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CHAPTER 1
INTRODUCTION

A. Background of the Study

The Philippine Food Manufacturing Industry is said to be the most dominant and dynamic industry in our country today, having an approximate contribution of 20 percent in our Gross Domestic Product annually. The 2004 Philippine Bureau of Food and Drugs’ Statistical Report of Establishments listed a total of 11,601 food processing establishments nationwide. The food manufacturing has ten subsectors, namely: Bakery products, Coconut products, Milk and Dairy products, Grain Mill Products, Processed Meat and Fish, Processed Fruits and Vegetables, Milled and Refined sugar, Vegetables/Animal Oils and fats, and Animal Feeds and Miscellaneous food. Although the food manufacturing has linkages with the agricultural sector, it involves the processing of agricultural products into final stage for consumption (Abanto, 1998).

The major players of the said industry include San Miguel Corporation, RFM Corporation, Universal Robina Corporation, Liwayway Marketing Corporation, and Southeast Asia Food, Inc. (Quianzon, 2008). Despite the growth and performance of this industry locally, it has not yet reached its maximum potential. Compared to other countries in Asia, the Philippine Food Manufacturing Industry is seen as relatively small. Hence, the researchers believed that the industry has a lot more to offer.

Competitiveness, on this matter, can be associated with the food manufacturing industry. The term competitiveness has been defined in various ways by different literatures. Nonetheless, a definition of competitiveness that is more focused and related to manufacturing sector is that “competitiveness in industrial activities means developing relative efficiency along with sustainable growth.” (Lall, 2001) It was also defined as “the sustained ability to profitability gain and maintain market share” by the Canada’s Agricultural Food Competitiveness Task Force. (Martin et al., 1991; Fischer and Schornberg, 2007) The existence of these different definitions indicated the fact that competitiveness is multidimensional in nature, thus, it is difficult to deal with it theoretically, as well, as empirically.

This study specifically identified the most possible determinants of competitiveness, and then determined which of such has greater impact or significance to the competitiveness firms that were selected to represent the food manufacturing industry. It also aimed to know how competitiveness of firms affects the industry as a whole. In order to accomplish these, the researchers made an econometric model which comprised the factors determining competitiveness. Competitiveness of the firms in the food manufacturing industry was established in terms of market share. Determinants of such competitiveness were identified as number of employees, total liabilities and equity.

In order to fully understand and attain the goal of the study, the researchers had chosen twenty (20) corporations in the food manufacturing industry. The selection was made according to the firms’ profitability, technically choosing those that are on top of the list every year. Different corporations were included in the list as the included years in the time span change. Moreover, the study focuses on the determinants of competitiveness, thus, naming the top 20 firms would not be necessary.

Demand for goods will always be present, thus the need for fine food manufacturers remains. The comprehensive model done by the researchers, when developed, can be used and applied to improve the food manufacturing industry, and other local industries as well.

B. Statement of the Problem

The main purpose of this proposed study was to determine the factors of competitiveness which affect the selected firms in the Philippine Food Manufacturing Industry. Specifically, it sought to answer the following...
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