I. INTRODUCTION ABC Stationarious Manufacturing Inc. is a photo-album manufacturing company located in Rosario, Cavite. It was incorporated in September 1998 by a couple previously employed by several export album manufacturing companies in Export Processing Zone Authority (EPZA) and abroad. During the initial start-up, ABC was only selling its photo albums to distributors, middlemen and agents who in turn, sold these to retail stores such as SM, Makro, Robinsons and others. Due to the very small margins left to ABC and to the poor payment pattern of these distributors, ABC was forced to sell directly to some leading retailers such as SM and Big R. In the process, profitability improved, dependence on sales channel less magnified, it is now directly involved in selling activities and known to retailers as ‘the manufacturer.’ ABC manufactures low-priced generic or non-branded photo albums. At present, it has a 7% market share and competing with big names such as Sterling, Jerett, Seagull and other longtime players. Photo album demand is directly affected by the growth drivers of the film industry. Camera films, when developed, become pictures which are then stored in photo albums. Films’ growth is affected by purchasing power and economy. An interview with a Kodak marketing executive indicates that Kodak, the film industry’s market leader, projects the film industry to shrink due to the economic downtrend and widespread unemployment. Kodak defines market shrinkage as consumers’ postponement of camera film purchase and consequently, development. Kodak’s marketing executive further reveals that the market shrinkage actually started in 2001 when the film industry performance drastically declined by 35% from 27M in 2000 rolls to 20M rolls in 2001. Consequently, after the 2001 major decline, the photo album industry is projected to grow by a maximum of 9% only in the next three years, contrary to the double digit growth it used to enjoy in the past. A 7% market share is quite an achievement for a four-year old company because this has been achieved by stealing market share from other players and not from industry growth. In fact, ABC’ highest sales growth of 266% in 2001 happened during the same year when the industry experienced its worst decline of 32%. However in the process, ABC has sacrificed its profitability which is the reason why its gross profit margin of 17% is far from the industry average of 28%. In 2001, ABC diversified into office filing/files products consisting of ring binders, arch file binders and storage boxes made of paper and paperboard, which is almost the same materials and production process as photo albums. While concentric diversification increased sales
revenue to its existing market, it also allowed ABC to enter new markets – offices or companies through direct selling. At present, ABC (which is located 10 minutes away from EPZA) serves 10% or 25 of the 247 companies located in EPZA, the biggest export processing zone in the country. As a new entrant in the office files market, ABC has a 1% share in this P 450 M market and competes with manufacturers such as File System, Komstak, OfficeMate, Star Paper, Kaakbay Cooperative, Smart Move, and 10 other players. These players are either purely office files manufacturer, office/school supplies traders and distributors or album manufacturers as well. With the entry into this market, ABC hopes to increase its present sales revenues from its existing distribution channels and at the same time, develop new distribution channels and direct accounts as well. In summary, ABC’ consistent growth in a declining industry can be attributed to its low cost and frequent album cover design changes. Although there are other low-cost album players, ABC’ frequent investment in cover design changes makes it one of the most competitive photo album player in the industry.
II. RESEARCH DESIGN AND METHODOLOGY Both primary and secondary data were used to...