Analysis of the production and marketing operations of Sabutan-based handicraft enterprises in Baler and San Luis, Aurora

Date

2010

Degree

Bachelor of Science in Agribusiness Management

College

College of Economics and Management (CEM)

Adviser/Committee Chair

Victoria Guieb

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Abstract

The study of sabutan handicraft enterprises, subcontractors and weavers was undertaken to determine production and marketing operation of sabutan-based handicraft enterprises in Baler and San Luis, Aurora. Handicraft industry has long been existent in the Philippines providing work and livelihood to the country. Philippines is considered an important exporter of manufactured handicrafts due to creativity and ingenuity skills of Filipinos. Aurora province is known for its sabutan production. It makes use of P. Sabotan Blanco, an indigenous material that can be found in their forest and spaces and rows of coconut trees. Sabutan weaving in the province is more than

a three century old activity that has been handed down from generation to generation. It is a home- based business operation that eventually marks off to being a cottage business. Various products

out of sabutan were hats, mats, coasters, placemats, bags, slippers and other novelty items. Despite its development, it is still afflicted with many constraints in raw material sourcing, processing, marketing and limitations of government support. The study was conducted with the following objectives: to assess the conduct and performances of the sabutan based handicraft enterprises in Baler and San Luis, to identify the profile of the key players in the sabutan weaving and business operations, to discuss how marketing, production, and other management functions were undertaken by the handicraft manufacturers, to pinpoint the problems, weaknesses and gaps in the sabutan handicraft operations, to identify investment opportunities and or development entry points for entrepreneurs and/or government organizations respectively, to determine the factors causing success and failure of the business and to formulate recommendations addressing the problem encountered by the players in the sabutan weaving and business operations. Twenty nine weavers, 16 subcontractors and 13 manufacturers were included in the study. The respondents were accessed through the snowball method and purposive sampling or by referral. Primary data were gathered through scheduled and personal interviews. Secondary information were gathered from government agencies mainly DTI, BETP and DOST. The analysis used descriptive design incorporating the SWOT Analysis, competitive analysis using Porters Five Forces model and value chain analysis. Cost- return analysis, driving forces and competitive forces at work in the weaving and business operations of the enterprises was also determined. Results showed that the key players were concentrated in some of the barangays of the two municipalities. Ten of manufacturers were operating in micro scale level operation, while two were classified as cottage level operators and one was small scale operator. Twelve of the manufacturers were formally registered. Entrepreneurs were mostly female and college graduates. The domestic buyers of manufacturers were handicraft processors located in Bulacan and Manila while the end consumers were buyers from the Aurora province, Central Luzon and Region 2. The manufacturers only produced when there was demand. Pull method of demand pushes the start of operation. Cost plus pricing was adopted by the manufacturers, however, there was no fixed percentage used in pricing scheme. The enterprises performance was way behind the key success factors in the handicraft industry which includes 1) labor productivity; 2) unique and innovative designs; 3) value adding activity; 4)financial capability; 5) price competitiveness;6) wide distribution system;7) excellent delivery times; 8) good quality design and originality. The enterprises were advantageous through the offering of wide array of products from the biggest to the smallest handcrafted materials. This enabled them to provide choices to their end consumers.

Michael Porters Five Forces of Competitive Analysis Framework utilized in the analysis of the enterprises revealed that the most promising entry point in the business was manufacturing of sabutan craft due to higher income compared to subcontracting and weaving. Bargaining power of suppliers of raw materials was low while the bargaining power of domestic buyers was moderate. Rivalry of competitors among each other was moderate and competition was low. The threat of substitution in Aurora province was low due to the low influx of substitute product however substitution in outer provincial area was high. The study revealed that the manufacturers of sabutan handicrafts lack value adding activity in the primary activities conducted in the business. Value adding activity was conducted most by the domestic buyers of the manufacturers. They rarely finish product in large volume and economies of scale was not observed. Most of the cost was tied up in manufacturing cost which includes purchase of raw materials, and direct materials. A higher profit and generated income may be realized in higher rate of value addition as deduced from cost return analysis. Competitive advantage analysis revealed that sabutan handicraft was the cheapest among exported handicraft. The major problem afflicting the sabutan farmer were the 1) decreasing supply of sabutan due to climate change, weather condition and cutting of sabutan trees; 2) long and tedious process of harvesting and manufacturing sabutan fiber; 3) lack of sabutan integrators or traders. The problems of the weaving sector were 1) Decreasing number of people into weaving; 2) unsynchronized weaving operation; 3) manual production relying on simple tools and equipment; 4) increasing cost of raw materials; and 5) lower market price of produced. The major identified problems in subcontracting were 1) lack of capital and reliance to manufacturers for capital in operation 2) decreasing number of weavers brought about rivalry in acquisition of weavers; 3) unmet delivery dates; 4) poor quality control management and transportation. Status of the sabutan-based handicraft operation showed that there was declining trend in all the production and marketing aspects of enterprises as well as with the production of sabutan fiber in the area. In the next few years if no intervention will be given to the industry as well as cooperation with manufacturers, the weaving operation will gradually vanished. Manufacturers of sabutan handicrafts identified problems where mainly in the production operation and marketing of the produced crafts. 1) limited promotional activity and pure competition; 2) lack of value addition; 3) seasonality of demand; 4) low quality of products were among the identified problems in production and marketing, on the other hand finance related problems were; 1) occurrences of uncollected receivables; 2) Reluctance to acquire additional capital for the business; 3) poor budgeting and accounting system and lack of government support. The manufacturer-exporter problem was the economic recession that struck major export countries and the substitute handicrafts from China, Vietnam and Thailand. Based on the result to attain growth and development of the weaving sector and enterprises business operation, it is recommended to do the following actions 1) improvement of production through development of machineries and product development; 2) intensified promotion and public awareness; 3) improved equipment and tools for weavers and suppliers of sabutan; 4) marketing linkages and assistance; 6) market intensification; 7) government and private institutions linkages and 8) creation of laws and ordinances on sabutan business involvement, sabutan growing, planting and cutting.

Language

English

Location

UPLB College of Economics and Management (CEM)

Call Number

LG 993 2010 M17 F36

Document Type

Thesis

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