCES OF VALUE Exhibit 16 ILLUSTRATIVE

56. 55 STRATEGIC INITIATIVES: VALUE QUANTIFICATION Exhibit 17 ILLUSTRATIVE Estimate of total ongoing operating income and capital employed impact from successful implementation of strategic initiatives Operating income ongoing impact 2001-2004 PhP millions Capital employed ongoing impact 2001-2004 PhP billions Present operating income Volume increase Price increase Cost reduction benefit Additional costs Total ongoing operating income Present capital employed Improved capital efficiency DivestmentsInvestments (capex, acquisitions) Total ongoing capital employed one-time operating income impact = one-time costs = +++–= ––+=

57. 56 STRATEGIC INITIATIVES: RESOURCING REQUIREMENTS Exhibit 18 ILLUSTRATIVE Categories of initiatives Specific actionable initiatives People/skills Resource requirements FundingEx-Com involvement 1.Capture greater market share 2.Cost reduction 3.Achieve higher prices 4.Create new market demand 5.Form strategic alliances/partnerships

58. 57 DEFINITION OF RISKS Exhibit 19 Definition Risk of loss due to changes in industry and competitive environment, as well as shifts in customer preferences Business risk Risk due to changes in regulatory environment (e.g. deregulation) Regulatory risk Risk due to major changes in technology Technology risk Risk of failures due to business processes and operations or people’s behavior, either intentional (e.g. fraud) or unintentional (e.g. errors) Integrity risk Risk of loss due to changes in the political, social, or economic environments Macroeconomic risk