effects of the global financial crices on small and medium enterprises - dr. reynaldo bautista, fbe

8/14/2019 Effects of the Global Financial Crices on Small and Medium Enterprises - Dr. Reynaldo Bautista, FBE

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- Chin-Ning ChuBusiness Strategist, Author, Neo Renaissance Woman

Without the strength toendure the crisis, one will notsee the opportunity within.

It is within the process ofendurance that opportunity

reveals itself.


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Philippine Chamber of Commerce and Industries, Inc. (PCCI)Baguio-Benguet Chamber of Commerce and Industries, Inc. (BBCII)

A research commissioned by:

18th North Luzon Area Business ConferenceAugust 2009, Baguio Country Club

to provide the talking points &

set the discussion foundation for the

Saint Louis University &

Department of Trade and Industry - CAR


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Global unemployment level will go up by 20 millionby the end of 2009 from 190 million in 2007.

Asian regional level:113 million out of work in 2009.>140 million plunge into poverty

ILO Estimates:


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Philippines not exempted not immune

in January 2009, 18,641 lost their jobs.mostly electronics and garments

33,548working in reduced hours


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Cordillera Administrative Region (CAR)Stats from NEDA-CAR:

growth of 1.8%in 2008 despite effects of the globaleconomic crisis

slowest growthposted among the countrys 17 regions

despite 7%increase inconstruction, electricity,and water, weexperienced a

slowdown in 46%of total industrial output:manufacturing (1.0%),mining and quarrying

(5.3%)


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growth areas:

12% increase in corn production(also palay, cabbage, broccoli, carrots,cauliflower, irish potato, etc.)

5.6%in services82% increase in PEZA-registered BPOs

(SITEL, People Support, IHG)

2.5%in agriculture sectors

Stats from NEDA-CAR:

Cordillera Administrative Region (CAR)


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Presidential Consultant forEntrepreneurship (March, 2005):Creation of 3M entrepreneurs by 2010.

Thrusts: Advocacy and Education

The creation of six million jobs in

six years via more opportunities given

to entrepreneurs, tripling of the amount

of loans for lending to small and

medium enterprises and the

development of one to two million

hectares of land for agriculturalbusiness. - GMAs 10-Point Agenda


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About half of the target are expected to come from

the development of 2 million agribusiness lands &the support of 3 million micro, small and mediumenterprises (SMEs), which are composed mainlyof the poor.


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However, inadequate internalcapacities and support access,

limit the MSMEs contributionto total GDP to only about

32% for the past 6 years.

MSMEs account for 99.6% of the Philippines

business enterprises and 69.1% of employment.


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Respondents:

SMEs in Baguio & Benguet

> 60 SMEs(PhP15M or 10 workers)

bulk in Baguio and La Trinidad

Data gatheringtechniques:Questionnaire

(24 indicators;6 qualitativequestions)

FGDs

KIIs


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real estate manufacturing transport operation handicraft / furniture

food / restaurant / bakeshop appliance construction / surveying store

services (parlor, barber shop, spa, tailoring, etc.)

varied business endeavors


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1

2

3

4

5

Ratings

1.00 1.80

1.81 2.60

2.61 3.40

3.41 4.20

4.21 5.00

HypotheticalMean Ranges

Not Experienced at All (NEA)

Low Extent (LE)

Moderate Extent (LE)

Great Extent (GE)

Very Great Extent (LE)

Descriptions

Scales Used


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4 Functional Areas

MarketingAspects

MarketingAspects

Human Resource/Orgn. and

Mgmt. Aspects

Production

Aspects

Financial

Aspects


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MarketingAspects

promo/ad budget distribution of products/services

product lines product development demand for products/services

number of substitute products

4 Functional Areas


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4 Functional Areas

MarketingAspects

Human Resource/Orgn. and

Mgmt. Aspects

number of employees number of working hours tasking

provision of incentives/benefits trainings

overtime/undertime


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4 Functional Areas

Production

Aspects

volume of raw materials

quality of inputs inventories

type of operations spoilage/wastage supply of raw materials


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The Findings

Eff t f Fi i l C i i SME l


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no. of product lines

64.52%(3.10, ME)

16.13%19.35%

(3.33, ME)promotion/ad budget

58.06%

(3.33, ME)

38.71%

25.81%

(3.38, ME)

DecreasedStatus

Quo

Marketing Aspects Increased

product/service distribution

38.71%(3.17, ME)

16.13%

22.58%(3.86, GE)

opportunity to pursue

product development16.13%

45.16%

(3.29, ME)

38.71%

(4.08, GE)

demand for their products 9.68%51.61%

(2.94, ME)38.71%

(3.50, GE)

no. of substitute products

by competitors 25.81%

22.58%

(4.00, GE)

51.61%

(2.88, ME)

Effects of Financial Crisis on SMEs alongMarketing Aspects



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preparation towardsmulti-tasking

41.94%(2.92, ME)

25.81%32.26%

(3.10, ME)no. of employees

25.81%

(3.00, ME)

16.13%

45.16%

(2.43, LE)

DecreasedStatus

Quo

HR/OM Aspects Increased

no. of working hours

16.13%(3.00, ME)

29.03%

67.74%(3.43, GE)

provisions of incentives 29.03%38.71%

(3.25, ME)

32.26%

(3.40, ME)

trainings 29.03%29.03%

(2.67, ME)41.94%

(3.00, ME)

overtime 29.03%

29.03%

(2.78, ME)

41.94%

(2.46, LE)

Effects of Financial Crisis on SMEs alongHR/OM Aspects



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ending inventories

29.03%(2.70, ME)

38.71%32.26%

(2.36, LE)raw materials storage

(inputs)

32.26%

(3.00, ME)

41.94%

48.39%

(3.00, ME)

DecreasedStatus

Quo

Production Aspects Increased

quality of inputs

29.03%(2.44, LE)

19.35%

29.03%(3.00, ME)

automation 41.94%29.03%

(2.67, ME)

29.03%

(3.11, ME)

spoilage/wastage 51.61%25.81%

(2.38, LE)22.58%

(2.88, ME)

abundance of raw materials 45.16%

35.48%

(2.55, LE)

19.35%

(2.00, LE)

Effects of Financial Crisis on SMEs alongProduction Aspects



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ease/difficulty to collect A/R

48.39%(3.44, GE)

12.90%38.71%

(2.75, ME)increased profits

25.81%

(3.00, ME)

19.35%

25.81%

(2.88, ME)

DecreasedStatus

Quo

Financial Aspects Increased

expansion/contraction

51.61%(3.00, ME)

48.39%

29.03%(2.67, ME)

ease/difficulty of accessing

credits25.81%

38.71%

(3.08, ME)

35.48%

(2.82, ME)

cash flow 22.58%35.48%

(3.18, ME)41.94%

(3.00, ME)

sales on credit 32.26%

25.81%

(2.63, LE)

41.94%

(3.15, ME)

Effects of Financial Crisis on SMEs alongFinancial Aspects


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Conclusions/GeneralizationsMarketing Aspects:

during financial crisis,

SMEs tend to reduce their promo/advertisingbudget & product distribution to moderate extents.

Demand for their products moderately decreaseas their competitors increase the number ofsubstitute products, which are generally oflower quality as what they offer.

Changes in the number of product lines are nota function of (financial) crisis conditions to40% of SMEs. These conditions are seen asopportunity for product development, thereby

increasing demand.


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HR/OM Aspects:


SMEs develop their employees toward multi-taskingto great extents.

While they cut down the number of employees,they train them, and require them to renderovertime as they tend to increase the number ofworking hours.

30% of them do not experience significant differencesin the incentives that they provide, and maintainstatus quo in terms of working and overtime hours.

Conclusions/Generalizations


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Production Aspects:


Most SMEs do not experience product spoilageduring this condition, and changes in ending

inventories are moderately affected by demandchanges. Abundance of raw materials is not a function of

financial crisis conditions.

The manner by which they operate is maintained.



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Financial Aspects:


Most SMEs experience reduced profits to greatextents, one major reason is their difficulty to collect

A/Rs. Business expansion or divestiture is far from beingconsidered as an option, at this time.

Sales on credit increase as a result of decreased

cash sales.



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Recommendations

Strengthen the value-chain structure of SMEsto promote high-value products/services

Streamline systems that provide support

programs and incentives for SMEs subsidy (by LGUs) in trade fairs/missions, trade-marching/promo

activities less stringent augmentation capital for recovery (existing bank

loans are not accessible to MSMEs/SMEs) discounted rates on LGU-organized events (Panagbenga, fiestas,

trade exhibits, market encounters, etc.)


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Recommendations

Facilitate passing of the Local Investment andIncentive Code (LIIC)

provision of employment for displaced workers provision of friendly business environment

Active linkages with the DTI, DOSTs PRDC,

Chamber

Establishment of a Baguio Pasalubong Centeror a trade house

Establishment of a Loan Facility Program by thelocal Chamber


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Recommendations

Academe (the professional unbiased 3rd party):provides the bridge between LGUs and the SMEsvia the local Chambers

organization of relevant fora

sustenance of entrepreneurial passion among students provision of community-driven researches


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Diyos ti agnginakadakayo amin.Effects of the Global Financial Crisis onSmall and Medium Enterprises (SMEs)

Dr. Reynaldo Bautista (SLU)Ms. Freda Gawisan (DTI)Ms. Marife Posadas (SLU)

Ms Maria Joan Barlis (SLU)

effects of the global financial crices on small and medium enterprises - dr. reynaldo bautista, fbe

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