Business Environment: Case Study, the Philippines

Introduction

The Philippines is one of the progressive countries in Southeast Asia. Its present growth can be attributed to the resilience of the Filipino spirit and the industry of millions of overseas workers, added with a popular and enigmatic president, Benigno S. Aquino III, son of former president Corazon Aquino, one of the heroes of the EDSA Revolution and martyred Benigno Aquino.

The rich culture and a people who want to rise above underdevelopment can make a business venture promising and challenging. The economy depends much on overseas Filipino workers (OFW) remittances and export products like sugar, pineapple, coconut, and electronic products which are being exported to major countries like the United States, Europe and other Asian countries.

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Overseas remittances remain the lifeblood of the economy; if it were not for the billions of dollars sent by Filipinos from the Middle East and other countries, the economy could have suffered much. Presently, Filipinos are united to rise from political crises that have plagued the nation for years.

PEST Analysis

Political

The Philippines experienced two colonizing periods in its long history – four centuries of Spanish colonization which introduced Christianity, and the takeover of the Americans which introduced education and the bulwarks of democracy. Through these periods, the Philippines experienced political upheavals, repression, and a little growth.

After years of instability due to the emergence of different political factions, the Philippines now has a stable political system under the administration of President Benigno Aquino or Pinoy as he is popularly known. President Aquino has opened the floodgates of investments coming from major investors from the United States and Europe.

In the recent past, it was put in a stagnant position because of politics and quest of a few greedy politicians for power. It deteriorated during the reign of the dictator, Ferdinand Marcos, who ruled with impunity and countless human rights violation. There were other factors that affected the downward trend of the economy, such as the SARS scare and Islamic terrorism. (Beirman, 2003, p. 254)

The Philippines is a developing country although in some respect it has been observed as more developed than some countries in the Association of Southeast Asian Nations (ASEAN). The country is blessed with abundance of natural resources and a big and industrious workforce presently employed in the Middle East, the United States, Europe and other progressive countries in Asia.

Economic

The Philippine economy has continued to be strong and growing despite the many challenges, both political and economic, that it has encountered all through the years. (Tetangco, 2006)

The present global economic crisis did not have much effect on the Philippines because of the OFW remittances. Skilled labor is one of its valuable economic assets. The level of unemployment has gone down (Trading Economics, 2011) due to skilled labor being exported to countries wanting for talented and experienced labor force.

The vast natural resources could have been a major asset of the economy if it were tapped with utmost diligence and care. Mining could be a major contributor considering that recent mines have been discovered in its islands, but thanks to the militancy and awareness of the people, there are oppositions trying to save the environment.

The Philippines can be the number one destination in Asia because of its rich heritage, historic spots, rich natural resources, and hospitable people willing to receive any guest who enters in their shore lines.

Social

Social factors are in favour of foreign investments. Filipinos are hospitable, they welcome every foreign national into the country; this is the reason why tourism is thriving and is also one of the major dollar earners of the country.

The people are ‘westernized’, due to years of American colonization, so that entry of a UK company is very much welcome. UK products are welcome. Filipinos patronize ‘imported’ products, or those coming from western countries because they have this colonial mentality and the fact that they are used to Western products brought to them by relatives who come home from abroad.

Technological

Technology plays an important role in this new venture to the Philippines as the next destination of a UK supermarket chain. Information technology and the Internet have been introduced. Young graduates from first class universities and thriving technical schools in the country are equipped with IT expertise and other technical courses. IT professionals also dominate the labor force. The Internet is not new to Filipinos.

Almost all major businesses and organizations in the Philippines have their websites and they make use of computers and the Internet.

Porter’s Five Forces

Porter’s five forces will also shape the entry of a UK firm in the Philippines. Profitability will be determined by these five sources of competitive pressure. (Grant, 2005, p. 173)

Threat of New Entrants

There are a number of supermarkets in the Philippines and our entry will be a threat, although this will depend on the kind of products the UK supermarket will bring. Existing supermarkets also bring with them imported products coming from the UK, U.S. and Europe

Bargaining power of suppliers

Outsourcing companies from China can supply the UK supermarket for its store in the Philippines. However, this is what existing stores and supermarkets are doing. Chinese products are flooding Philippine stores. Products will have to come from local suppliers.

Bargaining power of buyers

Filipino customers are meticulous and want low cost products. In order to remedy the situation, supermarket products will have to be sourced locally, but some imported ones will be mixed with local products, such as fruits coming from UK and the US, in order to make the store competitive.

Threat of substitute products

This is one of the problematic areas that the UK store will have to tackle. Local products will be a major threat. The Philippines has an abundance of fruits, vegetables, fish, and different kinds of meat products. These are cheap and are supplied locally.

Cultural Dimensions

The Philippines has a rich cultural heritage, from the Malay race to the European and American cultures introduced to Filipinos. There are also various ethnic groups comprising the Filipino culture.

The UK supermarket management will have to adjust to the Filipino culture, but it is not too difficult. Filipinos are receptive of foreign culture. They are hospitable and love to be with other nationalities. Most families have members abroad; many come from the UK doing different professional jobs. Employees will not have difficult time adjusting to the Filipino culture.

Recommendations

The Philippines is an important country in Asia and to have a UK supermarket in that country is recommended. It is a growing and dynamic economy.

Management decision making will be influenced by the local cultures, for example the kinds of products and foods that should be available all the time. (Cray and Mallory, 1998, p. 71)

Management will have to adjust with the Filipino culture although, as stated above, Filipino culture is already a mixture of ethnic and foreign culture. There are a number of foreign nationals in the Philippines and many of them are Europeans, Americans, and mostly ethnic Chinese.

References

Beirman, D., 2003. A comparative assessment of three Southeast Asian tourism recovery: Singapore roars: Post SARS 2003, Bali Post – the October 12, 2002 Bombing, and WOW Philippines 2003. In: Y. Mansfeld and a. Pizam (eds.), 2006. Tourism security and safety: from theory to practice. Oxford, UK: Elsevier Inc. p. 254.

Cray, D. and Mallory, G., 1998. Managing culture. UK; US: International Thomson Business Press.

Grant, R., 2005. Contemporary strategy analysis, fifth ed. United States of America: Blackwell Publishing.

Tetangco, A., 2006. The state of the Philippine economy and policy directions of the Bangko Sentral ng Pilipinas. Bank for International Settlements. Available at: www.bis.org/review/r060724.pdf [Accessed 19 November 2011]

Trading Economics, 2011. Philippines unemployment rate. Available at: http://www.tradingeconomics.com/philippines/unemployment-rate [Accessed 19 November 2011]

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