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NATIONAL UNIVERSITY

Manila, Philippines

Small- and Medium- Sized


Enterprise Development in the
Philippines after 2000

A Project Case Study


Presented to
The Faculty of College of Business and Accountancy
Accountancy Program
National University

_______________________________

In Partial Fulfillment of the


Requirements for the course
ECONOMIC DEVELOPMENT

_______________________________

Presented by:

Cruz, Luigi V.
Barrientos, Merry Grace M.
Terrible, Jemaica M.
Tero, Axel D.
Tupas, Rexy B.
ACT-181

Presented to:
MR.IRENEO R. AGUILAN

December, 2018
COLLEGE OF BUSINESS AND ACCOUNTANCY
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NATIONAL UNIVERSITY
Manila, Philippines

INTRODUCTION

Small and Medium Enterprise development plays a big role in the economy of the

Philippines in relation to the general economic factor parallel to Market – related

factors,Financing – related factors and the Government SME policy. The 2016

Manufacturing Summit stated:

Accelerating connectivity to Marketing promotions and productivity

development for SMEs are subsidized Trade Fairs, Promotions and Assistance

(CITEM, EMB, SB Corp, LBP, DOT,), product development & innovation (DTI

PDC, Fablabs, DOST, DTI Negosyo Centers, Academe) and Virtual Marketing,

International Cooperation – Strategic alliances, licensing, joint ventures.

According to Aldaba et al (2010) indicated that financing constraints have

remained one of the most critical barriers affecting SME growth. The surveyed

firms cited the following financing problems: shortage of working capital to

finance new business plan, difficulties in obtaining credit from suppliers and

financial institutions, insufficient equity, and expensive credit cost.

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NATIONAL UNIVERSITY
Manila, Philippines

Small and Medium Enterprise of the Philippines continuously broadens due to

the massive growth of number of SMEs in the Philippines and becoming

innovative and having a highly skilled worker. But SMEs in the Philippines

remains small. This case study will discuss the strength and weakness of SMEs

in the Philippines. The paper will start with a brief discussion about the

development of the SMEs after 2000. Basic statistics describing different type of

the situation of SMEs are then presented. The final part discusses public policies

and regulations that affect the development of SMEs in the Philippines.

Statement of the problem:

The case study entitled: Small and Medium – Sized Enterprise Development

in the Philippines after 2000, aims to determine what general economic factor

influenced the Philippines Small and Medium – Sized Enterprise to develop. And

these following questions will guide the readers throughout the study.

1. How does market related factors affect the development of SME in the

Philippines?

2. How financial sector could be a problem to the development of SME in the

Philippines?

3. What is the impact of government policy to the development SME?

The scope is the study is limited only to the statements mentioned above.

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NATIONAL UNIVERSITY
Manila, Philippines

Proposed Solution:

1.Market Sectors

-According to a recent data from the Department of Trade and

Industry, SMEs account for 99.6 percent of total registered enterprises. Out of

the 820,255 businesses which operated in the country, 816,759 were SMEs

while only 3,496 were large enterprises. Of these, 91 percent (743,250) were

microenterprises, 8.6 percent (70,222) comprised of small firms, and less than

one percent (3,287) made up medium-sized companies. It means that the

competition among SME are too tight so, To go beyond survival and actually

compete, SMEs will need to undergo successful business transformation in

various dimensions of their operations—spanning enhanced entrepreneurial skill,

innovation in process and product development, more successful collaboration

across SMEs and with larger firms, and improved crisis resilience among other

factors.

2.Financing

-Many private banks are still unwilling to lend to SMEs because of lack of

credit information and low appreciation of lending, lack of acceptable collateral,

slow loan processing, short repayment period, high interest rates, difficulties in

loan restructuring, and lack of start-up funds.

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NATIONAL UNIVERSITY
Manila, Philippines

To overcome these challenges, particularly factors limiting SME lending, the

Philippines and its Asean neighbors must adopt innovative business solutions to

address SMEs’ varied financial and non-financial needs. With the digital

revolution, banks and financial institutions in the Asean region can develop new

business models which involve leveraging on digital solutions providers and

forming strategic partnerships with challenger banks, financial technology and e-

commerce providers to target SMEs in unconventional ways. For example, they

could finance SMEs through alternative channels; use payment data to

supplement credit risk models; capitalize on digital infrastructure to lower cost

and improve distribution channels; and offer a comprehensive suite of products

and services.

3.Government Assitance

-The government recognized the significant of SME’s and many programs

have been offered to assist the SMEs, Recently, APEC started a new framework.

It is called the APEC Center for Technology Exchange and Training for Small

and Medium Enterprise (ACTETSME), and it is one of the action programs under

Economic and Technical Cooperation. This new movement gives the government

an alternative source of information, finance and technology exchange for the

SMEs development. The ACTETSME role is to improve SME’s technological

capabilities to enhance their international competitiveness by offering different

programs such as information networking and technology training.

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NATIONAL UNIVERSITY
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Recommendation:

1. Be ready for the challenges and problems.

According to Jourdan,(2017). As an entrepreneur, you’re at the center of

everything. You have to keep everybody in place, everything in the right

direction. As a leader you must flexible enough to handle problems and solve it

immediately.

2. Getting the right strategic vision is critical.

This means being able to anticipate what the customer is going to want

and how best to achieve it. It also includes defining the depth and scope of the

changes and the redesign of internal processes and structures. The survey

revealed that the majority of companies take a strategic approach to

transformation by continuously aligning their business models with strategy; the

rest is split between those who view transformation as a wholesale turnaround

that leads to an overhaul of the business model and those who adopt a narrower

view, limiting themselves to transforming specific processes, functions or areas.

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NATIONAL UNIVERSITY
Manila, Philippines

3. Execution is the hardest part of the transformation.

Most companies get the vision right, but the execution is the hard part:

more than half of companies undertaking transformation fail to achieve the

desired business result, estimates Stephen G. Hasty, a KPMG partner and U.S.

Innovation Leader for Advisory. In the current complex and fast-changing

business climate, organizations often underestimated the significance of

operating model refinements necessary to effect transformation across people,

process, technology, data management and risk management components.

Issues to consider include engaging new stakeholders, such as executives from

risk and compliance, who may not have played big roles in transformation in the

past, but are fast gaining in importance due to the increase in transformations

triggered by the regulatory environment. Also, the analysis of big data may

provide new information about customers' behavior, eliminating the guesswork

when deciding on new directions.

4. Take a broad view of customer demand when embarking on business

transformation.

Customers need solutions, not specific products or services. Business

transformation needs to be aligned with customers’ needs—in fact, it needs to

anticipate them. Broader research on this topic reveals that customer demand

can be decoded by figuring out transformation triggers that are affecting

customers.

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NATIONAL UNIVERSITY
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Conclusion:

The SME sector is recognized as the center of attention for growth that will

ensure that the Philippine economy moves forward despite the threats of an

unfavorable global environment, the overall fiscal condition of the country

prevents it from being given utmost financial support. The government is open to

learn new modalities and modernities that can help the businesses and also the

country. Small and Medium Enterprises in the Philippines continuously broaden

due to the massive growth of number of SMEs and becoming innovative and

having a highly skilled workers. However the constraints they face make it

difficult for them to compete globally. In coming years, business competitiveness

will become fiercer in line with an increasingly more develop and integrated world

economy. SMEs face numerous constraints to further growth and productivity,

including credit constraints, cumbersome registration procedures and strict

regulatory environments, and other challenges related to an economic playing

field that is not level between large and small firms. SMEs, especially startups,

has lower probabilities of survival than larger firms, leading to high rates of

market entry and exit across nearly all economic sectors.

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NATIONAL UNIVERSITY
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Throughout these studies, the researchers find out solving business

transformation is a big help to go beyond survival and actually compete for all

SMEs in the Philippines. Making a one step of creating a business is hard, but if

you pursue in creating and innovating some strategies, having an intelligent and

being not afraid in trying the other way of business are competitive enough in

making a good decision that can help even if it’s small or medium enterprise. A

true entrepreneur is not afraid facing the future.

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NATIONAL UNIVERSITY
Manila, Philippines

References

Doyle, A. (2018). List of Skills Entrepreneurs Need. [online] The Balance Careers.
Available at: https://www.thebalancecareers.com/list-of-skills-entrepreneurs-
need-2062391

Fukumoto, M. Development Policies for Small and Medium Enterprises in APEC In


the Case of the Philippines. Retrieved from
http://www.ide.go.jp/library/English/Publish/Download/Apec/pdf/1998_04.pdf

Lagua, B. (2018). SME characteristics and statistical needs in the Philippines.


Retrieved from http://www.oecd.org/sdd/business-stats/15004719.ppt

Melchor, M. & Mendoza, R, U. (2014). SMEs in the Philippines: Going Beyond


Survival. Reyrieved from https://www.rappler.com/thought-leaders/74674-
smes-philippines-asian-institute-management

Moreno, K. (2014). 4 Steps to a Successful Business Transformation. Retrieved from


https://www.forbes.com/sites/forbesinsights/2014/03/18/4-steps-to-a-
successful-business-transformation/#13d986991807

Natividad, N. (2016). Infographic: how tech gives SMEs the competitive advantage.
Retrieved from
https://www.google.com.ph/amp/s/amp.rappler.com/brandrap/create-
success/151578-globe-mybusiness-tech-advantage.

Natividad, N. (2016). Starting 2017 right: advice for SMEs on running a local
business. Retrieved from
https://www.google.com.ph/amp/s/amp.rappler.com/brandrap/create-
success/155499-advice-local-business-roundtable

Surdej, A. (2018). Small and Medium-Sized Enterprise Development in Poland after


1990. Retrieved from https://www.wider.unu.edu/publication/small-and-
medium-sized-enterprise-development-poland-after-1990

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