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University of Southeastern Philippines

College of Business Administration
Obrero, Davao City Philippines

BD MACHINE DESIGN & AUTOMATION SOLUTIONS

BUSINESS PLAN

In partial Fulfillment of the Requirements for the Degree

Master of Business Administration

Major in Enterprise Development

DANA MARINELA C. CUDAL

NOVEMBER 2020
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DECLARATION OF ORIGINALITY

I hereby certify that this material, which I now submit for

assessment on the program of study leading to the award of Master of

Business Administration is entirely my own work and has not been taken

from the work of others save and to the extent that such work has been

cited and acknowledged within the text of my work.

Dana Marinela C. Cudal

Signed ……………………………………………..........

November 13, 2020

Date …………………………………………….............
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APPROVAL SHEET

This business plan entitled “BD MACHINE DESIGN &

AUTOMATION SOLUTIONS BUSINESS PLAN” prepared and submitted by

Dana Marinela C. Cudal in partial fulfillment of the requirements for the

degree Master of Business Administration major in Enterprise

Development has been examined and recommended for acceptance and

oral examination.

Signed ……………………………………………..........

Date …………………………………………….............

Signed ……………………………………………..........

Date …………………………………………….............

Signed ……………………………………………..........

Date …………………………………………….............
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Acknowledgment

I would like to express my sincere gratitude and appreciation to

Bryan James C. Lorejo whose inspiration, collaboration, support and

encouragement has been invaluable throughout the completion of this

business plan.
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Table of Contents

Executive Summary 7
Our Business 8
Vision 8
Mission 8
Goals 9
Objectives 9
Business Model Canvass 11
Introduction 17
MARKETING PLAN 20
Product and Services 20
Product Description 20
Market Readiness 27
Proprietary Position 28
Market Analysis 29
Macro-environment 29
Industry and Competitive Environment 34
Market Segmentation 46
Target Market Profile 48
Comparative and Competitive Analysis 49
Marketing Objectives, Strategies and Implementation Plans
50
Marketing Personnel 50
Marketing Processes 52
Marketing Programs 57
Marketing Performance 59
Sales (or Revenue) Targets, Marketing Costs and Budgets 72
Sales (or Revenue) Targets 72
Milestones 73
Cost and Budget Estimates 74
OPERATIONAL PLAN 75
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Production Process/Trading Operations 75

Operational Processes 75
Raw Materials 76
Quality Monitoring and Supply 76
Waste Disposal System 76
Facilities 77
Manufacturing Plant and Other Buildings 77
Machinery and Equipment 77
Maintenance and Repairs Plan 77
Staffing Requirements 78
Operational Costs and Budget 78
ORAGANIZATIONAL PLAN 79
Legal Structure of the Business 79
Ownership 79
Organizational Structure and Key Personnel 80
Pre-Operating Activities 82
Fixed Assets for Administrative Offices 83
Administrative Costs and Budget 85
FINANCIAL PLAN 86
Total Project Cost 86
Projected Financial Statements 87
Projected Statement of Comprehensive Income 87
Projected Statements of Financial Position 88
Projected Cash Flow Statements 89
Financial Assumptions 90
Financial Analysis 92
Break-even Analysis 92
Profitability 92
Efficiency 93
Liquidity 93
Solvency 93
References 96
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Curriculum Vitae 99
List of Figures and Tables

Figure 1: Business Model Canvas 11

Figure 2. Sample Basic Engineering Design of a Brick Puncher 20

Figure 3. Sample Detailed Engineering of a Processing Plant Layout21

Figure 4. Sample Piping Design 22

Figure 5. Sample of Optimization of Copra Drying Facility 23

Figure 6. 3d Model of Automated Compressed Earth Block Machine

25

Figure 7. Manufactured Compressed Earth Block Machine 25

Figure 8. Official Logo of BD DESIGN 28

Figure 9. Ratings 60

Figure 10. BDD Milestones 73

Figure 11. BDD Operational Processes 75

Figure 12. BDD Organizational Structure and Key Personnel 80

Figure 13. BDD Pre-Operating Activities 82

Table 1. Mechanization status of various crops in the Philippines 46

Table 2. BDD Target Market Profile 48

Table 3. BDD Competitive Profile Matrix 49

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Executive Summary

BD Machine Design & Automation Solutions (BDD) is an

engineering design firm specializing in the design, engineering and

installation of micro and small-scale equipment and process plants. Its

core activities focus on engineering in the field of mechanical processing.

We adapt the scope of engineering according to client requirements. BDD

has identified three customer segments namely the agricultural, food

processing, and construction industries.

Currently, BDD is operating at a home office in Casisang,

Malaybalay City, Bukidnon. Client meetings are conducted in coffee

shops and co-working spaces according to the client’s convenience of

location. Project locations are not restricted and flexible. Current BDD

projects have sites located at Davao City, M’lang, North Cotabato, and

Bukidnon. Eventually, BDD will be occupying a virtual office space in

Regus Office Rentals located at Topaz Tower Centre, 4F Topaz Tower,

Damosa IT Park, J.P. Laurel Ave, Davao City.

The end in view of the proponent is to have a business that can

provide income in the long term perspective, a venue to develop

management and engineering skills, and perhaps one day provide

significant contributions to client organizations and welfare of the

community.
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Our Business

Vision

To become the highest quality provider of machine design and

automation solutions for micro and small enterprises in the country

offering cost efficient equipment and prompt after sales services.

Mission

Our mission is to provide the best quality of machine design and

automation solutions for micro and small enterprises that belong to the

agricultural, manufacturing, and construction industries nationwide.

We aim to meet and exceed our client’s expectations by

incorporating their ideas through effective co-creation and collaboration.

We seek to provide opportunities for growth and enrichment to our

employees and contribute to the welfare of the community and the

environment that we operate in.

Our priority is always sustainability over quick profit in all our

business activities.

We believe that honesty, integrity and hard work are our key

factors that should be applied from the smallest tasks to the biggest

projects.
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Goals

To gain recognition in the entire Philippines.

To consistently deliver high quality machine design and

automation solutions.

To create and maintain sound customer and supplier

relationships.

To nurture and aid employees by developing their knowledge and

skills in the field.

To contribute to the social welfare of the community and

participate in environmentally sound activities in our locality.

To generate enough income to sustain operations and have enough

profit to grow and stabilize the business.

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Objectives

To create online presence through social media platforms

(Facebook, LinkedIn, Instagram, Twitter, etc.) on top of the requisite

company website to be used for marketing.

To initiate face-to-face meetings, negotiate and close a deal with a

new client every month.

To hit the initial annual sales target and increase by 5% every year

thereafter.

To participate in seminars and conferences that provide the

required Continuous Professional Development points to our professional

employees as often as necessary.

To participate in exhibits and expositions to expand the reach of

our products and services and be updated with the ongoing trends in the

market at least once a year.

To donate a portion of our sales to a good cause or local charity at

the end of every year.

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Business Model Canvas

BD MACHINE DESIGN & AUTOMATION SOLUTIONS

∙ Designing
The business The business
∙ Lessor of ∙ Sourcing of can be aims to: Included in the
Rental Space materials distinguished as customers
an machine ∙ Encourage co- segments are the
∙ Fabricators ∙ Fabricating design and creation with following
Association automation clients industries:
∙ Testing service provider
∙ Joint that offers: ∙ Strengthen ∙ Agricultural
Venture ∙ Commissioning customer ∙ Manufacturing
Capitalists ∙ Fully relationship ∙ Construction
∙ Marketing customized with excellent ∙ Others
machines after sales
∙ Accounting according to
customer’s
needs

∙ Modular design
using current
∙ Senior Designer
technology ∙ Social Media
∙ Fabricators
∙ Expertise in ∙ Website
global design
∙ Material
standards ∙ Personal selling
suppliers
∙ Transition from ∙ Word-of-mouth
∙ Designer
manual to
Workstations
automated

∙ Operating Costs
(Rent, Salaries, Utilities) ∙ Professional fee
∙ Licensing & Registration
∙ Communication and Advertising ∙ Income from sale of fabricated
∙ Repairs and Maintenance products
∙ Logistics

Figure 1: Business Model Canvas

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A business model describes the rationale of how an organization

creates, delivers, and captures value (Osterwalder, Pigneur and Clark,

2010). The business model summarizes all the undertakings of the

business and gives a clear picture of the core value that the business

aims to offer. BDD aims to provide clients with quality design services

and high-performance equipment that meets the clients specific needs.

Customer Segment

The major customer segment of BDD are business owners or client

organizations who are in agriculture, manufacturing, and construction

industries. These clients are either starting a new production facility

that requires engineering equipment or already have an existing

operation but wants to transition from manual to automated or

mechanized production. Other clients require retrofitting of new features

to their existing equipment wherein we provide turnkey solutions. A

turnkey solution is a type of system built end-to-end for a customer that

can be easily implemented into a current business process.

Customer Relationship

BDD encourages co-creation with its clients. This means majority

of the input will come from the client’s ideas and imagination. The

designers foster effective communication with clients through an

approachable manner of conducting technical discussions. Technical

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discussions are conducted in a simplistic approach to make sure that

there is mutual understanding in all aspects of the project requirements.

Strong customer relationship is also developed by providing excellent

customer support after delivery of designs and/or equipment.

Channels

BDD initializes contact with clients who are seeking out designers

by leaving contact details in well-known local machine shops. By

recommendation, the clients are able to learn about BDD services. To

increase the awareness regarding our products and services we will use

social media platforms and advertise our portfolio. An even more

aggressive campaign will be personal selling to existing businesses and

creating partnerships and networks with suppliers and fabricators.

Value Proposition

The business can be distinguished as an engineering design and

fabrication service provider that offers fully customized machines

according to customer’s specific needs. The business specializes in

modular design using current technology. BDD is proud of having more

than 10 years of experience in machine design through its senior

designer who guarantees his expertise in global engineering design

standards. The business desires to add value to an existing

manufacturing facility by transitioning from manual operations to

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automation and mechanization or by retrofitting existing equipment to

achieve greater efficiency.

Key Activities

The business breaks down its activities in phases including but

not limited to research, conceptualization, designing, sourcing of

materials, fabricating, testing, commissioning, marketing, and

accounting. BDD highly encourage co-creation in all projects which

means the client is constantly updated with the progress of the project.

Clients can continually provide input all throughout the design process

to achieve the best version of the equipment that they want.

Key Resources

For the business to thrive we need the following resources: Senior

Designer, Fabricators, Material suppliers, and Designer Workstations.

The Senior Designer holds the most critical role in the business. The

quality of our deliverables relies heavily on his expertise and

capabilities. Access to reliable fabricators that can deliver quality

products is also a key factor. Fabricators must have highly skilled

workers to execute the design properly. A good relationship with

material suppliers that offer quality products with correct specifications

at a reasonable cost is important to the implementation of the design.

The designer workstation must have the latest hardware and software
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specifications to efficiently produce high resolution rendering and

manufacturing drawings of our designs.

Key Partners

To operate, we will need the following partners: Lessor of Rental

Space, Fabricators Association, and Joint Venture Capitalists. We have

several options available for our office space. For our workstations we

can use the owner’s home office. For client meetings we can avail of co-

working spaces and virtual office services available in the city. A close

relationship with a fabricators’ association is needed to easily job out

specific processes entailed in the fabrication process. There will be

opportunities to engage in joint ventures with investors who are willing

to finance the mass production of a sellable equipment using our design.

Revenue Streams

BDD will earn revenue through the following streams: Professional

fee and income from fabricated products. Our bread and butter will be

our professional fee since engineering design is the main service

provided in our business. Additional income can be generated by selling

prefabricated equipment to clients who want to purchase operational

equipment instead of just the design only.

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Cost Structure

The business will need to spend for the following costs: Operating

Costs (Rent, Salaries, Utilities), Licensing, Registration, Communication,

Advertising, Repairs, Maintenance, and Logistics. Rent expenses will be

paid to co-working spaces and virtual offices as needed. Salaries will be

paid to the General Manager and Senior Designer. Professional fees will

be paid to a qualified bookkeeper. Utilities payments will include

electricity and high-speed internet. Expenses will be incurred for the

initial licensing and registration of the business and its renewals as

required. Domain fees will be paid to host our company website and

premium subscription fees will also be paid for project management and

accounting software. Technical repairs and maintenance for the

designer workstations will incur costs as well. Payments will also be

made for gas expenses and cellphone bills.

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Introduction

The proponent acknowledges the entirely unique and

unprecedented situation of implementing a business idea during the

onslaught of a global pandemic. Although, this idea has been brewing in

the proponent’s mind since the beginning of her MBA journey last

August 2018, it is critical to evaluate whether the value proposition that

the business claims to offer will still hold true after the devastation that

COVID-19 will cause on the national and global economy.

After much deliberation and consultation, the proponent still

firmly believes that this business can help client organizations create

something of great value. In a way, this business will plant the seed of

empowering local micro and small businesses to mechanize and

automate manufacturing processes instead of relying on manual labor

processes. The services that we provide hopes to enable these businesses

to become less dependent on manual labor, increase capacity and

productivity, and eventually contribute to the recovery of the local

economy.

In the past year, the proponent has encountered several clients

who needed the kind of services that BDD would like to offer. These

clients were practically strangers seeking out engineering professionals

who can provide machine design and automation services for them. Their
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search stories were all unique but all of them ended up contacting BDD.

This was without marketing or any form of advertising, but just through

mere word of mouth recommendations. BDD was able to pitch seven

different projects to five client organizations.

BDD will initially be composed of two people. The general

manager, who is the proponent of this business plan, and the senior

designer. The proponent is a licensed mechanical engineer who is

passionate and loyal to her profession. The senior designer is a licensed

electrical engineer who has a wide range of experiences working as a

product designer for Japanese, German, and Dutch companies.

One of the obvious changes that the COVID-19 pandemic has

foisted upon businesses is the abrupt transition to work from home

arrangements. This is an actual benefit that BDD would like to take

advantage of. Initially, the pressure of providing a traditional office setup

in a physical location was present prior to the pandemic. But now more

evidence have shown that working from home has great benefits. First, it

greatly reduces overhead expenses. Second, more businesses now are

reevaluating the necessity of going back to the traditional office setting,

especially since the productivity of their teams have improved while

working remotely. Last, working from home was already a trending

concept way before the health crisis and it has been the original plan of

the proponents regarding the setup of the BDD office.

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BDD insists to pursue the idea of having the main workstations at

home but also acknowledges the importance of having face to face client

meetings. This can easily be solved by using the services of virtual office

spaces that are readily available in Davao City. Virtual office spaces

provide all the advantages of a professional working conducive

atmosphere, a prestigious office address and other office essentials.

The most crucial challenge of starting a business is none other

than the financial aspect. BDD admits that perhaps the timing of this

endeavor may be less than ideal. Who in their right mind would start a

non-essential business during a global recession? This has been a

looming thought in the proponent’s mind but at the end of the day it is

the resiliency of the entrepreneurial spirit that prevails. To be practical

considering recent events, BDD financial forecasts will be at the most

minimum. Resources will be maximized as efficiently as possible but

return on investment is not expected until at least three years of full-

blown operations.

Ultimately, the end in view of the proponent is to have a business

that can provide income in the long term perspective, a venue to develop

management and engineering skills, and perhaps one day provide

significant contributions to client organizations and welfare of the

community.
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MARKETING PLAN

Product and Services

Product Description

BDD core activities include engineering in the field of mechanical

processing. We start with process development, create plant concepts

and design machines/equipment. We adapt the scope of engineering

according to client requirements.

Basic Engineering

At the beginning of a project, the basic engineering phase starts.

During this stage, initial ideas are detailed further to confirm initial

ideas as well as estimated investment costs. The documentation for

project approval or the Memorandum of Agreement (MOA) is prepared.

Further, the project timing is analyzed.

Figure 2. Sample Basic Engineering Design of a Brick Punching Jig

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Detailed Engineering

During the detailed engineering phase each aspect of the plant

arrangement is considered carefully. Using the information and design

obtained from the Basic Engineering phase, the timing for the design

and installation phases can be coordinated exactly. Detailed calculations

for equipment as well as technical specifications are prepared.

The results are detailed procurement documents for individual

suppliers with respect to process, equipment and project timing.

Figure 3. Sample Detailed Engineering of a Processing Plant Layout

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Piping Design

A very effective manner for producers and plant designers is to

subcontract the piping design, but to purchase piping materials directly.

As a result, typically high profit margins on standard piping components

can be avoided – budgets are relieved.

Figure 4. Sample Piping Design

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Process Optimization

Production facilities require process optimization to maximize their

resources and increase productivity and efficiency.

Figure 5. Sample of Optimization of Copra Drying Facility

The reasons why companies require process optimization often lie

in the following areas:

1. Productivity and Efficiency

o Increased performance / throughput

o Minimization of raw material use

o Re-usage of waste (raw) materials

o Minimizing energy consumption

o Minimizing change-over / lost times

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2. Quality:

o Increasing the reproducibility

o Reduction of waste level

o Reduction of quality costs

o Plant availability

3. Reducing standstills

4. Increased plant availability

5. Reduction of maintenance costs

6. Operation

o Increasing the efficiency of operators

o Increasing safety

o Environmental factors

7. Minimizing the environmental impact

o Reduction of waste disposal costs

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Machines / Systems

BDD has a vast experience in this field and has acquired a solid

range of equipment designs. If the client’s project requires custom

equipment, we will gladly check our design possibilities.

Figure 6. 3d Model of Automated Compressed Earth Block Machine

Figure 7. Manufactured Compressed Earth Block Machine

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Installation

For a turnkey delivery, a professional installation of the equipment

is required.

Commissioning

Process plants are almost always individual solutions that require

specific commissioning. During the commissioning stage, the original

engineering idea becomes reality.

In close collaboration between the engineering and automation

team, the equipment will be put into operation. Raw materials will be

brought in as well as process parameters adjusted to achieve the

required product quality and designed plant throughput.

The commissioning phase represents a very important stage for

training future operating staff.

We will support the client until handing over the plant to the

production and maintenance teams.

Depending on the project requirement, we can carry out a

supervisory installation and/or commissioning. For turn-key

installations, we work with customer staff, suppliers and partner

companies.

During all stages, the client will have the same project partners.

We will support the client from the project idea, equipment delivery until

turnkey installation including commissioning.

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Market Readiness

Currently, there is a wide gap between fabricators/machine shops

and clients. There is a medium that is lacking for both parties to have

mutual understanding. This gap can be filled by the universal language

of engineering which is design materialized in the form of drawings.

BDD is dedicated to being the bridge between client and fabricator

and to make our services more accessible to everyone who needs it. Last

year, in a span of eight months BDD has acquired seven projects from

five clients without any form of advertising but only through

recommendation. This is a good indication that it is the clients who are

looking for us. This brought us to the question on how much more

clients we can serve if we advertise our services. We are convinced that

the market is ready for our services.

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Proprietary Position

BDD protects its name and reputation by registering its logo as a

trademark through the Intellectual Property Office of the Philippines.

Figure 8. Official Logo of BD

MACHINE DESIGN & AUTOMATION SOLUTIONS

Based on the Memorandum of Agreement crafted between the

client and BDD, the client owns the proprietary rights to all the designs

that we supply. BDD may require the permission of clients to include the

designs created for them in our portfolio for marketing purposes only.
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Market Analysis

Macro-environment

Political

Prior to the pandemic, government stability in the national level

has been remarkable. Philippines under President Duterte’s

administration is perhaps an interesting though unsurprising case which

shows illiberal democracy and liberal economic policy can coexist

(Capuno, 2020). As seen in robust economic conditions, Duterte's

authoritarian‐populist political style has had no crucial negative impact

on the Philippine economy so far and possibly may have saved the

country from suffering grave economic devastation when the pandemic

hit.

In 2018, the Philippine tax reform bill known as the Tax Reform for

Acceleration and Inclusion or TRAIN law was implemented. One of the

main beneficiaries of the law are workers who earn an annual income of

P250,000. Under the law, they will be exempted from paying income tax.

Small businesses are also beneficiaries of the new law. Under the

TRAIN law, the tax threshold for micro, small and medium enterprises

(MSMEs) was raised from P1.5 million to P3 million. MSMEs with gross

sales below the threshold can choose to pay a flat rate of just 8% instead

of paying the regular income tax. Given the current political stature and
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new tax regulations of the country, BDD affirms that there is a great

opportunity for small businesses to thrive and succeed.

Economical

One of the indicators of a sound economic environment for

business and investing is the availability of credit. An analysis was

conducted between the relationship between firm characteristics credit

constraints among small and medium enterprises (SMEs) in the

Philippines where it determined whether SMEs were credit-constrained

or “quasi-constrained” – i.e. able to borrow from informal sources.

The study provided evidence that firm size, previous purchase of

fixed assets, and increased use of digital technology for financing

management and accounting are associated with lower probability of

being credit constrained (Flaminiano, 2019). This is encouraging for

BDD specially since these characteristics are present in the company.

However, there is a significant economic factor that poses a threat

to the company. This is the fluctuating inflation rate. Due to the

implementation of the Tax Reform for Acceleration and Inclusion (TRAIN)

Act, the year 2020 started off with a higher national headline inflation

rate of 2.9 percent. This is the highest inflation recorded since June

2019, in which the inflation was posted at 2.7 percent. The annual rate

in December 2019 was 2.5 percent and in January 2019, 4.4 percent

(PSA, 2020).
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Officially cited as Republic Act No. 10963, is the initial package of

the Comprehensive Tax Reform Program (CTRP) signed into law by

President Rodrigo Duterte on December 19, 2017.

The excise tax cause higher operational expenses in terms of

moving supplies through logistics service providers. Materials that are

not available locally sometimes need to be imported from other Asian

countries.

Social

In a study entitled “The Technology Adoption and Governance of

Artificial Intelligence in the Philippines” attitudes of Filipinos towards

modernization brought about by artificial intelligence was discussed.

Collectively, cultural, organizational and technological barriers are very

apparent in neglecting the adoption of any disrupting technology such

as artificial intelligence. Fear is the first specific constraint of adoption.

The Gallup Poll conducted last 2018 shows that 73% of human fear of

losing their job because of AI-enabled tasks (Concepcion, 2019).

BDD realizes the significance and social impact of automation and

mechanization to different industries. This prevalent negative notion of

machines replacing humans is a possible threat to the company. This is

common in provincial areas where most production processes are still

heavily labor intensive.

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Automation or AI may displace some non-digital jobs that performs

heavy load and repetitive tasks, but it certainly augments labor shortage

by realigning the workforce competitiveness to what the technology

requires (Concepcion, 2019).

Technological

The market’s attitude towards technological upgrades may vary

depending on the industry. In a study conducted in Davao Region,

Philippines, the determinants of the extent of adoption among micro,

small, and medium food processing enterprises were identified. MSMFEs

need to modernize and adopt technological innovations to stay

competitive. Various factors influence MSMFEs’ ability to adopt

innovations (Barroga, et. al., 2019).

Results showed that 4% of the MSMFEs did not or failed to adopt

technological innovations. On the other hand, 21% of the MSMFEs fully

adopted the innovations. The majority of them were in the highly

adoptive level. Additionally, the extent of technological innovation

adoption (TIA) among MSMFEs was mainly influenced by the sex of the

owner, educational attainment, business scale, and type of market.

Thus, male owners, those with higher educational attainment, and those

who own micro-scale businesses catering to both domestic and export

markets are likely to adopt more technological innovations (Barroga, et.

al., 2019).
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Another industry worth to mention is agriculture. Laws adopted in

the Philippines affecting agricultural mechanization include the

Agriculture and Fishery Modernization Act (AFMA) of 1998, the

Agricultural Engineering Law issued in 1998, and the Agricultural and

Fishery Mechanization Law (AFMech Law) issued in 2013. There are

strong demands for appropriate agricultural machinery in the

Philippines. Attention shall also be paid to structures and controlled-

environment agriculture, precision agriculture/smart farming, and high

energy utilization for the future development of agricultural

mechanization in Philippines (Suministrado, 2013).

BDD considers food processing and agriculture industry as target

segments. The data showed that these particular segments are highly

adoptive to technological innovations and have great demand for

mechanization. This provides an opportunity for the company to consider

focusing on these segments.

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Industry and Competitive Environment

Description of the Industry

Engineering consulting and design services, as highly specialized

activities, represent a key knowledge-intensive sector that emerged

during a later phase of industrial development when a need for

innovative solutions and improved design for construction projects,

plants layout and technologies became evident. It has been seen as the

key factor in the generation and definition of new technologies in

advanced industrial economies and as a key factor in undertaking

technology transfer in developing economies. The markets for engineering

consulting and design services are therefore primarily related to the

growth of industries (metals, mining, power, oil and gas, heavy

machinery, cement, etc.) and construction sector, and business in this

industry tends to fluctuate with the cycles of growth and stagnation in

manufacturing and production in major markets (Stroe, 2013).

Engineering consulting and design services are generally defined

as highly specialized activities of intellectual nature, which identify,

select, organize and apply technological engineering knowledge for

purposes of investments and production. They are characterized by

certain methods/methodologies of work and often by a multidisciplinary

approach (engineering, architecture, economics, finance, project

management, ecology) (Koutsikouri, 2006). The ECDCs may provide any

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or all of a number of services, from consultancy to engineering, and these

services can be categorized according to the stage of a project for which

the services are provided. As such, there are services related to

formulation of the project, research operations which explore various

technologies available for a specific operation resulting in the choice of

product design and technology to be used, project evaluation, basic and

detailed engineering and design, procurement of plant components,

preparation of bid and contract documents, supervision of fabrication

and construction, commissioning, testing and start-up of a new plant,

training of personnel, services related to the operation and maintenance

of an industrial facility (Aranda, 2003).

Depending on the sector the ECDCs are active in, they can be

categorized in:

o Civil (roads, bridges, railways, tunnels, airports, dams,

harbors, docks, social utility buildings, water supply and

treatment plants, sewerage systems, irrigation systems, land

planning and architecture, commercial buildings,

communication systems, hydrology, geology, etc.)

o Industrial (metals, mining, power, heavy machinery, ship

building, aircraft, oil and gas, cement, glass, chemical, pulp

and paper, nuclear, manufacturing facilities, power

transmission and distribution plants, etc.)

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o Military (guns, ammunition, defense systems, special

machines and communication systems, etc.)

o Environmental (environment protection systems and plants,

waste disposal and recycling, management and use of

natural resources, etc.)

Engineering consulting services are particularly defined as

activities involved in the identification and organization of technological

knowledge, relating its possibilities and uses to the context of physical,

technological, economic, social, and environmental requirements (Hales

and Gooch, 2004).

Depending on the stage of a project for which the services are

provided, consulting services can be grouped into three categories:

Pre-investment consulting services, rendered before the

materialization of an investment, in order to identify, prepare and

evaluate projects and select the appropriate technologies. These services

are provided (typically for industrial-type projects) before the actual start

of engineering design and fabrication and comprise techno-economic,

pre-feasibility, project feasibility and evaluation studies (including

market, location, technological, economic, commercial, financial and

environmental aspects), preparation of terms of reference and invitations

for tender;
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Project implementation consulting services, rendered during the

execution of the project. These services are comprised of project

engineering (choice of appropriate technology and equipment,

engineering surveys, specifications, tendering, bids evaluation and

contracting, negotiation of financial, commercial, know-how agreements,

information systems), supervision of project execution (procurement,

fabrication, construction, erection, installation), and commissioning and

start-up (including personnel training);

Consulting services for management and production, rendered

during the operation stage of an investment which has already been

materialized. These services comprise technical assistance and

troubleshooting during operation/production, production planning and

control, cost control and optimization, product design and development,

process improvement, quality control and maintenance systems, sales

and inventory systems, expansion programs, personnel training,

management information and control systems, etc.

Engineering design services, rendered mainly during the project

implementation stage (project engineering), are particularly defined as

activities involved in the application of knowledge in order to develop

data, diagrams, drawings, models, simulation and calculation reports,

product specifications, materials and fabrication specifications, wear and

tear parts specifications, painting, packing, labeling, and transport

 40

specifications, procurement specifications for special plant components

and equipment, risk analysis reports, instructions for assembly, erection,

installation, commissioning, start-up, operation, maintenance, with the

purpose of implementing physical facilities for economic activities, and of

optimizing and maintaining the existing facilities (Pellicer, 2005).

Nowadays, almost all countries have their own engineering

consulting and design companies that were initially founded to assist

local industries and organizations in the development and

implementation of new technologies and products. It is said that

engineering consulting and design services play a unique and crucial role

in industrial development due to their presence at the junction of

information and decisions flows circulating amongst productive units,

capital goods manufacturing, and research and development.

According to the Philippine Standard Industrial Classification

(PSIC) prepared by the National Statistical Coordination Board (NSCB),

the classification of BDD falls under the following:

Section: Section M - Professional, Scientific and Technical Activities

This section includes specialized professional, scientific and

technical activities. These activities require a high degree of training and

make specialized knowledge and skills available to users.

 41

Division: Architecture and Engineering Activities; Technical Testing and

Analysis

This division includes the provision of architectural services,

engineering services, drafting services, building inspection services and

surveying and mapping services. It also includes the performance of

physical, chemical, and other analytical testing services.

Group: Group Code 711 - Architectural and Engineering Activities and

Related Technical Consultancy

Class Description : Class Code - Architectural and Engineering

Activities and Related Technical Consultancy

This class includes the provision of architectural services,

engineering services, drafting services, building inspection services and

surveying and mapping services and the like.

o Engineering design (i.e. applying physical laws and principles of

engineering in the design of machines, materials, instruments,

structures, processes and systems) and consulting activities for :

o machinery, industrial processes and industrial plant

o projects elaboration and realization relative to electrical

and electronic engineering, mining engineering, chemical

engineering, mechanical, industrial and systems

engineering, safety engineering

 42

o Elaboration of projects using air conditioning,

refrigeration, sanitary and pollution control engineering,

acoustical engineering, etc.;

This class also includes environmental engineering activities such

as: management and provision of anti-pollution technologies covering

wastewater treatment or pollution control and solid and hazardous

waste management, etc.

 43

Market Forces Analysis

Competitive Rivalry

In Porter’s model this force describes the competition amongst the

established rivals in a certain industry. These aspects dictate the

intensity of competition and the basis on which companies compete.

Competitive moves by one company within an industry will

eventually be felt and noticed by all the companies in that industry.

Companies affected by such competitive moves will have to respond by

taking similar or maybe more drastic countermoves. Porter states that

“firms are mutually dependent” (Porter, 1980).

The engineering consulting and design companies have long

enjoyed a high degree of differentiation in the various sectors of the

industry. In effect, a specific firm has had few direct competitors as each

firm has managed to carve its own niche in the market (Løwendahl,

2005).

In the global setting the engineering consulting and design

industry has overcapacity and the competition among ECDCs is getting

tougher. Similarly, in the local setting, the consultancy firms for

architecture, construction, and structural engineering is prolific.

However, there is a possible shortage of engineering design providers

who specialize in machine design. There is yet a popular existing

engineering consultancy firm that offers machine design services which

is reason enough to conclude that the level of competition is low.

 44

Threat of New Entry

The new entrants in an industry usually cause an increase in the

capacity of that industry thus leading to an overcapacity. In the classic

sense of Porter’s analysis this increase in capacity and entrants’

eagerness to gain market share will compromise the level of returns that

companies can ask and expect.

The low capital intensity of engineering consulting and design

services as professional services means that the barriers to entry in the

industry are practically non-existent (Lorsch and Tierney, 2002). The

number of potential new entrants will be great as the capital

requirement to set up design firm is relatively low. This is due to the

minimal amount needed to finance the fixed costs (office rental,

computers, printers, plotters).

Potential new entrants to the engineering consulting and design

industry are usually the following:

o private, freelance, independent individual engineering consultants

and designers who are former employees of ECDCs or professors

from schools of engineering;

o groups of experienced engineers and designers working for an

ECDC and who, at a moment in time, decide to leave the company

and start their own engineering services business

 45

Bargaining Power of Supplier

The stronger the power of suppliers in an industry, the more

difficult it is for firms within that sector to make a profit because

suppliers can determine the terms and conditions on which business is

conducted.

The suppliers of software, paper and ink cartridges, printers and

plotters, offices and furniture are not powerful and have a relatively low

bargaining power because there are many suppliers of the same or

similar products on the market. The biggest portion of costs are with

personnel salaries and compensations.

The major asset of any engineering firm is the highly trained and

qualified professionals (engineers, designers) specialized in the fields of

engineering in which the company is active. Highly qualified and skilled

engineers and designers are the ones who enjoy the privilege of being

the most powerful suppliers (of knowledge, expertise, experience,

capabilities) when the economy is booming. On the other hand, during

economic slowdown, the bargaining power of employees and potential

employees is very low.

The most important suppliers for a consulting and engineering

design company are the existing professional employees or the highly

specialized professional engineers and designers available or potentially

available on the labor market. The bargaining power of engineers and

 46

designers depends on the economic and business conditions at a

particular time.

Bargaining Power of Buyer

With respect to the power of buyers, Porter argues that “buyers

compete with the industry by forcing down prices, bargaining for higher

quality or more services, and playing competitors against each other –

all at the expense of industry profitability (Porter, 1980).”

The power of buyers is dictated by a company’s dependence on a

specific group of buyers. In cases where a specific buyer or group of

buyers forms the primary source of revenue they are in the position to

dictate price and product/service specifications.

One of the reasons which lies behind this power is the fact that the

“switching costs” to the buyer are practically non-existent. A

governmental or financing agency will practically incur no costs if

another project it has in plan will be awarded to another firm.

Bargaining power of buyers becomes very high when there is an

overcapacity of the companies active in the engineering consulting and

design industry, especially in the mature engineering disciplines.

The emergent engineering disciplines which require a certain set of

rare expertise and experience being available at only few companies will

have a better and friendlier competitive environment in which to survive

from the buyers’ power standpoint.

 47

Threat of Substitutes

According to Porter, “substitutes limit the potential returns of an

industry by placing a ceiling on the prices firms in the industry can

profitably charge” (Porter, 1980).

The degree to which the engineering consulting and design services

can be substituted varies quite a bit. That is, however, if one potential

customer expands the concept of service substitution to include the

option of simply deselecting or not purchasing the service at all. A

potential customer can deselect engineering consulting and design

services when the customer company can manage in-house this kind of

services by its own technical departments. In general, the degree of

deselection is higher for engineering design than for engineering

consulting services.

However, in terms of acquiring custom built equipment, there is no

substitute for having a custom design. The only possible alternative is to

purchase off-the-rack equipment which are not customized to client’s

needs.
 48

Market Segmentation

BDD has identified three customer segments namely the

agricultural, food processing, and construction industries. The

Philippines has a land area of 30 million hectares, while agricultural area

covers 9.5 million hectares, among which 4.8 million hectares are used

for rice production, 2.6 million hectares for corn production, and other

areas are for major plants including coconut, sugar cane, banana,

pineapple, cassava, rubber, mango, and vegetables. The Philippines is a

net rice importer, and total rice production in 2013 was 18 million tons.

Corn production reached 7.4 million tons in the same year

(Suministrado, 2013). Below is an overview of mechanization status of

various crops in the Philippines:

COCONUT/
VEGETABLE,
FRUITS SUGARCANE,
OPERATION RICE/CORN LEGUMES &
/ FIBER PINEAPPLE
ROOT CROPS
CROPS
LAND INTERMEDIATE INTERMEDIATE
LOW
PREPARATION TO HIGH TO HIGH
PLANTING/ LOW TO
LOW LOW LOW
TRANSPLANTING INTERMEDIATE
CROP CARE/
LOW LOW LOW LOW TO HIGH
CULTIVATION
HARVESTING LOW LOW LOW LOW
THRESHING/ INTERMEDIATE LOW
SHELLING TO HIGH (LEGUMES)
CLEANING LOW
LOW
DRYING LOW LOW
(LEGUMES)
MILLING/
VILLAGE LEVEL HIGH LOW LOW
PROCESSING
Table 1. Mechanization status of various crops in the Philippines.
 49

The second customer segment we identified is the food processing

industry. Micro, small, and medium food processing enterprises

(MSMFEs) depend on the adoption of technological innovation by

acquisition of upgraded equipment and diffusion of new technologies to

increase their productivity, competitiveness, and efficiency (Barroga, et.

al, 2019). The flexibility of micro enterprises, their simple organizational

structure, their low risk, and their receptivity are the essential features

that facilitate the adoption of more technological innovations. Therefore,

micro enterprises among MSMFEs have the unrealized innovation

potential that needs to be tapped.

Lastly, the construction industry is included as our customer

segment. Construction infrastructure projects are one of the most

important factors in supporting the social economic development in the

country. It could generate downstream economic activities and

completely enhance productivity and competitiveness in the construction

industry (Juanzon, 2015).

 50

Target Market Profile

In order to identify the target market profile, BDD enumerated

critical success factors that determine whether or not a particular client

organization would be interested in a company’s products and services.

Each of the critical factors were then assigned corresponding weights

according to BDD’s perception. The applied rates according to industry

or segment was multiplied to the weight to come up with the weighted

score.
CRITICAL SUCCESS FACTOR W EIGHT AGRICULTU RAL FOO D PRO CESSIN G CO N STRU CTION
W EIGHTED W EIGHTED W EIGHTED
RATE RATE RATE
SCO RE SCO RE SCO RE
Management Q ualification and Experience 0.16 4 0.64 4 0.64 3 0.48
Customer Ser vice Satisfaction 0.14 3 0.42 3 0.42 4 0.56
Customer Loyalty 0.11 4 0.44 3 0.33 4 0.44
Q uality Base O utput 0.11 4 0.44 3 0.33 3 0.33
Skilled W orkfor ce 0.10 3 0.3 4 0.4 4 0.4
Management Competency 0.08 4 0.32 2 0.16 3 0.24
O n-time Turn-over of Projects 0.07 4 0.28 2 0.14 3 0.21
Clear Str ategic Dir ection 0.06 3 0.18 3 0.18 3 0.18
Price 0.05 3 0.15 3 0.15 4 0.2
Innovation in Products and Ser vices 0.05 3 0.15 3 0.15 4 0.2
Strong Supplier Network 0.04 2 0.08 2 0.08 2 0.08
Supply Chain Integration 0.03 3 0.09 2 0.06 3 0.09
TO TAL 1.00 3.49 3.04 3.41

Table 2. BDD Target Market Profile

It is determined that the agricultural industry is a more lucrative

segment for BDD with a weighted score of 3.49. Next is the construction

industry with a weighted score of 3.41 and lastly the food processing

industry with a weighted score of 3.04. This means that BDD should

allocate more resources in marketing to clients in the agricultural

industry.
 51

Comparative and Competitive Analysis

In analyzing and comparing the competition, BDD used the same

critical factors enumerated previously. This time, the variables are rated

based on the capacity of the competitor.

CRITICAL SUCCESS FACTOR W EIGHT BDD DECO MACHIN E SHO P AGDAO STEELW ORKS
W EIGHTED W EIGHTED W EIGHTED
RATE RATE RATE
SCO RE SCO RE SCO RE

Management Q ualification and Experience 0.16 4 0.64 4 0.64 2 0.32

Customer Service Satisfaction 0.14 3 0.42 3 0.42 2 0.28
Customer Loyalty 0.11 2 0.22 3 0.33 2 0.22
Q uality Base O utput 0.11 4 0.44 3 0.33 3 0.33
Skilled W orkforce 0.10 4 0.4 4 0.4 4 0.4
Management Competency 0.08 4 0.32 3 0.24 2 0.16
O n-time Turn-over of Projects 0.07 4 0.28 3 0.21 3 0.21
Clear Strategic Direction 0.06 4 0.24 2 0.12 2 0.12
Price 0.05 3 0.15 3 0.15 2 0.1
Innovation in Products and Services 0.05 3 0.15 1 0.05 1 0.05
Strong Supplier Network 0.04 2 0.08 1 0.04 1 0.04
Supply Chain Integration 0.03 3 0.09 2 0.06 2 0.06
TO TAL 1.00 3.43 2.99 2.29

Table 3. BDD Competitive Profile Matrix

It is determined that BDD surpasses the two identified competition

with an overall weighted score of 3.43. Deco Machine Shop falls behind

in terms of Innovation in Products and Services since they are not able to

provide design services to their customers. They also fail in having a

strong supplier network since they cannot cater to customers that have

special material requirements. Agdao Steel Works falls behind in the

same categories since they have the same conditions with their

customers.
 52

Marketing Objectives, Strategies and Implementation Plans

Marketing Personnel

The marketing manager is responsible for the total management of

the marketing department. The following requirements (job

specifications) were determined and derived from the job description as

crucial for success in the marketing manager job.

Required Skills, Knowledge and Characteristics

These are the most important qualifications of the individual

selected as the marketing manager.

o Strong effective communicator.

o Highly developed, demonstrated teamwork skills.

o Ability to coordinate the efforts of a large team of diverse creative

employees.

o Demonstrated ability to increase productivity and continuously

improve methods, approaches, and departmental contribution.

Commitment to continuous learning.

o Expert in Internet and social media strategy with a demonstrated

track record.

o Demonstrated effectiveness in holding conversations with

customers, customer evangelism, and customer-focused product

development and outreach.

 53

o Demonstrated ability to see the big picture and provide useful

advice and input across the company.

o Ability to lead in an environment of constant change.

o Experience working in a flexible, employee empowering work

environment. Structured or large company experience will not

work here.

o Familiarity and skill with the tools of the trade in marketing

including PR, written communication, website development,

market research, product packaging, Microsoft software suite of

products, visual communication software products, and creative

services.

o Experience managing external PR and communication consulting

firms and contractors.

o Experience in the global marketplace is a plus.

High Level Overview of Job Requirements

The marketing manager must be able to perform effectively in each

of these areas:

o Researching and evaluating new product opportunities, demand

for potential products, and customer needs and insights.

o Overall marketing strategy and execution of plans for the existing

products.
 54

o Working with product development teams to manage new product

development.

o Managing launch campaigns for new products.

o Managing distribution channels for products.

o Ensuring effective, branded marketing communications including

the company website, print communication, and advertising.

o Managing media and marketing staff and external PR agencies.

o Analysis of the effectiveness of all marketing efforts.

Marketing Processes

BDD marketing channels include digital ads, content marketing,

word of mouth, and social messaging. These e-commerce channels

educate who and what is BDD, what is its mission and objectives, and

most especially the products and services that the company provides.

According to Dr. P.M. Pavlidis, there are five marketing processes

that successful companies must be able to manage well. These are

Opportunity Identification, New Product Development, Customer

Attraction, Order Fulfillment, and Customer Retention and loyalty

building. BDD wishes to adopt these marketing processes.

Opportunity Identification

Two streams of thought related to opportunity identification and

human information processing can be found in the literature. They are

 55

the opportunity recognition or discovery viewpoint and the opportunity

construction or enactment viewpoint. Entrepreneurs as information

processors use more or less both approaches in order to identify

opportunities; thus entrepreneurial opportunities can be recognized and

constructed at the same time in a variety of combinations and

recognized or constructed individually (Vaghely and Julien, 2010).

BDD is committed to nurture a strong relationship with its

customers. Through our emphasis on co-creation, we will be able to

identify new opportunities based on the ideas that we gather from our

clients. The more clients that we get to share ideas with, the more

opportunities we can gather for further exploration and development.

New Product Development

BDD has an existing design portfolio of unrealized product ideas

which are just waiting to be funded. These can be used to develop new

products.

Although many new-products professionals may harbor hopes of

developing “the next big thing” in their respective industries, most

product development efforts focus on incremental innovations.

Accordingly, most research on the new-product development process

focuses on the development of evolutionary products (Veryzer, 1998).

This means that new product development is a slow and

evolutionary process that needs a lot of time in research and

 56

development to create something worthy of mass production. BDD

approaches new product development through incremental

improvements from time to time and focusing on the quality and

sustainability of the product as the priority above profitability.

Customer Attraction

Attraction is a central concept in the social psychology/exchange

literature. The literature on buyer-supplier relationships has been

inspired by social psychology/exchange, adopting concepts such as

trust and commitment, but overlooking the concept of attractiveness.

Attraction is a vital prerequisite for developing trust and commitments,

both initially and in the continuing relationship. Further, attraction

enlarges and complements the concept of value by emphasizing the

social elements of exchange in buyer-supplier relationships (Ellegaard,

2006).

BDD believes that the best way to attract new customers is by

delivering exceptional customer satisfaction through our high-quality

products and services. The approach is to let our products speak for

itself. The promotions and advertisements are only auxiliaries in

conveying the message, but it is the product and service itself that will

eventually attract the customer.

Order Fulfillment
 57

The order fulfillment process is often viewed as transactional and

part of the logistics function within a firm. However, it is important that

managers recognize its strategic components, its cross-functional needs,

and its role within the management of the supply chain (Croxton, 2003).

At the operational level, the order fulfillment process focuses on

transactions, while at the strategic level, management can focus on

making critical improvements to the process that influence the financial

performance of the firm, its customers and its suppliers.

To accomplish these tasks, BDD is determined to design a network

and a fulfillment process that permits a firm to meet customer requests

while minimizing the total delivered cost. This requires integration of

logistics, marketing, finance, purchasing, research and development,

and production within the firm, and coordination with key suppliers and

customers.

Customer Retention and Loyalty Building

Today’s companies must manage a strange paradox: In the race to

win market share and its promise of profit, a company risks (and often

loses) the highest-margin customers, and in doing so, worsens

profitability rather than improving it (Griffin, 2010).

BDD is interested in building a solid, loyal customer base by using

an approach different from that of a company interested in simply

building market share. Loyalty building requires the company to

 58

emphasize the value of its products or services and to show that it is

interested in building a relationship with the customer. BDD recognizes

that its business is to build a stable customer base rather than make a

single sale. This shift in emphasis is sometimes subtle, but it is

necessary to create loyalty among customers and an understanding of

the importance of loyal customers to the company.

Customer satisfaction with a company's products or services is

often seen as the key to a company's success and long‐term

competitiveness. In the context of relationship marketing, customer

satisfaction is often viewed as a central determinant of customer

retention (Hennig-Thurau, 1997).

 59

Marketing Programs

Product

Objectives Strategies Implementation Plan

Create quality
procedures that are Implement the quality
To ensure service and
compliant to procedures with top
product quality is
international priority and no
maintained
standards and local exceptions
laws
Design and develop Allocate resources for
To offer multi product
different machines for the research and
line to suit target
target market development of new
market segments
segments products
To strengthen Allow warranty
customer relationship Offer warranty in periods of up to 1 year
through after sales products and services in all products and
service services

Price

Objectives Strategies Implementation Plan

Offer competitive Design services
To charge competitive
price specially in pricing is minimal
pricing to clients.
design services. and flexible.
Offer discounts to Allow giving discounts
To allow discounts to selected clients to even to new
selected clients encourage customers. Applicable
patronization to billable hours only.
Allow up to 60 days
To allow credit terms Offer credit terms
credit term to new
to clients even to new clients
clients

Place of Distribution

Objectives Strategies Implementation Plan

Properly coordinate all

To provide on time Optimize use of details of the delivery
delivery of products logistics providers to ensure no delays
are incurred
 60

Promotion

Objectives Strategies Implementation Plan

Buy Facebook Ads

using company
content on Facebook
To develop a strong
Optimize use of social
social media
media accounts Post frequent updates
presence.
on Twitter, Instagram,
LinkedIn,

Schedule face to face

meetings with old,
Initiate and nurture new, and potential
harmonious Prioritize and allocate clients.
communication and resources to personal
relationship with selling Frequent phone calls
client to customers to give
updates and check for
new requirements.
To develop
Provide company Regularly send out
continuous
updates through newsletters through
relationship with old
newsletters email
customers
 61

Marketing Performance

BDD will monitor the company’s Marketing performance through

the following metrics, as prescribed by Farris, et. al. (2010).

Market Share

Market share is the percentage of a market (defined in terms of

either units or revenue) accounted for by a specific entity.

Unit Market Share is also known as Volume Share. Revenue

Market Share is also known as Value Share. Marketers need to be able to

translate sales targets into market share because this will demonstrate

whether forecasts are to be attained by growing with the market or by

capturing share from competitors. The latter will almost always be more

difficult to achieve. Market share is closely monitored for signs of change

in the competitive landscape, and it frequently drives strategic or tactical

action.

Market share is an indicator of how well a firm is doing against its

competitors. This metric, supplemented by changes in sales revenue,

helps managers evaluate both primary and selective demand in their

 62

market. That is, it enables them to judge not only total market growth or

decline but also trends in customers’ selections among competitors.

Generally, sales growth resulting from primary demand (total

market growth) is less costly and more profitable than that achieved by

capturing share from competitors.

Conversely, losses in market share can signal serious long-term

problems that require strategic adjustments. Firms with market shares

below a certain level may not be viable.

Similarly, within a firm’s product line, market share trends for

individual products are considered early indicators of future

opportunities or problems.

Customer Satisfaction and Willingness to Recommend

Customer satisfaction is generally based on survey data and

expressed as a rating.

Figure 9. Ratings

Within organizations, customer satisfaction ratings can have

powerful effects. They focus employees on the importance of fulfilling

 63

customers’ expectations. Furthermore, when these ratings dip, they warn

of problems that can affect sales and profitability.

A second important metric related to satisfaction is willingness to

recommend. When a customer is satisfied with a product, he or she

might recommend it to friends, relatives, and colleagues. This can be a

powerful marketing advantage.

Customer satisfaction data are among the most frequently

collected indicators of market perceptions. Their principal use is twofold.

1. Within organizations, the collection, analysis, and

dissemination of these data send a message about the importance

of tending to customers and ensuring that they have a positive

experience with the company’s goods and services.

2. Although sales or market share can indicate how well a firm

is performing currently, satisfaction is perhaps the best indicator of

how likely it is that the firm’s customers will make further

purchases in the future. Much research has focused on the

relationship between customer satisfaction and retention. Studies

indicate that the ramifications of satisfaction are most strongly

realized at the extremes. On the scale in Figure 2.3, individuals

who rate their satisfaction level as “5” are likely to become return

customers and might even evangelize for the firm. Individuals who

rate their satisfaction level as “1,” by contrast, are unlikely to

 64

return. Further, they can hurt the firm by making negative

comments about it to prospective customers. Willingness to

recommend is a key metric relating to customer satisfaction.

Margins

Margin (on sales) is the difference between selling price and cost.

This difference is typically expressed either as a percentage of selling

price or on a per-unit basis.

Managers need to know margins for almost all marketing

decisions. Margins represent a key factor in pricing, return on marketing

spending, earnings forecasts, and analyses of customer profitability.

considerations, including budgets and forecasts. All managers should,

and generally do, know their approximate business margins. Managers

differ widely, however, in the assumptions they use in calculating

margins and in the ways they analyze and communicate these important

figures.
 65

Selling prices can be defined before or after various “charges” are

taken: Rebates, customer discounts, brokers’ fees, and commissions can

be reported to management either as costs or as deductions from the

selling price. Furthermore, external reporting can vary from management

reporting because accounting standards might dictate a treatment that

differs from internal practices. Reported margins can vary widely,

depending on the calculation technique used. This can result in deep

organizational confusion on as fundamental a question as what the price

of a product actually is.

Variable costs can be aggregated into a “total” or expressed on a

“per-unit” basis. Fixed costs, by definition, do not change with the

number of units sold or produced. Variable costs are assumed to be

relatively constant on a per-unit basis. Total variable costs increase

directly and predictably with unit sales volume. Fixed costs, on the other

hand, do not change as a direct result of short-term unit sales increases

or decreases.

Marketers need to have an idea of how costs divide between

variable and fixed. This distinction is crucial in forecasting the earnings

generated by various changes in unit sales and thus the financial impact
 66

of proposed marketing campaigns. It is also fundamental to an

understanding of price and volume trade-offs.

The simplest model of cost behavior is to assume total costs

increase linearly with quantity supplied. Total costs are composed of

fixed and variable costs. Total cost per unit decreases in a non-linear

way with rising quantity supplied.

To predict how selling costs change with sales, a firm must

distinguish between fixed selling costs and variable selling costs.

Recognizing the difference between fixed and variable selling costs

can help firms account for the relative risks associated with alternative

sales strategies. In general, strategies that incur variable selling costs are

less risky because variable selling costs will remain lower in the event

that sales fail to meet expectations.

Marketing costs are often a major part of a firm’s overall

discretionary expenditures. As such, they are important determinants of

short-term profits. Of course, marketing and selling budgets can also be

viewed as investments in acquiring and maintaining customers. From

either perspective, however, it is useful to distinguish between fixed

 67

marketing costs and variable marketing costs. That is, managers must

recognize which marketing costs will hold steady, and which will change

with sales. Generally, this classification will require a “line-item by line-

item” review of the entire marketing budget.

Over typical planning periods of a quarter or a year, fixed

marketing costs might include

o Sales force salaries and support.

o Major advertising campaigns, including production costs.

o Marketing staff.

o Sales promotion material, such as point-of-purchase sales aids,

coupon production, and distribution costs.

o Cooperative advertising allowances based on prior-period sales.

o Variable marketing costs might include

o Sales commissions paid to sales force, brokers, or manufacturer

representatives.

o Sales bonuses contingent on reaching sales goals.

o Off-invoice and performance allowances to trade, which are tied to

current volume.

o Early payment terms (if included in sales promotion budgets).

 68

Other Marketing Performance Metrics

BDD focuses its marketing activities through online platforms and

finds it beneficial to use the following metrics in measuring performance

of these platforms.

Visits, Visitors, and Abandonment

Visits measures the number of sessions on the Web site. Visitors

measures the number of people making those visits. When an individual

goes to a Web site on Tuesday and then again on Wednesday, this should

be recorded as two visits from one visitor in the week. Visitors are

sometimes referred to as “unique visitors.” Visitors and unique visitors

are the same metric.

Abandonment usually refers to shopping carts. The total number

of shopping carts used in a specified period is the sum of the number

abandoned and the number that resulted in complete purchases. The

abandonment rate is the ratio of the number of abandoned shopping

carts to the total.

Web sites can easily track the number of pages requested. As we

saw earlier in Section 10.1, the pageviews metric can be useful but is far

from a complete metric. We can do better. In addition to counting the

number of pageviews a Web site delivers, firms will also want to count

the number of times someone visits the Web site and the number of

people requesting those pages.

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Conversion Rate

Many marketers monitor their conversion rate, the percentage of

visitors who actually buy. This gives a good headline view of how effective

your Web site is at generating sales once you have visitors.

Google Analytics uses sessions as the denominator. This means

that each consumer can convert more than once if they visit more than

once. Be careful to understand which your data represents.

Bounce Rate is a measure of the effectiveness of a Web site in

encouraging visitors to continue their visit. It is expressed as a

percentage and represents the proportion of visits that end on the first

page of the Web site that the visitor sees.

High bounce rates typically indicate that the Web site isn’t doing a

good job of attracting the continuing interest of visitors. Bounce rate is a

commonly reported metric that reflects the effectiveness of Web sites at

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drawing the continuing attention of visitors. The assumption behind the

usefulness of the metric is that the owner of the Web site wants visitors

to visit more than just the landing page. For most sites this is a

reasonable assumption. For example, sites that are seeking to sell goods

want visitors to go to other pages to view the goods and ultimately make

a purchase. Bounce rate is also a measure of how effective the company

is at generating relevant traffic.

Social Media Metrics: Friends/Followers/Supporters/Likes

Friends/Followers/Supporters is a very simple metric that

measures the number of individuals who join an organization’s social

network.

Friends (#) = Number of friends of the entity registered on a social

network (#)

A high number of friends signifies an active interest in the owner of

the page. If a brand has a high number of friends, this indicates a

stronger brand with a loyal customer base.

Likes is a similarly simple metric that measures the number of

individuals who have favored a post/page/organization using the “like”

button.

Likes (#) = Number of individuals favoring a social networking

post/page (#)
 71

We use the term friends to encompass followers, supporters, and

other similar concepts. Friends are members of a social networking site

who register that they know, like, and/or support the owner of the social

networking page. For instance a strong brand may have many customers

who want to publicly signal their love of the brand. Social networking

sites hold great benefits in allowing companies to develop customer

relationships and can help a company identify and communicate with

committed customers.

Likes are ways that individuals on social media show they favor a

post or a page. They click on the like button below pages, comments,

brands, etc. Like is an extremely low commitment activity, and some

people like many things in a day. It seems, however, a reasonable

assumption that generally a larger number of likes is indicative of greater

appeal.
 72

Net profit measures the profitability of ventures after accounting

for all costs. Return on sales (ROS) is net profit as a percentage of sales

revenue.

ROS is an indicator of profitability and is often used to compare

the profitability of companies and industries of differing sizes.

Significantly, ROS does not account for the capital (investment) used to

generate the profit.

Earnings Before Interest, Taxes, Depreciation, and Amortization

(EBITDA) is a rough measure of operating cash flow, which reduces the

effect of accounting, financing, and tax polices on reported profits.

How does a company decide whether it is successful or not?

Probably the most common way is to look at the net profits of the

business. Given that companies are collections of projects and markets,

individual areas can be judged on how successful they are at adding to

the corporate net profit. Not all projects are of equal size, however, and

one way to adjust for size is to divide the profit by sales revenue. The

resulting ratio is return on sales (ROS), the percentage of sales revenue

 73

that gets “returned” to the company as net profits after all the related

costs of the activity are deducted.

Return on investment is one way of considering profits in relation

to capital invested.

Return on assets (ROA), return on net assets (RONA), return on

capital (ROC), and return on invested capital (ROIC) are similar

measures with variations on how “investment” is defined.

Marketing not only influences net profits but also can affect

investment levels too. New plants and equipment, inventories, and

accounts receivable are three of the main categories of investments that

can be affected by marketing decisions.

ROI and related metrics (ROA, ROC, RONA, and ROIC) provide a

snapshot of profitability adjusted for the size of the investment assets

tied up in the enterprise. Marketing decisions have obvious potential

connection to the numerator of ROI (profits), but these same decisions

often influence assets usage and capital requirements (for example,

receivables and inventories). Marketers should understand the position

of their company and the returns expected. ROI is often compared to

expected (or required) rates of return on dollars invested.

 74

Sales & Revenue Targets, Marketing Costs and Budgets

Sales & Revenue Targets

Sale s & Re ve nue Targe t s Mo nt hly Ye ar 1 To t als

Pro duct Line s

De sign Se rvice by De signe r I
Billable Hours 200 2,400
Total Revenue 100,000 1,200,000
Total COGS 46,154 553,848
Total Margin 53,846 646,152

De sign Se rvice by De signe r II

Billable Hours 200 2,400
Total Revenue 60,000 720,000
Total COGS 30,000 360,000
Margin 30,000 360,000

Agricult ure Machine

Pieces Sold 1 1
Total Sales 35,000 35,000
Total COGS 20,000 20,000
Margin 15,000 15,000

Fo o d Pro ce ssing Machine

Pieces Sold 1 1
Total Sales 30,000 30,000
Total COGS 20,000 20,000
Margin 10,000 10,000

Co nst ruct io n Machine

Pieces Sold 1 1
Total Sales 25,000 25,000
Total COGS 20,000 20,000
Margin 5,000 5,000
To tal Unit s So ld 403 4,803

To tal Sale s ₱ 250,000 ₱ 2,010,000

To t al Co st o f Go o ds So ld ₱ 136,154 ₱ 973,848
To t al Margin ₱ 113,846 ₱ 1,036,152
 75

BDD targets to bill a total of 4,800 hours for an equivalent of Php

1,920,000 for total services rendered. BDD also targets to sell at least

one machine per target market segment with a total of three machines

sold for an equivalent of Php 90,000. The grand total Sales & Revenue

Targets is equivalent to Php 2,010,000 during the first year of

operations. These targets were calculated under the assumption that the

current economic status of the country is still in recession hence the

sales targets are kept at the minimum

Milestones

BDD targets to officially launch on January 2021. During the first

half of operations, BDD expects to reach their first milestone of 1,000

billable hours. The next milestone is to deliver at least one machine for

each target market segment. Towards the end of the year, BDD expects

to reach another milestone of 2,000 billable hours. BDD hopes to

achieve all of these on or before their first-year anniversary in January

2022.

2021
-
2022
 76

Figure 10. BDD Milestones

 77

Cost and Budget Estimates

Annual
Marke ting Co st and Budge t Est im ate s Mo nt hly
To t als
Marke ting & Se lling Expe nse s
Advertising 1,550 18,600
Car Expenses 5,000 60,000
Telephone/Communication Services 1,900 22,800
Legal and Professional Services 700 8,400
To tal Marke ting & Se lling Expe nse s ₱ 9,150 ₱ 109,800

BDD estimates to spend Php 1,550 for advertising through

Facebook ads every month. Additional monthly allotment of Php 5,000 is

intended for gas expenses for the company vehicle and Php 1,900 for

three post paid cellphone plans (Smart, Sun, and Globe). BDD will spend

Php 700 for online filing of taxes through the services of Taxumo. The

total monthly Marketing & Selling Expenses amounts to Php 9,150 and

the grand total annual equivalent is Php 109,800.

 78

Operational Plan

Production Process/Trading Operations

Operational Processes
PHASE 1 PHASE 2 PHASE 3 PHASE 4
Initialization Basic Engineering Detailed Engineering Installation and Com m issioning

Conceptual Design P&I diagram Tim ing and re source planning

De finition of Sc ope Preparation of tendering

Process Engineering docum ents / manufacturing Specialized e quipme nt required
drawings

O btaining and evaluation of

Equipm e nt and supplier selection Procedure at battery lim its
quotations

Procurem ent or assistanc e during

Initial Review of Scope Proce ss diagram s and descriptions
the procurem e nt phase

Layout of plant equipm ent Ge neral arrange m ent drawings

Preparation of technical Determ ination of foundations

specifications loads, static calculations
Finalization of Sc ope

Tende ring, obtaining m ain quotes Floor plans

Preparing de tailed technical

Determ ination of require d utilities
specific ations

Preparation of proje ct tim e Equipm e nt and instrum entation

schedule lists for e lectric al equipm ent

Determ ination of investm e nt costs Projec t tim e schedule and control

Plant docum entation

Figure 11. BDD Operational Processes

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Raw Materials

The strategy of BDD when it comes to fabrication is to job out the

production process through our access to a network of fabricators in

Davao City. This means that the fabricators will source out the raw

materials themselves. Although when necessary, BDD will support in

providing the special materials to use specially when they are not

available in the local market.

Quality Monitoring and Supply

Quality assurance and quality control procedures will be

implemented throughout the duration of the production process.

Frequent visits to the fabrication site allows BDD to gather correct

progress update to be relayed to the client. Prior to commissioning, a

thorough check and review of all design aspects is carried out to ensure

total quality management is implemented.

Waste Disposal System

BDD is compliant with all the government regulations when it

comes to waste disposal. As much as possible, BDD would like to reuse

and recycle any available material that is suitable for repurposing.

 80

Facilities

Manufacturing Plant and Other Buildings

Fabrication site will be located at the respective independent

fabricators within our contact fabricators association.

Machinery and Equipment

All machinery and equipment will be provided by the fabricators

association and independent contractors.

Maintenance and Repairs Plan

All machinery and equipment are subject for a maintenance and

repairs plan based on the manufacturer’s prescription. This is to ensure

the quality of the output and to minimize the occurrence of machine

breakdowns.
 81

Staffing Requirements

To start, BDD only requires two employees. First, the General

Manager who will also be the Marketing Manager at the same time.

Second, the Senior Designer who will be in charge of the technical side

of the business.

Operational Costs and Budget

Ye ar 1
Ope rating Co st and Budge t Est im ate s Mo nt hly
TO TALS
O pe rating Expe nse s
Office Rental Expense 6,410 76,920
Home Office Utilities (Electricity) 3,000 36,000
Home Office Utilities (Internet Connection) 2,200 26,400
To tal Ope rating Expe nse s ₱ 11,610 ₱ 139,320

BDD estimates to spend Php 6,410 monthly for the virtual office

rental expense at Regus Office Rentals. A total of Php 5,200 is allotted for

home office utilities expense per month. A total monthly of Php 11,610 is

expected to be spent on Operating Expenses for an equivalent of Php

139, 320 for the first year of operations.

 82

Organizational Plan

Legal Structure of the Business

BDD will be registered as a sole proprietorship business under the

name of the General Manager.

Sole proprietorships have several advantages over other business

entities. They are easy to form, and the owners enjoy sole control of the

business profits. However, they also have disadvantages, the biggest of

which being that the owner is personally liable for all business losses

and liabilities.

With minimal licenses to obtain or separate forms to follow, sole

proprietorships are relatively easy to form, easy to maintain, and easy to

dissolve.

There is no separate cost to establish a sole proprietorship. A sole

proprietorship is established when an owner begins operating his

business. There are no separate licenses to obtain to form a sole

proprietorship. The sole proprietorship will be maintained so long as the

owner keeps doing business.

 83

Organizational Structure and Key Personnel

General Manager /
Marketing Manager

Senior Designer

Figure 12. BDD Organizational Structure and Key Personnel

POSITION JOB DESCRIPTION

General o Review financial statements, sales or activity

Manager reports, or other performance data to measure
productivity or goal achievement or to identify
areas needing cost reduction or program
improvement.
o Direct and coordinate activities of businesses or
departments concerned with the production,
pricing, sales, or distribution of products.
o Direct administrative activities directly related to
making products or providing services.
o Prepare staff work schedules and assign specific
duties.
o Monitor suppliers to ensure that they efficiently
and effectively provide needed goods or services
within budgetary limits.
o Direct or coordinate financial or budget activities
to fund operations, maximize investments, or
increase efficiency.
o Perform personnel functions such as selection,
training, or evaluation.
o Plan or direct activities such as sales promotions
o Set prices or credit terms for goods or services
based on forecasts of customer demand.
o Manage the movement of goods into and out of
production facilities to ensure efficiency,
 84

effectiveness, or sustainability of operations.

o Perform personal selling to potential clients.
o Develop or implement product-marketing
strategies, including advertising campaigns or
sales promotions.
o Implement or oversee environmental management
or sustainability programs addressing issues such
as recycling, conservation, or waste management.
o Design and development of systems and
components. Ensure form, fit and function of
designs while coordinating with fabricator. Ensure
cost effectiveness and manufacturability of design.
o Collaborate and co-create with client to produce
design sketches and drawings in accordance with
applicable standards. Accurately incorporate
geometric tolerances into design drawings.
Senior
o Create and review structural analysis, prototype
Designer
test processes, operation procedures, and reports
using computer aided engineering (CAE) and any
appropriate software.
o Create 3d models from concept plan and 2d
manufacturing drawings. Review and verify design
drawings and other technical documentation
prepared by others to ensure correctness and
accuracy.
 85

Pre-Operating Activities

Act ivity 2020 2021

W K 46 W K 47 W K 48 W K 49 W K 50 W K 51 W K 52 W K 1 WK2
Refining of Business
Plan
Licensing and
Registration
Signing of Rent
Contract
Purchasing of
equipment, furniture
and fixtures
Setting up online
presence
Preparing portfolio,
official business cards,
administrative
documents, accounting
documents, templates
of MOA, etc.
Official Launching

Figure 13. BDD Pre-Operating Activities

 86

Fixed Assets for Administrative Offices

BDD will opt to avail of virtual office services provided by Regus

Office Space Rentals located at Topaz Tower Centre, 4F Topaz Tower,

Damosa IT Park, J.P. Laurel Ave, Davao City, Davao del Sur. This virtual

office includes usage of business address, mail handling services,

telephone answering, complimentary use of Community Meeting Room

for 2 hours daily and 5 days usage of a private room for 1 person each

month.
 87

Regus Office Reception Area

Regus Office Meeting

Room

Regus Office Communal Area

Regus Office Building

88
 89

For their home office, BDD requires the following equipment,

furniture and fixtures to operate:

Fixed Assets fo r Administrative Offices

Qty Unit Descriptio n Unit Price Am ount
Laptop:
Dell Inspiron 3480
Intel Core i7-85654
1 unit 8GB RAM 43,000 43,000
1TB HDD
14" Display
W indows 10 Home
PC W orkstation:
Intel Core i7-9700K
Asus ROG Strix 2390
Gaming 4DDR4 (HDMI, DP) with W ifi
8GB x 2 DDR4 2666 HY426C16FB2/8 HyperX Fury Black
Palit GTX 1050TI 4096MB 128 Bit DDR5 StormX (DVI, HDMI, DP)
Silverstone PS14B-W Precision 14 Black
Mid Tower Case with W indows USB 3.0
1 set Silverstone ST85F-GS Strider 850W 151,000 151,000
Gold-S Power Supply (Modular Cabling)
Samsung S20A3006 LED 20" Monitor (2 units)
TP Link TL-R402m + 4 Ports Router
Seagate Free Agent 60 Flex 500GB Portable HDD
Genius 100x USB Optical Mouse Black
Genius KB110 USB Keyboard Black
APC BK650-AS 650VA UPS
APC BE500-PH 500VA UPS
1 unit Brother HL-1110 Mono Laser Printer 5,590 5,590
2 pcs Office Table 1,500 3,000
2 pcs Computer Chair 2,000 4,000
To tal Fixed Asse ts fo r Administrative Offic es ₱ 206,590
 90

Administrative Costs and Budget

Ye ar 1
Adm inistrative Co st and Budge t Est im ate s Mo nt hly
TO TALS
Adm inistrat ive Expe nse s
Salaries Expense 66,000 792,000
To tal Adm inistrat ive Expe nse s ₱ 66,000 ₱ 792,000

BDD expects to spend for the salaries of the General Manager and

the Senior Designer at Php 26,000 and Php 40,000 per month,

respectively. A total of Php 792,000 is allotted for the administrative

costs during the first year of operations.

 91

Financial Plan

To tal Pro je ct Co st
Fixe d Asse ts A mo unt
Equipm e nt 199,590
Furnit ure and Fixt ure s 7,000
To tal Fixe d A sse t s ₱ 206,590

O pe rat ing Capital A mo unt

Le gal and Acco unt ing Fe e s 700
Re nt De po sits 6,410
Supplie s 7,150
Adve rtising and Pro m o tio ns 9,150
Lice nse s 10,000
W o rking Capit al (Cash On Hand) 20,000
To tal Ope rating Capit al ₱ 53,410
To tal Re quire d Funds ₱ 260,000

The total project cost of BDD amounts to Php 260,000. The total

cost will be split into two sources. The sources of funding will be 50%

from the General Manager (Dana Marinela C. Cudal) and 50% from the

Senior Designer (Bryan James C. Lorejo).

 92

BD MACHINE DESIGN & AUTOMATION SOLUTIONS

Comparative Statements of Comprehensive Income

For the Periods Ended December 31

Re ve nue 2020 2021 2022
Design Service by Designer I 1,200,000 1,320,000 1,518,000
Design Service by Designer II 720,000 792,000 910,800
Agricultural Machine 35,000 38,500 44,275
Food Processing Machine 30,000 33,000 37,950
Construction Machine 25,000 27,500 31,625
To tal Re ve nue ₱ 2,010,000 100% ₱ 2,211,000 100% ₱ 2,542,650 100%
Co st o f Go o ds So ld
Design Service by Designer I 553,848 609,233 700,618
Design Service by Designer II 360,000 396,000 455,400
Agricultural Machine 20,000 22,000 25,300
Food Processing Machine 20,000 22,000 25,300
Construction Machine 20,000 22,000 25,300
To tal Co st o f Go o ds So ld 973,848 48% 1,071,233 48% 1,231,918 48%
Gro ss Margin 1,036,152 52% 1,139,767 52% 1,310,732 52%
Payro ll 853,157 873,308 911,322
O pe rating Expe nse s
Advertising 18,600 19,158 20,116
Car Expenses 60,000 61,800 64,890
Cellphone Postpaid Plan 22,800 23,940 25,137
Legal and Professional Services 8,400 8,652 9,085
Office Rental Expense 76,920 79,228 83,189
Home Office Utilities (Electricity) 36,000 37,080 38,934
Home Office Utilities (Internet Connection) 26,400 27,720 29,106
To tal O pe rating Expe nse s ₱ 249,120 12% ₱ 257,578 12% ₱ 270,456 11%
Inco m e (Be fo re O the r Expe nse s) -₱ 66,125 -3% ₱ 8,882 0% ₱ 128,954 5%
O the r Expe nse s
Depreciation 21,359 21,359 21,359
Interest
Line of Credit 20,284 27,691 28,555
To tal O the r Expe nse s ₱ 41,643 2% ₱ 49,050 2% ₱ 49,914 2%
N e t Inco m e Be fo re Inco m e Tax -₱ 107,768 -5% -₱ 40,169 -2% ₱ 79,040 3%
Inco m e Tax ₱ - ₱ - ₱ 6,323
N e t Inco m e /Lo ss -₱ 107,768 -5% -₱ 40,169 -2% ₱ 72,717 3%
 93

BD MACHINE DESIGN & AUTOMATION SOLUTIONS

Comparative Statements of Financial Position

As of December 31

ASSETS 2020 2021 2022

Current Assets
Cash 50,000 50,000 131,879
Accounts Receivable 208,000 224,000 242,480
Prepaid Expenses 33,410 33,410 33,410
To tal Current Assets ₱ 291,410 ₱ 307,410 ₱ 407,769

Fixed Assets
Equipment 199,590 199,590 199,590
Furniture and Fixtures 7,000 7,000 7,000
To tal Fixed Assets ₱ 206,590 ₱ 206,590 ₱ 206,590
(Less Accumulated Depreciation) ₱ 21,359 ₱ 42,718 ₱ 64,077
Total Assets ₱ 476,641 ₱ 471,282 ₱ 550,281

LIABILITIES & EQUITY

Liabilities
Accounts Payable - 2,285 8,567
Line of Credit Balance 324,409 356,934 356,934
To tal Liabilities ₱ 324,409 ₱ 359,219 ₱ 365,501
Equity
Common Stock 260,000 260,000 260,000
Retained Earnings (107,768) (147,937) (75,220)
Dividends Dispersed/Owners Draw - - -
To tal Equity ₱ 152,232 ₱ 112,063 ₱ 184,780
Total Liabilities and Equity ₱ 476,641 ₱ 471,282 ₱ 550,281
 94

BD MACHINE DESIGN & AUTOMATION SOLUTIONS

Comparative Statements of Cash Flow

As of December 31

Ye ar 1 To t als Ye ar 2 To t als Ye ar 3 To t als

Be ginning Balance
Cash Inflo ws
Cash Sales
Accounts Receivable
To t al Cash Inflo ws
₱ 402,000 ₱ 663,300 ₱ 1,017,060
₱ 1,400,000 ₱ 1,531,700 ₱ 1,507,110
₱ 1,802,000 ₱ 2,195,000 ₱ 2,524,170

Cash O ut flo ws
Investing Activities
Cost of Goods Sold ₱ 973,848 ₱ 1,068,948 ₱ 1,225,635
Operating Activities
Operating Expenses ₱ 249,120 ₱ 257,578 ₱ 270,456
Payroll ₱ 853,157 ₱ 873,308 ₱ 911,322
Taxes ₱ - ₱ 6,323
Financing Activities
Line of Credit Interest ₱ 20,284 ₱ 27,691 ₱ 28,555
To t al Cash Out flo ws ₱ 2,096,409 ₱ 2,227,525 ₱ 2,442,291
N e t Cash Flo ws -₱ 294,409 -₱ 32,525 ₱ 81,879
O pe rat ing Cash Balance
Line o f Cre dit Drawdo wn ₱ 324,409 ₱ 32,525 ₱ -
Ending Cash Balance
Line o f Cre dit Balance
 95

Financial Assumptions

Values used for the computation of depreciation amount:

Fixe d A sse t s D e pre ciat io n (ye ars)

Equipm e nt 10
Furnit ure and Fixture s 5

Values used for the computation of sales & revenue targets:

Sales Price Per COGS Margin Pe r

Pro duc t Lines U nits
U nit Per U nit U nit
Design Service by Designer I Hours ₱ 500.00 ₱ 230.77 ₱ 269.23
Design Service by Designer II Hours ₱ 300.00 ₱ 150.00 ₱ 150.00
Agricultural Machine Pieces ₱ 35,000.00 ₱ 20,000.00 ₱ 15,000.00
Food Processing Machine Pieces ₱ 30,000.00 ₱ 20,000.00 ₱ 10,000.00
Construction Machine Pieces ₱ 25,000.00 ₱ 20,000.00 ₱ 5,000.00

Values used for the computation of three-year sales forecast:

Gro wt h Rat e Ye ar 1 to Ye ar 2: 10.00%

Gro wt h Rat e Ye ar 2 to Ye ar 3: 15.00%

Values used for the computation of accounts receivable:

Acco unt s Re ce ivable (A/R) Days Sale s Out st anding

Pe rce nt o f Co lle ctio ns Ye ar 1 Ye ar 2 Ye ar 3
Paid within 30 days 20% 30% 40%
Paid between 30 and 60 days 30% 40% 50%
Paid in more than 60 days 50% 30% 10%
Allowance for bad debt 0% 0% 0%
 96

Values used for the computation of accounts payable:

Acco unt s Payable (A/P)

Pe rce nt o f D isburse m e nt s Ye ar 1 Ye ar 2 Ye ar 3
Paid within 30 days 100% 70% 50%
Paid between 30 and 60 days 0% 30% 50%
Paid in more than 60 days 0% 0% 0%

Values used for the computation of line of credit:

Line o f Cre dit Assum pt io ns

Desired Minimum Cash Balance 50000
Line of Credit Interest Rate 8.00%
 97

Financial Analysis

Break-even Analysis

Gro ss Margin %o f Sale s

Gross Margin ₱ 1,036,152
Total Sales ₱ 2,010,000
Gro ss Margin/To t al Sale s 51.5%
To t al Fixe d Expe nse s

Payroll ₱ 853,156.72

Operating Expenses ₱ 290,763.44

Ope rat ing + Payro ll ₱ 1,143,920

Bre ake ve n Sale s in Pe so s (Annual)

Gross Margin % of Sales 51.5%

Total Fixed Expenses ₱ 1,143,920

Ye arly Bre ake ve n Am o unt ₱ 2,219,056

Monthly Bre ake ve n Am ount ₱ 184,921

The breakeven sales level represents the number of units that

must be sold in order to break even. This means that revenues are equal

to expenses. Any units sold beyond this quantity will allow the company

to generate net income. The calculated yearly breakeven amount for BDD

amounts to Php 2,219,056 or equivalent to Php 184,921 monthly.

 98

Financial Ratios

Rat io s Ye ar O ne Ye ar Two Ye ar Thre e

Liquidity
Current Ratio 0.9 0.9 1.1
Quick Ratio 0.8 0.8 1.0
Safety
Debt to Equity Ratio 2.1 3.2 2.0
Debt-Service Coverage Ratio - DSCR -0.3 -0.1 0.3
Profitability
Sales Growth 0.0% 10.0% 15.0%
COGS to Sales 48.5% 48.5% 48.5%
Gross Profit Margin 51.5% 51.5% 51.5%
SG&A to Sales 54.8% 51.1% 46.5%
Net Profit Margin -5.4% -1.8% 2.9%
Return on Equity (ROE) -70.8% -35.8% 39.4%
Return on Assets -22.6% -8.5% 13.2%
Owner's Compensation to Sales 15.5% 14.3% 12.6%
Efficiency
Days in Receivables 37.3 36.5 34.3
Accounts Receivable Turnover 9.7 9.9 10.5
Days in Inventory 0.0 0.0 0.0
Inventory Turnover 0.0 0.0 0.0
Sales to Total Assets 4.2 4.7 4.6

The current ratio is an indication of a company's ability to meet

short-term debt obligations.

The quick ratio is the ratio between all assets quickly convertible

into cash and current liabilities. Measures a company's liquidity. Also

called acid-test ratio.

 99

The debt to equity ratio expresses the relationship between capital

contributed by creditors and that contributed by owners.

The debt service coverage ratio indicates how well your cash flow

covers debt and the capability of the business to take on additional debt.

The sales growth ratio calculates the percentage of increase (or

decrease) in sales between the current year and the previous year.

The COGS to sales ratio is the percentage of sales used to pay for

the COGS (expenses which directly vary with sales) is expressed in this

ratio.

The gross profit margin ratio indicates how much profit is earned

on your products without consideration of indirect costs, selling and

administration costs.

The SG&A sales to sales ratio measures the percentage of selling,

general and administrative costs to your amount of sales.

The net profit margin shows how much profit comes from every

dollar of sales.

Return on equity determines the rate of return on your investment

in the business. As an owner or shareholder this is one of the most

important ratios as it shows the hard fact about the business - are you
 100

making enough of a profit to compensate you for the risk of being in

business?

The return on assets ratio measures how effectively assets are

used to generate a return.

The owner’s compensation to sales ratio measures the owner's

compensation as a percentage of sales.

Days in receivable calculates the average number of days it takes

to collect your account receivable (number of days of sales in

receivables).

Accounts receivable turnover ratio tells you the number of times

accounts receivable turnover during the year.

Days in inventory ratio shows the average number of days it will

take to sell your inventory.

Inventory turnover ratio calculates the number of times inventory

is turned over (or sold) during the year.

Sales to total assets ratio indicates how efficiently your business

generates sales on every dollar of assets.

 101

REFERENCES

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DANA MARINELA CUDAL

Mechanical Engineer
PERSONAL PROFILE

As a licensed mechanical engineer, I believe that my career potential is unlimited. I trust that
my willingness to learn and determination to become successful will inspire the discerning company to
push me to achieve my fullest potential.

WORK EXPERIENCE

Mechanical Design Engineer

CONTACT INFO HGG Profiling Specialist Philippines, Inc. (Davao City) | March 2018 – Present

0917 140 0312  Worked on 3d modelling, manufacturing drawings and electrical diagrams using SolidWorks and
SolidWorks Electrical
Buhangin, Davao City  Involved in project management, total quality management and production activities.

danacudal@gmail.com APPRENTICESHIP

Research Intern

Hokkaido University (Sapporo City, Japan) | December 2016 – February 2017

SKILLS SUMMARY
 Studied topics and conducted experiments in robotics and mechatronics.
o Project Management
Quality Assurance / Quality Control Assistant

o Mechanical Design Metalite Builders Dev’t. Co. Inc. (Cagayan de Oro City) | April 2016 – May 2016

 Implemented quality control procedures and documented all mechanical works and activities for
o Mechatronics Pilipinas Shell Petroleum Corporation Terminal Upgrade project.

TRAINING
o Total Quality Management
Comprehensive SolidWorks Essentials Training Program
o Sales
Computrends Systems Technology, Inc. (Makati City) | January 22-25, 2019

EDUCATIONAL BACKGROUND

Master's Degree in Business Administration

SOFTWARE University of Southeastern Philippines (Davao City) | August 2018 – Present

o SolidWorks Bachelor of Science in Mechanical Engineering

Central Mindanao University (Maramag, Bukidnon) | June 2012 – June 2017

o SolidWorks Electrical
 Conducted thesis entitled "Design, Fabrication, and Performance Evaluation of an Automated
o Microsoft Office Compressed Earth Block Machine"

AFFILIATIONS
o QuickBooks + Fishbowl
Inventory Real Estate Agent