THE EXECUTIVE CHIC INC.

EXECUTIVE SUMMARY

The Executive Chic Inc. is a family-owned corporation with the purpose of tailoring
custom-made uniforms for identified members of the community. The original operation of the
company commenced at the Province of Nueva Ecija through the leadership of the matriarch of
the Gonzales Family. It has been registered at the Securities and Exchange Comission (SEC) on
September 02, 2002.
Currently, the company operates at 58 Pla Pla St., Kaunlaran Village, Brgy 014,
Caloocan City, Metro Manila. The pioneer of the company is Ms. Illuminada Gonzales and was
later on succeeded by her daughters, Ms. Nimfa Gonzales-Pacson and Ms. Marissa Gonzales-
Santiago.
The target customer of The Executive Chic Inc. are institutions from the public and
private, including national agencies, local government units and premier companies in the metro.
It has a generic strategy of being cost leader in the garments industry, particularly the custom-
made sector. Furthermore, the
The major concern for The Executive Chic Inc. is the inventory management and
marketing strategy of the company.
At present, the inventory management of the business practices safety stock strategy
where a bulk of inventory materials are maintained by the company. This strategy has caused
efficiency issues in the resource allocation of the business.
Also, the production capacity and target market of the business has also causes major
concerns. With the tough competition in the market, the marketing approach of The Executive
Chic Inc. lacks presence in the social media aspect. Furthermore, the fully depreciated machines
hamper the production capacity of the business.
To fully assess the business’ competitive position in the market, the researcher utilized a
variety of tools to grasp the external and internal environment of the company. Through the
Internal-External Factor Evaluation Matrix, the researcher was able to extract the ideal strategy
to implement for the business which is the Hold and Maintain Strategy through market
penetration and product development.
 As a result of the strategy matching tools, the researcher recommended that The
Executive Chic Inc. to improve its marketing strategy though digital marketing and advertising
materials such as brochures and catalogues.
Second, to increase the production capacity, the researcher proposed that the company
must invest on procuring new machineries and equipment. It has been discovered that the
business operates with fully depreciated equipment which incurs significant amount of repairs
and maintenance cost.
Third, to align the company’s production capacity with its target market, the researcher
encourages the management to pursue clients in the local government units and MSMEs. These
sector of the community is fitting to the limited production capacity of the company.
Lastly, the management must invest on an Enterprise Resource Planning System that will
aid the business in the monitoring and management of business’s finances and operation aspect,
which includes the inventory management. Instead of allocation a large portion of the business’
resources towards inventory stocking, the company must apportion the resources towards the
ultimate goal of profit maximization for the stockholders.
Overall, the researcher can ascertain that with the proper implementation and effective
execution, the proposed strategies for The Executive Chic Inc. will reap maximum rewards for
the stockholders.

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 TABLE OF CONTENTS

APPROVAL SHEET.....................................................................................................................2
LANGUAGE EDITING CERTIFICATE...................................................................................3
ACKNOWLEDGMENT...............................................................................................................4
DEDICATION...............................................................................................................................5
EXECUTIVE SUMMARY...........................................................................................................6
TABLE OF CONTENTS..............................................................................................................8
LIST OF TABLES.......................................................................................................................11
LIST OF FIGURES.....................................................................................................................12
LIST OF GRAPHS......................................................................................................................13
LIST OF APPENDICES.............................................................................................................14
CHAPTER I : Industry Analysis................................................................................................15
1.1 Definition of Industry...........................................................................................................15
1.2 PESTLE Analysis.................................................................................................................17
1.3 Analysis of the Industry Using Porter’s Five Forces Model................................................26
1.4 Major Industry Players.........................................................................................................31
1.5 Competitive Profile Matrix..................................................................................................33
1.6 Opportunities and Threats in the Garments Industry...........................................................37
1.6.1 Opportunities............................................................................................................37
1.6.2 Threats.......................................................................................................................39
1.7 External Factor Evaluation Matrix.......................................................................................41
1.8 Conclusion on Industry Analysis.........................................................................................43
CHAPTER II : Company Analysis............................................................................................44
2.1 Company Background..........................................................................................................44
2.2 Products and Services...........................................................................................................45
2.3 Customer History.................................................................................................................45
2.4 Organizational Diagnosis and Value Chain Analysis..........................................................46
2.4.1 Organizational Diagnosis.........................................................................................46
a. Management Audit......................................................................................................46
b. Marketing Audit..........................................................................................................47
c. Operations Audit.........................................................................................................48
2.4.2 Value Chain Analysis...............................................................................................49

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 a. Primary Activities.......................................................................................................49
b. Support Activities.......................................................................................................52
2.5 Financial Analysis and Conclusion......................................................................................54
2.5.1 Statement of Financial Position/ Balance Sheet.......................................................54
2.5.2 Statement of Financial Performance / Income Statement.........................................55
2.5.3 Financial Ratios and Conclusion..............................................................................55
2.5.3.1 Profitability Ratios..................................................................................................55
2.5.3.2 Efficiency Ratios....................................................................................................56
2.6 Strengths and Weaknesses of The Executive Chic Inc........................................................57
2.6.1 Strengths...................................................................................................................57
2.6.2 Weaknesses...............................................................................................................59
2.7 Internal Factor Evaluation Matrix and Conclusion..............................................................61
2.8 Strategic Issues facing the firm............................................................................................62
CHAPTER III : Strategy Formulation......................................................................................64
3.1 Strategic Option: SWOT Matrix..........................................................................................64
3.1.1 S-T Strategies............................................................................................................65
3.1.2 S-O Strategies...........................................................................................................66
3.1.3 W-T Strategies..........................................................................................................66
3.1.4 W-O Strategies..........................................................................................................66
3.2 Strategic Option: Internal and External (IE) Matrix............................................................67
3.3 Vision and Mission of The Executive Chic Inc...................................................................68
3.3.1 Proposed Vision Statement.......................................................................................68
3.3.2 Proposed Mission Statement:....................................................................................68
3.4 Generic Strategy...................................................................................................................69
3.5 Present Strategy....................................................................................................................69
3.6 Objectives.............................................................................................................................70
3.6.1 Strategic Objectives..................................................................................................70
3.6.1 Financial Objectives..................................................................................................70
3.7 Proposed Strategy.................................................................................................................70
CHAPTER IV : Implementation................................................................................................74
4.1 McKinsey 7S Framework....................................................................................................74
4.1.1. Hard Elements..........................................................................................................74
4.1.1.1. Strategy.............................................................................................................74

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 4.1.1.2. Structure...........................................................................................................75
4.1.1.3. System..............................................................................................................75
4.1.2. Soft Elements............................................................................................................75
4.1.2.1. Shared Values...................................................................................................76
4.1.2.2. Style..................................................................................................................76
4.1.2.3. Staff..................................................................................................................76
4.1.2.4. Skills.................................................................................................................77
4.2 Balanced Scorecard..............................................................................................................78
CHAPTER V : Financial Assumptions......................................................................................81
5.1 Summary Results.................................................................................................................81
5.2 Attainment of Objectives.....................................................................................................82
5.3 Financial Projection Assumptions.......................................................................................82
5.4 Projected Financial Statements............................................................................................83
5.5 Projected Financial Ratios...................................................................................................86
REFERENCES............................................................................................................................87
APPENDICES..............................................................................................................................90

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 LIST OF TABLES

Table 1 : Major Industry Players...................................................................................................31

Table 2 : CPM Matrix of the Major Industry Players....................................................................35
Table 3 : CPM Matrix of The Executive Chic Inc.........................................................................37
Table 4 : The EFE Matrix of The Executive Chic Inc...................................................................41
Table 5 : Three Year Financial Position (2017 to 2019)...............................................................54
Table 6 : Three Year Financial Performance (2017 to 2019)........................................................55
Table 7: Key Officers of The Executive Chic Inc.........................................................................57
Table 8 : Distance between TECI and nearby potential clients.....................................................58
Table 9 : List of Suppliers and Years of Engagement with TECI.................................................59
Table 10 : IFE Matrix of The Executive Chic Inc.........................................................................61
Table 11 : SWOT Matrix of The Executive Chic Inc....................................................................64
Table 12 : IE Matrix of The Executive Chic Inc...........................................................................67
Table 13 : Analysis of the Proposed Vision..................................................................................68
Table 14 : Evaluation of Proposed Mission Statement..................................................................69
Table 15 : McKinsey's 7S Framework...........................................................................................77
Table 16 : Balanced Scorecard of The Executive Chic Inc...........................................................79
Table 17 : Projected Financial Performance (2021 to 2025).........................................................83
Table 18 : Projected Financial Position.........................................................................................84
Table 19 : Projected Statement of Cash Flows (2021 to 2025).....................................................85
Table 20 : Projected Changes in Equity (2021 to 2025)................................................................85
Table 21 : Summary of Financial Ratios (Projected Years)..........................................................86

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 LIST OF FIGURES

Figure 1: Basic Garment Manufacturing Process..........................................................................16

Figure 2 : Tailoring Shops in the National Capital Region (NCR)...............................................26
Figure 3 : Garment Capital of the Philippines (Taytay, Rizal)......................................................28
Figure 4 : 2018 CPBI - Distribution of Manufacturing Establishments in the Philippines...........29
Figure 5 : Porter's Five Forces of the Garments Industry..............................................................30
Figure 6 : Areas covered by the Enterprise Resource Planning (ERP) System.............................71
Figure 7: Process of establishing Social Media Marketing Roadmap...........................................72
Figure 8 : Sample Brochures and Catalogue for a tailoring shop..................................................72
Figure 9 : Organizational Structure of The Executive Chic Inc....................................................75
Figure 10 : Balanced Scorecard Diagram......................................................................................78

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 LIST OF GRAPHS

Graph 1 : Philippine Inflation Rate (2017-2020)...........................................................................19

Graph 2 : Peso Exchange Rate from 2000 to 2020........................................................................19
Graph 3 : 2018 Classification of Establishments in the Philippines..............................................21
Graph 4 : Total Employment contribution per business classification (2018)..............................21
Graph 5 : Geographic Distribution of Business Establishments...................................................38

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 LIST OF APPENDICES

Appendix A : Notes to Financial Statements (2021 to 2025)........................................................90

Appendix B : Financial Ratios (Historical and Projected Years)..................................................92
Appendix C : Quotation Sample for the ERP System...................................................................95
Appendix D : Procurement Cost Schedule of ERP System and Machines (2021 to 2025)..........96

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 CHAPTER I
INDUSTRY ANALYSIS

The industry analysis section of strategic management is a mechanism to understand the

competitive dynamics of the industry. It is a tool that helps identify key external factors essential
in the assessment of the potential opportunities and imminent threats relative to the business
operation.

1.1 Definition of Industry

The Philippine Garments Industry, also known as the sunrise industry of the 90’s, is the
business of manufacturing pieces of clothing with the use of textiles and accessory parts. It
produces a wide range of products that includes customized uniforms, dresses, suits, and ready to
wear apparels. However, in the age of General Agreement on Tariffs and Trade (GATT), the
industry continuously struggled to survive. This is an impact of the industry’s customary reliance
on the quota system brought by the Multi-Fiber Agreement (MFA). The garment industry relied
on the benefits of the imposed quotas on developing countries, like the Philippines, to export to
first tiered nations.
The garments industry is a labor-intensive type of industry. It requires a relatively large
number of workers to manufacture the products and render their services.
The industry has provided employment for Filipinos, both for the formal and informal
sector of the economy. In the 2016 Annual Survey of Philippine Business and Industry (ASPBI),
the formal economy of the garment industry has employed 65,813 Filipinos. This figure has
further increased in 2018. As stated in the Census of the Philippine Statistics Authority, the
garments industry accounted for 98,868 employed Filipinos or 7.80% of the formal economy.
(Mapa, 2020)
Presently, the industry is gearing up towards regaining its former glory. The effort
includes strengthening the linkage between the textile and garment industry of the Philippines,
allocating resources for an improved production, and providing lower taxes/ fiscal incentives for
the industry players. This plan by the government will provide a more sustainable source of
fabrics and other textile materials for the industry players. The garments industry relies heavily
on imported raw materials to produce their finished goods.

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 The industry is further categorized in the following subsets:
A. Industrial. This subcategory includes the mass production of apparel/ dresses and requires a
high number of laborers and large equipment and machineries. It follows an ideal body measurement for
the production and often, the fitting of the garment is not perfect for the potential customers.
Additionally, industrial production includes a process called pattern grading. This process allows
the industry to create a wide-range of sizes for a single apparel style.

B. Tailoring. Also known as the custom-made process of garment construction. This process
meticulously follows the precise body measurement of a specific client. Tailoring, unlike industrial
production, requires a relatively low number of skilled workers and minimal number of machineries.
The tailored garment production is known for its high fabric wastage due to the
unique measurement of the patterns.

Figure 1: Basic Garment Manufacturing Process

Meanwhile, the garment industry has identified two production process that most industry
players implement.
a. Cut, Make, Trim (CMT) System. It basically includes the process of cutting, trimming and
sewing the garment into a fully furnished goods. (Liang, 2020) The clients of the business have full
control over fabric and other textile selection. This allows the business to save a lot of time and focus on
the production process.

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 a. Full Production Package System. This is a clothing production type where the business
facilitates the entire process. From the fabric selection to the final garment production, the business will
be responsible every step of the way. The most common hindrance for this type of production is the
amount of time it takes to fully finish the production process.

1.2 PESTLE Analysis

PESTLE Analysis is the assessment of the external factors that has an impact to the
competitive environment and operation of the industry. It provides the reader with a “bird’s eye
view” of the industry through digging deeper on its (1) political, (2) economic, (3) social, (4)
technological, (5) legal, and (6) environmental aspect relevant to its development.

1.2.1Political Factors
Ratification of the CREATE Bill
The Department of Finance, under the leadership of the Duterte administration, has
proposed several version of TRAIN Law Package 2. It originated from the TRABAHO Bill
which was later revised into the CITIRA Law and this 2021 the House of Representative called it
the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Bill.
In the final reading of the bill, the chamber approved the final version of the CREATE
bill, which seeks to lower corporate income tax from 30 percent to 25 percent for large
corporations and 20 percent for small and medium corporations. (Cervantes, 2021)
With this new fiscal incentive, business investors are likely to be encouraged to invest in
industries and sectors that are aligned with the government’s development agenda. Also, it can
create higher value job for Filipino workers. This bill’s incentives will be performance based,
targeted, time bound and transparent.
This CREATE Bill will be an opportunity for businesses to effectively utilize their
resources and allocate the tax savings from the Corporate Income Tax Rate for other necessary
expenditures of the entity, such as procurement of equipment (capital infrastructure) and hiring
of additional workforce (people). Also, there will be subsequent 1% decrease in Corporate
Income Tax (CIT) in the coming years until it reaches the 20% mark. (Lim, 2020)

Quarantine Restrictions

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 The COVID-19 pandemic has created an impact across all borders. With the danger of
community transmission, the government took the initiative of implementing the military
approach of total lockdown. This has resulted to the temporary closures of businesses and
mobility restrictions for the people. With people locked down inside their homes, the
consumption for non-essential goods/services has declined. Towards the latter part of 2021, the
community quarantine restriction eased up and businesses were allowed to operate given their
adherence with the minimum health standard.
However, with the emergence of more infectious variants, experts say that the dream of
having a COVID-19 free environment will have to wait until the latter parts of the year or worse
we’ll have to deal with COVID until 2022 or 2023. (Sarun Charumilind, 2021)
The uncertainty brought by the varying community quarantines greatly affects the
capacity of the business to maximize profit and achieve optimal gain for its shareholders.

1.2.2 Economic Factors

Philippine Growth Rate and BSP’s Interest Rates
The Philippine economy is expected to recover slowly from the 2020 economic downfall.
According to the World Bank, they expect that the country will have an economic growth of
5.9% and 6.0% for the year 2021 and 2022 respectively. However, this expected growth is far
from the target annual growth rate of 6.5 to 7.5% and 8 to 10%, correspondingly. (Remitio,
2020)
Moreover, in an effort to help jumpstart the economy, Bangko Sentral ng Pilipinas (BSP)
has revised their monetary policy for the 5th time in the year 2020. Their move was dubbed to be
the most aggressive action by any central bank in the world. BSP has issued a reduced interest
rates to make the bank borrowing cost cheaper which should attract more borrowers and
stimulate domestic demands towards economic recovery. (Lim, 2021)

Philippine Inflation Rate

The Philippine Statistics Authority (PSA) reported that the December, 2020 Philippine
inflation rate has rose to 3.5%. However, the average inflation rate for the year 2020 settled at
2.6%, only 0.1% higher than the 2.5% rate in 2019. (National Economic and Development
Authority, 2021)

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 6.00%

5.00% 5.10%

4.00%

3.00% 2.90%
2.50% 2.60%
2.00%

1.00%

0.00%
2017 2018 2019 2020

Graph 1 : Philippine Inflation Rate (2017-2020)

The inflation rate of the Philippine economy has a huge impact on the business
industry, like the garments sector. Inflation will prompt an increase in the prices of imported
raw materials and diminish the purchasing power of the employees. In the garments
industry, an increase in the price of raw materials will create a negative impact on the cost of
production.

Health of the Philippine Peso

For the past 2 years, the Phililippine Peso gets stronger against the US Dollar. As shown
in the graph the trend is it gets lower, the December 2020 exchange rate closed at Php 48.34
which is lower than the December 2018 and 2019 closing rate of Php52.72 and Php 48.34,
respectively.

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 Graph 2 : Peso Exchange Rate from 2000 to 2020
However,
economists says that this economic development has a positive and negative effect on the
business industry.
According to the Philippine Chamber of Commerce (PCCI), the benefits of a strong peso
includes cheaper imports, lower consumer prices, benign inflation and lower foreign debt
servicing. However, the stronger peso also entails disadvantages such as expensive exports, less
value for OFW remittances and curtails development of local industries. (Sy, 2020)
For the garments industry, who imports textiles and fabrics, a stronger peso means that
the imported goods are at a lower price. It lowers the production cost of the business.
According to trend economy website, here are the top 10 trading partners of the
Philippines in terms of importing "Woven fabrics of synthetic filament yarn, including woven
fabrics obtained from materials for the year 2019: (Trend Economy, 2019)
1. China with a share of 52% (60 million US$)
2. Other Asian countries, with a share of 16.4% (19 million US$)
3. Korea with a share of 8.87% (10.2 million US$)
4. Vietnam with a share of 4.34% (5 million US$)
5. Japan with a share of 4.13% (4.77 million US$)
6. Hong Kong with a share of 3.79% (4.38 million US$)
7. Indonesia with a share of 2.65% (3.06 million US$)
8. USA with a share of 1.59% (1.83 million US$)
9. Thailand with a share of 1.1% (1.26 million US$)
10. Malaysia with a share of 1.02% (1.18 million US$)

Micro, Small and Medium Enterprises in the Philippines

Micro, Small and Medium sized Enterprises (MSMEs) is considered to be the backbone
of the Philippine Economy. There are 1,003,111 business establishment operating in the
country and out of these number 998,342 accounts for MSMEs.

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 Graph 3 : 2018 Classification of Establishments in the Philippines

The Department of Trade and Industry estimates that MSMEs contributed 35.7% of the
total value-added or gross domestic product in 2018. MSMEs generated 5.7 million jobs or
63.2% of the total employment in 2018. (Congressional Policy and Budget Research
Department, 2020)
Additionally, the MSMEs sector employs 63.19% of the total employment of business
establishments.

1.2.3 Social
Factors
Graph 3 : Total Employment contribution per business classification (2018)

Emergence of embroidered uniforms

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 In the Philippines, the fashion of corporate uniforms has evolved. From the traditional
formal terno uniform, the emergence of embroidered casual wear has invaded the culture of
corporate apparel. The art of embroidery dates back from the Spanish colonial times and it has
been a part of Philippine fashion since then. However, the tedious process of hand crafting and
the amount of time it took to produce a design made the art of embroidery expensive and
unpopular.
With the development of innovative machines, the art of embroidery has now arisen as
part of the Philippine fashion, including in the corporate uniforms sector. The shift from the
traditional formal terno uniform to the casual embroidered shirt is a result of the comfortability
and functionality over fashion trend.
According to Deirdre Clemente, a historian who studied about the shift of uniform
preference, “Over the past 100 years, comfort and versatility have come to define our
wardrobes. Nobody wants to be uncomfortable at work anymore.” (Thompson, 2019)

Impact of Social Media to the preference of consumers

Filipinos are prolific users of the social media. In 2019, data shows that there are 76
million active social media users from the Philippines. Of this number, 75 million are on
Facebook; 12 million on Twitter, and 4 million are LinkedIn users. (Gonzales, 2019)
During the peak of the pandemic, 60% of the small businesses in the Philippines relied on
social media and technology to keep their business afloat. The social media became their main
line of communication to customers and it provides a relief on the burden brought by the limited
mobility of consumers. According to Go Daddy, an internet domain registrar and web hosting
company, their survey found out that 43% of Filipino business owners are planning to create
their own websites, and 38% are considering to get into the e-commerce platform. (Aguinaldo,
2020)

1.2.4 Technological Factors

In a competitive world, the evolution of technology is a major force that affects a business.
Businesses, like the garments industry, has to be well-versed on the latest innovations that will help
improve their production through increased labor productivity and reduction of overall manufacturing
cost.

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 Some of these technologies are as follows:

a. Size Stream 3D Body Scanner;

This breakthrough technology uses 20
infrared lasers to take over 250 body
measurements in as fast as 14 seconds.
Also, it allows the tailors to be efficient in
getting the body measurements of the
clients. This kind of innovation has
already reached the Philippine shore and is
currently being used by Manila
Embroidery Gold Inc., one of the players
in the custom-made garment industry.

b. Manufacturing Customer Relationship Management (CRM);

CRM systems are designed to record and store every piece of information regarding customer
interactions. This can create sales projections, nurture the prospect through the sales funnel, can manage
invoices and communication and more. A CRM improves efficiency, increases sales and offers more
accuracy with customer data. As a result, customer relations are enhanced. (Sherweb, n.d.)

c. Enterprise Resource Planning (ERP);

ERP software is designed to streamline business operations. While a CRM focuses on the sales
side of the organization, an ERP system is integrated and implemented across multiple departments.

d. Computer Aided Design (CAD) Software & Computer Aided Manufacturing

(CAM) System.
Computer-aided design (CAD) involves creating computer models defined by geometrical
parameters. These models typically appear on a computer monitor as a three-dimensional representation
of a part or a system of parts, which can be readily altered by changing relevant parameters. CAD systems

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enable designers to view objects under a wide variety of representations and to test these objects by
simulating real-world conditions. (Ames, 2006)
Computer-aided manufacturing (CAM) uses geometrical design data to control automated
machinery. CAM systems are associated with computer numerical control (CNC) or direct numerical
control (DNC) systems. These systems differ from older forms of numerical control (NC) in that
geometrical data are encoded mechanically.
Since both CAD and CAM use computer-based methods for encoding geometrical data, it is
possible for the processes of design and manufacture to be highly integrated. (INC, n.d.)
The technology brought by CAD and CAM allows businesses to be efficient in the design and
product development. It provides the efficient and effective generation of quality products which then
allows the business to develop products at par with the demands of the clients.

Advertisement in the age of Internet

Traditionally, a business in the garments industry advertises its products through
brochures, pamphlets and personal presentations. Such materials are presented to potential
customers to inform and attract them about the features and quality of the products. However, as
time passes by and as technological developments took over the market, an internet-based
marketing was developed.
In this modern age, businesses should capitalize on the use of the internet to advertise
their products and improve their customer reach. According to forbes.com, businesses with an
established and well-crafted website is perceived by clients to be more credible and trustworthy.
There are chances that several businesses offer the same product, like in the garments industry,
but a website with all the information needed by the customer can be a competitive advantage for
the business. A website on the internet can reach more client overall the country without the
hassle of having to travel to the place.
Based on the survey conducted by the Philippine Statistics Authority, the Information
Economy of the country reported 44.9% of business establishments maintaining a website of
their company. It is higher than the 2015 survey which indicated that 29.5% of the businesses
have a website (Philippine Statistics Authority, 2020)

1.2.5 Legal Factors

Culture of Contractualization

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 Contractualization is the practice of hiring employees for a short period of time, usually 6
months and below, before terminating them. This system allows business to reduce cost of
mandatory benefits to be given to regular employees. (Osoro, 2020)
The culture of contractualization is both beneficial and detrimental for businesses. As a
benefit, this practice gives the company the advantage of reducing production cost. However,
this practice affects the turnover rate of the business’ employee and it may hamper the business
processes.
In the Philippines, the practice of contractualization is very rampant, even in the
government. However, President Duterte included in his campaign promise to end this unethical
practice. The passage of this bill received a strong objection from the business community, but
they are relieved when the President vetoed portion of the bill.
As stated, “…while labor only contracting must be prohibited, legitimate job-contracting
should beb allowed, provided that the contractor is well capitalized. Businesses should be
allowed to determine whether they should outsurce certin activities or not.” (Punongbayan,
2019)
In the 2015 Integrated Survey of Labor and Employment of the Philippine Statistics
Authority, there are 7 Million Filipino workers engaged in the exploitative end of contract and
labor only contracting working arrangements. Also, the industry of manufacturing, which
includes garment factories, is found to be one of the top user of the this unethical practice.
The garments industry is a known patron of this labor practice. If contractualization truly
ends, this industry will likely be impacted greatly as it relies of contractual labor force.

1.2.6 Environmental Factors

According to the United Nations Economic Commission, 10% of global carbon emission is
linked to the fashion, garment, apparel industry of the countries. Also, 85% of the the raw
materials being used by the industry ends up in landfills and take years before decomposing.
Materials such as syntethic fibers and polyester takes twice or thrice the carbon emission of
cotton production. The carbon footprint of these fibre materials emits more greenhouse gases
than a coal-fired powered plants.

Waste Accumulation

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 When garments factory conducts large scale production, the waste produced after the
cutting process is enormous. The wastage accounted is expected to be 3% of the total fabric
consumption. It seems to be a small percentage, but when equated into thousands or millions of
raw materials the wastage parallel to high quantity of waste. (Mohapatra, 2020)

1.3 Analysis of the Industry Using Porter’s Five Forces Model

The Porter’s Five Forces is a framework that allows a business to assess the competitive environment
of the industry it belongs to. It gives them the overview of the potential problems they may face in the
business operation. The analysis of the business industry as a whole and the competitor’s capacity to
excel is crucial in the survival of the business.
In this section, the researcher will provide you an assessment of the overall competitive
environment of the garments industry, which includes the custom-made garments sector.

1.3.1 Threat of New Entrants – Moderate

The garments industry, which includes the business of tailoring/custom-made, is a relatively
easy industry to enter into. As proof, there are a large number of tailoring shops in the metro as
shows in Figure 2.
According to Speedian Industrial Trading Inc., a supplier of industrial sewing machine and
other equipment located at Tondo, Manila, a brand-new basic sewing machine is priced at least
Php 10,000.00 to 35,000.00, while a refurbished machine is expected to be at least Php 7,500.00,
depending on the brand of the equipment. This particular aspect of the industry may attract
investors or business-minded people to enter into the industry. However, the industry is covered
by several government agencies, such as the local government unit, DTI and BIR, that requires
tons of documentary requirements proving to be an ordeal for some. The tedious process of
establishing the business negates the positive impact of the low price of equipment.

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 Figure 1 : Tailoring Shops in the National Capital Region (NCR)

Furthermore, the garments industry caters to 2 main sectors: the public and the private
sector of the country.
For the public sector, the threat of new entrants is relatively low. This assessment is
driven by the unusual licenses, such as PhilGEPS Registration, being required by the agencies
during the bidding/ procurement process. Also, this specific client of the industry may relatively
include political factors in their procurement activity which new businesses may not be able to
tolerate. After all, the Philippine Public Procurement is nicknamed as the “spawning ground” for
corruption. (Philippines, 2008)
For the private sector, the threat of new entrants is moderate. This judgment was based
on the level playing field that industry players has to operate. Unlike in the government, the
private sector can be penetrated by start-up businesses who has the capacity to supply the
demand of the client. In the government, a good client list is a must to gain a head start against
the competition.
Overall, the researcher can ascertain that the potential entry of new competitors in the
garments industry is deemed to be moderate.

1.3.2 Threat of Substitute – Low

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 The custom-made garment industry produces tailored uniforms for the public and private
companies. Uniforms is defined to be a dress of a distinctive design or fashion worn by members
of a particular group and serving as a means of identification. (Merriam-Webster, n.d.)
Through the years, the preferences of employees regarding their uniforms have evolved.
From the traditional formal uniform, the emergence of a more casual approach into uniform has
surfaced. This change of preference is being linked to the fast-pace working environment of the
companies and the workers value about functionality over fashion.
While the threat of preference change is imminent, the concept of having a uniform,
whether formal or casual, is here to stay.
Therefore, the researcher’s assessment for the threat of substitutes for the products being
manufactured by the industry is low.

1.3.3 Bargaining Power of Suppliers – Moderate

The garments industry, which includes tailoring shops, have three “major suppliers” that
is essential for the manufacturing of their product. These suppliers are namely; (1) Fabrics, (2)
Equipment (Sewing Machine, Embroidery etc), and (3) Laborer/ Manpower
First, the negotiating power of fabric supplier is considered to be moderate. This
assessment is brought by the number of fabric distributors and retailers available overall the
country. In fact, the country has the so-called “Garment Capital” in Taytay, Rizal which is touted
to be the main supplier of fabrics in the metro and nearby locations (Figure 3).

Figure 2 : Garment Capital of the Philippines (Taytay, Rizal)

23
 Second, the bargaining power of the equipment supplier to dictate their price is
moderate. In the age of social media, there are several potential suppliers of equipment in the
marketplace of social networking sites. Some of which are open to lowering their prices to meet
the budget constraints of the potential buyer. Also, the existence of refurbished/ surplus
machines has also impacted their bargaining position.
Lastly, the third main supplier is the laborer/ manpower. In the Philippines, the
minimum wage is set at the range of Php 500.00 to Php 537.00/ day depending on the industry
classification. (Commission, 2018) With the government setting the minimum wage earned by
the employees, the bargaining position of the laborer is low. However, there are situation
wherein the business considers the skill set and experience of the employees in determining their
wage rate. With that, the bargaining position of laborer/manpower supplier is deemed to be
moderate.
Overall, the researcher can ascertain that the bargaining power of suppliers in the
garments industry is set to be at the moderate level.

1.3.4 Bargaining Power of Buyers - High

Based on the 2018 Census of Philippine Business and Industry: Manufacturing (Figure
4), the estimated number of establishments related to the wearing apparel sector is 869. This is a
considerable number of businesses that provides option for potential buyers.

Figure 3 : 2018 CPBI - Distribution of Manufacturing

Establishments in the Philippines (Mapa, 2020)

24
 Given the substantial number of industry players, the bargaining position of the buyer to
demand a decrease in the prices is relatively high. If a buyer is not satisfied with the pricing of
one potential business supplier, the buyer can choose other entity to satisfy their needs.
Also, the garment industry supplies businesses that are considered to be larger than the
entity itself. In such cases, the buying entity can request for discount for the bulk orders of their
product.

1.3.5 Rivalry of Competition - Moderate

There are established and startup businesses in the garments industry who are in some
ways competes with each other. Their competition is characterized by the (1) loyalty of
customers, (2) the pricing arrangement, (3) the production capacity of the business and (4) the
quality and timeliness of product delivery.
Customer loyalty is difficult to achieve, but not impossible. It requires a long consistent
harmonious relationship with the customer, primarily satisfying their expectations on pricing and
product quality. This is a great competitive advantage for a business.
In order to maximize the buyer’s resources, the demand for low-cost but quality products
are on the rise. Such pricing arrangement, should be mutually beneficial for the buyer and the
industry players.
The ability to produce a large amount of order is a great competitive advantage. As
previously mentioned, the buyers of this industry are relatively larger than the firm itself.
Therefore, their demands may include bulk orders which should be met satisfactorily to attain
customer loyalty.
The quality and timeliness of product delivery is significant because it creates a culture
of trust and confidence between the supplier and the buyer.
With all the foregoing discussion, the researcher concluded that the rivalry of competition
in the garments industry, particularly the custom-made sector, is deemed to be moderate.
Amongst the criteria mentioned above, achieving customer loyalty is the penultimate success for
a garment manufacturer/ business. It provides longevity of the business operation and maximum
profit generation.

25
 1.3.6 Conclusion

Threat of New
Entrants
(Moderate)

Bargaining
Power of
Rivalry of Bagaining
Suppliers Competition Power of
(Moderate) (Moderate) Buyers (High)

Threat of
Substitutes
(Low)

Figure 4 : Porter's Five Forces of the Garments Industry.

Even though the threat of new entrants, the bargaining power of supplier and the rivalry
among competitors are deemed to be moderate and the bargaining power of buyer is high
business enthusiast should be moderately attracted to the garment industry because of the low
threat of substitute for the product. This means that the products being offered by the industry
will continue to exist into the foreseeable future.
Also, the moderate rivalry of competition may be further mitigated through the
establishment of business strategies suitable for the business and its target market. Through the
Porter’s Five Forces, the researcher can ascertain that the industry is moderately attractive to
engage in.

1.4 Major Industry Players

In order to craft an effective and efficient strategic management, it is important to identify and
assess the major players of the industry where the business operates. This will provide the management
with an overview of the competitive advantage that the company has over its major competitors.
For the Executive Chic Inc, the researcher has identified 2 other major industry players.

26
Table 1 : Major Industry Players

27
 1.4.1 Manila Embroidery Gold Inc.

The company was established in 1972 by Marilyn Bediones Ongkingco at the Rotary
Building in Ayala Center, Makati City.
MEGI caters to the upper elite group of businessmen, ambassadors, government officials,
diplomats and their wives providing them with tailor-made garments to wear for their parties,
social functions and for their day-to-day use. (Manila Embroidery Gold Inc., n.d.)
They started their tailor-made business for corporate uniforms when several contractors
and top designers sought their expertise in hand, machine and computerized embroidery, design-
making, pattern making, sewing and finishing for their garment needs.
Manila Embroidery Gold Inc has established 2 clothing line specifically catering to the
needs of its client namely, Suit it Up Manila and Bride Manila. One of the company’s
competitive advantage is their 3D Body Scanner by Size Stream USA where the efficiency of
body measurement is 99%. This investment made by the company is the first in the country.
Moreover, MEGI values their customer loyalty. In fact, they have a client who has been
served by the company for more than 20 years. This company was not disclosed but the
employees they cater in this company is almost 2,000 individuals.
The Executive Chic Inc. competes with MEGI in attracting public/private agencies in
getting their services to tailor their custom-made uniforms and other clothing needs. In fact,
MEGI is the supplier of corporate uniforms of the Landbank of the Philippines, which according
to Ms. Pacson, TECI’s CEO, is one of their most sought-after agencies because of the volume of
potential orders.

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 1.4.2 Exclusively His Tailoring

Exclusively His Tailoring was established on 1965 by Mr. Benjamin C. De Ocampo as a

sole proprietor business. From its humble beginnings in the province, EHT has now become the
biggest chain of tailoring shops in the country.
Exclusively His is well known for offering its services at very affordable prices without
compromising its quality (allhitdata.com)
Also, it is one of the leading tailoring shop in the Philippines with more than 55 years of
experience in the industry. It started as a small in-house tailoring shop which blossom into
several chains of stores.
The Executive Chic Inc. competes with Exclusively His Tailoring in the suits and men’s
wear line. Since TECI also tailors these kinds of apparel for men, it is a tough act to defeat a
tailoring shop with over a dozen of shops all over the country.

1.5 Competitive Profile Matrix

Competitive profile matrix is an essential strategic management tool to effectively compare the firm
with the major players of the industry. Competitive profile matrix shows the clear picture to the firm
about their strong points and weak points relative to their competitors. (Quain, 2018)
In this section of the paper, the researcher will provide you a rivalry comparison of the
competing firms in the garments industry where The Executive Chic Inc is associated with under
the custom-made industry.
1.5.1 Key Success Factors

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 As mentioned in the Porter’s Five Forces Model, the garment industry is a moderately
attractive industry to engage in because of the minimal capital requirements and the demand for
the product as it doesn’t have definite substitute. However, this indicator is not enough to
guarantee the success of a business in the industry.
With the growing competition in the market, business should have these key success
factors to gain a competitive advantage over its rivals.
1.5.1.1 Product Quality
The products of the business should be of the highest standard of quality to gain a
relatively good margin of competitive advantage. This key success factor drives the achievement
of the other KSF, specifically customer loyalty. It is essential for a product related business to
ensure that everything that goes out of their door is something worth the money of their clients.

1.5.1.2 Production Capacity

This key success factor attracts customers especially when ordering with a large volume
of products. It allows the business to meet target timeline set by the buyer and be efficient in the
use of the company’s resources. Production capacity in the garments industry is essential because
time is of the essence in terms of the use of the product.

1.5.1.3 Customer Loyalty

Customer loyalty is an essential factor for long term success. It provides the company
with assurance that a revenue will be profited from the relationship. Moreover, while customer
loyalty’s primary goal is to retain them as a client, the end goal would be having these loyal
customers be the advocate of the company through word of mouth.
To quote, “Word-of-mouth marketing is highly persuasive. We trust our friends and
family members when they recommend retailers, services or companies to us. Loyal customers
believe in your company, and they're not shy about sharing their positive feedback with others.”
(Freedman, 2020)
1.5.1.4 Innovative Technology
In this age of technology, businesses should be able to adapt to the innovations/ changes
happening in the business circle. A garment industry, like tailoring shops, involves the use of

30
industrial sewing machine, embroidery machine and cutting equipment which is currently
evolving to cater the fast-paced market.
This is contributory to the success of a business in the garments industry because it
provides faster production, less waste, reshoring and localization of production nearer to market
and lower carbon footprints. (Centre for the Promotion of Imports, 2019)

1.5.2 Competitive Profile Matrix (CPM)

Table 2 : CPM Matrix of the Major Industry Players
The Executive
Manila Embroidery Exclusively
Chic Inc.
Critical Success Factor Weight Gold Inc. His Tailoring
(TECI)
Rating Score Rating Score Rating Score
1 Product Quality 0.30 3 0.90 4 1.20 4 1.20
2 Production Capacity 0.25 2 0.50 3 0.75 3 0.75
3 Customer Loyalty 0.20 3 0.60 4 0.80 4 0.80
Innovative
4 0.25 1 0.25 3 0.75 2 0.50
Technology
  Total 1.00 2.25 3.50 3.25
  4 - Major Strength 3 - Minor Strength 2 - Minor Weakness 1- Major Weakness

CSF # 1: Product Quality

The measure of product quality is really uncertain for the researcher. However, based on
the data gathered on the company’s website and the interview performed the researcher can
ascertain that MEGI and EHT is rated at 4.0. The fabrics that they use are graded to be A-class
and from the European Market. They also use local fabrics, such as piña and jusi, which is of the
best quality.
Meanwhile, TECI was rated at 3.0. Admittedly, they source out resources from Divisoria,
Taytay and Manila. Although they admit the fabrics are cheaper than what its competing firm’s

31
uses they assure their client that the kind of craftsmanship they put on their product is of the best
quality. Also, some of the fabrics that they use are imported from other countries, such as China.

CSF # 2: Production Capacity

In terms of the company’s capacity to produce bulk orders, MEGI and EHT are tied with
the rating of 3.0. According to their website, EHT has 250 personnel – 150 of which are skilled
tailors. Meanwhile, the number of employees for MEGI is not available but their website states
that they regularly supply 2,000 uniforms for one of their loyal clients.
Lastly, TECI registered a 2.0 rating because admittedly they lack the manpower and high
power equipment to produce bulk orders. They have a total of 36 skilled workers, a combination
of tailors and cutters. This success factor has been an issue for the company. As mentioned
previously, they aspire to be the supplier of the Landbank of the Philippines, however, this
proves to be a tough feat to overcome because of the large volume of products they have to tailor
all at once. With the limited manpower, this will be a main issue.

CSF # 3: Customer Loyalty

For customer loyalty, the researcher rated MEGI at 4.0. They have a long list of client,
public and private, which they have been serving for almost 20 years. The kind of customer
loyalty is being valued by the company because it gives them the consistent influx of revenue.
Exclusively His Tailoring was rated at 4.0. By having several chain of stores in Luzon,
chances are customers will patron them because of their accessibility and ideal locations.
The Executive Chic Inc. was rated at 3.0 as well because they have the history to repeat
order because they are satisfied with the kind of quality and customer service they have received.

CSF # 4: Innovative Technology

Among the three companies, Manila Embroidery Gold Inc. registered a 3.0 rating
because of the existence of Size Stream Innovative Machine in their operation. This machine is
the latest technology in body measurement. It uses infra-red scanner to increase the accuracy of
the vital statistics of the customer.
Next, Exclusively His Tailoring received a 2.0 rating because they value craftsmanship
over the use of technology. Although they have computerized embroidery machines and several

32
industrial machines, EHT prefer the personal touch being brought on the table by their
employees.
Lastly, TECI was rated at 2.0. Based on the interview with the company executives, TECI
lacks the latest innovations in the market. They also have industrial sewing and embroidery
machine but they admitted that it isn’t at par with their competitors.

1.5.1 Conclusion on the Competitive Profile Matrix (CPM)

Table 3 : CPM Matrix of The Executive Chic Inc.
The Executive
Critical Success Factor Weight Chic Inc.
Rating Score
1 Product Quality 0.30 3 0.90
2 Production Capacity 0.25 2 0.50
3 Customer Loyalty 0.20 3 0.60
Innovative
4 0.25 1 0.25
Technology
  Total 1.00 2.25

Overall, The Executive Chic Inc. garnered a total rating of 2.25 or a below average rating
for the critical success factors identified by the researcher. The Executive Chic Inc., should
improve its business strategy by focusing on a more specific market aligned with the company’s
capability and resources. Through that, the company can further identify the market niche they
want to settle in.

1.6 Opportunities and Threats in the Garments Industry

Based on the industry analysis conducted through PESTLE Analysis, the researcher has
identified the following opportunities and threats of the garments industry. These
opportunities are the factors that industry players must capitalized on, and threats that they
should mitigate/ eliminate.

1.6.1 Opportunities
1.6.1.1 Ratification of the CREATE Bill by the Congress. The Corporate Recovery and
Tax Incentives for Enterprise (CREATE) is a fiscal tax incentive directed towards helping

33
businesses to jumpstart their operation and overturn the effects of the recent pandemic. This bill
will be an avenue for the business to allocate additional resources on other priority expenditures
such as infusion of additional manpower, and procurement of much needed equipment.
According to Secretary Dominguez of the Department of Finance, “CREATE is really
about trusting the private sector. Instead of passing funds through what tend to be less efficient
government programs, this will leave the money in the private sector’s hands to revitalize their
businesses.” (DOF, 2021)

1.6.1.2 The large number of MSMEs in Luzon. In the 2019 MSME Statistics from the
Department of Trade and Industry, majority of the micro-small-medium enterprise can be located
at the National Capital Region, Region IV-A and Central Luzon. (See Graph 5)
Graph 4 : Geographic Distribution of Business Establishments (Department of
Trade and Industry, n.d.)

The large number of MSMEs in Luzon is a great opportunity for the garments industry,
especially The Executive Chic Inc., to gain more potential clients. These businesses will be a
more appropriate target market and establish a new market niche.

1.6.1.3 Emergence of technological innovations in the garment production. In the age of

technological advancements, it is essential for a business to keep up with the latest trends and
developments available in the market. It provides the company with a great competitive advantage and
increase production efficiency.
Also, technology has push the garment industry to be more sustainable and appropriate for the
business environment. Sustainability has become a crucial part of the survival capacity of the business.

34
 Technology trends, with the proper application and implementation, poses a great opportunity for
industry players to lengthen and improve its business operation. The potential benefits of these
technology are as follows: (CBI.eu, 2019)
a. Increase production efficiency;
b. Lesser lead time;
c. Lower incurred cost in the long run; and
d. Reduced operating expenses due to decrease in raw materials wastage.

1.6.1.1 Marketing potential brought by the existence of internet.

In this modern age, businesses should capitalize on the use of the internet to advertise their
products and improve their customer reach. According to forbes.com, businesses with an established and
well-crafted website is perceived by clients to be more credible and trustworthy. There are chances that
several businesses offer the same product, like in the garments industry, but a website with all the
information needed by the customer can be a competitive advantage for the business. A website on the
internet can reach more client overall the country without the hassle of having to travel to the place.
Furthermore, the use of internet or social media offers a wide array of opportunity for the
business. It can improve the line of communication between the client and the business, faster
transaction media and an alternative distribution channel. A website or a social media page can
boost the business’ knowledge of the market about the products and services of the business.

1.6.2 Threats
1.6.2.1 Potential expansion of major competitors that can affect the market share of the
business.
As mentioned in the Porter’s Five Forces Analysis, the industry has a moderate threat for potential
new entrants. With the relatively low cost of industrial sewing machines, a business can acquire
additional equipment and further improve the production capacity of the business.
Exclusively His Tailoring, one of the major competitors of The Executive Chic Inc., has expressed
their intention of establishing more branches in the future. It was just hampered by the pandemic, but it is
expected to prosper in the coming years.
This is a threat to the business because the expansion may take a part of the market share of TECI.
Currently, the subject entity has clients in Palawan and a potential expansion in the region mar greatly
impact TECI’s market share.

35
 1.6.2.2 Bid to end contractualization made by the Duterte Administration.
With the vision of the Duterte Administration to end contractualization, the threat of high labor cost
is imminent. This will increase the production cost of the company and limits the allocation of resources
for other expenses.
Although experts do not have the exact cost of endo for the businesses, the strong
opposition by business owners signifies that it will greatly affect the company’s net income.
(Canivel, 2018)
As previously mentioned, the garment industry is labor intensive. In fact, the garment
industry is identified to be one of the top patron of contractualization which includes the food
service industry and manufacturing sector. (Palabrica, 2016) This is a threat to the industry
players because a change in the employment terms or culture will incur additional cost for the
business.
1.6.2.1 Work from Home employment arrangement brought by the COVID-19
Pandemic.
One of the most drastic impact of the pandemic is the imposition of the work from home
set up of employees. This is the response of the business community to the clamor of the
government to limit the mobility of their workers. The nationwide and local lockdowns prove to
be a hindrance for employees to report for work regularly. Also, the industry of public
transportation hasn’t fully adapted to the new normal and is still prohibited to operate at full
capacity. With that, the business community discovered that the work from home set up can
actually work for employees in accounting, analytics and information technology sector.
According to Lenovo Philippines, the work from home set up was already being discussed
by industry players even before the surge of the pandemic. But the rapid spread of the virus
hastens the process of transition to off-site working.
This is a threat to the industry as it lessens the demand for working apparel and other
clothing accessories. When employees work from home, they tend to veer away from spending
on clothes because they don’t see the use of it. Also, the requirement for uniforms may diminish
significantly due to the remote working arrangements.

1.6.2.2 The evolving preference of the target market.

36
 Market Preference is an essential success factor for a consumer driven industry like the
garment industry. This is an opportunity for the company to explore avenues for expansion and
development. Also, it is important for a company related to clothes to keep abreast to the latest
trends in the market. This also projects an image of flexibility for the clientele and it will attract
potential clients to join the list.
As mentioned in the social factors of the PESTLE Analysis, the fashion of corporate
uniforms has evolved. From the traditional formal terno uniform, the emergence of embroidered
casual wear has invaded the culture of corporate apparel. This proves to be a threat for the
business as it will impact the demand for the products that the business offers.

1.7 External Factor Evaluation Matrix

The External Factor Evaluation (EFE) Matrix is a strategic tool used to assess the company’s
external environment and identify the potential opportunities and imminent threat for the industry players.
(Sridharan, n.d.) This section of the paper will discuss the opportunities and threats affecting the garments
industry, specifically The Executive Chic Inc., the subject firm.

Opportunities Weight Rating Score

1 Ratification of CREATE Bill by the Congress 0.15 3 0.45
2 The large number of MSMEs in Luzon 0.15 4 0.60
Emergence of technological innovations in the
3 0.10 2 0.20
garment production
Marketing potential brought by the existence of
4 0.15 2 0.30
internet
Threats
Potential expansion of major competitors that can
1 0.10 2 0.20
affect the market share of the business.
Bid to end contractualization made by the Duterte
2 0.10 2 0.20
Administration

37
 Work from Home employment arrangement brought
3 0.15 2 0.30
by the COVID-19 Pandemic.
4 The evolving preference of the target market. 0.10 2 0.20
  Total Weighted Average 1.00 2.45
Table 4 : The EFE Matrix of The Executive Chic Inc.

After conducting the External Factors Evaluation (EFE) Matrix and identifying the
opportunities and threats of the industry, The Executive Chic Inc. garnered a total weighted
average score of 2.45. This means that the company is below average in terms of its response to
imminent opportunities and threats.
For the analysis of the response of the subject entity to the aforementioned external
opportunities and imminent threats, the assessment are as follows:

Opportunities
a) Ratification of the CREATE Bill by the Congress.
The Executive Chic Inc. has been affected by the global pandemic. In their 2020 operations,
majority of their projects were delayed or postponed until further notice. It definitely created a dent on
their financial position. The rating for TECI in this opportunity is at 3.0. This CREATE Bill will be an
opportunity for the business to jumpstart their operation and to recover from the economic upset this
pandemic has created.
b) Large number of MSMEs in Luzon.
The Executive Chic Inc. has clients, both in the public and private sector of the economy. Given
the limited production capacity, the company is leaning towards focusing on MSMEs in Luzon. The
response rating for this external factor is 4.0 because the company is doing conscious effort to establish
its market niche. The company can increase their market share if the business will focus on MSMEs
instead of going after large establishments which is beyond of their production capacity.
c) Emergence of technological innovations in the garment production.
The Executive Chic Inc.’s rating for this opportunity is at 2.0. While the business has industrial
sewing machines and embroidery machine, they haven’t invested on the latest innovations available on
the market. The subject entity capitalizes on their employee’s craftsmanship.
d) Marketing potential brought by the existence of internet.
The Executive Chic Inc. doesn’t fully utilize the opportunity brought by online marketing,
hence the rating of 2.0. At the moment, the company doesn’t have an existing website or social

38
networking site. They relied heavily on their direct strategy approach to client and the loyalty of
their customers.

Threats
a) Potential expansion of major competitors that can affect the market share of the
business.
The response rating for this external factor is 2.0. Although the subject entity cannot
control the expansion project of its competitors, this external threat can be mitigated by
capitalizing on the large number of MSMEs in Luzon opportunity.
b) Bid to end contractualization made by the Duterte Administration.
Currently, the company reports that out of their 36 employees there are 20 regular, 6
contract-based and 10 on-call employees. While the company owners value their employees and
their contributions to the success of their business, the cost of regularizing all of them will be a
burden to the company. They mentioned that the demand for the products of the business is
inconsistent. Although there is no known substitute for uniforms, the demand for the product is
seasonal. For example, the frequency of a company to change their uniform is on an annual
basis.
c) Work from Home employment arrangement brought by the COVID-19
Pandemic.
The response rating of the company for this external factor is 2.0 or an average response.
The threat of the COVID-19 pandemic exposes many establishments into several vulnerabilities. For
TECI, this threat proves to be an area of concern. The company’s response for this threat is to explore
other target market suitable for the capacity of the business, like capitalizing on the MSMEs.
d) The evolving preference of the target market.
The rating is at 2.0. Although the business maintains and updated portfolio of the latest
trends in the market, the company still needs to improve their knowledge and facility to attain
market sustainability.

1.8 Conclusion on Industry Analysis

To assess and evaluate the industry of The Executive Chic Inc., the researcher employed
the use of PESTLE Analysis, Porter’s Five Forces Model and the External Factor Evaluation

39
(EFE) Matrix. The Porter’s Fiver Forces Model determined that the industry is moderately
attractive to engaged in and the EFE Matrix garnered a 2.45 rating for the company. It means
that the company should improve its business strategy in terms of its flexibility in dealing with
threats and capitalizing on its opportunities.

CHAPTER II
COMPANY ANALYSIS

2.1 Company Background

The Executive Chic Inc. (TECI) is a family-owned corporation located at 58 Pla Pla St.,
Kaunlaran Village, Brgy. 014, District 2, Caloocan City, Metro Manila. It was registered with the
Securities and Exchange Commission on September 02, 2002 with the primary purpose of
offering designs for corporate uniforms to public and private institutions. The company has a
wide range of designs that is suitable to customers’ preferences.

40
 Before its registration with the SEC, the matriarch of the Gonzales clan, Ms. Illuminada
Gonzales, has long been running a small dress shops in Caloocan and Nueva Ecija. But prior to
her retirement, Ms. Gonzales encouraged her daughters, Nimfa G. Pacson and Marissa G.
Santiago, to continue the operation of the business. The sisters then pooled in resources resulting
to the establishment of The Executive Chic Inc.
TECI has 20 regular employees, 6 contract-based and 10 on-call employees.
These employees are the company’s most prized asset. They are the bread and butter of
the company. It is through their expertise in pattern making, design craftsmanship and
garment/apparel construction that made TECI’s budding reputation in the business.
Organizational Structure

The following are the key officers of The Executive Chic Inc. (TECI):
a. Ms. Nimfa Gonzales-Pacson
TECI’s President and a graduate of the Polytechnic University of the Philippines (PUP)
with a Bachelor’s Degree in Marketing. She is formerly affiliated with La Tondeña
Philippines, or mostly known as Ginebra San Miguel Inc, as the company’s Executive
Secretary.
b. Jan Mark G. Santiago

41
 The Company’s Treasurer and son of Mr. Marissa G. Santiago. He’s a graduate of De La
Salle University and University of the East with the Degrees on Electronics and
Communications Engineering, and Accounting Technology, respectively.
c. Evelyn U. Bautista
The Company’s Corporate Secretary and Finance Manager. She is a graduate of
Polytechnic University of the Philippines with a Degree in BS Accountancy.

2.2 Products and Services

Presently, The Executive Chic Inc. caters several government and private institutions. They
use the direct sales strategy in their feat against the prominent tailoring shops in the country.
They provide fashionable designs fit to the needs and requirements of their clients.
With more than a decade of experience, TECI ensures to provide only the best custom-made
uniforms and uphold their commitment of producing only quality products. The company’s
product of custom made uniforms has reached Palawan City Government and Palawan State
University. In the metro, they supply uniforms for the PNP-Non Uniformed Personnel and
the Supreme Court of the Philippines.

2.3 Customer History

The Executive Chic Incorporated’s lists of previous and current customers are as follows:
Government Agencies/ Institutions
 Philippine National Police (Non Uniformed Personnel)
 Insurance Commission
 Provincial Capitol of Puerto Princesa, Year 2018
 Palawan State University, Year 2019
 City Government of Puerto Princesa, Year 2020-2021*pending completion
Due to the pandemic, the project between TECI and the City Government of Puerto
Princesa was put on hold. However, it is expected that the project will continue this
2021 with an expected revenue projection of Php 5.9M.
 Supreme Court of the Philippines, Year 2020-2021 *pending completion
This project by TECI was halted by the COVID-19 pandemic, but according to the
company’s officials the project will push through this 2021.

42
 Private Agencies/ Institutions
 University of the East Ramon Magsaysay Memorial Medical Center
 University of Sto. Tomas Hospital
 Globe Telecommunication
2.4 Organizational Diagnosis and Value Chain Analysis
2.4.1 Organizational Diagnosis
a. Management Audit
Audit Question
1. Are company objectives
and goals measurable and
well communicated?
2. Do managers at all
hierarchical levels plan
effectively?
3. Is the organization’s
structure appropriate?
4. Are job descriptions and
job specifications clear?
5. Is employee morale high?
6. Are employee turnover
and absenteeism low?
b. Marketing Audit
Audit Question
1. Are markets segmented
effectively?
2. Is the organization
positioned well among
competitors?
Assessmen
Evidence
t
The company doesn’t have an established
NO
vision, mission and objectives.
The managers at all levels of the hierarchy are
equipped with experience and knowledge about
their duties and responsibilities. However, the
YES
downside of the company is that they merge
responsibilities of one manager into another due
to limited number of employees.
The organizational structure of the company is
YES appropriate and functional. However, there are
functions that overlaps with other managers.
The job descriptions of the managers are
conflicted with the duality of their
NO responsibility. It often results to
miscommunication and minor problems, such as
overlooked function and activity.
The employees’ morale are deemed to be high
YES because they strived to meet delivery deadlines
and produce quality products for the clients.
The turnover rate of employee is high because
NO
of the contract based employment agreement.
Assessment Evidence
The company’s market is demographically and
geographically segmented. The focus of the
YES
company is to supply custom-made uniforms to
companies and its employees within Luzon.
The company is at a disadvantage in terms of
NO production capacity and accessibility in
comparison with its competitors.
43
 3. Has the firm’s market
share been increasing?
4. Does the firm have an
effective sales organization?
5. Does the firm conduct
market research?
6. Are product quality and
customer service good?
7. Does the firm have an
effective promotion,
advertising, and publicity
strategy?
8. Do the firm’s marketing
managers have adequate
experience and training?
11. Is the firm’s Internet
presence excellent as
compared to rivals?
c. Operations Audit
Audit Question
1. Are supplies of raw
materials, parts, and
subassemblies reliable and
reasonable?
2. Are facilities, equipment,
machinery, and offices in
good condition?
The market share has increased through the
YES
years.
The company uses direct sales strategy approach
YES to its clients and so far it has provided them with
profits.
The company doesn’t capitalize on market
NO
research.
The product quality and customer service is
good as evidenced by the prominent clients from
YES the public and private sector. Also, the company
conducts quality inspection before product
delivery.
The company does not utilize the social media as
a medium of advertisement. It solely relies on
NO
the direct sales strategy and word of mouth
approach.
The marketing manager of the company is the
YES CEO, who is equipped with years of experience
in running the business.
The company fails to capitalize the use of the
internet. There are no existing social media
NO
accounts or website that showcase the capacity
and product line of the company.
Assessment Evidence
The raw materials being used by The Executive
Chic Inc. comes from the Divisoria, Taytay and
Manila. Although these are distributed locally,
YES the materials are originally from other countries
like China and Taiwan. China, being the garment
capital of the world, is known for its quality
fabrics at an affordable price.
NO The financial statement of the company shows
that the equipment being used are nearing its full
depreciation.
Also, the operating expenses of the company
shows that the amount incurred for the repair and
maintenance of the equipment is significant.
44

3. Are inventory-control
policies and procedures
effective?
4. Are quality-control
policies and procedures
effective?
5. Are facilities, resources,
and markets strategically
located?
6. Does the firm have
technological
competencies?
The company’s method of inventory management
is by procuring safety stocks. This is not an
NO
effective method because the company resources
tend to be stagnant on inventory.
The finished products are inspected thoroughly
before delivery to clients. A quality control
officer inspects the product as to adherence with
YES
the project specifications and the cleanliness of
the finished product (no trimmings and loose
threads).
The business is situated at Caloocan City, Metro
Manila. It is strategically located because of its
accessibility to clients situated in the National
YES Capital Region (NCR). Also, Caloocan City is
surrounded by a variety of mode of transportation
from Light Rail Transit to public utility vehicles
such as bus and jeepney.
The company use the traditional approach of
NO monitoring their income and expenses through
Microsoft Excel and tabular system.

2.4.2 Value Chain Analysis

Value Chain Analysis is a tool to assess the production efficiency of a company. This too
is used by the company to deliver most value of product at the least possible production cost.
Below is the Value Chain Analysis of The Executive Chic Inc.:
Strength or
Primary Activities Value Chain Analysis
Weakness
Inbound Logistics The Executive Chic Inc. uses raw materials from
Divisoria, Taytay Rizal and Manila. Majority of the
materials are imported goods from countries like
China, who is known for the quality raw materials Strength
at a reasonable price. Also, Taytay Rizal is known
as the garment capital of the Philippines and prides
the quality of the garments it produced.
TECI’s raw materials are delivered to the Caloocan Weakness
office in bulk orders. TECI uses the safety stock
inventory management. This is the kind of
inventory management where the company

45
 procures bulk of raw materials for the company to
store in the facilities. The most common problem
with this type of inventory management is the
tendency of the company to hoard unnecessary raw
materials which often results to stagnant resources
and inefficient utilization.
The company has 36 employees who are employed in a
regular, contract-based, and on-call arrangement. The
number of employees are a mixture of tailors,
seamstress, pattern makers, sewers and other production Weakness
staffs.
This limited number of employees resulted to the limited
production capacity of the business.
The type of production operation of The Executive
Chic Inc. is full production package. This style of
Operations manufacturing is preferred by small to medium
sized businesses in the garments industry. The Strengths
company retains full control over the products from
fabric selection up to the smallest details of the
garment.
However, the FPP type of production is a tedious
process and requires great amount of time during
production. Also, it only works on small scale Weakness
production and becomes a problem in the long run
due to production limitation.
The Executive Chic Inc. delivers the finished products
on a by batch system. Since the production capacity of
the business is only limited, the company delivers the
uniforms of the clients on a first come, first served basis.

Outbound Logistics The finished goods are personally delivered to the Neutral
client’s location with the use of the company’s delivery
vehicles. The delivery process includes the personal
appearance of a tailor and an assistant to attend to the
needs of the clients in case of fitting issues.

Marketing and Sales Strength

The company patronize the traditional marketing of their
product wherein they personally present their designs to
the clients. This is an effective marketing style because
of the personal approach and promotes brand awareness.

Also, the business relies on referral marketing where the

existing clients of the company endorsed or advocate for
the company. This marketing style is a result of
continued customer satisfaction by product quality and
affordable price.

46
 The Executive Chic Inc. has a limited marketing reach
due to the lack of internet presence of the company. The
business does not have any social media accounts or a Weakness
website to advertise their products in the online
platform.

Strength or
Support Activities Impact on Value Chain Elements
Weakness

The Executive Chic Inc. infrastructure includes the

hierarchical level of management pertaining to the
following departments:
1. Finance
Firm Infrastructure Neutral
2. Marketing/ Sales
3. Operations
The effectivity of these departments and its managers
are essential to the smooth operation of the business, like
TECI.
The company hires competent and skilled workers in the
poverty-stricken sector of the community. These
Neutral
workers are the partners of the business to ensure the
quality of the production output.
TECI still practice the culture of contractualization
Weakness
which resulted to high employee turnover.
Human Resource
The Executive Chic Inc. put their workers into the
Management
TESDA Program for aspiring tailors. This is an effort
made by the company to further develop the talent and
skills of their workers. Out of the 20 regular employees Strength
of TECI, 12 workers have undergone the TESDA
Program and has been steadily contributing to the
growth and development of the company’s operation.

The Executive Chic Inc. uses industrial sewing machines

and embroidery equipment to manufacture the finished
goods of the company. However, the business lacks the
Technology latest technological innovations available in the market.
Weakness
Development
The company has to implement systems that can aid not
only the production efficiency of the business, as well as
the marketing and sales aspect.

47
2.5 Financial Analysis and Conclusion
Financial Analysis is the process of systematically evaluating the financial status and performance of a
business in terms of solvency, liquidity, efficiency and profitability. (Tuovila, 2021) This process will
allow the management to make intelligent business decisions towards achieving the company’s objectives.
In this section, the researcher will utilize financial ratios and financial data to determine the
financial performance of the business from year 2017 to 2019.
2.5.1 Statement of Financial Position/ Balance Sheet
The Statement of Financial Position or Balance Sheet provides a reader and idea of how
well the company is performing in terms of assets, liabilities and equity. It is an overview of the
company’s resources, obligations, and ownership details at a certain point of operation of the
organization.
The table below shows the Three-Year Financial Position of The Executive Chic Inc.:
Table 5 : Three Year Financial Position (2017 to 2019)

48
2.5.2 Statement of Financial Performance / Income Statement
The financial audit also tackles the Statement of Comprehensive Income of the company.
The Statement of Comprehensive Income, also known as Income Statement, is a financial report
that deals with the financial performance of the company for a certain period of time.

The Statement of Comprehensive Income of The Executive Chic Inc. is shown in the
table below:
Table 6 : Three Year Financial Performance (2017 to 2019)

Since its inception in 2002, The Executive Chic Inc. has recorded a positive net income
from its operations. However, the company has experienced ups and downs throughout the years.
As indicated in their Three-Year Statement of Financial Performance, the company registered a
17% decrease and a 2% increase for the years 2018 and 2019, respectively. It can be noted that
there is a problem in the profit maximization procedures of the business resulting to the ups and
downs in their operation.
Also, an average cost of sales percentage is computed to be at 67% of sales and a gross
profit margin of 33% of sales. The operating expenses of the business includes the utilities,
depreciation and other operation related expenses.

49
2.5.3 Financial Ratios and Conclusion
2.5.3.1 Profitability Ratios measures the ability of company to create earnings or be
profitable.
2.5.3.1.1 Net Profit Margin.
It is the percentage of net income generated from the company’s revenue/ sales. The trend of
TECI’s net profit margin declined in 2019 at 2.95% from a 3.42% in 2018. It is a result of the increased
operating expenses and the interest expense being paid by the company.

2.5.3.1.2 Revenue Growth Rate

It indicates the trend of profitability of a business.
For The Executive Chic Inc., the business has recovered from the negative revenue
growth rate from the year 2018. The fiscal year 2019 registered a 17.77% increase in revenue
compared with the (19.53%) growth rate from 2018. With that, a 10.31% average revenue
growth rate was registered for the 3 historical years of the company. This percentage is below
the 15% to 45% revenue growth rate standard of an industry. It may be earning profits for its
stakeholders, but the researcher can ascertain that it can be more profitable through some
strategic implementation.

50
 2.5.3.1.3 The Return on Assets (ROA).
It is ratio is a firm’s financial metric to assess the company’s efficiency in terms of
generating profits out of its assets. The company registered a decrease in the ROA at 3.20% in
2019 from a 3.37% in 2018. It signifies that the company is not performing well in translating its
assets into profit.

2.5.3.2 Efficiency Ratios measures a company’s ability to utilize its assets and manage its
liabilities within a short period of time.
2.5.3.2.1Inventory Turnover Ratio
It assesses the company’s inventory management which is measured through
determining the number of times the inventory is sold over a period of time. For the past three
years, the company has a relatively low inventory turnover ratio of 1.10, 1.63, and 1.32 for 2017
to 2019, respectively. It is an indicator that the company maintains a bulk of its inventory
throughout the year and isn’t efficient in converting it to finished goods in a short period of time.
This is an area for concern because a bulk of its assets is invested in the inventory account
neglecting other assets that may improve its production efficiency, such as property, plant and
equipment.

2.5.3.2 Conclusion

51
 With the above financial ratios and percentages, the researcher can ascertain that the company is
profitable. However, its profitability can be improved through better inventory management and increased
production efficiency.

2.6 Strengths and Weaknesses of The Executive Chic Inc.

2.6.1 Strengths
2.6.1.1 Traditional Brand Marketing through direct sales and referral.
The direct sales marketing approach is defined by the company as the personal marketing of the
products being offered by the company. The management approaches potential clients and presents their
ideas for the product they are looking for. This marketing approach is often preferred by small companies
because it doesn’t require big capital machineries.
Moreover, a traditional marketing also includes the referral system where existing clients
becomes brand advocate of the product. This marketing strategy is only effective through
continued customer satisfaction.

2.6.1.2 Competent and Experienced management and employees.

The lifeblood of the company are its employees. They are the ones who ensure that the company is
operating efficiently and maximizing the resources.
For TECI, their management consists of highly experienced managers with years of
experience from the industry.

Table 7: Key Officers of The Executive Chic Inc.

The company’s tailors are equipped with years of experience from the industry. Also,
training from TESDA’s NCII training program were provided to regular employees to enhance
their skills, not only on tailoring but on how the machines works.

52
 2.6.1.3 Accessibility of the business’ location.
The Executive Chic Inc. is located at Caloocan City, Metro Manila. The business’ location is
highly accessible to potential clients due to the various modes of transportations within the vicinity of the
business location. Also, the business is strategically located as it is a short distance away from the
business districts of the country.
According to the Department of Information and Communications Technology, the vast
majority of the micro, small to medium sized enterprise in the country is situated in the National
Capital Region (NCR). (DICT, 2016)
Given the TECI is located in Caloocan City, the business is highly accessible to the
neighboring cities. The rough estimate of the company’s location to neighboring cities are as
follows:
Table 8 : Distance between TECI and nearby potential clients
Location of Businesses Distance from TECI
1. Quezon City 11.9 km
2. Manila City 22.2 km
3. Pasig City 26.3 km
4. Makati City 30.5 km
5. Taguig City 33.2 km

Overall, the strategic location of The Executive Chic Inc. is a major strength for the
company because it allows the business to be accessible to clients and potential business
partners. Hence, the rating of 4.0 for TECI.
2.6.1.4 TESDA NCII Program for the continuous development of employees’ skills.
The Technical Education and Skills Development Authority (TESDA) is a government agency
that aims to improve the lives of the poor and underserved citizens of the country through skills
development. The Executive Chic Inc., in coordination with TESDA, enrolls their skilled workers to the
NCII Program of the agency to further develop the capacity of the workers to produce quality products.
This is a major strength (4.0) for the company because the skills and knowledge of the
employees is essential in achieving the company’s vision of being included in the top ten
tailoring shop in Luzon. Also, it is important for the workers to be abreast on the latest approach
with regards to garment production. It can help the business improve the production efficiency of
the company.

53
 2.6.1.5 Long standing relationship with suppliers
The
Yrs. of
Supplier’s Name Products/Materials
Executive Engagement Chic Inc.
Philon Uni-Line
has a Inner lining for fabrics 7 years
Product, Inc.
Lerre Marketing Textile and fabrics 4 years
Los Amigos & Sons Garments/ fabric
3 years
Inc. accessories
Textile and fabric
Ariya Accessoriya 3 years
accessories
Grand Textile Ent.
Supplier of Fabrics 8 years
Company
sustainable source of fabrics and raw materials in the country. For a business that deals with
deadlines and timelines, having a stable source of materials is essential to the continuity of
production.
The strong relationship of TECI with its suppliers is evidenced by their long-term
engagement as indicated in the Table 10.

Table 9 : List of Suppliers and Years of Engagement with TECI

Overall, the company is rated 4.0 as it provides the company sustainability and continuity in
production.

2.6.2 Weaknesses

54
 2.6.2.1 Limited production capacity brought by the full production package system.
Full package production system is the process of manufacturing apparel from the raw
materials selection to the delivery of the goods to clients. This is a production type utilized by
small to medium scale businesses in the garments industry. However, this production style is
time consuming and produce a relatively significant amount of waste which affects the
production efficiency of the company.
The Executive Chic Inc., with its limited manpower capacity and the tedious process of
FPP, has limited production capacity resulting to delays and inefficiency in the production
process. This is minor weakness (2.0) for the company because it affects the relationship of the
business with its clients and optimal use of resources.

2.6.2.2 Limited marketing reach due to lack of internet presence.

In the age of internet, being visibly present in the internet space is essential. For a
business, a website or a social media account is important to promote and make the product
known to the general public. It widens the reach of the business and somehow promotes the
credibility of the company through posting of successful client projects and product samples.
TECI does not have a website nor do any social media account to promote the business
and its product. It limits the business promotion and advertisement in the online platform. Hence,
the rating of 1.0.
2.6.2.3 Poor inventory management as evidenced by the high percentage of resources
allocated to inventory.
The Executive Chic Inc. uses the safety stock inventory management. This system when
not implemented effectively, gives the company excessive inventory amount than what is really
needed for the production.
The company’s financial analysis indicated that TECI allocates more than 40% of its
assets towards inventory. Although the inventory of the business isn’t perishable, the efficient
use of the shareholder’s resources is sacrificed. A large sum of money becomes stagnant on the
inventory instead of investing on the latest technology available in the market or improving the
working condition of its employees.
Hence, the rating for this internal factor is 1.0.

55
 2.6.2.4. Lack of technological innovations and efficient machinery and equipment.
To keep up with the market and industry players, The Executive Chic Inc has to invest on
the latest technological innovations available in the market. Although the business has industrial
sewing machines and embroidery equipment, it is not enough to increase the production capacity
of the company. Also, during the financial audit it shows that the equipment and machineries
available in the company is almost fully depreciated and often undergo repair which incurs cost
and delays in the production process. Hence the rating of 2.0.

2.7 Internal Factor Evaluation Matrix and Conclusion

Internal Factor Evaluation Matrix is a strategic tool for assessment and auditing of the company’s
major strengths and weaknesses. It focuses on the internal position/ capacity of the business to prosper in a
competitive environment.

Table 10 : IFE Matrix of The Executive Chic Inc.

WEIGH RATIN SCOR
STRENGTHS
T G E
Traditional Brand Marketing through direct sales
1 0.10 3 0.30
and referral.
Competent and Experienced management and
2 0.15 4 0.60
employees.
Accessibility of the business' location to its
3 0.10 4 0.40
clients.
TESDA NCII Program for the continuous
4 0.05 4 0.20
development of employees.

5 Long-standing relationship with the suppliers. 0.10 4 0.40

WEAKNESSES  
Limited production capacity brought by the full
1 0.10 2 0.20
production package system.
Limited marketing reach due to lack of internet
2 0.15 1 0.15
presence.
Poor inventory management as evidenced by the
3 high percentage of resources allocated to 0.15 1 0.15
inventory.
Lack of technological innovations and efficient
4 0.10 2 0.20
equipment.

56
   TOTAL WEIGHTED AVERAGE 1.00 2.60

Based on the researcher’s assessment of the company’s internal strengths and

weaknesses, The Executive Chic Inc garnered an IFE Matrix rating of 2.60 or a slightly above
average. This signifies that the company has a relatively above average response in mitigating
its weaknesses and capitalizing on its strengths.
As stated in the strengths assessment, the salient positive traits of the business and is
considered to be it major strengths are its competent employees, accessibility, continuous
development of the employees and its long standing relationship with business suppliers. As
emphasized, the business value employees of the company and provides as much incentives that
they can give without majorly depreciating the company’s resources. Furthermore, the subject
entity should capitalize on its strategic location in the metro to mitigate the impact of its
weaknesses.
However, the internal analysis of the business also shows major weaknesses of the
company that can gravely affect the competitiveness of the subject entity. The lack of internet
presence as a medium of sales/marketing and its poor inventory management should be an issue
of concern for the company.

2.8 Strategic Issues facing the firm

The objective of this section is to identify and understand the strategic issues that The Executive
Chic Inc. should focus on and assess. Through this assessment, the company can have a guide in crafting
strategies appropriate to address such strategic concerns.

2.8.1 How can the business improve its sales/marketing strategy?

The sales/marketing strategy of The Executive Chic Inc. is relatively traditional as it relies on
business presentations and referral. In a competitive environment, the business should consider alternative
medium of marketing that could provide the company with a wider reach of client and enhanced
credibility.

2.8.2 What should be done to be efficient in the allocation of resources?

The primary goal of a business should be profit maximization that can be achieved through
efficient resource allocation. As demonstrated in the IFE Matrix, the business has a poor inventory

57
management resulting to a stagnant allocation of resources to the inventory. This strategic issue should be
address in order for the company to reach the penultimate goal of profit maximization for the
shareholders.

2.8.3 How to mitigate the impact of the small production capacity of the business?
Given the limited manpower complement and outdated equipment, The Executive Chic Inc. must
address the issue of production capacity in an urgent manner. The production capacity of the subject
entity is an issue especially with the target of establishing market niche in the industry. This critical
success factor is highly considered by potential clients because it demonstrates the company’s capacity to
meet deadlines and delivery the product in a timely manner.

CHAPTER III
STRATEGY FORMULATION

3.1 Strategic Option: SWOT Matrix

Table 11 : SWOT Matrix of The Executive Chic Inc.

STRENGTHS WEAKNESSES

W Limited production capacity brought

S1 Traditional brand marketing through
1 by the full production package
direct sales and referral.
system.

Competent and Experienced W Limited Marketing reach due to lack

S2
management and employees 2 of internet presence
S3 Accessibility of the business' W
location. 3 Poor inventory management as
evidenced by the high percentage of

58
 resources allocated to inventory.

TESDA NCII Program for the W Lack of technological innovations

continuous training and development 4 and efficient equipment
S4
of employees.

Long standing relationship with

S5  
suppliers
OPPORTUNITIES THREATS

Potential expansion of major

O Ratification of CREATE Bill by the
T1 competitors that can affect the
1 Congress.
market share of the business.

Large number of MSMEs in Luzon. T2 Bid to end contractualization made

O
by the Duterte Administration.
2
Work from Home employment
Emergence of technological
O arrangement brought by the COVID-
innovations in the garment T3
3 19 Pandemic.
production.
O Marketing potential brought by the The evolving preference of the target
T4
4 existence of internet. market.
     

3.1.1 S-T Strategies

ST # 1: Invest on machine and equipment improvements and employee skill
development to increase production capacity (S2,S4,T1)
The Executive Chic Inc should invest on machineries and equipment that can aid in
achieving an increased production capacity. Normally, a new piece of equipment is more reliable
and efficient in producing quality products. Also, the company should invest on the skill
development of its employees. The Executive Chic Inc. values its employee’s craftsmanship and
therefore should invest on its enhancement
Furthermore, The Executive Chic Inc. should invest into brand new machineries and
equipment. By doing so, the company can increase their production efficiency by having a
decreased time spent on repairing the machineries and equipment. Additionally, the company can
save repair costs incurred for the refurbishment of the old equipment.

59
 ST # 2: Promote the development of a business continuity plan. (S2,S5,T3)
The recent pandemic proves to be a catastrophic event for the business community.
However, the virus outbreak isn’t the only disaster that can hamper the production/ operation of
the business. In order to anticipate the actions to take in such cases, the business should better yet
plan ahead the possible courses of action during imminent destructive situation. This business
continuity plan will provide the company with a plan on how to restart after the unexpected turn
of events.
ST # 3: Gather market data through business presentations to potential clients
(S1,T4)
Since The Executive Chic Inc., prides on the direct sales approach of their
marketing/sales department. This should be taken as an advantage in gathering preferential data
from the clients. The company can gather as much data during the personal business presentation
and conduct brainstorming activity to achieve the ultimate goal of satisfying the clients. Their
personal approach of marketing their products should be capitalized and translate into data
gathering which will be beneficial in future client engagement.
ST #4: Continue to build a relationship-oriented business engagement that fosters
long-term relationship with suppliers and customers. (S5,T1,T4)
Long–term relationship with a supplier mitigates the impact of pricing volatility and
ensures supply stability. Suppliers are the company’s lifeblood and should be well-taken care of.
These suppliers include the raw materials suppliers and labor workers of the company.

3.1.2 S-O Strategies

SO # 1: Investing on software system to improve operation and production
monitoring. (S2,O1,O3)
With the problem of the company with inventory management, The Executive Chic Inc
should invest on a software system that can aid them in being efficient in monitoring their
operation and production transactions.
A system, like CRM or ERP, will allow the company to be efficient in the allocation of
resources and be able to generate prompt reports necessary for business decisions.
SO # 2: Integrate the traditional brand marketing and online-based marketing for a
wider customer reach through a digital marketing roadmap. (S1,S2,O4)

60
 With the development of social media, the business should capitalize on its wider customer
reach. The business should establish a social media account or a website to promote the products
and services of the company. A digital marketing roadmap will allow the company to have an
increased internet presence extending its reach to customers within the country.

3.1.3 W-T Strategies

WT # 1: Maintain an acceptable level of inventory to maximize the full potential of
the company’s resources. (W3, W4, T1)
The inventory stock management of the company should be improved to allow the business
to allocate the company’s resources to other necessary expenditures such as employees’ benefits,
continuing development of the workers and capital expenditures.
Also, the company may consider the implementation of a new inventory management style
called Just-In-Time Inventory Management. This type of inventory management will only have
inventory necessary for the immediate project and will decrease the cost of maintaining a large
volume of stocks.
3.1.4 W-O Strategies
WT # 1: Fostering a focused strategy on establishing market niche. (W1,O2)
With the limited manpower complement and production capacity, The Executive Chic Inc.
should focus on micro, small to medium sized enterprise and local government units as a client.
A focus strategy involves offering the clients with a product customized to the preferences and is
directed towards satisfying the needs of the customer group.
WT # 2: Use savings from fiscal incentives to invest in capital expenditures. (W4,O1)
The CREATE Bill, although not yet implemented, will be an avenue for the business to
allocate resources for the improvement and procurement of necessary capital expenditures. The
savings from the bill will be an opportunity to invest in the long overdue upgrading of equipment
and machineries.

3.2 Strategic Option: Internal and External (IE) Matrix

Table 12 : IE Matrix of The Executive Chic Inc.

TECI – 2.60

61
 TECI – 2.45

Based on the previously conducted Internal and External Factor Evaluation, The Executive Chic
Inc garnered an IFE Matrix rating of 2.60 and an EFE Matrix rating of 2.45. As a result, TECI
falls on the “V” cell which means that the company should Hold and Maintain. Also, the company
should focus on market penetration and product development.
Given the limited production capacity of the company, The Executive Chic Inc. should focus
their attention in the local government unit and small to medium sized businesses as a potential
client. This target market will be more appropriate for the company’s capacity to produce.
Moreover, given the emergence of casual uniforms and the evolving preference of the market,
the company must work on developing and adapting to these changes through product development
and improvement of capital infrastructures.

3.3 Vision and Mission of The Executive Chic Inc.

Currently, The Executive Chic Inc. has no definite vision and mission statements. The vision
and mission statement is essential as it prompts the company into the right direction.

3.3.1 Proposed Vision Statement

“To be included in Luzon’s top 10 tailoring supplier of custom-made garments by the
end of year 2030, attained through customer satisfaction in quality and affordability.”

62
 Table 12 : Analysis of the Proposed Vision
Parameter Yes/ No Evidence
Does it clearly answer the To be included in Luzon’s top 10
question, “What do we want to Yes tailoring supplier of custom made
become?” garments…..

The proposed vision states that the

Is it concise enough yet
Yes company aims to be in the top 10 in
inspirational?
the industry.

Does it give clear indication as It implies that the company should

Yes
to when it should be attained? attain this vision by the year 2030.

With that, the researcher believes that the company has now complied with the criteria of
knowing what to become, being aspirational, concise, and time bound.

3.3.2 Proposed Mission Statement:

In order for the company to achieve the proposed vision, the researcher suggest the
following mission statement to guide the business towards achieving their goals:
“To uphold our commitment in tailoring quality and affordable custom-made
uniforms for public and private employees within Luzon through the use of premium-grade
materials and innovative equipment.
We strive to be the provider of quality employment for skilled and passionate workers
in the community, especially the poverty-stricken sector and elevate their way of life.
To be efficient in the use of the shareholder’s resources and reach for optimal profit for
the company.”
As for the evaluation of the proposed mission statement, below are the evidence
of compliance with the mandated criteria:

Table 13 : Evaluation of Proposed Mission Statement

Elements Aligned? Evidence

1 Customers Yes public and private employees
2 Products/Service Yes custom-made uniforms

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 3 Market Yes Within Luzon
4 Technology Yes Innovative equipment
efficient in the use of the
Survival, Growth,
5 Yes shareholder’s resources and reach
Profit
for optimal profit
6 Philosophy Yes uphold our commitment
7 Self-concept Yes Tailoring quality and affordable
employment for skilled and
Concern for public
8 Yes passionate workers in the poverty-
image
stricken sector
9 Concern for employees Yes Provider of quality employment

3.4 Generic Strategy

The generic strategy of The Executive Chic Inc. is cost leadership strategy. This type of strategy
is attained through 2 possible ways:
a. Increasing profits by reducing cost; and/or
b. Increasing market share by charging lower prices and maintaining reasonable
profit.
The cost leadership strategy of the company is evidenced by the company’s effort to
provide quality products at minimum production cost. Although the company’s market share
isn’t significant enough, this strategy is conducted through the low cost of labor and low-priced
raw materials used in the production process.

3.5 Present Strategy

At present, The Executive Chic Inc. uses the cost leadership strategy. The company focuses on
reducing the cost of supplying the products that the customer needs. Aside from that, the company also
employs the following strategies:
a. Direct Sales Marketing Strategy. The company depends on the personal and actual
presentation of the products and services to potential clients. This is conducted through

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 business proposals accompanied by samples of products that attracts clients to hire the
services of the company.
b. Referral or Word of Mouth Marketing Strategy. This marketing strategy is engaged
by the company with reliance to former/current client as brand advocate of the business.
Such strategy is implemented through continued customer satisfaction achieved by
maintaining product quality and pricing satisfaction.
c. Employee Development Strategy. This strategy is conducted by the company to ensure
that the employees are equipped with appropriate knowledge and skills essential in
providing quality products and services. The TESDA NCII Program for Tailoring
provides proper training for the employees to further enhance their skills towards
improving production efficiency and effectiveness.
d. Safety Stock Inventory Management Strategy. This type of inventory management
practice the stock piling of raw materials. Safety stock provides the company a buffer for
emergency situation and immediate resources at the helm of the company’s stock room.
However, this strategy often create problem if proper monitoring is not done.

3.6 Objectives
3.6.1 Strategic Objectives
As the strategic objective of the business, The Executive Chic Inc. should strive to be
included in Luzon’s top 10 tailoring supplier of custom-made garment by the end of year
2030, attained through continued customer satisfaction in quality and affordability.
3.6.1 Financial Objectives
As the financial objective of the business, The Executive Chic Inc. should gear towards
achieving a at least 10% revenue growth rate every year and at least a Php 20 Million revenue
by year 2030. However, there should be due consideration to the financial impact of the
COVID-19 Pandemic and the uncertainty of quarantine restrictions.

3.7 Proposed Strategy

A business strategy is a company’s plan of action towards achieving the desired goals and
outcomes of its stakeholders. It is a medium for the organization to secure a competitive
advantage over its business rivals. For the subject entity, The Executive Chic Inc., the researcher

65
used the SWOT Matrix Analysis to help identify and formulate the business strategy deemed fit
for the goals and objectives of the entity.
Based on the SWOT Matrix Analysis, here are the recommended business strategies for
the market penetration and product development business strategy of the company:

2.5.3 Investing on software system to improve operation and production monitoring.

The Executive Chic Inc. should invest on the adoption of the Enterprise Resource
Planning (ERP) System for better inventory management and financial monitoring. The
company should consider adapting this system to enhance the business’ capacity to manage the
inventory and monitor its financial position.
An ERP inventory management system provides real-time inventory information to the
entire organization. This is an important capability for businesses that plan to expand, have
complex workflows or supply chains, need advanced automation, operate in “just in time” mode,
sell many products or simply wish to maximize their investments in inventory. (Schwarz, 2020)

Figure 5 : Areas covered by the Enterprise Resource Planning (ERP) System (hooman.design)

2.5.4 Intensify marketing strategy through establishing a social media marketing

roadmap and curating effective advertisement materials.
The internet is an avenue for a company to promote their products for a wider reach of
customers. By intensifying the company’s internet presence, the business can grasp more
customers. A digital marketing roadmap acts as a solid foundation for all online marketing
efforts of the company. It allows the business to plot a course for optimal growth and lays out the
exact tactics to enable efficiently attain the company’s goals Also, this marketing strategy incurs

66
only minimal cost and should be capitalized by the company to reap maximum rewards. The
Executive Chic Inc. should establish a social media presence to penetrate unexplored market
fitting for the company’s production capacity. The social media will allow the business to
advertise the business widely and more efficient.
The social media presence of the business may be improved through advertisement
boost being offered by social networking sites, such as Facebook.

Figure 6: Process of establishing Social Media Marketing Roadmap

Furthermore, the business must allocate a portion of their resources in the production of
catalogues or business brochures to exemplify the products and services of the company.
Although the business currently has leaflets and pamphlets to distribute, the management should
curate a more detailed and extensive catalogue to effectively promote the business and attract
clients.

Figure 7 : Sample Brochures and Catalogue for a tailoring shop

67
 2.5.5 Investing in capital expenditures essential to the improvement of production
capacity and efficiency.
In order for The Executive Chic Inc. to achieve its objectives, the business should invest in the
procurement of production equipment and machineries. Acquiring additional industrial sewing machines
and embroidery equipment to replace the fully depreciated ones is pivotal in increasing the capacity and
efficiency of the business production.

2.5.6 Fostering a focused strategy on establishing market niche.

With the limited manpower complement and production capacity, The Executive Chic Inc. should
focus on micro, small to medium sized enterprise and local government units as a client. A focus strategy
involves offering the clients with a product customized to the preferences and is directed towards
satisfying the needs of the identified customer group.
This business strategy can be implemented by having an intensified marketing strategy
through an integration of both the traditional and digital approach of sales/marketing.

68
 CHAPTER IV
IMPLEMENTATION

4.1 McKinsey 7S Framework

The McKinsey 7S Framework is a tool for the company management to analyze the
organizational design of the entity. Through this model, the researcher can evaluate the
organization’s effectiveness in terms of the strategy, structure, system, shared values, style, staff,
and skills.
The framework is further categorized into two: hard and soft elements.
4.1.1. Hard Elements
The hard elements are the tangible and identifiable elements which is perceived to be
immediately influenced by the management. There are three (3) hard elements in the framework.
4.1.1.1. Strategy
Since its inception in 2002, the strategy of The Executive Chic Inc. is Cost Leadership
Strategy. As a small-medium enterprise (SME), the company focuses on maximizing potential
returns for the shareholder’s through minimizing the incurred cost in the production. Although it
is not stated in the company’s vision, the company official stated that they are focused on
providing quality and affordable products for its target market.
With the analysis conducted in the previous section, the company is recommended to
implement market penetration and product development. This can be achieved through the
following suggested strategies:
1. Investing on software system to improve operation and production
monitoring.

69
 2. Intensify marketing strategy through a social media marketing roadmap
and curating advertisement materials.
3. Investing in capital expenditures essential to the improvement of
production capacity and efficiency.
4. Fostering a focused strategy on establishing market niche.

4.1.1.2. Structure
The Executive Chic Inc. employs a functional organizational structure composed of the
sales/ marketing, operations, finance and human resource. The company is headed by the Chief
Executive Officer (CEO), followed by the managers and staffs accordingly.

Figure 8 : Organizational Structure of The Executive Chic Inc.

The direction of the company is spearheaded by the President/ CEO, in coordination with
the respective managers. However, the company encountered problems on the separation of
duties and responsibilities. The company is a relatively small organization and some functions of
the managers tend to overlap with the other creating miscommunication and conflict between the

70
levels of management. Also, there are managers that functions dual responsibilities resulting to
minor conflict/ problems.

4.1.1.3. System
Based on the researcher’s interview, the company does not use or utilize any system for
its business processes. They only utilize Microsoft Excel for its financial monitoring, as well as
for its inventory monitoring during the production process. The lack of an established system in
its financial and operational needs may prove to be a hindrance for the company to achieve
overall effectiveness and efficiency.

4.1.2. Soft Elements

The soft elements of an organization are the intangible, but equally important factor to a
company’s overall effectiveness.
4.1.2.1. Shared Values
These are the company’s stated values and behaviors that acts as a guide for the leaders,
employees and customers about the vision and mission of the institution. For The Executive Chic
Inc., the shared values are as follows:
Quality.
The commitment of providing excellent products that meets the needs and expectations of
the customers. It is the degree of excellence that is aimed by the company in terms of product
output.
Competence.
With a labor intensive business, the capability of the employees to produce quality
products is linked to the competence and skills that they possess.
Teamwork.
It is the coordination of the company employees towards achieving one goal, which is to
provide quality products for the clients.
Value for Craftsmanship. The objective of the company to provide continuing
education and training for its employees to attain the desired craftsmanship of the business.
Social Responsibility. The commitment in providing employment for skilled workers in
the poverty-stricken sector of the community.

71
 4.1.2.2. Style
The leadership style for The Executive Chic Inc. is democratic. The President/CEO
utilize this participative leadership style which promotes trust and confidence to the employees.
The tailoring business is an industry driven by collaboration of designs and inputs from all level.
The democratic leadership style allows the business to be productive through the collaborative
effort of all managerial levels. Also, the President/CEO conducts coaching and brainstorming
activities with its managers for the improvement of style and operations of the business.
4.1.2.3. Staff
The employees of The Executive Chic Inc. are distributed across different departments
with respect to their appropriate functions. The operations staff of the company are residents of
the community where the business operates (Caloocan City). Given that majority of the
employees are undergraduate and doesn’t have the proper training but possess the skills, the
company provides an incentive program for the employees that allows them to study the TESDA
NCII Program for Tailors. This allows the employees to improve their skills and deepen their
knowledge about the craft.
Having identified the sales/marketing department as a waterloo for the business, the company
must invest or utilize the opportunity of social media marketing to widen their reach in their target
market. It is essential for a product-driven business, like The Executive Chic Inc., to be well adept to the
latest marketing innovations available in the market.
4.1.2.4. Skills
The Executive Chic Inc. is under the subset of the garment industry, known as tailoring/
custom-made sector. The skills requirement for this type of business includes technical
knowledge on apparel/garment designing, pattern making, fabric selection and garment
construction, also known as the actual tailoring process.
The skills mentioned can further be improved through continuous training by undergoing
training programs such as TESDA NCII Tailoring which the business already employs.
However, this kind of training program can be implemented in a more efficient and effective
manner. A retention period for the employees must be included in the contract or a regular
position may be employed to strengthen the business workforce.

72
Table 14 : McKinsey's 7S Framework
Aligned
Element Present Proposed Aligned?
?
Product Development
through procurement of
additional machines. (ie.
Cost Leadership
Embroidery Machines
Strategy
and Sewing Machines)
Strategy Focuses on large No Yes
Market Penetration
companies/ group
through investing in
that requires big
digital marketing
production capacity.
pursuing clients in the
MSMEs and LGUs
sector.
Functional
Maintain the same
Organizational
organizational structure,
Structure Level; Small Level Yes Yes
but ensure separation of
Hierarchy
duties of the manager.
Management
Invest in an ERP System
Microsoft Office –
and Venture in digital
Excel and Manual
Systems No marketing to help Yes
Ledger/Book of
promote the products/
Accounts
services.
1. Quality
2. Competence
Capitalize on the existing
3. Teamwork
Shared shared values and
4. Value for Yes Yes
Values continue embodying
Craftsmanship
such.
5. Social
Responsibility

73
 Democratic Retain the democratic
Style Yes Yes
Leadership Style leadership style.
Keep the employees.
Staff Appropriate Yes Work on their skills Yes
development.
 Pattern Making Hone the skills of the
 Fabric Selection employees through
Skills  Designing Skills Yes intensifying TESDA Yes
 Garment NCII Training Program
Construction for Tailors.

4.2 Balanced Scorecard

The Balanced Scorecard is a strategic planning tool used to monitor and manage the
strategies being implemented by the organization. It is essential in the evaluation of the
efficiency and effectiveness of the strategy and tracks if the business is gearing towards the
objectives of the business.
With the implementation of the proposed strategies, The Executive Chic Inc. has the
following perspective and measures to achieve the strategic and financial objective of the
organization:

Figure 9 : Balanced Scorecard Diagram

74
Table 15 : Balanced Scorecard of The Executive Chic Inc.
BALANCED SCORECARD
“To be included in Luzon’s top 10 tailoring supplier of custom-made garments by the end of year 2030, attained through
Vision
customer satisfaction in quality and affordability.”
“To uphold our commitment in tailoring quality and affordable custom-made uniforms for public and private employees within
Luzon through the use of premium-grade materials and innovative equipment.
Mission We strive to be the provider of quality employment for skilled and passionate workers in the community, especially the
poverty-stricken sector and elevate their way of life.
To be efficient in the use of the shareholder’s resources and reach for optimal profit for the company.”
Strategic
Hold and Maintain Strategy : Market Penetration and Product Development
Priorities
Improved
Customer Loyalty and Improved competence
Strategic Improved financial production
increased market share and productivity of
Results performance efficiency and
in the target market employees
production capacity
STRATEGIC OBJECTIVES MEASURES TARGET
 Increase of at least 10% in
Sales and 30% in net
income per year until 2030.

 Sales or Revenue  A recorded sale of at least

Financial Minimized repair
20M by year 2030.
Perspective Increase Revenue Increase Net Income and maintenance  Net Income
cost  Operating Expenses
 At least 25% yearly
decrease in repair and
maintenance cost of
machineries and equipment.
 Increase market share
Customer Increase customer Improve customer  Length of customer
Perspective loyalty and customer experience engagement  To be part of the top 10
satisfaction tailoring shop in Luzon by
 % of market share in 2030
the identified target

75
  Low-cost, quality products
market
 # of purchased
machineries and
reduced cost of
repairs  Purchase of 10 new
machineries every year
Improve inventory from 2021 to 2024.
Increase production Improve marketing  % of market share
Internal management and
efficiency through strategy by social attracted through
Process allocation of  Subscription of ERP
procurement of new media penetration improved social
Perspective resources through System to efficiently
machineries and advertisement media presence and
ERP System monitor the company’s
advertising materials
inventory and operations
monitoring
 Improved Inventory
Turnover
 % of compliance
with delivery targets  Decrease in delays of
product delivery
 # of employees
Learning Increase worker’s
Improve employee’s enrolled to TESDA  Decrease in employee
and Growth productivity and keep
skills and knowledge Program turnover rate and increase
Perspective them motivated
in number of regular
 Employee Turnover employees
Rate

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 CHAPTER V
FINANCIAL ASSUMPTIONS

With the strategies recommended, the researcher formulated financial

assumptions relative to the chosen strategies. The assumptions will be projected on a
five-year period in consideration of the identified strengths, weaknesses, threats and
opportunities of the subject company. The financial projections are based on the actual
events in the industry and mathematical formulas.

5.1 Summary Results

The Executive Chic’s projected financial status for the years 2021 to 2025 is an upward
trend. The projected financial ratios, such as leverage, liquidity, efficiency, and profitability, is
computed to be improving on the projected years.
With regard to the procurement of additional machineries, subscription of ERP System
and additional marketing materials and strategy, the business will not avail a loan to finance the
strategic improvements of the business. The company will utilize the available cash as a result of
the efficient inventory management, decrease repairs and maintenance and the savings from the
implementation of the fiscal incentive.
Due to better inventory management, the inventory turnover ratio of the business is
anticipated to improve from 1.32 in 2019 to 2.86 in 2021 and 10.70 in the succeeding years. This
improvement allows the company to allocate their cash towards other strategic priorities such as
procurement of machineries and additional marketing strategies.
The profitability of the business will continue to improve during the projected years. The
Return on Equity will increase from 4.5% in 2019 to 6.46% in 2021 until it reaches a 23.90%
ROE by the end of year 2025. The Return on Assets will improve to 4.36% in 2021 and 19.15%
by the last projected year. This signifies that the business is performing well in maximizing the
investment of its shareholders. Also, the profitability of the business in terms of its Net Profit
Margin will increase throughout the projected 5-year period. From a 2.95% in 2019, the
company will have a 4.03% net profit margin and an 11.97% by year 2025.

77
 The growth on revenue/sales has an average of 14% from an 11% in 2021 and 15% until
year 2025. Also, the strategies implemented will allow the business to improve their net income
by at least 30% every year.
With that, the researcher can conclude that with proper implementation of the proposed
business strategies and the improved production efficiency, the business will be successful in
achieving positive results for the company’s operation.

5.2 Attainment of Objectives

5.2.1 The Executive Chic Inc. continues to be a cost leader in the custom made garment
industry in Luzon, with increased market share through market penetration and product
development.
5.2.2 The company will increase its production efficiency as a result of the procurement of
new machineries, and the ERP System, specifically the inventory management feature.
5.2.3 Continued employee development and commitment will be achieved through the
training program brought by the TESDA NCII Tailoring Program and contribute to the
corporate social responsibility of the company.

5.3 Financial Projection Assumptions

5.3.1. Sales will increase by 15% annually due to purchase of new sewing machines and
additional target market penetration through advertisements.
5.3.2. 40 new industrial sewing machines will be purchased in 2021 to 2024, 10 machines
each year. In addition, one embroidery machine and one edging machine will be purchased in
2021 and additional two embroidery machines and two edging machines will be purchased in
2022. (Appendix D)
5.3.3. Advertising expense is estimated to be at P50,000.00 and increases by 5% annually.
5.3.4. Subscription expense from ERP system adoption is estimated to be at P36,000.00
annually with initial startup fee of P15,000.00 on the first year.
5.3.5. The cost of sales is estimated to be at 67% of sales based on the average in years 2017-
2019. Ending inventory is estimated to be at 10% of cost of sales.
5.3.6. Operating Expenses except for Repairs and Maintenance are estimated to increase by
5% annually based on the average in years 2017-2019.

78
5.3.7. Repairs and Maintenance is estimated to decrease by 25% annually due to purchase of
new sewing machines.
5.3.8. Depreciation method is straight-line basis. The new sewing machines have a salvage
value of 10% and useful life of 10 years.
5.3.9. Interest expense is estimated to be at 6% of Outstanding Loans Payable at year end.
5.3.10. The increase in Taxes and Licenses includes the PhilGEPS Platinum License, which is
required for government suppliers.
5.3.11. Trade and Other Receivables is estimated to be at 30% of Sales. This is in
consideration of the collectability of accounts from clients in the government sector.
5.3.12. Prepayments are estimated to increase by 5% annually based on the average in years
2017-2019.
5.3.13. Advances to Officers are estimated to decrease annually due to payment of dividends.
5.3.14. Accounts payable is estimated to be at 10% of purchases.
5.3.15. Dividends are declared at the end of the year and paid the following year.

79
 5.3.16. Income tax expense is estimated to be at 20% of Income before tax based on the new
CREATE law.
5.3.17. Income Tax Payable is estimated to be the last quarter income tax expense or 25%.

5.4 Projected Financial Statements

The projected financial statement of The Executive Chic Inc. includes (1) Statement of
Financial Position, (2) Statement of Financial Performance, (3) Changes in Equity, and (4)
Statement of Cash Flows. Meanwhile, the notes to financial statements and other pertinent
computation is located at the appendices of this strategic paper.
Table 17 : Projected Financial Position
Table 16 : Projected Financial Performance (2021 to 2025)

Table 18 : Projected Statement of Cash Flows (2021 to 2025)

Table 19 : Projected Changes in Equity (2021 to 2025)

80
5.5 Projected Financial Ratios
The projected financial ratios of The Executive Chic Inc. include ratios pertaining
to the company’s leverage, liquidity, efficiency, and profitability.

Table 20 : Summary of Financial Ratios (Projected Years)

81
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APPENDICES
Appendix A : Notes to Financial Statements (2021 to 2025)

84
85
 Appendix B : Financial Ratios (Historical and Projected Years)

(Annex B: continued – part 2)

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(Annex B: continued – part 2)

87
88
Appendix C : Quotation Sample for the ERP System

Appendix D : Procurement Cost Schedule of ERP System and Machines (2021 to 2025)

89
90