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CHAPTER I

THE PROBLEM AND ITS SETTING

Introduction

The world witnessed the tremendous growth of furniture-making business

in the early 1970s. But the same industry faced a serious downfall in the last ten

years as evidenced by drastic decline in the gross sales in both domestic and

international trades. Arguably, furniture-makers attributed the decline to the

stricter implementation of environmental laws relative to cutting of trees as a

response of most countries of the global issue on Climate Change. In the

Philippines alone, most local producers suffered from those legislations and they

resorted to alternative raw materials such as bamboo, rattan, and other trees

comparable to Narra. This research generally attempts to present a descriptive

investigation of the growth and decline of furniture-making business in Sorsogon

City. One of the few localities in the Philippines known for furniture-making.

Furniture is a movable accessory, fitting or a decorative art that is used for

the purpose of making a room or building suitable to live in or to work. It includes

chairs, tables, desks, beds, cupboards, etc. It can be made from a wide range of

materials including wood, plastic, metal, fiber etc. The main purpose of furniture

is to provide comfort and a suitable décor to a building or a room. Over the years

furniture-making industry has developed greatly and is no longer restricted to the

production of tables and chairs. It has expanded into manufacturing of an

assortment of interiors, home furnishings that exhibit elegance and class. In

addition to the production of products for living rooms, offices, kitchens, gardens
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etc. it has also entered manufacturing upholstery, mattresses industries. Raw

materials for production today include plastic, wood, fiber, rattan etc. Skilled as

well as unskilled labor is used in addition to machine oriented mass production

techniques and sophisticated technologies for designing purpose.1

The slight increase of furniture production in the Asia and Pacific region

passed from US$ 87 billion in 2005 to US$ 112 billion in 2014 is a minor

structural phenomenon, which has insignificantly changed the world furniture

sector in the last ten years. The leading furniture importers are the United States,

Germany, France, the United Kingdom and Canada. However, in the last five

years the increase of furniture imports in the US from US$ 19 billion in 2009 to

about US$ 32 billion in 2015 was the main engine of growth in international trade

of furniture.2

Despite the odds, wooden furniture industry makes a substantial

contribution to development in tropical countries, producing important economic

benefits and playing a significant role in promoting economic growth. As wood-

processing industries such as the wooden furniture sector develop, they create

employment which in turn expands the tax base in the country, generate a

trained workforce, and contribute to the development of physical and institutional

infrastructure. These industries also contribute to foreign exchange earnings and

stimulate investment in a range of secondary support industries. 3 Corollary, in the

past ten years have seen the unprecedented opening up of the furniture trade,

meaning that the import component of consumption has continued to rise in

nearly all-important markets. Globally operating retail chains and buying groups
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representing the collective interests of nationally important furniture chains have

been at the vanguard of this change. In fact, realizing the cost-slashing and

earning opportunities to be derived from outsourcing labor-intensive

manufacturing to developing countries, they have been one of the drivers of the

evolution. As the entry barriers to making mass-furniture have remained low,

there has been an abundant supply of manufacturing capacity for overseas

buyers to deal with. Consumers have been educated to accept the more

eccentric designs and mixed styles along the way.

Asian countries, China and Malaysia in particular, have challenged this

conventional mode by embarking on larger-than-average manufacturing units.

The explanation can be found mainly in the role of the Asian furniture industries

as the world’s largest contract manufacturing base for meeting the needs and

specifications of buyers in industrialized countries. At the same time, retailers

and buyers’ groups have consolidated themselves into larger units, which buy in

bulk to minimize costs and profit from competitive sourcing.

This trend in furniture-making in the world put the Philippines at a

disadvantageous place posing challenges for survival in addition to

environmental-related issues.4 Historically, furniture craft first came to the

Philippines in the 16th century when cabinet makers from Spain were brought in

by colonial merchants who saw distinct possibilities for good furniture products in

the Philippine hardwood in abundance. Filipino craftsmen learned quickly not

only the art of masonry but also intricate carvings and adornments on doors and

other church furnishing. By the 18th century, distinct regional styles of furniture-
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making had emerged in the Philippines, and the whole range of European

domestic furniture was not only being replicated but redesigned to suit local

tastes and lifestyles. Casualness, comfort and practicality were values that

arrived during American colonial times in the early 1900s. These times gave birth

to the rattan furniture industry, which continues to lead the furniture industry

today. The ban on the export of rattan poles in 1977 led to the establishment of

more rattan factories in Manila and Cebu. Particularly in Cebu, traders who used

to export rattan poles to the U.S.A. and Taiwan, upgraded their production to

unfinished rattan parts such as chair backs, legs and seats which were then

exported to furniture assemblers.

Later developments saw more downstream value-added activities. With

continuous production improvement and product development, the furniture

makers were soon able to export complete furniture pieces which attracted the

attention of the international market. In the 80’s, manufacturers began to produce

assembled furniture from blueprinted designs provided by buyers. The value-

added chain was completed by the late 80’s when the companies started

undertaking their own product development and design manufacturing, assembly

and final finishing. The history of the industry is reflective of: rich craft heritage;

eclectic influences; variety of locally available materials; and native artisans with

excellent design flair and deft hands. These are the same reasons for the

industry’s subsequent growth and the wide acceptability of its products. This

culture of adaptation is the story of the Philippine furniture industry.

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As a consequence, responsible for over 60% of the Philippine exports,

Cebu is recognized as the furniture capital of the Philippines. It lives up to its

reputation as it consistently and steadily brings in a substantial percentage share

of the country’s furniture export sales. Cebu has all the potentials of becoming a

major player in the international scene. At present, it is serving the European,

North American, the Middle Eastern, and Asian markets. Thus, making it a

furniture resource of great promise.5

To date, the Philippine furniture export industry, with Cebu as its biggest

contributor, ranks among the top ten import source countries of the United States

of America. A big 70% of the total furniture products of the country are exported

to the US, and the remaining 30% distributed to the European, Middle Eastern

and Asian markets. Cebu manufacturers are known for their superior design

capabilities and craftsmanship, playing a big role in promoting and establishing

Cebu as the Design Destination of Asia. Cebu designers and manufacturers

make use of indigenous materials such as sea grass, abaca or manila hemp,

arorog and butay or coconut twig mixed with wood, bamboo, rattan, stone and

wrought iron. Other materials used are animal skins, shells, seeds, leaves and

tree barks. Even termite mounds have been used in the production of furniture

pieces. Furniture companies have started to produce eco-friendly furniture

pieces.

Other regions in the country were not able to take advantage of newer

technologies in furniture-making with potential markets for export. Bicol,

comprised of six provinces, four on the Bicol Peninsula mainland, the

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southeastern end of Luzon, – Albay, Camarines Norte, Camarines Sur, and

Sorsogon – and the offshore island provinces of Catanduanes and Masbate. The

region has a population of 5,796,989 as of 2015 census, growing at an average

annual rate of 1.29 percent between 2010 and 2015. Bicol’s population density

increased to 320 persons per square kilometer in 2015. The region has a large

amount of rich flatland, and agriculture is the largest component of the economy,

followed by commercial fishing. Coconuts, abaca, banana, coffee and jackfruit

are the top five permanent crops in the region. Rice and corn are among the

chief seasonal crops. Mining is also one of the contributors to the region's

economy. Commercial fishing is also important with thirteen major fishing

grounds supplying fish markets in places as far as Metro Manila. Another notable

source of income of most Bicolanos is furniture-making. Most localities in the

region have a considerably high number of small furniture shops. Particularly, in

the Province of Sorsogon, as reported by the Office of the Provincial Director of

the Department of Trade and Industry, there was a boom in the furniture-making

business as evidenced by the sprouting of local shops.6

Sorsogon is the southernmost province in Luzon and is subdivided into

fourteen municipalities and one city. Its capital is Sorsogon City formerly the

towns of Sorsogon and Bacon. The province is bordered by the province of Albay

to the north. Geographically, Sorsogon is at the tip of the Bicol Peninsula and

faces the island of Samar to the southeast across the San Bernardino Strait and

Ticao Island to the southwest. The Province's economic activity is highly

concentrated in its capital city, Sorsogon City, and the Municipalities of Bulan,
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Irosin, Gubat, Pilar and Matnog as well. Sorsogon Province is classified as 2nd

class with an average annual income of ₱339.4M reported in 2003. The province

is gifted by wonderful natural resources which gave birth to furniture-making. 7

In the early 1980s, the boom of the industry showed great potential for a

sustainable domestic growth and possible exporting opportunities, but major

environmental laws and issues threatened many local producers which led to the

eventual decline of the business. The DTI in its commitment to aid local

businesses offered alternatives such as the use of bamboo and rattan in lieu of

Narra and other banned trees. This scenario seriously caused the closure of

many local shops in the province’s capital, Sorsogon City. A third class city with a

population of 168,110 people according to the 2015 census. Geographically,

Sorsogon City covers a land area of 31,292 hectares. As the capital town of the

Province of Sorsogon, it is a hub of trade and commerce. Its strategic location

has given rise to a busy commercial district composed of local businesses and

franchises of national and regional business chain. Business is concentrated in

the downtown area near the public market and major commercial establishments

primarily geared towards retail and wholesale and the Bacon District is the

secondary business district of the City. Noticeably, the City has a growing

number of local manufacturing shops engaged in furniture-making in its three

districts. It is sad to note, that these local producers are suffering from serious

decline in sales posing major threat of closure as lamented by a number of local

shop owners.8
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Considering the foregoing, the researchers valued the relevance of

undertaking an investigation of the growth and decline of the furniture-making

businesses in Sorsogon City. A number of select furniture shops from the three

districts which were operational for at least five years were identified as key-

informants. Further, this study presented the factors affecting the growth of the

industry and more importantly, inquired on current trends, opportunities and

prospects for the industry. The findings of this scholarly work were significant to

the industry in general and to a number of furniture-shop owners not only in the

identified locale of the study but also to the other localities with existing or

promising furniture-making business opportunities. However, this research did

not investigate in-depth on the furniture-making industry as a whole and thus did

not result to proposing policies to regulate the business operations of the

industry.

Statement of the Problem

Generally, this study is aimed at presenting the current status as well as

the historical status of select local businesses in Sorsogon City which are into

furniture-making. Corollary, this investigate on the issues and factors resulting to

the rise and fall of the industry. Further, the researchers inquired on the

prospects and opportunities for the industry.

Specifically, this study sought answers to the following sub-problems:

1. What is the profile of the identified businesses in terms of:

a. Organization and Management

b. Sales and Marketing

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c. Finance

d. Human Resource

e. Production

2. What are the factors affecting the operations of the identified business

as perceived by its managers?

3. What interventions may be implemented to improve the operations of

local furniture-making businesses?

Scope and Delimitation

This study is a descriptive investigation of the growth and decline of

specific local shops in the City of Sorsogon engaged in furniture-making. The

researchers identified local businesses in each of the three geographical districts

of the City, to wit: Sorsogon East, Sorsogon West, and Bacon districts from a list

sourced out from the Department of Trade and Industry-Sorsogon Provincial

Office. The identification of those local shops which served as key-informants of

this research represented by their respective managers cum owners and their

subordinates as respondents was based on a specific set of selection criteria

formulated by the researchers, to wit: (1) popularity of the furniture business

within the district, (2) the furniture business has remained operational at least for

the last five years, (3) duly registered in DTI. The research was further aided by

significant data from the Provincial Department of Trade and Industry.

The locale of this study is Sorsogon City covering its three districts. Upon

prior inquiry with Provincial DTI personnel, the group considered the furniture-

making businesses in the barangays of Buhatan, Cabid-An and Bibincahan for

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Sorsogon East District, the barangays of Pang-pang, Pi-ot and Tugos for

Sorsogon West District, and the barangays of Poblacion, Caricaran and Balete

for Bacon District as the subjects of this research. However, in determining the

actual businesses, the researchers followed certain sampling technique.

This undertaking was limited to few select business and thus the findings

of the study is not conclusive to the furniture-making industry in the City however,

may be considered as vital in establishing a framework in understanding the

status and prospects of the said industry.

Specific agencies were involved in the conduct of this study to wit: (1)

Provincial Office of the Department of Environment and Natural Resources, and

the City Environment and Natural Resources Office and the Provincial Office of

the Department of Trade and Industry. The responses of the key personnel of the

identified agencies were significant in validating the responses of the key-

informants and respondents.

The supposed number of key-informants and respondents were not

achieved by the researchers due to the refusal of a number of owners of the

identified businesses. Much that they would like to make this research

comprehensive but they were limited by the circumstances that are beyond their

control. The supposed key-informants from DTI Sorsogon Provincial Office and

DENR and CENRO personnel likewise refused the request for interview.

The actual frequency distribution of respondents and key-informants is

shown in the table below.

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Table 1
Frequency Distribution of Actual Key-Informants and Respondents

Name of Business Respondents Key-Informants

East District
1. DeZigns & Kreations
1
Enterprises (Buhatan, 0
Sorsogon City)
2. A.L. Guardian Enterprises
(Garcia Compound, 0 1
Bibincahan, Sorsogon City)
3. E.D.D. Furniture Shop
(Narra St., SPPVS, 0 1
Bibincahan, Sorsogon City)
West District 0 0
Bacon District
1. Antonio Deocareza
Furniture Shop (Amador 0 1
St., Bacon District,
Sorsogon City)
2. Doctama Marketing and
Furniture Making (Bacon 0 1
District, Sorsogon City)
TOTAL 0 5

The table revealed that the total respondents and key-informants for the

East District is zero and three respectively. A slight decrease in the frequency for

the key-informant in Bacon District. The limited number of key-informants for the

two districts is due to time constraints on the part of the identified key-informants

and respondents. The managers refused to allow their workers to be interviewed

because of the workload in the shops. However, researchers attempted to

reiterate the need to interview the workers but their efforts were futile. No single

business in the West District is involved in this undertaking because of the three

shops identified in the said district are no longer existing and a personnel from

the other business refused to because his manager is outside the City for a

month already.
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Significance of the Study

Generally, the results of this research is deemed valuable to the field of

business and management, particularly to the industry of furniture-making and

other related business. Corollary, the framework of this research may come

practical for prospective business owners in their desire to join the industry.

Specifically, the following will benefit from the findings of this research:

Department of Trade and Industry. The outcomes of this scholarly work

may be used by the department in its attempt to assist the industry and the local

furniture shops in particular in the formulation of policies and strategies.

Department of Environment and Natural Resources. This may aid the

department in revisiting specific provisions of relevant laws that regulate the

conduct of furniture-makers. Further, this may call for a partnership between the

department and furniture-makers for activities that may promote sustainable

utilization of trees and other related resources.

Furniture-Making Industry. The results of this study may give the various

stakeholders of the industry a clearer and more substantial understanding of the

current status, trends, opportunities and prospects of the industry.

Existing Furniture-Makers. The findings of this undertaking is deemed very

practical for theses businesses in the conduct of their daily operations. As a

consequence, the research framework may serve as guide in their decision-

making relative to production, manpower sourcing, and sales and marketing.

Prospective Furniture-Making Business Owners. This may help them

develop an appreciation of the industry. This will also allow them to see and take
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advantage of market and business opportunities in furniture-making. As such,

increase in the number of local producers will increase the level of competition

thereby intensifying challenges on quality and competitive pricing.

General Public. The consuming public is likewise perceived to benefit from

the results of this undertaking. This will result to a group of more informed and

wise buyers understanding the dynamic interplay of supply and demand as

affected by availability of raw materials and labor cost. However, increase in local

producers may result to a more competitive pricing which is obviously

advantageous to consumers.

Field of Management. The outcomes of this research are believed to

contribute to the general knowledge relative to management. Findings of this is

study is expected to enrich existing theoretical knowledge relative to production

management. Also, the investigation of actual phenomenon in this industry is an

opportunity to challenge relevant theoretical standards resulting to a more

practical learning.

Accountancy, Business and Management Department. More particularly,

the conduct of this research is a milestone relative to the implementation of the

Senior High School Curriculum of this school. This is a practical learning

opportunity for student-researchers develop a passion for investigation and

critical thinking.

Future Researchers. Other relevant concepts concerning the furniture-

making industry may be considered for further study by future researchers.

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NOTES

1http://www.grandviewresearch.com/industry-analysis/furniture-

market(retrieved on _______________)
2http://www.furnitureandfurnishing.com/html/jan16/csil-world-report-world-

furniture-outlook-on-global-markets.php
3http://www.fao.org/forestry/23523f14bba18f78fa30aed5fcceaa0f41f69.pdf

4http://winner-tips.org/magazines/-an-analysis-a-quick-look-at-the-growth-of-

the-philippine-furniture-industry-
5http://furniturecebu.com/cebu/the-cebu-furniture-industry/

6https://en.wikipedia.org/wiki/Bicol_Region

7
https://en.wikipedia.org/wiki/Sorsogon
8https://en.wikipedia.org/wiki/Sorsogon_City