MODULE 4- MANUFACTURING INDUSTRY

Manufacturing Business
A manufacturing business is any business that uses components, parts, or raw materials to make a finished good.
These finished goods can be sold directly to consumers or other manufacturing businesses for making a different
product. Manufacturing businesses in today's world are normally comprised of machines, robots, computers, and
humans that all work in a specific manner to create a product (Hill, 2020).

Large-scale manufacturing allows for the mass production of goods using assembly line processes and advanced
technologies as core assets.

Efficient manufacturing techniques enable manufacturers to take advantage of economies of scale, producing
more units at a lower cost. Economies of Scale refer to the cost advantage experienced by a firm when it
increases its level of output.

The advantage arises due to the inverse relationship between the “per-unit fixed cost” and “quantity produced”.
The greater quantity of the output produced, the lower the per-unit fixed cost.

Economies of scale would also result in a fall in the average variable costs (average non-fixed costs) as output
increases. This is brought about by operational efficiencies as a result of an increase in the scale of production.
Economies of scale can be implemented by a firm at any stage of the production process.

In this case, production refers to the economic concept of manufacture and involves all activities related to a
commodity. Thus, a business can decide to implement economies of scale in its marketing division by hiring a
large number of marketing professionals.

A business can also adopt the same in its input sourcing division by moving from human labor to machine labor.
These are the effects of economies of scale on production costs:
1. It reduces the per-unit fixed cost. As a result of the increased production, the fixed
cost gets spread over more output than before.
2. It reduces per-unit variable costs. This occurs as the expanded scale of production
increases the efficiency of the production process.
Manufacturing Industry in the Philippines
According to the Board of Investment, the Philippine manufacturing industry remains to
be the most important sector for long-term productive employment, value-added
generation, and innovation. It has the highest multiplier effect on the economy compared
to other sectors.
Manufacturing is called the engine of the economy.
Many services exist because of manufacturing, hence many service jobs will disappear if
manufacturing disappears. Manufacturing creates more quality and gainful employment,
as it has extensive linkages not only among its sub-sectors but also with other industries,
not to mention that it can further make the services and logistics sectors more active.
Increasing manufacturing activities also have spillover effects of inducing additional
demand from the agriculture and resource-based industries.

The latest Annual Survey of Philippine Business and Industry (ASPBI) showed a total of
24,200 manufacturing establishments in 2017. This represents a 13.6% decrease from
the 28,003 manufacturing establishments recorded in 2016.
In the recent data about the Philippine economy, the Gross
Domestic Product (GDP) growth rate dropped by 16.5 percent in
the second quarter of 2020. The main contributors to the decline
were: 1. Manufacturing with -21.3%; 2. Construction with 33.5%;
3. Transportation and Storage with -59.2 percent%.

Tourism. Tourism is an essential component of the

economy of the Philippines due to the substantial
contribution it makes to the gross domestic product as well
as the vast number of people employed in the sector.Jul
24, 2018
The growth in the manufacturing sector was significantly supported by the
surge in the country's foreign direct investment (FDI) net inflows last year to
reach an all-time high of US$10.518 billion, 54.2 percent higher than US$6.822
billion in 2020, according to the data from Bangko Sentral ng Pilipinas (BSP).April 4,
2022

A foreign direct investment (FDI) is a purchase of an interest in a company by a

company or an investor located outside its borders.
Foreign Direct Investment in the Philippines
According to the 38th Global Investment Trends Monitor, the Philippines gained
an increase of 29% of FDIs in comparison to other countries in the ASEAN
region. The approved foreign investments in the country reached a total of 
₱36.5 billion (US$749 million) in the fourth quarter of 2020. 

The sectors that gained the most foreign investments are information and

communication, electricity, gas, steam and air conditioning supply,
manufacturing, and administrative and support service activities (BPOs).

Additionally, the United States, Singapore, China, and South Korea are the
largest contributors to foreign direct investments in the country.
Investment Campaign in the Philippines
In November 2020, the Board of Investments (BOI) and the Department of Trade and Industry (DTI) launched their 
Make it Happen in the Philippines campaign to entice foreign investors to do business in the country. 

Initially, the campaign was launched in Australia and New Zealand, showcasing six sectors in the Philippines such as
electronics, automotive, aerospace, copper, information technology, and business process management.  

Additionally, the campaign highlights the Philippines’ domestic market of 110 million and its strategic location which
provides businesses with favorable access to its neighboring countries in the ASEAN region.

At present, the Philippines is home to 49 million workers and produces approximately 750,000 college graduates
annually. 
 Top 10 Largest Manufacturing Companies in the World in 2020, by revenue
Source: Fortune Global 500

No. Company Industry Revenue (USD billions) Headquarters

1 Volkswagen Group Automotive 282.9 billion  Germany

2 Toyota Group Engineering, various 265.1 billion  Japan

3 Apple Electronics 260.2 billion  United States

4 Samsung Electronics Electronics, various 221.6 billion  South Korea

5 Daimler Automotive 185.2 billion  Germany

6 General Motors Automotive 137.2 billion  United States

7 Ford Automotive 155.9 billion  United States

8 Hon Hai Precision Industry Electronics 154.7 billion  Taiwan

9 Honda Automotive 138.7 billion  Japan

10 Cardinal Health Pharmaceuticals 136.8 billion  United States

Largest Companies in the Philippines (Latest)

The money you're holding right now will surely go to the largest companies in the
Philippines. It might not be in a direct way. Like a food chain, the biggest and last
consumer will get the food and energy from the chain of the previous consumers. I
describe these companies as GIANT MACHINES of capitalism.
They produce products and services to meet the needs of the growing market
demand and make more money! The companies listed are ranked according to their
market capitalization (market cap). What is market cap? It's calculated by multiplying
the total outstanding shares by the current market price of each share:
(Total outstanding Shares x Share Price = Market Cap).

It's very important to determine the market cap of the a company because it reflects
the company's market value. Investors are willing to pay for company's stocks with
growing market cap. The higher the company's market cap, the greater the growth
potential
Largest companies in the Philippines (2018) that produce
tremendous wealth in the country.  
(in red are Manufacturing companies)
1.)SM Investments Corporation Market Capitalization: Php 1.16 trillion

Cited as the richest man in the Philippines, Henry Sy, Sr. founded this company in 1958. Its interests are
in shopping mall development and management, retail, real estate, banking and tourism. It becomes one
of the largest conglomerates in the Philippines. Its subsidiaries includes SM Prime Holdings, BDO, China
Banking Corporation (ChianBank), SM Development Corporation (SMDC), Highlands Prime, Inc., Mall of
Asia Complex, OnE-com Center, Mall of Asia Arena, Hamilo Coast, Atlas Consolidated Mining and
Development Corporation, SM Hotels and Conventions, SMX Convention Center, Belle Corporation, SM
Foundation, etc. SM Prime Holdings Market Capitalization: Php 1.05 trillion Another Henry Sy's company
founded also in 1958. It's the biggest shopping mall and retail chain operator in the country. It operates
over 2,300 stores nationwide. That includes 63 mall, 48 SM Department Stores, 48 SM Supermarkets, 37
SM Hypermarket and 156 SaveMore stores, 39 WalterMart stores, 210 Alfamart stores, 1,749 specialty
stores, etc. Numbers are growing.

2.) BDO Unibank, Inc. Market Capitalization: Php 669 billion

It's the largest bank in the Philippines founded in 1968 as Acme and later renamed as BDO in 1976. It
operates as a full-service universal bank that serves the retail and corporate markets including lending,
deposit-taking, foreign-exchange, brokering, trust and investments, credit cards, corporate cash
management and remittances. It has over 1,000 branches nationwide. Unlike Landbank which has only
376 plus branches.
3. Ayala Corporation Market Capitalization: Php 641 billion
A holding company with its start-up company founded in 1834 as Casa Roxas, a partnership between
Domingo Roxas and Antonio de Ayala. It's known as the oldest conglomerate in the Philippines. It has
interests in retail, real estate, education, banking, water infrastructure, renewable energy, automotive,
electronics, telecommunications, information technology, healthcare and business process outsourcing.

It owns Ayala Land Inc. Bank of the Philippine Islands (BPI), Globe Telecom, Inc. (Globe),
Manila Water Company Inc., AG Holdings, Ltd., Portico Land Corp., Roxas Land Corp.,
Regent Wise Investment Limited, Ortigas & Company Limited Partnership, Trident
Infrastructure and Development Corporation, AC Industrial Technology Holding Inc. (AC
Industrials), Ayala-GT Capital, Ayala Healthcare Holdings, Inc., Ayala Education Inc.,
Zalora Philippines, The Insular Life Assurance Co., Ltd., Ayala Foundation, etc. Ayala
Land, Inc. Market Capitalization: Php 618 billion A real estate company founded in 1988.

Its main business are in real estate management, residential development, shopping centers, corporate
businesses, and hotels. They operate the Ayala malls, Raffles Makati hotel, Marriott hotel, Seda hotels, the
popular El Nido Resorts (in Palawan). They also owned the following residential properties: the Ayala Premier,
Alveo, Avida, Amaia, BellaVita residential, etc.
They also operate the following commercial estates: Makati Central Business District, City Gate, McKinley
Exchange, Circuit Makati, South Park District, Alabang and Madrigal Business Park, Altaraza Town Center,
Centrio, Vermosa, Capitol Central, etc.
4.)JG Summit Holdings, Inc. Market Capitalization: Php 474 billion
A holding company established in 1957. The famous John Gokongwei Jr. founded it. He
became one of the richest men in the Philippines. It has interests in real estate development,
food manufacturing, retail and shopping malls, banking, hotels, petrochemicals, power
generation, air transportation, publishing and telecommunications. Its businesses are mainly
focused on serving the growing middle class. Their companies include Universal Robina
Corporation, Robinsons Retail Holdings (includes Robinsons Departments Stores, Robinsons
Supermarket, etc.), Cebu Pacific (airline), JG Summit Petrochemical Corporation, JG Summit
Oleofins Corporation, Robinsons Bank Corporation. It owns 12% of PLDT and 29.6% of
MERALCO
.
5.)Bank of the Philippine Islands (BPI) Market Capitalization: Php 467 billion
Founded in 1851, BPI is known as the oldest bank in the Philippines. It's under the parent
company Ayala Corporation. It's the 2nd largest bank in the Philippines in terms of market
cap and the 4th largest bank in terms of assets.

6.)Aboitiz Equity Ventures, Inc. Market Capitalization: Php 427 billion

A holding company established in 1989. With interests in food, power, banking/financial
services, land, construction, shipbuilding and infrastructure. Their companies include: Union
Bank of the Philippines CitySavings Bank PETNET Pilmico Foods Corporation -
agribusiness and food company Aboitiz InfraCapital The Republic Cement Group - the 2nd
largest producer of cement in the Philippines. It produces 7 million tons of cement annually.
APO Agua Infrastructura Aboitiz Power Corporation which owns Davao Light and Power
Company Aboitiz Land Inc. etc.
7.) Manila Electric Company (MERALCO) Market Capitalization: Php 371 billion
Established in 1895 and known as the largest distributor of electric power in the Philippines. It powers the
whole National Capital Region (NCR) and the Metro Manila.

8.) San Miguel Corporation Market Capitalization: Php 344 billion (M)
A holding company founded in 1890 with interests in food, beverage, packaging services, oil, fuel, power,
and infrastructure. If you know San Miguel beer, it's their flagship product, And the Red horse beer, they
also produce that. San Miguel beer became the Philippines best-selling beer and among the top ten selling
beer brands in the world. It also owns the largest oil company in the Philippine, the Petron Corporation.
Petron supplies more than 1/3 of the country's oil requirements.

9.) PLDT Inc. Market Capitalization: Php 337 billion

The largest telecommunication company in the Philippines which is founded in 1928. It owns Smart, TNT
and Sun Cellular. It also owns MediaQuest Holdings, Inc., Nation Broadcasting Corporation, TV5 Network,
Primedia Inc. etc.

10.) Universal Robina Corporation Market Capitalization: Php 330 billion (M)
It's one of the largest food and beverage companies in the Philippines founded in 1954. Known for its
popular food brands: "Jack 'n Jill" snack foods, "C2" ready to drink tea and "Great Taste"
coffee. It mainly engages in producing flour, cornstarch and sugar. It also engages in agribusiness such
as manufacturing of farm products, animal feeds, veterinary medicines, and other related products.
11.) Jollibee Foods Corporation Market Capitalization: Php 320 billion
Established in 1978 and known to be the largest fast-food chain in the Philippines. Its core product is fried
chicken, branded as Chickenjoy. Most kids and even adults love it. It has over 2000 stores nationwide.
 Tony Tan Caktiong

12.) Metropolitan Bank & Trust Co. (Metrobank) Market Capitalization: Php 307 billion
Established in 1962, Metrobank is the second largest bank in the Philippines with over 900 branches and
2,000 plus ATMs. Aboitiz Power Corporation Market Capitalization: Php 292 billion Made its roots in 1905
but incorporated as AboitizPower in 1998. As a holding company, it holds interests in power generation and
distribution as well as retail electricity and other related services. It's the largest power utility company in
Visayas. George Ty

13. GT Capital Holdings, Inc. Market Capitalization: Php 255 billion

Incorporated on July 26, 2007 as a holding company of George Ty's family, GT Capital Holdings (GTCAP)
invests in diversified businesses such as banking, property development, automotive assembly,
importation, distribution, distribution, dealership and financing; life and non-life insurance; and
infrastructure and utilities. Its subsidiaries include Federal Land Inc, Property Company of Friends, Toyota
Motor Philippines Corporation, GT Capital Auto Dealership Holdings, Inc. While its sister companies
include Metrobank, Philippine Axa, Metro Pacific Investments Corporation and Toyota Financial Services
Philippines Corporation.

14. Globe Telecom, Inc. Market Capitalization: Php 233 billion

Like PLDT, it's also a telecom company. It's the second largest mobile network company in the Philippines.
In 2017, it has over 60 million mobile subscribers.
15.) International Container Terminal Services Market Capitalization: Php 222 billion
Incorporated in 1987, it is cited as one of the top five major maritime terminal operators in the
world. One of the richest men in the Philippines, Enrique Razon established this company. His
family has been managing ports/terminals in the Philippines for 3 generations.

16.) LT Group, Inc. Market Capitalization: Php 213 billion

One of known richest men in the Philippines, Lucio Tan and family established this holding
company in 1937 and incorporated under the name of LT Group in 1999. It holds interest in
distilled spirits, beverages, tobacco, property development, and banking. Its subsidiaries
include Tanduay Distillers, Inc. Asia Brewery, Inc., Fortune Tobacco Corporation,
Philippine National Bank (PNB), Saturn Holdings, Inc., Paramount Landequities, Inc., and Elton
Properties Philippines, Inc.

Golden Bria Holdings, Inc. (formerly Golden Haven) Market Capitalization:

17.)
Php 207 billion
Established in 1982, this company engages in the development and sale of memorial lots in
different parts of the Philippines. It also constructs and operates columbarium facilities. In
September 2017 it widens its business interest. Its business purpose was amended to real
estate in order to engage in real estate.... Chairman Manny Villar Jr. 
 
These companies are also the Most Valuable Companies in the Philippines. Henry Sy's companies;
the SM Investments Corp., SM Prime Holdings, and BDO altogether rise at the top. Astonishingly, the
biggest wealth in the Philippines are on the hands of Henry Sy family. It's not surprising that Henry Sy
became the richest man in the Philippines. The makes his family the wealthiest in the country (Philippines).
Activity #4
Activity 4.1: Name It!

Directions:
Name at least five (5) manufacturing businesses that operate in Cebu Province/ Island.

1. __________________
2. __________________
3. __________________
4. __________________
5. __________________

Activity 4.2: Business Tool

Directions:
From the list above, choose one (1) manufacturing business and identify its business
environment and competitiveness using any of the business tools (Environmental
Scanning, SWOT Analysis, or Porter’s Five Forces Model).