Professional Documents
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MANUFACTURING COMPANIES
A Mini-thesis
Presented to the
Basic Education
In Partial Fulfillment
By
FERNANDO, RYAN C.
MONTALBO, KLOUIE C.
March 2018
i
APPROVAL SHEET
Accepted and approved in partial fulfillment of the requirement s for RESEARCH 03-B.
ii
ACKNOWLEDGMENT
The accomplishment of this study was only made possible through our Almighty
Father, who has blessed us with learning experiences and provided us with wisdom,
We express our deep gratitude towards the following significant contributors as well:
Our family, most especially to our parents: Mr. and Mrs. Danuco, Mr. and Mrs.
Esgana, Mr. and Mrs. Fernando, Mr. and Mrs. Montalbo, Mr. and Mrs. Resuera for their
Our classmates, batchmates, and friends, whom we express gratitude for their
Our school, the University of San Carlos, and the Accountancy, Business, and
Management (ABM) strand faculty members for imparting the knowledge we have
acquired during our Senior High School years and for giving us the opportunity to apply
Our panelists, Mr. Joemel D. Dakay, Ms. Vanessa P. Delos Santos, Mr. Kenneth
Repunte, Ms. Quennie Ypanto, Mr. Christopher Bacungan, and Ms. Joyce Natalie Yang,
for giving comments and suggestions that helped us improve our research paper;
Our research teacher, Mr. Don Ali P. Jureidini, for guiding and supporting us
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Our respondents for giving us their time and effort for answering genuinely and
for providing us, not just the needed information for this project, but also advice and life
And lastly, to Mr. Michael Mancio and Ms. Emmy Torreon for always welcoming
us into their office, and helping us by imparting with us the information necessary for the
Special thanks go to Mr. Larry Page and Mr. Sergrey Bin, founders of Google,
FERNANDO, RYAN C.
MONTALBO, KLOUIE C.
iv
ABSTRACT
The study evaluated the effects of production need, distance, and price discounts
on the bulk purchase behavior for carton sheets by the customers of Ma-Vill Recycling
Center Corporation. Bulk purchase behavior is measured by the amount of purchase
price. The relationship between the three independent variables of the study and bulk
purchase price was studied.
Review of related literature was made with the following topics; i) raw materials;
ii) bulk purchasing; iii) inventory systems; iv) production demands or needs; v) distance
of customer to supplier; and vi) price discounts. The theoretical framework utilized for
this study was the model for factors and criteria affecting purchase decision of
manufacturing companies made by Gao and Tang in their 2003 study: a multi-objective
model for purchasing of bulk raw materials of a large-scale manufacturing plant.
Data about the existing clients of Ma-Vill Recycling Center Corporation was
gathered by visiting the company and interviewing the operations manager and head
officer for customer relations of the company. The survey was performed on the existing
clients of Ma-Vill around Cebu City and Mandaue City, with the help of the agents of the
company. Data gathering method used was through personal interviews and
questionnaires.
The study revealed that productions needs and price discounts have a very strong
positive correlation with bulk purchase price (Pearson r = 0.8261, and r = 0.9606,
respectively). On the other hand, distance from the customer to its supplier was found to
have no correlation (r = -0.0933). Furthermore, among the three variables, production
need was the variable found to have the greatest impact on bulk purchase price.
The study concluded that production need or the number of carton sheets that a
company consumes for a specific period of time and price discounts have a favorable
effect on both bulk purchase price and purchase behavior of the customers of Ma-Vill
Corporation. Distance has little impact to purchase decisions in buying carton sheets in
bulk.
The study recommends pricing-related strategies for Ma-Vill Center Corporation,
which is the main beneficiary of the study. The strategies involve increasing selling price
for clients with high production need, expanding market size, sticking to original selling
price when bargained from distant clients, and offering price discounts to customers with
high purchasing power and to potential and new customers.
Keywords: Bulk Purchasing, Carton sheets, Production Need, Distance, Price Discounts,
Purchase Price
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TABLE OF CONTENTS
Page
TITLE PAGE i
APPROVAL SHEET ii
ACKNOWLEDGMENTS iii
ABSTRACT v
TABLE OF CONTENTS vi
LIST OF TABLES viii
LIST OF FIGURES ix
Chapter
1 INTRODUCTION
Rationale of the Study 1
Industry Analysis 2
THE PROBLEM
Statement of the Problem 12
Statement of Assumptions 13
Statement of Hypothesis 14
Significance of the Study 15
Scope and Limitation of the Study 16
DEFINITION OF TERMS 17
2 THEORETICAL BACKGROUND
Review of Related Literature 18
Theoretical Framework 45
Conceptual Framework 49
3 RESEARCH METHODOLOGY 50
Research Environment 51
Research Respondents 53
Research Instruments 54
Research Procedures
Gathering of Data 56
vi
Treatment of Data 57
Page
vii
LIST OF TABLES
viii
Table Title Page
LIST OF FIGURES
ix
Chapter 1
INTRODUCTION
Since the late 1960s, different purchasing issues of raw materials have been
management decision as well as an important competitive weapon (Reck & Long, 1988;
Browning et al., 1983; Anthony & Buffa, 1977). As suppliers and dealers of raw
materials like the Ma-Vill Corporation, it is indispensable to understand these issues and
and components accounts for a significant portion of the production and manufacturing
industry. (Gao & Tang, 2003). Raw materials not only mark the beginning of all
production and operation activities, but also is the major part, about 60-80% (Bender et
al., 1985), of the production cost for an enterprise. The question for manufacturers as to
how to make effective purchasing policies and for dealers of raw materials as to how to
develop effective pricing strategies has come to have many new characteristics in the
supply chains. (Virolainen, 1998; Gunasekaran, 1999; Jahnukainen and Lahti, 1999).
is limited competition in the supply of raw materials even though its demand is very high.
needs and purchasing issues of raw materials by manufacturing companies. Hence, there
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is a necessity for research and knowledge in this field of selling and buying of raw
materials.
have a greater influence on the prices of raw materials, and thus can also have higher
gains on the prices (Bowley, 1928). This study aims to capitalize on the favorable
demand, insubstantial competition, and pricing power on the supply of raw materials on
local and national markets. Since raw materials are always purchased in bulk, this
with carton sheets as the main example, by manufacturing companies, and formulating
suggestions and strategies for bulk-pricing based on their preferences. In this study, bulk
purchase behavior will be measured primarily in terms of the purchase price of the bulk
orders. The factors affecting bulk purchase price that are taken into account are
production need of a manufacturing firm, distance of buyer to the dealer, and bulk price
discounts.
This research intends to begin bridging the gap of understanding of the dealers
and market of carton sheet, which is a highly-demand raw material, in the local scene,
and to specifically help the chosen business, Ma-Vill Recycling Corporation, develop a
competitive edge on its local and national business operations. The current status,
customers, and capacity of the corporation will be assessed, as well as the pricing
methods being used. Effects of selected factors affecting bulk purchase price will be
examined. Lastly, effective pricing strategies, which can be immediately used and
strategically applied by the company, will be formulated based on the results of this
study.
2
3
Industry Analysis
The prevailing market structure of the industry being studied in our research is
oligopoly. Oligopoly is defined as a market structure in which there is few and limited
competition in such a way the sellers have significant power on the market factors
Table 1.1
Characteristics of an oligopolistic market structure
Characteristics Description
Profits There is profit maximization. Firms under oligopolistic
structure have abnormal profits in the long run and the high
barriers to entry that prevent small businesses from entering
the market mean these firms get excess profits.
Pricing Ability Oligopolistic sellers are price setters rather than price takers.
Competition The market is controlled by a few powerful sellers wherein
there is usually a market leader. Competition is very limited.
Entry and Exit There are high barriers to entry such as economies of scale,
complex technology, strategic actions by firms, government
licenses and regulations.
Products Products may be differentiated or homogeneous.
Non-Price Competition Competition under oligopolies tends to be on terms other than
price such as loyalty, marketing schemes, and advertisement.
Ma-Vill is one of the only few recycling companies situated here in Cebu and
Mandaue city making it qualified to have an oligopolistic market structure. There are
only three major companies situated within the city of Cebu or Mandaue that sells
recyclable raw materials such as carton sheets and plastic namely; Ma-Vill, the subject of
our study, Trash for Goods Center, and Codie’s Recycling Shop. Thus, the competition in
this industry only belongs to these three firms. Even the operations manager of Ma-Vill
Corporation, Mr. Michael Mancio, said in an interview that there is a high demand for
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their products and the competition in the industry is very limited (Personal
communication, December 23, 2017). Entry of new businesses to compete against these
firms is almost impossible since most of the customers and clients in the market are
already captured by one of these firms. Furthermore, Mr. Mancio said that their
customers value more the reliability of their supplier rather than the amount of selling
price they set. This is an example of a non-price competition happening in this industry.
Overall, all these traits mentioned qualify Ma-Vill Corporation as an oligopolistic firm.
The price of the carton sheets in Ma-Vill Corporation with single-sheet thickness
ranges from 5 to 10 pesos, and 10 to 15 pesos for cartons with double-sheet thickness.
The prices vary to the size of the carton sheets. Although the unit price of their carton
sheets is small, their materials are bought in bulk and they have a minimum order
quantity of 500 pieces. The freight charges are added depending on how far the customer
is and the mode of transportation. Ma-Vill has provided prices of its carton sheets similar
C. Market Share
oligopolistic market structure. This means that the recycling industry here in the
Philippines, specifically within Cebu City area, is composed of only a few firms.
Furthermore, this also suggests that Ma-Vill Recycling Corporation only has a few
competitors to consider. Trash for Goods Center and Codie’s Recycling Shop are two of
the few recycling firms in Mandaue City, Cebu which Ma-Vill competes with. As a result
of this oligopolistic structure wherein only a few firms dominate the industry, a medium
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to high concentration ratio is expected. Thus, Ma-Vill Recycling Corporation and other
recycling firms are expected to have an estimated market share ranging from 50 % - 80 %
in terms of sales volume. Although each firm differs in terms of their sales volume, they
share roughly the same high percentage of market share when computing for the
concentration ratio of the recycling industry. Being an oligopolistic business firm implies
that Ma-Vill Recycling Corporation, as well as its competitors (Trash for Goods Center
and Codie’s Recycling Shop), greatly influence the products and services provided in the
market. Since each firm already comprises a large part of the market share, this implies
that there is no true dominant firm in the industry. However, this type of market structure
still consists of leading brands, and one of this includes the Ma-Vill Recycling
Corporation which is considered to be one of the top competitors amongst the recycling
industry.
D. Product Differentiation
market structure since there are only few competitors under the recycling industry here in
Cebu. Some of its competitors include Trash for Goods Center and Codie’s Recycling
Shop, which are both recycling corporations located in Mandaue City, Cebu. Under this
case of Ma-Vill Recycling Corporation, the products in its industry are homogeneous.
This means that the carton sheets that are made by the corporation cannot be
distinguished from different suppliers. The carton sheets have essentially the same
physical characteristics and quality as the carton sheets offered by the other existing
recycling companies since these carton sheets undergo the same recycling process,
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regardless of the company. Thus, they can be easily substituted from one another since
Compared with its competitors, there may be slight differences in terms of the
physical properties of Ma-Vill’s carton sheets such as size and packaging. For instance,
Ma-Vill’s carton sheets may slightly differ in size compared with its competitors or that
Ma-Vill has its own logo which can be placed on its products. However, these small
changes are not enough to fully differentiate the products, especially in terms of purpose.
As a result, this homogeneous characteristic leaves the price of the product to be the most
distinguishable feature in the eyes of its customers. For the corporation, this implies that
in order for the clients to be able to know the difference between Ma-Vill and the other
firms, the business must utilize an attractive price for carton sheets and formulate
effective pricing strategies which is the main goal of this research study. Furthermore, as
price setters rather than price takers, oligopolistic firms such as Ma-Vill Recycling
Corporation could utilize their pricing power by establishing their own prices to a certain
extent strategically with the aid of effective pricing techniques and strategies. However, it
interdependence. This means that Ma-Vill’s profits do not only depend solely on its
pricing and sales policies, but also on the performance of the few dominating firms in the
recycling and manufacturing industry. Thus, Ma-Vill must also consider the reaction of
its fellow recycling companies before implementing important pricing changes in order to
maintain the balance within the market structure and to keep its place in the industry.
E. Barriers to Entry
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Considering that the Ma-Vill Corporation belongs to an oligopoly type of market
structure, promising businesses, who are interested in entering the industry due to its high
profits and increasing demand, are expected to encounter high barriers. These barriers
prevent entry of new firms in the market in order to limit competition and often increase
the profit earned by existing firms in the marketplace (Karakaya, 2002). These are the
barriers to entry:
One barrier to entry is the economies of scale. This refers to the decrease in
costs per unit due to the increased total output of the product. Ma-Vill is a big
business that caters to thousands order of its customers as well as its competitors.
Because of the huge total output of its products, the costs (e.g. electricity for
machineries) would decrease since the products were made all at once. This would
allow the incumbents to decrease their selling price per unit in order to attract and
In order to gain customers, new entrants would need to consider the proposed
price of its competitors. Due to the reason that they are still new with fewer
customers and orders, their total output production would be small, thus increasing
production costs. They would not be able to match their selling price with those of
the corporations since their production costs are higher and it would result in a loss.
Since 1982, Ma-Vill Corporation has already begun its operation. Through
those years, the corporation was and is still able to gain the loyalty of its customers
and entice potential customers. Putting this into consideration, a business interested
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in entering the market will likely have a hard time snatching the current customers of
the corporations nor gain new customers considering that compared to its
suppliers of carton sheets and other raw materials. This will put potential entrants in
a disadvantage since they will need to match with the amount of money that the
incumbents offer to the suppliers and their huge orders that would likely decrease the
supply of the suppliers. This would leave them with lack of resources necessary for
their operations. With the limited number of junk shops in Cebu, finding enough
High set-up costs deter initial market entry. Setting up a business that can
compete with the Ma-Vill Corporation and other incumbents could be costly. Just
from the place of operations, machineries for processing of carton sheets, supplies,
labor etc., a potential entrant would need a huge amount of capital in order to start its
operations. The business will also need to consider marketing and advertising costs
In the Philippines, there are various laws and regulations that must be
these include business registration, licenses, business permits, etc. that would
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complicate the entrance of the business to the industry and creates additional
expenses.
Switching costs are costs that consumers incur in switching from a supplier to
another. Before switching suppliers, consumers take these costs into consideration
and if these costs are high, it is less likely the consumer would. Otherwise, when the
switching costs are low, it also likely that consumers would switch suppliers when
other suppliers offer better benefits. High switching costs deter entrance because it it
discourages the consumers to avoid switching to a new firm because the of the
g.) Advertising
These are sunk costs that will force new entrants to match in order to compete
nothing. This is also necessary for creating an effective impact on the customers and
the local and national market, even in international countries, same goes to the other
recycling corporations. This kind of brand locks in existing customers and deters the
entrance of the new business. This would be quite an obstacle for potential entrants
since a strong brand is an enormous task and would take a long time to establish
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F. Factors that Change Demand
There are different market factors that change the demand of the consumers of the
products of Ma-Vill Corporation. There are factors that change demand in a short-time
and in a long-time. The first three factors listed that are those that are expected to change
demand over the short run are, while the last two factors listed are those that are expected
Over the short run, the price of related goods can be expected to change the
demand for the carton sheets sold by Ma-Vill Corporation. Some of these related
goods are honeycomb boards which are substitutes of carton sheets. If the price of
these substitutes were to decrease, consumers are expected to buy more of these
substitutes and fewer carton sheets. But if the price of these substitutes were to rise,
consumers are expected to buy more carton sheets and fewer honeycomb boards.
The more purchasing power, it is expected that buyers will be able to buy more
carton sheets thus increasing demand. But if their income were to decrease, they
If people expect the price of carton sheets to increase next week, they are
expected to buy more products before that certain week thus increasing demand.
But if it is expected that the price of the carton sheets would fall in the following
week, they are expected to buy less today and more in that week.
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d.) Number of Buyers
or international countries that are within the coverage of Ma-Vill, the demand for
carton sheets is expected to increase. But if buyers of the product were to decrease,
Carton sheets are raw materials used in making carton boxes which are used
in packaging. If a time were to come that consumers would prefer other types of
packaging (e.g. packaging using plastics) instead of carton boxes, the demand for
carton sheets are expected to decrease. On the other hand, if consumers were to
place more value in using carton boxes, the demand for carton sheets are expected
to increase. Since taste and preferences change over time, the demand is affected in
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THE PROBLEM
This study aims to investigate bulk purchasing behaviors for carton sheets of Ma-
Vill Corporation’s customers, which are manufacturing businesses in Cebu City and
Mandaue City, in order to develop pricing strategies for bulk orders of carton sheets.
1. What are the current pricing methods and strategies of Ma-Vill Corporation for
2. What are the effects on bulk purchase behavior in buying carton sheets of these
specific factors:
2.2 Distance
3. Which among the three factors has the greatest impact towards the amount that
manufacturing companies are willing to spend for bulk orders of carton sheets?
Corporation and other dealers of carton sheets regarding the bulk purchasing
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Statement of Assumptions
This study is anchored on the effects of production need, distance, and price
discounts on bulk purchase behavior for raw material, specifically carton sheets, of Ma-
Vill’s clients. Bulk purchase behavior is measured through the purchase price of bulk
orders. The researchers have a certain assumption for each of the factor being examined.
Distance will greatly impact the purchase price that companies will spend for
carton sheets. This is because the researchers believe that clients that are far from their
suppliers are more likely to consider buying a huge bulk of carton sheets during their
orders to lessen the costs and hassle each time they order and transport the goods. Lesser
orders would mean greater amount and purchase price for each order. In the case of
production need, the researchers believe that the higher the needs of carton sheets for
production, the less they would mind changes in a price increase of the materials. This
presumes that even though there will be slight to an average increase in the prices of
carton sheets, the manufacturers will still purchase the same amount of goods. Moreover,
they may also likely increase the quantity or amount that they would like to purchase in
relation to their demand. Lastly, for price discounts, the researchers assume that the
number of discounts offered would have a substantial effect to the number of carton
sheets to be purchased in bulk such that the higher the discount, the higher the number of
carton sheets in bulk the customers would purchase. Considering this statement, it is also
presumed that the common practice of selling goods in bulk is through tier-pricing. Tier
product by applying discounts based on the quantity ordered such that the higher the
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Statement of Hypotheses
produces raw materials, specifically for carton sheets. The business’ major consumers are
the relationship of production need, distance, and price discounts on bulk purchase
behavior, which is measured through the purchase price of bulk orders, in buying carton
H01. There is no significant relationship between production need and bulk purchase
H11. There is a significant relationship between production need and bulk purchase
H02. There is no significant relationship between price discounts and bulk purchase
H12. There is a significant relationship between price discounts and bulk purchase
H03. There is no significant relationship between the distance of client to the supplier
H13. There is a significant relationship between the distance of client to the supplier
H4. Distance from the client to the supplier has the greatest impact on the amount of
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Significance of the Study
Through this study, the researchers intend to contribute improvements in the field
the following sectors which are involved in the bulk selling and buying of carton sheets:
Ma-Vill Recycling Corporation. The results of this marketing proposal will mainly aid
the corporation in developing its pricing strategies for bulk orders of carton sheets. Since
the key objective of this study is to provide Ma-Vill with these strategies and methods,
once applied, this could help the business improve its understanding of the clients and
Manufacturing companies. Businesses which accept bulk orders could gain new
insights from this research paper. The findings of this study could also be utilized in
The Public and Consumers. This paper allows the general public to be made aware of
their purchasing behavior and how it affects the budget which they are willing to spend
for bulk orders of goods. Furthermore, since the majority of the clients of Ma-Vill
Corporation are various companies as well, they will also be mindful of how the bulk
purchasing price of carton sheets affects the total cost of goods to be sold in the market.
Future Researchers. This study could serve as a reliable reference to future researchers,
including students, who wish to explore and examine the related literature for this
marketing research.
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Scope and Limitation of the Study
This study is conducted to specifically gather data about the bulk purchasing
companies. The main basis of this study is the bulk pricing methods of Ma-Vill
Corporation. The subjects of this research are manufacturing companies that are based in
Cebu City and Mandaue City who purchase carton sheets from Ma-Vill Corporation for
This study would also like to note that the data gathering for the 10 clients of the Ma-Vill
Corporation will be done with the help of the agents of the Ma-Vill Corporation due to
confidentiality purposes.
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DEFINITION OF TERMS
Bulk Purchase Price. This refers to the price offered by the suppliers of raw materials
when customers buy in bulk, usually with a reduced or negotiated price through trade
discounts.
Bulk Purchase Behavior. This represents the preferences of consumers when they buy
materials or items in bulk. In this study, it is measured by the purchase price that clients
Carton sheets. In the case of this study, the basis for raw material is carton sheet, which
one of the main products of Ma-Vill Recycling Center Corporation. These are flat sheets
of carton that are used as raw materials in producing the packaging of products.
Production Need. This refers to the need of the manufacturing companies for raw
materials to be used and consumed for the production of finished products in a specific
span of time.
Distance. This refers to how far apart are the suppliers to their clients and vice versa.
Price Discount. Refers to the price incentive or the reduction of the purchase price by
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Chapter 2
THEORETICAL BACKGROUND
Research works, related studies, journal articles, and dissertations that give
knowledge, insights, and comprehension to the main concepts of this study, which are
raw materials, bulk purchasing, inventory systems, production need, store distance, and
price discounts, are reviewed and examined in order to establish a theoretical foundation.
This review of numerous related literature is subdivided into six sections, one for each
key concept of the study. Topics under each section are also identified in order to
scrutinize and organize properly the related studies. An overview of raw materials, bulk
purchasing, and inventory systems is given first. This is then followed by the in-depth
related studies of the three main variables of the study that affect bulk purchase behavior
Inventory is any stock of an item that a company keeps to be used for the
company’s output (Cheng, 1991), and raw materials are one of the major inventories of
any manufacturing corporation. Inventory is classified into three, namely: raw materials,
work-in-progress and finished products (Stevenson & Hojati, 2007). Raw materials are
mix or blend of different raw materials. Kingsman (2014) states that “the choice of which
materials to use in what quantities is complicated by the situation that the materials are
19
only partially substitutable for each other. This means that if a decision is made not to use
a particular material, this cannot be replaced directly by the same quality of an alternative
material.” To simplify the statement, it emphasizes that some alternative materials can’t
suffice the expected quality of a certain product that was made with the originally used
raw material. This serves as an advantage for all those companies who supply raw
The prices of most basic raw materials, such as copper, tin, sugar, cocoa, cereals,
vegetable oilseeds etc., are outside the control of any individual buyer or supplier
(Kingsman, 1986). They are determined by the interaction of all producers and sellers,
usually on a worldwide basis, via a continuing market. Prices are continually changing,
fluctuating up and down in an uncertain pattern. This applies both to materials for
industrial use and materials for human consumption. In the end, the price of the finished
product or raw materials really depends on how the consumers of such materials or
services react to it. If the consumers prefer to use a certain product which uses a specific
raw material for it to be made, then the companies can decide on increasing the price.
The cost of raw materials and component parts purchased from external vendors
is significant for most manufacturing firms (Weber, C. & Current, J. 1991).” For
example, the cost of components and parts purchased from external sources by large
manufacturers may total more than half of the revenues. There are two basic decisions
that need to be made by the buyers. First, the buyer must decide which vendor to choose
and must determine the appropriate order quantity for each vendor chosen. In that case,
20
manufacturing companies are more willing to buy raw materials from suppliers who offer
a much lower price than the other suppliers but without compromising the quality of the
material. Purchasing and deciding on which vendor to choose is driven by more than one
objective since the vendor selection is often an inherently multi-objective one. “For
selection process. In that article, quality was seen as being of extreme importance while
delivery, performance history, warranties and claim policies, production facilities and
capacity, price, technical capability and financial position were viewed as being of
considerable importance in the vendor selection process.” But frequently, the objectives
might come into conflict. For example, the vendor with the lowest price might not have
the best quality compared to a material produced by another vendor with a higher price.
That’s why there’s a need for a deep analysis before buying and selling raw materials.
When purchasing raw materials, delivery and warranty expenses aren’t the only
thing a manufacturing company should keep in mind. Most raw materials are
components and fashion goods (Yang, 2002). The company should also consider the
inventory costs like the holding cost and deterioration cost of each material. However, in
this research study, the suppliers and manufacturers that will be examined are those that
buy and sell carton sheets wherein deterioration is negligible. This is mainly because the
materials which almost neglects rate of deterioration like plastic and paper.
It’s a major objective for every firm to present a product that is of high quality
and at a minimum cost. In developing and manufacturing products, it’s very important to
21
put in mind the suitable set of raw materials to be used. At the development stage of a
new product, the firm must already decide on what starting raw materials are to be used,
together with the formulation in which to combine them, and the process conditions in
manufacturing the desired product (Muteki & MacGregor, 2008). Aside from the
selection of different raw materials due to its manufacturing purposes, the firm should
also consider these points in purchasing and deciding which raw materials are best for
their product. For example, new materials become readily available in the marketplace
that may offer a cost and quality advantage. In this case, the firm is encouraged to branch
out to different materials that may have a higher possibility to make their current product
Some raw materials, as mentioned before, have a high deteriorating rate, may no longer
be available and are discontinued due to seasonal factors. It’s important to take notes on
these factors before finalizing the content of each finished product because this will
surely affect the manufacturing process and the output of the product. Unless the firm has
cost, and maximize the purchase of raw resources, bulk-buying can be considered. Bulk
buy great volumes of materials to avail for big trade discounts. (Browning et al, 1983).
22
considered a vital aspect of supply chain management processes wherein huge
corporations thoroughly research, receive, understand, and practice the said interaction
In the March 2014 issue of Harvard Business Review, Simons defined “customer”
to be one of the most elastic terms in management theory. Furthermore, he explained that
one’s customers include all the people and entities who purchase a company’s products
and services; thus, supplying the company’s revenue. Ultimately, the list comprises any
On the other hand, suppliers are being defined by Oregon Laws (2015) as any
Suppliers and customers have the freedom to choose between retail or bulk
purchasing and selling. Traditionally, retailers are those suppliers whose role is to offer a
variety of product selections in small quantities only, through locations accessible to the
consumers (Varley, 2014). Contrary to this, bulk purchasing, in the context of this
Furthermore, a bulk purchase price is referred as the price offered by the suppliers of raw
materials when customers buy in bulk, usually with a reduced or negotiated price through
trade discounts.
23
There is a distinct difference between retail and bulk purchasing and selling
models. Bohi & Palmer (1996) stated that “In the retail model, where individual
consumer preferences are more likely to be served, the contract market is likely to work
more efficiently, the array of products and services will be greater, and technological
innovation will be faster. In the wholesale model, transaction costs are likely to be lower
and investment in transmission capacity is more likely to take place.” This suggests that
bulk buying indeed allows consumers to save more resources due to the lower cost of raw
Ultimately, this serves as a factor towards achieving customer loyalty (Younus et al.,
product or service wherein it has another aspect of a consumer purchasing a product after
he/she has thoroughly evaluated it. Various factors affect the intention of the customer
while he/she is selecting the product; however, the final decision depends on the
consumers’ intention with huge external factors (Keller, 2001). Furthermore, there are
various factors which could affect a customer’s purchase intention which includes the
brand name, product quality, price, packaging, and advertising as independent variables
on customers’ purchase intention. (Mirabi et. al., 2015) This proves that the price of raw
materials, most especially if bought by bulk, greatly affects the purchase intention of
consumers. Consequently, the researchers can help Ma-Vill in maintaining its already
stable brand name and product quality to ensure purchase intention of its customers.
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According to Applebaum (1981), there are several factors which affect the
amount of each item which the customer purchases. The most important ones include:
number of consumers intended for the product, item’s perishability, available facilities
and storage requirements, and most importantly are the purchasing power, ready cash,
unit of sale, and the item’s price. This implies that consumers have various considerations
before deciding to buy raw materials by retail or bulk, and this includes the number of
resources which they are willing to spend. The lower the price and the higher the
discount, the greater the probability for the buyer to purchase a certain product in bigger
quantities.
enough inventory stock is held by an organization to meet demand (Coleman, 2000; Jay
& Barry, 2006). Inventory is the availability of any resource used in business for its daily
operations. An inventory system is the set of standards and policies implemented in order
to control and monitor inventory levels of a business and determine what level should be
maintained, how large orders should be made and when stock should be replenished.
Inventory control is the supervision of the storage, supply, and accessibility of items to
stocking adequate number and kind of stocks (Claycomb, et al., 1999). Inventory
management refers to the total sum of those related activities essential for the
procurement, storage, sales, disposal or use of the material. Inventory managers have to
25
stock-up supplies when required and utilize available storage space resourcefully so that
accountability of each inventory assets. They have to meet the set budget and decide
upon what to order, how to order and when to order so that stock is available on time and
at the optimum cost (Benedict and Margeridis, 1999). Therefore, Inventory management
involves planning, organizing and controlling the flow of stocks and materials from their
initial purchase unit through internal operations to the service point through distribution
Inventory management is also about specifying the size and placement of stocked
multiple locations of a supply network to protect the regular and planned course of
production against the unwanted shortage of materials or goods. The scope of inventory
management also concerns the fine lines between replenishment lead time, carrying costs
visibility, future inventory price forecasting, physical inventory, available physical space
for inventory, quality management, replenishment, returns and defective goods and
leads to optimal inventory levels, which is an on-going process as the business needs shift
some future demand as defined by Ghosh & Kumar (2003) in their study. This definition
was also supported by Brag (2005) who stressed that inventory management has an
26
finance. He established that there are three motives for holding inventories, which are
when there is a need to hold stock to meet production and sales requirements. A business
might also decide to hold an additional amount of stocks of raw materials to cover the
possibility that it may have underestimated its future production and sales requirements
(Claycomb, et al., 1999). This represents a precautionary motive, which applies only
when future demand is uncertain. The speculative motive for holding inventory might
making abnormal profits. This causes the business to purchase a certain amount of raw
material on each transaction in order to supply the needs of the inventory system.
Therefore, the inventory systems which a business implements in daily operations affect
the quantity which the business purchase of raw materials but it does not affect the
controlled process (Gomes and Mentzer, 1988; Sadhwani et al., 1985). The fundamental
objective of JIT requires production and delivery of a specific product at the exact
quantity needed at the precise time required and conforming to quality specifications
every time while minimizing total supply chain cost by eliminating waste from the
delivery and production systems of supply chain members (Gomes and Mentzer, 1988).
Ideally, JIT is the ultimate time-based pull logistics strategy coupled with total supply
27
The fundamental objective of JIT is simply straightforward, but obtaining its
objective is extremely complex and difficult (Zipkin, 1991). “A specific product in the
communication (both internal and external to the firm) that allow the delivery of products
within narrow time windows with minimization of materials handling and storage
(Gomes and Mentzer, 1988). Unlike traditional distribution systems where parts and
products are pushed through the system at large quantities in order to avoid shortages, the
JIT system concentrates on avoiding the manufacture or delivery of parts and products
before they are needed (Selto et al., 1995). The JIT pull approach prohibits any work on
or movement of parts or products until the next process signals that it is ready to receive
them.
“At the precise time required”, this means that customers get exactly what they
want or need at the exact time they want it or need it. JIT is illustrative of a time
by taking time and inventory out of the entire system (Germain and DroÈge, 1995; Stalk
et al., 1992). The essence of JIT is the timely acquisition of materials, components, and
products as the need arise in the supply chain. This keeps inventory at a minimum and
relies on the ability of suppliers and carriers to consistently deliver appropriate quantities
of materials, parts, and products within a fixed time frame or schedule (Daniel and
Reitsperger, 1996).
having continuous quality improvements with the goal of zero defects and no variances.
Perfectionism is sought because defects consume time, money, and inventory of the
28
business, irritate customers, and reduce margins. While knowing implementing zero
defect policy is costly, a fundamental principle of JIT is that quality is less costly than
fixing defects (Germain et al., 1994). With minimal or zero buffer or safety inventory,
production stops when quality parts and products are not available for the next stage,
resulting in a search for solutions to fix poor quality (Davy et al., 1992). Thus, Quality
facilitates JIT because poor quality is among the main reasons for maintaining “just-in-
changes in the way business conducts both internally and across firms' boundaries. It
demand with relatively small levels of inventory and high levels of productivity. The
objective of JIT is to eliminate waste of all kinds from the supply chain processes. In
theory, the product must conform to the customer's specification every time and be
delivered when needed in the exact quantity needed. In conclusion, Just In Time
inventory system limits the purchase of safety stocks and approximately purchases the
difference quantity purchased on each transaction and quantity needed in each production
cycle.
EOQ strategy minimizes the total cost of ordering and carrying cycle stocks. EOQ is the
number of units that a company should add to inventory with each order to minimize the
total costs of inventory—such as holding costs, order costs, and shortage costs (Bassin,
29
1990). The EOQ is used as part of a continuous review inventory system in which the
level of inventory is monitored at all times and a fixed quantity is ordered each time the
inventory level reaches a specific reorder point (Silver & Peterson, 1985). In addition,
Bassin also mentioned in his study that EOQ provides a model for calculating the
appropriate reorder point and the optimal reorder quantity to ensure the instantaneous
replenishment of inventory with no shortages. It can be a valuable tool for small business
owners who need to make decisions about how much inventory to keep on hand, how
many items to order each time, and how often to reorder to incur the lowest possible
costs.
The EOQ model assumes that demand is constant, and that inventory is depleted
at a fixed rate until it reaches zero (Bassin, 1990). At that point, a specific number of
items arrive to return the inventory to its beginning level. Since the model assumes
Therefore, the cost of inventory under the EOQ model involves a tradeoff between
inventory holding costs (the cost of storage, as well as the cost of tying up capital in
inventory rather than investing it or using it for other purposes) and order costs (any fees
associated with placing orders, such as delivery charges) (Silver, E.A. and Peterson, R.,
1985). Ordering a large amount at one time will increase a small business's holding costs
while making more frequent orders of fewer items will reduce holding costs but increase
order costs. The EOQ model finds the quantity that minimizes the sum of these costs.
“Quantity that minimizes the sum of these costs”, this means that EOQ is the
quantity that minimizes both holding and order cost. EOQ finds the quantity that puts
holding cost and order cost at equilibrium. This quantity makes ordering and holding a
30
product attainable and profitable for a business. In conclusion, Economic Quantity Model
affects the quantity being purchased by a company but it does not affect the quantity
needed in its daily production cycle. Therefore, there is a difference in the quantity
Reorder Point
According to Fangruo Chen (1998), The reorder point (ROP) is the level of
minimum amount of an item which a firm holds in stock, such that, when the stock falls
to this amount, the item must be reordered. Whereas, the quantity associated with safety
stock protects the company from stock-outs or backorders. It is normally calculated as the
forecasted usage during the replenishment lead time plus safety stock. Safety stock is also
known as a “buffer”. In the EOQ (Economic Order Quantity) model, it was assumed that
there is no time lag between ordering and procuring of materials. Therefore the reorder
point for replenishing the stocks occurs at that level when the inventory level drops to
zero and because instant delivery by suppliers, the stock level bounce back.
production need may vary since a business may opt to store more stocks and other
conditions may reduce the minimum amount for re-ordering. In conclusion, the re-order
point inventory system affects the quantity of materials a business purchase in each
transaction, but it does not affect its needs to produce a product. Therefore, there is a
31
Section III: Production Need
consumer needs in targeted or segmented consumer markets and to understand how these
needs affect their purchase behaviors. Identifying the needs of selected markets can help
in developing effective marketing strategies that would appeal to the specific needs of
these markets. (Kim, 2002). In the market for manufacturing companies, the most
obvious needs for these clients are their inventories and materials for the production of
Raw materials mark the beginning of all production and operation activities, and
it is only proper that it comprises 60-80% of the production cost for an enterprise.
(Bender et al., 1985). According to Bhat and Reddy (1998), goods that are designed to
deliver functional value or are used for operations satisfy the practical needs of
customers, and in the manufacturing field, these raw materials are the practical needs of
the companies. Production need, in the context of this research, are raw materials solely
finished products. Raw materials which are not processed and are only held as stocks or
Cheng (2007) states that holding of inventories of raw materials is very useful for
contingencies in the production system, yet keeping a high level of inventory may be a
costly exercise. This proves that manufacturing companies have different behaviors in
buying raw materials – others buy just for production need, while others maintain a
32
certain high level of stock raw materials. These different behaviors toward their needs
fulfillment can vary the amount of bulk, which consequently affects the bulk purchase
price.
The cost of buying raw materials and components is responsible for a significant
portion of the production and manufacturing industry. (Gao & Tang, 2003). It is of
utmost importance that these dealers and suppliers of raw materials will be able to
understand the purchase behaviors, preferences, and production need of their customers.
Knowing the amount and type of needed materials of manufacturers can give them a
competitive edge in pricing their raw materials when selling it to their clients.
Another perspective in looking at how the amounts of needs for raw materials
Ji and Wood in their 2007 study that “purchase and consumption behaviors are closely
linked together.” Thus, it is only natural that the number of raw materials consumed, or
processed, affect the bulk purchase price that manufacturing companies are willing to
spend. Specifically, this implies that the more raw materials to be consumed for the
production of a company’s product, the more amount they would spend for these
materials, and consequently may lead to increase the price to be paid for a single bulk
order of raw materials. In the 1998 study of Homer and Kahle, it is mentioned that needs
opinions. This suggests that production need is linked to production activities of a firm.
The extent to which customers use the products they’ve paid for determines their
purchase behavior (Gourville & Soman, 2002). The purchase price would have an effect
33
on the needs and demands of a product, and in addition, there is a statistically significant
correlation between a decreasing unit price and an increasing consumption (Black, Gill &
Chick, 2011). When buying goods in bulk, it is only imperative that discounts are given
based on the volume of goods that is bought. This is a very common practice for sellers to
discount the prices of bulk orders in order to attract customers to buy larger quantities
and increase sales volume (Walker et al., 2008). Basically, when materials are purchased
in bulk, the unit price of each good is reduced because the total price is discounted.
Considering these variables, relationships are established such that higher production
higher volume of goods to be bought leads to greater price discounts that ultimately
The amount and quantity of raw materials needed by a certain enterprise may also
be affected by the rate of spoilage. In the two decades, numerous research has been made
studying different inventory models for deteriorating items (Sachan, 1984; Harriga, 1996;
Teng et al., 1991). In general, when price discounts for bulk purchases are provided or
when the raw material under consideration is seasonal such as an output of harvest,
manufacturers may purchase more goods more than what can be stored in its own
warehouse, meaning more expenditure for bulk orders (Yang, 2004). Yang further
mentions that these excess quantities may be stored in a rented warehouse (RW). In
compensating with this, it will be economical to consume the goods of the rented
warehouse at the earliest in order to reduce inventory costs. The result of this is that while
firms store goods in an owned warehouse before renting, they clear their raw materials
34
stocks in the rented warehouse first (Benkherouf et al., 1997; Bhunia and Maiti, 1998;
Sarma, 1987). In the framework of this research, the suppliers and dealers of raw
materials being examined are those who provide carton sheets wherein spoilage is almost
negligible. Still, it is worth noting for future researchers that rate of deterioration is a
relevant variable affecting bulk purchase price and behavior, however, in this thesis, only
From an economics point of view, production need are similar to demand which is
elasticity, which Hayes (2003) defines as the degree to which demand or supply reacts to
a change in price. Hayes further mentions that elasticity varies on different types of
products and this is due to the reason that some products may be more essential to the
consumer than others. It is known that demand for products that are considered to be
necessary or a primary need is less sensitive to changes in price changes in such a way
that costumers will still continue to buy these products despite price increases. This
where consumer reaction to a change in price is small, and this occurs on highly-
is very little competition on suppliers for recyclable raw materials in the Philippines. This
results in raw materials being highly demanded by most manufacturing companies in this
setting which, as mentioned, makes the demand curve of raw materials to be inelastic. In
all cases of inelastic demand, price increases will increase total revenue on the seller
35
(Becker, 2015). Thus, when production need of manufacturing companies are known to
be high, the price increase on bulk orders can capitalize their price insensitivity.
Overall, the production need or the raw materials needed to be used and
consumed for the production of finished products in a specific span of time can affect
regarding this topic, production need are likely to have a favorable effect on the quantity
or volume of raw materials to be purchased and may consequently increase the price that
companies are willing to spend for bulk orders, which is intensified by added price
discounts. The rate of consumption and spoilage affect production need, however in this
study, the rate of spoilage will not be considered as suppliers being examined are those
that provide carton sheets which do not deteriorate for a long time. The rate of
consumption is related to the purchase price of materials in such a way that greater
consumption leads to purchase intention for a lesser unit price of an item. Lastly,
production need also have a good correlation with a company’s price sensitivity,
especially in the Philippine setting, because raw materials are considered necessities and,
as what has been mentioned, necessary goods tend to establish an inelastic demand.
important for running a business unit successfully at any place. The environmental
factors are key influencers of every aspect of a business, may be its nature, its location,
the prices of products, the distribution system, or the personnel policies. The
36
environment, according to Macro and Micro Economic Factors Researchomatic (2012),
natural environment, labor conditions, and so on (Eze, Odigbo, & Ufot, 2015). The
business environment includes all the external factors that affect an organization
environment include the economic system, the industry in which the organizations choose
to work and the market that it serves. Despite having the fact that an organization cannot
control any of these, it can opt to choose the location in which it works and it particularly
wants to choose an attractive industry and stable market. The business environment can
be classified into five categories- the physical environment, political and legal
Schooling (2008), simply means external influences, factors, and institutions that cannot
be controlled by the business and which provides a significant impact on the operations
(John et al., 2015). Some may connect both ideas as one but they are two different
37
concepts. The location of a business simply refers to where a business is located. It is the
physical space wherein the business exists. This is where it carries out its daily operations
and this has something to do with the specific physical environment in which the business
finds itself. Moreover, store location is a business’ most costly and long-term marketing-
mix decision (Fox et al., 2007). It is the first key factor that a business considers before
implementing other marketing decisions. Thus, the location of the business affects mainly
the business operations, other marketing decisions and its corresponding results.
It is essential for business operators to put location at the top of their minds. If
you're preparing to open any business, putting your business in the proper location might
be considered the most important factor during startup. Despite having the need of a
winning product, a business must consider the question “how will anyone know about
that product unless you get them through the door?” Hence, the three most important
decisions you'll make are: “location, location, and location," as affirmed by Overbo
(2014). Careful determination and identification of new sites are critical for most retail,
Location of the store is also measured by its accessibility to its customers (Kotler
et al., 2010). Stores located in the center of a city benefit from their next door to remote
customers (Finn A., 1996). Therefore, distance from home and distance from workplace
would have a relationship with the amount of purchase they ought to buy from a store
(Chaiyasoonthorn, 2011).
(Kotler et al., 2010). Consumers tend to prefer stores that are easily accessible to them
38
(Eppli et al., 1996). Thus, a far distance has a negative effect on the selection of a store
through reducing frequency of customers visiting a store and businesses with highly
accessible locations are more likely to have more consumers. Therefore, the distance to
where they will purchase their goods and supplies will affect the number of times a
instead of emphasizing location since consumers seek to optimize their “total shopping
costs” (Ailawadi et al., 2004). This suggests that in some instances; consumers may pay
more consideration to other factors (e.g., price promotions and bulk shopping) than the
location in determining the store of purchase (John et al., 2015). For example, when raw
material consumers of sugar for production need to travel to the supplier, the consumers
consider the amount of raw material they purchase in order to limit the total shopping
cost (e.g. transportation). This means that the consumer may weigh in and opt to choose
which is more favorable to the business and can benefit the business positively.
Distance: Relationship with Store Location, Price discounts and Repeat Purchases
The factors which Jere, Babatunde, and Albertina (2014) identify as important
influencers of store patronage are Store image, product, price, promotion, and location.
Focusing more on the influence of location, they assert that for consumers, the location of
and access to the business are important factors in the store choice decision. The location
which is mainly perceived in terms of time and distance is a particularly compelling value
proposition that retailers offer low-income consumers who tend to shop more frequently
and make small purchases because of their limited and unstable cash flows. Consumers
tend to prefer stores that are easily accessible to them (Eppli et al., 1996). While some
39
authorities argue that location is a major determinant of the success or failure of retail
predictors of customer satisfaction, Jere, Babatunde, and Albertina (2014) report that only
location (place) was found to be a significant predictor. This finding implies that it is
decisions that meet customer expectation; particularly distance and attractiveness and
hygiene. Moreover, a study on the importance of the predictors of store loyalty shows
that three of the six independent variables; store image, promotion, and location; are
focus on location, but to encourage loyalty and repeat purchases they need to emphasize
In another article, Bell, Ho, and Tang (1998), the found that location no longer
explains most of the variance in store choice decisions. Rather, store choice decisions
seem to be consistent with a model where consumers optimize their total shopping costs,
effort to access the store location being one component of their fixed cost of shopping.
That is not to say that location is no longer important. But, consumers’ store choice may
be based on different criteria depending upon the nature of the trip. For instance, small
basket, fill-in trips are very unlikely to be made to distant or inconvenient locations. And,
retailers in some formats, like convenience, drug, or supermarket have less flexibility in
their location decision than mass merchandisers or warehouse clubs. This implies that
consumers may take into consideration other key factors rather than the location in
determining the store of purchase and adjust in order to limit the cost. Therefore,
40
consumers consider the amount of purchase whenever they buy supplies because of the
Distance: A Summary
Generally, the distance or how apart the business is to the consumers of raw
implication of all of these studies is that aside from the obvious economic benefits of
convenience and low transportation costs, consumers of raw materials, take for example
the customers Ma-Vill Recycling Corporation, will be affected more by distance to their
suppliers when other favorable factors are also presented, like brand image and
promotional price discounts. Therefore, consumers tend to adjust to the distance of the
store when other factors (e.g. production need, price discounts and etc.) are favorable.
advantage, business and researchers began studying the attitude and behavior of
customers towards purchasing as well as the activities that would affect their purchase
practice by businesses and marketers since the 18th or 19th century or long before that.
They were used in marketing their products or services to their customers. Sales
promotion techniques are instruments that seek to increase the sales of products and
brands, usually in a short time (Wierenga & Soethoudt, 2010), because they act in the
41
consumer’s mind as a benefit to it, thus generating a consumer behavior. Also, it extends
control and is less costly than advertising while causing fast responses from customers
In a 2013 study conducted by Neha and his colleague, it is concluded that sales
promotion depicts an important role in the purchase decision of customers. They found
out that the use of these promotions and the proper combination of these greatly
influenced customers’ purchase decision. This is supported by other studies stating that
its effect on consumers' buying behavior is crucial and favorable (Ahmad et. al., 2015).
Sales promotion has various incentive tools that are utilized in order to entice customers
to the immediate purchase of the goods/services offered and to increase quantities of sale
(Kolter and Armstrong, 2010). Some of these are coupons, free gifts, rebates, contests,
According to Fill (2002), price discount is "a well-known tool for offering a good
discount in buying price." Furthermore, Chao and his colleagues (2016) stated that price
discounts are one of the most significant features of a business. They also found out that
it can directly affect the purchase intention of customers. Another 2017 study by
Brimblecombe and company found out that using price discounts greatly increased the
purchases of goods by 12.7%. But when the price discounts were removed, the quantity
between price discounts and consumer buying behavior during sales discounts. In the
42
data gathering stage of their study, their respondents were asked questions about
"If a brand offers price discount that could be a reason for me to buy it.”
“When I buy a brand that had a discounted price, I feel I am getting a good buy.”
“Price discount has allowed me to buy another brand which I do not regularly
buy.”
“I have favorite brands, but most of the times I buy a brand that gives good offers.”
With this, it can be deduced that price discounts greatly influence customers'
purchase intention. The discounts became the reason why consumers buy a product, sees
them as a good buy and the reason to switch brands (Al-Salamin et. al, 2016). This is
supported by a 2007 study by Lin wherein she found out that the higher the discount
It is believed that price discounts, such as bulk price discounts, has a positive
influence on the purchase intention. This is supported by a 2009 study conducted by Teng
that states that when price discounts are given to customers who buy in large quantities or
in bulk, it encourages them to purchase more. Another 2009 study conducted by Palazon
and her colleagues, found out that price discounts generate higher purchase intentions
When suppliers provide price discounts for bulk purchases or when the item under
consideration is a seasonal product such as the output of harvest, the client may purchase
more goods that can be stored in its own warehouse (Yang, 2002). For example, when
43
mangoes are in season and price discounts applied by different suppliers, the consumers
consider the amount of raw material they purchase in order to take advantage of the
discount they get since it lessens the shopping cost. Hence, the price discounts that the
consumer get may affect the amount of the bulk purchase price of the raw materials.
A contrasting study by Grewal et al. (1998) found out that price discounts have
negative effects on the perceived quality and the internal reference price of the customers.
Business people usually want their customers to perceive the products they offer to have
high reference price or to think that the product was originally more expensive than its
current discounted price (Faryabi et. al, 2012). That is why it is recommended to
business to use words such as "sale" or "special" or semantic price claims so that
customers would believe that the sale is temporary and may stimulate their interests
(Norberg et. al., 2013). It can also prevent customers from thinking that the product is of
poor quality is the reason why it is discounted. Furthermore, it is also researched that the
use of these phrases can enhance the effectiveness of price discounts. In order to be able
to use price discounts to its limits, it is also crucial to know the promotions and type of
discounts. According to Iyengar et. al. (2011), these types of discount are commonly used
by companies. Its key characteristic is that when the purchase quantities of customers
increase, the marginal price decreases. Among the abovementioned types of discounts,
44
quantity discount is found to be more effective in influencing a customer's bulk purchase
intention.
In a 2013 study of Peng and Zhou, they found out that quantity discount can
promote a manufacturer’s ordering quantity of raw materials. This shows that this type of
discount would be effective to companies that sell products or raw materials in bulk. It is
where a customer receives an advantage or benefit for bulk purchases (Ndayamukama et.
al., 2015)
All in all, price discounts can affect the bulk purchasing behavior of
necessity, but it is recommended to use it with great moderation and to use semantic price
45
Theoretical Framework
The several related studies concerning the effect of production need, distance, and
price discounts all give contributions and insights that they indeed affect the purchase
way that it gives a positive effect on the quantity or volume of raw materials needed to be
purchased. A higher quantity of needed materials tends increases the price that companies
are willing to spend for bulk orders, and this is even amplified by the effect of quantity
discounts. Production need also indirectly affect purchase through the rate of
purchase intention for a lesser unit price of an item, which can be achieved through the
bulk orders. Lastly, production need which are considered necessities are likely to
establish an inelastic demand such that an increase in price by the supplier barely affects
Distance or how far the suppliers of raw materials are to their clients affect the
bulk purchase prices and behaviors of manufacturing companies due to the positive
effects of saving transportation costs and convenience. Moreover, the distance will be of
more consideration and effect to the clients when other favorable factors (e.g. production
need, price discounts and etc.) are presented along with it.
through price discounts are imperative, but it is recommended to use it with great
moderation and to use semantic price claims for enhancing its effects.
46
Abovementioned are the key points for the effect on purchase behavior in buying
raw materials in bulk of each of the three variables being examined by this study. These
are founded upon several different studies that contribute to the knowledge of each
concept, however, the researchers believe that all of these are strung and related in the
Gao and Tang (2003) have made a multi-objective model for purchasing of bulk
raw materials of a large-scale manufacturing plant which deals with the main problem of
how to make purchasing decisions in order to obtain required raw materials while
considering a lot of factors such as price, quality, quantity, due date, and so on. Gao and
Tang (2003) assert that these criteria mentioned above are in connection with three kinds
of decisions, i.e., (2003) items or raw materials decision, quantities decision, and vendor
selection decision, and all of these lead to the firm’s purchase decision. These decision-
making processes are in chronological order and a diagram representing these processes
is presented below.
Quantity
Raw Material Supplier Purchase
Selection Requirement
Selection Decision
Decision
For any manufacturing company, the first thing they would do in the production
decide the quantities required for the making of the finished product. In determining the
quantities, the proportionality of each raw material to the other must be considered.
47
Supplier Purchase
Due Date
Selection Decision
Lastly, manufacturing plants will choose a supplier. Every offer differs from vendor to
Quality
vendor and consequently, the supplier-selection decision is regarded as a crucial
consideration as it will greatly affect the item, quality, price decision, etc. Vendor
selection is a complex process, and there are many objectives for purchasing decision, but
the most important three criteria regarded by the decision maker are quality, price, and
due date (Weber et al., 1991). A figure describing this relationship is shown below.
decision, one has also to consider factors that affect these criteria. In the same study of
Gao and Tang (2003), they have identified 5 constraints or factors that affect the criteria
for purchase decision-making process. The following factors and how three of these
factors have been adopted by this research paper are listed below:
Purchasing Budget – The purchase price for a bulk order of raw materials ought to
satisfy a firm’s purchasing budget. In this research, this is where bulk price discounts
are considered since they offer a significant effect on reducing the purchase price.
Production Demand - The raw materials purchased must satisfy demands in items,
quality, and quantities in a given time period. In the context of this study, this is
similar the variable “production need” that is focused on the item’s quantity.
48
Inventory Capacity Constraints – The amount of raw materials inventory bought
should satisfy the warehouse capacity and also consider holding a safe-stock at a
transportation conditions, etc. for each of the supplier are considered by companies.
This is adopted by the study through the variable distance, which is how far the
Combining together the factors and criteria that affect supplier selection which
ultimately leads to purchase decision of manufacturing companies for raw materials, the
framework by Gao and Tang (2003) serves as a foundation for this research, and the
Purchasing
Budget
Production
Demand Price
Technology Quality
Constraints
49
Conceptual Framework
Based on the theoretical foundation and related studies on factors that affect bulk
hypotheses of this study, which is presented through a diagram at the end of this section.
In the diagram, it presumes that production need and price discounts have a
positive correlation on bulk purchase price, such that when production need of the
company and the price discounts of the raw materials increase, the purchase price that
companies would spend for a single bulk order will also increase, and vice versa.
Distance, on the other hand, shows a positive correlation, and it suggests that the higher
the distance or the farther the client is to its supplier’s location, the lesser the number of
raw materials the company will purchase in a such a way that it reduces the purchase
price of each of its order. Lastly, the diagram depicts that bulk purchase behavior can be
measured by the amount of bulk purchase price that a company spends for orders of raw
materials, and bulk purchase price affects bulk purchase behaviors of companies. After
determining the correlation of each factor and the bulk purchase behavior of companies,
the researchers will suggest pricing strategies based on the findings of the study.
Production
Need
+
50
Chapter 3
RESEARCH METHODOLOGY
This chapter outlines the research methods used in order to gather data about the
effect of the factors namely: distance, price discounts and production need, on the
and relationship of the three variables mentioned to purchase price, and purchase
behavior with each other. In order to attain such information, a survey that tackles about
The first section of this chapter describes the research environment and the
presented. The second section discusses who are the respondents for this study, and the
third one describes elaborately how the research instruments are prepared and used to
gather data for the study. In the final section, the process taken by the researchers in
gathering and treatment of data are presented in the text. The information of each section
At the end of this chapter, a flowchart is presented regarding the research process
51
Research Environment
The location of the business being focused on this research, Ma-Vill Recycling
Corporation, is in Upper Canduman, Canduman, Mandaue City, Cebu. This is where the
business conducts its main operations and where their office is situated. However, even
though the location of the main beneficiary of the research is just in Mandaue City, the
setting of the study, where the research respondents are located, extends to the vicinity of
both Mandaue City and Cebu City. Manufacturing businesses situated in the areas of
Cebu City that purchase carton sheets from Ma-Vill Recycling Corporation in bulk will
urbanized city in the province of Cebu which belongs to Region VII, Central Visayas, in
the Philippines. As reported by the 2015 census, it has a population of 922,611, making it
the fifth most populated city in the nation and the most populous city in the Visayas.
(Philippine Statistics Authority, 2015). On the other hand, the City of Mandaue
as Mandaue City, is also as highly urbanize as Cebu City. In fact, it is one of three highly
urbanized cities on Cebu island and forms a part of the Cebu Metropolitan area. It is only
natural that this Metropolitan area is the center of commerce and trade in the Visayas.
Cebu Metropolitan’s economy has been rapidly developing since the 1990s
(Fajardo, 2013). In the field of bulk purchasing, shipbuilding companies in Cebu have
manufactured bulk carriers of up to 70,000 metric tons deadweight (DWT) and double-
hulled fast craft as well. This industry made the Philippines the 4th largest shipbuilding
country in the world. (Manila Bulletin, 2013) With the given advantage of the
52
shipbuilding industry here in Cebu City, it is only natural that it is home to manufacturing
companies who buy, import, and export materials in bulk through the carriers.
The Metropolitan area of Cebu remains as a major hub for industrial operations
(Lorenciana, 2017). To support this statement, the assessment on Cebu's industrial market
as of 2016, Pinnacle Real Estate Consulting Services rated Metro Cebu's industrial
market to be very healthy, which in fact, the industrial zones in the metropolitan were
filled up more than four years ago, well ahead of their counterparts in the other parts of
the Philippines.
which comprises of Cebu City and Mandaue City. This makes the setting a very
conducive environment for research about the purchasing and pricing of carton sheets of
manufacturing businesses. The geographical maps of the two cities are shown below:
MANDAUE CITY
CEBU CITY
53
Research Respondents
This study has a total of 10 manufacturing companies, which are existing clients
of Ma-Vill Corporation in Cebu, specifically in Cebu City and Mandaue City, as its
The qualified respondents are companies which purchase carton sheets in bulk for
manufacturing or production purposes from Ma-Vill. The researchers believe that these
called convenient sampling since the researchers would have to consider the accessibility
Corporation, and its clients. Convenient sampling is a sampling method where subjects
are selected because of their convenient accessibility and distance to the researcher.
Furthermore, due to confidentiality, the agents of the Ma-Vill Corporation will be the
54
Research Instrument
Appendix A) as the main tool for data gathering. The researchers, however, consider
personal interview as another option for surveying the respondents with the use of
recording devices depending on the respondent’s convenience and preference. When the
interview is chosen as the means for data gathering, the questions reflected in the
A letter, containing details about the research and the survey questions, is attached
overview of the details of the survey. In the questionnaire, general instructions are
provided and the first part aims to gather general information about the respondent’s
name, relationship to the business, the business name, location, and its finished products.
The second part of the research questionnaire is the survey proper which contains
the main questions that give insight about the correlation of the factors being studied,
namely: production need, distance, price discounts, bulk purchase price, and bulk
purchase behavior. It is specified in the instructions for part two that only carton sheet as
raw material shall be chosen. This is for the purpose of uniformity and valid comparison
There are four types of questions in this second part of the questionnaire, namely:
value-based questions (e.g. Question 1, 3, and 4), multiple choice questions (e.g.
Question 2 and 9), Likert-scale questions (Question 6, 7 and 8) and lastly, open-ended
question (e.g. Question 10). Questions 1, 4, and 5 are designed to give insights about the
55
preferences of the companies based on the three factors leading to purchase price, which
is the production need, distance and price discounts. Question 2 aims to validate the
related studies that higher distance may encourage to decrease the bulk orders of
manufacturing companies and consequently increase the purchase price of each order to
reduce additional transportation costs. Question 4 asks about the purchase price that
companies spend or budget for a bulk order of a raw material. The amount of purchase
price will be used to measure the effectiveness of the variables. In questions 6-8, the
importance of each of the three variable affecting purchase decision is being weighed,
and question 9 compares which among the 3 factors has the greatest effect on the amount
of purchase price that companies allot for buying a raw material in bulk. Lastly, question
behavior not mentioned by the preceding questions. All these 10 questions provide data
on the bulk purchase behaviors of manufacturing businesses that consider the variables of
this study.
The questionnaire will be pre-tested for validity and reliability through reviews
tested by allowing the operations manager of Ma-Vill to answer the question since he is
56
Research Procedures
Corporation in order to conduct an interview with the business being the focus of this
study. Before they started their interview, the researchers sent a letter, undersigned by
allow them to conduct an interview to the operation manager about the company. After
gaining the permission, the interview happened in the manager’s office where the
researchers introduced the purpose of the interview and achieved the objective of the
interview, which was to gain information about the company’s daily operation, clients
and its current status for potential topics for marketing research.
agent or contact person in order to accommodate the researchers for follow-up questions.
The agent is also responsible for guiding the researchers for the distribution of
questionnaires and gathering of data for Ma-Vill’s current clients. When the survey
instrument is already prepared, the researchers, with the help of the agent will contact the
10 chosen clients and will give a letter made by the researchers. The researchers will be
asking permission to conduct a survey of the clients. After gaining permission, the
researchers will give a questionnaire to each of the clients, along with a letter that ensures
the purpose and confidentiality of the gathered data. Another option that the researchers
consider, aside from handing out questionnaires, is to conduct a personal interview with
the companies depending on their convenience and preference of survey method. After
gathering all the data, the researchers collated and summarized it for further data
treatment.
57
Treatment of Data. After gathering data through interviews and questionnaires,
the collected data will be summarized, analyzed, and applied with statistical treatment.
1. Outlier tests will first be performed to detect abnormal values in the data. Iglewicz
and Hoaglin’s modified z-score outlier test (Iglewicz and Hoaglin, 1993) will be
performed to detect all outliers. The formula for performing the test is:
0.6745(x i−~
x)
M i= such that all values M i≥ 3.5 are identified as outliers
MAD
Tukey’s test for detecting outlier using quartiles will also be performed in order to
UB = Q3 + 3(IQR); LB = Q1 – 3(IQR) such that all values that fall outside the
on datasets with outliers in order to treat the outliers properly. The general
the outlier weight adjustment. Weight adjustment formulas are shown below:
for non-outliers
for non-outliers
58
3. In treating question 1, daily quantity needed will be multiplied by 26, which is a
month’s average number working days, in order to get the company’s monthly
monthly quantity needed will be calculated in order to find out whether Ma-Vill’s
clients just purchase solely for production need or add safety stock inventory.
for the following variables: (i) quantity needed (question 1) and bulk purchase
price (question 3); (ii) distance (question 5) and bulk purchase price (question 3);
(iii) distance (question 5) and frequency of ordering (question 2); and (iv) trade
discount (question 4) and bulk purchase price (question 4). The correlation and
determination test aims to find out the correlation, relationship strength, and
coefficient will be adopted. Below are the guidelines and Pearson r formula:
Formula:
Guidelines:
59
5. Frequency distribution table and weighted mean will be on Questions 6 to 8 since
these are Likert-scale questions. The interpretation system for the weighted mean
additional insights to the researchers. The answers to this question will only be
Contacted the
Preparation of the
Interview with Ma- company regarding 10
questionnaires
Vill Corporation of their current
customers
Treatment,
Interpretation and Data Gathering and
Making of Results
analysis of the Collection
and Conclusions
gathered data
60
Chapter 4
PRESENTATION, ANALYSIS, AND INTERPRETATION OF DATA
This chapter comprehensively presents the results and findings of the study. The
gathered data were summarized, tabulated, analyzed, and interpreted. The interpreted data
were then used to answer the research problems. There are five sub-headings in this
chapter based on the four research objectives and socio-economic impact of the business.
Section I
Pricing Methods of Ma-Vill Corporation For Carton Sheets
operations manager, and Ms. Emielda Torreon, the head officer for customer relations for
Ma-Vill Recycling Center Corporation in order to gain insights about the pricing methods
that the company uses for carton sheets. Generally, the price of carton sheets varies
according to size and thickness of each sheet specified by the client. Furthermore, the
company sets a minimum quantity of carton sheets to be purchased which is 500 pieces.
This is for an economic purpose of saving freight cost and delivery expenses.
In setting prices for each variation of the carton sheet, the interviewee said that a
lot of factors are considered. The first consideration made is the cost of production of the
materials: all the direct materials, direct labor, indirect materials, and other expenses
involved in operations. Second, an assumption is made regarding the number of units that
can be sold for a certain price under a specified amount of time. An example is
considering how many carton sheets can be sold if the price is ₱10 per sheet. The last
major consideration taken into account is comparing the proposed selling price to the
prevailing market price and the price of competitors. In addition to these, the company
gives sales discounts like trade and cash discounts to its customers for many reasons: to
61
reward and influence customer loyalty, to give incentives for the high purchase price, to
encourage prompt payment, and to improve the relationship with the client.
uses a combination of three pricing strategies which are cost-based pricing, contribution
wherein the selling price is determined by adding a certain amount markup to a product's
overhead, and indirect materials (Jain & Sudhir, 2006). Contribution margin-based
pricing is a pricing method based on the 2012 study of Coenenberg, Fischer, and
Günther. It capitalizes the profit derived from a product based on its contribution margin
per unit (selling price minus variable cost), and the seller's assumptions on the
relationship between the selling price and the number of units that can be sold at that
price. Lastly, competitive pricing is a well-known strategy that occurs when a company
includes in its decision making for selling price the price charged by its rivals and the
market leader which usually dictates the prevailing price in the market.
Cost-based pricing is exhibited when the company considers the all the costs
related to the production of the carton sheets and contribution margin-based is shown
when the business makes assumptions on the number of units that will be sold for each
certain price. Competitive pricing is seen when Ma-Vill compares their selling price with
the market and the competitors’ prices. Moreover, the company incorporates sales
promotion techniques by giving trade and cash discounts to their clients. These are the
current pricing strategies used by the company. The findings of the study aim to gather
new data in order add value to the current pricing strategies and suggest new ones.
62
Section II
Effects of Production Need, Distance, and Discounts on Purchase Price and Behavior
The respondents of the study are 10 existing clients of Ma-Vill Corporation which
purchase carton sheets as a raw material in bulk. The names of the ten companies are
respondents are given, however, in order to protect the confidentiality of the transactions
of the clients of Ma-Vill Recycling Center Corporation, the respective company name for
each set of answers in the questionnaire will not be disclosed. The names of the ten
respondents will be labeled as Company A, Company B, and so on. Here are the names
Production Need
Table 4.1
Carton Sheets Needed by Respondents
Respondent Daily Quantity Needed (pcs.) Monthly Quantity Needed (pcs.)a
Company A 80,000** 2,080,000**
Company B 2,000* 52,000*
Company C 1000* 26,000*
Company D 150 3,900
Company E 150 3,900
Company F 80 2,080
Company G 50 1,300
Company H 50 1,300
Company I 30 780
Company K 5 130
a
Monthly Quantity Needed = Daily Needs * 26 [Average Working Days in a Month
*
Values marked with asterisks are identified as outliers using the Iglewicz and Hoaglin’s test for multiple
outliers while values with double asterisks are identified as extreme outliers using Tukey’s outlier test.
63
64
Table 4.1 shows the answers of the respondents regarding the quantity of carton
sheets needed for their daily operations. The daily needs are multiplied by 26 days, which
is the number of working days or days of operations in a month, in order to get the
monthly quantity of carton sheets needed by the company. The monthly data is needed so
that it can be compared to the monthly quantity purchased by each company in order to
gain insights into their purchasing behavior regarding production need and safety stock
preferences.
Iglewicz and Hoaglin’s outlier test have identified Companies A, B, and C values
to be outliers and Tukey’s test have identified Company A’s values to be extreme
outliers. Weight adjustment method is performed on mild outliers. The data values for
company that buys carton sheets as raw materials and converts them into carton boxes.
Table 4.2
Mean and Standard Deviation for Quantity of Carton Sheets Needed
___Without Adjustment___ ___Outliers Adjusted___
Daily Monthly Daily Monthly
Mean 8,369 217,581 378.29 9,835.43
Std. Dev. 25,176.73 654,595.03 644.35 16,753.22
The daily and monthly means and standard deviations, with and without the
outlier adjustment method, is presented in Table 4.2. This study mainly used the values in
the outlier-adjusted method so that the sample population data can better represent the
data for the total population. Based on the results, it can be implied that the local clients
sheets of 378 pieces and an average monthly consumption of 9,835 pieces. However, the
average daily and monthly consumption of carton sheets of Ma-Vill’s clients has a very
high deviation of 644 and 16,753 pieces to be used, respectively. Thus, the average range
65
of carton sheets to be consumed by the clients daily may range from 0 to 1,022 pieces and
0 to 26,588 pieces monthly. Lastly, it can be also implied that the customers are always
purchasing in bulk because it has a high daily average usage of carton sheets, and bulk
Table 4.3
Carton Sheets Purchased by Respondents
Quantity Monthly
Respondent Frequency Multiplierb
Purchased (pcs.)a Purchase
Company A 520,000** once a week 4 2,080,000**
Company B 13,000* once a week 4 52,000*
Company C 7,800* once a week 4 31,200*
Company D 2,000 twice a month 2 4,000
Company E 2,000 twice a month 2 4,000
Company F 2,500 once a month 1 2,500
Company G 1,300 once a month 1 1,300
Company H 1,300 once a month 1 1,300
Company I 800 semi-annually 2 1,600
Company J 800 twice a month 1/6 133
a
Quantity purchased is the quantity purchased by pieces (pcs.) for each time frame specified in frequency.
b
Multiplier is the number multiplied by quantity purchased to get monthly purchase (twice a month = 2,
once a week = 4, semi-annual = 1/6).
*
mild outliers; **extreme outliers
It is shown in Table 4.3 the quantity purchased by the respondents during each
purchase and their respective frequencies for purchasing. The quantity purchased is
multiplied by its frequency in order to get a uniform data which is the quantity of carton
sheets purchased per month. It can also be seen from the result that the preference of the
Iglewicz and Hoaglin’s outlier test have identified Companies A, B, and C values
to be outliers and Tukey’s test have identified Company A’s values to be extreme
Table 4.4
66
Mean and Standard Deviation for Quantity of Carton Sheets Purchased
___Without Adjustment___ ___Outliers Adjusted___
Each Purchase Monthly Purchase Each Purchase Monthly Purchase
Mean 55,150 217,803 3,385.71 10,015.23
Std. Dev. 163,378.74 654,534.50 4,180.75 17,423.26
Table 4.4 presents the means and standard deviations of the quantity of carton
sheets purchased by Ma-Vill’s clients, with and without the outlier adjustment method.
These findings imply that the average quantity purchased by customers when they make
their purchase is 3,385 pieces, however, the customers vary to the time when they make
their purchase. In order to compensate for this, the monthly purchase is used as the
reliable indicator for average purchases. The results show that the average quantity of
carton sheets that the customers of Ma-Vill purchases are 10,015 pieces. Taking into
account the deviation, the monthly purchase of the customers may go as high as 27,438
pieces. Thus, it is suggested that Ma-Vill Recycling Corporation produces at least 10,000
Table 4.5
Comparison of Quantity Carton Sheets Purchased and Quantity of Carton Sheets Needed
Monthly Quantity Monthly Quantity
Respondent Difference
Purchased Needed
Company A 2,080,000** 2,080,000** 0
Company B 52,000* 52,000* 0
Company C 31,200* 26,000* 5,200**
Company D 4,000 3,900 100
Company E 4,000 3,900 100
Company F 2,500 2,080 420*
Company G 1,300 1,300 0
Company H 1,300 1,300 0
Company I 1,600 780 820*
Company J 133 130 3
Total 2,178,033 2,171,390 6,643
Unadjusted Mean 217,803 217,581 222
Adjusted Mean 10,015.23 9,835.43 179.8
*
mild outliers; **extreme outlier
67
Table 4.5 compares the monthly quantity of carton sheets purchased by the clients
against their monthly quantity of carton sheets needed or used. The difference gives a
rough estimation of the amount of safety stock or extra inventory of carton sheets that the
company has per month. It can be seen from the table that most companies (A, B, D, E,
G, H, J) prefer to have little to none safety stock. It is likely that they consume all their
purchased carton sheets during the month. these companies are likely to use just-in-time
(JIT) inventory systems and economic order quantity (EOQ) model since it minimizing
material handling and storage (Gomes and Mentzer, 1988; Bassin, 1990). Some
companies like F and I have an intermediate amount of safety stock (420 and 820 pieces,
respectively) while Company C has a very high amount of safety stock inventory per
month (5,200 pieces). These may signify that these companies have some months
wherein they stop purchasing in order to use up the accumulated extra stock of carton
sheets and stop adding more safety stock inventories to their warehouses. The other
companies are likely to purchase from Ma-Vill Corporation consistently since they use up
almost all of the carton sheets they purchase for the month.
The unadjusted mean difference between the monthly quantity of carton sheets
purchased and monthly quantity of carton sheets needed is 222 pieces, and the difference
between the adjusted means is 180 pieces. This implies that, on average, the clients of
Ma-Vill Corporation keep very little amount of safety stock, such that they consume and
use most of the carton sheets they purchase in a month. It supports the statement of
Cheng (2007) that keeping high levels of inventory or safety stock can be a costly
exercise. With this, it can be inferred that production need are a major factor that affects
greatly the quantity of carton sheets purchased by companies because most of these
68
companies mainly purchase for needs and buying for safety stock purposes is almost
Table 4.6
Relationship between Production Need and Bulk Purchase Price
Respondent Quantity Needed(pcs.) Amount of Purchase(₱) Test Values
Company A 80,000* 2,500,000*
Company B 2,000 100,000
Company C 1,000 135,000
Company D 300 8,000
Company E 150 13,000
Company F 100 12,000
Company G 50 14,000
Company H 50 25,000
Company I 30 10,000
Company J 5 4,000
Correlation, r 0.8261
Determination, r2 0.6824
Very Strong
Interpretation
Positive Correlation
*
extreme outliers are excluded in calculating the Pearson correlation coefficient
The Pearson correlation coefficient between the quantity of carton sheets needed
and the bulk purchase price of the respondents is 0.8261. Following the Pearson
relationship between the two variables is very strong since it falls within the 0.8 ≤ r < 1
range. Having a positive relationship signifies that an increase in the quantity of carton
sheets needed or production need will lead also to an increase in bulk purchase price.
Furthermore, the interpretation implies that strength of the relationship between the two
variables is very strong. Therefore, the first alternative hypothesis of the study that there
The reason for the high correlation between production need and purchase price
justifies the 2007 study of Ji and wood that consumption and purchase behaviors are
69
closely linked together. As seen on the table, companies with high amounts of production
need, which means that it also has a high consumption of the material purchased,
The coefficient of determination between the two variables is 0.6824. This means
that 68.24% of the variance of the bulk purchase price can be predicted from the amount
of quantity of sheets needed. Furthermore, this may also imply that there is a 31.76%
Table 4.7
Importance of Production Need on Bulk Purchase Price
Choices Frequency (f) Percentage (%) Interpretation
1 (Not Important) 0 0
2 (Slightly Important) 0 0
3 (Moderately Important) 0 0
4 (Important) 7 70
5 (Very Important) 3 30
Total 10 100
Weighted Mean 4.3
Remarks Important
Table 4.7 shows the level of importance of production need in considering the
amount of purchase price the company spends for a single bulk order of raw material by
the respondents. Almost all of Ma-Vill’s customers considered it important (f=7, %=70).
The weighted mean of the answers is 4.3 and according to the NIH Scoring System, its
production need to be important in considering the price that they will spend or budget
price has an implication on the type of demand that it has for raw material which is carton
sheets. Becker (2005) stated that it is known that demand for products that are considered
70
to be necessary or a primary need is less sensitive to changes in price changes in such a
way that costumers will still continue to buy these products despite price increases. Thus,
this implies that Ma-Vill’s clients have an inelastic demand for carton sheets.
Distance
Table 4.8
Distance of Respondents to Ma-Vill Corporation
Respondent Distance (km)
Company A 4.9
Company B 5.4
Company C 7.5
Company D 3
Company E 7.8
Company F 13.6
Company G 9
Company H 4.7
Company I 4.8
Company J 8
Range 10.6
Mean 5.3
Std Dev. 3.0255
Canduman, Canduman, Mandaue City. The company with the farthest distance to Ma-
Vill is Company C with a distance of 13.6 kilometers and its opposite is Company D with
the least distance of 3 kilometers. It can be inferred from this that the range of the
distance of the customers from Cebu City and Mandaue City to Ma-Vill Corporation is
10.6 kilometers. The average distance of the clients to Ma-Vill is 5.3 kilometers with a
standard deviation of 3.055. The standard deviation means that, on average, the distance
of each customer to its supplier deviates around 3.0255 of the mean distance which is 5.3.
This implies that the average range of distace is from 2.2745 to 8.3255.
71
Table 4.9
Relationship between Distance and Frequency of Orders
Frequency of Number of Orders
Respondent Distance (km) Test Values
Order per Month
Company A 4.9 once a week 4
Company B 5.4 once a week 4
Company C 7.5 once a week 4
Company D 3 twice a month 2
Company E 7.8 twice a month 2
Company F 13.6 once a month 1
Company G 9 once a month 1
Company H 4.7 once a month 1
Company I 4.8 semi-annually 1/6
Company J 8 twice a month 2
Correlation, r -0.2198
Determination, 0.0483
r2
Weak Negative
Interpretation
Correlation
It is mentioned in the related studies that businesses that are far from their
supplier tend to lessen the orders of their carton sheets and increase the amount of each of
their order in bulk. A Pearson correlation test was performed and the strength of the
relation between the two variables is a weak negative correlation since it belongs to the
-0.4 ≤ r < -0.2 range. Furthermore, it can be observed the correlation coefficient is very
near to the upper limit of 0.2 which means that the relationship of the two factors is
almost negligible. Lastly, the coefficient of determinations gives a value of 0.0483 which
means that only 4.83% of the variance of the frequency of order per month can be
predicted by the distance of the customer to the supplier. It has a high error of prediction
of 95.17%. Therefore, the distance of the customers of Ma-Vill to their supplier is a very
weak basis of the number of orders that they will have per month.
Table 4.10
Relationship between Distance and Bulk Purchase Price
72
Respondent Distance (km) Amount of Purchase (₱) Test Values
Company A 4.9 2,500,000*
Company B 5.4 100,000
Company C 7.5 135,000
Company D 3 8,000
Company E 7.8 13,000
Company F 13.6 12,000
Company G 9 14,000
Company H 4.7 25,000
Company I 4.8 10,000
Company J 8 4,000
Correlation, r -0.0933
Determination, r2 0.0087
Interpretation No Correlation
*
extreme outliers are excluded in calculating the Pearson correlation coefficient
The Pearson correlation coefficient between distance in kilometers and the bulk
purchase price of the clients of Ma-Vill Corporation is -0.0933. This correlation is very
because it falls within the -0.2 ≤ r < 0.2 range. The second alternative hypothesis of the
study is rejected and consequently, its corresponding null hypothesis that there is no
significant relationship between the two variables is accepted. Furthermore, when the
calculations imply that distance of the customers to Ma-Vill Recycling Corporation does
This finding is supported by the study of Bell, Ho, and Tang (1998) where it was
found that location no longer explains most of the variance in store or supplier choice
decisions. Rather, supplier choice decisions seem to be consistent with a model where
consumers optimize their total costs, and effort to access the store location is one
component of their fixed cost of purchasing. However, this does not conclude that
73
location is no longer important, but it suggests that customers’ choice for a supplier may
Table 4.11
Importance of Distance on Bulk Purchase Price
Choices Frequency (f) Percentage (%) Interpretation
1 (Not Important) 3 30
2 (Slightly Important) 3 30
3 (Moderately Important) 3 30
4 (Important) 1 10
5 (Very Important) 0 0
Total 10 100
Weighted Mean 2.2
Remarks Slightly Important
amount of purchase price spent for a bulk order of raw material. Most of Ma-Vill’s
customers range their answers from “not important” to “moderately important” (f=3,
%=30). These result in a weighted mean of 2.2 which is interpreted as slightly important.
This finding is consistent with the lack of correlation between distance and bulk purchase
price. Ultimately, these imply that clients of Ma-Vill Corporation find distance to be just
The slight importance can be explained by the same study of Bell, Ho, and Tang
(1998) that customers just tend to adjust to the distance of the store when other factors
such as price discounts, brand image, and reliability, are favorable. Thus, it can be
inferred that the customers may have seen other advantages and benefits from Ma-Vill
also possible that the customers may have criteria in choosing a supplier for carton sheets
Price Discounts
74
Table 4.12
Trade Discount Received by Respondents in Percentage and Pesos
Respondent Trade Discount (%) Amount of Purchase (₱) Trade Discount (₱)a
Company A 5 2,500,000** 125,000**
Company B 3 100,000* 3,000*
Company C 2 135,000* 2,700*
Company D 5 8,000 400
Company E 3 13,000 390
Company F 0 12,000 0
Company G 2 14,000 280
Company H 2 25,000 500
Company I 0 10,000 0
Company J 3 4,000 120
a
Trade Discount in pesos = percent trade discount multiplied by the amount of purchases in pesos
*
mild outliers; **extreme outliers
Table 4.12 shows the amount of trade discount that respondents, which are buyers
of carton sheets from Ma-Vill Corporation, in terms of percentage and pesos. The percent
trade discount is multiplied to the amount that a company spends or budgets for a single
bulk order of carton sheets in order to have a proper estimation of the amount of trade
discount that they receive in terms of money per order. Companies A and D receive the
highest discount in percentage (5%) while Company A receives the highest discount in
terms of amount (125,000). It can also be observed that Ma-Vill sometimes gives no
Iglewicz and Hoaglin’s outlier test have identified Companies A, B, and C values
to be outliers and Tukey’s test have identified Company A’s values to be extreme
Company A has the highest trade discount in terms of percentage and has a very high
discount in terms of money. This may be attributed to the very large amount order that
Table 4.13
75
Mean and Standard Deviation for Trade Discount (in Pesos)
Without Adjustment Outliers Adjusted
Mean 13,239 763.14
Std Dev. 39,284.20 1,121.58
Presented above in Table 4.13 are the mean and standard deviation of the amount
of trade discounts that the clients of Ma-Vill Corporation receive using both the
unadjusted and outlier-adjusted method. It can be observed from the data that Ma-Vill
gives an average of ₱763.14 trade discount on their customers for carton sheets. This
mean trade discount has a high deviation of ₱1,121.58 which means that the average
trade discount that the customers may receive range from ₱0 to ₱1,884.72.
increase sales (Wierenga & Soethoudt, 2010), and based on the result shown in the table
above, Ma-Vill Corporation has a good practice of giving fair discounts to its customers
in order to encourage more orders from them, or place higher amounts on their orders.
Table 4.14
Relationship between Trade Discount and Bulk Purchase Price
Respondent Trade Discount (₱) Amount of Purchase (₱) Test Values
Company A 125,000* 2,500,000*
Company B 3,000 100,000
Company C 2,700 135,000
Company D 400 8,000
Company E 390 13,000
Company F 0 12,000
Company G 280 14,000
Company H 500 25,000
Company I 0 10,000
Company J 120 4,000
Correlation, r 0.9606
Determination, r2 0.9228
Very Strong
Interpretation
Positive Correlation
*
extreme outliers are excluded in calculating the Pearson correlation coefficient
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Pearson correlation coefficient test between the quantity of trade discount and the
bulk purchase price of the respondents returned a value of 0.9606. In accordance with the
positive relationship between the two variables and its strength is very strong because the
value is within the 0.8 ≤ r < 1 range. The positive relationship implies that an increase in
the trade discount is would most likely lead to an increase in the amount of bulk purchase
price also. Moreover, the strength of the significant relationship between the two
variables signifies that an increase or decrease in the trade discount is a strong indicator
of an increase or decrease in the bulk purchase price, as well. Thus, the third alternative
hypothesis of the study is accepted and there is a correlation between the amount of trade
related literature of the study. Neha and his colleagues in the 2013 study concluded that
sales promotion such as price discounts greatly influenced customers’ purchase decision.
In addition to it, this is also supported by other studies stating that the effect of price
Table 4.15
Importance of Trade Discount on Bulk Purchase Price
Choices Frequency (f) Percentage (%) Interpretation
1 (Not Important) 2 20
2 (Slightly Important) 1 10
3 (Moderately Important) 0 0
4 (Important) 5 50
5 (Very Important) 2 20
Total (n=10) 10 100
Weighted Mean 3.4
Remarks Moderately Important
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It is observed in Table 4.15 the level of importance of trade discount in
considering the amount of purchase price that the customers of Ma-Vill spend for a single
bulk order of raw material by the respondents. Half of the respondents considered it
important (f=5, %=50). Moreover, the weighted mean of the answers is 3.4 which is
to be purchased in bulk. This supports the statement by Chao et al. (2016) that price
Table 4.16
Mean and Standard Deviation for Bulk Purchase Price
Without Adjustment Outliers Adjusted
Mean 282,100 33,328.57
Std Dev. 780,579.20 45,744.83
The mean bulk purchase price that the clients of Ma-Vill Corporation spend on
buying carton sheets is shown above in Table 4.16. The average price that the
respondents spend or budget for bulk purchase of carton sheets is ₱33,328.57. Moreover,
Section III
Greatest Impact on Purchase Price Among Three Factors
The fourth hypothesis of the study assumes that distance of the client to the
supplier has the greatest impact on the amount of bulk purchase price of carton sheets
that a consumer spends. This is tested by comparing the correlation coefficient of the
variables, the respondents’ answers to the question which among the three independent
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variables (production need, distance, price discounts) affect purchase decision the most,
and the Likert-scale results on each variable’s level of importance to purchase price.
Table 4.17
Comparison of Correlation Coefficient of the Three Independent Variables
Coefficient Production Need Distance Trade Discount
Correlation, r 0.8261 -0.0933 0.9606
Determination, r2 0.6824 0.0087 0.9228
Interpretation Positive (Very Strong) No Correlation Positive (Very Strong)
Table 4.17 compares the Pearson correlation coefficient of the three variables
being tested by the study that affects bulk purchase price and purchase decision. It is
observed that distance is not correlated with purchase price (r = -0.0933), and thus, it
does not give a significant impact on a customer’s purchase price. The fourth hypothesis
is then rejected, and the answer to which among the three factors has the greatest impact
Both production need and trade discount have a very strong positive correlation with bulk
purchase price, but trade discount has a stronger relationship and coefficient for
determination than of production need. This means that trade discount and purchase price
have a stronger correlation, and because it has a high coefficient of determination, the
amount of trade discount is likely to predict the amount of purchase price with a
that correlation is insufficient prove causation (Aldrich, 1995). Therefore, the strength of
the relationship between the two variables does not necessarily prove its impact.
Table 4.18
Which among these factors affect the purchase decision of the company the
most?
Choices Frequency Percentage
Distance 0 0
Price Discounts 7 70
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Production Need 3 30
Table 4.18 reports the answers of the respondents to the question, “Which among
these factors affect the purchase decision of the company the most?” with choices being
the three independent variables of the study. None answered distance and this is
persistent to the lack of correlation of distance to purchase price. The highest response to
the question is price discounts (f=7, %=70). which is followed by production need (f=3,
%=30). Based on the survey, price discount is the main consideration of the purchase of
Ma-Vill’s clients which is followed by their production need. Thus, it can be inferred that
price discounts have more impact than the production need of the company on the
purchase decision-making of the customers of Ma-Vill. However, this still does not
exactly verify the answer to which among the three factors has the highest impact on
purchase price, because the question asks for the effect on purchase decision which is not
Table 4.19
Weighted Means for the Level of Importance of the Three Variables on Purchase Price
Production Need Distance Trade Discount
Weighted Mean 4.3 2.2 3.4
Interpretation Important Slightly Important Moderately Important
The comparison of the derived weighted means from the Likert-scale questions on
the level of importance of the variables to bulk purchase price is shown in Table 4.19.
Still, the results are consistent that distance has the least impact on the bulk purchase
price and behavior of Ma-Vill’s clients. Furthermore, it is observed that this time,
production need have the highest weighted mean for its level of importance which is
followed by trade discount. It can also be seen that there is a high difference between the
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weighted means which results in production need being important and trade discount
Based on these results, the impact of the variables on purchase price can be
measured through its level of importance. Production need have the highest level of
importance, therefore, production need have the highest impact on the amount of
purchase price that a company spends for bulk purchase of carton sheets.
Section IV
Various suggestions for pricing can be derived based on the results and findings of
1. Identify customers and clients with the highest consumption of a specific raw
Market to them the products with high selling price or increase unit price of the
Explanation: Based on the results of the survey, production need and bulk purchase
price has a very strong positive correlation. It can be observed on the data that the
clients with the highest consumption for a raw material are those with the highest
production need as well, which consequently means that they spend and budget more
for their purchases. Furthermore, these companies with high production need have an
inelastic demand to their needed carton sheets because they are considered to be a
necessary or a primary need to their operation and thus, they are less sensitive to price
changes in such a way that costumers will still continue to buy these products despite
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price increases. Becker (2015) describes this as a situation where consumer reaction
relationship with each other. Based on the survey results, the clients of Ma-Vill
respondents were asked which among the three independent variables of the study
affect their purchase decision the most, none answered distance. According to Bell,
Ho, and Tang (1998), consumers consider adjusting to distance to the supplier when
other factors are favorable. All of these imply that distance does not impact much the
supplier selection and purchase decision of buyers of carton sheets, and because of
this, it is encouraged for Ma-Vill to expand its market size and stick to their selling
3. Identify customers with high purchasing power or budget. Offer higher trade
Explanation: Customers with high purchasing power are those that have high
production need, and in return, they allocate a large amount of budget in their
purchases. Trade discounts are shown to have very strong positive correlation with
the amount of purchase price. Moreover, trade discounts are the top answer when
respondents were asked which among the three independent variables of the study
affect their purchase decision the most. These data imply that trade discount has a
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significant impact on purchasing decision and purchase price of companies. When a
customer has high purchasing power, it is a good strategy to offer sales discounts in
order to influence the client to spend most of his budget or purchase more goods from
the company.
Explanation: Most of Ma-Vill’s clients answered trade discounts when asked which
among the three factors affect their purchase decision the most. This suggests that
This supported by the related literature of the study that sales promotion techniques
such as price discounts are effective instruments that increase sales of products,
usually in a short time (Wierenga & Soethoudt, 2010), because they act in the
the offering of discounts is a marketing activity that is less costly than advertising.
At the last part of the survey, the respondents were asked regarding their
their answers:
These answers by the respondents of the study are also helpful in considering
effective pricing and sales strategies of the business. The researchers suggest
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considering these comments from the respondents in formulating new strategies or
Section V
Recycling Center Corporation has made various impacts to different sectors of the
society. Some of impacts that the corporation have made are socio-economic impacts.
These refer to how an entity has affected a paticular group’s or socioeconomic class’
behavior within the society including their actions as consumers or buyers of products or
services.
1. The corporation exports carton sheets. These sheets are bought by companies that
process them to produce carton boxes, corrugated boxes, and the like. Considering
the distance of the business to some of its clients, some companies would have
higher freight cost in buying from Ma-Vill than buying from nearer corporations.
The cost of the boxes that the client produced will include the freight cost and will
boxes will then be bought by companies and will use them as packaging (e.g. pizza
boxes, ice cream boxes, candy boxes) of their products. Since the packaging is part
of the expenses in making a product, this again increases the selling price. The
increase affects the purchase price of the retailers and cause them to increase their
selling price in respect to the expenses they incurred. This selling price now affects
the budget and expenditures of the people or the end-users. On the other hand, it
would be a positive impact for the clients who are near the corporation since it
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would free them from the trouble of finding nearby firms that sell carton sheets. It
lessens their expenses and prevents the chain reaction of price build-up.
2. When buying carton sheets from suppliers, especially junk shops, one of the main
get too wet and smelly due to improper segregation and that excludes them from
being bought. This lessens the possibility of the cartons to be recycled and a huge
since it decreases the potential materials that the corporation can buy. It is also one
of the propaganda of the corporation to help in protecting the environment even just
through proper segregation. In order to solve this problem, Ma-Vill encourages and
convinces junk shops and the people to properly segregate the wastes they
collected. The corporation tries to educate them on the proper collection and
segregation of wastes and how they can help increase the value of these wastes and
the possibility of them to earn money through sellling recyclable materials. Also,
they join programs and groups that promote these practices. These junk shops
would then require households to segregate their trashes before selling these to
them. This makes a beautiful impact to the behavior of the junkshops and the people
and to the condition of the environment. Furthermore, this retains the original value
3. Just from being in operation, Ma-Vill is able to give more job opportunities to the
people. Considering that Ma-Vill is a corporation, this guarantees that it could offer
more job opportunities than smaller businesses. This makes a huge impact on the
lives of their employees as well as their families who depend on their income.
85
86
Chapter 5
SUMMARY, FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
SUMMARY
The study evaluated the effects of production need, distance, and price discounts
on the bulk purchase behavior for carton sheets by the customers of Ma-Vill Recycling
price. The relationship between the three independent variables of the study and bulk
Review of related literature was made with the following topics; i) raw materials;
ii) bulk purchasing; iii) inventory systems; iv) production demands or needs; v) distance
of customer to the supplier; and vi) price discounts. The theoretical framework utilized
for this study was the model for factors and criteria affecting purchase decision of
manufacturing companies made by Gao and Tang in their 2003 study: a multi-objective
Data about the existing clients of Ma-Vill Recycling Center Corporation was
gathered by visiting the company and interviewing the operations manager and head
officer for customer relations of the company. The survey was performed on the existing
clients of Ma-Vill around Cebu City and Mandaue City, with the help of the agents of the
company. Data gathering method used was through personal interviews and
questionnaires.
The study revealed that productions needs and price discounts have a very strong
positive correlation with bulk purchase price (Pearson r = 0.8261, and r = 0.9606,
respectively). On the other hand, distance from the customer to its supplier was found to
87
have no correlation (r = -0.0933). Furthermore, among the three variables, production
need were found to have the greatest impact on bulk purchase price.
The study concluded that production need or the number of carton sheets that a
company consumes for a specific period of time and price discounts have a favorable
effect on both bulk purchase price and purchase behavior of the customers of Ma-Vill
Corporation. Distance has little impact to purchase decisions in buying carton sheets in
bulk.
which is the main beneficiary of the study. The strategies involve increasing selling price
for clients with high production need, expanding market size, sticking to original selling
price when bargained from distant clients, and offering price discounts to customers with
SUMMARY OF FINDINGS
combination of three major pricing methods: (i) cost-plus pricing, (ii) contribution
margin-based pricing, and (iii) competitive pricing. In setting a unit price for a material,
the company first considers the cost of production such as direct materials, labor, and
operating expenses. Second, the company assumes a number of units that can be sold for
a proposed selling price. Third, the proposed selling is then compared with the prevailing
market price and the selling price of their competitors. Furthermore, the company also
88
customers. This is done in order to establish a better customer relationship, to encourage
prompt payments, to increase sales, and to give incentives for customer loyalty.
Production Need
The average daily and monthly quantity of carton sheets consumed or used for the
production of the clients of Ma-Vill are 378 and 644 pieces, respectively. The average
quantity of carton sheets purchased monthly is 10,015 pieces. The clients usually
purchase once a week, once a month, and twice a month. The average safety stock
inventory that they hold per month is 180 to 222 pieces. Most of them, however, keep
little to none safety stock inventory. It was found out that production need have a very
strong positive relationship with bulk purchase price. Furthermore, production need is
important for customers of Ma-Vill in considering the bulk purchase price of carton
sheets and it has the highest level of importance in considering purchase price among the
three factors examined. Lastly, the clients consider production need to be the second most
Distance
Although it is mentioned in the related studies that a far distance may cause a lesser
amount of orders, there is a weak negative correlation between distance and the
and the amount of bulk purchase price that companies spend for carton sheets. Ma-Vill’s
89
Price Discounts
The average price that the clients of Ma-Vill Corporation spend or budget for a
bulk purchase of raw material is ₱33,328.57, and the average trade discount that they
receive is ₱763.14. Price discounts and bulk purchase price have a very strong positive
correlation with each other, and among the variables, price discounts have the strongest
relationship with bulk purchase price. Furthermore, the clients found price discounts to be
moderately important in considering the amount that they will spend in buying carton
sheets in bulk. However, when considering purchase decision, the customers find price
CONCLUSIONS
The study concludes that the pricing methods incorporated by Ma-Vill Recycling
competitive pricing. Furthermore, the company also use sales promotions by giving price
The findings and results conclude that there is no significant relationship between
distance from customer to a supplier and bulk purchase price, while there is a very strong
positive relationship between production need, and bulk purchase price. There is also a
very strong positive relationship between price discounts and bulk purchase price, and
this relationship has the highest strength among the three relationships.
Production need was found to be the factor with the greatest impact to the amount
90
Pricing-related suggestions are offered to Ma-Vill Corporation based on the
findings of the study. These suggestions include: (i) identifying clients with high
production need and selling them units starting at a high unit price (ii) expanding market
size and sticking to original selling price when making bargains with distant clients; and
(iii) offering trade discounts to customers with high purchasing power (iv) winning
The researchers came up with a revised conceptual framework that are based from
the results and findings of the study. The conceptual framework is shown below:
Production
Need
+ Very Strong Positive Correlation
No Correlation Bulk Purchase Bulk Purchase
Distance
Price Behavior
RECOMMENDATIONS
The findings and results of the study were thoroughly analyzed and the
recommendations are for Ma-Vill Corporation, while the third recommendation is for
customers, in order to find out which among them has high purchasing power and
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high demand for a specific raw material. This can be done by analyzing past
purchasing power and high demand for products allocate large budget for
purchasing carton sheets and have an inelastic demand for items. Consequently, less
Corporation. The researchers also advise to give high trade discounts to these
2. The researchers suggest for Ma-Vill Corporation to expand market size to new and
importance to the customers of Ma-Vill Corporation, and thus, they are more likely
to adjust to distance if other factors are favorable such as reliability of the firm, and
businesses value trade discounts in their purchase decision when buying carton
sheets in bulk.
Table 5.1
Summary of Price-Related Suggestion to Ma-Vill Corporation
Production Need Distance Price Discounts
• Identify clients with high • Retain selling • Offer trade discounts to customers
production need and price when being with high demand and purchasing
purchasing power. Increase bargained by power
their selling price without distant customers
• Offer price discounts to win new
affecting their price sensitivity.
• Expand market and potential customers
• Offer trade discounts to size to distant
• Offer price discounts when
customers with high customers
tradeoff between anticipated
production need to encourage
increase in sale and reduction from
more purchase
discount is favorable
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3. The researchers highly recommend future studies that aims to expand the current
findings and results of this study to increase the number of respondents, expand
research respondents to other manufacturing businesses and not just clients of Ma-
Vill Corporation, and to collect more data from sales and purchases of different
companies in order to have a more statistically reliable data for discounts, and
purchases.
93
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Zipkin, P.H. (1991). Does manufacturing need a JIT revolution. Harvard Business
Review, 69, pp. 40-50.
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APPENDIX A – TRANSMITTAL LETTER
Greetings of peace and solidarity! We are Grade 12 students of the University of San
Carlos Senior High School that are taking up Research 03B under the Accountancy,
Business, and Management (ABM) strand as part of the Senior High School curriculum
mandated by the Department of Education. In line with this, we are tasked to make a
marketing research based on a chosen company.
Ma-Vill Recycling Center Corp. is one of the leading waste management and recycling
facility in Cebu. With this, we are deeply interested in studying your company as subject
for our marketing research. We would humbly like to know if your company would be
available in imparting basic company information for our research through an interview
or survey questionnaire in the next weeks to come. Rest assured, the data gathering
methods will be according to your utmost convenience and sensitive information will be
kept confidential.
For easier dissemination of information on your part, we would like to ask a contact
person, with his/her contact number and/or e-mail, from your company can guide/assist
us, the students, during the surveys.
Should you have further questions/clarifications, you may contact our logistics member
Ryan C. Fernando through his mobile 0956-839-3443.
Respectfully yours,
Noted by:
Dear Sir/Ma’am:
Good day! We are Grade 12 students of the University of San Carlos in the Accountancy,
Business, and Management strand. As a requirement for our strand, we are currently
conducting a marketing research about the effects of production need, distance, and price
discounts on bulk purchase behavior for raw materials of manufacturing companies.
The respondents for this study are manufacturing businesses that are based in the area of
Cebu City. In accordance with this, we have chosen you to be one of our respondents
who are knowledgeable in this field. The researchers hope that you will spare a few
minutes to answer the following questions.
Your response and participation to this survey would very much be appreciated. The data
that will be gathered will be beneficial in giving the manufacturing businesses industry
additional insights on bulk purchase behaviors on raw materials that would prove to be
useful in making effective purchase decisions. The researchers assure that all data
gathered will be treated with confidentiality and will be used for academic purposes only.
Kindly affix your printed name and signature below if you have understood the details of
the study, and agree in answering the questionnaire. Thank you very much for your time!
I have understood the details of the research and the survey, and I consent in answering
this survey:
_____________________________________________ __________________
Respondent’s Name and Signature Date
102
General instructions: Kindly fill in the blanks with the necessary information or check
the box of your corresponding answer to the question. Check only one box for each
question unless otherwise specified. Your participation is greatly appreciated. Thank
you!
Part I:
Respondent’s Name (Optional): _______________________________________
Position/Relationship to the Business: __________________________
Name of Business: ___________________________________
Location/Address of the Business: ____________________________________________
Finished product/s being produced: __________________________
Part II: In answering the following questions, kindly consider only carton sheets as the
raw material needed by the business.
1.) How many carton sheets does the company consume/need for its daily production,
and how many does the company buy for that carton sheets every time it makes a
purchase?
2.) How often does the business purchase the raw material?
3.) How much does the company spend or budget for a single bulk order of raw material?
4.) How much trade or price discounts does business receive every purchase?
5.) Where is the supplier of the business for the raw material located? If known, you may
also specify the distance (in kilometers) from the place of business to the supplier.
_____________________________________________________________________
103
6.) In a scale of 1 to 5, how important is the amount of trade/price discounts in
considering the amount of purchase price that the company spends for a single bulk
order of raw material?
7.) In a scale of 1 to 5, how important is the quantity needed of a raw material for daily
production in considering the amount of purchase price the company spends for a
single bulk order of raw material?
8.) In a scale of 1 to 5, how important is the distance of the location of the supplier in
considering the amount of purchase price of a raw material the company spends for a
single bulk order?
9.) Which among these factors affect the purchase decision of the company the most?
10.) What additional information does the company consider when purchasing raw
materials in bulk? (Optional)
________________________________________________________________________
________________________________________________________________________
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APPENDIX C – CURRICULUM VITAE
Personal Information
Educational Background
University of San Carlos – Downtown Campus, P. Del Rosario St., Cebu City,
Cebu
“The study on the role of convenience, service quality, product quality and store
105
Personal Information
Educational Background
University of San Carlos – Downtown Campus, P. Del Rosario St., Cebu City,
Cebu
“The study on the role of convenience, service quality, product quality and store
106
Personal Information
Educational Background
University of San Carlos – Downtown Campus, P. Del Rosario St., Cebu City,
Cebu
107
Personal Information
Educational Background
University of San Carlos – Downtown Campus, P. Del Rosario St., Cebu City,
Cebu
108
Personal Information
Educational Background
University of San Carlos – Downtown Campus, P. Del Rosario St., Cebu City,
Cebu
109