Forward integration/diversification

It has been determined worldwide that forward integration is not a part of the sugar business, and
that manufacturing candies or bottling beverages is not a necessary direction for sugar mills and
refineries, only an investment option. Sugar cane milling however, produces large volumes of
by-products particularly molasses, bagasse and filter cake/press.

That having been said, it is also noteworthy to mention that by-product diversification (e.g.,
alcohol from molasses, paper and particle board from bagasse, vegetable dehydration with
steam) is a very viable corollary business to sugar manufacturing and that waste product
utilization (e.g., organic fertilizer from filter mud, co-generation of electricity from bagasse) are
very profitable undertakings. In many countries and numerous mills throughout the world, this
has occurred, spurring the development of industrial estates beside mills, but the Philippines has
been unable to do so because of an obsolete law passed in the early 50s which mandates the
sharing of by-products between the mills and the planters. This law has prevented the
development of downstream industries by mill companies. Meanwhile, undetermined volumes of
surplus bagasse, and filter press lay in waste in mill yards and in fact contributing to the
environmental problems of many mill companies.

Backward integration/extension

McDonald’s company in the philippines used a backward integration. As a foof chain, they need
resources for their delicious dishes. So they acquired a farm producing lettuces and other
vegetables they need at Baguio City.

The Banco de Oro-Equitable PCI Bank merger (2004–2006) was a plan by the SM Group of
Companies and Banco de Oro Universal Bank, the fifth-largest bank in the Philippines, to merge
with Equitable PCI Bank, the third-largest bank (although it is considered by some as an
acquisition or even as a hostile takeover). The merger was part of a long-term goal of Banco de
Oro to become one of the largest names in the Philippine banking industry. It was closed on
December 27, 2006 with the formation of Banco de Oro Unibank, Inc.

The plan was controversial in terms that a smaller bank could not possibly acquire a bank much
larger than it is. At the time of the merger, Equitable PCI had three times the capital Banco de
Oro had. Analysts were worried about the repercussions this could have on the industry.
However, the deal had been able to generate a lot of media hype, especially in newspaper

Related Diversification in Coconut Lands

San Miguel Corporation before only made beverages for their customers. Now they had
Unrelated diversification
Hotel elinas establised a restaurant at the bottom part of its
establishment.

The restaurant named Anne is a great decision of Elinas company to

make. The foods served in here are very delicious making people to be
attracted and eat in this restaurant.

San Fabian Supply Co. (Philippines) market

penetration
MacDowell Corp., a producer of construction supplies, terminated its exclusive distribution
arrangement with San Fabian Supply Co., its sole distributor in the Philippines for nearly 20
years. Paul Cheng the owner of San Fabian had to decide whether to accept MacDowell's
decision or drop the line altogether. The case raises the notion of "relationships" in channels of
distribution. MacDowell and San Fabian both felt that they were better positioned to serve the
end-user and increase market penetration.

product development
Material and design are the two most recognizable elements in Philippine design. They form the creative
synergy behind every award-winning Filipino-made product. They are the yin and yang inspiring
Philippine manufacturers as they come up with their award-winning designs we remarkable call our
own.

Surrounded by water and laden with lush vegetation, the Philippines is teeming with organic and natural
materials any designer can find varied inspirations from. This includes the rattan, which has been used
by indigenous tribes in the Cordillera since the pre-colonial times. From basket weaving, rattan found
various uses because of outside influences.

“The rattan is vine-like that grows in thick forests using the trees for structural support,” said Edwin
Rivera, general manager of Obra Cebuana, a rattan furniture exporter from Cebu.

The company caught up with the booming of the rattan industry in mid-1980’s under the name Banawa
Furnicraft. Dr. Ramon Arcenas, a famous surgeon in Cebu established the company to create jobs for
Cebu’s creative weavers and to export rattan furniture. The family also owns other companies in real
estate, banking and information technology.

When the company got incorporated, it changed its name to Obra Cebuana (Cebu’s Masterpiece) to
promote Cebu as the rattan capital of the Philippines. They ventured into other materials such as
wrought iron and stone inlay but rattan is still their best material for export to countries like the US,
Germany, Japan, Netherlands, Australia, Denmark, Hong Kong and Singapore. Eventually, Obra Cebuana
embarked on expanding rattan furniture into lamps, which they featured for the first time in 2008 at
Manila F.A.M.E. International.

“At Manila F.A.M.E., we got good results from business dealers in Europe,” Rivera said. For them,
product research and development is key in keeping the company attuned in today’s market. “In order
to survive in the market, we have to be different,” Rivera added. Their designers are sent to local and
international fairs to learn new trends and source out materials.

One particular trendsetting piece that Obra Cebuana featured in the October edition of Manila F.A.M.E.
International is the ‘solihiya’, a weaving technique in rattan furniture. “Ordinarily, we find the ‘solihiya’
technique in baskets but we manage to put it in furniture through the rattan slats,” Rivera said.

Rattan slats is a processing technique from the original round pole converted into squares and sliced to
thin slats at about 3 mm. and then weaved around the frame. The end product was impressive and
unique that Obra Cebuana was awarded Best Product Design at the Katha Awards for Design Excellence
held at the tradeshow. The winning piece, a low-back chair, is just few of the awards Obra Cebuana
garnered over the years. “We did not expect to win despite deserving contenders at the fair,” Rivera
said.

The designer, Timmy Banzon came from a line of Cebu’s finest basket weavers. He integrated basket
weaving into furniture. “Why not,” Banzon said. Functionality and material manipulation are the
significant factors he believed why he won the design award. He expanded his designs to include tables
and lamps. “I am always inspired by the material and for its usage, I drew inspiration from my family,”
Banzon said noting that the low-back chair is actually meant for his playful daughter, Shine.

Manila F.A.M.E. International, the Philippine’s trend setting trade show, has been recognizing design
excellence since 1983 to inspire and challenge exporters as well as designers to constantly develop
designs and products for the international market. Katha, in Filipino parlance, means one’s creation. It
serves as a hallmark of Philippine design ingenuity and product innovation combining the ideals of form
and function. In addition to recognizing Filipino ingenuity, this year’s Katha Awards provided a window
to the creative processes of the Philippine’s design culture.

Uniqueness and innovation remained to be the main criteria in judging for the Katha Awards winners.
This edition’s roster of judges include: architects Joey Yupangco and Felino Palafox, Jr., Lesty Mejares of
Foreign Buyers Association of the Philippines (FOBAP), Luis Manalang of Product Development and
Design Center of the Philippines (PDDCP), and fashion designer Rajo Laurel.

Other winners in the Best Product Design include gugo by Nota Bene (Health and Wellness), Masaeco
(Holiday Décor/Giftware), and Bon-Ace (Fashion Wearables). Bag manufacturer S.C. Vizcarra won for
Best Booth Display. Special Recognitions were handed out to La Salle College International and Diana
Multicrafts for Best Promotional Material and Best Website respectively.

Every edition welcomes awardees for the Hall of Fame Award, given to companies, which already won
five Katha Awards previously. They are awarded to Accent Pieces, a holiday décor manufacturer and
furniture exporter, First Binhi Crafts. A new category called the Secretary’s Award for Design Excellence
went to MCCA Industrial Corporation for their design aesthetic, product innovation and business
potential in its dramatic use of wrought iron, glass and light.

Manila F.A.M.E. is led by Center for International Trade Expositions and Missions (CITEM), and is the
only trade fair in the country recognized by the Union de Foires Internationales (UFI), the union of the
world’s leading tradeshow organizers, fairground owners, and major international associations from the
exhibitions industry based in Paris. Through the years, Katha captures Filipino creativity in visible form
and sets the standard of what is good design and good taste. It is also what the show strives for over the
years.

Philippines Market Development

The total organic market in the Philippines is relatively small. In 2001, exports were estimated to be P
250 million or US$6.2 million, and by 2003 may have exceeded US$10 million. The domestic organic
industry is around P100 million, with a trade estimate of 10-20% annual growth, while imports are
estimated to be about P150 million. It is also reported that the demand for organic products will be far
greater than local production.

The major domestic organic product in the Philippines is rice. Other products include upland vegetables,
papaya, traditional wines, and herbal supplements. Some 20% goes for the producers’ own
consumption, and the rest is sold directly in markets. Small farmers are usually formed into groups and
most are associated with NGO-assisted social enterprises, especially for root crops, fruits, and
vegetables. Processed organic products of these groups include jams, catsup, local wines, and purees.

Herbal supplements also have an increasing share of the market, accounting for an estimated equivalent
of 5% of the total spending of Filipinos on synthetic drugs, about US$1 billion annually. Currently,
imported herbal supplements are in brisk demand. The most common herbal sold in the country is the
bitter gourd (Momordica charantia), followed by herbal personal care products such as papaya-based
soaps and astringents. The country is capable of developing into a leading grower of medicinal plants,
given its rich biodiversity and traditional use of herbal medicines.

Meanwhile, fresh bananas, banana chips, virgin coconut oil and coconut chips, vinegar, muscovado
sugar, coffee, and asparagus are the major organic products exported by the big producers from Visayas
and Mindanao. These include banana growers’ associations, coconut producers’ federations, herbal
manufacturers, and mango exporters’ associations.
Banana is the largest export crop. Certification of organic exports is provided by European certifiers such
as the Institute for Market Ecology (IMO, based in Switzerland), Naturland (Germany), and Ecocert
(France). IMO is accredited for organic certification by the Swiss Accreditation Service (SAS), the USDA,
and the Japanese Agricultural Standards (JAS).

Annually since 1997, the Center for International Trade and Exposition Mission (CITEM) of the
Department of Trade and Industry has been hosting the BioSearch Exhibitions for the promotion of
organic products. This has allowed small growers and manufacturers to display and promote their
organic products.

In general, organic products are a mixture of a focus on local informal markets, where producers are
free to label their product as organic, and those that require certification. This is due to the lack of
consumer awareness and enforcement of government regulation in the marketing of organic products.
Most local organic consumers still are not knowledgeable about standards and certification and still
choose products on the basis of labeling. Only a few producers are certified, and the single accredited
certification body is still in a weak formative stage. This situation has persisted until the present, when
there is already a national policy for organic certification under EO 481 (Promotion and Development of
Organic Agriculture in the Philippines). It is still too early to tell the impact of certification on market
trends.

At this early stage, the expansion of the organic market and consumer promotion are still in the hands of
development NGOs, farmer organizations, and associations like OPTA, ALTERTRADE, Rizal Dairy Farms,
UMFI, MASIPAG, PDAP, Gratia Plena, and Don Bosco, among others. The same groups, along with
CITEM, PCARRD, OCCP, and small corporations, are also responsible for the penetration of Philippine
organic products in the global market.

retrenchment

`MANILA, Philippines - Philippine Airlines (PAL) said on Monday it will proceed with the
airline's planned restructuring after the Department of Labor and Employment (DoLE) nixed
employees' opposition, and said it is management's prerogative to outsource its key operations. 

"We welcome the decision insofar as it recognizes PAL's financial troubles and the need to spin-
off non-core services as part of its survival strategy," PAL said in a statement.
 
The affected units are in-flight catering services, airport services (including ground handling,
cargo terminal/cargo handling, and ramp handling) and call center reservations.

The spin off will entail letting go some 3,500 out of its 7,500 workforce.

The planned retrenchment was originally set on May 31, but was deferred after DoLE assumed
jurisdiction over a simmering dispute between PAL management and its labor unions.
PAL had announced that it will outsource its call center reservations to ePLDT Ventus, which
would handle reservations, inquiries, bookings, disruption handling, back-office services and
other call center services.

Its catering services will be handled by SkyKitchen Philippines, which is owned by businessman
Manuel Osmeña. Also, PAL's cargo handling would be outsourced to Sky Logistics.

At the same time, PAL plans to downsize its medical, information technology and human
resource units so that it can let go of 500 more employees.

The cost-cutting measures would save the company about P500 million to P1 billion a year.
 
"With the DoLE decision, PAL must now focus on the tough challenge of surviving the crisis
and competing amidst a difficult operating environment. To do this, PAL must implement
various revenue enhancement and cost control initiatives that includes outsourcing," it said.
 
PAL is setting aside up to P2.5 billion to compensate the displaced workers.

The Philippine Airlines Employees' Association (PALEA)  slammed DoLE's "midnight

decision."

"If need be, we are ready to elevate the case up to the Supreme Court. We maintain that
contracting out is illegal," Gerry Rivera, PALEA president and concurrent Partido ng
Manggagawa (PM) vice-chairperson, said in a text message to abs-cbnNews.com on Sunday.

Rivera said the DoLE  decision was released with suspicious haste and preempted the ongoing
mediation proceedings at the DoLE.

The labor union will file a motion for reconsideration on or before June 28, added Rivera.

In another development, PAL was chosen by the Official Airline Guide (OAG) as the best airline
in the country for a second year in terms of flights and seat capacity operating out of the Ninoy
Aquino International Airport (NAIA).
 
Data from the OAG, the aviation industry's main data keeper, showed that NAIA's four terminals
handled 1,859 flights per week in 2009, an increase of 12% over the 1,654 flights per week
handled in 2008.
 
These flights resulted in 309,616 seats per week flown by all airlines using the NAIA complex
last year, 11%  more than the 278,130 seats per week flown in 2008.
 
Of this traffic volume, PAL had a market-leading share of 35% of all flights per week, and 38%
of all seats flown per week at the country's premier airport in 2009, stated OAG.
  

 Urban Bank: One of the largest banks in the Philippines before PDIC (Philippine Deposit Insurance
Corp.) closed it on the basis of illiquidity in 2000, Urban Bank merged with Export and Industry Bank in
2001. Don’t let the liquidation grounds fool you, though. Urban’s officers were later criminally charged
with economic sabotage related to the company submitting falsified SES (supervision and examination
sector) reports to the Monetary Board.