Factors Contributing to Sustainability of Bio-N Mixing Businesses in Central Luzon, CALABARZON and MIMAROPA

Date

4-2011

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Dinah Pura T. Depositario

Committee Member

Nanette A. Aquino, Nimfa D. Montes, Reynaldo L. Tan

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Abstract

Today’s modern agriculture is challenged by different issues confronting food sufficiency and food safety. The need to provide sufficient amount of food for the rapidly growing population prompted the development of biofertilizers that would not only increase crop production but also ensure food safety and environment protection. Biofertilizers promote growth of crops by harnessing elemental nutrients from the soil using strains of microorganisms. This bio-alternative received significant attention in the field of biotechnology in several countries located in Asia Pacific Region like Japan, Taiwan, Korea and Thailand.

In the Philippines, the National Institute for Molecular Biology and Biotechnology (UPLB-BIOTECH) in the University of the Philippines Los Baños is the pioneering institution in the field of biotechnology. Through continuous researches, the Institute developed several kinds of biofertilizers like Bio-N, MykoVam, BioGroe and Biofix. However, despite the availability of technologies, commercialization remains to be a big challenge for UPLB-BIOTECH. To support the promotion of biofertilizers in the country, the government launched the National Program on the Production and Utilization of Bio- N for Sustainable Production of Agricultural Crops. Bio-N is a microbial inoculant containing strains of Azospirillium that increases nitrogen intake of crops. It can reduce usage of nitrogen-based chemical fertilizers by up to half of the recommended fertilizer requirement.

Six mixing plants- two cooperative-administered (Gloria Community Multi-Purpose Cooperative and St. Philip Multi-Purpose Cooperative), two LGU-administered (Naujan- LGU and Marinduque Provincial Office), one vocational school (Quezon National Agricultural School) and one private enterprise (Romarc Enterprises) were covered in the study. These mixing plants are located in Central Luzon, CALABARZON and MIMAROPA. The case study method was employed to profile the mixing plant businesses and assess their current status. The Personal Entrepreneurial Competency test was also conducted to determine the level of entrepreneurial competencies of the managers of the enterprises.

The Department of Agriculture (DA) facilitated the overall management of the program. Bio-N mixing plants were awarded to qualified recipients from the 16 regional field units (RFUs) of the country. As of 2010, there were 68 Bio-N mixing facilities in the country composed of 24 cooperatives, 32 DA-local government units, 3 state universities/colleges and 9 private enterprises. However, of the 68 mixing plants, only 29 were actively producing Bio-N.

The need to conduct the research study was prompted by the increasing number of inactive Bio-N mixing facilities in the country. In 2008, there were already 10 inactive mixing plants but this number increased up to 39 mixing plants in 2010. The study aims to identify key success factors that contribute to the sustainability of operations of active mixing plants. Hopefully, the inactive businesses can apply the insights gained though the experience of the more successful mixing plants to revitalize their operations.

The profile of the Bio-N project was first presented by the researcher. The functions, responsibilities and contributions of each concerned organization were discussed to facilitate the analysis of the implementation of the program. The Department of Agriculture and National Food Authority provided the financial support that was used in the procurement of equipment and supplies needed in Bio-N production. On the other hand, BIOTECH provided the technology and facilitated technology transfer through the training of the members of the beneficiary-entities.

With regards to the classification of the status (i.e. active or inactive) of the businesses, a mixing plant was classified as active if it was continuously sourcing concentrate from BIOTECH and actively producing Bio-N at a regular schedule (i.e., at least twice a year). On the other hand, a mixing plant was considered inactive if it had ceased production of Bio-N or if production schedule was intermittent. St. Philip Multi-Purpose Cooperative and Marinduque Bio-N Mixing Plant were classified as inactive mixing facilities.

The recipients of the program received logistical assistance (i.e., equipment and supplies) to put up a mixing plant in the form of a grant. They were only required to provide the land, building and funds for wages and other incidental expenses during the initial production of Bio-N. They also received technical assistance for two years from BIOTECH to ensure successful technology transfer. The first ones to operate a mixing plant among the respondents were Naujan-LGU located in the province of Oriental Mindoro and St. Philip Multi-Purpose Cooperative located in Capas, Tarlac. They started production of Bio-N in 2005. On the hand, the Marinduque Provincial Office started Bio- N production only in 2008. Unlike the rest of the respondents, Romarc Enterprise did not receive the mixing plant in a form of grant but instead is a direct licensee of BIOTECH. The company received additional support from BIOTECH in the form of consultation, laboratory visits and the use of BIOTECH’s facilities. The rated production capacities of the respondent-entities ranged from 60,000 packs per year to 4,800,000 packs per year.

The research study assessed the performance of each respondent according to four functional areas of business. In the aspect of marketing, DA served as the primary market for the product for the first two to three years of operations. The mixing plant businesses’ output were picked up by DA staff and stored in regional/provincial warehouses. The department facilitated the free distribution of Bio-N to local farmers located in different areas within the region/province where mixing plants were located. Check payments were made by DA after the products were distributed to farmer-recipients. During this period, the mixing plants exerted little effort in product promotion since DA absorbed almost 98% of their production. The remaining two percent was absorbed by the walk-in buyers. The mixing plants served almost the same kind of market segment like rice and corn farmers. On the other hand, there were some which catered to vegetable and ornamental producers. The most common promotional tools employed by the mixing plants were giving product samples, providing trainings and seminars, participation in trade fairs and field demonstrations. On the hand, active mixing plants exerted innovative strategies in promoting Bio-N. They conducted radio advertisement, value addition (i.e. bundling of Bio-N with certified rice seedlings) and provision of technical support to customers. During the time the mixing plants has a tie-up with DA. The geographical scope of distribution was at the regional level. However, after the termination of the project, the scope of distribution has been limited to the district or municipality wherein the mixing plants were located. In the case of inactive mixing plants, the sudden withdrawal of orders coming from DA adversely affected their operations as they were not able to successfully identify and tap viable alternative market segments (i.e., end-consumers).

In terms of the production aspect, the raw materials (e.g. soil, chemical, charcoal, water and packaging materials) used in production were source from different suppliers except for concentrate produced by BIOTECH only. The most common supplier among the mixing plants was Chemline Corporation. The company supplied the chemicals needed in preparation of liquid media of Bio-N as well as the packaging materials. On the other hand, soil, charcoal and water were source from local suppliers. Romarc Enterprise registered the highest volume of production among the active mixing facilities. The actual volume of production of the mixing plants was relatively lower compared to its actual capacity. All of the subject-mixing plants were underutilized and percent capacity utilization only ranged from 1.26 (Romarc Enterprises and Gloria CMPC) percent to 8 percent (Naujan-LGU). However, despite the low utilization of Romarc Enterprises, it remained to be the highest producer of Bio-N due to its large rated production capacity. Distribution of Bio-N was either through a store outlet, retailer or direct delivery. Naujan- LGU and Gloria CMPC distributed the product through their outlet in the mixing plant and through delivery to customers. But Gloria CMPC also distributed the product through a retailer located in a nearby town of Gloria. On the other hand, Romarc Enterprises delivered Bio-N to customers either through their warehouse or direct distribution using their delivery trucks.

With respect to financial performance, Romarc Enterprises had the most stable financial condition compared to other respondents. Aside from registering the highest profit generated from sales of Bio-N, the company had a sufficient source of working capital to cover its operational expenses due to the support of its other business units. On the other, Naujan-LGU and Gloria CMPC experienced difficulty in covering its operational costs due to limited working capital and difficulties with collecting accounts receivables.

The research study identified the issues and problems that hinder the mixing plants’ viability and sustainability. The common problems faced by the mixing plants were insignificant market share, insufficient working capital and the managers’ lack of management skills. PEC results also revealed that the current managers were weak in terms of the competencies of opportunity seeking, risk-taking, persistence and demand for quality and efficiency.

The key competitive success factors of the active Bio-N mixing plant businesses. These success factors are: competitive workforce and access to financial capital such as in the case of Romarc Enterprises, experience in running business (i.e. Romarc Enterprise and Gloria CMPC); wide distribution network (Romarc Enterprise and Gloria CMPC), innovative marketing strategies and strong entrepreneurial culture (Romarc Enterprise, Naujan-LGU and Gloria CMPC); and presence of complementary projects (i.e., Naujan- LGU is also engaged in distribution of certified rice seeds). These factors contributed to the ability of the active mixing plants to sustain their operation even without the DA marketing link.

Recommendations were created to address the issues, problems and challenges faced by the mixing plant businesses. A strategic plan addressing the gaps in the program was created to guide the key parties involved in the project to achieve successful implementation of a possible extension of the Bio-N project wherein the rehabilitation f inactive mixing plants can be conducted. The plan proposed the following: product improvement, provision of continuous technical support and extensive entrepreneurial skill enhancement trainings and seminars by BIOTECH; and establishment of systematic method of evaluation and selection of recipients by DA. Moreover, individual recommendations for each mixing plant business covered by the study were also formulated to address specific problems experienced by mixing plants under different structures of organizations. It involved strategies that aimed to overcome the challenges in managing a technology-based enterprise.

Language

English

LC Subject

Agriculture, Biofertilizers, Biotechnology

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2011 M17 M37

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Document Type

Thesis

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