fglea manufacturing industry

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FGLEA MANUFACTURING INDUSTRY

A Business PlanPresented to the

Faculty of the Graduate SchoolASIAN FOUNDATION DEVELOPMENT COLLEGE

Tacloban City, Philippines

In Partial Fulfillmentof the Requirement for the Degree

MASTERS IN BUSINESS ADMINISTRATION

By

Frederick Carlos Bartolome

Ma. Gina FrancoLoreta Baldonaza

Erlette MendozaAsel Dacatimbang

2011


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TABLE OF CONTENTS

Page

Title Page i

Table of Contents ii

List of Tables v

List of Figures vii

Executive Summary 1

THE BUSINESS PLAN 2

THE BUSINESS NAME 2

BUSINESS BACKGROUND 2

THE MANAGEMENT TEAM 3

STRATEGY FORMULATION 4

Vision 4

Mission 4

MARKET SUMMARY 5

STRENGTH-WEAKNESSES OPPORTUNITIES-THREATS 6

External Factors 6

Economy 6

Demography 7

Customers 7

Competition 8

Technology 8

Political/Social Forces 11


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Government Taxation 11

Climate 12

Internal Factors 13

Products and Services 13

Financial Resources 14

Facilities, Machineries and Equipments 14

Management and Labor Relations 15

Managerial Competence 16

Human Resource Management 20

Marketing 21

Finance and Accounting 22

Operations/Production 23

Research and Development 25

Management Information System 26

BUSINESS STRATEGY (STRATEGY SELECTION) 29

OBJECTIVES AND GOALS 32

Projected Sales 32

Market Share 33

Return on Investment (ROI) 34

Human Resource Requirement 34

PROCESS: FUNCTIONAL PLANS 35

Marketing Plan 35


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Historical Demand Analysis 35

Historical Supply Analysis 36

Historical Demand-Supply Analysis 37

Projected Demand-Supply Analysis 40

Market Share Computation 41

Marketing Mix Strategies 42

Marketing Budget 43

Production Plan 43

Product Specification 44

Production Process 44

Equipment and Machinery 49

Management and Labor Relations 50

Production Management/Personnel 50

Organizational Plan 51

Legal Form of the Organization 51

Organizational Structure 51

Personnel Policies 55

Financial Plan 56

Total Capitalization 56

Source of Funds 57

Projected Income Statement 57

Projected Balance Sheet 59

Projected Cash Flow 63


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Financial Analysis 66

CONCLUSION 73

SCHEDULES 74


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LIST OF TABLES

Table Page

1 Permits and Licenses 12

2 Projected Sales 33

3 Human Resource Requirement 35

4 Historical Demand for Agar-agar Products 36

5 Historical Supply of Agar-agar Products 37

6 Historical Demand-Supply Analysis for Agar Products 38

7 Projected Demand 39

8 Projected Supply 40

9 Projected Demand-Supply Analysis for Agar-agar Products 40

10 Market Share 41

11 Equipment and Machinery 49

12 Production Personnel 50

13 Administrative Personnel and Support Staff 52

14 The Project Cost 57

15 Projected Income Statement 58

16 Projected Balance Sheet 60

17 Projected Cash Flow 64

18 Annual Net Profit Margin 66

19 Return on Investment 68

20 Current Ratio 69

21 Debt Ratio 70


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22 Equity Ratio 71

23 Growth Ratio 72


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LIST OF FIGURES

Figure Page

1 Graphical Presentation of the Management Information System 28

2 Schematic Diagram of the Production Process Flow 46

3 The Marketing Plan Layout 48

4 The Organizational Structure of FGLEA Manufacturing Industry 53


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EXECUTIVE SUMMARY

Highlights of the Study

Name of the Project : FGLEA Manufacturing Industry

Project Proponents : Frederick Carlos Bartolome

Ma. Gina Franco

Loreta Baldonaza

Erlette Mendoza

Asel Dacatimbang

Estimated Project Cost : P 17,278,150.00

Fund Source

Loan : P 10,000,000.00

Equity : P 7,278,150.00


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THE BUSINESS PLAN

I. THE BUSINESS NAME

The name of the business is FGLEA Manufacturing Industry. The first five

letters is an acronym consisting of the first letter of the given names of the five project

proponents. Virtually, the choice of this acronym will avoid duplication which is a

common problem when registering a business with the government.

On the other hand, the words manufacturing industry are included in the

business name to indicate the main features of the project.

II. BUSINESS BACKGROUND

FGLEA Manufacturing Industry is a processing plant for Agar-agar seaweeds with

Region VIII as the target market. The idea of processing agar-agar was conceived when

five individuals agreed to establish a business that will venture into the

manufacturing/processing niche. The proponents decided to establish their business in

Brgy. Bagacay, Tacloban City. It is located in the agro-economic section considering that

there is a vacant and spacious lot. Tacloban City was the best choice since the location is

the regional economic epicenter of Region 8. Hence it is advantageous for the business.

Seaweed is a mass growth of marine algae from natural stock or from pond culture.

One of the most important varieties of seaweeds is Agar or Agar-agar, which is commonly

grown in the Philippines. Agar is the source of agarose, one of the world's foremost food

and industrial additives. It is a valuable substance used in gelling, suspending, thickening

or water-holding properties in various products.

Agar or agar-agar is a gelatinous substance derived from a polysaccharide that

accumulates in the cell walls of agarophyte red algae. It is chiefly used as an ingredient in


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desserts and also as a solid substrate to contain culture medium for microbiological work.

Agar can be used as a laxative, a vegetarian gelatin substitute, a thickener for soups, in

jellies, ice cream and other desserts, as a clarifying agent in brewing, and for sizing paper

and fabrics.

However, this business will concentrate and specialize on a product for human

consumption. It is called Organic Gelatin which is to be derived from the raw material of

red and brown seaweeds that are grown in large and commercial quantities in the country.

Hence, there is no problem in so far as the availability of raw materials for the processing

plant is concern.

The processing of agar seaweeds into gelatin has a large business opportunity. The

demand is high even if there are competitors. And this demand will continue to rise since it

is use for human consumption. It will click in the market being health-friendly as an

organic derivative rather than the one with animal origin. Hence, the project has a good

prospect for a viable business endeavor.

III. THE MANAGEMENT TEAM

The management team of the business is the project proponents and/or owners of

FGLEA Manufacturing Industry. They have very wide spectrum of experiences in the

government and private sectors that make it very advantageous in so far as managing the

business is concern.

The members of the Management Team are:

1. Frederick Bartolome - He is a member of the Board of Directors of PHCCI, the

biggest Cooperative in Tacloban City. He is experienced in managerial work.


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2. Ma. Gina Logronio Franco She is a Cashier at the Department of Work and

Highways. She knows accounting and/or financial management.

3. Loreta Baldonaza - She is the Planning Officer of the Department of Environment

and Natural Resources. Obviously, she is a planner.

4. Erlette Mendoza She is a Registrar of the National Maritime Polytechnic. She is

an expert in records management.

5. Asel Dacatimbang She is a Social Welfare Officer at the Department of Social

Welfare and Development, hence good in managing the management

information system or promotion and/or advertisement.

Actually, all of the officers listed above have been in the service for more than ten

(10) years and all of them are still active in their present positions. However, Frederick

Bartolome will act as the General Manager because his present work is not full-time. In

fact should there be a need for him to resign as Board of Director of PHCCI, he is willing

to do so anytime.

IV. STRATEGY FORMULATION

Vision

FGLEA Manufacturing Industry seeks to be one of the leading business

organizations in the processing of agar-agar seaweeds producing high quality Organic

Gelatin for human consumption.

Mission

To produce steady supply of agar processed products in order to satisfy the needs for

gelatin as derivative for food, beverage, and snacks in Region VIII.


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V. MARKET SUMMARY

The Philippines is a dominant producer of the cultured Gracilliara and

Gellidium species upon which the Agar industry depends (DTI, Bureau of Trade and

Exports). Mindanao accounts for 50% of the agar seaweeds production of the entire

Philippines. It was estimated in 2009, that some 100,000 families are engaged in seaweeds

farming and about 72% of these families are located in Mindanao, particularly in the

ARMM provinces and the Zamboanga Peninsula. In Zamboanga City, it has more than

2,000 hectares devoted to the agar seaweeds farming providing livelihood to more than

3,000 families. At present, there are three processing plants in Zamboanga City producing

agar gel, agar powder and dried agar. Another processing plant will operate in year 2011

that will also produce the same products.

On the other hand, Western Visayas accounts for 35% of the total agar production

while Region VIII,which is the target market of this business has only a share of 15% of

the total production. Farms for the culture of seaweed in Region VIII are mostly located in

the province of Southern Leyte. Presently processed and dried agar seaweeds are exported

to numerous international markets, shipped to Cebu or Manila (Bureau of Fisheries and

Aquatic Resources).

What is lacking in the present marketing of dried agar seaweeds is packaging. In

this business, small bars of gelatinous extracted agar will be packaged and labeled with a

catchy name Organic Gelatin.

In terms of volume of production, the Philippines as of 2009 had a total production

of 283,785 metric tons of cultured seaweeds. Of this production, Eastern Visayas

contributed 2,482 metric tons which is about 0.88% only (http:/www.fao.org/docrep/field/


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003/ACO72E/ACOP72E04.htm). On the same period, the value of these cultured seaweeds

in the Philippines is P1,670,220,000.00. However, for Eastern Visayas the value of cultured

seaweeds is P388,000.00 only (http://www.zamboanga.net/ InvestmentSeaweeds.htm). Inother words, the value of cultured seaweeds in Eastern Visayas is nil. Roughly, it is only

0.023% of the entire countrys value. Therefore, the target market of this business (Eastern

Visayas) has rich potential for FGLEA Manufacturing Industry.

Indeed, the market performance of seaweed industry has manifested a remarkable

performance. According to the website cited above, the industry (seaweed) is finding a

growing use of processed seaweeds as evidenced by the increasing demand in the market.

It is full of unexplored opportunities. However, local seaweed processing is limited only to

agar-agar which is utilized purely for food.

Along this line, Organic Gelatin as the sole product of this business will be sold in

the market forthickener for soup, fruit preserves, ice cream, beverages, and other desserts.

VI. STRENGTH-WEAKNESSES -OPPORTUNITIES-THREATS

(SWOT ANALYSIS)

A. External Factors

1. Economy

It has been said that seaweed is an important component of the marine ecosystem

along with the mangrove and coral reefs and can be viewed into two perspectives, from the

ecological value as well as its economic uses. In terms of its economic considerations,

seaweed industry contributed about 27% of the total 2002 fisheries production. The steady

increase in production for the past five years (1997-2002) can be attributed to high market


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demand, better price, and good weather condition that encourage farmers to expand their

areas for seaweed culture.

Seaweed farming used to be an alternative livelihood in the 80s. But it is now

emerging to be an important and major livelihood in the coastal areas. According to the

website (http//www.bfar.da.gov.ph/pages/Programs/prog-seaweed.html); In the

Philippines, the industry employs between 100,000-120,000 manpower where 90% are

seaweed farmers and the rest are seaweed processors and traders.

The seaweed industry in the Philippines is considered to be a huge contribution to

the economy of the country. According to the Bureau of Trade and Exports of the

Department of Trade and Industry, the Philippines is the worlds largest supplier of Agar-

agar products garnering 68% of the total demand.

2. Demography

The targeted market of agar products is Eastern Visayas. The center of distribution

are Tacloban City, Ormoc City, Maasin City, Naval, Biliran, Catbalogan, Calbayog,

Borongan, and Catarman. However, the population of the younger generation who are

frequenting fast-foods, snack bars, eateries, canteens who are servicing meals and snacks

that include gelatin.

Nonetheless, Tacloban City, the location of the processing plant is the focal point of

the marketing network.

3. Customers

FGLEA Manufacturing Industry seeks to specifically capture a portion of the local

market where customers consist of End-users (for home consumption) and Consumer-

market (sellers of food and beverage). End-users are those who will be served by door-to-


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door delivery system. They are the household members who would purchase food items to

be cooked at home. On the other hand, the consumer-market are groceries and/or stores

who are either retailing or wholesaling food items.

The major consumer-market in Tacloban City identified for this business include

Robinsons Tacloban Place, Gaisano, Highway Commercials, Nenas Trading, and

Wilmars.

4. Competition

In Region VIII, FGLEA Manufacturing Industry has no competitor as regards

marketing. The only one industry processing agar seaweed (TBK Manufacturing Industry,

Inc.) located in Brgy. 74, Hollywood Hills, Nula-Tula, Tacloban City is not into selling its

product in the local market the fact that it is exporting to foreign market.

However, as to the use of raw materials, it can be considered a competitor. But this

problem can be easily solved with the idea of establishing contract growers and

supporting seaweed farmers to expand their seaweed culture.

5. Technology

Most processors are using the press/syneresis technology; although some are using

the freeze/thaw technology. However, a combination of these two technologies is also

used. While the basic processes may not have changed, improvements in presses and

freezing equipment must be noted. High-pressure membrane presses have greatly improved

dewatering of agar and thereby reducing energy requirements for final drying before

powder milling. Gracilaria and Gelidium are the principal seaweeds for commercially

producing agar. Gracilaria has become the preferred seaweed for making food grade agar;

because it has been successfully cultivated in the country. Gelidium continues to be the


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preferred seaweed for making bacteriological and pharmaceutical grade agars and agarose.

Strong-gelling agar is extracted directly from Gelidium with a dilute acid solution to break

down cell walls in a pressure cooker; whereas extracting strong-gelling agar from

Gracilaria requires the use of a boiling alkali solution. The alkali treatment converts the

galactose 6-SO4 to 3, 6 anhydrogalactose, well-known chemistry that de-kinks the

polygalactose molecules and enhances the gelling process. These process differences

explain why it is difficult to optimize the production of agar from both seaweeds in the

same process line.

The project proponents have studied some basic procedures in processing agar-agar

seaweeds. Among many other things, the one summarized by the website

(http://www.mixph.com/2008/10/seaweeds-processing-village-level.html) will be adopted

by them. There are eleven (11) steps in this chosen technology, to wit:

a) Washing of raw materials to remove the sea salts, dirt, mud, and sand entrained in

the seaweeds to produce a clean and good quality product,

b) Alkali treatment to improve the getting properties of the product (agar) and

making it more valuable. Alkali treatment results in a purer product and

facilitates the filtering stage as the viscosity of the agar solution is lowered by

this treatment,

c) Post-alkali washing to remove as much of alkali from the treated Glacilaria. This

is important for agar product quality and yield,

d) Bleaching to improve the color and appearance of the product. It also reduces

bacterial contamination in the seaweed,

e) Chopping to increase the efficiency of extraction,


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f) Extraction of agar from the Glacilaria is facilitated by utilizing the highest

temperature as possible. In order to dissolve the contained agar, the temperature

must be above the agar melting point, normally above 90 C,

g) Gelification to get the filtered extract solution by cooling at ambient temperature;

saves energy during the freezing process for agar bars. Gel is cut into correct size

for agar bars and into small pieces for gel de-watering operation,

h) Freezing as the only way to manufacture agar strips and bars. The agar solid

contained in the gel form a matrix surrounded by ice. This is a convenient

method of recovering agar from dilute solutions, although this procedure costs

considerably more both in equipment capital cost and operational cost than the

alternative pressure de-watering method,

i) Thawing to remove the water from the chilled agar bar or frozen gel blocks by

exposing it to a normal temperature and air,

j) Drying to obtain the maximum of 15% moisture content for good quality product

results. It can be done in a solar dryer or homemade dryer, and

k). Grinding or milling in order to pulverize the agar bar.

It appears from the enumerations of the step by step activities in processing agar-

agar that it is not highly technical. The procedure can be considered easy and simple. It is

noteworthy however, that the procedure is labor intensive aside from the need to use

machines. But since there is more than enough cheap labor in the project area, there would

be no problem in recruiting labor force for the project.


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6. Political/Social Forces

Tacloban City is one of the best locations in establishing a new business considering

that the present set of elected leaders is encouraging entrepreneurs to open investment in

the City. Apparently, there are no restraining forces that will slow down the

implementation of programs related to commerce and industry since the incumbent City

Mayor is aptly supported by the majority of the City Councilors. In fact the city was

recently approved as a Highly Urbanized City, which is a brainchild of the City Mayor. In

other words, there is stability of the present governance which naturally supports economic

activities in the City. Only recently, Robinsons was opened in Tacloban, and it keeps on

expanding. Gaisano had opened another branch. The existence of other equally popular

establishments, like MacDonald, Shakeys, or Jollibee have changed the eating habit of the

people that more and more are consuming foods and beverages with agar-agar as an

indispensable ingredients.

Specifically, there is the livelihood program of the city government which highly

supports small time entrepreneurs to put up economic activities. The City had recently

organized the Office of Cooperative and Development in support of the livelihood

program.

7. Government Taxation

The FGLEA Manufacturing Industry will be subjected to the required taxes and

other tariffs that the government may impose upon it. These are basic requirements for the

business to operate. On its pre-operation period, it will pay the needed permits, licenses and

certifications. During the operation period, the business will pay its annual income taxes


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and other necessary tariffs that may be levied upon it by the government on its operational

activities.

Table 1 shows the list of permits and licenses with their corresponding cost.

Table 1

Permits and Licenses

Permits and Licenses Cost

DTI Registration 600

City and Business Tax 1500

Mayor's Permit 1800

Application Fee 100Clearance Fee 100

Sanitary's Fee 500

Weight and Measure 500

Fire Inspection 600

Total 5,700.00

Annual projections:

2012 5,700.00

2013 5,985.00

2014 6,284.25

2015 6,598.46

2016 6,928.39

Note:

Permits and Licenses are assumed to increase 5% annually.

8. Climate

One of the major factors that affect FGLEA Manufacturing Industrys operation is

climate. In the Philippines with so many weather depressions and/or storms in a year, the

cultural management of the seaweed is naturally affected by the disturbance of the sea in

the form of strong waves. This is a major factor which could contribute to the fluctuation in

the supply of raw materials. In other words, during months and/or periods that these

weather depressions and/or storms are less expected, contracts to purchase with seaweed


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producers can be optimized. On the other hand, when climate is not favorable to the culture

of the seaweed, the need for raw materials will be reduced by lowering its operation target.

It is noteworthy that the reason why the project is highly feasible is the climate in

the Region. The hot and humid temperature of the Philippines is an ideal climatic condition

for the cultivation of the said seaweeds. This is so because according to the website

(http://en.wikipedia.org/wiki/Seaweed), one of the two specific environmental

requirements for seaweed ecology is the presence of sunlight to drive photosynthesis. The

other one is seawater or at least brackish water. Obviously, there is sunlight to hasten

photosynthetic activity to assimilate food nutrients by the seaweeds.

In view hereof, the FGLEA Manufacturing Industry management will jibe its

production target with the supply of raw materials. But to handle the bad effects of

fluctuation in the supply of raw materials, management will establish network of contract

growers who will be the exclusive suppliers of seaweeds to the business.

B. Internal Factors

1. Products and Services

The FGLEA Manufacturing Industry will concentrate and specialize on the

production of Organic Gelatin. This is to be utilized purely for food as substitute for animal

origin gelatin.

The specialized service that will be offered by the business is door-to-door

delivery of packaged agar gelatin.

At present, this product and kind of service are exclusive of The FGLEA

Manufacturing Industry.


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2. Financial Resources

The financial resources of the FGLEA Manufacturing Industry will be generated

from two sources, namely; the internal and the external sources. The internal fund is the

equity of the project proponents as their investment to the business. The external fund

amounting to P 10,000,000 on the other hand, will be loaned at the Development Bank of

the Philippines with an interest of 12.00% per annum payable in 10 years. The equity

contribution amounting to P 7,278,150 will be equally divided among the five project

proponents. Hence, the total estimated project cost of the business is P 17,278,150.

3. Facilities, Machineries and Equipments

The proposed business will build two buildings, the administration building and

processing plant building with modern equipment and machineries in order to provide

quality, fast and efficient processing of agar.

3.1 Project Facilities The proposed project will occupy a lot area of 1,500 square

meters with a one-storey administration building occupying about 225 square meters and a

processing plant building using approximately 297 square meters. The remaining area will

be allocated for parking lots, water treatment facility, quarters for production personnel,

and for future plant expansion. The ground development plan, building plan, building

design and estimates, including building construction supervision will be entrusted to a

Civil Engineer.

The proposed project will be located at the Agri-Economic Zone of Tacloban City in

Brgy. 93 (Bagacay), Tacloban City. The floor plan of the processing plant that will be

constructed will have nine (9) sections such as; 1) raw materials storage area, 2) cleaning


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area, 3) extraction area, 4) filtration area, 5) gelation area (bleaching), 6) gelation area

(syneresis), 7) drying area, 8) milling area, and 9) finished goods storage area.

On the other hand, the Administration Building will be furnished with electric funs

and will be provided with one computer. It will have adequate fixtures of a presentable

office.

3.2 Equipment and Machineries - The proposed Agar processing plant will be

equipped with different equipment from preliminary process up to the last stage of

processing network. In addition, vehicles will also be purchased to transport raw materials

from the source to the processing plant and deliver finished products to the costumers.

All equipment and machineries to be installed in the processing plant including

tricycles will be brand new, while cargo trucks and vans are to be slightly used second-

hand units. The table on equipment and machineries is to be presented later (Table 11).

4. Management and Labor Relations


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Understanding legal decisions and legislations is fundamental in the increasingly

litigious society. Hence, the management should make it a point to be cautious in making

managerial decisions that may pertain to labor relations. The upper level management in

adopting a policy of directive democratic managerial system shall respect the right of its

employees and shall give them their respective benefits tantamount to the service that they

provide to the company. In order to uphold its reputation as an employer of choice, FGLEA

Manufacturing Industry shall maintain trust and cohesion with the employees and shall

avoid wrongful and unjust terminations. Moreover, the decision to terminate an

individuals employment carries with it the risk of a possible legal challenge, hence it is but

wise to determine first whether it is rightful to terminate an employee or not. To avoid this

problem, labor requirement that can be classified as seasonal shall be hired on contractual

basis.

It's a good idea for business to maintain a personnel file for each employee.

Documentation of employment history, records of contribution and achievement,

disciplinary notices, promotions, and performance record shall be kept on file in the hard

disk. For the benefit of the company, there should be confidentiality agreement which is a

written legal contract between the business and its employees. The confidentiality

agreement lays out binding terms and conditions that prohibit the employee from disclosing

company confidential and proprietary information. A confidentiality agreement is in effect

for the duration of an employees employment.

On the other hand, a Code of Conduct should be imposed by the company to its

employees. A Code of Conduct is a written collection of the rules, principles, values, and

employee expectations, behavior, relationships that an organization considers significant,


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and beliefs that are fundamental to successful operation. A code of conduct enumerates

those standards and values that make an organization remarkable and that enable it to stand

out from similar organizations. This would avoid conflict of interest, which causes an

employee to experience a struggle between diverging interests, points of view, or

allegiances. By applying these methods, FGLEA Manufacturing Industry will have a

smooth sailing operation.

5. Managerial Competence

In order to have a successful business, the proponents of this study who will

compose the Management Team of the project will ensure managerial competence on all

levels of operation. Although they have different college educational qualifications and

disciplines, they are both studying Masters in Management (MM) that unifies them to a

common denominator of being potential effective business managers. They understand

how to exercise their managerial functions.

The desire of the project proponents to acquire managerial competence is shown in

their present desire to graduate MM. While it is true that they lack actual experience in

running a business, but they are certainly very adequately prepared to put the theories in

their heads into actual practice.

, less soluble matter remains, so the agar is more pure. Less energy is also needed in

the drying process since less water needs to be removed. This process based on syneresis

has been widely adopted by large agar producers who can afford the higher capital costs for

this equipment.

10. Research and Development


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In the area of research and development of, R&D of FGLEA Manufacturing Industry

is specializing in just one product. It will require high quality control that the new product

will meet the product specification. On the other hand, researching the product according to

allocated budget, checking if the product meets production costs, delivering products in

time and in full range, and developing the product to comply with regulatory requirements

and specified quality levels are serious concerns of the business.

The business will endeavor to maintain and even enhance the quality of the product.

It will strive to keep the company product range ahead should there be any competitor in

the near future. The business will sustain that the new product will be able to comply with

some regulations and/or requirements pertaining to quality.

11. Management Information System

FGLEA Manufacturing Industry will install a centralized Management Information

System (MIS) that keeps a database using a computer programmed for the purpose. The

equipment will have a password only known to the Administrative Head who will handle

MIS to avoid from being corrupted if other users are free to open it. The system's remote

users are served by transporting input and output data physically or electronically. This

would be advantageous for the business since it provides for the standardization in the

collection of data and the release of information.

The MIS of FGLEA Manufacturing Industry will reduce the need for multiple

hardware, software, space, personnel, and databases because it is centralized. It will be

using the Databank Information System which will observe, classify, and store any item of

data which might be potentially useful to the decision maker. Examples of the kind of data

that might be recorded in the database are; supplier of raw materials, production quota


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(daily, monthly and annual basis), production inputs (daily, monthly and annual basis),

production staff assigned in the working area, number of work hours devoted by staff to the

respective working area, and total production cost (materials, labor and over head).

The data that will be contained in the databases stated above can be summarized and

converted to single tabular presentation of information easy to understand to management.

Figure 1 is the graphical illustration of the Management Information System.

It is obvious in the figure that the MIS needs reports and/or information. So, data are

collected, classified, processed, and presented to aid in the decision-making. If data is

insufficient, projections and models of the business will be re-studied to design possible

alternative, strategies, and forecast. The best alternative will be selected. If the selected

alternatives or strategies will not yield to a satisfactory solution, changes in assumptions

will be done before such alternative is implemented. There will becontinuousfeedback and

follow-up to review the outcome. Hence, monitoring of implementation is important to the

MIS.


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Figure 1: Graphical Presentation of the Management Information System

.

DECISION STAGE INFORMATION REQUIRED

INTELLIGENCE

(Collection, classification,processing, andpresentation of data)

- Status reports

- Trend reports- Other reports

- Ad-hoc inquiry

DESIGN

(Outline alternative, strategies,

forecast, and possible outcome of

each alternative)

CHOICE(Selection of the best alternative)

REVIEW(Monitoring of implementation)

- Models and analytical tools

- Projections

- Alternatives(Expected scenario)

- What if?- Evaluation of alternatives

Feedback and follow-up

Insufficient data

No satisfactory solution

Change in assumptions


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VII. BUSINESS STRATEGY (STRATEGY SELECTION)

The main strategy of FGLEA Manufacturing Industry is stated in its vision and

mission; that of being socially concern of its customers by producing high quality product.

It means that if its high quality, it satisfies the taste of the users.

The Management Team of FGLEA Manufacturing Industry is conscious that any

business venture, like its business, is most susceptible to failure during its first few years of

operation. A key to getting through these early years is to avoid the obvious mistakes.

FGLEA Manufacturing Industry management will try to avoid these obvious mistakes

which include the area of finance, market/sales, management, operations, and offering.

It is apparent from the listing above that there are very many obvious mistakes that

the business needs to avoid if only to shun from early failure. The trick in avoiding them is

to anticipate them by executing appropriate strategies at the outset. FGLEA Manufacturing

Industry will avoid these causes of failure by using market research to confirm demand and

assess suitability of proposed offerings, creating a management team to offset any gaps in

experience or expertise, and raising equity to reduce exposure to interest from loans.

VIII. OBJECTIVES AND GOALS

The discussion on this topic deals on sales, market share, return on investment,

production and operations, and human resource requirement. The discussions are all linked

with the business vision and mission of being a producer of high quality organic gelatin

agar product.

A. Projected Sales

After conducting its market study, the five project proponents have laid down the

proposed capacity of the business. Table 2 in the next page reflects the projected sales that


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the business has targeted over the period of five years. These projected sales were

computed by multiplying the proposed capacity of the processing plant by the unit selling

price of the product. In the table, the business will start with a production capacity of

100,000 kilograms of dried agar with a selling price of six hundred pesos per kilo. After

five years, the proposed capacity of the processing plant is 121,550 kilograms with a selling

price ofP 675.00.

Table 2

Projected Sales

YearProposed Capacity*

(Kgs.)

Unit Price/Kg.**

(Pesos)

Projected Sales

(Pesos)

2012 20,000 600 12,000,000

2013 21,000 618 12,978,000

2014 22,050 637 14,045,850

2015 23,153 656 15,188,368

2016 24,310 675 16,409,250

Legend:

* - Expected to increase by 5% annually.** - Expected to increase by 3% annually.

B. Market Share

While it was said earlier that the business has no competitor in Region VIII in

marketing agar organic gelatin, it is actually competing with the animal gelatin products.

Hence, getting a market share will indicate the business market competitiveness, e.g. how

well FGLEA Manufacturing Industry will par against businesses dealing with similar but


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not the same products. The market share will supplement the changes in sales revenue of

FGLEA Manufacturing Industry and help its Management Team evaluate both primary

and selective demand in the market. That is, it will enable them to judge not only total

market growth or decline but also determine customers selections between organic gelatin

or animal gelatin.

The business will translate its sales targets into market share in order to demonstrate

whether forecasts are to be attained by going with the market or by capturing share from

those buying animal gelatin. Nonetheless, FGLEA understands that market share is almost

always difficult to achieve. Hence, it will closely monitor for signs of changes in the

competitive landscape. The computation of market share for FGLEA Manufacturing

Industry is presented in the financial plan aspect that will be discussed later.

C. Return on Investment (ROI)

The Return on Investment will be used to evaluate the investment efficiency of

FGLEA Manufacturing Industry. It will be adopted in assessing the financial consequences

of business as to whether it is gaining, losing, or just break-even so that appropriate

decisions and/or actions can be made.

Therefore, the profitability of FGLEA Manufacturing Industry will be measured

through its income growth and the marginal return of its invested capital. Thus, the Return

on Investment (ROI) is being computed in order to ascertain whether the proposed project

has garnered a positive performance or whether it is a financial failure, and in order to

determine whether the business was capable of handling its assets in order to gain profit, or

the rate of return that the business has on its investment.


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The ROI of FGLEA Manufacturing Industry is computed and presented in the

Financial Plan to be discussed later.

D. Human Resource Requirement

The human resource requirement of FGLEA Manufacturing Industry is presented in

Table 3. Their corresponding salaries are also indicated. There are 47 personnelto be hired

for the project. For this number of personnel, the total annual salary is P 4,386,000. It is

assumed that this expense will increase 7% per annum.

Table 3

Human Resource Requirement

Name of PositionNumber of

Personnel

Monthly

Salary

Total Monthly

Salary

Manager 1 20,000 20,000Production Head 1 12,000 12,000

Production Unit Operators 7 8,000 56,000

Production Helpers 16 7,000 112,000

Administrative Head 1 10,000 10,000

Supply Officer 1 8,000 8,000

Storekeepers 2 7,000 14,000

Accounting Clerk 1 7,000 7,000

Truck and Van Drivers 2 7,500 15,000

Tricycle Drivers 3 5,000 15,000

Janitors 2 5,500 11,000

Marketing Head 1 10,000 10,000

Marketing Assistants 2 8,000 16,000

Total 47 NA 365,500

IX. PROCESS: FUNCTIONAL PLANS


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A. Marketing Plan

The marketing plan of FGLEA Manufacturing Industry will describe the demand-

supply analysis, market share computation, five-year sales forecast, marketing mix

strategy, and marketing budget for promotions, advertisement and merchandizing.

1. Demand Analysis - Based on the gathered data from the Department of Trade

and Industry and the National Statistical Coordinating Board, the demand for Agar

Seaweeds has showed a very promising investment opportunity. Since year 2006, the

demand for dried agar has shown a relative increasing trend in the market. This clearly

manifest that the said venture is indeed profitable as reflected by its continued growth in

demand. Table 4 shows the historical demand for dried agar.

Table 4

Historical Demand for Dried Agar

Years

Demand

(Metric Tons)

2006 4,368

2007 4,605

2008 4,954

2009 5,278

2010 5,605

It is reflected in Table 4 that the historical demand for dried agar is steadily

increasing every year. Over the past five years the supply of dried agar had increased by

22% [5,605 4,368] [5,605].

2. Supply Analysis - In order to meet with the growing demand, producer of these

products continued to supply the market. As shown by the data gathered from the same


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source above stated, the quantity of supply for these products has also shown a relative

increasing trend. This increasing trend in the supply does not only reflect the efforts of the

suppliers to produce more but also a natural phenomenon of trying to meet the increasing

demand in the market.

The historical supply of dried agar in metric tons is shown in Table 5.

.

Table 5

Historical Supply of Dried Agar

Year Supply(Metric Tons)

2006 3,334

2007 3,542

2008 3,822

2009 4,179

2010 4,569

A close look at Table 6 shows that the supply has an increasing trend every year.

Over the past five years the supply of dried agar had increased by 27% [4,569 3,334]

[4,569].


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3. Demand-Supply Analysis - A close scrutiny of Tables 4 and 5 presented above

reveals that the supply is always lower than the demand. While the trend of both demand

and supply are increasing annually, but supply always lags behind throughout the period

covered by this analysis.

The data above reflect that the commercial potential of the Agar-agar seaweeds is an

example of a demand-driven development, wherein the right mixes of financial and

institutional support in tandem with private investments has made the prospect of this

industry bright. The continued growth of its market has made it an important industry in the

seaweed sector. The market study conducted by the project proponents showed that not

only in Region VIII but also in the entire Philippines that agar seaweed is a profitable

business.

3.1 Historical Demand-Supply Analysis - With the discussions above, and with

the records on demand and supply taken from DTI and NSCB, the proponents studied the

market situation for the project. As what can be observed from the data below, the supply

cannot fully supplement the growing demand of the local and world market. Hence, a gap

has occurred resulting to an unsatisfied demand in the world market, which might be

attributed to different kinds of production or technical factors. This clearly implies that the

situation can offer a market space for another player. Table 6 reflects the historical demand

supply analysis.

Table 6

Historical Demand-Supply Analysis for Dried Agar

Year Demand Supply D-S Gap UD (%)

2006 4,368 3,334 1,034 24


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2007 4,605 3,542 1,063 23

2008 4,954 3,822 1,132 23

2009 5,278 4,179 1,099 21

2010 5,605 4,569 1,036 18

It is shown in Table 6 that the demand is higher than the supply. Noteworthy to

mention is that the gap between demand and supply is increasing annually. The gap in 2006

was 398 metric tons and gradually increased every year that hit 486 metric tons in 2010.

Hence, the unsatisfied demand in 2006 and 2010 were 24.32% and 23.72%, respectively.

This is computed by dividing the gap by the demand multiplied by a constant of 100.

The reason why dried agar seaweed is in demand is it is very nutritious. According

to the website, seaweed draws an extraordinary wealth of mineral elements from the sea

that can account for up to 36% of its dry mass. The mineral macronutrients include sodium,

calcium, magnesium, potassium, chlorine, sulfur and phosphorus; the micronutrients

include iodine, iron, zinc, copper, selenium, molybdenum, fluoride, manganese, boron,

nickel and cobalt. Seaweed has such a large proportion of iodine compared to dietary

minimum requirements (http://www.itmonline.org/arts/seaweed.htm). The same website

also cited that aside from iodine, seaweed is one of the richest plant sources of calcium,

protein, several vitamins, and has very little fat, ranging from 1-5% of dry matter.

3.2 Projected Demand - In order to determine the market situation of the business

venture, the proponents conducted a study based on the trends from the gathered data. In

the historical demand shown in Table 5, it is reflected that the percentage increase is 22%

over five years. Roughly this is 4.4%. Hence, using the Straight-Line Method of the Time

Series Analysis, the projected demand using 5% increment yearly is adopted.


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The result of the study is shown in Table 7.

Table 7

Projected Demand

Year Demand in Metric Tons

2012 5,885

2013 6,180

2014 6,490

2015 6,814

2016 7,154

3.3 Projected Supply - Supply was likewise projected in order to have a clear idea of

the future market situation of the products. The projection is based on the trend of the historical

supply shown in Table 5. Obviously, there is a growing market for the products.

Table 8 indicates the projection of the supply.

Table 8

Projected Supply

Year Supply in Metric Tons

2012 4,798

2013 5,037

2014 5,289

2015 5,554

2016 5,830


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3.4 Projected Demand-Supply Analysis - By using the data on the projected demand

and projected supply, the Projected Demand-Supply Analysis was computed and presented in

Table 9.

Table 9

Projected Demand-Supply Analysis

Year Demand Supply D-S Gap UD (%)

2012 5,885 4,798 1,087 19

2013 6,180 5,037 1,143 19

2014 6,490 5,289 1,201 19

2015 6,814 5,554 1,260 19

2016 7,154 5,830 1,324 19

The results in the projection on demand-supply as indicated in the table shows that

the unserved demand is 19% yearly. However, the gaps between demand and supply are

increasing annually. This indicates that there is a potential market for the product.

Obviously, the data disclosed that demand cannot be satisfied by the supply, hence opening

another market for a new player.

4. Market Share Computation - The equation used in computing the market share

is as follows:

Market Share =Proposed Capacity

x 100Proposed Capacity + Projected Supply

The results of the computation of the market share of the FGLEA Manufacturing

Industry for the next five years are shown in Table 10.

Table 10

Market Share


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It is shown in the table below that there is a good market opportunity for the

products of the business.

Year

Projected *

Supply

Proposed **

Capacity

Proposed Capacity +

Projected Supply

Market

Share(Tons) (Tons) (Tons) (Percent)

2012 4,798 50 4,848 1.03

2013 5,037 52.5 5,089.5 1.03

2014 5,289 55.13 5,344.13 1.03

2015 5,554 57.88 5,611.88 1.03

2016 5,830 60.77 5,890.77 1.03

* - Refer to Table 8 on projected supply.

** - Refer to Table 2 on projected sales.

It is shown in Table 10 that the market share of FGLEA Manufacturing Industry for

the next five years is only 1.03%. These data indicate that there is a good market

opportunity for the product of the business since the market share that it requires will not

require getting most of it.

5. Marketing Mix Strategies - Since the primary objective of FGLEA

Manufacturing Industry is to gain profit, a thorough marketing plan is indeed needed in

order for the business to be successful. It is a process through which the customers may

gain interest of the product thereby producing vital sales to the business. It generates the

strategy that underlies sales techniques, business promotion, and business developments. It

is an integrated process through which the business will build strong customer relationships

and create value for their customers and for themselves. Specifically, FGLEA

Manufacturing Industrys marketing mix is a combination of marketing tools that are used


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to satisfy customers and company objectives. Its strategy is controlled by the following

variables:

3.1 Product The best marketing strategy of FGLEA Manufacturing Industry

is its product. The business will produce and deliver quality products to its

customers and will make sure that its product satisfies the consumers. The product

will be promoted as health-friendly being non-fat.

3.2 Price FGLEA Manufacturing Industry will adopt the generally accepted

pricing of adding 20% net income over and above its production cost. Therefore, the

selling price of the product will be influenced by the factors affecting production

cost, such as; raw materials, labor, and other expenditures directly related to it.

3.3 Place The FGLEA Manufacturing Industry will distribute its product in

wholesale to its consumers-market (grocery stores) and retail to end-users

(homeowners). Our marketing strategy will depend on how effective and efficient

we are in reaching our targeted market identified earlier.

3.4 Promotion The marketing strategy of FGLEA Manufacturing Industry

will include less expensive modes of promotion but are effective and efficient. It will

distribute printed leaflets at the main entrance of malls/grocery stores. It will also

take advantage of the free ads at http://www.google.com. It will also distribute free

samples in limited quantities from time to time.

4. Marketing Budget The marketing budget of FGLEA Manufacturing Industry

is mainly for promotions. All other expenses, such as salaries for employees making the

promotion are built-in in the other areas of budgeting. And the cost of promotion is very


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minimal since it will utilize free-of-charge advertisement in the Mozilla Firefox, printed

leaflets, and limited samples.

Therefore, from the above stated mode of promotion, this business has a very

conservative estimate of ten thousand pesos (P10,000) for marketing budget for the first

year of operation. But it is assume that these expenses for promotions will increase by 3%

annually.

B. Production Plan

The production plan of FGLEA Manufacturing Industry states in general terms the

product specifications, the product process, the product facilities and equipment, and the

product management. They are discussed as follows:

1. Product Specification - The proposed business will offer good quality products

of processed seaweeds (Gelidium and Gracilaria) into a dried agar bar called organic

gelatin with a dimensions of 12 inches x 1.5 inches. It is to be used for thickening agent. It

is a non-fat and non-caloric fiber good for the human health. As a thickening agent, it will

substitute animal gelatin in making ice creams, cakes, pastries, soups, soft drinks, and other

beverages.

2. Production Process - The basic extraction of agar from seaweeds starts with

washing and cleaning the seaweed to remove foreign matter. There are some differences in

the processing of the various seaweeds prior to extraction, depending on the type of

seaweed used. Gelidium is simply washed to remove sand, salts, shells and other foreign

matter and is then placed in tanks for extraction with hot water. Gracilaria is also washed,

but it must be treated with alkali before extraction; this alkaline pre-treatment causes a

chemical change in the agar from Gracilaria, resulting in a product with increased gel


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strength. Without this alkaline pre-treatment, most Gracilaria species yield an agar with a

gel strength that is too low for commercial use. The alkali treatment is heating the seaweed

in a 2-5 percent sodium hydroxide at 85-90C for 1 hour; the strength of the alkali varies

with the seaweed species and is determined by testing on a small scale. After removal of

the alkali, the seaweed is washed with water, and sometimes with a very weak acid to

neutralize any residual alkali. In the next processing step, the seaweed is heated with water

for several hours during which the agar dissolves in the water. Gelidium seaweed is more

resistant and extraction under pressure (105-110C for 2-4 hours) is faster and gives higher

yields. Gracilaria seaweed is usually treated with water at 95-100C for 2-4 hours. The

remainder of the process is the same for both types of raw material. The hot extract is given

a coarse filtration to remove the seaweed residue, filter aid is added and the extract is

pumped through a filter press. The extract is thick and will gel if allowed to cool. So it

must be kept hot during the filtration processes. The hot filtrate is cooled and forms a gel

which contains about 1 percent agar. The remaining 99 percent is water containing salts,

proteins, carbohydrates and colour molecules. The gel is broken into pieces, and, if

necessary, it is bleached to reduce the colour. Then it might be washed again to remove the

bleach and remaining salts. The next step is removing the remainder of the water from the

gel. There are two methods commonly used: either a freeze-thaw process or by using

pressure (synerisis). In the freeze-thaw process, the gel is slowly frozen so that large ice

crystals form. The structure of the gel is broken by the ice crystals and when it thaws again

a lot of the water drains away, leaving a concentrated gel which contains about 10-12

percent agar. Sometimes, this gel is placed between porous filter cloths and squeezed in a

hydraulic press to remove more water. However, this is a slow process, and usually the


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thawed material is simply drained and placed in a hot-air dryer. After drying, it is milled to

the required particle size. While the process involves press/syneresis technology is simply

by bleaching dialysis and syneresis. The press/syneresis is the most commonly use process

among different agar manufacturing company for it is not costly and becomes efficient to

operate. However, the proposed project will use the process of syneresis rather than the

freeze thaw process because of its cost effective viability.

The schematic diagram of the production process flow is reflected in Figure 2.

Washing and Cleaning of

Seaweeds

GELIDIUMRemove sand, salts, shells

and other foreign matter

GRACILARIA

Treat with Alkaliand wash

EXTRACTION

FILTRATI

GELATION

BLEACHING

DIALYSIS


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Figure 2. Schematic Diagram of the Production Process Flow

3. Product Facilities and Equipment - The proposed project will include product

facilities and product equipment vital to production. The main features of the facilities are

the administration building and processing plant. Whereas, the equipment are generally for

processing and transportation.

3.1 Product Facilities - The manufacturing plan layout is shown next page. It

is drawn to a scale of 1:100 in metric. The dimension of the plant layout is 14.90 by

19.95 meters.

The layout plan of the processing plant building has nine (9) main sections

which are: 1) the raw materials storage area, 2) cleaning area, 3) extraction area, 4)

filtration area, 5) gelation area (bleaching), 6) gelation area (syneresis), 7) drying

area, 8) milling area, and 9) finished goods storage areas.

SYNERISIS

DRYING

MILLING

AGAR

Block/Bar Form

Powder Form

Strip Form


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Figure 3 : The Manufacturing Plan Layout

3.2 Equipment and Machinery - The proposed Agar processing plant will be

equipped with different equipment suitable to the different processing stages. Table

11 reflects the brand new equipment that will be used for the production of Agar

products.

Table 11

Equipment and Machinery

Equipment Function No. of

Unit

Unit

Price

Total Cost

1. Cargo TruckTransport raw materials from sources

to processing plant1 300,000 300,000

2. Slightly used vanDeliver finished products to

customer-markets1 120,000 120,000

3. TricyclesDeliver finished products to end-

users3 80,000 240,000

4. Conveyors

Transport raw materials

mechanically from different areas ofproduction 5 50,000 250,000

5. Alkali treatmentMachine

Use for cleaning/washing graciliarabefore extraction

1 20,000 20,000

6. Boiler with 2

tanks

Use for extraction of Agar (Gelidium

and Graciliara)1 100,000 100,000

7. Filter Press Use in filtration process of agar 1 150,000 150,000


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8. Bleaching

Machine

Use in gelation process of Agar

through bleaching dialysis1 320,000 320,000

9. SyneratorMachine use for separation of agargel into water

1 250,000 250,000

10. High EfficiencyDrying Machine

Machine use for drying the gel andforms into sheets

1 270,000 270,000

11. Milling Machine

(w/ 3 class ofmill)

Machine use for milling Agar into 3

different class of Agar1 170,000 170,000

12. Water Tank 3 50,000 150,000

13. Storage Tank

(100cm x198cm)

Use for storing seaweeds and other

raw materials.5 10,000 50,000

14. Storage Tank

(23.50cm x

24cm)

Use for storing final goods/products. 3 35,000 105,000

Over-all Total Cost 2,495,000

4. Management and Labor Relations

4. Production Management/Personnel - The proposed project will employ

personnel in every area of production and it will have to operate 8 hours in a day from

Monday to Saturday. The operation of the production will start at 7 oclock in the morning

until 4 oclock in the afternoon. All production personnel must arrive on time because

operation will not start if anyone is not on their respective post before operation starts.

Table 12 shows the list of production personnel with their corresponding salary.

Table 12

Production Personnel

Particulars

Number of

Items

Monthly

Salary

Total Monthly

Salary

Production Head Assistant 1 8,500 8,500

Storage Area

Production Helper 2 7,000 14,000

Cleaning Area

Production Operator 1 8,000 8,000



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Extraction Area



Filtration Area



Gelation Area (Bleaching

Dialysis)



Gelation Area (Syneresis)



Drying Area

Production Operator 1 8,000 8,000Table 12 to be continued

Continuation of Table 12.


Drying Area



TOTAL 24 NA 176,500

C. Organizational Plan

The organizational plan briefly includes the discussions on the legal form of FGLEA

Manufacturing Industry, its organizational structure, and personnel policies.

1. Legal Form of the Organization

FGLEA Manufacturing Industry which is owned by five individuals shall have the

Partnership Style as its form of organization. Its business style is based on the premise that

the five individuals are general partners of the business, wherein each and every one has

co-equal share on its capital contribution and has equal responsibility in managing the

business being a management team. They have also equal share in the profit. And in case of

insolvency or bankruptcy, the liabilities will be equally shouldered by them.


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2. Organizational Structure

The five project proponents who are the members of the management team are the

decision makers as a body of the business. However, one of them will be the General

Manager.

The processing plant will hire 24 production personnel as previously shown in Table

12. In addition to these production personnel, administrative personnel and support staff

will also be hired. Table 13 shows the list of administrative personnel and support staff

with their corresponding salaries.

Table 13

Administrative Personnel and Support Staff

Particulars Number Monthly SalaryTotal Monthly

Salary

Manager 1 20,000 20,000

Marketing Head 1 10,000 10,000

Marketing Assistants 2 8,000 16,000

Administrative Head 1 10,000 10,000

Supply Officer 1 8,000 8,000

Storekeepers 2 7,000 14,000

Accounting Clerk 1 7,000 7,000

Truck and Van Drivers 2 7,500 15,000

Tricycle Drivers 3 5,000 15,000

Janitors 2 5,500 11,000

Production Head 1 12,000 12,000

17 NA 138,000


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Total

The organizational structure of the business was designed and reflected as Figure 4

on the next page.

Figure 4. The Organizational Structure of FGLEA Manufacturing Industry

Management

Team

ProductionHead

MarketingHead

AccountingClerk

Manager

Supply

Officer

Storekeepers Drivers

Janitors

Marketing

AssistantsProduction

Personnel

AdministrativeHead


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As shown in the above organizational structure, the Management Team will

perform a staff function as indicated by the broken line. The team is a policy-making body,

the adviser of the Manager,andthefinal arbiter should there be any problem/issue that the

Manager will find difficulty in solving it .

On the other hand, the primary function of the Manager is to serve as the chief

executive of the organization. He will oversee the over-all operation of the business and

will indulge in strategic activities among the three Division Heads of the business in order

to enhance coordination and inter-dependence. The Manager is Frederick Bartolome who is

one of the owners and a graduating student of Master of Management. He is also at present

a member of the Board of Directors of the Perpetual Help Credit Cooperative, Inc.

The Production Head has the primary function of overseeing the production

process of the business. His/her main concerns are quality control and production quota.

However, in the absence of the Manager, the Production Head will automatically act as

Officer Incharge. All the production personnel are directly under the Production Head. He

shall endeavor to periodically report to the Manager on the status of operation, especially

on problems that might transpire within the production area. The qualification for this

position is at least a graduate of a business baccalaureate course, but preferably with 2

years experience in processing and a holder of Masters Degree.

The Marketing Head shall oversee the distribution of the products to its respective

customers. He shall conduct studies on the existing marketing trends and shall recommend

changes in the marketing mode/strategy when needed. All Marketing Assistants are directly

under him/her. The qualification for this position is at least a graduate of a business


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baccalaureate course and with 2 years experience in marketing, but preferably a graduate of

Bachelor of Science in Commerce major in marketing.

The Administrative Head is responsible in providing administrative supports. The

most vital support is coordinating with the Production Head that there will always adequate

supply of raw materials. Other supports like financial and accounting management, project

facilities and equipment maintenance, and janitorial services are functions of the

Administrative Head. Therefore, the Supply Officer, Storekeepers, Accounting Clerk,

Drivers, and Janitors are directly under him/her. The Administrative Head will likewise

handle the responsibilities of human resource management, research and development, and

management information system.

In order for the organization to work harmoniously, FGLEA Manufacturing Industry

will adopt the following principles:

a) Specialization is encouraged to build up expertise.

b) The organization adheres to the principle of Command Responsibility.

c) Respect of duly constituted authority is a mandate. Obedience is required.

d) There shall be unity of direction by understanding goals.

e) Goals of the business are always paramount over personal interest.

f) The industry will give remuneration commensurate to services rendered.

3. PersonnelPolicies

The personnel policies that are deemed vital for the business include recruitment,

selection, training, and incentives and reward system.

3.1 Recruitment policy


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3.1.1 Announcement for the opening of positions will be posted in public places.

The qualification standard for each position will be indicated in the

announcement. Radio and TV plug-ins will also be made, including other

relevant information.

3.1.2 No recommendations from anyone will be entertained.

3.1.3 Applicants who will be late in submitting their bio-data will not be

entertained.

3.1.4 Applicants with bio-data that fits to the position he/she is applying will be

called for the selection process.

3.2 Selection policy

3.2.1 All applicants are given Psycho Exam

3.2.2 Those that will pass in the Psycho Exam will be interviewed. The Panel of

Interviewer is composed of the Management Team.

3.2.3 The best one that will come out during the interview will be selected.

3.3 Training

3.3.1 Technical training will be given to workers in the processing plant.

3.3.2 Only those who will pass the training will be hired.

3.4 Incentives and Reward System

3.4.1 Adopt a program on honor-system. Employees with high accomplishment

will be given a certificate as honor roll for the month and a cash incentive.

3.4.2 Annual bonuses will be given to the employees computed based on the net

income of the business.

D. Financial Plan


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The discussion on financial plan for this business includes total capitalization,

source(s) of funds, projected income statement, balance sheet, cash flow, and financial

analysis.

1. Total Capitalization

The FGLEA Manufacturing Industry will have a total project cost of P

17,278,150 as reflected in Table 14.

.

Table 14

The Project Cost

Fixed Asset

Land 1,500,000

Buildings 2,500,000

Furniture and Fixtures 86,000

Utilities Installation 50,000

Machineries and Equipments 2,495,000

Organization Cost 100,000

Total Fixed Asset 6,731,000

Working Capital (6 months)

Salaries Administration 828,000

Production Cost 7,542,850Operating Expense 2,176,300

Total Working Capital 10,547,150

Total Project Cost 17,278,150

2. Source ofFunds


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Each of the five proponents of the FGLEA Manufacturing Industry shall have a

capital share of P 1,455,630 amounting to the total owners equity of P 7,278,150 which is

42% of the over-all project cost. The remaining capital of P 10,000,000 will be borrowed

from the Development Bank of the Philippines with an interest rate of 12% per annum

payable in 10 years.

3. Projected Income Statement

Below is the projected Income Statement of the FGLEA Manufacturing Industry for

five consecutive years from 2012 to 2016 which is shown hereunder as Table 15. The data

on the table were taken from various tables and schedules previously computed.


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Table 15

Projected Income Statement

Account Titles 2012 2013 2014 2

Sales 12,000,000 12,978,000 14,045,850

Less: Cost of Goods Sold 4,910,700 5,576,235 5,918,441

Gross Income 7,089,300 7,401,765 8,127,409

Less: Operating Expenses

Salaries Administration 1,656,000 1,738,800 1,825,740

Office Supplies and Materials 18,700 19,260 19,838

Promotions and Advertising 10,000.00 10,300.00 10,609.00

Permits and Licenses 5,700.00 5,985.00 6,284.25

Building (Repair and Maintenance) 50,000.00 51,500.00 53,045.00

Machineries & Equipment (R&M) 30,000.00 30,600.00 31,212.00

Utilities Expenses 516,000 526,320 536,846

Miscellaneous Expenses 20,000.00 21,000.00 22,050.00

Interest Expenses 1,200,000 1,080,000 960,000

Depreciation 826,200 826,200 826,200

Amortization (Organization Cost) 20,000.00 20,000.00 20,000.00

Total Operating Expenses 4,352,600 4,329,965 4,311,824

Net Income Before Taxes 2,736,700 3,071,800 3,815,585

Less: Income Taxes 903,111 1,013,694 1,259,143

Net Income After Taxes 1,833,589 2,058,106 2,556,442


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4. Balance Sheet

A balance sheet is a financial statement that summarizes a company's assets,

liabilities and shareholders' equity at a specific point in time. The balance sheet gives

investors an idea as to what the company owns and owes, as well as the amount invested by

the shareholders.

The current assets in the balance sheet are all cash. On the other hand, the fixed

assets are land, building, furniture and fixture, utilities, and machineries and equipment.

The estimates are reflected in the Schedules.

The Balance Sheet of FGLEA Manufacturing Industry is presented in Table 16.


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Table 16

Projected Balance Sheet

Account Titles Pre-Operating 2012 2013 2014

ASSETS

Current Assets

Cash 10,547,150 13,130,050 15,144,939 17,793,030

Total Current Assets 10,547,150 13,130,050 15,144,939 17,793,030

Fixed Assets

Land 1,500,000 1,500,000 1,500,000 1,500,000

Building 2,500,000 2,500,000 2,500,000 2,500,000

Less:Accumulated

Depreciation 0 250,000 500,000 750,000

Net Book Value 2,500,000 2,250,000 2,000,000 1,750,000

Machineries and

Equipment 2,495,000 2,495,000 2,495,000 2,495,000

Less:Accumulated

Depreciation 0 499,000 998,000 1,497,000

Net Book Value 2,495,000 1,996,000 1,497,000 998,00

Furniture and

Fixtures 86,000 86,000 86,000 86,000

Less:Accumulated

Depreciation 0 17,200 34,400 51,600

Net Book Value 86,000 68,800 51,600 34,4

Utilities

Installation 50,000 50,000 50,000 50,000

Table 17 to be continued.


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Continuation of Table 17.

Less:Accumulated

Depreciation 0 10,000 20,000 30,000

Net Book Value 50,000 40,000 30,000 20,0

Total Fixed Assets 6,631,000 5,854,800 5,078,600 4,302,400

Other Assets

Organizational

Cost 100,000 100,000 100,000 100,000

Less:Amortization 0 20,000 40,000 60,000

Net Book Value 100,000 80,000 60,000 40,0

Total Other Assets 100,000 80,000 60,000 40,000

TOTAL ASSETS 17,278,150 19,064,850 20,283,539 22,135,430

LIABILITIES & CAPITAL

LIABILITIES

Current Liabilities

Income Taxes Payable 0 903,111 1,013,694 1,259,143

Loans Payable -Current 0 2,200,000 2,080,000 1,960,000

Total Current Liabilities 0 3,103,111 3,093,694 3,219,143

Noncurrent Liabilities

Loans Payable -

Noncurrent 10,000,0009,000,000 8,000,000 7,000,000

Total Noncurrent Liabilities 10,000,000 9,000,000 8,000,000 7,000,000

Total Liabilities 10,000,000 12,103,111 11,093,694 10,219,143

Table 17 to be continued


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Continuation of Table 17

CAPITAL

Owners Equity 7,278,150 7,278,150 9,111,739 11,169,845

Net Income 0 1,833,589 2,058,106 2,556,

Total Capital 7,278,150 9,111,739 11,169,845 13,726,278

TOTAL LIABILITIES &

CAPITAL 17,278,150 19,064,850 20,283,539 22,135,430


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5. Cash Flow

The Cash Flow is the movement of cash into or out of FGLEA Manufacturing

Industry. The movement of cash is used to calculate other parameters that give

information on the business like rate of return or liquidity.

It can be deduced from the results of the computation of cash flow that FGLEA

Manufacturing Industry has adequate cash to support its operational activities.

The cash flow of the business is presented in Table 17.


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Table 17

Projected Cash Flow

Account Titles Pre-operating 2012 2013 2014

Cash

Inflow

Cash received from

bank loan 10,000,000 0 0 0

Cash received from

owners 7,278,150 0 0 0

Sales 0.00 12,000,000 12,978,000 14,045,850

Total Cash Inflow 17,278,150 12,000,000 12,978,000 14,045,850

Cash Outflow

Purchase of Land 1,500,000 0 0 0

Purchase of Building 2,500,000 0 0 0

Purchase ofMachineries &

Equipment 2,495,000 0 0 0 Purchase of Furniture& Fixtures 86,000 0 0 0

Utilities Installation 50,000 0 0 0

Organization Cost 100,000 0 0 0

Cost of goods sold 4,910,700 5,576,235 5,918,441

SalariesAdministration 1,656,000 1,738,800 1,825,740

Office Supplies and

Materials 18,700 19,260 19,838

Promotions andAdvertising 10,000 10,300 10,609


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Permits and Licenses 5,700 5,985 6,284

Building (Repair andMaintenance) 50,000 51,500 53,045

Machineries &Equipment (R&M) 30,000 30,600 31,212

Utilities Expenses 516,000 526,320 536,846

MiscellaneousExpenses 20,000 21,000 22,050

Interest Expenses 1,200,000 1,080,000 960,000

Payment of Loan 1,000,000 1,000,000 1,000,000Payment of incometaxes 0 903,111 1,013,694

Total Cash Outflow 6,731,000 9,417,100 10,963,111 11,397,759

Net Cash 10,547,150 2,582,900 2,014,889 2,648,091

Add: Cash Balance, beg. 0.00 10,547,150 13,130,050 15,144,939

Cash Balance Ending 10,547,150 13,130,050 15,144,939 17,793,030


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6. Financial Analysis

The financial analysis presented herein includes the discussions as regards net

profit margin, return on investment, liquidity ratios, leverage ratios, and growth ratios.

6.1 Net Profit Margin - One of the financial analyses that will be used to

determine the profitability of this business is the net profit margin. The net profit

margin manifests how much profit this business makes for every P 1.00 it generates in

sales. This helps to determine whether the prices set by the business or its operating costs

are on a viable ceiling. For FGLEA Manufacturing Industry, a profit margin of 5%

indicates that its sales prices are relatively low or the costs are high or both.

The equation in computing net profit margin is reflected below:

Net Profit Margin =Net Income After Taxes

x 100Sales

Table 18below shows the annual net profit margin for the proposed venture.

Table 18

Annual Net Profit Margin

Year Net Income After Taxes Sales Net Profit Margin (%)

2012 1,833,589 12,000,000 15

2013 2,058,106 12,978,000 16

2014 2,556,442 14,045,850 18

2015 3,132,708 15,188,368 21

2016 3,701,383 16,409,250 23


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It is reflected in the table that during the first year of its operation, FGLEA

Manufacturing Industry made a net profit margin of 15% which is relatively high for it is

above 5%, the danger zone for a net profit margin. This suggests that despite its effort of

competing with the existing players in the market, the venture will still be able to manage

and earn a high income. Moreover, the project is able to maintain its high profit from the

first to the fifth years of operation. The same profit margin went up from 15% during the

first year to 23% in the fifth year of operation. In other words, despite the fact that the net

profit margin is already high, it has an increasing trend.

6.2 Return on Investment (ROI) Another way of measuring the efficiency of

investment of FGLEA Manufacturing Industry is with the use of ROI.

To calculate ROI, the benefit (net income after taxes) of an investment is divided

by the cost of the investment; the result is expressed as a percentage or a ratio. FGLEA

Manufacturing Industry has an ROI target of 6%. Therefore, any computed ROI higher

than this target is considered high, which means the business is financially viable.

The formula in computing ROI is shown below:

Return on Investment =Net Income After Taxes

x 100Total Investment

The results of ROI computation is shown in Table 19.


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Table 19

Return on Investment

Year Net Income After Taxes Total Investment ROI

2012 1,833,589 26,949,100 7%

2013 2,058,106 27,227,615 8%

2014 2,556,442 27,558,866 9%

2015 3,132,708 27,945,489 11%

2016 3,701,383 28,390,253 13%

During its first year of operation in the year 2012, FGLEA Manufacturing Industry

reflected an ROI of 7% which is above the suggested ceiling of 6%. This is normal for a

new business considering that there are lots of things to know about its operation and

marketing. However, the table above further indicates that the ROI is increasing which

means that the expected financial performance of the business is improving.

6.3 Liquidity Ratio - This ratio measures the firms ability to meet maturing

short-term obligations. The safety of the business provides a basis for the rational pursuit

of profit which is identified with the ultimate goal of business activities and serves as an

important means of measuring the safety of invested capital.

For FGLEA Manufacturing Industry, testing of liquidity will use Current Ratio.

This ratio indicates the extent to which the claims of short-term creditors are expected to

be converted into cash in a period corresponding to the maturity of claims. The solvency

of the business shall be appraised by comparing its current assets with current liabilities.

The Current Ratio is computed by dividing the current assets by the current liabilities. A


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current ratio below 1 suggests that the business would be unable to pay off its

obligations if they came due at that point.

Using the above procedure, the current ratio of FGLEA Manufacturing Industry is

presented in Table 20.

Table 20

Current Ratio

Years Current Assets Current Liabilities Current Ratio

2012 13,130,050 3,103,111 4

2013 15,144,939 3,093,694 5

2014 17,793,030 3,219,143 6

2015 21,055,771 3,382,976 6

2016 24,883,450 3,543,070 7

It is shown in the above table that the current ratio of FGLEA Manufacturing

Industry is very high since the current assets are exceedingly higher than the current

liabilities. It means that the business has the capacity to pay back its bank loan payables

because it has adequate current assets in cash.

6.4 Leverage Ratios - This ratio measures the extent to which the firm has been

financed by debt. Leverage ratio provides several implications. Firstly, creditors look at

the equity for margin of safety. Secondly, raising funds through debts allows answers to

gain benefits of controlling the firm with limited investments. Thirdly, the firm may earn

more on borrowed funds that it pays interest. However, it should be noted that when the


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return on assets goes below interest rates, the firm comes in trouble since cost of debt is

more than

what assets earn.

6.4.1 Debt Ratio - One leverage ratio is called Debt Ratio.It is a measure of the

company's total debt to its total assets. In other words, the Debt Ratio indicates the

percentage of the total assets provided by the creditors. A ratio less than one means that a

company has more assets than debt, while a ratio of more than one means the opposite. A

debt ratio is a measure of how risky it would be for a bank to extend a loan to a company,

with a higher ratio indicating great risk. FGLEA Manufacturing Industry is using this

ratio.

The formula for Debt Ratio is shown below:

Debt Ratio =Total Liabilities

Total Assets

Using the above formula and computing the debt ratios, the results are presented in

Table 21.

Table 21

Debt Ratio

Years Total Liabilities Total Assets Debt Ratio

2012 12,103,111 19,064,850 0.63

2013 11,093,694 20,283,539 0.55

2014 10,219,143 22,135,430 0.46

2015 9,382,976 24,601,971 0.38

2016 8,543,070 27,633,450 0.31


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It is reflected in Table 21 that all the computed debt ratios are less than 1. It

mans that FGLEA Manufacturing Industry is very bankable. Moreover, the trend of the

debt ratio is going down which means that the risk of having a loan is becoming lesser

every year.

6.4.2 Equity Ratio Another leverage ratio used in this study is the equity ratio.

Equity ratio is a financial metric that is used to measure the amount of leverage employed

by a company. This ratio indicates the percentage of the assets provided by the owners.

Since the equity ratio includes the firm's total assets in its calculation, it is therefore

relatively simple to calculate assets from the equity ratio.

The formula in computing equity ratio is shown below:

Equity Ratio =Total Capital

x 100Total Assets

The results of the computation of the equity ratio are presented in Table 22.

Table 22

Equity Ratio

YearsTotal Capital

(Pesos)

Total Assets

(Pesos)

Equity Ratio

(Percentage)

2012 9,111,739 19,064,850 47.79

2013 11,169,845 20,283,539 55.07

2014 13,726,278 22,135,430 62.01

2015 16,858,995 24,601,971 68.53

2016 20,560,378 27,633,450 74.40

The table above indicates that the capitalization that was provided by the project

propon

fglea manufacturing industry

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