Foreign Investment In The Philippines Marketing Essay

After researching the background of the Philippines economically, politically and socially, our company believes that it is ready to venture our concern into the Philippines. What sort of concern sector should the company look into that is non merely suited for the local but besides profitable to the corporation? In twelvemonth 2012, Philippines ‘ population has reached 103,775,002 and the increasing Numberss of population has made the state the 12th largest population in the universe today ( Central Intelligence Agency, 2012 ) . Due to the increasing population, it has opened up chance for foreign companies such as ours to make concern investings in the Philippines. There are Numberss of industry that our corporation can look into when thought of making concern in the Philippines, for illustration the hotel industry.

Philippines is good known for their beautiful beaches islands and attractive tourer finish therefore touristry is one of the chief economic system in the Philippines. The interpreter of Philippines ‘ Tourism, Abigail Valte, states that touristry has contributed US $ 12.83billion for the state and it has non merely helps the economic sciences of citizens of Philippines but it besides contributes to their improved criterion of life ( Eturbonews, 2012 ) .

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Besides the hotel industry, it is recommended that our company looks at stepping into the nutrient and drink industry. This is because eating good nutrient has become one of the Filipinos ‘ wonts. An mean individual will devour three heavy repasts in a twenty-four hours but an mean Pinoy can really eat about 7 to 8 heavy repasts which consists of the normal breakfast, bites, tiffin and dinner and extra of three repasts which are merienda, spurge nettle, pulutan. ( Matthew Sutherland, 2010 ) . Not merely that, their love of nutrient is proven when 0.8 out of 1 of their advertizements negotiations about nutrient whether you are in a coach or cab, and advertizements on telecasting channels besides will include nutrient ( Panda B, 2011 ) .

Last, embarking into the manner retail industry in the Philippines can be another option. Retailing has been one of the major subscribers in occupation offering to the locals every bit good as one of the grounds behind of the success of the Philippines economic system. Harmonizing to The Philippine Retailers Association, retailing has contributed 15 per centum of their gross national merchandise ( The Philippine Retailers Association, 2012 ) . Other than that, Americans and the Spanish have exposed Filipinos to Western civilization since the colonisation. In add-on, pinoys ever wanted to look for new appliances and apparels that are in the current market. Furthermore, because of globalisation and the usage of the Internet, celebrated dressing trade names such as Zara is successful within the Philippines.

Retail Clothing Industry

Our company should besides see embarking into the retail manner and vesture industry in the Philippines. Retail vesture or dress refers to the gross revenues of merchandises such as menswear, adult females ‘s wear, and kids ‘s apparels to consumers normally from a physical shop in an country.

The retail industry has seen enormous growing over the past several old ages in the Philippines. Harmonizing to the Philippine Retailers Association ( 2012 ) , the retail industry contributes about 15 % to the entire gross national merchandise ( GNP ) of Philippines. Furthermore, the retail sector creates employment for about 5.25 million people, tantamount to 18 % of the labour force in the Philippines. Retail industry constitutes 33 % to the Philippine service sector ( Philippine Retailers Association, 2012 ) . Therefore, it is possible for our company to profit from the retail sector in the Philippines. The growing potency in the retail sector for our company is comparatively positive.

In 2010, Business Monitor International ( BMI ) reported in the Q111 BMI Philippines Retail Report that retail gross revenues were forecasted to turn from PHP1.40 trillion ( US $ 31.42 billion ) A in 2011 to PHP1.65 trillion ( US $ 37.06 billion ) A by 2014 ( Business Monitor International, 2010 ) . This is due to consumer disbursement and the increasing degree of income. Furthermore, an addition in dual-income households and immature professionals can besides potentially enhance retail gross revenues.

In recent old ages, in order to pull foreign investing and keep planetary fight, the Filipino authorities has besides opened up its retail sector to foreign companies. In 2000, this is done through the Republic Act 8762, which is besides known as the Retail Trade Liberalization Act. Section 2 of the Retail Trade Liberalization Act states that “ it is the policy of the State to advance consumer public assistance in pulling promoting and welcoming productive investing that will convey down monetary value for the Filipino consumer, make more occupations, promote touristry, help little makers, stimulate economic growing and enable Philippine goods and services to go globally competitory through the liberalisation of the retail trade sector. Pursuant to this policy, the Philippine retail industry is herewith liberalized to promote Filipino and competitory retail trade sector in the involvement of empower the Filipino consumer through lower monetary values, higher quality goods, better services and wider picks ” ( Republic Act 8762, 2000 ) . This gives our company the chance to profit from the inducements provided by this trade liberalisation act when we venture into the vesture and manner shops in the Philippines.

As manner and vesture lines by and large targeted towards the immature grownup demographic, Philippine ‘s turning younger population play an of import function in retail ingestion. Based on UN informations, Filipinos between the ages of 20 to 44 has been forecasted to increase to approximately 39 % by 2015, 63 % of the population will be economically active in 2015 and 70 % of the population will be located in urban countries ( Business Monitor International, 2010 ) .

The Philippines besides has a booming manner industry and the citizens are manner witting, particularly in the metropolitan countries such as Manila and other major metropoliss. Every season, the Philippine Fashion Week is hosted to expose designs from top trade names around the universe and local Philippine interior decorators every bit good. In order for this house to venture into the manner concern in the Philippines, the house would necessitate a platform in which to make exposure for the merchandise and the Philippine Fashion Week can be an ideal topographic point to get down edifice trade name acknowledgment for our house. Furthermore, our company can besides take advantage of the local endowment pool and hire Filipino design experts with superior cognition of the manner industry in the Philippines.

Entry Mode

There are several ways that our company can come in the retail vesture industry in the Philippines. There are many ways to sell and administer vesture in this today ‘s universe. Some retail merchants market and sell their apparels and merchandises online, transporting straight to the consumer. Others open a physical dress shop or retail mercantile establishment in locations such as shopping promenades, flea markets, and so on.

We suggest the company to look into set uping its ain vesture trade name or perpetrating to a joint venture by securing a interest in an bing trade name of vesture in the Philippines. These two methods of come ining the retail market have its ain benefits and drawbacks to our company.

Our company can look into constructing its ain trade name by bring forthing and selling its ain garments in retail mercantile establishments in the Philippines. As a foreign trade name, the Philippines is an ideal market to set up the company ‘s bridgehead as a retail vesture trade name because Filipinos are receptive to foreign dressing trade names such as Zara, Topshop and Gap. The younger urban Philippine citizens frequently purchase foreign trade names ; hence, our company should look into puting up its new subdivision in a major metropolis such as Manila before spread outing the concern to other parts of the state. Furthermore, our company can besides put up an online platform in order to make clients in the broader Filipino part every bit good. Puting up an full new vesture trade name can be disputing for our company every bit good as dearly-won. However, our company should look into cut downing production costs by fabricating within the Philippines to cut down cost of transporting or lower fabrication costs by outsourcing the production to a state with cheaper labour. The United States Department of Labor ( 2011 ) found that the hourly compensation costs in fabrication in 2010 in the Philippines is $ 1.90, which is the lowest among all the states compared in its survey including Mexico, Taiwan and Brazil and others.

On the other manus, our company can look into making a joint venture with a local trade name or a local interior decorator. The Philippines has many talented local manner interior decorators that may non hold the resources to fabricate and sell their vesture. Our company can supply the financess necessary for these interior decorators to make a vesture line to sell to consumers. In this sense, our company saves cost in carry oning market research, engaging new forces to detect the industry tendencies and engaging interior decorators to come up with new vesture because the interior decorators are equipped with the cognition of the manner industry in the Philippines and are better versed in the manner industry. This option is less hazardous than Greenfield venture because the company has limited liability should the venture fail. The company will merely hold fewer losingss from the capital provided to the interior decorator as compared to capital losingss from making an full new trade name from abrasion.

Food and Beverage Industry

There are a few concern sectors that our company could see embarking in the Philippines. One of it is the Food & A ; Beverage ( F & A ; B ) industry. F & A ; B is an industry that specializes in the devising of, conceptualisation, and bringing of nutrients. The biggest sector in F & A ; B employees are in eating houses and bars, which includes hotels, resorts, and casinos.

Based on statistics by the Department of Primary Industries ( DPI ) in Victoria ( 2009 ) , Philippines is one of the universe ‘s youngest population and fastest turning populations, which is 96 million and 65 % of its people below 30 old ages of age. The difference between the rich and hapless is big with 30 % of them populating below the poorness line. This broad gulf consequences in really contrasting nutrient ingestions tendencies in the Philippines. In general, locally produced merchandises are consumed and low-medium priced imported merchandises are consumed by traditional markets whereas medium-high priced imported merchandises are chiefly found in five star hotel eating houses and foreign owned supermarkets in major urban Centres such as Manila.

The bulk of nutrient consumed by the Filipinos are chiefly manufactured by local companies such as San Miguel and RFM Corporation, which produces all major nutrient sectors, such as processed meat merchandises, processed fruit and veggies merchandises, dairy merchandises and bites. These manufactured nutrient plus with fresh meat, fruits and veggies are the typical nutrient for the low-middle category Filipino ‘s, who are the dominant consumer in the Philippines. However, middle-high income earners are demanding for non-traditional and imported nutrients that are ‘ready-to-eat ‘ and in bend for a modernisation in the food-retailing sector. This is a good chance for our company to venture in the Philippines by exporting our local goods to run into their demands.

Harmonizing to a company that organizes trade expoundings ( 2012 ) , this twelvemonth itself the nutrients and drinks industry is expected to turn around 5 % to 10 % , stimulated by the demand of healthier nutrients and drinks. As said by Mildred Caballero ( 2012 ) , president of Tradecon, “ Right now, there is more focal point on wellness nutrient and health-related merchandises. Now, when people buy nutrient, they look for wellness benefits. That is the strength of the industry right now, ” in an interview at the 5th one-year Philippines International Food and Beverage Expo. Other factors that influence and form the state ‘s demand for nutrient and drink merchandises are the Filipino ‘s food-oriented civilization that stresses on frequent snacking, the young person oriented nutrient market ( 35 % of the population is below 15 old ages old ) , the increasing work force engagement by adult females and double income families, which consequences in greater demand for convenience nutrient that is easy to fix, and besides the western influence on the nutrient and drink market.

Entry Mode

As consumers in the Philippines are going more wellness witting, our company could export our local merchandises and increase the scope of their organic merchandises. Although states like United States and New Zealand are the top exporters of packaged nutrients to the Philippines, there is still chance for our company to supply them with healthier packaged nutrient merchandises such as seafood-based, vegetarian, all natural and organic merchandises. It is besides expected that more Filipinos are traveling to urban countries due to better occupation chances and demand for easy meal readying packaged nutrient merchandises will decidedly increase. Apart from their traditional Filipino dishes being the bulk repast solution, there are still chances for our local culinary art as the market easy evolves to globalisation. Despite that, we will hold to see factors like affordability due to limited disposable income of most families.

Hotels and Accommodation

The other concern that is suited in the Philippines is the hotel and resort concern. As we know that, the hotel industry is related to the touristry industry in one state. Expecting the touristry industry in the state can convey the reply whether to come in the market of hotel industry in that state is a valid determination.

The touristry industry of Philippines had kept on constructing up as visitant reachings from January to September 2012 had reached an sum of 3,149,985 for a 9.08 % topping over last twelvemonth ‘s reachings of 2,887,715 for the same clip of the twelvemonth. Most markets throughout the mentioned period had showed increasing growing rates.

Korea continued as the Philippines ‘s top tourer market with 752,918 reachings, for 23.90 % of the entire visitant volume, and exposing an enlargement of 9.61 % . Korea is followed by the U.S.A. , which made up 485,484 or 15.41 % of the entire visitant reachings. This market increase 4.01 % from the 466,767 visitants registered for the same clip last twelvemonth. In the interim, Japan supplied 311,008 reachings for 9.87 % portion to entire visitant volume, increasing the per centum up by 8.52 % from 2011. China positioned at the 4th topographic point with 6.25 % portion of the entire visitant volume or entire visitant reachings of 196,926. This market registered entire visitant reachings of 171, 981 versus its double-digit enlargement of 14.50 % a twelvemonth ago. Taiwan is positioned at fifth with 171,420 reachings for a 5.44 % portion of the entire visitant volume. This market expanded by 25.39 % from 136,713 reachings registered last twelvemonth, hence, puting the topmost growing rate amongst the top five markets.

After analyzing the touristry facet of the Philippines, we besides took the concern environment of Philippines into consideration. With the lifting of limitations on the foreign investing jurisprudence, 100 % foreign equity may be approved in all sectors of investing apart from those held in modesty for Filipinos by consent of the Philippine Constitution and bing Torahs. A foreign corporation has to ab initio get the indispensable licences or enrollments from the proper authorities organisation. For corporations or partnerships, the needed incorporation paperss from the Securities and Exchange Commission must be attained.

The authorities of Philippines appreciates the critical function of private sector investings and, therefore, pledges to invariably better the concern environment. Foreign investings are inspired to carry through capital spreads, aid in provide employment, enhance production, and provide a base for the overall growing of the economy.A Investment Torahs and ordinances have hence been loosened to ease the entry of foreign investings.

Entry Mode

There are a few signifier of entry that can be considered in come ining the hotel industry in Philippines. The signifier of entry that is deemed suited is through amalgamation and acquisition. Amalgamations and acquisitionsA ( M & A ; A ) is a common term used to mean the combine of companies. A amalgamation is the meeting of two companies to make a new company, whereas an acquisition is the skill of a company by another where no new company is established. ( Investopedia, 2012 ) We have chosen this signifier of entry with valid grounds. Due to the established market in Philippines, it is appropriate to utilize this signifier of entry to come in the market. Using M & A ; A besides provides a certain advantage that is to minimise the clip needed to get down the concern which includes constructing a hotel or resort from abrasions. The attempt of garnering human resources to pull off the concern is besides nullified to the lower limit since the basic labour force has already existed and the company merely needs to depute the direction sector of the concern. Since the hotel industry is a high capital and high hazard concern, we avoid utilizing the Greenfield signifier of entry for the hazard it imposes.

Currency and the International Monetary Policy

The currency in Philippines is Peso or officially “ piso ” . The currency codification or an international abbreviation for Peso is PHP and the symbol of it would be “ P ” ( a line or a dual line in the center of the capital P ) . The currency rankings show that the most popular Philippines Peso exchange rate is the PHP to USD rate. Peso is divided into 100 centavos ( officially centimo ) . Presently in November 2012, the U.S. dollar is deserving about 41 pesos and the Euro about 52 pesos. Current are coins of 1, 5, 10, and 25 centavos and 1 and 5 pesos, and bank notes of 5, 10, 20, 50, 100, 200, 500 and 1000 pesos. Five and ten peso note is no longer printed, but still legal stamp. In 1997, all old Philippine currency was replaced by new bills and coins. Notes from before 1997 can non be used any longer. In December 2010, a new series of bills was announced. The old notes will stay valid for at least three more old ages. New coins have been announced for 2012. The Security Plant Complex of the Bangko Sentral ng Pilipinas is where the coins and bills are made.

In 2009, the Bangko Sentral ng Pilipinas announced that has launched a monolithic redesign for current bills and coins to farther enhance security characteristics and better lastingness. Beginnings from Bangko Sentral ng Pilipinas, the members of the numismatic commission include Bangko Sentral Deputy Governor Diwa Guinigundo and Dr. Ambeth Ocampo Chairman of the National Historical Institute. The new bill designs feature celebrated Filipinos and iconic natural admirations. Philippine national symbols will be depicted on coins. The BSP started let go ofing the initial batch of new bills in December 2010 while new coins will be introduced get downing 2012. Current bills will stay legal stamp for at least three old ages precisely in December 2013.

Table below is the current exchange rates taken last updated on Tuesday, 6 November 16:00

Currency

Code

Rate

Rate

pesos / foreign currency

foreign currency / peso

US dollar

USD

41.251

0.024242

Euro

EUR

52.801

0.018939

Nipponese hankerings

JPY

0.51463

1.9431

Australian dollar

AUD

43.057

0.023225

Brasilian existent

BRL

20.282

0.049304

Bulgarian lev

BGN

26.997

0.037041

Canadian dollar

Cad

41.504

0.024094

Chinese kwais renminbi

CNY

6.5865

0.15183

Croatian kuna

HRK

7.0098

0.14266

Czech koruna

CZK

2.0866

0.47925

Danish krone

DKK

7.0777

0.14129

Hong Kong dollar

HKD

5.3225

0.18788

Magyar forint

HUF

0.18737

5.3370

Indian rupee

Bureau of intelligence and research

0.75780

1.3196

Indonesian rupiah

IDR

0.0042883

233.20

Israeli New Shekel

Illinois

10.588

0.094443

Latvian lats

LVL

75.831

0.013187

Lithuanian litas

LTL

15.292

0.065393

Malayan ringgit

MYR

13.463

0.074277

Mexican peso

MXN

3.1699

0.31546

New Romanian leu

Ron

11.684

0.085586

New Turkish lira

Try

23.218

0.043069

New Zealand dollar

NZD

34.173

0.029263

Norse krone

NOK

7.2113

0.13867

Polish zloty

PLN

12.813

0.078048

Pound sterling

GBP

65.923

0.015169

Russian ruble

Hang-up

1.3100

0.76335

Singapore dollar

SGD

33.715

0.029660

South African rand

ZAR

4.7359

0.21115

South Korean won

KRW

0.037819

26.442

Swedish krona

SEK

6.1596

0.16235

Swiss franc

CHF

43.728

0.022869

Thai tical

Bachelor of theology

1.3410

0.74569

The Philippines has used the floating exchange rate system for many old ages. As a consequence, it was non one of the Asiatic Tigers that thrived under fixed exchange rates. When the tiger economies moved to the drifting exchange rate system, their economic systems collapsed in what is was called the Asian Financial Crisis in 1997.

In recent old ages, the Philippines have moved off from a rigorous application of the floating exchange rate system ( Central Bank ‘s description of policy ) . Filipino Bankss are allowed to buy foreign currency for their ain histories, following the Central Bank ‘s guidelines. These guidelines require depository Bankss to keep 100 % screen for their foreign currency liabilities ( except for US dollar denominated repurchase understandings with the Central Bank- Section 73 ) . In add-on, the Central Bank admits that it intervenes in the market to stabilise the currency and guarantee the fight of Filipino merchandises.

From the official foreign militias, the Philippines now construct up official foreign militias and since 2003 has had current history excesss. Its foreign investings have increased from the equivalent of 2.6 months imports in 1995 to the equivalent of more than 9 months imports in 2009. It appears to be stabilising the exchange rate and raising its foreign militias. This motion off from the rigorous application of Friedman ‘s drifting exchange rate system is shooting new money into the Filipino economic system, thereby exciting economic growing, which reached 8 % in existent footings in 2007. At the same clip, it is bettering the external balance of payments place of its economic system.

In add-on, it is lending to the economic growing of the Philippines. The graph below shows the growing imports and exports in the Philippines. The planetary fiscal crisis has reduced exports in 2008 and 2009 and reduced imports in 2009.

hypertext transfer protocol: //www.buoyanteconomies.com/Philip1.gif

Exports and Imports in current dollar footings ( beginning Central Bank of the Philippines )

Even so, farther reform to pecuniary policy of the Philippines could see that economic system grow more quickly to use the bing high degree of unemployed resources while keeping balance of payments stableness.

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