Strategic plan of Duty Free Philippines

Date of Publication

1997

Document Type

Oral Comprehensive Exam

Degree Name

Master of Business Administration

Subject Categories

Business Administration, Management, and Operations

College

Ramon V. Del Rosario College of Business

Department/Unit

Decision Sciences and Innovation

Thesis Adviser

Raul Mirasol

Defense Panel Member

Rex Ma. Mendoza

Mila Beltran

Abstract/Summary

The retailing industry is a big industry which comprises diverse products and service concepts. In terms of sales performance for the past five years, it grows at an annual rate of 31% despite the fluctuating number of players that leaves and joins the industry every year. With a total of 722 players in 1995 (Top 7000 Corporations), the top ten retailing firms remain strong in their sales performance thus eating up 27% of the total industry sales. Such reveals that the industry is being dominated by a few big firms that are not directly in competition with each other thus lessening the intensity of rivalry among players. Added to this, majority of the countrys retailing organizations are still characterized by limited resources brought about by traditional practices and protectionist attitude of the government (R.A. 1180 provides that only Filipinos are allowed to engage in retail business) and among retailers. At present, the proposal on the amendment of R.A. 1180 is already in the hands of the legislators which includes the provision on the minimum paid up capital for foreign ownership in which the local retailers are lobbying against, among others. In Southeast Asia, only Philippines and Vietnam have not yet achieved retail trade liberalization (Indonesia is partly liberalized) which explains the limited number of world class shopping destination in the country.

One of the greatest threats the Retailing Industry is facing is the image dilution referred to as the trend for brand image and quality outlets to create a total quality ambiance, as a result of the rising affluence of Asian shoppers. Thus, being in the industry where the power of its buyers matters a lot, the limited sources of funds to improve the quality and variety of products and facilities will leave customers no choice but to shop somewhere else. Also, the bigger retailing organizations are faced with the growing concern for efficiency in the delivery of store services as well as the curbing of merchandise shrinkage that affects the firms profitability. This requires big investments on retail technology. At present there are only few firms that can afford to embark on such expensive investments. Consequently, the industrys opportunities hinge on the passing of the trade liberalization law that would allow bigger sources of funds. Then there is also the increase in domestic and international tourism activities spurred depreciation however, industry sales may slowdown temporarily especially for retailers carrying imported products. Nevertheless, it will manage to catch up as soon as economic levels stabilize.

For Duty Free Philippines, the main strength lies on its special access to its market the Balikbayans(BB), the Regular Filipino Travelers (RFT), Tour Groups(TG) and Foreign Individual Tourists (FIT) – having stores located in the countrys major international airports. In exchange, its main role is to maximize profitability that will contribute funds for tourism infrastructure projects of its mother agency, the Philippine Tourism Authority (Operating under the Department of Tourism). Moreover, as a big ticket account, DFP enjoys cost advantages from its suppliers such as volume discounts and longer payment terms (at zero or minimal interest). With the objectives of attaining sales of 16 billion pesos, net income of 1.9 billion pesos and transforming Duty Free Philippines as one of the best managed duty free shops in Asia by the year 2001, a lot will have to be done in overcoming its weaknesses which include dwindling profit levels due to increasing operating expenses, low inventory turnover (overstock), vulnerability to changes in government policies (brought about by protests from local retailers) and inefficient delivery of store services, and the unstable situation of foreign exchange rates which threatens to weaken DFPs competitiveness in the local market.

Abstract Format

html

Language

English

Format

Print

Accession Number

OCE0080

Shelf Location

Archives, The Learning Commons, 12F Henry Sy Sr. Hall

Physical Description

82 leaves ; 28 cm.

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