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PHILIPPINE L STITUTE for DEVELOPMENT STUDIES Working Paper 83-01

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PHILIPPINE L STITUTE for DEVELOPMENT STUDIES Working Paper 83-01 PHILIPPINE L_STITUTE FOR DEVELOPMENT STUDIES Working Paper 83-01 STUDIFS ON THE WOOD BASED FURNITURE, LEATHER PRODUGTS A_D FOOTWEAR MANUFACTURING INDUBTRIES Ok THE PHILIPPINES ACKNOWLEDGEMENTS We wish to express our sincerest appreciation and gratitude for the cooperation, assistance and enaouragement of the following, with- out whom these studies would not have been completed: o Dr. Filologo Pante, Jr., Dr. Romeo Bautista, Mr. Isaac Puno III and Mr. Mario Ferramil of the Philippine Institute for Develop- ment Studies ; o Dr. Magdaleno Albarracin, Jr. and Prof. Remedios Balbin of the U.P. Business Research Foundation, Inc. o The SGV Foundation, Inc. and the SGV Development Center; o Messrs. Jaime Cari_o and Jose Cabacaa of Premiere Financing. C_P,; o Prof. Romeo dela Paz and Dr. Epictetus Patalin_hug of the U.Po College of Business Administration_ o Messrs. Edgardo Reyes and A1 de Lange, Jr. of the Chamber of Furniture Industries of the Philippines; o Mayor Osmundo de Guzman and Mr. Domingo Antonio of the Marikina Shoe Trade Commission; o Atty. Manuel Cruz of the Tanners Association of the Philippines; o Atty. Cora JacOb of £he leather products manufacturing industry; o Messrs. Gregorio Timbol and Juvenal CatejQy of the wood-based furniture industry; o Prof. Honesto Nuqui of the U.P. Computer Center; o Mr. Cristopher Gomez, for statistical advice, and Mr. Roberto Magno, Mr. Saturnino Navarrete and_, Ps_el_- Verdejo, for _omputer programming; and - ii - o Our research assistants, Ms. Araceli Paraiso, Mr. Ernesto Dacmnay, Ms. Gina Villa and Ms. Ma. Victoria Taro, and the corps of interviewers who helped us put together our data. The Research Team* (* Niceto S. Poblador, Ad_-i-amoO. Solis, Roy C. YbaSez, and B{enveoido M. Aragon of the U.P. Business Research Founda- tion, Inc. and the U.P. College of Business Administration.) - iii - TABLE OF CONTENTS I. INTRODUCTION A. Objectives and Scope of the Studies 1.0 Objectives of the Studies I-i 2.0 Scope of the Studies I-2 3.0 Limitations of the Studies 1-3 B. Method i .0 Definition •of Terms 1-4 2.0 Sampling Procedures I-7 3.0 Data Gathering Procedures 1-21 4.0 Analytical Tools 1-26 II. WOOD-BASED FURNITURE INDUSTRY A. Overview of the Industry II-i B. General Characteristics of the Sample 1.0 Size Distribution of Establishments II'-8" 2.0 Product Lines IIUl5 3.0 Organizational Characteristics II-23 C. Production Inputs and Practices 1.0 Production Fanilities and Major Practices II-26 2.0 Production Capacity and Capacity Utilization II-37 3.0 Labor Force II-42 4.0 Raw Material II-47 5.0 Product Design/Technology II-51 6.0 Production Support Facilities and P rac rices II-53 - iv- D. Marketing Practices and Export Market Prospects 1.0 Channels of Distribution 11-59 2.0 Seasonality of Sales II-65 3.0 Pricing Practices II-69 4.0 Credit Sales II-70 5.0 Downpaym_mt on Sales II-74 6.0 The Export Market: Some Problems, Issues and Prospects II-74 E. General Management 1.0 Major Managerial Functions II-93 2.0 Planning and Budgeting 11-96 3.0 Institutional Linkages 11-98 F. Sources of and Problems in Financing i. 0 Sources of Financing II-i01 .2.0 Major Problems in Financins If-106 G. Rajor Conclusions and Recommendations 1.0 Financing for the Small Manufacturers II-i14 /2.0 Export Promotion II-I18 Biblio 8raphy If-121 llI. FOOTWEAR INDUSTRY A. An Overview of the Industry Ill-i B. General Characteristics of the Sample 111-6 1.0 Location III-6 2.0 Years of Operation III-6 3.0 Types of Business Organizations !II-8 - V - Page No. 4.0 Size Distribution of Respondents: Labor Force and Output Levels 111-8 5.0 Product Type Distribution Ill-ll C. Production _pj_s and Practices III-ii 1.0 Sectoral Distribution of Output IIl-ll 2.0 Production Equipment 111-14 3.0 Other Facilities IIl-18 4.0 Labor Force 111-18 5.0 Raw Material Inputs III-22 6.0 Production Practices III-23 7.0 Quality Control 111-27 8.0 Sources of Information on Technology III-28 9.0 Summary III-30 D. Marketing Practices III-31 1.0 Channels of Distribution 111-31 2.0 Seasonality Iii-34 3.0 Credit Sales 111-46 4.0 Pricing Practices 111-38 5.0 Modes of Transport 111-38 6.0 Export Market 111-40 7.0 Summary 111-50 E. General Management Practices 111-51 F. Sources of and Needs for Financing III-54 1.0 Sources of Financing and Working Capital III-54 2.0 Financing of Equipment III-59 3.0 Other Problems in Financing 111-.59 4.0 Summary III-64 -vi- Pap_e No. G. Major Conclusions and Recommendations III-65 1.0 The Domestic Market III-66 2.0 Export Market III-68 3.0 Additional Considerations for Growth III-70 Bibliography III-74 IV. LEATHER INDUSTRY A. Overview of the Industry 1.0 Ori_,_insand Structure IV-i 2.0 Economic Significance IV-2 3.0 Some Industry Statistics IV-6 4.0 Investments in the Industry IV-8 B. General Characteristics of the Sample 1.0 Capacity IV-8 2.0 Years in Operation IV-9 3.0 Organization and Location IV-9 4,0 Employmemt IV-10 C. Marketing 1.0 Supply and Demand for Leather IV-10 2.0 Distribution I_-ll 3.0 Pricing and Credit Practices IV-II 4.0 Prospects IV-13 D. Production 1.0 State of Technology IV-13 2.0 Capacity and Utilization IV-14 3.0 Large Tanneries and the "Sipa-Sipa" IV-15 - vii - P_e No. 4.0 Expansion Possibilities IV-16 5.0 Raw Material Supply _d Quality IV-17 6.0 Leather-Using Industries IV-18 7.0 Prospects and Alternatives IV-19 E. General Management Practices 1.0 Ownership and Management IV-21 2.0 Planning IV-22 F. Financing 1,0 Sources of Financing IV-23 2.0 Problems in Financing IV-23 G. Summary of Findings and Recommendations 1,0 Major Findings IV-24 2.0 Some Recommendations IV-25 Biblio graphy IV-28 V o LEAIKBR PRODUCTS INDUSTRY A, Overview of the Industry V-I B. General Characteristics of the Sample 1.0 Scope V-I 2.0 Organization and Ownership V-2 3.0 Years in Operation V-2 4.0 Location V-2 5.0 Size by Labor Force and Sales V-6 - viii - Page NO_ C. Production 1.0 Raw Material Quality and Supply v-6 2.0 Craftsmanship and Quality Control V-10 3.0 Product Design V-II 4.0 Mechanization V-12 D_ Marketing 1.0 Channels of Distribut_" V-12 2.0 Pricing and Selling Terms V-14 3.0 Prospects in the Export Market: _ Vil8 "f . , E. Management 1.0 Extent of Ownelr Participation in •- .,. -" Management V-I 8 2.0 Extent of Pr_-paration. and NSe of .Busines s /Finaucial: Repot ts V-20 3.0 Planning V-20 F. Finance 1.0 Financing ProBlems V-24 2.0 Sources and Terms of Financing V-27 3.0 Uses for Available Funds V-28 g. Conclu io acom dations 1.0 Raw Materials V-29 2,0 Export Marketing V'29 "7, 3.0 Technical Assistance V-30 4.0 Financing V-30 BibliograPhY V-31 ... VI. SUMMARY _. "'Trl-I - iX - LIST OF TABLES Table No. Descri_ I.i Summary of Sample Populations of I-ii Manufacturing Establishments (by Industry and by Area) 1.2 Distribution of Sample Population, Wood- 1-12 Based Furniture Manufacturing Establish- ments (by Area jnd by Size) I. 3 Distribution of Sample Population, Leather 1-13 Tanning Establishments (by Area and by Size) 1.4 Distribution of Sample Population, Leather 1-14 Products Manufacturing Establishments (by Area and by Size) 1.5 Distribution of Sample Population, Footwear !-15 Manufacturing Establishments (by Area and by Size) 1.6 Summary of Derived Sample Sizes (by Industry 1-16 end by Area) 1.7 Distribution of Derived Sample, Wood-Based 1-17 Furniture Manufacturing Establishments (by Area _nd by Size) 1.8 Distribution of Derived Sample, Leather 1-18 Tanning Establishmemts (by Area and by Size) 1.9 Distribution of Derived Sampler Leather 1-19 Products Manufacturing Establishments (by Area and by Size) I.i0 Distribution of Derived Sample, Footwear 1-20 Manufacturing Establishments (by Area and by Size) I.ii Summary of Results of Field Survey Operat_oms 1-24 - X - Table No. Descz_ption P a_e No. II.i Gross Value Added to Gross Domestic 11-3 Product (Manufacturing), Wood-Based Furniture and Fixtures (1970-1980, at Constant 1972 Prices) 11.2 Philippine Exports of Wood-Based Furniture II-5 and Fixtures as a Percentage of Total Philippine Exports (1976-1980, in FOB $ Values ) II. 3 Percentage Distribution of Philippine Exports II-6 of Wood-Based Furniture and Fixtures Accor- ding to Principal Raw Material (1970-1979, in FOB $ Values) 11.4 Location of Respondents II-9 11.5 Distribution of Respondents by Size of Labor II-lO Force II.6 Use of Household Labor, by Size of Labor II-13 Fo rce Ii.7 Distribution of Respondents bY Gross Sales II-14 II.8 Number of Respondents Engaged in the Manufac- II-17 ture_ Subcontracting and/or Resale of Wood- Based Furniture, by Major Product Type II.9 Distribution of Respondents According to II-18 Location and Principal Raw Material II.10 Distribution of Respondents Who Exported II-20 During the Period 1976-1980, by Location and Principal Raw Material Iioli Distribution of Respondents •_qqo Exported II-21 During the Period 1976-1980; According to Number of Years Actually Exporting in the Period, and to Principal Raw Material 11.12 Number of Respondents Who Have and/or Are 11-22 Ensaged in Export of Wood-Based Purniture, by }_jor Product Type 11.13 Distribution of Years in Which Respondents 11-22 First Exported 11.14 Distribution of Respondents by Number of 11-25 Years in Operation - Xi - Table No.
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