54

1064 CHAPTER V

1065 SUMMARY, FINDINGS, CONCLUSIONS AND RECOMMENDATION

1066

1067 This chapter presents the summary of discussions presented, the findings

1068 of the researchers and analyses on the data gathered. It also discusses the

1069 conclusion inferred from the data and recommendations are offered to the cost

1070 minimization strategies of Albay Agro-Industrial Development Corporation.

1071

1072 SUMMARY

1073 The study was conducted to identify descriptively the competitive

1074 strategies and cost minimization strategies of Albay Agro-Industrial Development

1075 Corporation, specifically, it answered the following:

1076 1. What are the competitive strategies adapted in ALINDECO along with:

1077 a. Differentiation

1078 b. Niche

1079 c. Cost leadership aspects?

1080 2. What are the cost minimization practices used by ALNDECO in terms of:

1081 a. Asset utilization?

1082 b. Direct cost incurrence?

1083 3. What are the benefits of cost minimization strategies adopted to the firm’s:

1084 a. Profitability?

1085 b. Liquidity?

1086 c. Efficiency?
 55

1087 The Finance Officer of Albay Agro-Industrial Development Corporation

1088 was given questionnaire to get a view of the organization’s competitive strategies

1089 and cost minimization practices. The question was about the competitive

1090 strategies adapted by the company along differentiation, niche and cost

1091 leadership aspects; cost minimization practices in terms of asset utilization and

1092 direct cost incurrence; and its benefits to company’s profitability, liquidity and

1093 efficiency.

1094 The descriptive method was used in this study. The primary data were

1095 taken from the responses on the questionnaire.

1096

1097 FINDINGS

1098 I. Competitive Strategies of Albay Agro-Industrial Development

1099 Corporation

1100 From the data gathered by the researchers through the questionnaire

1101 answered by the respondent the following findings regarding on the competitive

1102 strategies Albay Agro-Industrial Development Corporation:

1103 Along with differentiation aspect of competitive strategies, the company

1104 engages into research & development to improve the production process and

1105 achieve superior or high quality of Abaca pulp, develops and delivers high quality

1106 or premium products. The superior quality of ALINDECO’s abaca pulp has been

1107 achieved through intensive research and development efforts and investments.

1108 Such strategies developed a competitive advantage and differentiating factor to

1109 the business. A successful differentiation strategy leads to more loyal customers,
 56

1110 means for achieving future growth and maintains a relevant product to the

1111 market. The business sometimes adapts to create innovation or new product not

1112 offered in the market since the company manufactures standardized pulp grades

1113 accepted in the world market. Creation of new product is part of research and

1114 development but the business focused more on improving their existing products

1115 or sought for product upgrade.

1116 Along with niche aspect of competitive strategies, the business builds

1117 strong brand loyalty. The business achieved it through meeting customers’ needs

1118 and the idea behind such strategy is to keep them coming back or to have repeat

1119 purchase. This is consistent to the niche strategy which is oriented towards

1120 customer needs. And companies adapting it must be prepared to meet a range of

1121 needs and expectations of customers. While the idea on product customization

1122 allowing to arrive at pulp characteristics suitable to buyer’s requirements doesn’t

1123 just give customers what they want but also keep customer satisfied which

1124 promotes brand loyalty. This, in turn, allows the business to count/project on a

1125 certain level of revenue, generates more sales and increases profit margin.

1126 Along with cost leadership aspect of competitive strategies, the business

1127 makes sure that the manufacturing plant’s location is where continuous abaca

1128 fiber supply was provided. The availability or nearness of raw materials is a factor

1129 that manufacturing business must consider when choosing business location

1130 because if not, then sourcing and transportation will reduce business’ profit

1131 margin. The automation of manufacturing process makes sure of business

1132 productivity and efforts exerted by the company to keep its facilities safe and
 57

1133 environment friendly make the business more competitive meeting the increasing

1134 market demand for high quality Abaca pulp. In order to reduce product cost, the

1135 company sometimes adapts to produce its own raw materials. To provide raw

1136 materials for continuous production of Abaca pulp, the business produced its own

1137 raw materials but won’t suffice the production needs and that’s the reason it

1138 sometimes adapted such strategy. Unable to provide continuous abaca fiber

1139 supply might affect production and later on the profit margin.

1140

1141 II. Cost Minimization Practices of Albay Agro-Industrial Development

1142 Corporation

1143 A. Asset Utilization

1144 In terms of utilizing the company’s assets, it limit access to raw materials

1145 storage area to prevent unauthorized entry and to prevent losses and thefts. The

1146 business is employing FIFO policy in using raw materials in order to reduce old

1147 raw materials and to ensure that ending inventory reflects current market prices.

1148 The business schedules the production activities to reduce downtime, identifies

1149 the causes of delays and puts programs and processes to address those causes.

1150 Additional income is generated by making others rent idle plant capacity. And to

1151 improve workers’ effectiveness and efficiency, the business retrains them for

1152 continuous improvement. The business sold the unused assets and examined

1153 the occasionally used assets to justify the expense of holding them. The

1154 business is employing computerized inventory and order system to better

1155 account for its inventory and to have better order taking, respectively.
 58

1156 B. Direct Cost Incurrence

1157 In terms of direct cost incurrence, the business is purchasing raw

1158 materials anytime when available for the reason that the production of their

1159 product is continuous and prevents insufficient raw material supplies and

1160 prevents production delays. Direct labor cost is properly accounted for since the

1161 business is making use labor time ticket and clock card, maintaining records for

1162 each worker account, providing overtime pay, monitoring and assessing workers

1163 performance through monthly report to ensure whom the business are paying

1164 works in a manner they supposed to be, and basing manufacturing overhead

1165 cost on direct material cost since company’s operations are materially oriented

1166 and the production depends upon the availability of the materials. At times when

1167 the production doesn’t require so many raw materials and avoid overstocking, the

1168 business purchased raw materials only when stock needs replenishment. The

1169 company never practiced purchasing raw materials from one supplier since doing

1170 so would not ensure the continuous supply of raw materials essential to the

1171 production.

1172

1173 III. Benefits of Cost Minimization Strategies

1174 A. Profitability

1175 The company consistently showed a profitable operation for five (5)

1176 consecutive years from year 2014 to 2018. Based on the ratio analysis,

1177 ALINDECO’s gross profit margin for 2014 to 2018 have been stable which is

1178 considered a positive sign even if the company had to offer discounted products
 59

1179 in order to attract customer or to generate more sale to drive up inventory

1180 turnover. It also tells the business’ ability to pay for its operating expenses. This

1181 also means for every peso that ALINDECO generates in sales, the business

1182 generated one peso in gross profit before other business expenses were paid.

1183 The analysis on net profit margin of ALINDECO showed a steady or an even

1184 profitability for past five years after considering all revenues earned and

1185 expenses incurred. The 1 or 100% net profit margin indicates that for every peso

1186 generated by the business in sales, the company kept Php 1.00 as a profit.

1187

1188 B. Liquidity

1189 The company steadily revealed that it had short–term debt–paying ability

1190 for 2014 to 2018. ALINDECO’s current ratio indicates that for past five years

1191 current assets covered current liabilities one time or had one is to one ratio. The

1192 company had relatively enough assets to meet it debts requiring retirement within

1193 one year or one operating cycle. As to analysis of company’s quick ratio, it

1194 consistently showed that it had the ability to meet its obligation without having to

1195 liquidate or depend too much on its inventory.

1196

1197 C. Efficiency

1198 the company consistently showed overall efficiency in managing its total

1199 investment in assets which indicates the company’s profit earned relative to the

1200 level of investment in total assets. ALINDECO’s return on assets showed that its

1201 investment had a favorable return which is the profits they generated out of that.
 60

1202 The trade receivable turnover of the company showed that trade

1203 receivables had been turned into cash 1.25 times in the five year period. As an

1204 implication, the company is consistent with its collection and credit policies and

1205 indicates the efficiency in the collection of trade receivable.

1206 The company’s inventory turnover is not relatively high and does not

1207 showed improvements for past five years in terms of managing and selling its

1208 inventory. A relatively low turnover means that the company is carrying too much

1209 inventory or slow-moving or inferior inventory stock.

1210

1211 CONCLUSIONS

1212 It is concluded that the abaca pulp manufacturing industry provides

1213 greater opportunities for every investor and to entire society to support locally

1214 made products but globally competitive. The company is adapting competitive

1215 strategies and is practicing cost minimization over its utilization of assets and

1216 incurrence of direct costs.

1217 With regards to competitive strategies, the business maintained its

1218 competitive standing or edge through adaption of different strategies along with

1219 differentiation, niche and cost leadership aspects. In connection to differentiation

1220 aspect, engaging to research and development is the key/factor to achieve

1221 superior quality of ALINDECO’s pulp. In line with niche aspect, producing abaca

1222 pulp grades suitable for buyer’s requirement is one thing that made and

1223 continuously making their products accepted in the world market. As to cost
 61

1224 leadership aspect, making sure that continuous abaca fiber supply is provided to

1225 the production is one way to aid the continuous.

1226 With regards to the cost minimization strategies in terms of asset

1227 utilization, the company attends to always optimizing the use raw materials to

1228 benefit the business as a whole. They limit access of workers to raw materials

1229 storage area to prevent thefts. In terms of direct cost incurrence, the company

1230 makes sure that they have variety of suppliers to aid continuous production and

1231 avoid potential loss if there would be no product produced to be offered in the

1232 market. With regards to labor, employee performance is monitored and assessed

1233 through the preparation of labor reports daily, weekly and monthly.

1234 The company’s benefits to the practice of cost minimization are that it had

1235 profitable operations and continued to be competitive as a manufacturing

1236 industry in different aspect; to meet its current obligation when it comes due; and

1237 to efficiently manage the use of its assets in earning profits.

1238

1239 RECOMMENDATIONS:

1240 For further improvements in the company’s operations, the researchers

1241 formulated certain recommendations: the company’s strategy to sometimes

1242 adapt in creating innovation of existing products and new products to always

1243 adapt on this strategy to be at par with the changing market and to continue

1244 practicing not relying on only one supplier because it might affect production and

1245 cause losses. The company should also make sure that the research and

1246 development costs as one of their differentiating factors will still complement to
 62

1247 the company being cost competitive. For further studies on the company future

1248 researchers may consider the corporate social responsibilities and import-export

1249 transactions of the company.