University of Santo Tomas

UST – Alfredo M. Velayo College of Accountancy

Espana Blvd., Manila, Philippines

A Business Plan on
Rusty Lopez Enterprises Incorporated

In partial fulfillment of the Requirements for the Degree of

Bachelor of Science in Managerial Accounting

Submitted by:
Bonzon, Hanna Allyza G.
Dela Pena, Rachelle Anne E.
Lausin, Frances Ann C.
Palmer, Kevin Owen S.
Tabuno, Marc Kimberly S.
3MA1

Submitted to:

Gerardo M. Castro

MAY 2019
 UNIVERSITY OF SANTO TOMAS
UST – Alfredo M. Velayo College of Accountancy
Espana, Manila

APPROVAL SHEET

The Business Plan for

Rusty Lopez Enterprises Incorporation

Prepared and submitted by:

Bonzon, Hanna Allyza G.
Dela Pena, Rachelle Anne E.
Lausin, Frances Ann C.
Palmer, Kevin Owen S.
Tabuno, Marc Kimberly S.
3MA1

has been approved and accepted as partial fulfillment of the Requirements for the Degree of
Bachelor of Science in Managerial Accounting

PANEL OF EXAMINERS

____________________________ _____________________________
 UNIVERSITY OF SANTO TOMAS
UST – Alfredo M. Velayo College of Accountancy
Espana, Manila

CERTIFICATE OF ORIGINALITY

We hereby declare that this submission is our own work and that, to the best of our
knowledge and belief, it contains no material previously published or written by another person
nor material which to a substantial extent has been accepted for the award of any degree or
diploma of a university or other institute of higher learning, except where due acknowledgement
is made in the text.

We also declare that the intellectual content of this Strategic Management paper is the
product of our work, even though we may have received the assistance from others on style,
presentation and knowledge expression.

_____________________ ________________________
Bonzon, Hanna Allyza G. Dela Pena, Rachelle Anne E.

___________________ ___________________
Lausin, Frances Ann C. Palmer, Kevin Owen S.

______________________
Tabuno, Marc Kimberly S.
 University of Santo Tomas
UST – Alfredo M. Velayo College of Accountancy
Bachelor of Science in Management Accounting
Strategic Management II

Rusty Lopez Enterprises Incorporated

3MA1
Bonzon, Hanna Allyza G.
Dela Pena, Rachelle Anne E.
Lausin, Frances Ann C.
Palmer, Kevin Owen S.
Tabuno, Marc Kimberly S.
 TABLE OF CONTENTS

Executive Summary
I. Overview
II. S.W.O.T.
III. Objectives
I. Introduction
A. Background of the Company
B. Key Financial Highlights
C. Major Consumer Groups Served
D. Other Relevant Information
II. Vision/Mission/Objectives
A. Current vision, mission, and objectives of the company
B. Evaluation
C. Suggestions
III.External Environment Analysis
A. General Information
a) Demographic
b) Political-Legal
c) Economic Development
d) Socio-Cultural Trends
e) Technological Trends
B. External Environment Forces
a) Market Demand
b) Products offered
c) Intensity of Competition
d) Supply Chain
e) Financial Aspect
C. Industry and Competitor Analysis
a) Market Size and Growth Rate
b) Current Buyers and Suppliers
 c) Technology Development
d) Industry Prices
e) Critical Success Factors in the Industry
i. Technology
ii. Product and Service Information
iii. Brand Recognition
IV. Internal Environment Analysis
A. Porter’s Value Chain
a) Primary Activities
b) Secondary Activities
B. McKinsey’s 7S
C. VRIO Analysis
D. Tangible Assets Analysis
E. Value Chain Analysis
a) Management
b) Marketing Financial Ratios
c) Production and Operation
d) Research and development
e) Management Information Systems
V. Strategy Formulation and Recommendation
A. Recommendations and Action Plan
B. Projected Financial Statements
a) With implementation
b) Without Implementation
VI. References
Executive Summary
 CHAPTER I: INTRODUCTION

Nature of Business

Centropelle, which means “center of leather”, was the original name before Lolito Lopez
situated Rusty Lopez as a brand name. Lopez opened a shoe store in 1997 in the Cubao Shoe
Expo. Rusty Lopez had their own manufacturer; the reason why Rusty Lopez turned out on top.
Their manufacturer is Maritalia Manufacturing Incorporated which was established on December
17, 1996 and became the official manufacturing arm of the company. The name Maritalia was
created by merging Marikina and Italy, "MARI" (Marikina) and "ITALIA" (Italy). It expresses to
the joint endeavors of Filipino and Italian shoemakers. Maritalia is situated along E. Rodriguez
Avenue in Sto. Niño, Marikina City. The shoe industry was then flooded with affordable
imported brands giving local companies, such as Rusty Lopez, a tougher time marketing their
products. Instead of choosing to get buried under the competition, the Rusty Lopez team decided
to step-up and invested in shoe-making machinery and technology in Italy; fusing world-class
innovation with Marikina’s originality. Rusty Lopez succeeded in coming out with top-quality
yet reasonably priced footwear in the year 2004. Maritalia Manufacturing Inc., besides being the
organization behind men’s footwear under the Rusty Lopez brand, additionally fabricates high-
style women's footwear under the brand Centropelle, streetwear under the brand Russ, school
shoes under the brand Walk-over and women shoes under the brand Azaleia.

Rusty Lopez is a proud member of the Philippine Footwear Federation Incorporated or

PFFI and it has a wide range of products such as footwear, clothing, and accessories. They
conveyed its work of art and contemporary structures to the Indonesian market with a wide range
of shoes from the basic black shoes, pumps, step-ins to classier and sophisticated style. Rusty
Lopez aims to provide quality-based shoes ready for export for it has reached global
competitiveness and standard.
Financial Highlights

In 2011, Rusty Lopez Enterprises Inc. has acquired sales of PHP 197 million, generated a
gross profit of 55.83% (PHP 110 million), an operating profit of 3.73% (PHP 7.3 million), and a
net comprehensive income of 1.73% (PHP 3.4 million). Their overall expenses were PHP 102.6
million.

For 2012, sales have increased 6.77% resulting in an amount of PHP 210.3 million. The
gross profit on the other hand had increased 7.22% (PHP 117.9 million). The cost of sales, as
well as the selling, general and administrative expenses increased 5.19%. Despite of the
increased in expenses, the company still gained an operating income before tax of 5.15% (PHP
10.8 million) and a net comprehensive profit of 2.77% (PHP 5.8 million).

For 2013, overall expenses of the company increased through the year following and their
sales decreased 1.81% (PHP 206.5 million) generating a gross profit of 61.77% (PHP 127.5
million). The earnings before interest and taxes was still operating at an income of 4.33% (PHP
8.9 million), making a net profit of 3.03% (PHP 5.8 million).

For 2014, the sales continuously increased giving revenue of PHP 268.2 million and
produced a gross profit of 45.89% (PHP 123.1 million). Cost of sales as well as the selling,
general and administrative expenses greatly increased. The continuous increase in expenses is
mostly caused by the launching of nine Rusty Lopez outlets by the Brand’s Motion Project. The
company still gained an income before tax of 0.72% (PHP 1.9 million) and a net comprehensive
profit of 0.51% (PHP 1.3 million).

For 2015, Rusty Lopez Enterprises Inc. made a breakthrough reaching its highest sales
revenue with a value of PHP 359.8 million. Gross profit increased 38.98% (PHP 140.2 million).
In this year, Lolito’s daughter Nicole became active in the business as she introduced fresh ideas,
new styles and new fashion influences. Rusty Lopez introduced a new line of fashion-forward
footwear from studded pumps to gladiator sandals and stilettos. This resulted to an operating
profit of 2.34% (PHP 8.4 million) and a net comprehensive income of 1.64% (PHP 5.9 million).
Major Consumers Groups Served

The target market of Rusty Lopez is met with their wide range of quality-based footwear,
and even apparels and accessories. Rusty Lopez has different brands under them that cater to a
specific market such as to ladies, men’s, and youth. They offer casual and formal footwear for
women; casual, formal, and athletic footwear for men’s; and formal, casual, school, and sporty
footwear for the youth. Rusty Lopez caters to every women and men, from young, middle-aged
to older adult, with their varied and broad spectrum of products. As they have already made a
name in the Philippine industry, and gained the trust of the people, especially their long-time
consumers, they have preferred to sell their products in a formal and higher market.

Other Relevant Information

Rusty Lopez’s different branches and stores operate every day from Monday to Sunday at
10 am to 8pm, paying their employees a minimum wage rate. Maritalia works at full limit with
300 laborers producing and delivering as many as 24,000 pairs of shoes a month.

To be with the current trends, Nicole is helping infuse the words ‘fun’ and ‘frills’ to the
brand’s new products. Besides from the basic black shoes, pumps and step-ins, Rusty Lopez now
has chic, classy and current shoe styles. This expands their market, reaching out to young
fashionistas. The research and development team of Rusty Lopez also came up with a collection
of Magnet Therapy Shoes, applying the same principles with the growing trend on the use of
magnet for health purposes as the magnet energy helps relieve a person of pain, stress, headache,
fatigue, and anxiety problems when magnet is placed near the body.

Rusty Lopez has significantly contributed to the Marikina City Local Government’s
production of “The World’s Largest Shoes”, and even with the growing population at an annual
rate of over two percent, the Philippines is a compelling market for manufacturers of footwear
and Rusty Lopez is blessed to be a pioneer and continues to be so.
 CHAPTER II: VISION/ MISSION OBJECTIVES

Current Vision

“To be the leading shoe manufacturer in the country and be one also of the major
suppliers in the world market by exceeding customer’s expectation through continuing
improvement in the quality and services as well.”

Evaluation of Vision Statement

A vision is something which reveals what an organization hopes and achievements in the
long term. It also provides a concrete way for stakeholders, especially employees, to understand
the meaning and purpose of the business. Rusty Lopez’s vision statement is very clear and serves
as an inspiration and direction for employees of the company. The company focuses on their
passion on manufacturing high quality Filipino products and services not only in the Philippines
but also in other countries. Aside from this, the company also initiates innovation to give their
clients the best quality of their products and services.  

Proposed Vision Statement

“To be the leading shoe manufacturer in the country and be one also of the major
suppliers in the world market by exceeding customer’s expectation through sustained quality
management guided by world class standards.”

Current Mission

“(2) To produce quality shoes at an affordable price by (5) bringing together the best
people, the best materials and (7) the best technology available. Through this, we aim not only
(1) to satisfy our customers but also to make them proud of owning Rusty Lopez shoes.”
Evaluation of Mission Statement     
              
Rusty Lopez’s mission statement includes four (4) components of a meaningful mission
based on David’s Framework namely, Customers, Products or Services, Concern for Employees,
and Technology. It lacks the five (5) other components which are:

1. Markets
A shoe manufacturing business such as Rusty Lopez must identify its target market.
A specified target market would help the company in producing better quality
products to its customers who have various needs.

2. Concern for Survival, Growth, and Profitability

Company’s growth must be prioritized by Rusty Lopez for their stakeholders. They
must work parallel to their goals and for the company’s survival in the future.
Activities of the company must be profitable enough to cover the expenses.

3. Philosophy
Rusty Lopez must integrate its culture and beliefs as their philosophy in the mission
statement of the company.

4. Self – Concept
Rusty Lopez needs to determine its strengths that are beneficial to the company and
enhance it. Furthermore, weakness of the company should also be known to be
corrected and developed. These would help the company in attaining a sustainable
competitive advantage in the future.

5. Concern for Public Image

Rusty Lopez should be aware of its environment. It must consider safety and engage
in environmental campaigns and welfare of the society.
Proposed Mission Statement

“To produce quality shoes in the Philippines at an affordable price by bringing together
the best people, the best materials, and the best technology available. We value excellence,
creativity, and quality as we positively support safety and environmental matters. Rusty Lopez
will drive its stakeholders towards the success of the company. Through this, we aim not only to
satisfy our customers but also to make them proud for owning Rusty Lopez shoes.”
 CHAPTER III: EXTERNAL ENVIRONMENTAL ANALYSIS

A. General Environment

1) Demographic
The consumers of Rusty Lopez Enterprises Inc. are from young to adult men and women.
The Philippines’ population is continuously increasing every year. As shown in the
Graph 3A below, in 2018, the population on both sexes and on all ages is 106,598,600
with an annual growth rate of 1.59 percent from 2017.

Graph 3A Philippines’ Population 2014-2018 (in millions)

The latest data of employment rate is 94.6 percent in July 2018, which has increased from
94.4 percent in July 2017, as reported by the Labor Force Survey (LFS) of the Philippine
Statistics Authority. The total employed persons were approximately 41.160 (in millions)
in 2018. Employed persons were grouped into three major sectors: agriculture, industry,
and services sector.
 Graph 3B No. of Employed Persons in Three Major Sectors 2018 (computed in percentage)

The individuals who work in the industries mentioned above need footwear and apparel
for their outdoor and indoor activities. Rusty Lopez offers genuine leather shoes,
clothing, and bags that can be used in varying industries, especially on services sector
that comprises more than half (57 percent or 23.313 in millions) of the country’s total
employment.

2) Political- Legal
Approved by Former President Gloria Macapagal-Arroyo and was enacted on April 15,
2004, The Republic Act No. 9290 otherwise known as the “Footwear, Leather Goods and
Tannery Industries Development Act” promotes the development of footwear, leather
goods and tannery industries, and recognizes its potential to generate employment and
increase foreign exchange income through exporting and importing. The government aim
to support, promote, and encourage the growth and development of small and medium
scale enterprises (SMEs) in these industries.

The process of applying for the issuance of Certificate of Accreditation under R.A. No.
9290 involves the determination of the eligibility of: first, applicant footwear, leather
goods or tannery enterprise for the incentives provided under the law; and second,
 applicant footwear, leather goods or tannery association for the endorsement of its
members for accreditation under the law. As Rusty Lopez Enterprises Inc. is a
manufacturer of leather goods such as footwear, the enterprise is eligible to apply for the
issuance of Certificate of Accreditation under R.A. No. 9290.

3) Economic Development
In Graph 3C below, it shows that the Philippines’ GDP has been steadily increasing over
the last five years. The gross domestic product (GDP) is one of the primary indicators
used to measure a country’s economy as it represents the total dollar value of all goods
and services produced over a specific period. The GDP for 2018 is approximately 333.04
in billion US dollars, resulting in the 6.2% full-year growth for 2018. A higher GDP may
lead to new investments in the country.

Graph 3C Philippines Gross Domestic Product 2014-2018 (in billion US dollars)

4) Socio-cultural trends
a) Seasonal behaviors
The rainy season every year has been coming and going out which made the customers
more uncomfortable when going to school or work with wet smelly feet. Rusty Lopez
listed the things a person should take into consideration when it comes to picking shoes
during rainy season. Therefore, Rusty Lopez made such boots which is very timely to use
during this season:
 Shoes you can trust - Accidents happen and customers probably do not want to
walk in the rain with a broken shoe. It should score at least an 8 on your 10-point
sturdiness scale.
 Waterproof shoes - Shoes that are water resistant are good if a customer really
wants dry feet all throughout the day. However, most waterproof shoes are made
up of materials that might be a bit too heavy for children to run around with.
 Shoes that breathe – Customers do not want having feet wet with rain water the
whole day which is why little holes are helpful that will drain the water.
 Strong grip shoes - Safety is on the top list that customer should consider which
means choosing shoes that have good traction must be a priority.
 Barely there shoes – Most of us have experienced walking through a flood-prone
area, and we would know the struggle of lifting feet without leaving shoes behind
which is why customer need to consider shoes that fits feet well and are
lightweight.
 Shoes that dry fast - Considering this question, “what materials are your shoes
made of?” We should always choose shoes that are made of materials that dry fast
because we do not want our feet to get soaked for a long time.

There are also trends during seasons of summer and here are the list of customer’s top
picks in the brand Rusty Lopez:
 Gold Sandals: A Sandal with a touch of bling and to reflect the sun prettily, gold
flat sandals is a favorite summer shoe choice that can easily be mixed and
matched with any outfit. Dress in monochrome colors and then let your golden
feet stand out or mix printed fabrics with this reflector.
 Sexy Strappy Heeled Sandals - This is good to use when you have a meeting to
attend but too hot to be donning closed shoes
 Black Flat Sandals - These sandals are good if you want your feet to be
comfortable but do not want to lose that hint of formality in your footwear. It
helps your feet breathe perfectly without losing style and grace.
  Toe Ring Sandal - Customer could wear this kind of sandals when walking on the
beach and while communing with nature with toe ring sandals in cool, aquatic
colors and easily feel the sand and water against your feet.
 Hiking Shoes - These shoes can be used in climbing mountains, going on hiking
trips in the summer. This gives you endurance and longer hours for walking,
which is why picking shoes made of soft material that will not chafe against your
skin, nor give you bruises is a must. It would not give you tired, aching feet.

b) Buying Trends
During the early years, we sew more and more of sneakers and boots as buying trends but
in the year 2017, Rusty Lopez introduced a new buying trend that is adopted from Seoul
Fashion week which is the Street Style which has become so trendy considering its
comfort and new trend style design.

c) Demographics
There is a Rusty Lopez for each and every member of the family. The wide range of
merchandise will definitely not leave any member of the family empty handed.

When it comes to looking for potential mates, ladies pay attention to every detail, that’s
why for the gents out there it’s always important to smell good, have a good personality,
and wear the right type of shoes. Below are list of men's footwear line consists of the
following:
 Casual - These are the shoes you wear when you go out on weekends, when you
hang out to chill during holidays, or when you go to work during Dress Down
Fridays. There are 5 shoe styles for men that fall under this category including
Boat Shoes, Heavy-Soled Leather Shoes, Saddle Shoes, Slip-On Shoes, and
Sandals.
 Boat Shoes - Boat shoes are the choice of men who are looking for
comfort. It goes with slacks, jeans and shorts. However, it can only
be worn when the sun is out as it is not made for enduring rainy
weather.
  Heavy-Soled Leather Shoes - Gents wear heavy-soled leather
shoes when it is raining outside. These shoes for men usually have
a chunky appearance. Heavy-soled leather shoes should be worn
with socks and jeans.
 Saddle Shoes - Saddle shoes are the type of shoes for men that fall
under the category of Oxford shoes. These shoes are distinguished
by their 2 different colors and retro style. Saddle shoes should
always be worn with socks and slacks.
 Slip-On Shoes - Another popular choice for men are the slip-on
shoes because of the comfort it offers. These shoes have thicker
soles than dress slip-ons and are identified with its lack of laces.
As with saddles shoes, these men’s shoes are also worn with socks
and slacks.
 Sandals - With its open top and durable sole, sandals are also a
popular choice for those looking for comfort in men’s shoe wear. It
is worn with shorts and should never be worn with socks.
 Athletic Shoes – These shoes are used if a customer is fond of playing basketball,
going for an early morning jog, or those who usually walk for miles in their daily
commute, athletic casual shoes are worn for sports and casual wear.  It should be
noted that those who are playing sports should always wear white socks with their
shoes. Meanwhile it is highly recommended that those who are wearing shorts
and athletic shoes outside the gym should not wear socks with their shoes.
Athletic men’s shoes are categorized into two categories: Canvas Shoes or
Running/Basketball/Tennis Shoes.

 Canvas Shoes - Characterized by its rubber soles and toes, canvas

shoes may be worn even outside the gym. Converse sneakers is an
example of canvas shoes. These shoes are usually worn for
comfort. Canvas shoes fall under 2 styles: High Top and Low Top.
These types of men’s shoes should be worn with socks and can be
worn with all types of pants including shorts, jeans and slacks.
  Running/ Basketball/ Tennis Shoes - Laced up and with rubber
soles, these types of athletic shoes are also worn for comfort by
men who play sports, go to the gym or those who just like wearing
this type of casual shoes. Running, basketball or tennis shoes is
worn with shorts and socks and should never be worn with suits.
 Dress Shoes - For the young professionals in the corporate world, having dress
shoes is a must. Dress shoes are the shoes worn for going to work and for
attending formal events such as weddings, debuts, and other formal parties and
celebrations. It should be noted that plain, thinner socks should be worn with this
type of shoes. Dress shoes are categorized into 3 categories: Oxford Shoes, Derby
Shoes and Slip on Shoes.

 Oxford Shoes - Characterized by closed lacing and cap toe, Oxford

shoes is a type of dress shoes that is worn with socks to go with
your suit.
 Derby Shoes - Features lacing- can be described as less formal
than Oxford shoes. These men’s shoes have no laces and are
categorized into Moccasin, Tassels and Monk Strap.
 Slip-On Shoes – These are less formal than both Oxford and Derby
Shoes. Slip on shoes are worn with socks and are usually very
comfortable to wear.
 Boots – You can use these if you cannot decide between formal and informal or if
you know you need to go to a formal event but you still want comfortable shoes to
last you for the day. Divided into categories, men’s boots are classified into 4:
Casual Boots, Walking Boots, Dress Boots and, Work Boots.
 Casual Boots - Made of soft leather material and featuring a laced-
up design, casual boots are worn with socks paired with jeans or
slacks.
 Walking Boots - Lightweight, equipped with thick durable soles,
and supporting the ankles, walking boots are the shoes to wear
with socks and jeans during rainy weather.
  Dress Boots - Made of leather and depicted with a cap toe, a slight
heel, lace up style, and slim fitting, dress boots is the shoes to wear
with suits, slacks or jeans. It is worn with socks.
 Work Boots - Made of leather, long lasting and marked by its
durable soles, work boots are worn with socks and paired with
either jeans or slacks.
While the women's line consists of formal and casual including outfit and accessories
such as the following:
 Casual Shoes - These are female shoe types that you wear on an everyday
premise. These are normally cooperated with women’s easygoing wear for a
casual look.
 Wedges – This gives an outfit a more polished look without
actually having to wear excruciating heels. Wedges are far
more comfortable to wear, especially a lower wedge.
 Ballerinas – These are practical solution to casual, everyday
footwear. Ballet pumps are a flat slipper type shoe that are an
essential item to have in a wardrobe. Ballerinas are such a
versatile shoe that come in every print, color and pattern
imaginable, from classic nude to wild animal prints and bright
quirky colors.
 Lace Ups - They can be brogues, loafers, heels, ballerina
pumps or any other shoe. These shoes tend to be slightly
sturdier and can provide additional support for your feet, as
well as providing an adjustable fastening that can be tightened
or loosened to suit your feet.
 Canvas Shoes - Lightweight women’s canvas shoes are slightly
sportier looking than ballerina shoes, but they’re an equally
great choice for casual wear. They’re comfy, practical and
come in every color and pattern so you can always find a pair
that will match your outfit. They look great with jeans and a t-
shirt for an easy and simple weekend outfit.
 Women’s boots – These are practical choice through all seasons – from
functional wellies to stylish ankle boots in a vibrant color, there are boots to
match any occasion, outfit or season.
 Ankle Boots – These are boots that reach your ankle. They are a
classic shape that transfer well from the office to everyday life. They
look great with a pair of tailored trousers or with a summer dress, they
are as versatile as they are stylish.
 Calf Boots – These are boots that offer more coverage and are better
for winter and colder spells. Calf length boots are best bought in a
material that will last, especially if they’re going to be worn mostly
during winter.
 Chelsea boots - These are close fitting, flat boots with an elasticated
side panel. Yes, they are named after the affluent district of London.
 Military Boots – These are inspired by boots worn in the military,
these are chunky, sturdy boots usually with laces at the front that reach
all the way up. Military boots create a definitive look that adds a
toughness to an outfit.
 Dress shoes – These are for women who wants more sophistication and
elegance to an outfit. ‘Dress shoes’ is a relatively old-fashioned term and
would be more likely to be called women's formal shoes, occasion shoes or
simply party shoes today.
 Heels – A choice for evening or dress wear. There are a wide variety
of different styles of heels.
 Court Shoes – These are a classic style that work well for a more
formal event, such as a wedding or for business attire. Court shoes
generally have a low line upper, which means that the top line of the
shoe sits quite low down on the foot, they have medium height heel
and a pointed toe. Find out more about court shoes in our detailed blog
post.
 Brogues – These are not just for the men, and in recent years have
become a major fashion staple for women. Women’s brogues are as
 versatile as any flat shoe but have the advantage of looking more
formal than ballerina flats. They add quirkiness to a summer dress by
adding a masculine element to something feminine, and make a
tailored office outfit look polished and traditional.

5) Technological trends
Instead of getting buried under the competition against rivals, the Rusty Lopez group
chose to venture up, they put resources into shoe-production hardware and innovation in
Italy combining world-class development with Marikina's creativity. Rusty Lopez
succeeded in coming out with top-quality yet reasonably priced footwear in the year
2004. The shoe business was then overpowered with sensible imported brands giving
close-by associations, for instance, Rusty Lopez harder time promoting their product.
Instead of getting covered under this challenge, Rusty Lopez chose to venture up, they
put resources into shoe-production apparatus and innovation in Italy intertwining world-
class development with Marikina's inventiveness. Lopez winning and turning out with
best quality yet reasonably assessed footwear in the year 2004.

6) Global
Philippine brand Rusty Lopez has just entered foreign market by establishing its first
store in Indonesia. Rusty Lopez’s manufacturing firm, Maritalia Inc., had been awarded
the Most Outstanding Small and Medium Entrepreneur (SME) Award last 2002. Rusty
Lopez also had the privilege to interpret the designs of foreign consultant Rene Coster in
a Philippine trade show with international standards a year later. Indonesian shoppers can
benefit from a wide range of shoe collection including pumps, boots, sneakers and
sandals.

In 2017, Puteri Pariwisata, otherwise known as the Miss Universe of Indonesia which is
their version of Bb. Pilipinas stated that Rusty Lopez was her shoe of choice.
 B. External Environmental Forces

1. Market Demand

As population in the Philippines increases, there is also an increase in spending on

footwear and apparel products. The footwear market in the Philippines has expanded at a
compound annual growth rate (CAGR) of 6.9% from 2009 to 2014. Aside from these,
increased demand for footwear and apparel products is expected to grow at a
considerable CAGR of 9.1% and analysts forecast the market to worth Php 255 billion by
2019. The industry’s highest production is during months of October, November and
May. This can be attributed to Christmas and school opening seasons.

Due to Rusty Lopez’s expansion to Indonesia, it has been observed to have an increasing
market demand for the past year. Department of Trade and Industry (DTI) stated that
increased interest in Philippine-made shoes abroad helps revive the local shoe industry
and is expected to open more opportunities for small enterprises to generate employment
within their communities.

2. Products or Services offered

Rusty Lopez offers products for each and every member of the family. Having a wide
spectrum of shoppers is answered by Rusty Lopez’s wide range of footwear, clothing and
other accessories that will exceed customer’s expectation. They have products like Men’s
collection, there is a choice of dress, formal, casual shoes, and sandals. Even children can
own long lasting and stylish pairs of Rusty Lopez footwear too. Most of the raw material
of the products are imported from India, Pakistan, and Korea. Compared to similar
products offered by their local competitors, quality is much assured.

Rusty Lopez offers leather shoes which includes footwear with leather upper and outer
soles of leather, rubber, plastic, wood cork, or other materials. These are usually used by
people who are working on industry, and services sector. On the other hand, slippers,
 sandals and boots includes footwear with upper leather, plastic, textile or other materials
and outer soles of leather, rubber, plastic, wood, cork, or other materials.

3. Competitive position

The use of footwear and apparel has become part of our daily life. This results to an
increasing demand for the said products. In order to cope with the growing demand,
companies decide to enter in this kind of business. One of the apparent factors for an
intense competition is that there are more companies competing to gain the market share
from each other. Gibi Shoes, which started in 1986, also produces comfortable pumps,
sandals and shoes, is the number one competitor of Rusty Lopez and the reason why there
is an intense competition in the footwear industry.

There is a moderate barrier to entry in this kind of industry that strengthens the
competition between companies. There is a low product differentiation with regards to
footwear. With this, Rusty Lopez must think of new ideas or strategies to make their
products ahead against its competitors. Since there is an intense competition in the
footwear industry, Rusty Lopez cannot simply raise prices. With this, most of the
products do not differ much in price. Customers could freely choose where to buy
footwear products that satisfy their needs and expectations since there is a low switching
cost to be incurred.

4. Suppliers/ Supply Chain/ Distribution Channel

Materials of Rusty Lopez such as their leather are outsourced. It is imported from foreign
countries to ensure a good quality. Shoes are produced by manufacturer which is then
brought to different branches to sell the products. Rusty Lopez houses its shoes in their
own physical stores located in different cities in the country. One of it is its first boutique
in Alimall, Cubao. Products are also sold in department stores of various malls such as
SM and Robinsons.

5. Financial Aspect
 Maritalia Manufacturing Inc. which is the manufacturer of Rusty Lopez engages in local
manpower which receives minimum wage as their salary. With this, Rusty Lopez has low
cost in the case of their labor. Lower labor costs help in obtaining higher gains.
C. Industry and Competitive Analysis

Porter’s 5 Forces Framework

Competitive Rivalry High
Supplier Power High
Buyer Power High
Threat of Substitute High
Threat of New Entry Moderate

Table 3.1 Porter’s 5 Forces Framework

In Porter’s 5 Forces Framework, organizations keep a close watch on their rivals, hence it
examines what other factors could impact the business environment. The above stated are factors
which can erode your profitability.

Competitive Rivalry is high because the industry for shoes is filled with companies who
have fashionable and affordable products to offer. Although some companies have loyal
customers, most of the consumers are fueled by quality which most companies; even sole shoe
enterprises have.

Supplier Power is high due to the fact Rusty Lopez has its own leather making partner.
This makes Rusty Lopez tied to meet amends with small price changes from various prices of
leather.

Buyer Power is high because there are a lot of shoe company rivals which provide cheap
products. Even small shoe stores make quality enough shoes accessible to customers. Most
students aren’t particular with the brand they use to go to school, so when the time comes to buy
a new pair, they go to the shoe stores that give you enough quality for a lower price.

Threat of Substitute is high due to the, again, market filled with shoe companies which
are all over the place. A lot of companies offer quality products with a small variation in prices.
If the customers are particular with a certain style of shoe at a certain price, then it’s easy to
switch.

Threat of New Entrant is Moderate because start up shoe companies will be facing a
jammed market, but will only require to put up little capital. In the industry, if you have your
own leather supplier, then you are substantially set to do business.

C. Key external issues, challenges & problems

Competitive rivalry and Threat of substitute will be a key challenge and issue for Rusty
Lopez. As stated earlier, the market is filled with rivals. Most of these companies provide quality
shoes and some for a much lower price. Heightening the quality, lowering the price, and
swimming with the current fashion trends will almost certainly put a particular company on top
of the commoner’s market. In Rusty Lopez’s case, the style of their products are late, making
larger competition win the fashion war and the smaller competition win the price war.
 CHAPTER IV: INTERNAL ENVIRONMENTAL ANALYSIS

Management
I. Mckinsey’s 7’s Framework

Structure

Different tasks are divided to departments such as lay outing, cutting, sewing, etc.
following the functional organizational structure of Rusty Lopez.

Shared Values

In accordance to the Rusty Lopez’s objectives, there is a need for a quality of employees
and its management. Exemplary integrity, discipline, and displaying honest behavior at
all times are the foundations in order to do Rusty Lopez’s vision to be the leading shoe
manufacturer in the country and be one also of the major suppliers in the world market by
exceeding customer’s expectation through continuing improvement in the quality and
services

Rusty Lopez imposed a compliance for codes of conduct. This aims to establish virtues of
honesty and excellence to its employees when it comes to their work in order to provide
good quality of products.

Skills

In order to provide a good quality of products to its customers, a company is looking for
good skills, character and qualities of an employee. In line with Rusty Lopez’s mission
“To produce quality shoes at an affordable price by bringing together the best people, the
best materials”, the company invested in their employees by conducting continuous
training and seminars to enhance the potential of their employees and to assure the
quality of their products.

Strategy
 Rusty Lopez focuses on its vision of exceeding customer’s expectation through
continuing improvement in the quality and services. The need to maintain their signature
edge of comfort, quality and affordable price essential in everything that they do is
instilled in their culture. In order to meet the needs of their customers, investing on
modern machinery and technology and manpower training to be more competitive is their
strategy.
Style

Rusty Lopez is known for their unblemished reputation for quality and affordability with
a wide range of footwear and accessories products for its broad market. Despite its image
of being pricey brought about by its trend setting and high quality products, Rusty Lopez
is affordable and its footwear line offers a comfortable fit matched with design
sophistication. The products attributes and brand’s popular appeal and image are
consistently preserved by the company.

System

Rusty Lopez produces various types of products in order to support their footwear and
apparel business. Aside from this, the company’s products consists of men’s, ladies’,
children’s leather shoes and sandals. Recently, the company created a new website that
will cater the needs of their customers who prefer buying things online over the
conventional method of going into stores.

Staff

The workers are given adequate training and seminars to enhance their skills. The
workers in Rusty Lopez are skilled workers who can manage different activities and can
use machineries.

II. Strength and Weaknesses

Strengths Weaknesses

Well known or Trusted Brand Has a limited distribution

 Best price for a high quality based shoes Poor Research and Development

Recently rebuild website Lacking of promotional and advertising media

Table 4.1 Strengths and Weaknesses

Rusty Lopez is well known for producing durable and high-quality footwear products.
Aside from this, the company offers a wide range of footwear, clothing and other accessories for
each and every member of the family thus becoming one of the trusted brands in the country.
Having a wide range of shoppers, the company created a website that will extend their capacity
to meet the needs of their customers.

Having a poor research and development is one of the weaknesses of the company. The
company somehow failed to adopt to the changing needs of its customers and did not improve
their processes. They also have difficulty in forecasting fashion trends. The company
experienced unsuccessful repositioning.

III.Risk Assessment

Risks Likelihood [1-5] Significance [1-5] Fraud Risk

Score
Fraud Risk 2 2 4

Inflation Risk 3 2 6

Credit Risk 2 3 6

Market Risk 3 4 12

Table 4.2 Risk Assessment

 Table 4.3 Heat Map

IV. VRIO Analysis

VRIO Yes No
Is it Valuable? x   
Is it Rare? x   
Is it costly to Imitate? x
Is it Exploited by the Organization? x
Rusty Lopez has a Sustained Competitive Advantage obtaining materials that are of best
quality. Its products are one of a kind making it costly and hard to imitate. The company
uses its quality as an advantage to its competitors. This is why other companies fail to
imitate the products of Rusty Lopez.
Table 4.4 VRIO Analysis
 V. Tangible Asset Analysis

Critical Questions Yes No

1. Is the company financially capable as indicated by its financial x
ratio analysis?
2. Are facilities, equipment, machinery and offices in good x
condition?
3. Does the firm have adequate Research and Development (R&D) X
facilities?
4. Are the company’s services technologically competitive and x
competent?
5. Are the information systems regularly maintained and updated? X
Table 4.5 Tangible Asset Analysis

1. As indicated by its financial ratio analysis, the figures are fluctuating and has an unfavorable
trend for the last two years on the majority of the measurements.

2. Some of the facilities are old, but is more than capable to meet the demands of its customers.
3. The company have no adequate Research and Development (R&D) facilities. They failed to
adopt to the changing needs of its customers and did not improve their processes.

4. The company recently opened its own store and expands in Indonesia. Indonesia has a high
standard for the quality of products, it only shows that their products are competent.

5. Yes, the company’s information system is regularly maintained and updated because it helped
the company with up-to-date, accurate, and timely information regarding the company’s
performance and sales.

VI. Intangible Asset Analysis

 Critical Questions Yes No

1. Does the firm’s employees and workers have adequate experience x

and training?
2. Is the company investing on its human resources department? x
3. Does the firm have good relations with its customers and x
suppliers?
4. Is the company continuously developing its organizational x
capacity?
5. Is the company’s brand recognizable? x

Table 4.6 Intangible Asset Analysis

1. To ensure that the company produces good quality of products, the company conducted a
training for its workers.

2. The company makes sure that their workers attend training, seminars, and other programs that
will enhance their knowledge and skills.

3. The company has trusted suppliers and because of that they receive a high quality materials
from them.

4. Rusty Lopez’s sales are increasing thus having their ability to achieve their objectives but has
a poor research and development.

5. In their industry, yes because they are one of the trusted brand in the country. Aside from this,
the company is starting to recognize in Indonesia following their expansion.

Marketing

Formulating a marketing strategy for the company is challenging but a necessary step in
order to successfully promote the business, and improve the business’ profit by boosting sales. A
good marketing strategy would help a company maximize their visibility in a competitive
environment. Rusty Lopez promotes their products by using online marketing, and advertising.
They use social media platforms such as Twitter, Instagram, and Facebook from time-to-time to
communicate to their customers and potential customers as internet has easy accessibility with
customers and reaching markets nationally and globally. Some of their advertising campaigns are
by having some artists use their products, and by sponsoring big events such as Puteri Pariwisita
Indonesia 2017. They have a lot of local branches, and they sell at higher and formal markets
such as malls. These help the business increase the visibility of their brand and easily reach out
to their customers.

Figure 4A Rusty Lopez Website

The image above is a screenshot of Rusty Lopez Enterprises Inc. website,

www.rustylopez.com. The homepage of the website comprises information such as their e-mail
address for customer care, policies for return and exchange of products, social media platforms,
store locator for their physical stores, promotions, and an overview of their products. Customers
can leave a message on its website to make sure that their customers’ inquiries are attended, read
blogs about Rusty Lopez’s successes and activities throughout the years to engage the customers,
and buy Rusty Lopez products online for the convenience of the customers. In their products’
page (Women, Kids, and Men), customers can see different types of footwear and product lines
offered. However, their website is not updated and only contains few products, so the customers
only have few options online and may be discouraged to buy.

Financial (Profitability, Solvency, Liquidity, Debt, Operating Ratios)

The analysis of the financial transactions of the company which is presented into a
financial report or statements, the finance or accounting principle in the company analysis
determines the financial situation of the company.

A. Statement of Financial Performance

RUSTY LOPEZ ENTERPRISES INC.

Statement of Income
(In Philippine Peso)
% of % of
  2015 Sales 2014 Sales
359,890,823.1 268,246,768.8
Sales 8 100.00% 2 100.00%
219,596,537.2 145,138,802.4
Cost of Sales 9 61.02% 5 54.11%
140,294,285.8 123,107,966.3
Gross Income 9 38.98% 7 45.89%
131,862,591.2 121,166,080.1
Operating Expense 7 36.64% 9 45.17%
Net Income before Income Tax 8,431,694.62 2.34% 1,941,886.18 0.72%
Provision for Income Tax 2,529,508.39 0.70% 582,565.85 0.22%
Net Income after Income Tax 5,902,186.23 1.64% 1,359,320.33 0.51%
Expired MCIT 0 0.00% 981,713.76 0.37%
NET INCOME 5,902,186.23 1.64% 377,606.57 0.14%

Table 4.7A Statement of Financial Performance

RUSTY LOPEZ ENTERPRISES INC.

Statement of Income
(In Philippine Peso)
 % of % of
  2013 Sales 2012 Sales
210,339,532.0
Sales 206,524,367.77 100.00% 1 100.00%
Cost of Sales 78,951,278.86 38.23% 92,416,724.22 43.94%
117,922,807.7
Gross Income 127,573,088.91 61.77% 9 56.06%
107,090,678.1
Operating Expense 118,638,541.85 57.45% 9 50.91%
Net Income before Income Tax 8,934,547.06 4.33% 10,832,129.60 5.15%
Provision for Income Tax 2,680,364.12 1.30% 3,249,638.88 1.54%
Net Income after Income Tax 6,254,182.94 3.03% 7,582,490.72 3.60%
Expired MCIT 374,401.22 0.18% 1,759,156.70 0.84%
NET INCOME 5,879,781.72 2.85% 5,823,334.02 2.77%

Table 4.7B Statement of Financial Performance

RUSTY LOPEZ ENTERPRISES INC.

Statement of Income
(In Philippine Peso)
% of
  2011 Sales
Sales 196,997,530.81 100.00%
Cost of Sales 87,016,986.28 44.17%
Gross Income 109,980,544.53 55.83%
Operating Expense 102,639,021.03 52.10%
Net Income before Income Tax 7,341,523.50 3.73%
Provision for Income Tax 2,202,457.05 1.12%
Net Income after Income Tax 5,139,066.45 2.61%
Expired MCIT 1,738,942.30 0.88%
NET INCOME 3,400,124.15 1.73%

Table 4.7C Statement of Financial Performance

 B. Statement of Financial Position

RUSTY LOPEZ ENTERPRISES INC.

Statement of Financial Position
(In Philippine Peso)
  2015 % 2014 %
ASSETS        
Current Assets        
Cash 828,617.26 0.73 1,307,278.14 3.37
Inventory 88,902,153.50 78.84 25,191,525.00 64.84
Other current assets 19,440,323.69 17.24 7,176,874.94 18.47
109,171,094.4
  96.81 33,675,678.08 86.68
5
         
Non-Current Assets        
Property and Equipment-net 2,083,193.58 1.85 3,293,676.14 8.48
Other non-current assets 1,507,752.00 1.34 1,879,593.48 4.84
  3,590,945.58 3.19 5,173,269.62 13.34
         
112,762,040.0
TOTAL ASSETS 100 38,848,947.70 100
3
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current Liabilities        
104,840,784.2
Trade Payables 1
92.97 45,832,122.06 117.98
Other Current Liabilities 8,230,412.23 7.3 5,928,168.28 15.26
113,071,196.4
  4
100.27 51,760,290.34 133.23
         
Non-Current Liabilities        
Advances from shareholders 11,200,000 9.93 4,500,000 11.58
124,271,196.4
Total Liabilities 4
110.21 56,260,290.34 144.82
         
Shareholders’ Equity        
Share Capital 3,750,000 3.32 3,750,000 9.65
Retained Earnings (Deficit) -15,259,156.41 -13.53 -21,161,342.64 -54.47
  -11,509,156.41 -10.21 -17,411,342.64 -44.82
         
TOTAL LIABILITIES & SHAREHOLDERS' 112,762,040.0
100 38,848,947.70 100
EQUITY 3

Table 4.8A Statement of Financial Position

 RUSTY LOPEZ ENTERPRISES INC.
Statement of Financial Position
(In Philippine Peso)
  2013 % 2012 %
ASSETS        
Current Assets        
Cash 1,100,404.41 2.26 1,762,432.21 4.87
Inventory 37,152,010.02 76.21 23,443,646.43 64.86
Other current assets 4,606,047.69 9.45 3,426,580.39 9.48
  42,858,462.12 87.92 28,632,659.03 79.21
         
Non-Current Assets        
Property and Equipment-net 4,907,160.02 10.07 5,821,630.59 16.1
Other non-current assets 981,713.76 2.01 1,693,131.02 4.69
  5,888,873.78 12.08 7,514,761.61 20.79
         
TOTAL ASSETS 48,747,335.90 100 36,147,420.64 100
         
LIABILITIES AND SHAREHOLDERS' EQUITY        
Current Liabilities        
Trade Payables 56,132,144.04 115.15 55,006,529.35 152.17
Other Current Liabilities 3,904,141.07 8.01 4,272,606.18 11.82
  60,036,285.11 123.16 59,279,135.53 163.99
         
Non-Current Liabilities        
Advances from shareholders 6,500,000 13.33 1,000,000 2.77
Total Liabilities 66,536,285.11 136.49 60,279,135.53 166.76
         
Shareholders’ Equity        
Share Capital 3,750,000 7.69 3,750,000 10.37
Retained Earnings (Deficit) -21,538,949.21 -44.18 -27,881,714.89 -77.13
  -17,788,949.21 36.49 -24,131,714.89 -66.76
         
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 48,747,335.90 100 36,147,420.64 100

Table 4.8B Statement of Financial Position

 RUSTY LOPEZ ENTERPRISES INC.
Statement of Financial Position
(In Philippine Peso)
  2011 %
ASSETS    
Current Assets    
Cash 1,759,653.35 5.54
Inventory 14,512,486.65 45.73
Other current assets 2,627,268.34 8.28
  18,899,408.34 59.55
     
Non-Current Assets    
Property and Equipment-net 8,049,265.83 25.36
Other non-current assets 4,785,810.93 15.08
  12,835,076.76 40.45
     
TOTAL ASSETS 31,734,485.10 100
     
LIABILITIES AND SHAREHOLDERS' EQUITY    
Current Liabilities    
Trade Payables 57,072,796.96 179.84
Other Current Liabilities 3,616,737.05 11.4
  60, 689,534.01 191.24
     
Non-Current Liabilities    
Advances from shareholders 1,000,000 3.15
Total Liabilities 61,689,534.01 194.39
     
Shareholders’ Equity    
Share Capital 3,750,000 11.82
Retained Earnings (Deficit) -33,705,048.91 -106.21
  -29,955,048.91 -94.39
     
TOTAL LIABILITIES & SHAREHOLDERS' EQUITY 31,734.485.10 100

Table 4.8C Statement of Financial Position

Profitability Ratios, Solvency Ratio, Liquidity Ratio

a. Profitability Ratios

Profitability Ratios shows the profitability of the company with regards to their assets and
equity less all the liabilities and obligations. Profitability ratios includes the computation of the
gross profit margin; operating profit margin; net operating margin, return on total assets; and
return on stockholders’ Equity.

2015 2014 2013 2012 2011 Observation

Gross Profit
Margin 34.16% 29.89% 1.89% 6.77% 10.19% Increasing

Operating
Profit Margin 2.34% 0.72% 4.33% 5.15% 3.37% Fluctuating

Net Profit
Margin 1.64% 0.51% 2.85% 2.77% 1.73% Fluctuating

Return on
Total Assets 7.48% 5% 18.33% 29.97% 23.13% Decreasing

Return on
Stockholders’ (40.82%) (7.72%) (28.05%) (21.53%) (10.74% Fluctuating
Equity )
Table 4.9A Profitability Ratios

Analysis:

The profitability ratio determines the performance of Rusty Lopez when it comes to the
capacity of making profit. The data presented above shows that the gross profit margin has
increased from 2011 to 2015. A high profit margin can mean low cost of goods sold, which can
be attributed to high selling prices, high sales, or soft market competition. The operating margin
and net profit margin are fluctuating, this shows that the results from year 2011 to 2015
sometimes increased, then decreased again. Return on total assets are decreasing each year, this
 can be attributed less investment of assets. Return on stockholders’ equity is decreasing at a loss;
meaning the stockholders aren’t getting any dividends.

b. Solvency Ratios

Solvency ratios are tolls in accounting to determine whether the company has sufficient
capital in the form of debt to pay their obligations or liabilities. Solvency ratio is one of the
various ratios used to measure the ability of a company to meet its long-term debts.

2015 2014 2013 2012 2011 Observation

Debt to
Equity
10.75 3.23 3.74 2.5 2.06 Increasing
Total Debt/
Total SHE
Debt to Asset
1.1 1.45 1.37 1.67 1.94 Decreasing
TOT Debt/
TOT Assets
Table 4.9B Solvency Ratios

Analysis:

Solvency ratios have to prove that business firms can service their debt or pay the interest
on their debt as well as pay the principal when the debt matures. The debt to assets ratio has been
decreasing for the last five years. The debt to equity ratio is increasing; it means that if the
company goes out of business after it pays all liabilities 1075% will be left for its investors.

As the debt to asset ratio increases, the likelihood of bankruptcy also increases as the firm
is financed more and more with debt as opposed to equity sources. The decrease in debt to asset
ratio has a positive impact on the business.
 c. Liquidity Ratio

Liquidity Ratio is used in order to determine whether the company was able to meet its
assets and liabilities. Liquidity Ratio is divided into two, the current ratio is used to determine the
coverage level of the current assets and current liabilities; and the quick or acid-test ratio is used
in order to determine whether the company can suffice their current liabilities.

2015 2014 2013 2012 2011 Observation

Current Ratio 0.97 0.65 0.71 0.48 0.31 Increasing

Quick Ratio 0.18 0.16 0.10 0.09 0.07 Increasing

Cash Ratio 0.01 0.03 0.02 0.03 0.03 Fluctuating

Table 4.9C Liquidity Ratios

Analysis:

The current ratio has been increasing for the last five years. The ratio measures a
company's ability to pay off its current liabilities with its current assets. The higher the ratio the
better the company's liquidity position. The quick ratio measures a company's ability to meet its
short-term obligations with its most liquid assets and therefore excludes inventories from its
current assets. The quick ratio has increasing. A good quick ratio is above 1 so the quick ratio of
the company is bad. The cash ratio or cash coverage ratio is a liquidity ratio that measures a
firm’s ability to pay off its current liabilities with only cash and cash equivalents. The cash ratio
has been fluctuating for the last five years. A ratio below 1 means that the company needs more
than just its cash reserves to pay off its current debt.
 I. Porter’s Value Chain
A. Primary
a. Production and Operation

According to what is indicated in the preceding chapters, Rusty Lopez holds one of the
biggest market shares within the entire local shoe industry. They operate in Marikina City, which
is the shoe capital in the Philippines. Established on December 17, 1996, Maritalia
Manufacturing Incorporated became the official manufacturing arm of the said company. It is
through the collaborative efforts of Filipino and Italian shoemakers that Maritalia was born.
Rusty Lopez’ production of shoes is mainly by batch, operating at full capacity with 300
workers, Maritalia can produce as many as 24,000 pairs of shoes in a month. Rusty Lopez
produces different shoes’ design dependently on what the customers need and want. Rusty Lopez
do not only supply locally but also exporting their products to other country like Indonesia.
Although, Rusty Lopez is known as the “center of leather” here in the Philippines, they also
specialize in producing quality shirts, jeans, and kids’ apparel. Rusty Lopez received numerous
citations including being a Hall of Famer in the Philippine Retailers Association Awards for
small and medium enterprise (SME), and has been recognized at the Manila FAME for being at
par with international standards. It was also presented the prestigious Super Brands Award and
its Seal of Approval in 2005. Although it was solely believed that their greatest achievement was
not of a longevity, they still need to look into a lot of factors when producing and operating each
kind of shoes.

B. Secondary
a. Research and Development

Although Rusty Lopez has earned its reputation over a long period of time with their
company giving its customers constant feet-friendly shoes for work, or sturdy loafers for school
which has become synonymous with comfort, functionality and durability, it still need to find
ways in order to cope up with the sudden change of trends and the likes of mass. Now a days,
competitors are arising, trend is rapidly changing and Rusty Lopez has been left behind when it
comes to design and innovation. New ideas and improvement should be considered by the
Research and Development committee of Rusty Lopez in order to get along with the trend in the
present as well as for the future. Some of their products have designs and styles that are copied
or imitated from other brands such as Hush Puppies, Adidas, Nike and more. Rusty Lopez still
needs to improve on their design and style through further research and studies depending on the
trend now a days.

Management Information System

Management information system supplies management and other personnel within the
business with up-to-date, acccurate, and timely information regarding the company’s
performance and sales. It will be benefical for the companies to use MIS as it helps in taking
appropriate decisions that will directly affect the performance of the business, and as it plays an
important role in the e-business and e-commerce operations.

Rusty Lopez Enterprises Inc. is applying MIS in their business as they operate globally.
For manufacturing businesses, such as Rusty Lopez, applying MIS in their production is
advantageous as it would make their production more efficient and effective.

Summary

Internal analysis is an important aspect in determining the company’s competency, cost

position in the market industry. The company should be able to identify their weaknesses and the
possible risks in order to know how to handle and minimize them. Also, strengths should be
identified to maximize and take advantage of them. Rusty Lopez should take initiative in making
significant investments in Research and Development to forecast new fashion trends and new
technology because they have difficulty in coping up with the fast-changing fashion trends.
Aside from this, the company also lacks promotional efforts such as advertising and sales. The
company should have a plan on how to address the weaknesses and risks that they are facing.
 CHAPTER V: STRATEGY FORMULATION AND RECOMMENDATION
Strategic Formulation
Strategic Objectives
 To increase sales growth rate by 3.7% by the end of 2022.
 To increase budget on Research and Development by 2% every year.
Strategic Alternatives
SWOT Strengths
ANALYSIS 4. Has a strong relationships with
its suppliers
5. One of the trusted brands in the
  country in terms of affordability
and the quality of the products
6. Has access to DTI’s SSF facility
7. Exposure to export markets
Opportunities Strength-Opportunity
3. Upgrade online 1. Use of information technology
website and decision support software to
4. Quality products help eliminate the length of the
as an competitive production cycle for different
advantage products.
2. The government could promote
the products and provide subsidy
for the exporters to promote export
in the country.
Threats Strength-Threat
1. Local 1. Being a trusted brand for its
Competitors product, consumers patronize it
2. Substitute or rather than other brands.
Alternative 2. Strong supplier relationship gives
products quality products to the company
3. Fast changing which makes it advantageous and is
Weakness
1. They have difficulty in
forecasting fashion trends
2. Lack of promotional efforts
such as advertising and sales
promotion
3. Unsuccessful repositioning
Weakness-Opportunity
1. Acquire new and unique
shoe designs through
attending seminar and
workshops regarding fashion
and design.
2. Innovative advertising and
promotion of products
through upgraded online
website.
Weakness-Threat
1. Local competitors who
follows new fashion trends
with their products.
2. Consumers might patronize
alternative products due to
poor advertising of Rusty
 fashion trends not threatened by competitors. Lopez.

Forecasted Performances of the Organization

Current Financial Forecast
Based on the horizontal analysis, the trends in performance of the company are reflected
as follows:

Without Implementation
RUSTY LOPEZ ENTERPRISES INC.
Statement of Comprehensive Income
(In Philippine Peso)
For the Projection Year 2018-2022
  2011 2015 CAGR 2018 H% V% 2019
196,997,53 16.26 418,406,35 100
Sales 359,890,823 16.26% 486,436,066
1 % 3 %
20.34 264,258,99
Less: Cost of Sales 87,016,986 219,596,537 20.34% 63% 318,005,087
% 4
109,980,54 154,147,35
Gross Income 140,294,286 4.99% 9.27% 37% 168,430,979
5 9
Less: Operating 102,639,02 138,638,36
131,862,591 5.14% 5.14% 33% 145,762,312
Expenses 1 5
Net Income before
7,341,524 8,431,695 2.81% 15,508,994 46.16% 4% 22,668,667
Income Tax
Less: Provision for
2,202,457 2,529,508 2.81% 2,600,530 2.81% 1% 2,673,546
Income Tax
Net Income after
5,139,066 5,902,186 2.81% 12,908,464 54.90% 3% 19,995,122
Income Tax
Less: Expired
MCIT 1,738,942 0 100% 0 0.00% 0% 0
11.66
NET INCOME 3,400,124 5,902,186 12,908,464 19,995,122
% 54.90% 3%

H% V% 2020 H% V% 2021 H% V% 2022 V%

16.26 565,526,8 16.26 100 657,477,3 16.26 100 764,378,1 100
100%
% 97 % % 00 % % 43 %
20.34 382,682,2 20.34 460,513,7 20.34 554,175,0
65% 68% 70% 73%
% 84 % 98 % 09
182,844,6 196,963,5 210,203,1
8.56% 35% 7.72% 32% 6.72% 30% 27%
13 01 34
5.14% 30% 153,252,3 5.14% 27% 161,127,2 5.14% 25% 169,406,7 22%
 24 11 50
30.54 29,592,28 21.10 35,836,29 13.84 40,796,38
5% 5% 5% 5%
% 9 % 0 % 4
0.4
2.81% 1% 2,748,611 2.81% 0.5% 2,825,785 2.81% 2,905,125 0.4%
%
34.25 26,843,67 22.97 33,010,50 14.79 37,891,25
4% 5% 5% 5%
% 8 % 6 % 9
0.00% 0% 0 0.00% 0% 0 0.00% 0% 0 0%
34.25 26,843,67 22.97 33,010,50 14.79 37,891,25
% 4% 8 % 5% 6 % 5% 9 5%

Statement of Financial Position

(In Philippine Peso)
For the Projection Year 2018-2022
CAGR 2011 2015 2018 2019
ASSETS
Current Assets
Cash (13.98%) 1,759,653.35 828,617.26 1,067,776.28 1,375,962.39

Inventory 43.69% 14,512,486.65 88,902,153.50 114,561,469.23 147,626,685.24

Other current assets 49.22% 2,627,268.34 19,440,323.69 25,051,272.17 32,281,676.35

42.01% 18,899,408.34 109,171,094.45 140,680,517.69 181,284,323.99

Non-Current Assets
Property and Eq.net (23.69%) 8,049,265.83 2,083,193.58 2,684,453.73 3,459,252.12

Other noncurrent assets (20.63%) 4,785,810.93 1,507,752.00 1,942,925.76 2,503,701.22

22.49%) 12,835,076.76 3,590,945.58 4,627,379.49 5,962,953.34

TOTAL ASSETS 28.86% 31,734,485.10 112,762,040.03 145,307,897.17 187,247,277.32

LIABILTIES AND SHAREHOLDERS EQUITY

Current Liabilities
Trade Payables 12.93% 57,072,796.96 104,840,784.21 135,100,375 174,093,616.88

Other current liabilities 17.87% 3,616,737.05 8,230,412.23 10,605,908.63 13,667,030.86

13.25% 113,071,196.44 145,706,283.6 187,760,647.75

60,689,534.01

Non-Current Liabilities
Advances from shareholders 62.12% 1,000,000.00 11,200,000.00 14,432,591.39 18,598,186.99

Total Liabilities 61,689,534.01 124,271,196.44 160,138,875 206,358,834.74

 Shareholder’s Equity
Share Capital 0% 3,750,000.00 3,750,000.00 4,832,340.868 6,227,071.54

Retained Earnings (14.66%) (33,705,048.91) (15,259,156.41) (19,663,318.7) (25,338,628.95)

(17.41%) (29,955,048.91) (11,509,156.41) (14,830,977.83) (19,111,557.41)

TOTAL LIABILITIES AND 28.86% 31,734,485.10 112,762,040.03 145,307,897.2 187247277.32

SHAREHOLDERS
EQUITY

2020 2021 2022

ASSETS
Current Assets
Cash 1,773,098.47 2,284,857.66 2,944,322.95
Inventory 190,235,323.82 245,141,847.96 315,895,725.43
Other current assets 41,598,950.38 53,605,415.47 69,077,237.31
233,607,372.68 301,032,121.08 387,917,285.68

Non-Current Assets
Property and Eq.net
4,457,676.10 5,744,269.44 7,402,204.80
Other noncurrent assets
3,226,330.06 4,157,527.09 5,357,490.15
7,684,006.16 9,901,796.53 12,759,694.95
TOTAL ASSETS 241,291,378.84 310,933,917.62 400,676,980.63

LIABILTIES AND SHAREHOLDERS EQUITY

Current Liabilities
Trade Payables
224,341,253.26 289,091,575.07 372,530,408.75
Other current liabilities
17,611,667.14 22,694,821.04 29,245,096.32
241,952,920.40 311,786,396.11 401,775,505.07
Non-Current Liabilities
Advances from shareholders 23,966,074.42 30,883,264.23 39,796,922.63

Total Liabilities 265,918,994.82 342,669,660.34 441,572,427.70

Shareholder’s Equity
Share Capital
8,024,355.27 10,340,378.65 13,324,862.49
Retained Earnings
(32,651,971.26) (42,076,121.37) (54,220,309.56)
(24,627,615.98) (31,735,742.72) (40,895,447.07)
 TOTAL LIABILITIES 241,291,378.84 310,933,917.62 400,676,980.63
AND SHAREHOLDERS
EQUITY
The growth starting year 2018 to 2020 was forecasted using the compounded annual
growth rate, which attempts to smoothen the trend by using the first given year as the basis of
comparison.

With Implementation

RUSTY LOPEZ ENTERPRISES INC.

Statement of Comprehensive Income
(In Philippine Peso)
For the Projection Year 2018-2022
  2011 2015 CAGR 2018 H% V% 2019
359,890,82 431,722,31 19.96
Sales 196,997,531 16.26% 100% 517,890,827
3 4 %
219,596,53 275,129,02 24.34
Less: Cost of Sales 87,016,986 20.34% 64% 342,091,068
7 3 %
140,294,28 156,593,29 12.27
Gross Income 109,980,545 4.99% 36% 175,799,759
6 1 %
Less: Operating 131,862,59 141,275,61
102,639,021 5.14% 7.14% 33% 151,360,592
Expenses 1 6
Net Income before 59.55
7,341,524 8,431,695 2.81% 15,317,674 4% 24,439,167
Income Tax %
Less: Provision for
2,202,457 2,529,508 2.81% 2,600,530 2.81% 1% 2,673,546
Income Tax
Net Income after 71.15
5,139,066 5,902,186 2.81% 12,717,144 3% 21,765,622
Income Tax %

Less: Expired MCIT 1,738,942 0 100% 0 0.00% 0% 0

71.15
NET INCOME
3,400,124 5,902,186 11.66% 12,717,144 % 3% 21,765,622

H% V% 2020 H% V% 2021 H% V% 2022 V%

19.96% 100% 621,257,925 19.96% 100% 745,256,315 19.96% 100% 894,003,847 100%
23.69% 66% 423,127,023 23.41% 68% 522,174,356 23.34% 70% 644,041,578 72%
12.70% 34% 198,130,902 12.59% 32% 223,081,959 12.05% 30% 249,962,269 28%
7.14% 29% 162,165,484 7.14% 26% 173,741,684 7.14% 23% 186,144,253 21%

47.16% 5% 35,965,418 37.19% 6% 49,340,275 29.34% 7% 63,818,016 7%

2.81% 1% 2,748,611 2.81% 0% 2,825,785 2.81% 0.4% 2,905,125 0%

52.61% 4% 33,216,807 40.03% 5% 46,514,490 30.95% 6% 60,912,891 7%

0.00% 0% 0 0.00% 0% 0 0.00% 0% 0 0%

52.61% 4% 33,216,807 40.03% 5% 46,514,490 30.95% 6% 60,912,891 7%

RUSTY LOPEZ ENTERPRISES INC.

Statement of Financial Position
(In Philippine Peso)
For the Projection Year 2018-2022

CAGR 2011 2015 2018 2019

ASSETS
Current Assets
Cash
Inventory
Other current assets

Non-Current Assets
Property and Eq.net
Other noncurrent assets

TOTAL ASSETS

LIABILTIES AND
SHAREHOLDERS EQUITY
Current Liabilities
Trade Payables
Other current liabilities

Non-Current Liabilities
 Advances from shareholders
Total Liabilities

Shareholder’s Equity
Share Capital
Retained Earnings

TOTAL LIABILITIES AND

SHAREHOLDERS EQUITY

Recommendation

Even though Rusty Lopez Enterprises Inc. uses online marketing and few advertisements,
they are still lacking as evidenced by their sales. They need to increase their marketing budget to
have memorable and effective advertisements that will be retained in the mind of customers, and
promotional activities such as participating in some government activities and big public events
to increase brand awareness. Also, Rusty Lopez needs to invest more on research and
development as they have difficulty in forecasting and adapting to fast-changing fashion trends.
They need to come up with new ideas and innovation for their products as it would provide
unique value to the customers. Rusty Lopez needs to increase the involvement of the customers.
They can improve their Customer Care program by introducing a new feature that can help them
understand the customer’s need and demand, and produce a better tailor-fit product that are
satisfactory for their customers. In order to come up with good results, proper monitoring of their
products on-site and online, sales, and customer awareness should be practiced.
REFERENCES