A good business case study

I would like to share with you insights gained for working with a company that is celebrating its 35th Anniversary this October.

Thirty-five years ago, Swedish Match AB, a publicly-traded Swedish multinational, started the manufacture of disposable lighters here in the Philippines on 15 October 1973. It established a Lighter Division in its local subsidiary, Philippine Match Company (Phimco Industries). Starting with a focus of manufacturing for the local market, it eventually began to export its production. Today, at least 95 percent of its production capacity is for export! In 1991, Swedish Match spun off the Lighter Division as a separate legal entity called Swedish Match Philippines, Inc. (SMPI) and sold off the rest of its local operations.

For over three decades, SMPI has produced high quality lighters and observed its tradition of excellence and quality in its products. Our brand name, Cricket, is recognized as a global brand for disposable lighter and for its safety, reliability and design. Through years of product development, Swedish Match has successfully introduced several Cricket variants like Original, Mini, Maxi, Electronic, Pocket and Pico that are used by over 200 million people in more than 100 countries.

Starting as factory manager and up to my present position as managing director, I’ve had the good fortune to be present for 19 of those 35 years of SMPI. During this period, the company has imparted on me two important lessons which are still valid, even for the future.

The first is that the only constant in business (or life for that matter) is change. You can either deal with it or ignore it at your own peril. It will not go away. Part of SMPI’s ability to survive and prosper all these years was that it adapted to the various changes facing it. It started out producing lighters under the Feudor brand. It used manual intensive process to make these products. The company could have just stayed that way. And, when the product was no longer meeting consumer needs or the process was no longer viable, it could have just closed shop.

Instead, its management pushed for a new brand: the Cricket lighters. It also expanded its product lines to include electronic lighters, utility lighters and gas cartridges. In the late 1990s, it also began to sell in the local market the global tobacco products of Swedish Match. These tobacco products were cigars, pipe tobacco and chewing tobacco. These products carried brand names such as Macanudo, Wings, Borkum Riff, Willem II and Days Work.

Furthermore, instead of holding on to a labor-intensive production model, we benchmarked ourselves against the automated manufacturing processes in our European factories. We emulated the best practices in those factories and transformed our factory to that level. We wanted to combine those best practices with our local wage structure. We felt we could be the lowest cost producer among the Swedish Match lighter factories if we did so.

This objective was achieved in 2005. Furthermore, in recognition of this achievement, the factory moved from its previous location in Manila to its current location in the Laguna Technopark, Inc.’s PEZA zone last December 2007. The new site has the potential to produce almost twice its 2007 capacity. That is our goal for the near future!

I also don’t want to give the impression that everything was easy in meeting these challenges. It requires hard work and commitment from all of SMPI’s employees at all levels. Along with the gain, there has been pain. There were four major restructurings in the company’s history. In each case, we made sure that the affected employees were treated fairly, humanely and assisted them to find new opportunities after SMPI. It also gave a message to the remaining employees that everyone will always be treated with respect and dignity no matter the situation.

This leads to the second lesson: Change happens through people. Without people committed to meet challenges and perform their best, you cannot effect the desired change. It has been indeed a privilege for me to work with such a dedicated group of individuals who are the past & present employees of SMPI: the SMPI Family and Team.

I’ve often been asked how this teamwork and family spirit developed and was maintained through these years. The simplest answer is that we reward and recognize collective and individual performance through such measures as an annual Productivity Program and an Individual Performance Evaluation system which has monetary benefits for good performance. We also celebrate individual milestones and events with Service Awards and company-sponsored social and sports events.

There are many other good business lessons that SMPI’s history can give. I just felt the above mentioned experiences were the most significant for me as a professional manager.

The past 35 years has been quite a challenge for everyone in SMPI. Growing from a very small production unit to a key player in Swedish Match’s Asia-Pacific operations is a big achievement. Its employees have been the key factor in that achievement. I congratulate and thank all present and past employees in their contributions to the company. Our employees’ ability to meet the challenges with teamwork and a family-oriented spirit will continue to serve them well in the next 35 years!

Mabuhay SMPI!!