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Chapter 4

EXTERNAL ANALYSIS

To perform an external audit, a company first must gather competitive intelligence and
information about economic, social, cultural, demographic, environmental, political,
governmental, legal, and technological trends. The external business environment is the
external setting in which Hexa-arch works and almost completely outside the companys
control. Hexa-arch is part of the agricultural and manufacturing industry and their market
is the construction of private and public property such as high-rise buildings, houses,
and other similar constructs.

A. General Environment
A.1. Economic Forces

Economic forces are the factors that help to determine the competitiveness of the
environment in which the firm operates. It refers to the nature and direction of the
economy in which business operates. Factors such as level of employment, rate of
inflation, rate of interest, demographic changes, and fiscal and monetary policies, which
determine the state of competitive environment in which a firm operates affect the
outcome of the firm's marketing activities, by determining the volume and strength of
demand for the its products.

Key Competitive Findings Source


1. Unemployment Trends http://www.tradingeconomics.com/philippines
/unemployment-rate
2. Import/Export Factors http://atlas.media.mit.edu/en/visualize/tree
_map/hs92/export/phl/all/show/2014/
3. Demand Shifts for Different Categories of http://www.tradingeconomics.com/philippines
Goods and Services /consumer-spending
4. Gross Domestic Product Trend http://www.tradingeconomics.com/philippines/gdp

A.1.1 Unemployment Trends


Philippines unemployment rate fell to 4.7 percent in the fourth quarter of 2016 from 5.4
percent in the September quarter. It was the lowest figure on record, as the number of
unemployed declined to 2,040 persons from 2,335 in the previous period while the
number of employed went up to 41,664 from 40,974. Meanwhile, the labor force
participation rate increased to 63.6 percent from a 63.3 in the preceding three months.
Among employed persons, workers in the services sector made up 54.9 percent of the
total, followed by those in the agriculture sector (27.9 percent) and industry (17.2
percent). Unemployment Rate in Philippines averaged 8.63 percent from 1994 until
2016, reaching an all-time high of 13.90 percent in the first quarter of 2000 and a record
low of 4.70 percent in the fourth quarter of 2016.

Figure 4.1 Unemployment Rate

A.1.2 Import/Export Factors


The Philippines is the 41st largest export economy in the world and the 61st most
complex economy according to the Economic Complexity Index (ECI). In 2014, the
Philippines exported $80B and imported $80.7B, resulting in a negative trade balance of
$741M. In 2014 the GDP of the Philippines was $284B and its GDP per capita was
$6.97k.The top exports of the Philippines are Integrated
Circuits ($17.1B), Computers ($6.44B), Office Machine Parts ($4.37B), Semiconductor
Devices ($3.65B) and Nickel Ore ($2.9B), using the 1992 revision of the HS
(Harmonized System) classification. Its top imports are Integrated
Circuits ($9.7B), Refined Petroleum ($6.15B), Crude Petroleum ($5.88B), Cars ($2.74B)
and Planes, Helicopters, and/or Spacecraft ($2.52B).
Figure 4.2 Import Export Factors

A.1.3 Demand Shifts for Different Categories of Goods and Services


Consumer Spending in Philippines increased to PHP 1434402 PHP Million in the fourth
quarter of 2016 from 1421707 PHP Million in the third quarter of 2016. Consumer
Spending in Philippines averaged 921746.54 PHP Million from 1998 until 2016,
reaching an all-time high of 1434402 PHP Million in the fourth quarter of 2016 and a
record low of 581662 PHP Million in the first quarter of 1998.
Figure 4.3 Demand Shifts for Different Categories of Goods and Services
A.1.4 Gross Domestic Product Trend
The gross domestic product (GDP) measures of national income and output for a given
country's economy. The gross domestic product (GDP) is equal to the total expenditures
for all final goods and services produced within the country in a stipulated period of
time. The Gross Domestic Product (GDP) in Philippines was worth 292.45 billion US
dollars in 2015. The GDP value of Philippines represents 0.47 percent of the world
economy. GDP in Philippines averaged 69.02 USD Billion from 1960 until 2015,
reaching an all-time high of 292.45 USD Billion in 2015 and a record low of 4.40 USD
Billion in 1962.

Figure 4.4 Gross Domestic Product

Analysis of the Economic Forces


The current economic trend purports generally friendly and
Monitoring beneficial factors such as an increase in government revenue
and a demand shift towards product and services.
The economic forces, under the GDP & unemployment rates,
firms in the chosen industry may lead to shift in different
Forecasting policies evolving in the firm. The competition and audience
demand may lead to an intense rivalry with extra necessary
expenses.
Opportunities:
O1. Continuing rise in the GDP rate under the present
administration.
The continued rise in the GDP under Dutertes
administration means that the government has more
revenue which allows it the capacity to lend out money
to businesses at a low interest rate. This is an
opportunity for Hexa-arch because it means that it can
borrow easily from the government due to the low
interest rates. This allows Hexa-arch more flexibility
and ability to fund other business functions.
O2. Demands shift to different categories of goods and
services.
This is an opportunity for Hexa-arch primarily because
it means the general market is willing to spend on both
Assessment goods and services. Hexa-arch manufactures veneer
wood (goods) and installs (service) them.

Threats:
T1. Import/Export Factors
The top exports of the Philippines are that of the
manufactured technologies such as the integrated
circuit and computer units. This means that the
Philippines is still seen as an exporter of technological
goods rather than processed natural materials such as
wood veneers. This also means that there is little
demand from other countries to import wood veneers
from the Philippines. This absence also means little to
no business opportunities for Hexa-arch.
T2. Unemployment Rates
The demographic of the unemployed here in the
Philippines largely comes from the labour sector.
These include those working in farms and factories.
Since there was a decrease in the unemployment rate,
this means there is not much of an abundance of
potential manpower that Hexa-arch could tap since it
also manufactures its own wood veneers in its plant.

A2. Social, Cultural, Demographic, and Natural Environment Forces

Social and cultural forces refer to those structures and dynamics of


individuals or groups and their behaviors, beliefs, traditions, values,
consumer psychology, thought patterns and lifestyles, friendship, etc.
Demographic forces refer to the study of people age, sex, status,
occupation family size, etc. Natural forces include the physical environment
itself, including the availability of natural resources that can hinder an
organizations production output.

Key Social, Cultural, Demographic And Natural Source


Environmental Variables
1. Growth of veneer production in the Philippines http://forestry.denr.gov.ph/index.php/statistics/philippines-forestry-
statistics
2. Filipinos spending habits boost retail business http://www.manilatimes.net/filipinos-spending-habits-help-boost-
investments investment-on-retail-business/35624/
3. Climate change affecting wood industry http://www.resins-inc.com/?page_id=893
4. Trends in furniture, home design and architecture http://www.gmanetwork.com/news/story/435477/lifestyle/philippine-
interior-designers-figure-in-on-hot-trends-this-2015

A.2.1 Growth of veneer production in the Philippines


The produced veneer as the data shows largely goes to inner-city constructions and
improvements. This means that the use of wood veneer generally enjoys a high number
similar to other materials used in construction like steel, marble, granite, and the likes.
Regions 11 and 13 are highly populated areas which also mean a great number of
people are there and that inevitably they use the produced wood veneer products.
Figure 4.5. Monthly veneer production by region: 2015

A.2.2 Filipinos spending habits boost retail business investment


A growing affluent middle class and higher purchasing power has also led to a change
in consumer taste toward more unique and high-end brand concepts. Filipinos
shopping and spending habits are obviously driven by the Philippines economic
growth. PTT Philippines Corporation President and Chief Executive Officer Wisarn
Chawalitanon said as he notice that Filipinos have the habit of spending rather than
saving money, making retail business in the Philippines a brighter prospect for
investment. Middle income level is into consumer good spending and theres a lot of
impulse buying that makes the Philippine retail as a growing market, Chawalitanon
added. Retail business in the Philippines is really booming. He said that over one-
fourth of retail business establishments in the Philippines are located in Metro Manila.

A.2.3 Climate change affecting wood industry


The public must be told that the wood industry is the savior of the world, declared
Resins, Inc. President Meneleo Carlos, Jr. noting the ability of trees to fight climate
change by capturing carbon dioxide (CO2), the greenhouse gas that mainly causes
global warming. The Climate Change Commission of the Philippines asserted that in
2010, a total of 155.1 million tons of carbon emissions were caused by agriculture,
energy, transportation, industrial processes and waste, but 83.2 million tons of carbon
removals and capture were also achieved by land use change and forestry; thus, he
estimated that in the Philippines, there is 20 to 30% carbon capture compared to other
developed countries with 11% or 17% giving us more room to industrialize to have
cheap power by using coal, as long as more trees are planted and replanted.
Figure 4.6. Emissions & Removals

A.2.4. Trends in furniture, home design and architecture


There will be a stronger presence and demand for local designs in the
Philippines. New boutique hotels are going local and patronizing some of Philippines
best designers. Talavera said citing the Seda boutique hotel chain home to Kennet
Cobonpue and Anne Pamintuan pieces. Forecasted as one of the biggest trends in
2015 was incorporating Filipino touches and indigenous materials into someones place
is hitting two birds with one stone. Where most Filipino-inspired furniture and accents
are made from natural and organic materials like wood and natural wood was that
years biggest trend predictions. Mark See, Partner and Interior Designer of Design
Studio Manila, said, This year, we expect to see the use of natural or organic materials
in interior finishes; natural stones like marble and agate; natural and petrified wood.
Recycling, or upcycling materials, will be big this 2015 because of the growing
awareness among interior designers about environmental issues.

Analysis of the Social, Cultural, Demographic and Natural Environment Forces

The trend that natural and organic materials will be big by 2015
Monitoring
may be an advantage for the veneer industry.
Production of wood veneer is high.

In an environmental sense, however, the large amount of carbon


Forecasting emission may also affect the production. It may also have an effect
on the demand of wood veneer.

O1. The increase of Filipinos spending habits provides benefit and


gain for industries.

O2. Filipino-inspired furniture and accents made from natural and


organic materials give wood industry advantage.
Assessment
T1. The large percentage of carbon emission harming the ozone
layer affects the demand for wood.

T2. There is a high threat to new entrants in the agro-manufacturing


and wood industry since the production of wood veneer is high.

A3. Political, Governmental and Legal Forces


Political governmental and legal forces include the influence of government officials,
leaders and political parties, outcomes of elections, legislation, court judgments, and
decisions rendered by various commissions and agencies, as well as various pressure
groups such as trade unions and civil society groups. These forces affect policies that
may change the course of business in your industry in a negative or positive way such
as difficulties with supplies if government decisions implement stricter laws in natural
resources or impose more tax regarding importation of supplies, or limit your market
opportunities or even create more tension with your competitors. Legal Forces are also
critical for business success if the changes in policies, laws and regulations are studied
and used to avoid legal problems.

Key Political, Governmental and Legal Variables Source


http://www.gov.ph/2011/02/01/executive-order-no-23-s-
2011/
1. Voluntary Partnership Agreement
http://www.flegt.org/news/content/viewItem/southeast-asia-
marks-progress-in-combating-illegal-timber-trade/04-01-
2017/75
http://www.lawphil.net/statutes/presdecs/pd1975/pd_
705_1975.html
2. Basic Forestry law
http://mddb.apec.org/Documents/2014/EGILAT/EGILAT2/14
_egilat2_026.pdf
3.
4.

A.3.1 Voluntary Partnership Agreement


A timber-exporting country and the EU developed a Voluntary Partnership Agreement
(VPA) in phases through nested sets of processes. These include bilateral negotiations
between the EU and the timber-exporting country, and national negotiations within and
among stakeholder groups in the timber-exporting country.
In 2011, executive Order No. 23, s. 201 was promulgated with a provision that the
Department of Environment and Natural Resources shall close and not allow to operate
all sawmills, veneer plants and other wood processing plants who are unable to present
proof of sustainable sources of legally cut logs for a period of at least five (5) years
within one month from effectivity of such executive order.
Although the Philippines is not currently engaged in a VPA process, it is upgrading its
timber legality assurance system to comply with the ASEAN Criteria and Indicators for
Sustainable Forest Management. What we have in the Philippines now is a one-way
traffic: once the logs are processed into lumber we cannot trace it back to the forest of
origin, said Raul M Briz, chief of the Forest Protection Section in the Forest
Management Bureau of the Department of Environment and Natural Resources. We
hope to achieve 100% back to stump traceability for our wood production. He added
that the new timber legality assurance system would be subjected to a nationwide multi-
stakeholder consultation before it is implemented.

A.3.2. Basic Forestry law


In compliance with the provision of Presidential Decree No.705 Revised Forestry
Reform Code of the Philippines that the Bureau shall regulate the establishment and
operation of sawmills, veneer and plywood mills and other wood processing plants and
conduct studies of domestic and world markets of forest products. Several permits and
licenses as well as taxes are needed in order to operate as agro-manufacturing
industry.
Figure 4.7 Unemployment Rate

Analysis of Political, Governmental and Legal Forces


(Observe environmental changes to see if an important trend is emerging
from among these spotted through scanning. The LM student must write a
priority trust of the government especially crime and security, free
Monitoring
education for state universities and colleges)
-2 sentence/ phrase of bulleted information that is worth to watch out

(Develop feasible projections of what might happen and how quickly, as a


result of the changes and trends)
Forecasting -2 sentence/ phrase of bulleted information that is being forecasted by
student/s

(Assessment is specifying the implications if the revealed changes from


Assessment the scanning part, a trend emerges from the monitoring or feasible
projections from the forecasting is favorable or hindrance to the company.
It is important that there must be 2 opportunities and 2 threats here.)
O1. (If favorable, classify it as Opportunity; Opportunity factors
must be in declarative complete sentence meaning it must
declare an information)
O2.
T1. (If hindrance, classify it as Threat; Threat factors must be
in declarative complete sentence; Meaning it must declare an
information that this factor is a hindrance)
T2.

In the Assessment, it is important to identify two (2) opportunities and two (2) threats
factor. Here in Chapter 4, the student must NOT focus on the solutions or
recommended strategies for each opportunity factors and threat factors.

A4. Technological Forces

Technological forces represent major opportunities and threats that must be considered
in formulating strategies. Technological advancements can dramatically affect
organizations products, services, markets, suppliers, distributors, competitors,
customers, manufacturing processes, marketing practices, and competitive position.
This category of the General Environment is different from the other categories because
it constantly changes and develops.

Key Technological Variables Source


1. Access to the Internet http://www.internetlivestats.com/internet-users/
2. Raw Material or Materials Management https://www.researchgate.net/publication/226719933
3. IT connected or software https://psa.gov.ph/content/2010-survey-information-
and-communication-technology-information-
economy-preliminary-results
4. Process or Equipment https://www.researchgate.net/publication/226719933

A.4.1. Access to the Internet


There has been a drastic increase as to those who can access the Internet, World Wide
Web and its features. In 2011, only 29% of the population of the Philippines was able to
access the Internet. Over time it grew and rose steadily and in 2016, 43.5% of the
population of the Philippines, or almost half of the population, is capable of accessing
the internet and its features. The access may be thru the form of broadband connection
or mobile data connection. This is also largely due to the investments and expenditures
done by the government in terms of improving the countrys ICT infrastructure.
Figure 4.8 Access to the Internet

A.4.2. Raw Material or Materials Management


Forest resources are being squeezed between growing needs (including fast growing
demand for wood as an energy carrier) and environmental restrictions. This will open
the raw material allocation to semi-natural forests, forest plantations, agroforestry and
agricultural resources and new mobilization concepts for wood resources as discussed
by Scarascia-Mugnozza and Pisanelli 2008). This new raw material spectrum, including
the increasing use of recycled material, will have a huge impact on wood technology
and material design as well.

Figure 4.9 Raw Material or Materials Management


A.4.3. IT connected or Software

About 97 percent of the 2,122 IE establishments IE used computer and other hardware
in their business operations SICT. This percentage was slightly higher than the 96.1
percent reported in 2009. Only 91.1 percent was recorded in 2008. Those in the ICT
sector (97.2%) reported a slightly higher percentage compared to the Content and
Media Sector (96.8%). All of the establishments engaged in ICT manufacturing
industries, software publishing and computer programming, etc. activities used
computers and other hardware. Those engaged in repair of computers and
communication equipment had the lowest percentage at 83.5 percent.

Figure 4.10 IT Connected or Software

A.4.4. Process or Equipment

Primary and secondary wood processing has improved a lot in the last centuries (e.g.
high capacity sawmills, continuous presses for wood based panels, high-performance
wood machining), but new process technologies, manufacturing concepts (mass
customization, tailoring of products etc.) have to be developed. Resource- and eco-
efficient processes have to be envisaged in wood industries by means of improved and
new process analytics as discussed by Kessler (2006) and production management
systems which in turn are part of a concept of knowledge-based production

Analysis of the Technology Forces


Monitoring Republic Act 8792 which provides for the recognition
and use of electronic commercial and non-commercial
transactions.
Republic Act 7161 which provides for the changes in
the charges made against the use of timber and other
forest products.
Forecasting Given the trend of fast-paced technological
advancements, more developments are bound to
happen which inevitably affects the agro-manufacturing
industry and the wooden industry.
Assessment O1. Access to the Internet
This is an opportunity for Hexa-Arch given that the
company is active on social media (Facebook) and on
online websites. This means that they have more
visibility and that it increases their presence in the
decision-making calculus of the people in the market
O2. Process or Equipment
This is an opportunity for Hexa-arch because it means
the quality and quantity of the wood veneer products
that they manufacture and sell would increase. Given
that the demand from people is affected by the quality
of product, the increase in quality would therefore
mean an increase in demand from the wood veneer
products of Hexa-Arch.
T1. Raw Materials or Materials Management
This is a threat for Hexa-Arch because it means that
the suppliers would have to increase the prices of
timber and other forest products in order to offset the
costs they shoulder. This would make it harder for
Hexa-arch because they have additional expenses to
shoulder.
T2. IT connected or Software
This is a threat for Hexa-Arch because since almost all
establishments are IT connected or have a software, its
hard to gain a competitive advantage in the
technological field. Given that Hexa-Archs competitors
are more established, it needs as much competitive
advantages over said competitors.

A5. Competitive Forces


These are factors that influence the competitive position of a company in a
market or industry. It also helps in determining an industry's weaknesses and strengths.
Some of these forces are the competition in the industry, potential of new entrants into
the industry, power of suppliers, power of customers and threat of substitute products.

Key Competitive Findings Source


1. Filtra Timber Solidwood Philippines main http://www.filtratimber.com/about-
timber distributor us/environment/
http://www.solidwood.ph/about-us/
2. Manila Wood Veneer Supplies being one of http://www.manilawoodveneer.com/about/
Philippines top distributor of wood veneer
3.
4.

A.5.1. Filtra Timber Solidwood

Solidwood is part of FILTRA Timber, largest importer and distributor of premium wood
species. The company supplies the wood consuming industries in the Philippines such
as furniture and door manufacturers, with woods from all over the world. Filtra timber
exists for more than 40 years in the Philippine and international timber markets. They
have established partners in all major timber producing countries which enables them to
offer a wide range of wood products that will meet the demands of the consumers. It
can be seen that Filtra Timber - Solidwood have already established a good reputation
in the wood industry because most of their customers are some of the biggest local and
multi-national conglomerates in the Philippines such as Starbucks, The Manila Hotel,
Solaire, City of Dreams, Sofitel etc. Filtra Timber is likely to strengthen their
relationships with their supplier in order to maintain the quality of premium woods they
are offering as well as their customer loyalty.

A.3.2 Manila Wood Veneer Supplies


Established on the year 2002, Manila Wood Veneer Supplies (MWVS) is one of the
countrys top distributor of wood veneers ranging from locally produced to internationally
well-known and high quality veneers. MWVS provides wood veneers directly imported
from Europe, America and Africa and the only authorized ALPI Wood Products
distributor in the Philippines. Despite being one of the countrys top wood veneer
distributor it may not be able to cope up with the changing trends in the market since
there is a limited number of product-line coverage. Manila Wood Veneer Supplies is
currently firming up their relationship with their suppliers as well as their clients in order
to survive the competition in the wood veneer industry.

A.3.3 Critical Success Factor

Table 4.11 Critical Success Factors


Critical Success Factor or
Definition
CSF
Establishing a brand reputation in
1. Brand reputation order to maintain and attract more
consumers.
Attracting and retaining skilled
2. Skilled workforce workforce will help these firms to
produce high quality wood veneer
products.
The firms need to set the price of
3. Price competitiveness their product or service based on
what the competition is charging.
This involves determining what
different commodities should be
4. Product-line coverage producedadded or droppedso
that the company produces an
economically balanced output.
Since the products that these three
firms offer uses finite resources they
5. Access to key suppliers will compete when it comes to their
access to suppliers in order to meet
the demands of the consumers.
The firm needs to allocate huge
6. Large marketing resource
amount of marketing budget to let
budget
the consumers

Figure 4.12 Competitor profiling

CSF1 Brand Reputation High Low

High Low
CSF2 Skilled workforce

CSF3 Price competitiveness High Low

CSF4 Product-line coverage High Low

CSF5 Access to key suppliers High Low

CSF6 Large marketing resource budget High Low

resource budget
Analysis of the Competitive Forces
Monitoring The information gathered shows that the competitors of
Hexa-Arch are well established firms in the agro-
manufacturing industry.
Forecasting Given the current information and trends, the
competitors will still pose a challenge for Hexa-Arch.
But they too have deficiencies which could benefit
Hexa-Arch
Assessment O1. Hexa-Arch could capitalize on other wood veneer
products and the creation of other furniture such as wall
clocks and file organizers to have provide for demands other
than that of the construction and housing sector.
O2. Hexa-arch could expand its international linkages or
supplier of wood timber in order to offer a wider range of wood
species.
T1. The dominant players in the field namely Filtra Timber-
Solidwood & Manila Wood Veneer Supplies as established
networks makes it difficult for Hexa-Arch, as the emerging
one, to reach an equal standing with them in terms of the
quality and quantity of wood veneer products.
T2. Hexa-arch could invest on expanding their product line
coverage in order to keep up in the changing demands of the
consumers and trends in the agro-manufacturing industry.

B. Industry Analysis
Porter's Five Forces is a model of analysis that helps to explain why different industries
are able to sustain different levels of profitability.

B.1. Porters Analysis


Figure 4.13: Key Industry Findings based on the Five Forces of Competition

Potential new entrants to the


market LOW

- Established Competitors
- High capitalization
requirement
-

Suppliers of Key Resources Industry Competitors HIGH Customers - [HIGH, MEDIUM or


[HIGH, MEDIUM or LOW] LOW]
- Filtra Timber
- (write here key words that Solidwood - (write here key words that
- Manila Wood Veneer
describes this force; bulleted) Supplies describes this force; bulleted)

-(write here key words that -(write here key words that
describes this force; bulleted) describes this force; bulleted)

- -

Substitute products from


organization in other industries -
[HIGH, MEDIUM or LOW]
- (write here key words that
describes this force; bulleted)

-(write here key words that


describes this force; bulleted)

B.1.1. Rivalry among Competing Firms


The importance of this force is the number of competitors and their ability to threaten a
company. The larger the number of competitors, along with the number of equivalent
products and services they offer, dictates the power of a company. Suppliers and
buyers seek out a company's competition if they are unable to receive a suitable deal.

The degree of threat is HIGH. This is so because Filtra Timber, a well-established


company being active in the industry for more than 40 years and the largest importer
and distributor of premium woods. While In fact, they were already able to establish a
new firm Solidwood. By virtue of the current technologies they are more advanced
which help them to provide quality control in their wood supplies. They have established
partners around the world in order to meet the demands of their clients and to provide a
large variety of wood species.

B.1.2. Potential Entry of New Competitors


A company's power is also affected by the force of new entrants into its market. The
less money and time it costs for a competitor to enter a company's market and be an
effective competitor, the more a company's position may be significantly weakened.

The degree of threat is low to MODERATE. Although the number competitor in the
wood veneer industry is few they are those that are well-established having already
wood manufacturers and suppliers. Entering in this kind of market is costly with regard
to the capital requirement because this kind of business requires equipment, warehouse
and plant. Furthermore, most industries today are focusing on business that would cater
the everyday needs of the people as the population in the Philippines continues to grow.

B.1.3. Potential Development of Substitute


Competitor substitutions that can be used in place of a company's products or services
pose a threat. For example, if customers rely on a company to provide a tool or service
that can be substituted with another tool or service or by performing the task manually
and this substitution is fairly easy and of low cost, a company's power can be
weakened.

The degree of threat is LOW. As of now, the eco-friendliness trend has infiltrated every
industry, including the architecture and construction industry. Many structures today
incorporate natural elements in their architectural designs by using natural building
materials such as wood finishes from timber. Potential substitute for wood products are
those factory made wood-like materials which are not as durable as natural wood
products and way much more costly.
B.1.4. Bargaining Power of Suppliers
This force addresses how easily suppliers can drive up the price of goods and services.
It is affected by the number of suppliers of key aspects of a good or service, how unique
these aspects are and how much it would cost a company to switch from one supplier to
another. The fewer number of suppliers and the more a company depends upon a
supplier, the more power a supplier holds.

The degree of threat is LOW to MEDIUM. Although there are plants that supply wood
veneer the price are still expensive since most of the wood being used in making the
products are from suppliers licensed to log trees.
MEDIUM KASI MAY PLANT NAMAN TO SUUPLY WOOD VENEER PERO MEJO
MATAAS DIN KASI YUNG WOOD NA KINUKUHA NILA HINDI SILA MISMO NAG
LOLOG KINKUHA NILA SA SUPPLIER, MAS MAHIRAP KUMUHA NG PAG
KUKUNAN NG WOOD,
VENEER IT SELF LOW KASI TAYO MISMO GUMAGAWA.
SUPPLY OF WOOD DON MATAAS KASI HINDI SATIN NANGGAGALING YUNG
WOOD VENEER SILA NAG SUSUPPLY

B.1.5. Bargaining Power of Consumers


This specifically deals with the ability customers have to drive prices down. It is affected
by how many buyers, or customers, a company has, how significant each customer is
and how much it would cost a customer to switch from one company to another. The
smaller and more powerful a client the more power it holds.
The degree of threat is LOW.

LOW- KASI SILA MISMO BUMILI, AND CURRENT TREND IS GUSTO NILA NGA
VENEER, OR GUMAGAMIT NG VEENEER SA BAHAY OR FURNITURES.
The body of section B.1.5. will proceed immediately. Mention immediately if the degree
of threat is HIGH, MEDIUM OR LOW. Analysis must be based on the data and
information gathered to explain why the threat is high, medium or low. [ 5 quality
sentences; in paragraph format; together with tables, charts and/or figures]

Analysis of the Industry under Porters Analysis


(Observe environmental changes to see if an important trend is emerging
from among these spotted through scanning)
Monitoring
-2 sentence/ phrase of bulleted information that is worth to watch out

(Develop feasible projections of what might happen and how quickly, as a


result of the changes and trends)
Forecasting -2 sentence/ phrase of bulleted information that is being forecasted by
student/s

(Assessment is specifying the implications if the revealed changes from


the scanning part, a trend emerges from the monitoring or feasible
projections from the forecasting is favorable or hindrance to the company.
It is important that there must be 3 opportunities and 3 threats here.)
O1. (If favorable, classify it as Opportunity; Opportunity factors
must be in declarative complete sentence meaning it must
declare an information)
Assessment O2.
O3.
T1. (If hindrance, classify it as Threat; Threat factors must be
in declarative complete sentence; Meaning it must declare an
information that this factor is a hindrance)
T2.
T3.

In the Assessment, it is important to identify three (3) opportunity factors and three (3)
threat factors from the 5 Sections of the Porters Analysis. These 6 factors should have
high implication for the company.
B.2. Market Analysis

A market analysis studies the attractiveness and the dynamics of a


special market within a special industry. It is basically a business plan that presents
information regarding the market in which you are operating in which deals with various
factors. It done so that you can formulate a strategy on how to run your business by
taking into consideration certain factors, you will know how to operate your business.

B.2.1. What are the main features of the market? [ 3 quality sentences]. Include
here the sales volume, sales value, geographical spread of sales, channels of
distribution, supply chain, trends in demands, ease of market entry and exit, seasonality
and trends. (LM students should carefully describe the market because this is one of the
major basis for implementing market penetration strategies, market development and/or
product development)

B.2.2. Who are the customers and what are their buying habits? [ 3 quality
sentences] Include the target market, the number, common features, products they
really want, satisfaction with current products, loyalty, etc.

B.2.3. What are the products? [ 3 quality sentences] Include important features,
where are they in their life cycle, delivery frequency, quality, lead time, stocks,
substitute, potential new products, customer service, etc.

Market Analysis
(Observe environmental changes to see if an important trend is emerging
from among these spotted through scanning)
Monitoring
-2 sentence/ phrase of bulleted information that is worth to watch out

(Develop feasible projections of what might happen and how quickly, as a


Forecasting result of the changes and trends)
-2 sentence/ phrase of bulleted information that is being forecasted by
student/s

(Assessment is specifying the implications if the revealed changes from


the scanning part, a trend emerges from the monitoring or feasible
projections from the forecasting is favorable or hindrance to the company.
It is important that there must be 3 opportunities and 3 threats here.)
O1. (If favorable, classify it as Opportunity; Opportunity factors
must be in declarative complete sentence meaning it must
Assessment declare an information)
O2.
T1. (If hindrance, classify it as Threat; Threat factors must be
in declarative complete sentence; Meaning it must declare an
information that this factor is a hindrance)
T2.

In the Assessment, it is important to identify three (3) opportunity factors and three (3)
threat factors from this Market Analysis. These 6 factors should have high implication
for the company.

C. Summary of External Analysis


1. Summary of Porters Five Forces

Porter Five Forces Rate (High, Moderate, Low)


1. Rivalry among Competing Firms High
2. Potential Entry of New Competitors Low to Moderate
3. Potential Development of Substitute Low
4. Bargaining Power of Suppliers Low to Moderate
5. Bargaining Power of Consumers Low
OVERALL RATE Low
Interpretation:
Two of Porters five forces got a rating of LOW, namely the potential development of
substitute and bargaining power of suppliers. The two other, namely potential entries of
new competitors and bargaining power of suppliers rated LOW to MEDIUM. The
remaining one which is the rivalry among competing firms rated HIGH.

2. Profile of Competitors
The two major competitors are Solid Wood/FILTRA Timber and Manila Wood Veneer.
Solid Wood/FILTRA Timber is the Philippines largest importer and distributor of
premium wood species and they supply the wood consuming industries in the
Philippines such as furniture and door manufacturers, with wood from all over the world.
Manila Wood Veneer Supplies (MWVS) is one of the countrys top distributors of wood
veneers ranging from locally produced to internationally well-known and high quality
veneers.

3. List of All Opportunities and Threats Identified from the General Environment
and Industry Analysis

Category Opportunity Factor


A1. Economic O1. Continuing rise in the GDP rate under the present
Forces
administration
O2. Demand shift to different categories of goods and services
O3. Unemployment Rate
A2. Social, O1. The increase of Filipinos spending habits provides benefit
Cultural,
and gain for industries.
Demographic and
Natural O2. Filipino-inspired furniture and accents made from natural
Environment
and organic materials give wood industry advantage.
Forces
A3. Political, O1.
Governmental and
O2.
Legal Forces
A4. Operations O1. Access to the Internet
Management
O2. Process or Equipment
Trend and
Technological
Forces
A5. Competitive O1. Capitalizing on other wood veneer products to provide for
Forces
demands other than that of the construction and housing
sector.
O2. Expanding its international linkages or supplier of wood
timbers to offer a wider range of wood species.
B1. Porters O1.
Analysis
O2.
O3
B2. Market O1.
Analysis
O2.

Category Threat Factor


A1. Economic T1. Import/Export Factor
Forces
T2. Unemployment Rates
A2. Social, T1. The large percentage of carbon emission harming the
Cultural,
ozone layer affects the demand for wood.
Demographic and
Natural T2. There is a high threat to new entrants in the agro-
Environment
manufacturing and wood industry since the production of wood
Forces
veneer is high.
A3. Political, T1.
Governmental and
T2.
Legal Forces
A4. Operations
Management T1. Raw Materials or Materials Management
Trend and
T2. IT connected or Software
Technological
Forces
A5. Competitive T1. The dominant players in the field namely Filtra Timber-
Forces
Solidwood & Manila Wood Veneer Supplies as established
networks makes it difficult for Hexa-Arch, as the emerging one,
to reach an equal standing with them in terms of the quality and
quantity of wood veneer products.
T2. Hexa-arch could invest on expanding their product line
coverage in order to keep up in the changing demands of the
consumers and trends in the agro-manufacturing industry
B1. Porters T1.
Analysis
T2.
T3
B2. Market T1.
Analysis
T2.

The student may adjust the font size in order to fit or modify the table size. After laying
down all the opportunities and threats, the student must choose top 6 opportunities and
top 6 threats. The choice must be highlighted by underline or putting it into box.

In choosing the top 6 opportunities, the opportunities must be very important in terms of
attaining goals of the company. If the opportunities are exploited effectively, it helps the
company achieve strategic competitiveness.
In choosing the top 6 threats, the student must think that the threats to be chosen has
high negative impact in attaining goals of the company. These threats are providing the
greatest hindrance or obstacles to achieve competitiveness.

4. Summary of Key Opportunities and Threats

Select 6 Opportunities and 6 Threats. The identification of key opportunities and threats
must be meticulously done. Importance of the opportunity and threat factors (in terms
of the big impact or relevance to the company) must be considered very well.

Check textbook pages 94 to 95 for the prioritization of the factors.


The key external factors should be
(1) important to achieving long-term and annual objectives,
(2) measurable,
(3) applicable to all competing firms (It is affecting many company in an industry), and
(4) hierarchical in the sense that some will pertain to the overall company and others will be more
narrowly focused on functional or divisional areas.

List of Key Opportunities and Threats of the (Company Name)


The BASIS of the identified factors must be specified (From what categories it came
from. E.g. It came from Economic Forces, or Technological or from Bargaining Power of
Suppliers)
After gathering all the Key factors, these must be classified based on the dimension of
Stability Position and Industry Position.

After classifying, rate each factor by assigning numerical value based on the dimension
on stability position or industry position (Check the PowerPoint slides for the lecture or
textbook pages 208 to 212 for the explanation of Stability Position and Industry
Position). The concept of Stability Position and Industry Position will be more useful in
Strategy Formulation.

# Opportunities Basis Dimension Rate


(From what category) (Classify if in Stability
Position or Industry Position)

1
2
3
4
5
6
# Threats Basis Dimension Rate
1
2
3
4
5
6

Ensure that each of these Opportunity and Threat factor must be traceable or has basis.
Its impossible that an opportunity factor or threat factor suddenly appeared in the list
without assimilating information in the general environment and industry analysis.

Notes:
*The Dimension in the table will reflect if the Opportunity or Threat factor falls under
Stability Position or Industry Position
**All tables and figures in the entire chapter 4 must be mentioned and explained in
paragraph discussions

Ex. Table 4.1 shows the . . . .


Figure below explains the . . .

***It is possible that 2 or more opportunities (or threats) can be identified from the same
level and sublevel.