A Study of Footwear Enterprises in Biñan, Laguna, 2010

Date

4-2010

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Normito R. Zapata, Jr.

Committee Member

Jimmy B. Williams, Agnes T. Banzon, Dinah Pura T. Depositario, Reynaldo L. Tan

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Abstract

The enterprise study aims to state the present status of the footwear enterprises of Biñan. The specific objectives of the study are: 1) to present the profile of selected small-scale and medium- scale enterprises SME’s and those of the entrepreneurs engaged in the footwear industry; 2) to discuss the characteristics, traits or qualities of the entrepreneurs engaged in the footwear enterprises and how these are concretely expressed and manifested in key business decisions; 3) to identify and analyze the economic, technological, customer and competition and legal-political factors affecting the footwear enterprises in Biñan; and 4) to discuss the various considerations in establishing and organizing a Footwear Enterprise in Biñan

The study involved 41 footwear manufacturers in Biñan. It included both the registered and unregistered enterprises. Data collection was made from December 2009 to January 2010. It involved personal interview of the current and former footwear manufacturers in Biñan. A descriptive research design was utilized while convenience sampling was used for the sampling method. The study was made during the peak months of December and January, making the data gathering quite difficult.

According to the respondents, footwear manufacturing in Biñan has been in existence even before the establishment of the first footwear enterprises in Liliw. This explains why the buyers though they know that footwear making in the town have declined, they still choose to make business with them because of their already established reputation. The town does not have any formal program that would be beneficial to the promotion and development of the industry. All the manufacturers considered in the study are into sole proprietorship. This choice of ownership helps in making quick and simple decisions to fast tract the implementation process.

Based on employment, most of the enterprises are classified into small scale. This means that majority of respondents have 10-99 workers. Based on asset size, all except one are classified as micro-scale. Most of the entrepreneurs use their own saving and personal resources in starting the business. Only one of them borrowed his initial investment from the bank. According to him, during that time, the bank offers low interest payment that’s why he chooses to loan his initial capital. The footwear manufacturing of the town only involves simple machines. Production process is semi-mechanized thus making the businesses labor-intensive because of the required number of workers to continue the production processes.

A PEC questionnaire was also used in the study. It was done to identify the strong and weak points of entrepreneurs. The results show that the footwear entrepreneurs are strong on their commitment to work and their demand for quality and efficiency. This is very evident on their persistence to meet demand no matter how large the orders are. In contrast, the entrepreneurs are weak at taking risks. This is clearly manifested on the reluctance of the entrepreneurs to engage in forward integration. They do not want to have their own distribution outlets because for them, it just incurs additional cost. They are also undermining the benefits of this potential.

A careful assessment of the four business functions was also done. Key problems were also identified and the corresponding innovations that entrepreneurs are doing to counter the problems. Production and marketing aspects were plagued with a number of problems. In the marketing aspect, competition from imported footwear was the main issue affecting the enterprises. These imported goods are cheaper and they come in large quantities making it more visible to the consumers. At present, competition is still stiff. Before, footwear manufacturing of the town is only being threatened by foreign competitors. Now, even the local scene has competition. With buyers preferring the less expensive imported goods, the demand for local footwear has decreased causing stiff competition locally.

Regarding the production aspect, the main issue is technology. Since footwear enterprises use only simple machines, production is limited making it less efficient compared to its foreign counterparts. To counter the problem, entrepreneurs decided to just focus on improving the quality of their products. They only wanted to compete on the aesthetic and value of their products and not on price and quantity.

Another aspect that has a very significant problem is the finance function. According to the entrepreneurs, lack of working capital has been a major threat to their businesses. Their major buyers offer terms that are on the delayed basis meaning the payments will be made just after some period of time. Since suppliers of raw materials do not offer credit terms and oblige entrepreneurs to pay cash right away, entrepreneurs experience lack of funds.

A SWOT analysis was also made in the study. The strengths include established market, proximity to source of inputs and the PEC strong point of entrepreneurs. However, every industry has weak points. In this study, the identified weak points are: insufficient working capital, lack of available quality workers, lack of government support, and the PEC weak point of the entrepreneurs. Regarding the external factors, the identified opportunities are: increase in population and fast change of footwear styles. The determined threats are: competition from both in local and international markets and the continuous increase in input prices.

On the industry analysis part, the study utilized Porter’s five forces model. The forces are barriers to entry, bargaining power of suppliers, bargaining power of buyers, existence of substitutes and intensity of rivalry. The bargaining power of buyers is the strongest factor affecting the footwear industry. The industry has many small companies supplying the product and buyers are few and large. Footwear enterprises have little negotiating power since a number of competing companies are trying to sell similar products to one large buyer. There is less room for negotiation because buyers know the market demand, prices, and costs of production. The major buyers also have the power to return all the products delivered to them if they see any flaw among the products of the footwear entrepreneur. The power of the buyers is also clearly manifested on their ability to switch to other manufacturers whenever they want to. The factors they greatly consider are prices, quality and design of the footwear.

To improve footwear businesses and to solve the reported problems, the study cited the factors that need to be addressed immediately. It is recommended to seek help from the local government to address some important issues affecting footwear enterprises. This would help entrepreneurs to address issues with their suppliers and buyers which are the main root of the industry problems. Forward integration is also recommended to enable entrepreneurs to have a slight control on their business decisions such as pricing and acquiring of inputs.

Language

English

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2010 M17 L36

Notes

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Document Type

Thesis

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