1

Chapter 1 THE PROBLEM AND ITS SCOPE INTRODUCTION

RATIONALE OF THE STUDY With the development of the national defense and industries, there are a lot of new requirements for the rubber seals. Meanwhile, in order to meet these new requirements, the structure and material of the bearing's retainer should be improved and developed. At present, for the role of the bearing retainer has exceeded the normal functions of holding, isolation and guiding the rolling element. The retainer is now developed to have the new function of oil lubrication. This new function will be widely used in the high speed bearing, selflubricating bearing and other bearings whose working media are quite special. With the increase of the rotating speed, the metal-made retainer with the great density can not meet the working requirement of the bearing, especially the roller bearing. In order to satisfy all kinds of new requirements, people find it is suitable to choose the plastic as the main material of the retainer. The plastic is characterized by the following features, such as small density, anti-friction, antiknock, anti-magnetic, radiation resistance, anti-corrosion, low friction and so on. What's more, owing to small density, high mechanical strength, excellent

machining property, heat resistance, oil absorption, oil penetration and other unique features, the laminated phenolic cloth is also widely used as the retainer's main material of the bearings for machine tools, instrument, gyro, turbine, pressure booster and so on. Under the situation where the metal retainer can not meet the requirement, the plastic retainer shows its unique advantages. For example, when the roller bearing is used in the liquid oxygen where the lubricating oil is not allowed, the plastic retainer can replace the metal one and plays a very important role. Since the retainer made of the plastic has so many advantages, there is no doubt that it will be quite popular. According to some reports, at present the plastic retainer is widely used by a lot of foreign companies. SKF Corporation is a good case in point. It is said that in the certain range the plastic retainer is selected as the standard retainer for the roller Bearing. FAG Corporation also produces a great number of bearings whose retainers are made of the plastic, especially the bearings for the automobile. This retainer is not only quite popular for the roller bearing but also is very applicable for the bearings for the window, furniture, toy and so on. All in all, with the wide application of the plastic retainer, a lot of metal can be saved, the labor hours can be shortened, the cost can be reduced and meanwhile the self-lubricating property can be improved. The purpose of this study is to know the problems encountered in NKC Manufacturing Philippines Corporation and to suggest possible solutions to the said problems.

THEORETICAL BACKGROUND Management Aspect According to Porter (1981) the profit-maximizing and competition-based theory, which was based on the notion that business organization main objective is to maximize long term profit and developing sustainable competitive advantage over competitive rivals in the external market place. The industrial organization (I/O) perspective is the basis of this theory as it views the organization external market positioning as the critical factor for attaining and sustaining competitive advantage, or in other words, the traditional I/O perspective offered strategic management a systematic model for assessing competition within an industry. Achieving a competitive advantage position and enhancing firm

performance relative to their competitors are the main objectives that business organizations in particular should strive to attain. Competitive advantage is a concept that remains as a major research area as far as strategic management is concerned. Moreover, as far as global and local businesses are concerned, competitive advantage is important. In order to compete and sustain successfully, locally and globally, businesses must not only excel in their area but also persevere in the long run. Achieving such a sustainable competitive advantage status is not an easy task without a proper road map or strategy being outline and put into practice. Competitive advantage is a result from and being associated with a long list of contributing factors. Such factors include operational efficiencies, mergers, acquisitions, levels of diversification, types of

diversification, organizational structures, top management team composition and style, human resource management, manipulation of the political and/or social influences intruding upon the market, conformity to various interpretations of socially responsible behaviors, international or cross-cultural activities of expansion and adaptation, and various other organizational and/or industry level phenomena. (European Journal of Social Sciences Volume 11, Number 3 (2009) 403) Competitive advantage is a concept that remains as a major research area as far as strategic management is concerned. Moreover, as far as global and local businesses are concerned, competitive advantage is important. In order to compete and sustain successfully, locally and globally, businesses must not only excel in their area but also persevere in the long run. Achieving such a sustainable competitive advantage status is not an easy task without a proper strategy being outline and put into practice. Competitive advantage is a result from and being associated with a long list of contributing factors. Such diversification, types of diversification, organizational structures, top management team composition and style, human resource management, manipulation of the political and/or social influences intruding upon the market, conformity to various interpretations of socially responsible behaviors, international or cross-cultural activities of expansion and adaptation, and various other organizational and/or industry level phenomena. (Ma, 1999a, 1999b; Flint and Van Fleet, 2005; King, 2007b).

Indeed, the concept of competitive advantage has been in existence since International businesses and Multinational Corporations (MNCs) such as Sony, Toyota and Intel have achieved and sustained their competitive advantage via various strategic management practices and approaches. However, the question that arises is the underlying epistemology of competitive advantage in management and business. Hence, a review of the existing literature examines the evolution of management theory, the overview of strategic management strategy and the linkage with competitive advantage, particularly from the resource-based view perspective. Strategic management is the process and approach of specifying an organizations objectives, developing policies and plans to achieve and attain these objectives, and allocating resources so as to implement the policies and plans. In other words, strategic management can be seen as a combination of strategy formulation, implementation and evaluation. (David, 2005; Haim Hilman Abdullah, 2005; Mohd Khairuddin Hashim, 2005; Zainal Abidin Mohamed, 2005) Technical Aspect

Marketing Aspect

According to Cohan William (2005) marketing strategy involves careful scanning of the internal and external environments. Internal

environmental factors include the marketing mix, plus performance analysis and strategic constraints. External environmental factors include customer

analysis, competitor analysis, target market analysis, as well as evaluation of any elements of the technological, economic, cultural or political/legal environment likely to impact success. A key component of marketing strategy is often to keep marketing in line with a company's overarching mission statement. Marketing has been practiced since ancient times and has been thought about almost as long. Yet, it is only during the 20th century that marketing ideas evolved into an academic discipline in its own right. Most concepts, issues and problems of marketing thought have coalesced into one of several schools or approaches to understanding marketing. In this article we trace the evolution of 10 schools of marketing thought. At the turn of the 20th century, early in the disciplines history, the study of functions, commodities, and institutions emerged as complementary modes of thinking about subject matter and became known collectively as the traditional approaches to studying marketing; shortly thereafter the interregional trade approach emerged. About mid-century, there was a paradigm shift in marketing thought eclipsing the traditional approaches as a number of newer schools developed: marketing management, marketing systems, consumer behavior, macro marketing, exchange, and marketing history. During the mid 1970s, three of the modern schools marketing management, consumer behavior, and exchange underwent a paradigm

broadening. The broadened paradigm has bifurcated marketing thought from the conventional domain of business behavior to the much broader domain of all human social behavior. Thus, at the beginning of the 21st century marketing thought is at a crossroads. (http://mtq.sagepub.com; 2011) Mass marketing is a market coverage strategy in which a firm decides to ignore market segment differences and go after the whole market with one offer. It is the type of marketing (or attempting to sell through persuasion) of a product to a wide audience. The idea is to broadcast a message that will reach the largest number of people possible. Traditionally mass marketing has focused on radio, television and newspapers as the medium used to reach this broad audience. For sales teams, one way to reach out to target markets is through direct marketing. This is done by buying consumer database based on the segmentation profiles you have defined. This database usually comes with consumer contacts (e.g. email, mobile no., home no., etc.). Caution is recommended when undertaking direct marketing efforts check the targeted country's direct marketing laws. (http://corporate.wwe.com/documents/annual_report_2009/images/WWEAR2009.pdf) According to Dave Kurtz (2010), a principal concept in target marketing is that those who are targeted show a strong affinity or brand loyalty to that

particular brand. Target Marketing allows the marketer / sales team to customize their message to the targeted group of consumers in a more focused manner. Research has shown that racial similarity, role congruence, labeling intensity of ethnic identification, shared knowledge and ethnic salience all promote positive effects on the target market. Research has generally shown that target marketing strategies are constructed from consumer inferences of similarities between some aspects of the advertisement (e.g., source pictured, language used, lifestyle represented) and characteristics of the consumer (e.g. reality or desire of having the represented style). Consumers are persuaded by the characteristics in the advertisement and those of the consumer. Marketing participants often employ strategic models and tools to analyze marketing decisions. When beginning a strategic analysis, the 3Cs can be employed to get a broad understanding of the strategic environment. An Ansoff Matrix is also often used to convey an organization's strategic positioning of their marketing mix. The 4Ps can then be utilized to form a marketing plan to pursue a defined strategy. (Aaker, J., Brumbaugh, A., & Grier, S.; 2000) Fahy, Farrelly and Quester (2004) have also found out the increasingly important role played by sponsorship in the marketing mix that has given rise to the view that it should be considered as a significant strategic activity with the potential to generate a sustainable competitive advantage in the marketplace. However, Ma (2004) has further advanced an integrative framework on the determinants of competitive advantage in global competition namely creation &

innovation, competition, cooperation and co-option. Whereas De Pablos (2006) explained that the competitive advantage of a transnational organization lies to a great extent in its ability to identify and transfer strategic knowledge between its geographically dispersed and diverse locations. Financial Aspect Taking a commercial business as the most common organizational structure, the key objectives of financial management would be to: Create wealth for the business Generate cash, and Provide an adequate return on investment bearing in mind the risks that the business is taking and the resources invested There are three key elements to the process of financial management:

(1) Financial Planning Management need to ensure that enough funding is available at the right time to meet the needs of the business. In the short term, funding may be needed to invest in equipment and stocks, pay employees and fund sales made on credit. In the medium and long term, funding may be required for significant additions to the productive capacity of the business or to make acquisitions.

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(2) Financial Control Financial control is a critically important activity to help the business ensure that the business is meeting its objectives. Financial control addresses questions such as: Are assets being used efficiently? Are the businesses assets secure? Do management act in the best interest of shareholders and in accordance with business rules? (3) Financial Decision-making The key aspects of financial decision-making relate to investment, financing and dividends: Investments must be financed in some way however there are always financing alternatives that can be considered. For example it is possible to raise finance from selling new shares, borrowing from banks or taking credit from suppliers A key financing decision is whether profits earned by the business should be retained rather than distributed to shareholders via dividends. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profits further

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Asset utilization relies on a family of asset utilization ratios, also called activity ratios. The individual ratios in the family can vary, depending on the practitioner. They include measures that also stand alone, such as accounts receivable turnover and asset turnover. The most commonly used sets of asset utilization ratios include these and the following measures. An accounting ratio is made by dividing one account item into another. The aim is to obtain a comparison that is easy and beneficial to interpret. Differences in ratios might be associated with various causes, enabling management to alter company processes in order to achieve better outcomes. However, it is easy to calculate ratios, and to see the differences in a ratio over succeeding years or across companies, but it is difficult to be sure as to the causes of those differences or to understand the relative contributions of those causes or to correctly interpret the future significance of those changes in a ratio. (http://pachamamatrust.org/f2/K/commerce/Accounting/Am_liquidity_KCo.htm; 2001) The current ratio is a popular financial ratio used to test a

company's liquidity (also referred to as its current or working capital position) by deriving the proportion of current assets available to cover current liabilities. The concept behind this ratio is to ascertain whether a company's short-term assets

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(cash, cash equivalents, marketable securities, receivables and inventory) are readily available to pay off its short-term liabilities (notes payable, current portion of term debt, payables, accrued expenses and taxes). (http://www.ehow.com/info_7822500_debt-utilization-ratio-definition.html; 2000)

Your debt utilization ratio is the amount of money you owe compared to the amount of open credit that you have on credit lines. Your debt utilization ratio is one of the most important factors that lenders consider when evaluating you for financing. In fact, this one statistic comprises up to 30 percent of your credit score. The only factor that holds more weight than this is your payment history. This means that if you're interested in improving your credit score quickly, you can pay down your credit card balances to have an immediate impact. (http://www.ehow.com/info_7822500_debt-utilization-ratio-definition.html; 2008)

REVIEW OF RELATED LITERATURE Management Aspect Martins Rubber Co Ltds Terms of Reference defines the management organization responsible for quality. The chairman and Joint Managing Directors have ultimate authority and responsibility for the effectiveness of the Quality

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System. The Company Quality Manager is authorized and responsible for implementing and maintaining the Quality System. All operations shall be carried out as described in the Manual and the Operating Procedures and Process Maps. Deviation from the procedures must be notified to the Company Quality Manager. The Chairman and Joint Managing Directors are responsible for final approval of all changes to procedures prior to implementation. (http://www.martins-rubber.co.uk/quality-policy/quality-policy.html; Quality Manual Rev 13, July 2009) It is the policy of Martins Rubber Co. Ltd. to comply with the terms of Health & Safety and Environmental legislation to provide and maintain a healthy and safe working environment. Martins Rubber Co. Ltd. Health & Safety and Environmental objective is to reduce risk and minimize the number of instances of occupational accidents, incidents and illnesses and ultimately to achieve an accident-free workplace with minimal impact to the environment. All employees will be provided with such equipment, information, training and supervision as is necessary to implement the policy and achieve the stated objective. Martins Rubber Co. Ltd. recognize and accept their duty to protect the health and safety of all visitors to the company, including contractors and temporary workers, as well as any members of the public and the environment which might be affected by our operations. While the management of Martins Rubber Co. Ltd. will do all that is reasonable to ensure the health & safety of its employees and environment, it is recognized that health and safety at work and

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environmental care is the responsibility of each and every individual associated with the company. It is the duty of each employee to take reasonable care of their own and other people's welfare and to report any situation which may pose a threat to the well being of any other person or potential damage to the environment. The management of Martins Rubber Co. Ltd. will provide every employee with the training necessary to carry out his or her tasks safely. However if an employee is unsure how to perform a certain task or feels it would be dangerous to perform a specific job then it is the employee's duty to report this to their supervisor or the Director of Safety. An effective Health & Safety and Environmental programme requires continuous communication between workers at all levels. It is therefore every worker's responsibility to report immediately any situation, which could jeopardize the well being of himself or herself or any other person or the environment. (http://www.martins-rubber.co.uk/health-safety-and-environmental-policy/healthsafety-and-environmental-policy.html; July 2009)

Technical Aspect In contrast to todays commercially available bearings, our products surface finishing state is beyond the Japanese Industrial Bearings Standards. Our bearings can fully cope with the severe conditions where high-speed revolution and heavy loads are required. Nearly 700 kinds of bearings and 300 types of housing made out of steel can be produced as stipulated in the

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Universal Standards. Thus, FYH is contributing to the worldwide bearings industry with several thousand kinds of pillow blocks being produced annually. (FYH Japan; 20003) Bearing Industry is likely to witness good times ahead riding on auto sector boom, economic revival and export growth. Valuations of bearing companies have not seen the kind of run up seen by Auto Ancillary peer group due to concerns over industry demand-supply dynamics and huge presence of unorganized sector. However we expect the leading players in the bearing industry to report a better performance over the next two years, as demand growth in key user industries is expected to rise sharply. (Indian Bearing Industry; 2008) AA Elasting Products Sdn Bhd provide the most competitive edge in business with their reasonable pricing and quality is the most important to them They specialize in colored as well as molded rubber products and are able to mould the most comprehensive range of elastomers to suit customers requirements. They provide services for designing of rubber moulds from customers technical drawings as well as samples and we also provide contract rubber molding. (http://www.aaelasting.com/catalog/Seals/; 2001)

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Martin's Rubber has produced rubber seals for many years, and since 1990 we have been seal manufacturers of both hydraulic seals and pneumatic seals using CAD/CAM processes. This complements the traditional moulded, extruded or punched products that we also manufacture. This unique combination of processes, available in-house, allows Martins Rubber to offer a wide range of sealing products that are rapidly available, cost effective and of high quality. We carry large stocks of standard rubber O rings,NOK Japanese sized seals, metal cased wipers and piston seals. Our M.R. Quality Parts service also allows us to offer a comprehensive cross reference of pattern seal kits for popular construction plant machinery types. Under the M.R. Quality Parts service we offer pre-packaged sealing kits for the repair or routine maintenance of plant-based hydraulic cylinders. Our kits have identical content to the OE but at a fraction of the cost. Our production, stockholding and kit-making facilities enable the supply of either bespoke or standard parts. And we maintain sufficient capacity and expertise to offer very short lead times where the customer requires exceptional service. Meanwhile, our planning systems ensure we maintain a consistent workflow to deliver high levels of Delivery Schedule Achievement across our vast range of products and customers. This flexibility and control is made possible by our in-house facilities for manufacture, finishing and packing, all of which contribute to the exceptional service that we provide.

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We produce seals in all the common polymers and engineering plastics, in a range of materials from very soft to rigid, and with specialist grades to confer properties such as high wear, high temperature or explosive decompression resistance for example. There are very few applications that cannot be fulfilled with our range of seals. Our technical staffs are always available to discuss any challenges faced by our customers, and our long experience as rubber manufacturers and the range of our facilities mean we are ideally placed to solve most problems. (http://www.martins-rubber.co.uk/products/seals.html; 2000) It is the policy of Martins Rubber Co Ltd to provide and deliver the Company products on time and in accordance with agreed customer requirements. The achievement of high quality and consistency calls for a systematic and disciplined approach by all employees in all activities associated with the customers order according to the principles of Quality Assurance Martins Rubber Co Ltd quality objective is to achieve sustainable profits by providing products that consistently satisfy the needs and expectations of our customers. The level of quality is achieved through adoption of a system of procedures and processes that reflect the requirements of ISO 9001:2008 and demonstrate competence of the company to existing customers, potential customers, and auditing authorities. Achievement of this policy involves all staff, who is individually responsible for the quality of their work, resulting in a continually improving environment for all.

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(http://www.martins-rubber.co.uk/quality-policy/quality-policy.html; Quality Manual Rev 13, July 2009)

Since 1945, Wefco Rubber Manufacturing Co., Inc. has filled a niche in the rubber manufacturing business. This niche is the short run and quick turn around demand environment so prevalent in today's business requirements. While we are capable of producing high rate production output, we are expert in bringing a new product to market in short cycle time frames. We have over a 60year history of perfecting rubber extrusions and our production process is reflected in the strength, styling, and exceptional value of every extrusion that we produce. There is no project to big or small for Wefco to handle. Short run extrusions are our specialty with a 25' minimum for any size, shape, or material. Manufacturing black, white, and gray colored rubber in E.P.D.M. and Neoprene materials is no problem for Wefco. From prototypes to full production runs, Wefco is confident they can manufacture the rubber that you are looking for. We have evolved to having well over 8,000 extrusion shapes satisfying the Industrial, Marine, and Automotive industries. Having our own in house tooling department we can produce your custom profiles. Wefco takes pride in the fact that the final product is up to the standards of the customer. For over 60 years in this highly competitive market we are proud to be of service to you and your company. We pride our self on our short run and quick turn around niche, quality products, and the lowest pricing in the industry.

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(http://www.wefcorubber.com/profile.asp; 2007) Marketing Aspect The Indian bearing industry is estimated at Rs30bn. The Industry has established a highly diversified product range of around 1000 types of bearings, having high volume demand. The domestic industry caters to almost 70% of total demand for common varieties and sizes of bearings. The remaining demand to the tune of 30% is being imported, essentially for industrial applications and special purpose. Bearing Industry in India can be divided into three segments the organized sector, unorganized sector and imports. The organized sector primarily caters to the OEM segment, which are predominantly automotive, railways and other industrial users. The replacement, market is dominated by unorganized sector. Imports generally represent the specialized bearings not manufactured in India. There are large variants of imported bearings, each holding a small market share in India. Though, the quality of bearings manufactured by large players in India is comparable to world standards, domestic manufacture is not viable due to the small size of the market segment. It becomes uneconomical to manufacture such type of bearings as it includes huge capital expenditure. Illegal imports generally represent the entry of spurious imports of bearings. In the past, the Indian bearings industry was highly protected on account of very high import duties ranging from 150% to 240% ad valorem. As a result , illegal imports via smuggling and under invoicing of imports was the order of the day, accounting

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for a high 45-50% of total imports. While duty rates have come down over the last few years, a few countries like China, Russia, and Eastern Europe dump their excess production at a very low rate. This leads to a huge price differential between domestic and imported bearings (almost 40-50%), encouraging imports. Wefco Rubber Mfg. Co., Inc. is proud to announce that we now offer custom color matching for all of our extrusion profiles. For a minimum order of 200 lbs we can provide custom color matching for nearly any color in our 70 durometer EPDM compound. We can match powder coats, aircraft, appliances, plastics, furniture, tile, special panels, etc. In order to match colors successfully, we will need a painted part at least 4" square. Not all colors will need custom matching. If we find an existing color that we feel is an excellent match, we will notify you with no delay. (http://www.wefcorubber.com/whats_new.asp; 2007)

As a joint-stock company, Seashore has been built on and continues to grow because of our tradition of strong customer relationships, integrity and highquality products. At present, we have technical staff of over 45 people, and a total of more than 300 employees working in our company. We can work with you to develop and manufacture a product that will meet your specific needs and applications, with the confidence of knowing that at each step in the process. Now, Seashore Rubber supplies to all industrial and agricultural sectors including: Engineering, Automotive, Mining, Medical,

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Construction, Retail, Marive and so on. (http://seashorerubber.en.made-inchina.com/company-Seashore-Industrial-Co-Ltd-.html; 1999)

Financial Aspect The engineering sector is the second largest user segment for Indian bearing market accounting for 28% of bearing sales. The manufacturing sector has grown at 6% in FY03 and capital goods have shown a robust growth of 10.5% in FY03. The Indian economy is expected to grow by 6.5-7% in FY03-04. The overall revival in industry and manufacturing will drive capital investments and spur growth in the engineering industry the second largest customer for bearings industry. Exports of bearing companies have increased at a CAGR of 13% during the last 5 years. The domestic players are sensing the outsourcing opportunity and have initiated the process of producing a range of bearings for meeting the requirement of the parent or other global customers. (Indian Bearing Industry; 2008)

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THE PROBLEM Statement of the Problem This study seeks to determine what are the problems encountered in every aspect of the company and what are the possible solutions to the problems. Specifically, it tends to answer the following queries: 1. What are the problems encountered by the company in terms of the following aspects:

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1.1 Management aspect 1.2 Production or Technical aspect 1.3 Financial aspect 1.4 Marketing aspect
2. What are the effects of the said problems to the present economy?

3. What are the implications of the findings to the future BSIE graduates? 4. What are the proposed solutions to the problems in every aspect?

Significance of the Study

The following are apparent benefits from the study for different entities. Management. It helps the company formulate plans in improving the production of bearing retainers in their management, technical, marketing and financial aspect in order to maintain quality assurance and customer satisfaction. Workers. For them to know what are some ways in order to contribute to their companys thorough success. Customers. For them to know how the company maintain its exceptional performance and respond to the various demand of its customers. Future Researchers. The result of this study can be used as a source of reference in the course of their own researchers as a requirement to Bachelors Degree, particularly in the four aspects of the company.

Scope and Limitation

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The study focuses on the production of rubber seals in the Nakanishi Kosan Corporation (NKC) Manufacturing Philippines in MEPZ 2 Barangay Basak, Lapu-Lapu City Cebu. The study focuses on the four aspects of company such as Management, Technical or Production, Marketing and Financial.

RESEARCH METHODOLOGY Method Used The method used was descriptive research focused on the four aspects of the company namely: management, technical or production, financial and marketing at NKC Manufacturing Philippines. Research Environment

The study was conducted in Barangay Basak, Lapu-Lapu City Cebu where the researchers gather data about the four aspects of the company

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namely: management, technical or production, financial and marketing. It is located and operated inside the Mactan Export Processing Zone 2 (MEPZ 2). Research Respondents The respondents for this study are those employees and workers at NKC Manufacturing Philippines Corporation. The company employs 804 employees including 7 Japanese nationals. There are 54 regular employees and 66 contractual for day and night sessions at the Bearing Retainer Division that satisfied this criterion and all of them were taken as respondents.

Research Instruments The study is done through informational interview as a tool for gathering data and other comparative study of different approaches. The interview schedule for the survey was written in English. To facilitate understanding, it was translated to Cebuano, the dialect spoken by the respondents. The researchers gathered its data through interview on production manager, line leader, machine operators and production workers, internet surfing, time study and reading of research books related to the study.

Procedures for Data Gathering

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Before conducting the study, the researchers ask permission from the management through submission of letter and calling them by telephone. To gather data about the four aspects of company, the researchers personally carried out the interview among the selected respondents.

Treatment of Data Scoring Procedures DEFINITION OF TERMS

Chapter 2 PRESENTATION, ANALYSIS, INTERPRETATION OF DATA, ANALYSIS AND CONCLUSION Management Aspect NKC Manufacturing Philippines Corporation (NPC) was established in March 1997 in Lapu-Lapu City, which is located in Cebu Province in the Visayas region of the Philippines.Cebu is well known for its beach resorts, but it also played an important role in the history of the Philippines. By the Spanish imperial command Ferdinand Magellan arrived at Cebu in the spring of 1521, as the first European visitor to the Philippines, in the same year he died in Cebu in a battle

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against the Filipino Chief Lapu-Lapu. Under Spain's rule, the Philippines' first university was founded in Cebu in the 16th century. As a result of this long history of learning, the people of Cebu are well known for their high standard of education. They are multi-lingual and, in addition to their fluency in the local dialect (Cebuano) and the national language of the Philippines (Tagalog), they achieve a high degree of proficiency in English through the Cebu educational system. This background helps the city to produce highly skilled workers for international companies. Cebu is a popular holiday resort, and every year a lot of tourists from overseas enjoy marine sports such as scuba diving and island hopping at the islands of Cebu. In addition, industrial parks are located near those beach resorts, and over 100 of the Japanese companies have their local facilities to manufacture in a wide range of industries, such as cameras, electronics components, and shipbuilding. In recent years more and more IT companies have started to establish facilities in Cebu. NPC manufactures rubber seals for bearing units which are directly exported to overseas such as Japan, Europe, North America, South America, China and India. NPC also manufactures sash rollers for household aluminum sashes which are mainly exported to Japan and Thailand. NKC now employs 804 worker including Japanese nationals for day and night sessions. Their shifting starts from 8:00 a.m. 5:50 p.m. and 8:00 p.m. 5:50 p.m.

28 1. Bearing Retainer Division: Our retainers are a core part of automobile

production, industrial machinery, electrical appliances, etc.

2.

Conveyor Division: NKC conveyors carry much of the world's automobiles through the production process.

3.

Window Sash & Hardware Division: NKC manufactured window sash and hardware add to the beauty and functionality of living environments around the world. While meeting the needs of our customers today, NKC is already working

to maximize our potential in these core industries for the future. Supported by our proven track record, advanced technology and our eleven world-class manufacturing facilities, we look to the future with great hope and promise. Corporate History

June 19, 1941 Established: Nakanishi Manufacturing Co., Ltd. 1941 1945 1952 1965 Reorganization/ Trade Name Change: Nakanishi Bearing Metal Works. Trade Name Change: Nakanishi Metal Works Co., Ltd. Started manufacturing of conveyors. Started manufacturing of sash rollers.

1973

Conveyor Division established: Nakanishi Conveyers Co., Ltd. Shiga, Japan manufacturing facility opened.

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1980 1982 1983 1984 1986

NKC of America, Inc. established. Sash Roller division acquired JIS (Japanese Industrial Standards) certification. NKC Conveyors (Australia) PTY established. Nakenishi Conveyors Engineering (Malaysia) established. Nabari Metal Retainer Plant established. Nabari Plastic Retainer Plant established. Rubber Technical Center at Mie Office started.

1987

NKC Conveyors (UK) Ltd. established. Nakanishi Manufacturing Corp. (USA) established. Thai Nakanishi Co, Ltd. (Thailand) established.

1988 1997 2003 2005 2005 2011

Taiwan Nakanishi Conveyors Co., Ltd. (Taiwan) established. NKC Manufacturing Philippines Corporation (Philippines) established. NKC Manufacturing Dalian Co., Ltd. (China) established. NKC Conveyor Foshan Co., Ltd. (China) established. NKC Manufacturing WUXI Corporation (China) established. NKC Manufacturing Sweden AB (Sweden) established.

Code of Conduct

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Nakanishi Metal Works Co., Ltd. and its group companies (hereafter, the NKC Group) considers itself an economic entity that pursues profit through fair competition, at the same time striving to be of service to society in a broad sense. Based on the following 10 guidelines, the NKC Group shall uphold all laws and international conventions and the spirit that they embody, and strive to carry out sound corporate activities based on good judgment with respect for human rights in Japan and abroad.

Principal Mission Our mission is to develop and supply high-quality, safe products that will satisfy customers and consumers and earn their trust, while safeguarding personal information and customer information. Compliance with Laws and Social Norms We shall comply with laws and regulations, and engage in fair, transparent, and free competition in a manner that is appropriate. We shall also maintain healthy, normal relations with the government and public administration. Information Disclosure

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We shall actively communicate with shareholders and the public, and disclose relevant information regarding our corporate management in a prompt and appropriate manner. Providing a Good Work Environment We shall do our utmost to maintain safe, comfortable work environments at the companies in the NKC Group, providing respect for the character, individuality, and self-initiative of all employees.

Environmental Protection We recognize that efforts to protect the environment are a pre-requisite to business presence and activities, and shall engage in them voluntarily and proactively. Social Contributions We shall actively engage in community activities that contribute to society and fulfill our role as a good corporate citizen. Opposition to Antisocial Influence

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We shall resolutely oppose any antisocial organizations or interests that threaten the peace and safety of civil society. International Contributions In our international business activities we shall adhere to international conventions and local laws, respect the culture and customs of the local society, and contribute to the development of the hosting communities. Promoting Corporate Ethics Senior management assumes the responsibility for implementing this charter and for taking all necessary action in order to promote awareness of it throughout the NKC Group. Senior management shall heed the voice of our stakeholders, both internally and externally, and promote the development and implementation of systems that will contribute to the achievement of ethical corporate behavior. Enforcement Should an event occur that violates this charter, senior management shall announce our intended actions for reform clarify the details of the situation, investigate the cause of the violation, and work to prevent its recurrence. After the prompt public disclosure of appropriate information regarding the violation and the fulfillment of accountability measures, rights and responsibilities shall be

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clarified and disciplinary action shall be taken, which includes action affecting senior management where necessary. Organizational Structure Organizational Plantilla POSITION President Vice President Product Developer Production Manager HR Manager Quality Control Manager Accounting Head Medical Doctor Supervisor Accounting Staff Bookkeeper Purchaser Company Nurse Quality Control Personnel Line Leader Health & Safety Officer Warehouse In Charge SALARY RANGE Php 40,000- Php 50,000 Php 40,000- Php 50,000 Php 25,000- Php 35,000 Php 25,000- Php 35,000 Php 10,000- Php 14,000 Php 10,000- Php 14,000 Php 9,000- Php 13,000 Php 8,000- Php 10,000 Php 8,000- Php 10,000 Php 8,000- Php 10,000 Php 8,000- Php 10,000 Php 7, 500- Php 10,000 Php 7, 500- Php 10,000 Php 7, 500- Php 10,000

Job Descriptions Accounting Head Accounting Staff - The person given the authority to make and protect the financial statements in order to assure the accuracy and security of the records. Bookkeeper Company Nurse Health & Safety Officer -

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HR Manager - Is somebody who is responsible for directing, controlling, and organizing the work and staff of a business or the department within it. Line Leader - A production line leader, more often referred to as a production team leader, is a hands-on supervisor who manages the production staff and process to ensure production goals are met. Medical Doctor President Product Developer Production Manager - Responsible in order to meet the production targets with the highest quality and efficiency while keeping the production and utilization at the lowest cost. Production Worker - Production workers manage the process of tending to manual or automated equipment in a production process operation. They perform functions as described by organizational instructions, operating the specified equipment or following production procedures as instructed. Purchaser Quality Control Manager Quality Control Personnel Supervisor Vice President Warehouse In Charge -

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Company Policies and Guidelines (HR Concerns) EMPLOYMENT POLICIES AND PRACTICES EMPLOYMENT We do not allow discrimination in any aspect of employment relationship including hiring, termination, promotion, training, compensation or benefits, based on race, sex, age, religion, creed, color, national origin, handicap, martial status, sexual preference, or pregnancy. This policy also prohibits sexual harassment. We intend to operate our business in compliance with Equal Opportunity laws and regulations of the Federal, State or Local government. Any violation of this policy or retaliation against an individual for asserting their legal rights will result in disciplinary action up to and including termination of employment. Any violation of this policy should be brought to the attention of the Vice President, who is charged with the responsibility of carrying out application of this policy. SELECTION Our employees are selected on the basis of ability. For some positions, we also give tests to assist in judging your job skills. It is our policy to promote from within when this supports our business objectives. As jobs are vacated or created, you will be made aware of the opportunity and may express interest to the Vice President. EMPLOYMENT APPLICATION

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The employment application is an important part of our hiring procedure. A clear understanding of your background and work history will aid us in placing you in a position that matches your qualifications and our business objectives. It also may assist us in possible future upgrading since your employment application becomes part of your permanent personnel record. All information submitted on the application is confidential but subject to verification. Falsification of the employment application is grounds for dismissal.

PERFORMANCE SALARY ADMINISTRATION PROGRAM PERFORMANCE REVIEW PROGRAM It is our policy to formally evaluate our employees' job performances on a regular basis. Merit increases are directly related to the performance levels displayed by each employee. It should be noted that the specific accomplishments and /or failures of each employee are a daily concern of the Agency's management. GUIDELINES 1) The Performance Review is an objective review of your performance based upon previously agreed-to-standards for your job. 2) The Performance Review deals only with job related information.

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3) Notes are kept by your supervisor on a continuing basis during each review period relating to both deficiencies and accomplishments. EVALUATION OF ALL EMPLOYEES The companys management reviews employees in two general areas; performance of major duties and responsibilities and contributing factors. Inspection of the Performance Review form will help in understanding the two areas. Job functions are specific to a given position in the agency; contributing factors are applicable to all positions in the agency. Performance Review occurs at least annually. METHOD OF REVIEW You are notified prior to a scheduled Performance Review to provide an opportunity for candid exchange about the particular job and all it entails, and also on other aspects of your situation that may also have an effect on performance and potential progress in the salary scale or agency hierarchy. You are provided a copy of the Performance Review Form and asked to complete it. A meeting between you, your manager and the Vice President of Operations is held to allow all parties to critique the documentation of the review. At this time, all of you will try and reach an agreement as to the conclusions of the review and any future actions that have to be taken. If training is decided upon, its character and schedule is established; if performance improvement is the outcome, the needed remedial action is determined. If advancement is planned, its schedule and direction is established. You may be advised that performance is acceptable

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and no other action is required. At the conclusion of the final meeting or any brief adjournment of it, all parties "sign off" on the final Performance Review Form. If you do not agree with the evaluation, you will still be asked to sign the form acknowledging that you received it. You may, however, write a rebuttal covering any areas of disagreement. FOLLOW-UP Both management and you must follow through to ensure that what was planned and agreed to for the future in the review actually is achieved within the appropriate timeframe. If some reason for modification of the plan should arise, such as changes in business conditions, an agreement as to how to accommodate the conditions, etc., continues throughout the interim period to the next formal Performance Review. PERFORMANCE RATING GUIDELINES Here are the performances rating guidelines used to evaluate workers performance: RATING: Outstanding (5) DEFINITION: Always exceeds standard requirements of the job, demonstrates extra effort at all times.

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Superior

(4)

Frequently exceeds standard requirements of the job, demonstrates extra effort.

Good

(3)

Meets standard requirements of the job, demonstrates good performance.

Fair Poor

(2) (1)

Meets most requirements of the job. Does not meet the minimum requirements of the job.

NKC Quality POLICY: Top quality On time deliveries Price competitive Safe and 5s work habits 5S BEST PRACTICES SORT Distinguish between what is needed and not needed SHINE Cleaning and looking for ways to keep it clean and organized. SET IN ORDER A place for everything and everything in its place. STANDARDIZE Maintain and monitor procedure policies. SUSTAIN - Stick the role. THE BEST WAY Do the 6S way and surely you will achieve a good place to work.

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Benefits Benefits mandated by law: 1. Social Security Systems (SSS) Contributions 2. Contribution to National Health Insurance Program (NHIP) 3. Contribution to Home Development and Mutual Fund (HDMF) 4. The 13th Month Pay 5. Service Incentive Leave 6. Meal and Rest Periods

Management Aspect Analysis TECHNICAL ASPECT Plant Location Building Profile Product Profile Materials Used with sources Rubber Coreplate Equipments, Tools Used Press Machine Dobby Machine Injection Molding Machine

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Material Inspection

Material Inspection

Press Work

Compounding

Gluing

Physical Test

Stacking of Core Plate

Calendering

Process Flow
Cutting

Vulcanization

Inspection (initial regular Tooling Setting

Visual Inspection

Trimming

Final Inspection

Silicon Treatment

Shipment

Visual Inspection

Stop

Packing

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Manufacturing Flow and Facilities Layout Methods and Time Study Trial 1 Trial 2 Trial 3 Trial 4 Trial 5

Process Coreplate: Material Inspection Press Work Gluing Stacking of Core Plate Rubber: Material Inspection Compounding Physical Test Calendaring Cutting Combination: Vulcanization Inspection (initial regular tooling setting) Visual Inspection Trimming Silicon Treatment Visual Inspection Packing Final Inspection

Average time

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Application of Ergonomics NKC Accident Monitoring Board green blue red orange Signage: Think wisely Act Carefully Work hardly To protect the company Balancing the Quality with Safety will lead to a prosperous NKC Safety everyday is NKCs way to productivity SPC Machine Operation Status no accident near miss accident major accident minor accident

Visual Control Legend: green red yellow pink blue orange SLOGAN: Moving onwards to lower down total defect rate for higher productivity, on-time delivery and topmost quality ok; running machine stop initial no operation machine maintenance others (adjustment)

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Bearing Division Quality Policy Accomplishing our goal in making the best quality product in the market at lower cost 1. Implementing, maintain and continually improve our Quality Management System (QMS) in order to secure stable quality. 2. Provide our customers with 100 % satisfaction at competitive price through improved technology. 3. Strive to introduce more advanced technology and develop new products for our customers. Pollution Control Environmental Policy Our Aim. To Pass on a clean earth to Future generation Environmental conditions have been deteriorating year after year due to global warming, ever-increasing waste production and many other reasons. At NKC, we believe that taking voluntary, energetic action to combat these issues is a matter of corporate and social responsibility. Our approach is to engage in global environmental conservation, striving to reduce the environmental impact that our products and services may have in Japan and other parts of the world in all of our businesses. We are promoting this environmental policy at all of our business facilities in Japan and abroad. 1. Primary Initiatives Regarding Environmental Issues

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a. Energy Conservation: reducing CO2 emissions 1 % annually by unit of output i) Increase operating efficiency of production facilities ii) Systematically replace existing electrical air conditioners with natural gas type iii) Regulate indoor temperature to a low of 28C during the summer months and a high of 20C during the winter months iv) Turn off all office equipment when it will not be in use for 30 minutes or more v) Systematically replace existing company vehicles with eco-friendly cars vi) Reduce electrical energy consumed for security and during non-working hours

b. Industrial Waste Reduction

i) Promote zero emissions (eliminate waste that goes directly to landfill) In April 2007 we achieved zero emissions at the head office and a total of six major districts/plants in Japan. We will sustain these efforts into the future. ii) Maintain current minimum recycle rate of 99% iii) Promote "3R" campaign Reduce Reuse Recycle We promote refuse separation to maximize recycling potential based on the saying: "Separate and it's a resource; mix and it's just trash." c. Toxic Chemical Countermeasures

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We employ efforts to properly manage and reduce or eliminate the use of specified chemical substances in compliance with the Pollutant Release and Transfer Register (PRTR). d. Green Procurement: Giving priority to the following goods.

i) Products that meet environmental standards ii) Products that use reclaimable materials or recycled parts iii) Products that are lighter, longer lasting, or help to save resources in other ways iv) Energy-saving products v) Products that contain no toxic chemicals vi) Products that are easy to handle at time of disposal 2. ISO 14001 Certification Three factories in Japan (Osaka, Nabari and Mie) were certified as ISO14001 compliant on February 27, 2006. 3. Adoption of Natural Energy Sources We began participating in a joint research project with NEDO in 2005, "Field Testing of New Solar Power Generation Technologies." A 110kW solar energy generator has been in operation since October 2009. 4. Social Action Program NKC's Osaka factory was selected by The Energy Conservation Center of Japan's Kinki Branch as a model plant to host the Center's second training session on converting to energy-saving practices. On May 14, 2004, the factory

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introduced its energy conservation practices to participants from other companies in the effort to promote energy conservation. These efforts were based on the Osaka factory's receipt of an award for excellence in energy management from the Kansai Bureau of Economy, Trade and Industry in the year 2003 (electrical division).

MARKETING ASPECT NKC's highest priority in business is our customers' satisfaction. We continually strive to meet or exceed expectations in all areas of our business, from the planning and development stage, through design, manufacturing, implementation and follow-up. It is our goal that NKC's customer satisfaction rating be counted among the best in the world. Since is founding in 1924, NKC's forward thinking has made us a consistent source of innovation across many industry segments while our flexibility has allowed to keep pace with every changing market demands. NKC continues to advance the technologies of our three core divisions. NKC production facilities are designed to maximize quality and performance while minimizing delivery times in order to meet the increasing diversification of our customers' requirements.

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1. Osaka facility: Our Osaka facility manufactures automotive related products as well as a variety of bearing retainers for tapered rollers, balls, etc. 2. Mie facility: The factory in Mie manufactures ball retainers and rubber seals. 3. Nabari facility: The Nabari factory produces small and mid-size taper roller retainers, small and mid-size ball retainers, plastic retainers and a variety of other plastic parts used in other NKC technologies. This plant is equipped with a fully automatic inventory control system for receiving materials and delivery of finished products. 4. Kawachi facility: Our factory in Kawachi manufactures metal components for sashes and other residential related products. 5. Shiga facility: The factory in Shiga manufactures conveyor equipment, automatic controllers, and forklifts. In keeping with our mission to provide 100% customer satisfaction, each of these factories pursues product development and quality improvement initiatives with great zeal.

Target Market

NKC was among the first companies to recognize and enter into the "global market'. The company continually refines its own technologies, while aggressively incorporating a wide range of superior technology developed abroad.

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In 1980, the company expanded its reach in the conveyor industry by founding NKC of America, Inc. in Memphis, Tennessee, USA. While America was already a pioneer nation in the production of conveyor technology, it did not take NKC long to become a well-known brand name in the USA and around the world. As many Japanese automotive and appliance companies began to establish production facilities in the USA, NKC was there to support them from design through the final construction of entire production lines.

Building upon its experience and success in the United States, NKC moved further into the global market by establishing locally incorporated companies in Australia, Malaysia, Canada and the United Kingdom, with branch offices in Thailand and Taiwan. NKC bearing retainer division followed the conveyor division into the global manufacturing arena with production facilities in Atlanta, Georgia, USA and in the Philippines. Today, NKC owns [19] affiliated companies, including [6] factories, outside of Japan that export high quality products to all corners of the world. NKC Manufacturing Corporation Philippines main target market was classified according to the following: Demographic Segmentation Geographic segmentation -

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Psychographic segmentation Investment Perspective

Bearing Industry is likely to witness good times ahead riding on auto sector boom, economic revival and export growth. Valuations of bearing companies have not seen the kind of run up seen by Auto Ancillary peer group due to concerns over industry demand-supply dynamics and huge presence of unorganized sector. However we expect the leading players in the bearing industry to report a better performance over the next two years, as demand growth in key user industries is expected to rise sharply. The automobile industry is the largest user segment for Indian bearing market accounting for almost 45% of total demand. We expect all segment of automobile industry to report strong growth in the coming year. The transformation of road transport through these initiatives as well as higher economic growth would lead to higher demand for commercial vehicle industry. Passenger Cars continue to grow in double digit driven by rising aspirations and cheap and easy availability of finance. Within two wheelers, we expect motorcycle industry growth to continue on its growth path.

Market Demand The demand for bearing industry is derived from demand in two key user segments - automobile and industrial sector growth.

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Market Share

Product Costing

Selling Price Comparison

Product Distribution

Promotion

FINANCIAL ASPECT Income Statement Balance Sheet Financial Aspect Analysis:

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Profitability Ratios Profit margin ROI ROE Asset Utilization Ratios Receivable turnover Average collection period Inventory turnover Fixed asset turnover Total asset turnover Liquidity Ratios Current ratio Quick ratio Debt Utilization Ratios Debt to total ratios Times interest earned Fixed charge coverage Trend Analysis (all the ratios for the past 5 years)