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

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
first three years of his administration were characterized by an economic boom, technological
development, political stability and efficient delivery of basic needs to the people (Presidency
FVR, 1992). Had in his agenda to 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 s 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
diversified into three core businesses, namely SCG Cement-Building Materials (cement, steel,
roofing, gypsum board, ceramic tile, sanitary ware toilet, lavatory, urinal, accessory, sanitary
fitting, bathtub, faucet, shower fitting, 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 s 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 story 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. 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. 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?

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