Colegio de San Juan de Letran

Letran Graduate School

A Case Study presented about

Philippine Appliance Corporation

In Corporate Social Responsibility

Group I Members:

Bayaras, Michael Angelo

Borbe, Ariane Joy
Cabal, Jan Eureshi
Clemente, Ron Allan
Cortez, Pia Marie
Dela Cruz, Paolo Nicanor
Detoon, Noreen Angelica
Escoses, Micah
Flores, Hazel
Formalejo, Jerome
Franco, Catherine

July 27, 2019

 The Philippine Appliance Corporation (PHILACOR)

BACKGROUND OF THE PROBLEM

History

The Philippine Appliance Corporation (PHILACOR) is currently the leading manufacturer of large electrical
goods. Philacor produces refrigerator, freezers, washing machines, dryers and air-conditioners under the
name of its international partners with General Electric, White Westinghouse and Hotpoint. Philacor
founded in August 16, 1963 by Dante G. Santos and five other Filipino Businessmen. Mr. Dante G. Santos
is Filipino Businessman with 14yrs of experience in the appliance industry in Australia. The company is
currently based in Sucat, Paranaque. Philacor has three separate “staff”. The search for harmonious
industrial relations remains a prime concern at Philacor since the staff union is also affiliated with the
Kilusang Mayo Uno (KMU), a trade union confederation seen by many as consisting of the more
ideological, radical unions and federations.

Year Activity Units Affected

1963 Produce 2400 units
January 13, 1965. Negotiation of Technical
Licensing Agreement in
New York.
1965 Setting up of Creditco
(Philacor’s consumer
financing division
1973 Produce 52000 Units and
become the largest
refrigerator and freezer
manufacturer in ASEAN.
1976 introduced “Winner” as a
sub-brand for PHILACOR.
1976 Westinghouse relinquished
share in Philacor while GE
took over.
1983 Produce 180k units
1993 Reduction of Employees
due to modernization and
industrial unrest
1995 Assets – Php 1.6B, Sales –
Php 2B, and 65% market
share
1996 Produce 300k Units
Table 1: TIMELINE OF OPERATIONS
240 Workforce
Westinghouse Electrical
Corporatin * PHILACOR
Westinghouse X Chase
Manhattan Bank plus a
local company Filinvest
Over 1400 workforce
Philacor products can be
offered to the low end
market.
Philacor and its foreign
Partners
Over 2500 workforce
Employees of Philacor
Philacor
2000 WORKFORCE

PRESENT SITUATION

Philacor’s Working Conditions Include Some of the best Wages in Any Philippine Manufacturing
Enterprise. Employees also receive a range of Monetary Bonuses including 13th Month Pay, A Midyear
Bonus, And a Christmas Bonus. Philacor Also Runs A Long-Standing Productivity Bonus Scheme Based
On Monthly Productivity Targets.
STRUCTURING

Philacor is highly unionized; wherein, each job designation has its own Union Members and Union Leaders
and each has different CBAs subject for negotiation of both the union and the management. According
to union officials, union membership rates are 75% for the rank and file union, almost 100% for the
Supervisors’ Union, and nearly 85% for the Staff Union. Due to the presence of its Union, they are able
to create a socially responsible working environment to its employees that is above the industry and legal
standard.

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

A. Time Context 1993

It describes the take off point of the analysis, the period PHILACOR reduced its staff members
due to modernization and industrial unrest. The company retrenched 500 workers and rehired some after
the modernization happened.

B. View Point Mr. Dante G. Santos (Founder and CEO)

He is responsible for the final review and approval decisions for the maintenance of the company’s
socially responsible working environment.

C. Statement of the Problem

What continual action will the Philippine Appliance Corporation (Philacor) will establish to sustain
its socially responsible approach working conditions to its stakeholders?
 Evaluating the privileges, “representational” benefits, and promotion scheme given by Philacor to
employees from its Top Management, Staff, CBA/Unions and Rank and File were good. The
harmonious coordination of the Union Leaders to the senior management would make both
parties know the efforts of each in assessing the working conditions. Continuous Improvement in
the above aspect up to the very point of making their lives better and that of their family were
overwhelmingly positive.
D. Objectives

1. To sustainably maintain the good working environment/condition the company have.

2. To have more involvement from rank and file’s employee in decision making process.
3. To address the employee's concern regarding their benefits and limits for promotion.

E. AREAS OF CONSIDERATION (SWOT ANALYSIS)

I. Internal Environment

Functional Areas Strength Weakness

1. Philacor success in Manufacturing large electrical goods - X
In 1995, the company boasted assets of P 1.6B ($60M), annual
sales of P2B ($76M) and a 65% Market Share.
2. Philacor Health and Safety Program - The company earned X
a Plaque of Appreciation from the Safety Organization of the
Phiiippines for its reduction in the frequency of lost time due to
accidents and the company was chosen among the Top 25 Healthy
Workplace
 3. Competitive Salary and Compensation - In 1994 Finance X
Department estimates that employee take home is atleast 195% of
their basic wage rate
4. Philacor's Family Welfare Council - Provides range of X
services for Philacor employees and their family
5. Community related programs - Philacor extend the X
company's benefit to even wider communities than employee
families. (Donation of water pumps, artisan walls, medical
missions). These services are offered near the factory site in Sucat
6. Less Contractual Employees - A significant number of 23 X
temporary or contract workers out of 2038 employees
7. Philacor long standing productivity scheme. - Low rates of X
Absenteeism, high product quality, annual performance appraisals,
length of service and skill level.
8. Philacor is Highly Unionized - Philacor operates with 3 unions X
which complicates assessment of working conditions
9. Disuse of LMCC - In 1994, Philacor discontinued the use of X
LMCC which resulted to a costly strike by the employees
10. Employee career development/promotion opportunities X
- Due to high standard of Philacor this led to employees stay for a
relatively long time with an average length of 10 years of service.
This low turnover rate limits the opportunities for promotion.
11. Employee Participation in company policy/decision X
making - Employee involvement on the decision making
particularly on the planned relocation of site in Calamba Laguna.
Table 2: INTERNBAL ENVIRONMENT

II. External Environment

Functional Areas Opportunities Threats

1. Entering Small Appliances – PHILACOR is known majorly as
a large appliance and home appliances product. But there are
many small appliances which are not present in the product
X
portfolio of PHILACOR. This is something which other brands had
done and which PHILACOR can do to expand its targeted
customer base and to offer more products from its own brand.
2. E-commerce sales – PHILACOR can capitalize the rise in E-
X
commerce sales across Asia and especially in developing nations.
3. Emerging markets – PHILACOR can concentrate on
developing and emerging markets especially in other parts of
Asia. These emerging markets can help PHILACORP build its X
brand in a nascent market and thereby give a boost to the
revenue of the brand.
4. Increasing depth of Portfolio – Increase product portfolio
depth is an opportunity which PHILACOR can capitalize on. It can X
sell more products to its already existing huge customer base.
5. R & D – PHILACOR can spend more on its R & D to give even
better products at competitive prices to the customer thereby X
penetrating the market even more.
6. Services – The consumer durables segment is one of the
segments where it is always a problem because of the nature of
X
the products. Thus, innovations in service delivery will help the
brand in brand equity as well as in becoming a trustworthy brand
 7. Intense Competition – A major problem to PHILACORP is
the intense competition in this industry. As a result, other brands
are taking away market share and PHILACORP’s revenue is
X
touching stagnancy. The competition is not going to drop in time.
Thus PHILACORP needs to look at additional avenues to generate
revenue and to get profit.
8. Dropping margins – The dropping margins are a major
threat to PHILACORP as they challenge the brands expansion and X
the brands existence directly.
9. Mature markets – Philippines and other Asia markets are
mature markets where there are many brands present and
X
penetrated. As a result, having a footprint in these regions is
getting more and more difficult.
Table 3: EXTERNAL ENVIRONMENT

Strengths – S Weaknesses – W
1. Philacor success in Manufacturing 1. Philacor is Highly
large electrical goods Unionized
2. Philacor Health and Safety 2. Disuse of LMCC
Program 3. Employee career
3. Competitive Salary and development/promotion
Compensation opportunities
4. Philacor's Family Welfare Council 4. Employee Participation
5. Community related programs in company policy/decision
6. Less Contractual Employees making
7. Philacor long standing productivity
scheme.
Opportunity – O SO Strategies WO Strategies
1. Entering Small
Appliances 1. As Philacor established it named in 1. With the employee
2. E-commerce sales the manufacturing industries, it can participation in R and D, it
3. Emerging markets used its branding built to enter into can bring positive outcome
4. R & D the E- Commerce Sales. to the performance
5. Increasing depth of 2. With the outstanding productivity appraisal and can bring
Portfolio scheme, PHILACOR would encourage promotion opportunities to
6. Services its employees and middle the employees due to the
management to engage thoroughly intense market
into R and D and enter into small competition.
appliances. 2. As PHILACOR is highly
3. Community Related programs are unionized, the services of
also built to commercialize the public each employee is taken
image of Philacor that could emerge into consideration that
it existing and new markets. would give a negotiable
Collective Bargaining
Agreement.
Threats – T ST Strategies WT Strategies
1. Intense
Competition 1. With the competitive salary and 1. In the stage of Intense
2. Dropping margin compensation given to its employees, Competition, employee
3. Mature markets they are more encourage to dedication is needed for
manufacture the Philacor products the continuous production
that would deliver into the needs of of its appliance goods.
the Intense Competition. With the highly unionized
 2. With the establishment of "Winner"
(Philacor branding to low end
markets), they can experience
dropping margin if it is not strategize
accordingly.
3. As Philacor has penetrated most
parts of the Philippine Markets,
mature markets can be avoided.
Table 4: TOWS MATRIX
PHILACOR, employees can
give some
recommendation regarding
to the productivity scheme
if they continuously
penetrated the market.
2. As the markets mature,
the revamping of the LMCC
could give the formulation
of plans to set higher
standards of working
conditions.
3. Preparation of Voluntary
Retirement programs to
answer the employee
career
development/promotion
opportunities and avoid the
dropping margins due to
the encourage employees.

F. ALTERNATIVE COURSES OF ACTION:

FROM THE INITIAL SWOT ANALYSIS PRESENTED BELOW ARE THE FOLLOWING COURSE OF ACTION
BEING DERIVE:

ACA 1: Formulation of Voluntary Retirement Program that would address employee concern regarding
Limits of Promotion.

Advantages:

1. Before implementation of the Program, creation of the historical data regarding to the number of
employees that should be enrolled in the program per position, the turnover rate per position,
the job description versus to the employees that can be affected by the program and be given a
promotion.
Example: (Rank and File)

Position Job Description/Affected Department Yearly Employee Count Turnover Rate

Rank 6
Rank 5
Rank 4 *
Entry level
Table 5: DATA FORMULATION FOR VOLUNTARY RETIREMENT PROGRAM

2. Mapping out different benefits per position (Staff, Rank and File, and Supervisor) that would be
included in the voluntary retirement program that would entice the existing employees to avail.
3. Figuring out the cost of the benefits and it effects to the concern on the limits of promotion to be
submitted to the senior management approval. Also, indicate the possible revenue or value added
production if the younger generation would be promoted.
4. This strategy would answer the low turnover rate by the company and make sure that all of the
their employees are at the right age and be able to do manufacturing work (hard labor) and
 5. The program is to be checked and balance by the LMCC and the FWC that it is made with relations
to the negotiations indicated in the CBA.

Disadvantages:

1. The company is unionized and each unions are thoroughly checking the formulated plans for the
program that it would bring a socially responsible employer impact against their employees.
2. Resulting on the continuous efforts of the management, to reach out to their unions to formulate
different plans for the resulting of socially responsible working environment to its employees.
3. There is an additional expense that should be indicated in the yearly budget of the company; as
they say, the employees take home at least 195% of their gross monthly pay.
4. However, there should be a continuous checking if the productivity of the promoted employees
are met as it takes cost to lessen the limits of promotion.

ACA 2: Union Leaders would get to vote for senior management decision making and sustain the
benefits of the employees and socially responsible working conditions.

Advantages

1. The company has three unions for the subset employees. Each union leaders would gain a
percentage of the minority in the decision making process needed to be made.
2. The union leaders would be able to voice out the needs of their employees during each senior
management meeting.
3. One example is the site relocation in Calamba, Laguna in the next two years. With the union
leaders, they are able to plot out the ways for the site relocation be accepted by the employees,
and the continuous trainings and seminars for the employees of Philacor.
4. Transportation Allowance and Shuttle buses were one of the ways by the company to make it
easier for the employees, and the possibility of hiring external trainers to give the highest standard
of learning.
5. The Union Members would also be aware to the efforts being made by the senior management
to continuously give the socially responsible working conditions.

Disadvantages:

1. There is a possibility that each union has different conditions that needed to consider carefully by
the senior management that would result to the different implications in the working conditions.
2. The possibility of incurring higher expenses just to provide to the needs of each employees.
3. A continuous checking of the productivity in the manufacturing of appliance should be made to
ensure that the profits would be incurred.
4. The employees can reason out to different opinions that could lessen the power of the
management to the company. (Ex. They tend to solicit more “wants” benefits than the “needs”
since they have a voice in the company)

G. Decision Matrix
The Five Point Likert Scale is used as a tool in the decision making process of choosing the best
alternative course of action to take in order to solvep the problem of the case.
CRITERIA ACA#1 ACA#2
Cost 4 3
Performance 3 3
Effectivity 3 4
Employee Retention 3 4
 Corporate Image 3 3
Total 16 17
Average 3.2 3.4
Table 6: FIVE POINT LIKERT SCALE

Legend : 5 – Most Likely

4 – More Likely
3 – Likely
2 – Less Likely
1 - Unlikely
RATIONALE:

 COST: Voluntary Retirement Program is likely to cost more than the ACA #2. The company should
add more retirement fee for their loyal employees that serve the company for over years.
 PERFORMANCE: ACA#1 will help more to boost the performance of their employees. Voluntary
Retirement Program will motivate the employee and will affect the performance of the employees
of PhilaCor. When the employees are motivated there is a higher chance that they will actively
and willingly to participate in achieving the organizational goal and a positive indication for future
promotion and career development plans of the employees.
 EFFECTIVITY: ACA#2 is more likely to be effective than the ACA #1. Union Leaders can have a
big impact when their ideas have a chance to be heard by the senior managements. It gives a
chance for every employees to contribute more for the company by voicing out their ideas.
 EMPLOYEE RETENTION: ACA#2 is more convenient than ACA#1 because ACA#1 proves a
more subtle approach that not all employees will get to stay in the company for over a year to
get a Voluntary Retirement Program. It is not a 100% sure that an employee will get to stay with
a company for a long time. ACA#2 proves a more interesting approach when it comes to employee
retention.
 Corporate Image: Both ACA will give better image not only for the employees but also for the
company as they give the fair rights to those unions/people.

H. RECOMMENDATION (ANALYSIS):

The researcher strongly recommends that ACA #2 Union Leaders can get to vote for
senior management decision making be implemented in PhilaCor in order to achieve good
performance, to help the company to have cause in gaining more profit, and a negotiable
Collective Bargaining Agreement for both the employees and the senior management.

I. ACTION PLAN:

CORPORATE MISSION

We aim to be the leading manufacturer and distributor of high-quality appliances in the

Philippines and in the world. Our products will be a part of people’s everyday life.

CORPORATE VISION

 We will achieve the highest standard of customer satisfaction through customer

relationship management
 We will become a beloved brand, an innovative and admired company, here and around
the world.
 We will create a rewarding corporate environment in which employees are highly
motivated and results-driven.
CORPORATE OBJECTIVE

 Improve employee career development

 Market Expansion
 Improve Decision Making
 Leadership

STRATEGY

1. Formulation of Job Classification & the corresponding compensation structure in relation to

Job Classification for the data be included in the Voluntary Retirement Program.
2. Implementing the workable Collective Bargaining Agreement between the employees and the
management
3. Health programs for the employees that would sustain the socially responsible working
environment.

POLICY

1. Process the implementation of the CBA.

2. Proper communication of CBA provision to all concerned employees.
3. Labor Management Cooperation Council; along with the Family Welfare Council would be
the one overseeing the implementations of the CBA

IMPLEMENTATION OF THE PLAN ACTIONS

Functional Person
Strategies/Activities Time Frame Budget
Areas Responsible
1. Develop a CBA
Union Officials/2
programs which are
HR
acceptable to the top
Representatives
management & the union
HR Manager / at the expiration
2. Adopt the legally
HR Employee of the existing
acceptable process in the
Department Relations CBA (1 to 2
formulated CBA
Supervisor months)
3. All employees should be HR
properly informed about Supervisor/Union
the CBA Representative
per position
100,000
1. Make sure that the at the expiration
provisions are aligned with of the existing
Legal Legal Counsel /
the legal requirements in CBA (1 to 2
Department Attorney
the country and with the months)
Corporate Guidelines
1. Proper implementation
of provisions pertaining to
salaries and benefits.
Accounting Accounting as allocated &
2. Making sure that the
Department Manager & Staff budgeted
allocated amount is within
the Annual Budget
approved
 1. Budget allocation &
approval of the CBA. at the expiration
Top
2. Giving CEO/ Board of of the existing
Manageme
Recommendations if the Directors CBA (1 to 2
nt
CBA is negotiable on the months)
senior management end.
Table 7: IMPLEMENTATION OF ACTION PLANS

J. Appendices:

 Bureau of Labor Relations. 2019. Collective Bargaining. [ONLINE] Available at:

https://blr.dole.gov.ph/2014/12/11/collective-bargaining/. [Accessed 24 July 2019].

 Corporate administration and management. (n.d.). Corporate Social Responsibility, 219-

254. doi:10.4337/9781786433350.00015 [Accessed 23 July 2019].

 Ideas and thoughts came from the Graphs represented in the case Study.

K. List of Tables

Table 1: Timeline of Operations

Table 2: Internal Environment
Table 3: External Environment
Table 4: Tows Matrix
Table 5: Data Formulation for Voluntary Retirement Program
Table 6: Five Point Likert Scale
Table 7: Implementation of Action Plans