CHAPTER 1

THE PROBLEM AND ITS SETTING

Introduction

Micro and Small Enterprises (MSEs) are widely defined in terms of their characteristics,

which include the size of capital investment, the number of employees, the turnover, the

management style, the location and the market share (Kasekende and Opondo, 2003). According

to World Development Indicators Database Micro, small, and medium-size enterprises are

business that may be defined by the number of employees. There is no international standard

definition of firm size; however, many institutions that collect information use the following

size. Categories micro enterprises have 0-9 employees, small enterprises have 10-49 employees,

and medium-size enterprises have 50-249 employees.

Credit is the lifeline of business. Small businesses facing high tax rate will lead lack

accesses to capital and money markets. Investors are unwilling to invest in proprietorships,

partnerships or unlisted companies. As risk perception about small businesses is high. So is the

cost of capital, institutional credit, when available, requires collateral which in turn makes the

owner of the unit even more vulnerable to foreclosure. Despite efforts by financial institutions

and public sector bodies to close funding gaps, Small and Medium Enterprises (SMEs) continue

to experience difficulty in obtaining capital. These funding gaps relate to firm size, risk,

knowledge and flexibility. In addition, SME borrowing requirements are small and more

collateral may be required than SMEs can pledge. Further, the financial institutions may face

high tax on their business leading to raise their interest rates to cover the gap between them and

their clients and therefore it will lead to lack expertise in understanding SMEs and also flexibility

in terms and conditions of financing that are required by SMEs (PECC, 2003). Mall firms have

39
traditionally encountered problems when approaching providers of finance for funds to support

fixed capital investment and to provide working capital for the firm’s operations because the

government taxes every transaction carried out. The presence and nature of a “finance gap” for

small firms has been debated for decades, ever since the Macmillan Report (Macmillan, 1931)

According to Tucker and Lean (2003) one of the problems faced by small firms when attempting

to raise finance is information asymmetry in that they cannot prove the quality of its investment

projects to the provider of finance (usually the bank). Small firm managers often suffer from a

lack of financial sophistication, as they are often product or service specialists, not specialists in

the area of finance.

The Tax Reform for Acceleration and Inclusion (TRAIN) Act, officially cited as

Republic Act No. 10963, is the initial package of the Comprehensive Tax Reform Program

(CTRP) signed into law by President Rodrigo Duterte on December 19, 2017. The TRAIN Act is

the first of four packages of tax reforms to the National Internal Revenue Code of 1997, or the

Tax Code, as amended. This package introduced changes in personal income tax (PIT), estate

tax, donor's tax, value added tax (VAT), documentary stamp tax (DST) and the excise tax of

tobacco products, petroleum products, mineral products, automobiles, sweetened beverages, and

cosmetic procedures.

Pricing has always been an integral component of marketing (Borden, 1964); of the

traditional marketing elements, only pricing creates revenue (LaPlaca, 1997; Shipley & Jobber,

2001). As Morris (1987, p. 79) notes, “one of the more basic, yet critical decisions facing a

business is what price to charge customers for products and services.” This decision is

particularly critical in what The Economist (2013) calls the “age of austerity”—an era

characterized by sales stagnation, no reasonable possibility of cutting costs further, and price as

39
the only remaining lever. In this competitive environment, more than ever, a sound pricing

strategy is required to facilitate customer value creation, structure price decisions, and earn a

profit (see Lancioni, Schau, & Smith, 2005); Hinterhuber and Bertini (2011) caution that a

deficient pricing strategy inhibits profitability.

Different pricing strategies in turn reflect these contingencies, such as price skimming,

penetration pricing (Noble &Gruca, 1999; Tellis, 1986), price bundling, price promotion, or

complementary pricing (Gijsbrechts, 1993). Accordingly, “a pricing strategy provides a

systematic delineation of the elements that must be managed to achieve profitable performance

in a business” (Cressman, 2012, p. 246). Generally, these elements include the intended pricing

objective (e.g., profit maximization), the relative target price level (associated with cost,

competition, and/or customer value), and the internal and external factors (e.g., market

environment) that face the business (Noble &Gruca, 1999).

Statement of the Problem

The researchers aim to determine the impact of TRAIN Law to Pricing Strategy of Small-

to-Medium Enterprises.

According to Gijsbrechts (1993, p. 115) though, “developing an appropriate pricing

strategy is both crucial and highly complex.” Prior research emphasizes its dependence on

various factors, such as the environment (Diamantopoulos, 1991), firm objectives, customer

characteristics (Tellis, 1986), and the pricing situation (Noble &Gruca, 1999).

39
Specifically, it seeks to answer the following questions:

1. What is the profile of the respondents in terms of:

1.1 Classification of business,

1.2 Business name,

1.3 Ownership

1.4 and Nature of Business?

2. For being part of SMEs, how much tax does the SMEs is paying?

2.1 Will there is any tax savings or benefit from the TRAIN law wherein the

SMEs are benefits?

3. Is it true that due to higher excise taxes, all prices of basic commodities will be

affected?

4. What pricing strategies did you use when TRAIN law comes up?

Objectives

The researcher summarizes what is to be achieved by this study entitled “A Study on the

Impact of TRAIN Law to Pricing Strategies of Small-to-Medium Enterprises (SMEs)”.

For the current study, a pricing strategy is the mean to determine relative price levels by

considering influential factors and thereby realizing certain business objectives in a specific

situation (Noble & Gruca, 1999; Tellis, 1986).

39
 The Objectives of the study are:

1.) To identify the positive and negative effect of implementing TRAIN law on Small-to-

Medium Enterprises (SMEs).

2.) Is to know the changes to their business before and after having a TRAIN law

3.) Is to know what each Small-to-Medium Enterprises' basis in choosing what kind of

pricing strategy due to the TRAIN Law.

Scope and Limitations of the Study

This study will focus on finding out the Impact of TRAIN Law to Pricing Strategy of

Small-to-Medium Enterprises.

The respondents will be the selected SMEs’ owner/manager within San Pedro Laguna.

Significance of the Study

This study is conducted to benefit the following:

The Consumers

This study aims to inform the consumers on the effect of the TRAIN Law to the services

and products that they consume.

Entrepreneurs/Business Men

This study would guide and give ideas to entrepreneur s and business men of what kind

of pricing strategy they would do due to the TRAIN Law.

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The Researchers

Researchers can also gain significance in this study. This enables them to look for strong

evidences and responses from the respondents. It improves their research skills little-by-little.

The Future Researchers

The result of this study can be validated and verified by the future and other researchers.

They may add variables and recommendations not included in this study. It will help them gather

more ideas about the given problem and develop research skills to be more productive in the

future.

Conceptual Framework

Input Process Output

Impact to
pricing
TRAIN Law Survey Test
strategies of
SMEs

Figure I. Input process output model

The conceptual framework of this study gives the relationship between the impact of

TRAIN law to pricing strategies of Small-to-Medium Enterprises (SMEs).

Accordingly, “a pricing strategy provides a systematic delineation of the elements that

must be managed to achieve profitable performance in a business” (Cressman, 2012 )

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Definition of Terms

For the purpose of clarification, the important terms used in this study have been defined.

The following terms are:

Proprietorship - The state or right of owning a business or holding property.

Information Asymmetry - information asymmetry deals with the study of decisions in

transactions where one party has more or better information than the other.

Elucidate - make (something) clear; explain.

Honorarium - a payment given for professional services that are rendered nominally without

charge.

Provision - the action of providing or supplying something for use.

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 CHAPTER 2

REVIEW OF RELATED LITERATURES AND STUDIES

This chapter presents the review and overview of related literature and research studies

which provided valuable information, insights, and direction to the various aspects of the

research problem.

Foreign Literature

A Review of the Effect of Pricing Strategies on The Purchase of Consumer Goods

According to Ehmke (2015), marketing your business is about how you position it to

satisfy your customers’ needs. In the face of rapid economic and technological changes, today‘s

consumer is more curious, more educated and conversant with what he/she exactly wants. These

changes also affect the needs of firms.

(Bearden 2014) stated that the emphasis will be on price; hence the need to elucidate

more on meaning of price to both customers and firms. Price is the amount a customer pays for a

product or the sum of the values that consumers exchange for the benefits of having or using a

product or service.

An Analysis of the Effect on Pricing Strategy for Effective Marketing plan of a product.

According to Rosa (2014), the importance of price as a purchase stimulus has a key role

in price management since not only does it determine the way prices are perceived and valued,

but it also influences consumer purchase decisions.

39
Pricing strategies and levels and their impact on corporate profitability

According to Besanko, Dranove, Shanley, & Schaefer, 2012; De Toni & Mazzon, (2013),

Strategic pricing requires a stronger relationship between marketing and the other sectors of a

company. In order to enhance companies' economic and financial performance, the pricing

policies should be defined by their internal capacities and on the basic systematical

understanding of needs and wishes of their customers, in addition to market conditions such as,

economic conditions and degree of competition.

According to Hinterhuber (2013), pricing strategies vary considerably across industries,

countries.

Foreign Studies

Based on Kotler et al, (2016), considering the nature of the consumer products

(frequently purchased and consumed products, implying medium-low level of consumer-supplier

interaction), the basic is, the customers who usually purchase are more frequently in contact with

prices. Pricing strategy is paramount to every organization involved in the production of

consumer goods and services because it gives a cue about the company and its products, a

company does not set a single price but rather a pricing structure that covers different items in its

line.

According to Kotler (2013) Price means different things to different people. It is interest

to lenders. COT or services charged by the banker (lenders), premium to the insurer, fare to the

transporter, honorarium to the guest lecturer etc.

39
Pricing strategies and levels and their impact on corporate profitability

According to Drury (2014), while discussing pricing strategy argued that cost information is

only one of many variables that must be considered in the pricing decision.

The effectiveness of pricing policy and profit planning in Nigerian organization A

performance appraisal of selected manufacturing firm

According to Egbunike (2013) sustained that setting the price for an organizations

product or service is one of the most difficult, due to some number of variety of factors that must

be considered. The primary decision arises in virtually all types of organization, just to mention

but a few of them such as manufacturers set prices for their products, they manufacture,

merchandising companies set prices for their goods, service firms set prices for such services as

insurance policies, bank loans etc.

Penetration Pricing Strategy and Performance of Small and Medium Enterprises in Kenya

According to Andrea(2015), conducted a study on customer value-based pricing

strategies: why companies resist where a two-stage empirical approach was employed and

identified five main obstacles to the implementation of value-based pricing strategies: deficits in

value assessment; deficits in value communication; lack of effective market segmentation;

deficits in sales force management; and lack of a support from senior management.

Local Literature

According to GMA News (2018), Rate-Inflation is the rate in which the general level of

prices of goods and services increase.

39
 According to Philippine Daily Inquirer (January, 2018), Government estimates indicate

that the price impact of the new taxes will be manageable. Expanding the value-added tax base

and adjusting excise taxes will raise the prices of some basic commodities, but this will be

minimal or moderate and only temporary. The effect is estimated to be a 0.73 percentage point

increase in inflation during the first year of the TRAIN’s implementation, with the impact

tapering off over time. A higher tax, technically, will affect the rich far more than the poor. Food

prices can cause an increase of up to 0.73 percentage point; transportation, up to 2.8 percentage

point; and electricity, up to 0.7 percentage point. In 2016, the price of diesel surged by P14 to

P32.10 a liter from P18.25, yet inflation remained low and stable as prices of food,

transportation, electricity, gas, housing and water increased by only 2-3 percent. The TRAIN will

increase diesel prices by only P2.50 a liter.

The Tax Reform for Acceleration and Inclusion (TRAIN) Act

According to Diokno (2018), In January 01, 2018, a new law for taxation has taken effect

in the Philippines namely the Tax Reform for Acceleration and Inclusion (TRAIN) Law. It was

in December 19, 2017 where our President Rodrigo Roa Duterte signed into this law (RA No.

10963). It contains alteration to several provision in the National Tax Code of 1997 on several

tax provisions. These tax provisions include lowering individual income taxation, reducing

exemptions in the Value-Added Tax base, increasing taxes on petroleum products and

Automobiles, and Introducing taxes for Sugar-Sweetened Beverages with the implementation of

the said Law, Filipinos- ordinary citizens, employees, employers, the self-employed, the rich and

the poor were all affected.

39
 According to Jessica Bartolome (2018), the rate in which the CPI changes refers to

inflation. Many factors contribute to the inflation rate. Some of the top contributors of inflation

include the prices of rice, vegetables, meat, electricity, gas, tobacco, among others. As inflation

rises, the value of the peso becomes lower, as people are able to buy less products and services

for the same amount. Prices of rice, energy, and transport specifically were mainly responsible

for the higher-than-expected inflation in August 2018, the Bangko Sentral ng Pilipinas (BSP)

said.

SMEs get big tax breaks under TRAIN

According to Privacy Impact Assessment (PIA) (2018) Small and Medium Enterprises

(SMEs) are benefiting from the tax breaks under the Tax Reform for Acceleration and Inclusion

(TRAIN) law. The SMEs are now covered by a higher value-added tax (VAT) threshold and can

choose from two options where they can pay lower income taxes.

The TRAIN Law VAT threshold is now at P3 million as compared to the previous pre-

TRAIN VAT threshold of P1.9-million. This means that those SMEs earning below P3-million

will be exempted from the 12% VAT and has the options of paying the flat tax of 8% income tax

or the scheduler personal income tax rates less business costs and expenses.

Department of Finance Secretary Carlos Dominguez III said the increase in the

percentage and income tax collections as compared to the 2017 January to June period indicated

that SMEs and self-employed taxpayers that have not exceeded the P3 million VAT threshold

are choosing to pay the eight percent income tax on gross sales or the percentage tax and the

graduated income tax rates provided by TRAIN.

39
 Data from the Department of Finance (DOF) showed that from the first six months of

2018 collections from the percentage tax and income tax increased as VAT collections

decreased. This showed that SMEs are benefitting from the raised VAT threshold.

Local Studies

A Review of The Effect of Pricing Strategies on The Purchase of Consumer Goods

According to Munroe (2013), pricing a product or service is one of the vital decisions

management makes. Pricing has been viewed as the major pressure point for managerial decision

making hence its importance. Munroe examined the environmental pressures that allowed for an

increased pressure on the importance of pricing. The importance of pricing can be examined with

faster technological progress, proliferation of new products, increased demand for service,

increased global competition, the changing legal environment, and economic uncertainty.

Tax Reform for Acceleration and Inclusion Act

According to Omar (2013), stated that Taxation is nonetheless subject to established

limitations, such as those inherent in the power itself or mandated by the constitutional precepts.

The Senate passed Senate Bill 1592, the Tax Reform for Acceleration and Inclusion (TRAIN

Law), six months after its counterpart House Bill 5636 was approved by the House of

Representatives last May (Manila Bulletin, Fred M. Lobo December 5,2017). Taxation is the

power by which the sovereign, thru its legislature, raises revenue to support the necessary

expenditures of the government.

Middle class and the tax reform law

According to (Miranda, 2018) the Tax Reform for Acceleration and Inclusion (TRAIN

Law) was said to be designed to improve the number of middle class population. In fact, even

39
bringing it to the upper middle class level, with the TRAIN Law providing tax cuts for middle

class families, the money what will go to taxes will be freed up in the system through increase

consumption of goods, investment in their children's college education or purchase of necessary

personal items such as appliances or even a second car for their wives. Uniformity of Taxation

means that all the Taxable persons or property of the same class shall be taxed at the uniform or

same rate. There is uniformity in taxation when the tax operates with the same force and effect

on this subject wherever found.

According to Mara-Mara (2018), President Duterte on December 19, 2017 signed into

law the Tax Reformation for Acceleration and Inclusion (Train) bill, the first tax reform package,

for a fairer and simpler tax system for the Filipinos, allowing it to take effect starting January 1,

2018. While we celebrated the New Year and were excited to start with a clean slate, we were

taking the TRAIN law with us. Tax exemption includes the mandated 13th month bonus and other

bonuses. This means every employee can now take home more than they did the previous years.

But since everything is a give-and-take process, some goods will be priced higher from now on.

TRAIN law burdens majority of Filipino families, say study by ASIAN JOURNAL

PRESS (2018), a recent study conducted by the IBON Foundation concluded on Thursday,

October 4, that the first package of the Tax Reform for Acceleration and Inclusion (TRAIN) law

burdens the poorest 17.2 million Filipinos nationwide. The said non-stock and non-profit

organization found out that 76 percent or three out of four Filipino families are struggling to bear

oil and other consumption taxes without the benefit of receiving compensatory personal income

tax cuts. “The poor and middle class, even those few with gains from personal income tax cuts,

will suffer cuts in their standard of living unlike the rich who will easily be able to maintain their

lifestyles,” IBON Foundation said as reported by CNN Philippines. This goes against the claim

39
of the Department of Finance (DOF) stating that the tax reform is not “anti-poor.” The country’s

finance department claimed that the top 10 percent of richest households consume as much fuel

as the poorest 80 percent combined which is at about 51 percent. In order to lessen the harm that

TRAIN law is causing, several lawmakers have looked into the cancellation of some provisions

in the tax reform program especially those on fuel and oil. However, President Rodrigo Duterte

does not want to stop TRAIN as he does not believe that the tax reform law is responsible for the

price surges.

Synthesis

The perspectives presented by the literatures and research studies provided this researcher

with valuable insights into the impact of TRAIN Law to pricing strategy of Small-to-Medium

Enterprises. Several studies and literatures have shown a positive relationship and effects

between TRAIN Law to pricing strategy of SMEs.

Based on the information’s that we've gathered, both Mara-Mara (2018) and Omar (2013)

stated that even though some of our goods priced high, implementing TRAIN Law still gave a lot

of benefits not only in employees but also in our government like 13th month pay and other

benefits more than they've received from previous years and also taxation helps to increase the

revenue to support expenditures of the government. In addition, according to Philippine Daily

Inquirer (2018) indicated that the impact of having new taxes will be minimal, moderate,

manageable and temporary only. Technically, rich people are more affected than the poor one.

Furthermore, in Diokno's statement in (2018), with the implementation of the said law, ordinary

citizens, employees, employers, the self-employed, even the rich and poor were all affected.

However, Jessica Bartolome (2018) concluded that because of the TRAIN Law, the value of the

39
peso becomes lower, so that people can buy products and services for the same amount and

because of that situation, SMEs must think and use effective pricing strategy to attract

consumers.

Finally, the review of related literature and studies determined the factors and will give

reinforcement of information in able to the enrich the analysis that can point clearly the direction

of the study.

Chapter 3

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 RESEARCH METHODOLOGY

This chapter is consist of the research method to be used, the respondents, the description

of the respondents, the research instrument to be utilized, the data gathering procedure, the data

processing procedure, and the statistical treatment of the data.

Research Design

Purposive research design was used for the purpose of the study. This research design

was considered appropriate because it was suitable in providing a description of the impact of

TRAIN law on Pricing Strategy of Small-to-Medium Enterprises (SMEs).

According to Arikunto (2010:183), purposive sampling is the process of

selecting sample by taking subject that is not based on the level or area, but it is taken based on

the specific purpose.

Population and Sample

The population of this study basically refers to the same study we choose. The total

sample of study is 120 respondents. The respondents will be asked about the impact of TRAIN

Law to the pricing strategy of Small-to-Medium Enterprises (SMEs)

Description of the Respondents

39
 A total of 120 Respondents of selected Small-to-Medium Enterprises (SMEs) employees

within San Pedro, Laguna. They are described according to their demographic profile such as

Ownership and Nature of their business. All of our respondents covered of TRAIN law so that

their have an idea about on our topic which is the impact of TRAIN law on Pricing Strategy of

Small-to-Medium Enterprises (SMEs).

Research Instrument

The researchers will be using a researcher-made questionnaire checklist to gather the data

that are needed. The design of the questionnaire was based on the researchers’ literatures,

studies, and readings that are proportional to the study. For the preparation of the questionnaire,

statements that are describing the situations pertaining were toned down to orient the knowledge

preparedness of the respondents. The questionnaire included variety of questions that will relate

to the study itself. The survey sheet asked the respondents to check the possible impact of

TRAIN law on Pricing Strategy of Small-to-Medium Enterprises (SMEs).

Data Gathering and Procedure

The researcher will secure permission from the SMEs to conduct the study in the

owner/manager of the store. After the admin approves the permit, the researcher will use a

random sampling technique and conduct the study following the procedure below:

Procedure

The following step-by-step procedures will be done strictly by the researcher:

1. The researchers will choose a suitable location and answer by the employees/owner on

each SMEs.

39
 2. The respondents will be assigned to answer the questionnaire that will be given to them

by putting a check as their response.

3. After the respondents are done with answering the questionnaire, the researchers will

collect the questionnaires and will start to tally the respondents’ responses according to

their answers.

Statistical Treatment of Data

1. The frequency and percentage distribution to describe the profile of the

respondents. The formula of the percentage is:

f
P= ×100
n

Where: P = Percentage

F= Frequency

N= Total number of respondents

1. In determining the impact of TRAIN Law to pricing strategies of Small-to-Medium

Enterprises (SMEs) in San Pedro Laguna, the Likert scale will be used. It used four-point

scale; each point corresponding a Likert term

Point Scale Verbal Interpretation

4 3.25-4.00 Strongly Agree
3 2.50-3.24 Agree
2 1.75-2.49 Disagree
1 1.00-1.74 Strongly Disagree

39
2. One way ANOVA assumes that each group comes from an approximately normal

distribution and that the variability within the groups is roughly constant. The factors are

arranged so that experiments are columns and subjects are rows, this is how you must

enter your data in the Stats Direct workbook. The overall F test is fairly robust to small

deviations from these assumptions but you could use the Kruskal-Wallis test as an

alternative to one way ANOVA if there was any doubt.

Numerically, one way ANOVA is a generalization of the two sample t test.

The F statistic compares the variability between the groups to the variability within the

groups:

where F is the variance ratio for the overall test, MST is the mean square due to

treatments/groups (between groups), MSE is the mean square due to error (within groups,

residual mean square), Yij is an observation, Ti is a group total, G is the grand total of all

observations, ni is the number in group i and n is the total number of observations.

CHAPTER 4

PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

39
 This chapter presents the data gathered, the results of statistical analysis done and

interpretation of findings. These are presented in tables following the sequence of the specific

research regarding the impact of TRAIN Law to pricing strategy of Small-to-Medium

Enterprises (SMEs).

Presentation of Data

The data gathered were presented, analyzed and interpreted. A total of one hundred

twenty (120) questionnaires distributed to SMEs owners/managers in San Pedro, Laguna. All

distributed questionnaires were filled within the month of September and October in 2019 and

returned to the researchers.

The first item of the study focused on the Age of Business, Classification of their

business, Business name and Job title of the respondents in the selected business, the barangay

where there store located within San Pedro City, Laguna

60
50
40
30
20
10
0
1-3 years 4-6 years 7 years above

Figure 2. The age of business

Figure 2 shows the bar chart on the age of business in which 55 respondents with 45.83%

responded that they had been in business between 1 to 3 years, while the 43 respondents with

39
35.83% responded that they had been in business between 4 to 6 years, while the 22 respondents

with 18.33% responded that they had more than 7 years in business.

Category of Respondents Number of respondents Percentage (%)

Small Enterprises 100 83.33%

Medium Enterprises 20 16.67%
Total 120 100%

Table 1. Category of respondents

As presented in Table 1, 100 of our respondents are part of small enterprises with a

percentage of 83.33% and the 20 are part of medium enterprises with a percentage of 16.67%.

Classification of business Number of Respondents Percentage (%)

Eatery/Canteen/Carinderia 50 41.66%
Fruit Stand 20 16.67%
Bakery Shop 20 16.67%
Sari-Sari Store 20 16.67%
LPG Retailer 10 8.33%
Total 120 100%

Table 2. Classification of business

As presented in table 2, 50 of our respondents with 41.66% responded that their business

are eatery/canteen/carinderia, while 20 of our respondents with 16.67% responded that their

business is fruit stand, while 20 of our respondents with 16.67% responded that their business is

baker shop, while 20 of our respondents with 16.67% responded that their business is sari-sari

store. The last one is the gasoline shop/station, 10 of our respondents with a percentage of 8.33 is

the owner/manager of this business.

39
 50
45
40
35
30
25
20 SMEs
15
10
5
0
Landayan San Antonio Pacita Nueva Cuyab San Vicente

Figure 3. Location of the respondents

As presented in figure 3, 45 of our respondents with 37.5% responded that their business

are located in Nueva, while 25 of our respondents with 20.83% responded that their business are

located in Pacita, while 15 of our respondents with 12.5% responded that their business are

located in Landayan, while 15 of our respondents with 12.5% responded that their business is

located in San Vicente, while 10 of our respondents with 8.33% responded that their business is

located in Cuyab, The last one is located in San Antonio, 10 of our respondents with a

percentage of 8.33

Respondents’ perception Number of respondents Percentage (%)

Positive 35 29.17%
Negative 85 70.83%
Total 120 100%

Table 3. Respondents’ perception

As presented in table 3, most of our respondents had negative perception towards TRAIN
law because base on their answer, they reported that President Duterte must fix the TRAIN law.

Number of respondents Percentage (%)

Price decrease 0 0%
Price increase 76 63.33%
Price constant 44 36.67%
No response 0 0%

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 Total 120 100%

Table 4. Changing of price

One of the possible impacts of increasing tax is corresponding increase their prices,

which in turn affect their pricing strategy of SMEs. Table 4 presents perceived impact of the tax

increase in pricing of an enterprise

Pricing strategy Number of respondents Percentage (%)

Psychological Pricing 26 21.67%
Economy Pricing 60 50%
Penetration Pricing 10 8.33%
Competitive Pricing 24 20%
TOTAL 120 100%

Table 5. Pricing Strategies

As presented in table 5, 26 of our respondents used psychological pricing, and 60 of our

respondents used economy pricing, and 10 of our respondents used penetration pricing and

lastly, 24 of our respondents used competitive pricing.

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

39
 Figure 4. Paying high tax rates affect the performance of the SMEs.

80 of our respondents with (66.67%) agreed that paying high tax rates affect the

performance of the SMEs. whereas, 40 of persons with (33.33%) disagreed.

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

Figure 5. The tax reform law affects the profits of their business.

Of the 120 respondents, 82 persons equivalent to (68.33%) agreed that leads and 38

persons disagree with (31.67%) showing that the tax reform law affects the profits of their

business.

70

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

Figure 6: the tax reform law affects the pricing strategy of SMEs

39
 The graph above specifies that most of the respondents having the percentage of (70.83%)

a total of 85 agreed that the tax reform law affects the pricing strategy of SMEs, whereas, 35

persons with (29.17%) disagreed.

70

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

Figure 7: the TRAIN Law affects the flow of their business.

A total of 120 respondents, 92 respondents’ equivalent to (76.67%) agreed that leads. while

28 respondents’ equivalent to (23.33%) that disagreed, showing that the TRAIN Law affects the

flow of their business.

45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

39
 Figure 8. the TRAIN Law gives bad effects on SMEs

The graph above specifies that most of the respondents having the percentage of (65%) a

total of 78 agreed that the TRAIN Law gives bad effects on SMEs and 42 respondents with

(35%) are disagreed.

70

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

Figure 9. SMEs still get benefits from the Tax Reform Programs

Within the 120 respondents, 63 of our respondents’ equivalent to (52.5%) agreed on the question

number 6 which states that SMEs still get benefits from the Tax Reform Programs. Followed by

57 our respondents’ equivalent to (47.5%) disagreed.

50
45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

39
 Figure 10. Their product price increases when the TRAIN Law was implemented

Within the 120 respondents, 76 of our respondents’ equivalent to (63.33%) agreed on the

question number 7 which states that their product price increases when the TRAIN Law was

implemented. whereas, (36.67%) equivalent to 44 respondents are disagreed.

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

Figure 11. They found it difficult to start when tax increases

According to 120 respondents, 80 of them which equivalent to (66.67%) agreed that they

found it difficult to start when tax increases. whereas (33.33%) equivalent to 40 respondents

disagreed.

50
45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

39
 Figure 12. Keep their price despite of rising tax rates

According to 120 respondents, 63 of them which equivalent to (52.5%) disagreed that

they keep their price despite of rising tax rates. Followed by 47 persons equivalent to (47.5%)

agreed.

45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

Figure 13. The sales of their product decrease when there was a TRAIN Law

According to 120 respondents, 70 of them which equivalent to (58.33%) agreed that the

sales of their product decrease when there was a TRAIN Law. Followed by 50 of them which

equivalent to (41.67%) disagreed.

50
45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

39
 Figure 14. TRAIN Law is better for your business

Within the 120 respondents, 52 respondents equivalent to (58.33%) agreed on the

question number 11 which state that TRAIN Law is better for your business. whereas (56.67%)

equivalent to 68 respondents are disagreed.

45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

Figure 15. Product stocks decrease when the TRAIN Law was implemented

Of the 120 respondents, 63 respondents equivalent to (52.5%) agreed and 57 respondents

equivalent to (47.5%) disagreed, showing that their product stocks decrease when the TRAIN

Law was implemented.

39
 40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

Figure 16. Implementing TRAIN Law has a massive impact in the popularity and sales of their

products

Within the 120 respondents, 70 respondents equivalent to (58.33%) agreed on the

question number 13 which states that implementing TRAIN Law has a massive impact in the

popularity and sales of their products. whereas (41.67%) equivalent to 50 respondents are

disagreed.

50
45
40
35
30
25
20
15
10
5
0
Strongly Agree Agree Disagree Strongly Disagree

Figure 17. TRAIN Law decrease the gross sales of their business

39
 Within the 120 respondents, 78 respondents equivalent to (65%) agreed on the question

number 14 which states implementing TRAIN Law decrease the gross sales of their business.

whereas, 42 respondents equivalent to (35%) are disagreed.

60

50

40

30

20

10

0
Strongly Agree Agree Disagree Strongly Disagree

Figure 18. President Duterte must fix the TRAIN Law

Within the 120 respondents, 85 respondents equivalent to (70.83%) agreed on the question

number 15 which states that Pres. Duterte must fix the TRAIN Law. Whereas, (29.17%)

equivalent to 35 respondents are disagreed.

39
 The researchers conclude that the computed F is 19.57191 is greater than the F critic

2.769431 of LPG Retailer. Therefore, we reject the null hypothesis that there is no significant

effect of TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

The researchers conclude that the computed F is 3.091919 is greater than the F critic

2.769431 of Bakery shop. Therefore, we reject the null hypothesis that there is no significant

effect of TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

The researchers conclude that the computed F is 32.55597 is greater than the F critic

2.769431 of Eatery/Carinderia/Canteen. Therefore, we reject the null hypothesis that there is no

significant effect of TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

The researchers conclude that the computed F is 4.410838 is greater than the F critic

2.769431 of Sari-Sari store. Therefore, we reject the null hypothesis that there is no significant

effect of TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

The researchers conclude that the computed F is 1.52657 is less than the F critic 2.769431

of Rice store. Therefore, we accept the null hypothesis that there is no significant effect of

TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

39
 CHAPTER 5
SUMMARY, CONCLUSION AND RECOMMENDATION

Generalizations and other interferences would be seen on the conclusion while the

recommendations of the researchers to the beneficiaries of this study can also be seen on this

chapter. Generally, this chapter aims to cover-up the end result of the study.

Summary

1. A total of 80 persons with (66.67%) agreed that paying high tax rates affect the performance

of the SMEs. whereas, 40 of persons with (33.33) disagreed.

2. Of the 120 respondents, 82 persons equivalent to (68.33%) agreed that leads and 38 persons

disagree with (31.67%) showing that the tax reform law affects the profits of their business

3. The graph above specifies that most of the respondents having the percentage of (70.83%) a

total of 85 agreed that the tax reform law affects the pricing strategy of SMEs, whereas,

35persons with (29.17%) disagreed.

4. A total of 120 respondents, 92 respondents’ equivalent to (76.67%) agreed that leads. while 28

respondents’ equivalent to (23.33%) that disagreed, showing that the TRAIN Law affects the

flow of their business.

5. The graph above specifies that most of the respondents having the percentage of (65%) a total

of 78 agreed that the TRAIN Law gives bad effects on SMEs and 42 respondents with (35%) are

disagreed.

39
6. Within the 120 respondents, 63 of our respondents’ equivalent to (52.5%) agreed on the

question number 6 which states that SMEs still get benefits from the Tax Reform Programs.

Followed by 57 our respondents’ equivalent to (47.5%) disagreed.

7. Within the 120 respondents, 76 of our respondents’ equivalent to (63.33%) agreed on the

question number 7 which states that their product price increases when the TRAIN Law was

implemented. whereas, (36.67%) equivalent to 44 respondents are disagreed.

8. According to 120 respondents, 80 of them which equivalent to (66.67%) agreed that they

found it difficult to start when tax increases. whereas (33.33%) equivalent to 40 respondents

disagreed.

9. According to 120 respondents, 63 of them which equivalent to (52.5%) disagreed that they

keep their price despite of rising tax rates. Followed by 47 persons equivalent to (47.4%) agreed.

10. According to 120 respondents, 70 of them which equivalent to (58.33%) agreed that the sales

of their product decrease when there was a TRAIN Law. Followed by 50 of them which

equivalent to (41.67%) disagreed.

11. Within the 120 respondents, 52 respondents equivalent to (58.33%) agreed on the question

number 11 which state that TRAIN Law is better for your business. whereas (56.67%) equivalent

to 68 respondents are disagreed.

12. Of the 120 respondents, 63respondents equivalent to (52.5%) agreed and 57respondents

equivalent to (47.5%) disagreed, showing that their product stocks decrease when the TRAIN

Law was implemented.

39
13. Within the 120 respondents, 70 respondents equivalent to (58.33%) agreed on the question

number 13 which states that implementing TRAIN Law has a massive impact in the popularity

and sales of their products. whereas (41.67%) equivalent to 50 respondents are disagreed.

14. Within the 120 respondents, 78 respondents equivalent to (65%) agreed on the question

number 14 which states implementing TRAIN Law decrease the gross sales of their business.

whereas, 42 respondents equivalent to (35%) are disagreed.

15. Within the 120 respondents, 85 respondents equivalent to (70.83%) agreed on the question

number 15 which states that Pres. Duterte must fix the TRAIN Law. whereas, (29.17%)

equivalent to 35 respondents are disagreed.

Conclusion

1. The small-to-medium enterprises as it is observed by the researchers, they increase the price of

their product that they sell for them to pay taxes, because in that way they can easily save money

and pay the taxes on time.

2. The small-to-medium enterprises as it is observed by the researchers, they pointed out that

taxes tended to reduce sales and therefore profits. Majority of the respondents reported that

businesses would grow if the tax-policy is aligned carefully to SMEs’ needs. They claimed that

taxes are high and adversely affect their competitive advantage.

3. Eatery/Canteen/Carinderia, Fruit Stand, Bakery Shop, Sari-Sari Store and LPG Retailer are the

respondents of this study. We used them for us to have information for this study.

39
4. The researchers conclude that the computed F is 19.57191 is greater than the F critic 2.769431

of LPG Retailer. Therefore, we reject the null hypothesis that there is no significant effect of

TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

5. The researchers conclude that the computed F is 3.091919 is greater than the F critic 2.769431

of Bakery shop. Therefore, we reject the null hypothesis that there is no significant effect of

TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

6. The researchers conclude that the computed F is 32.55597 is greater than the F critic 2.769431

of Eatery/Carinderia/Canteen. Therefore, we reject the null hypothesis that there is no significant

effect of TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

7. The researchers conclude that the computed F is 4.410838 is greater than the F critic 2.769431

of Sari-Sari store. Therefore, we reject the null hypothesis that there is no significant effect of

TRAIN Law to the Pricing strategy of Small-to-Medium Enterprises.

8. The researchers conclude that the computed F is1.52657is less than the F critic 2.769431of Fruit

stand. Therefore, we accept the null hypothesis that there is no significant effect of TRAIN Law

to the Pricing strategy of Small-to-Medium Enterprises.

Recommendation

The researchers highly recommend that the future researchers seek further towards

improving this research study and come up with a much complex way of address the limitations

and unanswered aspects of our research problem. To improve and to gather more information

and data, you can address the same research problem in a different setting, context, and location.

Find and study more theories and papers that related to our study and in your study as well. Seek

39
more information and it would be helpful if you capture qualitatively the experiences and

perspectives of other researchers and respondents who had participate in study about the impact

of TRAIN Law in pricing strategy of SMEs such as ours.

39
References

Andrea (2015), Chapter 2, Penetration Pricing Strategy and Performance of Small and Medium

Enterprises in Kenya

Besanko, Dranove, Shanley, & Schaefer, 2012, Chapter 2, Pricing strategies and levels and their

impact on corporate profitability

Diokno (2018), Chapter 2, the Tax Reform for Acceleration and Inclusion (TRAIN) Act

Drury (2014), Chapter 2, Pricing strategies and levels and their impact on corporate profitability

Egbunike (2013), Chapter 2, the effectiveness of pricing policy and profit planning in Nigerian

organization A performance appraisal of selected manufacturing firm.

Ehmke et al (2015), (Bearden et al 2014), Chapter 2, A Review of the Effect of Pricing Strategies

on The Purchase of Consumer Goods

Hinterhuber and Bertini (2011), Chapter 1, Profiting When Customers Choose Value Over Price

(Kasekende and Opondo, 2003), Chapter 1, FACTORS INFLUENCING PERFORMANCE OF

SMALL AND MEDIUM ENTERPRISE TEA FIRMS IN MOMBASA COUNTY,

KENYA.

Munroe (2013), Chapter 2, a review of the Effect of pricing strategies on the purchase of

Consumer Goods

Miranda, (2018), Chapter 2, Middle class and the tax reform law

Omar (2013), Chapter 2, Tax Reform for Acceleration and Inclusion Act

39
Privacy Impact Assessment (PIA) (2018), Chapter 2, SMEs get big tax breaks under TRAIN

Rosa et al (2014), Chapter 2, An Analysis of the Effect on Pricing Strategy for Effective

Marketing plan of a product.

Tucker and Lean (2003), Chapter 1, Challenges Facing Micro and Small Enterprises in

Accessing Credit Facilities in KangemiHarambee Market in Nairobi City County, Kenya

39
 Appendix A

We, the students of SPCBA conducting a research entitled “The Impact of TRAIN law on Pricing

Strategy of Small-to-Medium Enterprises (SMEs)”. We promise that all information that we will receive

will be treated as strictly confidential and they will be used purely and for school purposes only.

Kindly fill up the Demographic Profile listed below:

Classification of Business:_____________ Business Name:______________

Job Title:___________________

Small Enterprise Medium Enterprise

Year of Business Existence: 1-3 years 4-6 years 7 years and above

Instruction: Please indicate your level of agreement or disagreement with each of these statements

regarding the impact of TRAIN law on Pricing Strategy of Small-to-Medium Enterprises (SMEs). Put

“✔”mark in the box of your answer.

Strongly Agree Disagree Strongly

Agree (Pagsang- (Hindi Disagree
QUESTION (Lubos na ayon) Pagsang- (Lubos na
(Tanong) Pagsang- ayon) hindi
ayon) pagsang-
ayon)
Paying high tax rates affect the budget of the
SMEs
(Ang pagbabayad ng mataas na mga rate ng
buwis ay nakakaapekto sa badyet ng mga SMEs)
The tax reform law affect the profits of your
business
(Ang batas sa reporma sa buwis ay nakaka-apekto
sa tubo ng inyong negosyo)
The tax reform law affects the pricing strategy of
SMEs
(Ang batas sa reporma sa buwis ay nakakaapekto
sa diskarte o stratehiya sa pagpepresyo ng mga
SME)

39
TRAIN Law affects the flow of your business
(AngTRAIN law ay nakakaapekto sa
pagpapatakbo ng iyong negosyo)
TRAIN law gives bad effects on SMEs
(Ang TRAIN law ay nagbibigay ng masamang
epekto sa mga SME)
SMEs still get benefits from tax reform programs?
(Ang mga SME ay nakakakuha pa rin ng
benepisyo mula sa mga programa sa reporma sa
buwis)
Your product price increase when the TRAIN law
was implemented
(Tumaas ang presyo ng inyong produkto nung
naitupad ang TRAIN law)
Did you find it difficult to start when tax increase?
(Nahirapan ba kayo sa simula nung nagkaroon ng
pagtaas ng buwis)
Do you keep the price of your product despite of
rising tax rates?
(Pinanatili nyo ba ang presyo ng inyong produkto
kahit na tumaas angbayad ng tax)
Did the sales of your product decrease when there
was a TRAIN law?
(Ang pagkakaroon ng TRAIN Law ay
nakapagpababa sa benta ng inyong produkto)
TRAIN law is better for your business
(Mas nakabuti sa inyong negosyo ang TRAIN law)
Your product stocks decrease when the TRAIN
law implemented
(Bumaba ang iyong stock ng produkto nang
pinatupad ang batas ng TRAIN)
Implementing TRAIN Law has a massive impact
in the popularity and sales of the products
(Ang pagpapatupad ng TRAIN Law ay may
malaking epekto sa katanyagan at benta ng mga
produkto)
Implementing TRAIN Law decrease the gross
sales of the business/enterprise
(Ang pagpapatupad ng TRAIN Law ay
napapababa ang kabuuang benta ng produkto )
Pres.Duterte must fix the TRAIN law
(Dapat ayusin ni Panggulo Duterte ang batas ng
TRAIN)
Appendix B

LPG RETAILERS

39
 STRONGLY STRONGLY
QUESTION AGREE AGREE DISAGREE DISAGREE
1 4 5 0 1
2 3 5 1 1
3 1 7 2 0
4 4 5 1 0
5 1 7 1 1
6 1 6 2 1
7 2 6 2 0
8 3 3 3 1
9 1 6 3 0
10 1 2 5 2
11 0 6 4 0
12 3 1 5 1
13 5 4 1 0
14 5 3 1 1
15 3 4 3 0
TOTAL 37 70 34 9
MEAN 2.46667 4.66667 2.26667 0.6
VAR 2.55238 3.2381 2.35238 0.4

Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
STRONGLY AGREE 15 37 2.466667 2.552381
AGREE 15 70 4.666667 3.238095
DISAGREE 15 34 2.266667 2.352381
STRONGLY DISAGREE 15 9 0.6 0.4

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 125.4 3 41.8 19.57191 8.38E-09 2.769431
Within Groups 119.6 56 2.135714
Total 245 59        

BAKERY SHOP
STRONGLY STRONGLY
QUESTION AGREE AGREE DISAGREE DISAGREE

39
 1 5 8 1 6
2 5 8 2 5
3 5 6 1 7
4 6 7 4 3
5 8 7 3 1
6 7 2 6 5
7 7 7 5 1
8 6 8 5 1
9 2 6 6 6
10 7 4 4 5
11 3 4 7 6
12 6 2 4 8
13 5 5 5 5
14 6 6 5 3
15 6 8 5 1
TOTAL 84 88 63 63
MEAN 5.6 5.866667 4.2 4.2
VAR 2.4 4.266667 3.171429 5.6

Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
STRONGLY AGREE 15 84 5.6 2.4
AGREE 15 88 5.866667 4.266667
DISAGREE 15 63 4.2 3.171429
STRONGLY DISAGREE 15 63 4.2 5.6

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 35.8 3 11.93333 3.091919 0.034199 2.769431
Within Groups 216.1333 56 3.859524

Total 251.9333 59        

EATERY/CARINDERIA/CANTEEN
QUESTION STRONGLY AGREE DISAGREE STRONGLY

39
 AGREE DISAGREE
1 9 30 7 4
2 14 30 5 1
3 11 31 6 2
4 11 35 1 3
5 15 27 4 4
6 11 22 9 8
7 17 26 4 3
8 18 19 7 6
9 10 17 10 4
10 8 26 10 6
11 11 8 19 12
12 7 21 15 7
13 13 14 12 11
14 12 15 15 8
15 17 19 8 6
TOTAL 184 340 132 85
MEAN 12.26667 22.66667 8.8 5.666667
VAR 11.20952 55.80952 23.6 9.952381

Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
STRONGLY AGREE 15 184 12.26667 11.20952
AGREE 15 340 22.66667 55.80952
DISAGREE 15 132 8.8 23.6
STRONGLY DISAGREE 15 85 5.666667 9.952381

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 2455.65 3 818.55 32.55597 2.59E-12 2.769431
Within Groups 1408 56 25.14286

Total 3863.65 59        

39
 SARI-SARI STORE
STRONGLY STRONGLY
QUESTION AGREE AGREE DISAGREE DISAGREE
1 6 3 6 5
2 7 5 6 2
3 4 12 0 4
4 5 9 3 3
5 2 3 13 2
6 1 5 8 6
7 2 4 8 6
8 4 9 7 0
9 5 7 2 6
10 3 8 7 2
11 4 5 6 5
12 2 8 4 6
13 8 6 4 2
14 4 9 4 3
15 6 9 1 4
TOTAL 63 102 79 56
MEAN 4.2 6.8 5.266667 3.733333
VAR 4.028571 6.885714 10.6381 3.638095
Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
STRONGLY AGREE 15 63 4.2 4.028571
AGREE 15 102 6.8 6.885714
DISAGREE 15 79 5.266667 10.6381
STRONGLY DISAGREE 15 56 3.733333 3.638095

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 83.33333 3 27.77778 4.410838 0.007445 2.769431

39
Within Groups 352.6667 56 6.297619

Total 436 59        

RICE STORE
STRONGLY DISAGRE STRONGLY
QUESTION AGREE AGREE E DISAGREE
1 6 4 6 4
2 3 2 6 9
3 3 5 4 8
4 4 6 6 4
5 7 1 5 7
6 3 5 5 7
7 2 3 7 8
8 1 9 4 6
9 1 2 15 2
10 3 8 6 3
11 4 7 4 5
12 5 8 6 1
13 3 7 6 4
14 8 10 1 1
15 5 8 3 4
TOTAL 58 85 84 73
MEAN 3.866667 5.666667 5.6 4.866667
VAR 4.12381 7.809524 9.114286 6.552381

Anova: Single Factor

SUMMARY
Groups Count Sum Average Variance
STRONGLY
AGREE 15 58 3.866667 4.12381
AGREE 15 85 5.666667 7.809524
DISAGREE 15 84 5.6 9.114286
STRONGLY 15 73 4.866667 6.552381

39
DISAGREE

ANOVA
Source of Variation SS df MS F P-value F crit
Between Groups 31.6 3 10.53333 1.52657 0.21763 2.769431
Within Groups 386.4 56 6.9

Total 418 59        

39