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EXECUTIVE SUMMARY
One of the most important crops in the Philippines is pineapple. Demand for
pineapple products is increasing because Filipino consumers are becoming more health
conscious and opportunities for pineapple exportation in the global market is constantly
growing as well. Majority of pineapple production is concentrated in Mindanao and a huge
percentage of production nationwide is operated by giant companies such as DOLE and
Del Monte, making it difficult for the smaller ones to establish a competitive position.
To solve these issues, current and long-term strategies were presented in this
paper together with the specific strategies, actions to be taken, period of implementation
and success indicators. Potential problems that may arise in the strategy implementation
were identified such as conflicting problems in the workplace, inability or resistance to
change of employees, additional expenses and lack of resources, inability to reach
consensus, ineffective leadership and insufficient attention and evaluation. Suggested
solutions to counter these drawbacks were also shown.
Through the strategies provided, this paper basically aims to aid DAVECO-ARB
not only for the maximization of its wealth but also, through proper implementation, for
the realization of its vision which is to be the best Agrarian Reform Beneficiaries
Cooperative and its mission which is to provide excellent services, produce high quality
products and foster economic growth to better serve its stakeholders.
ABOUT THE COMPANY
Company Background
To generate revenue, the cooperative decided to lease the land that was covered
through CARP for Php5,000.00 per hectare per year. In addition, DAVECO also engaged
in money lending business activities which caters its own members. After three years, the
cooperative grew from thirty-seven to one hundred and ninety-six members with a total
land holding of two hundred sixty hectares.
In 2007, with the abundance of pineapples in the locality, DAVECO officers and
members saw an opportunity to venture into a new market. Through regular meetings
and consultation workshops, the officers were able to come up with a “Pineapple Food
Processing” project. TESDA hosted a training for Food Processing which was attended
by DAVECO officers and members to prepare for the said project. On March 7, 2008, the
cooperative presented the “Pineapple Food Processing” project to the Department of
Labor and Employment in Region XI and was able to receive financial assistance for the
purchase of tools to be used for processing. With all preparations in place, the DAVECO
Food Processing was formally launched on April 18, 2008.
Currently, the cooperative is faring well with its lending and land leaseback
activities, and is commonly known for its pineapple processed food products such as
pineapple juices, jams, vinegars, and wines.
The proponents of this study suggest the following vision and mission statements
for the cooperative.
Vision: “To be the best Agrarian Reform Beneficiaries Cooperative in Davao City.”
Opportunities
It is undeniably clear that for the coming years, the demand for
processed/preserved or raw pineapple products will increase. In an article released
by the government, it stated that market opportunity for global demand for
Processed Philippine Fruits and Vegetables has an average growth of 7% from
2006-2010 with preserved fruits having 53% and juices/concentrates with 24% of
total exports. This placed the company in a position to consider exporting their
products.
3. Disposable income among citizens due to tax exemption
Starting this year, most provisions in the Tax Reform for Acceleration and
Inclusion (TRAIN) Law will become effective. Those with income of Php 250,000
and below are no longer subject to income tax. This gives consumers a higher
excess income because of the lesser tax implications.
For the past years since President Rodrigo Duterte took the seat in
Malacañang, tourism boosts in the city as they wanted to visit the home of Digong.
Davao is not only known for its festivals but also for the products that the city offers.
As part of OTOP, the entity's products are included in those that are bought by
tourists which numbers are expected to increase in the coming months.
The opening of retail stores and other distribution channels gives DAVECO
the chance to show their products on a larger audience. Aside from their usual set-
up of delivering their products at schools, they can also expand by entering into
partnerships with outlets such as convenience stores, malls among others to widen
product recognition.
6. Trade Fairs
Exhibits and Trade Fairs gives the company a chance to present and show
their products. This contributes to the exposure of their name among those who
visits their stalls. The business is an active participant of such being under the
Department of Trade and Industry (DTI). Aside from city-wide trade fairs, the
agency conducts the Sikat Pinoy National Trade Fair annually to promote various
products from different localities.
It is undeniably clear that large corporations hold most of the market share
in the industry. This goes without saying that as of now, DAVECO can't compete
with larger brands in a larger scope. Del Monte and Dole have already become a
household name and if consumers were going to choose between the known brand
versus the lesser known brand, most would obviously choose what they were
already grown used to. For the larger companies, smaller businesses are of little
threat because they have already established their position in the market.
Because of the increasing entrants in the food industry, the government saw
a need to implement stricter rules when it comes to supplying products that enter
the body. The DTI is strictly implementing businesses such as DAVECO to have
an equipment/machine that counts some nutritional content that their products are
required to have. There are regulations that is needed to be complied with before
being able to penetrate the market. In addition, if the company considers to export
their products or raw pineapples in the future, then an even stricter rules will be
applied. These rules will challenge the company and needs to be considered.
3. Saturated market
The effectivity of the TRAIN Law does not only give an advantage among
the taxpayers but also disadvantages. Because the government increased the
exemptions of a certain group of income earners, they will now channel the loss to
other means of obtaining taxes. It's like exchanging your money from your right
pocket to your left. It also touched some taxes that are needed to be paid by
business that can affect business licenses. And because revocation of business
licenses will be deemed illegal in the eyes of law, businesses are compelled to
comply.
The following paragraphs will discuss the analysis of the industry of DAVECO
Agrarian Reform Beneficiaries Cooperative using the five forces of competition and such
analysis will greatly affect the possible strategies that will be formulated for the
cooperative.
One factor of intensifying the competition in a industry is the threat of the new
entrants. When the pool of new entrants becomes larger, there will be more changes of
strong competition. In an analysis of the food & beverage industry, it was found out that
the food processing industry is directly linked to the agricultural industry. In relation to
this, the food processing industry in the Philippines is fairing very well. Thus, it will be no
surprise that businesses may start to venture on agricultural food processing. The
potential new competitors of DAVECO are Biao Joaquin Dairy Farmers Cooperative,
Magsaysay Coconut Farmers Cooperative, Federation of Davao Dairy Farmer’s
Cooperative and Davao Tropical Fruits. To secure the cooperative’s place in the market,
they may opt to improve nutritional value on their products, add modern features to their
products (bottled pineapple juice, instead of tetra packs) or increase promotional
campaigns especially through social media.
Consumer needs are complex and a firm, may it be small or large, cannot satisfy
all sorts of needs alone. Such needs enable wide range of choices for the consumers
giving competitors a sufficient room for product developments that can replace existing
goods in an instant. DAVECO products have a lot of substitute products and most of them
were in the same industry longer than DAVECO. Competition increases when the relative
price of the company’s substitute products decreases and customers cost of switching
declines. The following substitute products, but not limited, pose a threat to the
cooperatives’ products:
▪ Tetra pack juice of Zest-O and Sunkist offering different fruit flavors
The intensity of competition among existing firms is one of the major factors of
profitability of a company. Rivalry among competing firms for DAVECO is moderately high
because there are lots of competitors to the cooperative wherein the former’s products
are not so different with the latter. However, DAVECO offers unique characteristics of
their products. Their products are a taste of home for Davaoeños and can be a reminder
for tourists of what Davao is. Also, their products are fresh, organic and healthy which are
offered at low price compared to other competitors.
INTERNAL ASSESSMENT
The key internal factors in evaluating the IFE matrix are the strengths and
weaknesses of DAVECO Agrarian Reform Beneficiaries Cooperative.
Strenghts
The major raw materials of DAVECO’s products are pineapples which have
great benefits such as it helps in improving oral and high health, boosts immunity
and improves blood circulation, helps prevent arthritis, cancer and heart diseases,
and etc. Because it’s organic, nutrients which are common from other competitors
are richer and other nutrients are present which can’t be found from a competitor’s
products.
5. Social responsibility
The company have good working relationship with its suppliers which will
solve not only the delivery cost savings but also reduce availability problems,
delays and quality issues of raw materials that will greatly improve the flow of
operations leading to a better service for the consumers.
8. Owns a larger portion of land
Having a larger portion of land means the cooperative has one less burden
whenever the Board of Directors would like to extend their market reach in the
future through expanding their operations or venturing to other businesses like
creating a new product line with different main raw material.
Weaknesses
The cooperative does not own a facility for checking nutritional contents of
their products. This is a great disadvantage for them because whenever they will
introduce or change the formula of their products, they need to outsource other
firms for the determination of the new nutritional contents and if it doesn’t meet the
criteria provided by the government, they have to formulate and repeat the process
again causing them to spend thousands just for this process.
They do not exert that much effort to promote their products even though
their products have the potential to place a great position in the industry when
promoted properly. They are contented with selling their products to limited buyers
in a specific area when it could sell better if introduced into a wider market.
4. Limited distribution
5. Narrow-ranged products
Since they do not promote their products that much, it is not known to many
specifically to areas far from the cooperative. They only depend on contracted
establishments to purchase and resell their products.
STRATEGIC ISSUES
The company is currently supplying its products in selected local stores. This
limits their market reach in a way that its mode of distribution channel cannot answer
to a wider audience. Some consumers haven't even heard about the products
because it is not visible in stores where a larger group of people commonly goes to,
where it's supposed to be. A narrow market coupled with minimal to no marketing
strategies implemented prevents it from further customer demand and ultimately
leads to low market share.
3. Fluctuating Profits
4. Unpopular products
Before starting this paper, some of the members of the group have no
knowledge of their existence and market presence. After the company visit, where
they distributed a free taste of their products, it actually taste distinct compared to
what we've tasted on other brands. This thought made us agree that it has greater
market potential and their products should reach the homes of the customers. They
don't need to spend too much on marketing in terms of promotion but efforts should
be taken well enough to put their products on the minds of the buyers. The
unpopularity or less knowledge of their products causes its minimal local patronage.
How are the customers able to patronize the product when they haven't even
heard of it? This is the next issue after weighing the product's unpopularity. This is
also related to the market share discussed above where the company must first
secure its hold on their existing local market as a step for growth. As part of the city's
OTOP, it must be that their products is already known to the market. However ironic
it is, those which are not from the local districts know more about their products than
those who actually are from here. "Mahalin ang sariling atin" should also be
emphasized, if not in the whole country, then in the Davao region- its home.
Long-term Objectives
The following objectives are anchored on the strategic issues identified, and are
established with reference to the company’s mission statement and to set the direction
for the further improvement and success of the entity:
Strengths Weaknesses
Opportunities Threats
ST Strategies WT Strategies
SO Strategies
1. Market Development
By matching the identified strength of owning a large portion of land and the
opportunity of a stable demand of pineapple exports in the global market, it would
be an advantage to pursue a market development strategy. However, instead of
introducing the existing products such as pineapple jams, this strategy suggests
that DAVECO engage in pineapple fruit plantation and export. By utilizing a portion
of land for pineapple plantation, the company would be able to expand its operation
and add a new profit center within the organization.
2. Market Penetration
WO Strategies
ST Strategies
The following are the strategies formulated in order for DAVECO to use its
strengths in avoiding or reducing the threats that it faces:
How a company prices its products affects not only its sales, but also its
position and ability to compete in the market. DAVECO has established its
products at a low price that consumers, even a student with no income, can afford.
However, due to the new tax reform law, prices of products with sugar and
artificial sweeteners have increased by Php 6.00 per liter (https://pcoo.gov.ph/wp-
content/uploads/2018/01/A-Guide-To-TRAIN-RA10963.pdf).DAVECO's Zlurpppd!
pineapple juice contains sugar as one of its raw materials. In accordance with the
new taxation law, DAVECO increased its products' prices. This change could taint
the company's established "consumer-friendly" price.
To address this threat, the business should establish cost reduction policies
to meet consumer's price expectation.
On one side, DAVECO's products are promoted by OTOP (One Town One
Product). It is a program of the government that focuses on the promotion of
products of specific towns. It also gives emphasis to the branding of these products
and how well these can be presented to the consumers.
WT Strategies
Below are the defensive strategies to reduce DAVECO's internal weaknesses and
avoid the threats that it faces:
Customer Relationship
Key External Factors Management Cost Reduction
Opportunities Weight AS TAS AS TAS
Increase in demand of health-conscious products 0.12 2 0.24 1 0.12
Incerasing demand in pineapple exports in the global market 0.12 1 0.12 2 0.24
Disposable income among citizens due to tax exempt
exemptions 0.11 3 0.33 4 0.44
Boost of tourism in Davao City 0.10 1 0.10 2 0.20
Increase in distribution channels 0.10 2 0.20 1 0.10
Trade Fairs 0.10 0 0.00 0 0.00
Threats
Existence of well-known competitors 0.09 3 0.27 4 0.36
Implementation of more strict regulatory requirements 0.07 3 0.21 2 0.14
Saturated market 0.07 4 0.28 3 0.21
Increase in taxes due to the new tax reform law 0.07 0 0.00 0 0.00
Adverse weather conditions 0.05 0 0.00 0 0.00
TOTAL 1.00 1.75 1.81
Key Internal Factors
Strengths
Produce Natural Organic Products 0.07 1 0.07 2 0.14
Owns own processing facility 0.12 0 0.00 0 0.00
Low-priced, consumer friendly product 0.05 1 0.05 4 0.20
OTOP (One town, one product) 0.07 0 0.00 0 0.00
Social Responsibility 0.04 0 0.00 0 0.00
Produce Unqiue Products 0.06 2 0.12 1 0.06
Fixed Suppliers 0.05 0 0.00 0 0.00
Owns a large portion of land 0.06 0 0.00 0 0.00
Weaknesses 0.00 0.00
No facility to check nutritional content 0.04 0 0.00 0 0.00
Difficult to obtain approval for new strategic choices 0.07 0 0.00 0 0.00
Poor Marketing Strategies 0.10 2 0.20 1 0.10
Limited Distribution 0.10 2 0.20 1 0.10
Narrow-range of products 0.05 0 0.00 0 0.00
Location of the business 0.08 0 0.00 0 0.00
No loyal customer base 0.04 4 0.16 3 0.12
TOTAL 1.00 0.80 0.72
GRAND TOTAL 2.55 2.53
By using QSPM in the decision stage, we have determined the most attractive
alternative strategy considering key internal and external factors as market penetration.
The results suggested that the company should intensify their product promotion and
advertisement to reach a wider market. This strategy makes use of the company’s
strengths of producing natural products and of selling them at a low price which is
consumer friendly. These strengths are advantageous when matched with the opportunity
of a current shift of the market demand to a healthier diet.
STRATEGY IMPLEMENTATION
The proponents have chosen intensive strategies for current and long-term
implementation.
The current situation can be best handled by the market penetration strategy. The
cooperative must present its pineapple products in present markets here in Davao
through enhanced marketing efforts. Strategic issues that can be addressed by this
strategy include limited market reach, relatively low market share, unpopularity of the
products and lack of local patronage.
On the other hand, market development strategy can be considered in the long
run. Products can be presented in new geographic areas outside Davao City such as
Davao del Norte, Davao del Sur and other neighboring cities to expand market reach. All
the strategic issues identified which are limited market reach, relatively low market share,
fluctuating profits, unpopularity of the products and lack of local patronage can be solved
by this strategy.
Market Development
1. Intensify Research and Development
2. Foster capital growth to accumulate earnings to be set aside for proposed business
venture
Given that the company is a neophyte when it comes to venturing their products
internationally, basics and know-hows from the established exporters are of great
contribution to the company’s success. They may enter into agreements and possible
partnerships from multi-national companies like Dole. The aim of Daveco is to enter the
global market with their raw pineapple/pineapple products and it would be too hard for the
company to penetrate it directly. Thus, distribution channels already etched internationally
are available. The company can be a “grower” for a brand like Dole where they will enter
into a contract to supply them with their products to be exported.
A need to orient and to empower stakeholders and the human resource is essential if
the company is going to globalize. It is necessary to communicate what this big step is all
about. This encourages the persons involved to be proactive and be more engaged in the
company’s strategy. This requires a higher effort from the workforce but will eventually
redound to their benefit. Some issues that should be discussed about are the changes in
the work that is needed to be done, the technicalities of exporting and the possible
changes in management among others.
Potential Problem Analysis
Additional expenses and This strategy comes with it Daveco should minimize
lack of resources outsourcing marketing the effect of resource
research studies, shortages by prioritizing
orientations and seminars, their resource allocation
etc. This means that this without prejudicing the
strategy has its respective strategies. It should set
cost. Thus, implementing aside funds specifically for
this would require a huge the implementation of the
amount of resources. strategies, or seek for
Correspondingly, all sponsorship.
businesses never seem to
have enough resources to
accomplish every strategy
it wants to achieve.
Inability to reach general This strategy must pass the Daveco must require its
assembly consensus cooperative’s general members to be committed
assembly before any to the common goal of the
implementation shall be cooperative, and to
made. Consensus decision differentiate and justify their
making is the process used own personal preferences.
by Daveco. Its inability to
reach consensus among its
members creates a huge
challenge in the
implementation of the
strategies above. Aside
from the assumption that
every member has a valid
perspective, biases among
factions may still arise.
Market failure Failure in the market is not Daveco should ensure the
a new thing in today’s commitment of each
business world. This members in the success of
happens in many ways. the strategies. Regular
Especially when the assessments shall also be
management becomes done by the firm in order to
complacent. Too often, monitor and evaluate even
members may the tiny details of the
underestimate the strategy process. If it fails, Daveco
development process and shall always be ready and
view it as a finite initiative. immediately perform other
After undergoing the courses of alternatives to
strategy formulation remedy the possible
process, some members problem.
might find themselves
jumping back or immersing
themselves in other firm
matters. Also, this potential
problm might occur if
Daveco’s attempt to
engage in market
development of exporting
pineapple products fails,
leading the business to
incur loss.
MARKET PENETRATION
Specific
Actions to be taken Time period Success Indicators
Strategies
Intensive Increase product Immediately Increase number of
marketing promotion through social plant visits by 10% and
Strategy media advertising, increase revenue by
regularly updating atleast 10%. Garnered
facebook pages and atleast 2,000 audiences
blogs, and partnering with the company's
with local entities to join social media accounts
festivals and trade fairs.
If possible, employ trade
discounts for bulk
purchases
Additional Contract with more June 6, 2019 Reach an agreement
distribution densely populated with Kapitan Tomas
channels elementary schools to Monteverde Sr. Central
sell the pineapple juice and Palma Gil
and with grocery stores elementary schools to
in malls to sell all the sell the pineapple juice
pineapple products of exclusively. Successful
the cooperative arrangement with
Gaisano Malls and
Central Warehouse to
distribute all the
pineapple products of
the cooperative.
Improve Hire a freelance Immediately Reduced production
products' Professional Designers expenses in packaging
design to upgrade products' materials by 10% of
aesthetics, ergonomics, current expenses.
graphic design, Increase sales in
promotional materials distribution channels by
and product feel. atleast 5% every
quarter.
Balanced Scorecard
LEARNING CONCLUSION
A close study of the market is essential to understand the needs of the customers
and improve the quality of the products accordingly.
All businesses need some sort of assistance in funding. It is best to find an investor
who shares the same passion, someone we believe we can work with.
Disclaimer: This research paper is for school purposes only. The information contained on this
paper are those of the proponents and does not necessarily reflect the views and opinions of
the subject company, DAVECO Agrarian Reform Beneficiaries Cooperative.