Exportation to the Philippines, Research Paper Example

Executive Summary

International Logistics Incorporated’ senior management needs to be made aware of three important assessments and their related recommendations, in terms of economic assessment, supply chain assessment, and transportation assessment, when identifying a new country for exportation of technological goods. The Philippines has been selected as a possible country for expansion; and whether it is a viable exportation destination for our company or not is the focus and the final conclusion for deciding if the country will become a new future market.

Both the recommendations and the conclusion reflect the viability of this country as the next destination for exportation of high-tech equipment, as shown herein. These three assessments, namely the economic assessment, the supply chain assessment and the transportation assessment, will determine if the company moves ahead with investing into the Philippines.

The economic assessment of the Philippines shows that the low cost of living, decreasing economic growth, and unclear business future render the country an unviable exportation destination; which shows that this country is not an adequate destination for high-tech technology at this stage. The country must be more acceptable in light of these three factors to be considered viable.

The supply chain assessment of the Philippines shows that the technological compatibility with local business partners will prove to be a problem, due to differences in both advancement and user-friendliness. Furthermore, maintaining the adequate operation of the supply chain may prove to be difficult, especially when working with local businesses for the first time. Finally, it may prove complex to achieve competency within the supply chain itself, as success within the business market is mainly location-specific. The Philippines is not the right country to export to if the supply chain is not suitable, as in this case; the country needs to have the right resources available to be viable.

Lastly, the transportation assessment of the Philippines shows that logistics have become an increasingly sophisticated process; and such a large, interconnected process requires a large investment, in monetary, timely and personnel terms. Therefore, these three reasons point to the fact that transportation will be more of a hindrance than a help, when arranging for logistics in the Philippines.

The company should identify an alternative country for exportation that provides suitable opportunities in these three areas as well as efficient and effective logistical advantages for the present as well as the future. The country that meets the suitable export requirements needed to establish a company presence will be the next destination for the business’ exportation of technological goods. International Logistics Incorporated should locate a company that is beneficial for the company in terms of the economy, the supply chain, and transportation.

Introduction

As exportation continues to expand, International Logistics Inc. has identified a country that offers a new business opportunity to distribute and export our cutting edge technology, namely the Philippines. However, before exportation begins to the Philippines, senior management needs to be made aware of three important assessments and their related recommendations, in terms of economic assessment, supply chain assessment, and transportation assessment. Once these have been assessed, a final conclusion will be made as to whether the Philippines is a viable exportation destination for our company, or not.

Economic Assessment

Described as a third-world country, the Philippines’ economy has been fairly high growth for many years; however, it has recently begun to slow down. Due to low cost of living and standard of living as shown by the Big Mac index, the Philippine population have struggled to find ways to improve the economy holistically as compared to most Western nations (Find the Data, 2013). However, the country’s economy has been the leader in comparison to other surrounding Asian economies.

In terms of exporting high-tech technology to the Philippines, the country does offer a thriving business market and the opportunity to establish a technological presence in one of the leading technology hubs of Asia. In addition, there are many American multinational firms that have endeavored to establish modes of foreign direct investment into the Philippines as part of the technology industry.

Statistics show that the income elasticity of export demand, as the relationship between real exports, real income and relative prices in the Philippines as per export demand is around unity, and the relative price elasticity is approximately -1.2 (Kumar, 2009). This data shows that demand for goods in the Philippines are relatively inelastic, in terms of economic indicators showing that changes in price have a small effect on the quantity of goods demanded.

Price elasticity of demand being one indicator of the economic position in the country of the Philippines seems to signify the relatively stable condition of the economy. However, recent economic activity shows that this is becoming a slightly improbable market for exportation, as economic growth is slowing down, and the indexes shows that cost of living is still quite low.

As a result, the economic assessment of the country indicates that it is not a viable country to export to, due to low cost of living, decreasing economic growth, and unclear business future. Since cost of living has remained low, consumers do not have the financial resources or capability to become customers for the company, because the majority of the population cannot afford high-tech technology due to their cost of living expenses.

Furthermore, the decrease in economic growth shows that businesses are competing for consumers, and are being forced to cut costs and inventory due to the economic climate, which is not a benefit for the business. Finally, the unclear direction for the company to continue to export if encountering potential barriers in terms of economic indicators seems to suggest that it is not economically feasible to export to the Philippines at this time.

Supply Chain Assessment

The method of managing the supply chain in such a country as the Philippines requires efficient technology, effective operations and measureable competencies. A recent case study showed that redeploying resources in the Philippines is a critical step in bettering supply chain agility in such a context (Ngai, Chau and Chan, 2011).

This shows that in certain cases, resources will need to be diverted in order to avoid breakdowns in the supply chain, as can occur when dealing with local businesses and businesspeople in a foreign country.

When maintaining the supply chain in the Philippines, it is important to note the cultural differences and standards of business dealings, while also noting the obligations to the business. Often, it is hard to follow both, but it is necessary to function according to the ethical components of correct business conduct than doing otherwise. In the Philippines, the company employees’ should be aware of such differences and act accordingly.

Additionally, there are certain locations and businesses in the Philippines that can be identified as suitable partners in the supply chain, and those who are not. It is often difficult, as a result, to conduct high-tech business in the Philippines without thorough planning and coordination.

As aforementioned, the central technology hub of the Philippines has many large American companies that are already established and functioning well with local suppliers. Research shows that effective collaboration will bring significant positive impacts in the area of location-specific development in technology (Agarano, Rivas and Quijada, 2011).

However, much of the thriving business population in the Philippines is due to the fact that a majority of the technological corporations are run by local businesspersons. Although this has its advantages, both culturally and business-wise, it is not a suitable strategy to employ within the company. This is due for three major reasons, which encompass technology aspects, operations aspects, and competency aspects, as mentioned earlier.

Firstly, technological compatibility with local business partners will prove to be a problem, due to differences in both advancement and user-friendliness. As most of the company’s exported goods will be higher-end technology with the latest cutting-edge features, it may be difficult to notify local businesspeople of our expectations and obligations when working with them to maximize the efficiency and effectiveness of the technology.

Secondly, maintaining the adequate operation of the supply chain may prove to be difficult, especially when working with local businesses for the first time. Despite obvious cultural and economic differences, it is hard to identify whether such partners will be with the company for the short-term or long-term, of whether the businesses that the company partners with will later become competitors.

In the Philippines, it is often cost-effective to make more affordable and less complicated versions of technology that consumers can afford and are familiar with, however; this may undermine the competitive advantage of the business and lead to further complications with consumers and businesses alike.

Thirdly, it may prove complex to achieve competency within the supply chain itself, as success within the business market, in terms of the technology industry and its advancement, is mainly location-specific, as referred to in the research.

Therefore, the location of the Philippines does not offer many benefits as per the disadvantages outlined here in regards to the supply chain and its assessment for the Philippines.

Transportation Assessment

The situation of transportation in the Philippines is very difficult to discern, primarily due to the various modes of transportation and the intricate network of logistics. There are two main modes of transportation that the company, International Logistics Inc., can choose: air freight and land freight.

For transportation purposes, it is necessary to transport the technology goods via both methods of transportation, since the goods are to be exported from the United States to the Philippines overseas via air freight, and then delivered to the business location onsite using land freight. This can be done using third-party outsourced providers linking with business contacts arranged by the company’s network.

In the Philippines, logistics have become an increasingly sophisticated process (Ling, Lee and Ho, 2009). Due to the interconnected process of logistics, it may be easier to utilize the company’s internal logistics capabilities to coordinate the safe and timely exportation of the high-tech technological goods; if necessary, in partnership with on-the-ground Philippine business contacts.

However, the method employed here includes access to resources by various groups and therefore enables the focus to shift from mere aggregate economic development to also encompass equitable and sustainable social development in the Philippines (Olsson, 2009). This is needed, due to the conditions of transportations that the local population and other businesses have to deal with on a regular basis.

As issues are addressed on the long-term basis in this country, some of the issues listed below also deal with long-term investments, on the part of the company, rather than the government. This alludes to the fact that more than mere monetary investment in required, especially when investing and dealing with a country and government such as the Philippines.

Such a large, interconnected process requires a large investment, in monetary, timely and personnel terms. The type of monetary investment involved requires freight fees, insurance costs and delivery surcharges, to name just a few. Foreign transfer of funds and value-added tax on transport services are additional investment that are required by the Philippine government (Goce-Dakila, 2010).

Additionally, the time investment would require delivery schedules, estimated time of arrival, customs timings, and other time estimations that would require on-the-ground personnel and company employees to overlook the transportation of goods to the required location, not to mention the local businesspeople that have to be liaised with. As this shows, it needs to be coordinated and prioritized according to the transportations and logistical needs of the company. Therefore, these three reasons point to the fact that transportation will be more of a hindrance than a help, when arranging for logistics in the Philippines.

Recommendations

According to each of the three assessments as outlined above, namely the economic assessment, the supply chain assessment and the transportation assessment, the logical recommendations will indicate whether or not the Philippines is a viable country for exporting technological goods.

The economic assessment of the Philippines shows that the low cost of living, decreasing economic growth, and unclear business future render the country an unviable exportation destination.

The supply chain assessment of the Philippines shows that the technological compatibility with local business partners will prove to be a problem, due to differences in both advancement and user-friendliness. Furthermore, maintaining the adequate operation of the supply chain may prove to be difficult, especially when working with local businesses for the first time. Finally, it may prove complex to achieve competency within the supply chain itself, as success within the business market is mainly location-specific.

Finally, the transportation assessment of the Philippines shows that logistics have become an increasingly sophisticated process; and such a large, interconnected process requires a large investment, in monetary, timely and personnel terms. Therefore, these three reasons point to the fact that transportation will be more of a hindrance than a help, when arranging for logistics in the Philippines.

Conclusion

In summary, the Philippines does not provide any long-term benefit in terms of business success, exportation advantages, or technological viability for high-tech technology to be exported to the country, based on the economic, supply chain and transportations assessments presented. The company should identify an alternative country for exportation that provides suitable opportunities in these three areas as well as efficient and effective logistical advantages for the present as well as the future.

References

Agarano, M. Rivas, S., and Quijada, J. (2011). Location-Specific Technology Development Program Implementation in Compostela Valley Province [Philippines]. Philippine Journal of Crop Science, 36(1), 113-116.

Find the Data. (2013). National Average. Retrieved from http://cost-of-living.findthedata.org/l/615/National-Average

Goce-Dakila, C. (2010). Assessment of Two Modes of Financing Land Transport Investment in the Philippines. Journal of the Eastern Asia Society for Transportation Studies, 8(1), 157-173.

Kumar, S. (2009). Structural Breaks and Exports in the Philippines. Global Economy Journal, 9(2), 112-119.

Ling, T., Lee, C., and Ho, W. (2009). The Analysis and Case Studies of Successful Express Logistics Companies. International Journal of Value Chain Management, 3(1), 20-35.

Ngai, E., Chau, D., and Chan, T. (2011). Information Technology, Operational, and Management Competencies for Supply Chain Agility: Findings from Case Studies. The Journal of Strategic Information Systems, 20(3), 232-249.

Olsson, J. (2009). Improved Road Accessibility and Indirect Development Effects: Evidence from Rural Philippines. Journal of Transport Geography, 17(6), 476-483.