Future strategy for Edgar Ramirez, Inc.
Abstract/Summary
Edgar Ramirez, Inc. is a furniture manufacturing and exporting firm whose products are mainly period-pieces and antique reproductions. Edgar Ramirez is a family-owned corporation that was established by Mr. Edgardo P. Ramirez on March 20, 1968. The company produces purely wooden furniture, with a product line composed of Italian, French, Chinese Chinoiserie, Spanish furniture and faux antique pieces. Most of these pieces are copied from the real antique pieces or replicate through blow-ups of the original pictures. The craftsmanship of his furniture is considered superb by international standards mainly due to his painstaking attention to detail and years of experience.
Originally, the market of the company was only limited to the high-end segment of the domestic furniture industry. Fortunately, the government realized the potential of the Philippine furniture exporting industry and stepped-up its drive towards exportation. The Department of Trade & Industry conceived the Center for International Trade, Expositions, and Missions (CITEM) which was responsible for promoting local goods through the staging of trade fairs both locally and abroad. The main clients of the company are antique collectors and furniture importers mainly coming from London, New York, North Carolina, Tennessee, Texas, Saudi Arabia, Singapore, and Hong Kong. At the moment, the export market takes approximately 65% of the company’s sales. Another source of income is generated through consultancy/designing of special projects where Mr. Ramirez’s expertise and experience is put to good use.
The company has posted conservatively-increasing profits since it has expanded into the international market. However, in the year 1995, the business experienced a significant drop in sales. This collapse in sales levels may be attributed to a downfall in Mr. Ramirez’s physical well-being. Mr. Ramirez’s understudies, his niece Ma. Cecilia and his nephew, Juan Raymundo, have taken charge since. Together, they have resurrected the company’s performance with a 30% increase in sales. This may be attributed to more efficient operations coupled with more conservative cash management.
The Medium-Term Export Development Plan (MTEDP) has identified furniture as one of the fourteen export priority products that are “export winners†and shall be given full assistance and support by the government. The industry’s high potential in the international market can be gauged from world imports which grew by 23% from USS$15.2 B in 1989 to US$18.7B in 1991, and still continues to rise until the present times.
Exports grew by an annual average of 11% in the last 10 years. Its value more than doubled in the said period, from US$88M in 1984 to US$203.2 in 1993. The furniture industry manufacturers affordable products of exquisite craftsmanship which is the successful result of modern technology combined with human creativity and love of beauty. From its prime position as the major source of creatively designed wicker and rattan furniture, the industry has successfully diversified into wood, metal, stone, bamboo, leather, and mixed media furniture collections.
The diversification of furniture is also marked by the shift from production of low-end furniture to the medium and- high-end lines. This means emphasis on quality, design, and material rather than on mass production of pieces. This is attributed primarily to growing competition, particularly with the entry of Indonesia into the rattan furniture export market. With its relatively easy access to raw materials and low wages, Indonesian manufacturers were able to carve a niche in the low-end market with exports prices than that of the Philippines.
There are 3 major furniture-manufacturing areas in the country Cebu, Metro Manila, and Pampanga. Cebu where the larger rattan manufacturers are based, produces at least 60% of total furniture exports most of which are rattan and fossilized stone furniture. Located in Metro Manila are a number of smack to medium-sized companies which are increasingly using a combination of materials. Some large producers of wooden furniture are also based in Metro Manila. Pampanga, on the other hand, is well-known for its hand-carved wooden furniture, while nearby Bulacan for its inlay work.
Major raw materials for production are lumber, hardware, finishing materials, and upholstery materials. Lumber is available in the domestic market but manufacturers already started using imported species, primarily due to the quality and variety of lumber. Aggravating the situation locally is the implementation of the log ban on our local hardwood. A new opportunity that has evolved due to lack of raw materials are the new types of wood which are not banned and/ or enjoy support from the government, namely rubberwood, Gamelina, and particle boards & multi-density fiberboards (MDF), which is processed wood.
The wood industry grew at 10% annually from 1989 onwards. Up to 1988, wood ranked second among furniture sub-group exports. The total wooden export industry posted in sales increases from approximately US$28M in 1989 to US$44 in 1993. Development efforts are currently being poured into this sub-sector. Among the furniture materials, wood enjoys greater patronage among consumers. Of total world furniture imports, wood has the biggest share of US$14.6B or 78% of total furniture demand in 1991. Many companies are likewise venturing into the production of wooden furniture in the heels of the declining rattan exports.
The traditional rivals of the Filipino furniture makers are Indonesia, Thailand, and Malaysia. A look at the developments in rival countries showed that Indonesia, Malaysia, and Thai went into mass production of furniture products.
The opening of the Philippine market to the entire world, as mandated by the General Agreement on Tariffs and Trade, will have positive repercussions on the Philippine wooden furniture industry. Basically, the access to world-class raw materials and technology will enable the Philippine-made furniture to complete globally. Given the natural talent of Filipinos for design and execution, the industry stands to gain from the inflow of imported inputs to production at much lower costs.
The first taken by the government is the creation of the Furniture Export Development Plan which recognizes the importance of stable raw materials, improved productivity through modernization, access to low-cost financing, and innovative marketing approaches.
The company could further improve their ability to adapt to the changing environment and increased competition by adopting strategic management policies to complement their short and long-range planning horizons. The recommended strategy for the company includes the conception and identification of a Company Vision & Mission Statements, automation of certain aspects of production, decentralization of organization, a more active participation in trade fairs & expositions, emphasis on product uniqueness, and the venture into other sources of income such as contract furnishing (hotels, restaurants, offices, etc.), and knock-down furniture, the latest industry trend in the Western markets.
