085 - Ramirez, Erika May G.

1180085
BME 90 - Strategic Management
2021-2022 1st Semester Thursday 3:00 - 5:00 pm
AAQ #1: Analyzing the External Environment of the Firm
August 21, 2021

Major Trends in the General Environment

Labor and Employment
1. Impact of COVID-19 on the Philippine economy - The unemployment rate in the
Philippines dropped from 8.8% in February 2021 to 7.1% in March 2021, translating to
roughly 3.44 million unemployed Filipinos.
Also, the Department of Labor and Employment (DOLE) has issued guidelines
encouraging employers to adopt alternative work arrangements in lieu of the outright
dismissal of employees or total business closure. These includes reduction of work
hours and/or work days, rotation of workers, and forced leave for employees.
2. COVID-19-related dismissals - There's a lot of retrenchment or business closures
because employers were placed under great financial strain
3. Working in the COVID-19 era - The Philippines has enacted the Telecommuting Act,
which outlines work arrangements whereby an employee in the private sector operates
from an alternative workplace with the use of telecommunication and/or computer
technologies.
Economic Impact and Recovery Measures
1. Passage of economic stimulus legislation - With the passage of Republic Act No
11469 (the Bayanihan to Heal as One Act – Bayanihan 1) and Republic Act No 11494
(the Bayanihan to Recover as One Act – Bayanihan 2), the Philippine government has
introduced much-needed measures to accelerate economic recovery in the time of
COVID-19 including relaxing regulatory requirements for a period of not more than one
year, expediting infrastructure programs and healthcare measures, providing tax
breaks, and extending livelihood assistance to low-income households
2. Reforms in financial sector - There is also significant development in the banking
industry, heralded by the passage of Republic Act No 11523 (the Financial Institution
Strategic Transfer Act – FIST Act), pursuant to which banks and financial institutions are
allowed to dispose of non-performing loans (NPLs) and non-performing assets (NPAs)
to FIST corporations.
3. Inflation - The country’s headline inflation slowed down to 4.1 percent in June 2021,
after recording an inflation of 4.5 percent for three consecutive months. This brings the
Philippines’ average inflation for the first semester of 2021 at 4.4 percent.
Attracting More Foreign Direct Investments
1. Proposed amendments to the Public Service Act - The proposed legislation seeks to
update the 83-year-old Commonwealth Act 146, more commonly known as the Public
Service Act. Under Section 16 of Senate Bill No 2094, foreign nationals shall be allowed
to own more than 40% of capital in public services engaged in the operation and
management of critical infrastructure, provided that the country of such foreign national
accords reciprocity to Philippine nationals as may be provided by foreign law, treaty or
international agreement.
2. Proposed amendments to the Retail Trade Liberalization Act - Senate Bill No 1840
seeks to amend Republic Act No 8762 or the Retail Trade Liberalization Act of 2000 to
reduce the required paid-up capital for foreign enterprises intending to engage in retail
trade business.
3. Proposed amendments to the Foreign Investments Act - Senate Bill No 1156 seeks
to amend provisions of Republic Act No 7042, otherwise known as the Foreign
Investments Act of 1991, as amended, and to ease equity restrictions on foreign
investments in the Philippines.
Tax
1. CREATE Act
- Since July 1, 2020, corporate income tax rate has been reduced from 30% to 25% for
large corporations. Meanwhile, small and medium corporations, including one-person
corporations, with net taxable income not exceeding PHP5 million and total assets not
exceeding PHP100 million shall be subject to a reduced tax rate of 20%. Foreign
corporations are eligible for a reduction in the corporate income tax rate to 25%.
- For the period of July 1, 2020 to June 30, 2023, Minimum Corporate Income Tax is
reduced from 2% to 1%.
- For the period of July 1, 2020 to June 30, 2023, Percentage Tax is reduced from 3% to
1%. This is applicable to all non-VAT registered taxpayers with annual gross sales of
PHP3 million and below.
- For the period of July 1, 2020 to June 30 ,2023, non-profit and proprietary educational
institutions are subject to a reduced special corporate income tax rate of 1%.
-Improperly accumulated earnings tax (IAET) of 10% is no longer imposed.
Real Estate
1. Amendment of regulations on Real Estate Investment Trusts
- The Minimum Public Ownership (MPO) requirement has been adjusted to one-third of
the outstanding capital of the REIT (from the 40% requirement from the old rules)
-The transfer of property to a REIT in exchange for shares, which qualifies as a “tax-free
exchange” pursuant to Section 40(c)(2) of the Tax Code, shall be exempt from 12%
VAT;
- The old requirement to place the Documentary Stamp Tax incentive and income tax
incentive in escrow has already been removed; and
- The Revised Rules require clear rules for the independence of fund manager and
property manager.
Intellectual Property
1. Doing business in a post-COVID world - The Philippines has fast-tracked the
“upgrading” of the country’s IP system, facilities and rules to embrace technological
solutions.
2. IP filings and prosecution - Improve online filing system to cover all IP prosecution,
namely patents, utility models and industrial designs. Also, Filings and payments can
now be made online.
Health Crisis
The Philippines has more than 1.8 million COVID- 19 cases and has 11.9% fully
vaccinated citizens.
Impact on the firm (Mush-ma-bute)
Political
The enactment of CREATE law will lessen the possible financial burden of the business
because percentage tax is reduced from 3% to 1%. This is applicable to all non-VAT
registered taxpayers with annual gross sales of PHP3 million and below.
Economic
Retrenchment or business closures might affect the feasibility of Mush-ma-bute
because it indicates difficulties in establishing a market position. Also, the
unemployment rate in the Philippines dropped from 8.8% in February 2021 to 7.1% in
March 2021 which affects the purchasing power of consumers. Meanwhile, it is good
that inflation rate slowed down during this June 2021
Social
Demographics has been changed because of deaths caused by COVID-19 virus. In this
matter, brand preferences, customer needs and consumer buying behavior might also
change that affects the profitability of the business.
Technological
Filings and payments can now be made online. This will help the business to acquire
legal requirements easily. Also, e-commorce has been an effective marketing tool that
will help Mush-ma-bute in communicating their value preposition to their target market.
Legal
The enacted the Telecommuting Act which outlines alternative workplace with the use
of telecommunication and/or computer technologies might affect the operating activities
of the business and consider to hire work from home employees.
Environmental
The health crisis will greatly affect the feasibility of Mush-ma-bute because it imposes
financial difficulties to both business and consumers. Consequently, the business must
have a strict health protocol in the production of mushroom patty to secure the health of
the buyers.
Major Sources of Information to Monitor these Trends
Industry News - these includes watching television, listening to radio and reading
newspaper to know the current situation in the market.
Social media - these includes using Facebook, twitter, Instagram and etc. to gather
information about the new trends, customer needs and market opportunities.
Web Sources- these includes numerous websites that can also help us monitor major
trends in general environment like Google Trends, YouTube’s trend dashboard and etc.