CHAPTER I

THE PROBLEM AND REVIEW OF RELATED LITERATURE

Industry analysis is a tool that facilitates a company's understanding of its position

relative to other companies that produce similar products or services. Understanding the

forces at work in the overall industry is an important component of effective strategic

planning. Industry analysis enables small business owners to identify the threats and

opportunities facing their businesses, and to focus their resources on developing unique

capabilities that could lead to a competitive advantage (Inc., 2018). Industry Analysis

will help the dying industry of Kesong Puti, by formulating a strategy that will make

them competitive again. Industry analysis is also known as Porter’s Five Forces Analysis

it is a very useful tool for business strategists. It is based on the observation that profit

margins vary between industries, which can be explained by the structure of an industry.

Kesong Puti industry in Sta. Cruz, Laguna was originated and learned from the

Spanish people according to the elderly people living in Barangay Bagumbayan,

Sta.Cruz. Kesong Puti is one of the trade-marks of Laguna in terms of delicacies,

particularly in the municipality of Sta. Cruz. Every year, the municipality of Sta. Cruz

organized the Kesong Puti festival and its main objective is to boost the struggling

industry of the Kesong Puti and to reintroduce the culture and tradition of production and

consumption to the new generation of Sta. Cruz residents. Before Kesong Puti industry is

at its peak, almost every house in the street sides of Sta. Cruz has a small Kesong Puti
stall. The business is highly profitable at that time, which is evident at the number of

stores present in the sidewalks. However, the Kesong Puti industry did not stay at its

peak, due to the number of factors such as decreased on carabaos’ milk supply, the life

span of the Kesong Puti, and the poor promotion of the product. Industry Analysis will

help to solve the problems of the Industry by identifying the strength, weaknesses,

opportunities and threats of the industry and to formulate a strategic management plan.

The purpose of this study is to help the Kesong Puti industry to be sustainable and

competitive in the marketplace by providing strategic management plan. Particularly, this

study will analyze the position of Kesong Puti industry by identifying the external

affecting the industry of Kesong Puti in Sta. Cruz. Laguna. In order to formulate

strategies, the initial phase is industry analysis. Understanding the forces at work in the

overall industry is an important component of effective strategic planning. Industry

analysis enables small business owners to identify the threats and opportunities facing

their businesses, and to focus their resources on developing unique capabilities that could

lead to a competitive advantage.

Review of Related Literature

This includes the discussion of related literature and studies, both local and

foreign from which particular study premised. This will certainly help in giving the

reader better understanding to the internal and external factors that affect the production

of dairy industry.

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 This related literature focuses on the Industry Analysis and Production Analysis

of Dairy Industry. The effect of the global economic meltdown by Andrew H. Savage,

(2013), The success of dairy sector depends on production and availability of raw milk by

Poulomi Bhattacharya, Badri Narayan Rath and Aruna Kumar Dash (2016), Milk price is

depending on the economic and political situation in the world said by Liga Paura & Irina

Arhipova (2015). The success of Dairy farming, as a form of business, depends on

profitable milk production and marketing by T.S.P. Jayaweera et., al. (2007). The growth

rate of milk production has increased statistically significantly while its instability has

declined by Ramphul Ohlan (2014). The major constraints of the Philippines’ dairy sector

are shortage of dairy stocks etc. by Angelo M. Tapia (2011). The critical factors

influencing dairy development by The Dairy Development Foundation of the Philippines

(2007)

The value of the Global Cheese Manufacturing industry has shrunk over the past

five years, despite stable demand for dairy products, improved per capita consumption of

cheese worldwide and continued product innovation. While the industry performed well

during the first half of the reporting period, in 2015, an appreciation in the US dollar

alongside a sharp decline in the price of milk, the industry's primary input, placed

significant downward pressure on cheese prices and resulted in diminishing industry

revenue figures in dollar terms. Economic recovery and relative stability in dairy product

prices will grow demand for cheese and support industry growth over the next five years.

The Global Cheese Manufacturing industry has had a mixed performance over the past

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five years. Cheese has evolved from its status as a European delicacy and has become a

staple in many other cuisines. Relatively strong economic growth and rising affluence in

emerging markets, especially India and China, are stimulating cheese consumption.

Cheese is now one of the world's largest agricultural commodities, with production

exceeding 23 million metric tons, according to estimates based off data from the Food

and Agriculture Organization of the United Nations (IBISWorld, 2018).

Nestle: Industry Analysis.

As cited by Savage (2013), the effect of the global economic meltdown has had a

less impact in food processing industry than in other industries due to its rising demand

for convenience food and ready to serve products. However, one of the challenges that all

food processing companies face today is the rising price of raw ingredients such as corn,

wheat and dairy. Other factors that affect demand for processed food are issues

concerning dieting and obesity, allergens, and increased interest in the use of quality

ingredients. One major key segment in the food processing industry is the increasing

growing market for organic food and health products.

Supply response of Milk Production: Analysis and Implications for BRIC countries

In line with Bhattacharya, Rath and Dash (2016), the success of dairy sector

depends on production and availability of raw milk. Theoretically, milk supply is a

function of milk price, price of substitute goods, quality of milking animals, cost of

inputs etc. Price of milk is expected to be positively associated with the number of

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milking animals and milk yield. A higher price of milk, ceteris paribus will enhance the

profitability of milk production and hence motivate milk producers to increase their herd

size and yield of the milking animals. Milk producer’s decision regarding the number of

milking animals also depends on the expected price of milk which broadly can be

captured by previous year’s milk price. Price and production conditions of the related

commodities can also influence milk producer’s supply decisions. Prices of competing

commodities are expected to influence milk supply negatively.

Analysis of the milk production and milk price in Latvia.

Milk price is depending on the economic and political situation in the world. It is

also influenced by the geographic location, seasonality, and raw materials (feed,

electricity, fuel) prices (Paura & Arhipova, 2015).

Analysis of cost of milk production in Ratnapura District.

Jayaweera (2007) states that the success of Dairy farming, as a form of business,

depends on profitable milk production and marketing. The price of milk depends on

various factors such as demand, supply, cost of production, location of the area and

marketing channel. Profit margin in the dairy industry has been considered to rest on the

difference between the cost of production per liter of milk and the average farm gate

price for milk.

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Growth and Instability in Dairy Production and Trade: A Global Analysis.

A line with Ohlan (2014) the growth rate of milk production has increased

statistically significantly while its instability has declined. It indicates that high rate of

growth in milk production does not cause high instability. The decomposition of output

growth indicates that the main source of growth in the global milk production is an

increase in the number of dairy animals.

The Philippine Dairy Industry: Situation and Prospects

Tapia (2011) asserts that major constraints of the Philippines’ dairy sector are

shortage of dairy stocks, limited industry entrants, competition with cheap imported milk

powders, trained technicians and farmers leaving the country to work in dairy farms in

New Zealand and Australia, improve productivity of animals on the ground, increase

herds through intensive local upgrading, increase the number of small-hold farmers

generating profits from dairy enterprise, support the establishment of breeding farms to

supply new industry entrants with good dairy stocks, continue training of farmer

technicians.

Philippines: Promoting dairy entrepreneurship through enterprise zones.

According to the Dairy Development Foundation of the Philippines (2007), the

critical factors influencing dairy development are participation of local government.

Local government engagement has expanded to involve provincial governors and

provincial boards, a marked improvement from the time when only village and town or

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city officials supported dairying efforts. Breakthroughs in appropriate technology for

long-life milk. In the absence of guaranteed public or private demand for milk products,

milk producers in the Philippines have no guaranteed market. As such, the burden of

managing the product mix is on the enterprises at all levels, from farm to retail outlets.

Availability of smaller processing facilities. With the training of local engineers and

fabricators and access to Chinese, Indian, Thai and Taiwanese dairy equipment suppliers,

the old practice of commissioning dairy plants on a turn-key basis has been abandoned.

In fact, even old plants have been reconfigured to suit the needs of smaller production

sites. Some of these are privately financed like the processing plants of two popular

brands in the market: Milk Joy and Gatas ng Kalabaw. Technical support for milk-

quality assurance. For many years, local industry relied on academia-based technical

support. This meant following the prescriptions of the Dairy Training and Research

Institute on all aspects of dairying, from farm to plant. While such support was

scientifically sound, it was not always grounded on commercial realities. Enterprise

orientation and market-oriented financing packages. Transforming dairy farmers to

dairy entrepreneurs has been the theme and pre-occupation of the industry movers, both

in government and the private sector. The transformation process includes training

farmers in business skills as well as value-adding in terms of standardized quality testing

at the collection centers and the processing plants, assisting in obtaining product licenses

and plant accreditation and enforcing product standards for suppliers in milk-feeding

programs. Island dairies for local milk supply. Even Manila-based bureaucrats could

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not believe that small islands could operate viable dairy enterprises. When dairy zones

were established on the islands of Siquijor, Iloilo and Negros Occidental and the

enterprises managed to penetrate local markets, it proved credible. Supplying the local

urban markets requires appropriate packaging, quality assurance and a distribution

system. Local teams were trained to handle these aspects. In the immediate communities

of the dairy producers, milk also became affordable to farm workers and households.

Dairy zones and the clustering of big and small farms. In previous years, there were

strong sentiments on whether support should emphasize big or small farms. The dairy

zone model provides a structure for the participation of smallholder farmers. Over time

and as dairy cooperatives and their counterpart big farms gained confidence in their

capacities, they started to do business with one another. Their transactions demonstrated

that they could gain bigger market shares by stabilizing the supply – if those who had

more milk made it available to those who did not have enough. In the end, it was good

business for big and small farms to collaborate. Commercial farm module. When

smallholder producers began growing into medium- and bigger-sized farms (of 20–100

animals), the National Dairy Authority started to design commercial farm modules that

would suit the emerging crop of dairy farmers. Farm size is a very fluid figure, but there

are stages of growth: Farmers first engage in dairy on a part-time basis; then one member

of the family goes into it full time, with about three other family members assisting in

forage gathering, milking, and milk delivery to the collection center and selling some of

the milk to the immediate community. Philippine Carabao Center. The PCC is a world-

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class research center for buffalo. Its studies and researches on genetic improvement are

directed towards making the Philippine carabao a major milk supplier for the country.

Today, 36 percent of national milk production comes from carabao, 63 percent from

cattle and less than 1 percent from goats. The emphasis on carabao is based on climate

suitability and the huge number of animals on the ground that may potentially be

upgraded to a dairy buffalo breed. Aside from the research focus, PCC also supports

buffalo-based dairy enterprises in various parts of the country. Dairy Training and

Research Institute. With its core staff of dairy specialists, the DTRI continues to be a

resource for the industry although its facilities are in need of improvement. Training

courses for cooperative-based dairy technicians are conducted in coordination with the

DTRI. It also maintains a semen-collection facility that supplies dairy farms in Luzon.

Official development assistance. With very limited resources channeled to the

smallholder dairy sector, support through official development assistance significantly

has accelerated dairy zone expansion in the past six years. Specifically, official

development assistance from the US Government’s Section 416(b) facility and the Food

for Progress programmed has been a significant source of investment in smallholder

dairy.

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 Synthesis

The review of related literature focuses on the different industry analysis of dairy

industry. Industry analysis enables small business owners to identify the threats and

opportunities facing their businesses, and to focus their resources on developing unique

capabilities that could lead to a competitive advantage (Indian National Corporation.,

2018).

This review laid the foundation of the present study especially the conceptual

framework. Moreover, much of the information gathered was from the different studies

from the different scholars which was also used as references in composing this study.

This study will provide a new knowledge on how to handle and deal with those

internal and external factors that affects the kesong puti industry. This will also help in

identifying the strength and weaknesses that will help not only the kesong puti industry in

Sta. Cruz, Laguna but also the dairy industry here in the Philippines.

This study will give benefits to the Kesong Puti industry in Sta. Cruz, Laguna by

providing appropriate strategic plan that suits to them that will make them competitive

again.

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 Conceptual Framework

The conceptual framework of the study will illustrate the Industry Analysis of

Kesong Puti in Sta. Cruz, Laguna.

INPUT OUTPUT

INDUSTRY STRATEGIC
ANALYSIS PLAN

SWOT
Strategies to mitigate
the constraints
Strengths Weaknesses

Opportunities Threats

Figure 1 Conceptual Framework of the Study

This framework was used to collect data for this study through questionnaire with

the producers of Kesong Puti in Sta. Cruz, Laguna in order to identify the strengths,

weaknesses, opportunities and threats that may use to formulate a suitable strategies to

the Kesong Puti production.

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 Statement of the Problem

1. What is the profile of the Kesong Puti producers in Sta. Cruz, Laguna in terms of:

1.1 Name of the business;

1.2 Type of the business;

1.3 Age of the business;

1.4 Price range of the Kesong Puti product;

1.5 Product produce per day;

1.6 Monthly Income;

2. What are the business opportunities in Kesong Puti production?

3. Is there a significant difference on the business opportunities in Kesong Puti

production as perceived by the producers?

4. What are the constraints on the Kesong Puti production?

5. Is there a significant difference in the constraints on Kesong Puti production as

perceived by the producers?

6. What strategies can be developed to alleviate constraints in Kesong Puti production?

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