Now that everyone’s gotten a bit more acquainted — some even quite comfy, in fact — with the general idea behind The Ultimate Poverty Framework™ (TUPF), it’s time we get into a bit more detail. The beauty of the reductionist approach that I use to encapsulate what to many is the mind-boggling complexity of the unique way by which we Pinoys impoverish ourselves is that it allows us to dissect this misunderstood beast like an onion — layer-by-layer, concept-by-concept; systematically working our way to the core of the poverty memes that inhabit our society at its fabric.
The Philippines has often been described as a “rich country”. It is “blessed” with abundant natural resources and is populated by a people world renowned for their self-described “ingenuity”.
So what happened?
Where are the results?
We learn to appreciate the full nature of how our society squandered this abundance of opportunity to prosper when we explore the first layer of our framework — scalability and productivity.
In page 32 of my book Get Real Philippines Book 1 (which you can download for free here), I had a section on Productivity which i will have to admit was written when I was still in a less-enlightened state as I kinda muddled together both concepts.
At the time, I was working with the following conceptual building blocks:
(1) To be productive is to convert input into useful output.
(2) To be efficient is to produce more with less or the same input.
(3) To exploit scale is to realise efficiencies resulting from larger production volumes.
And there I lament that despite the Philippines indeed having a vast array of natural resources and a workforce the size of which utterly dwarfs Singapore’s and Taiwan’s put together, our economic output is, for its part, pathetically dwarfed by societies with just one-tenth of what we are naturally “blessed” with.
However in terms of understanding our utter lack of prowess in the creation of sustainable wealth, we need to add a new dimension in our regard for the concept of scale. While we sufficiently appreciate the importance of productivity and its technical couisin — efficiency (note also that there is no Tagalog word for “efficiency” — which seems to reflect our society’s inability to grasp it), the concept of scale reveals another facet when regarded in the context of creating, building, and accumulating wealth. This new facet is the conceptual bridge I inadvertently leapfrogged in my book where, basically harking back to Nick Joaquin’s Heritage of Smallness piece, I go on and write…
[...] So now we have the size (i.e. population) but we do not have scale – the synergy and cohesiveness to turn size into power. Filipino undertaking consistently lacks scale and structure – both being key ingredients to world-class productivity. Large well-designed factories will always produce higher volume and quality than small mom-and-pop operations. [...]
How then do we achieve this all-too-critical scale that will enable us to combine production prowess (assuming we achieve that too) and size (which we have lots of in that flacid sort of way we are famous for) to achieve power?
The answer is quite obvious:
To achieve scale, you have to be scalable in the first place.
It’s simple, really™.
To be scalable involves having an output stream that does not directly correlate with input.
The following diagrams illustrates what it means to be scalable and not scalable:
In an economy such as the Philippines’ that is largely if not entirely labour-added-value, people are basically doomed to work disproportionately hard to prop up its economy. I emphasise “disproportionately” because for the amount of work Pinoys put into Philippine industry, the actual results are, to say the least, flacid (ironic, if you consider the above diagrams). Compare that to a society where a significant chunk of the fruits of its labour gets built into its capital base.
As Nick Joaquin observed:
The Filipino who travels abroad gets to thinking that his is the hardest working country in the world. By six or seven in the morning we are already up on our way to work, shops and markets are open; the wheels of industry are already agrind. Abroad, especially in the West, if you go out at seven in the morning you’re in a dead-town. Everybody’s still in bed; everything’s still closed up. Activity doesn’t begin till nine or ten– and ceases promptly at five p.m. By six, the business sections are dead towns again. The entire cities go to sleep on weekends. They have a shorter working day, a shorter working week. Yet they pile up more mileage than we who work all day and all week.
This is the essential nature of design-added-value. You design one thing in a single well-thought-out effort, and the work gets replicated and applied potentially an infinite number of times.
In essence (limited example so far described):
:D Labour is non-scalable.
:D Design is scalable.
Whereas industry can derive a continuous stream of value from a single design effort by an engineer, architect, or artist without a necessary continuous application of physical effort, the payoff from a day’s work by a labourer — specially those who work in service industries — is one-time. It explains why companies like Nike can sell a shirt manufactured in Cavite for 10 cents for $100. The Nike swoosh and the “Just Do It” tagline were both single strokes of genius whereas the actual physical shirts produced are the outcome of continuous mind-numbing 72-hour work weeks for the average Cavite schmoe.
It’s no different from the effort we expend in Fiesta Politics, Ocho-Ocho “Revolutions”, and Shawarma Discussions. Instead of the chatter and bustle going into actually building upon anything, they are relevant only at a particular point in time. Rather than channel that energy towards high-thinking-applied efforts to build and strengthen our democratic institutions — thereby refining the on-going quality of the way they work for us (an effort to build a scalable asset) — we direct our focus on the bozos and circuses of the hour.
So remember the word of the week, folks…
S C A L A B I L I T Y
… and let’s use it to reflect on where we currently channel our energies and intellectual horsepower. Are we building something? Or do we simply add uselesss entropy to the already structureless system that is Pinoy society?
============
Join us on Facebook!
Popularity: 2% [?]
“Whereas industry can derive a continuous stream of value from a single design effort by an engineer, architect, or artist without a necessary continuous application of physical effort, the payoff from a day’s work by a labourer — specially those who work in service industries — is one-time. It explains why companies like Nike can sell a shirt manufactured in Cavite for 10 cents for $100. The Nike swoosh and the “Just Do It” tagline were both single strokes of genius whereas the actual physical shirts produced are the outcome of continuous mind-numbing 72-hour work weeks for the average Cavite schmoe.”
question. if it the tagline that allows the shirts to be sold at a markup above cost?
I’m so confused.
Isn’t it that demand that allows one to price above cost, i.e. they are willing to pay $100 and thats why the price is $100.
Is the tagline the thing that is ‘causing’ the consumer to be willing to pay so much? isn’t the tagline just the consequence of other forces on the consumer (mainly sociological/psychological) that allow the company to do this?
its true that phil knight was able to create what was at the time, a far superior shoe. But now, the markups behind a nike shoe is far too great to be explained by technical product quality.
now your concept of scalability is a production side idea that related output and input. But this idea talks about falling costs as output rises, and i think what you are trying to do is talk about how unit-values rise as output rises (yes?).
can you explain this a bit more?
“The beauty of the reductionist approach that I use to encapsulate what to many is the mind-boggling complexity of the unique way by which we Pinoys impoverish ourselves is that it allows us to dissect this misunderstood beast like an onion”
Let me start with IT management in public service.
Benigno, you maybe targeting the decisionmaker or the policymaker of our country, where technology is not present. For economies of scale to work in public service, policymaker should have foster the development of increased analytical capability in central and local government units. With technology, system information can easily be duplicated and communicated among local government units. No need to send the corrupt senator in Mindanao or Cebu. Gastos lang yan. With technology, it can easily direct and train local government units in a push of a button on what to do or what not to do thus providing greater efficiency of service among our public officials. The cost of building this infrastructure is lesser than the cost of maintaining these corrupt officials. :)
It will take too much time doing all the footwork thus working 7 days a week with corruption :) Efficiency among public officials should be the WORD for the week. :) more to follow on National ID to manage my people. :)
GabbyD, I believe you already have some answers to your questions embedded within the same comment you made
Firstly, you said:
The genius of Nike marketing is how effectively they were able to create a “sociological/psychological” need or “force” in the consumer to perceive some value in owning a Nike product. In effect you are right. The tagline, logo, and overall brand mystique is what is “causing” the consumer to be “willing to pay so much”.
I call such consumers victims of clever marketing. Such is the market for products such as Nike’s. Doesn’t change the fact that they were indeed a clever bunch to have developed such a powerful brand.
This brings up to this second bit of insightful observation of yours:
Indeed. Most of today’s great brands are great because they have secured the confidence and trust of their respective markets. The gap between the value based solely on “technical product quality” of the merchandise and the actual price it is traded in the market is its premium. A premium is slightly different from a mark up. A mark up is usually just a reasonable margin levied on a traded item to account for the service provided by a retailer in getting the product onto the hands of its final consumer.
A premium on the other hand is, as you observed, greater than can be explained solely by materials, transport/distribution costs, plus markup. A price that has a huge premium over its actual physical value is what a product commands by drawing from its brand equity. Brand equity encapsulates the accumulated marketing and development work of the people/organisation that owns it.
Creating a great brand (one with valuable brand equity) is another example of a scalable trade. There is no actual on-going physical work that props up the ability of, say, the Nike brand to generate income for its shareholders. The brand may be managed but its value is inherent to it — kind of like stored marketing effort. The work that goes into building trust and confidence among your customers gets stored in a brand, much the same way as a personal effort to be honest, consistent, and transparent builds your personal reputation (your effort is stored in that reputation you uphold).
So going back to the value-vs-volume charts I showed and hopefully to anser this question of yours…
… say for example you just started a business and launched a new brand. In the initial effort you put into getting your brand recognied and trusted you will probably spend a lot of effort talking to your clients one-on-one and raising awareness. But as time goes by and assuming your efforts (and the quality of your product or service) remains consistent, word will spread and even people who you have not communicated with personally will recognise your brand. These people will represent business acquired without a direct selling effort on your part. Kung baga, the brand and its reputation (i.e. your brand equity) acutally did the selling for you requiring very little of your direct labour.
As your brand equity increases the economic output and value of your business gets less dependent on your direct selling effort.
thanks for your reply. many things are clearer now. its about brands/marketing!
on brands:
its not necessary to debate whether a company creates the need (leading to consumers being ‘victims’), or that whether a company merely identifies the need (and services it). Whatever it is, this activity requires talent and money and creativity.
i also agree that brands help sell. Thats why brands are invented. However, brand management requires a regular infusion of money, right? A brand is constantly re-enforced, re-made, diversified, etc… Whole marketing teams are built for this very thing, teams that are funded annually. While its not “physical work”, it may be considered “selling effort”, or somekind of ‘labor’ nonetheless. Do you agree?
But largely, i agree. Brands exist because of all the reasons you specified above.
Also, i’m excited to know what your final framework suggests. Are you suggesting brands? Do you want all business to have brands? Don’t all businesses already have (some kind of ) branding? Can everyone be a nike and appeal (or in your mind, ‘create’) to a need which causes a consumer to spend a hefty ‘premium’ (good term!) for goods? Don’t firms need alot of money to even come close to these global brands?
Huh?
GabbyD, kung baga, success is relative. It depends on which side of the fence you are situated. When you are clever enough to develop a product that people need or — even more clever — create a product and mount a marketing campaign to create a perception in peoples’ minds that they need that product, you are a winner. The losers are ultimately people who know nothing else but to consume and be victims of said clever marketing.
The world is a simple place. Rich societies basically buy commodities from poor societies, make great products out of these commodities, and sell them back to these poor societies for at least 10 times the value of the commodity they originally sold is worth.
Poor societies sell primarily labour-added-value products and services, while rich societies sell primarily design-added-value products and services.
Indeed as you say it is all about branding, marketing, and building reputation (the latter being synonymous with that concept brand equity). To answer your question here…
… I say YES everyone can “be a Nike” and build a brand. You will need lots of money if your plan is to compete with existing and established branding behemoths.
But if you have a truly innovative and original concept, you can potentially develop it from scratch. Note that Bill Gates and Steve Jobs started building what are among today’s most powerful brands out of their parents’ garages with very little money.
That’s the trouble with the “me-too” approach to entrepeneurship of imagination-deficited societies like ours. Rather than think outside the square, we march on lemming-like to the tune of other people’s thinking.
In page 30 of my book, I cited the efforts of Singapore to build brand equity on a national scale as observed by the eminent management guru Tom Peters (in the rambling style of writing he has become famous for):
I then go on to write:
Our idea of hedging our “hopes” remains — true to our primitivist form — in scrounging around for “heroes” and “messiahs” to save us from our own self-created wretchedness.
when you both have time, please read this link.
I am somewhat busy with work. Here’s a reference link that is more applicable to Philippines.
Scalability and Rural Development
For Philippine Brand, we are also a tourism industry. We have the competitive advantage. The name Philippine Island is paradise and tropical.
Or we can focus on Agricultural brand such as Mango, Kiwi, Passion Fruit or Coco. Brand names can be design from these products. There’s plenty of niche out there. Manufacturing is also a design. The copy cat concept is scalable:)
thank you again. i am very interested in understanding your mindset, your view of how firms work, and press you on your ultimate policy recommendations. thats why i asked those questions.you’ve raised so many issues here (too many perhaps), but I think i’m coming close to understanding, but i was hoping you’d indulge me further. For the sake of focus, i’ll focus on one thing:
You are right that brands must start from somewhere. It starts from a good idea, and a certain kind of confidence in it, in the face of uncertainty. Also brands are not unknown in this country. there are many big, successful filipino brands. No doubt, the folk who lead these big filipino brands know what brands are, and they believe in (mostly) everything you and i believe. Now you may say that most of these brands are in non-tradeable businesses [we can't just export 'SM'; to export SM involves significant FDI. This is certainly possible and SM is probably already doing this, but the point is its much harder than just shipping goods], so we can’t take advantage of larger markets to sell our premium goods. Yes, i agree.
1. Next, if filipinos know all about branding, yet we do not observe many of them breaking into tradeable industries, etc, there must be a reason! I believe you are trying to understand these reasons.
2. One reason could be that its costly to break into these high value industries. Yet, firms in other countries, can and do compete. How can they do it be we seem to be having a harder time? Is it because of a lack of an enabling environment? corruption? no govt support/ industrial policy [i.e. that singapore example you cited?]?
2.1 Another reason, and i suspect this is the reason you are talking about, is that branding is something only understood by a few, privileged among us. Most filipinos are limited in their mindset, or in their ability. Say most filipino aren’t risk-takers, or they are (in your words) unimaginative shararma selling businessmen?
if its 2.1, is it also your contention that this is an education issue (i.e. if only someone trained them to know business basics, we could compete!), OR is this a cultural issue, which cannot easily be cured by training or education alone?
oh, i just remembered. i’m glad you brought it up! (i’ve broken my promise to focus! darn it!) i’ve been chatting as much as possible with filipino ‘foodies’ to ask why we can’t make filipino cuisine more marketable. Is there a filipino cuisine? How is our cuisine situated compared to other cuisines, like chinese and thai? in my mind, the key issue is the ‘signature dish’ — We need a signature dish that is uniquely filipino! (like curry is to indian, chow mein is to chinese, pad thai is to thai!) is there such a dish? i thought once that adobo might fill that role, but i was told that adobo is similar to some latin american pork stew dishes. i’ve also been told there are other food specific issues, such as color, and texture (in the mouth).
@ leytenian
nice note. a quibble: it spends NO time at all saying WHY the technologies they describe are not scalable. they only have 3 examples! to be specific, it says:
“Zero Tillage is an example of a scalable technology design. At first, the technology
was designed for the South of Brazil. As farmers played a leading role in its design, the
technology was relevant for them and adoption occurred very fast during the 1990ties. In a
later phase, the zero tillage technology was redesigned for the conditions of the Brazilian
Cerrado. Once the technology was made scalable within the Cerrado region, the adoption rate
became very high in this region.”
huh? how is zero tillage an example? sadly no details follow…
“Dissemination: Farmer to Farmer approaches are examples of scalable dissemination
mechanisms. Such mechanisms do not need to be changed when the scale is increased: The
more farmers get involved, the more farmers act as ambassadors of a certain innovation.”
reallly? no need to change? but in the very NEXT bullet:
“Technology: Online weather reports or websites with market price information are examples of
scalable technologies: if more farmers use these websites, the costs of operating them will not
increase.”
won’t these technologies help with the dissemination of information at lower cost/faster than word of mouth? moreover, the cost of operating them “will not increase” can’t possibly be right. at the very least, they need more computers, more terminals, and electricity to expand the network, etc…
If you know this guy, perhaps you can convince him to talk more about examples of scalable technologies (techniques that work as well in small and huge scales). sayang!
Gabby,
I’m not a guy but a girl. You didn’t get the point of the link. Yes it is education that is lacking in Philippines. :)
Yet, firms in other countries, can and do compete. How can they do it be we seem to be having a harder time?
Is it because of a lack of an enabling environment? YES
corruption? YES
no govt support/ industrial policy? YES, therefore it’s not scalable.
Actually GabbyD, what you thought was a digression on your part in your last paragraph actually has something that caught my interest; where you say…
In my view, sometimes the way a product is marketed may in itself be the original idea, which means that coming up with an original product need not necessarily be the only ticket to business stardom.
For example, Microsoft Windows back in the early 80′s was a knockoff of a similar point-and-click system developed by Apple for its Macintosh back then which itself was an idea acquired from a similar concept being prototyped by Xerox at their PARC facility. The genius in the way Microsoft exploited the product was in the way it was marketed. MS went on to dominate the industry while Mac OS — though technically superior — languished (until now, that is).
Same thing with bottled water. In countries like Australia, tap water is a resource that is highly-regulated and closely monitored as it is seen as a matter of national security. This means tap water is far more safe than bottled water which is marketed by private enterprise that use unregulated supplies and processing/bottling methods. In this case we have a virtually free resource that is being sold to a bunch of suckers for up to $3.00 a bottle.
So going back to your adobo example, yes, maybe adobo is not unique to us. But if we develop a unique way of marketing it, it essentially becomes ours to exploit. Take our pancit. It is not too different from what is known here as Singapore Noodles (albeit the latter being a bit more spicy). So when non-asians see what is essentially pancit, the words “Singapore Noodles” come to mind. That’s brand equity at work. It’s all about who seizes and exploits an opportunity FIRST.
Winners take all, kung baga. Don’t let your pastor tell you that the meek shall inherit the earth. That’s bullshit if you ask me. The world belongs to winners. It’s as simple as that.
As Sean Connery’s character in the movie The Rock quipped:
Losers whine about doing their best;
Winners go home and fnck the Prom Queen.
Going back to the rest of the comment, I do confirm that I am more of the view you describe in your Item 2.1.
Pinoys are addicted to instant gratification. Rather than slowly acquire a market through consistent and sound build-up of reputation, we’d rather screw over customers as quickly as possible and gain fat but short-term profits.
I think there’s a Chinese proverb that describes the way the Chinese approach business (maybe Jon Limjap can help me out here) which makes them so successful. Something to do with low-margins, high volume, something…
And yes, while much of these underlying Philosophies can be taught, there is indeed something deeply-entrenched in our culture that will make such an effort a HARD SLOG. But if our survival as a society depends on it, or if we as a people are TRULY SERIOUS about our hope of one day being a prosperous nation, then the need to be all-hands-on-deck to approach that aspiration from the fundamental level of our cultural dysfunction should be made non-negotiable.
@letytenian
oh, sorry! i was not commenting on your comment; i just had a criticism on the content of the pdf link you posted. I just feel it wouldn’ve been more useful if the guy who wrote the pdf extended his examples a bit. just three paragraphs on the examples… sayang!
“Something to do with low-margins, high volume, something…”
Yes that something is scalable.
for those who are interested on benigno’s something, read economies of scale and diseconomies of scale. Then think of Kona coffee from the Big Island, Hawaii ( sold in many starbucks store, target, walmart, and many others). A friend of mine from cebu , owns a furniture design and manufacturing. She has 3 years contract to produce furnitures for all pier 1 or Pier 1 Imports outlet. Now she’s working on getting more contracts with other established furniture outlet. Another owner/ manufacturer of dried mangoes has contract with Costco and Sams. Is it a brand? not really. Let’s not be stucked with branding. Think of producing a product that you can sell thru acquiring a contract. Think of the world not Philippines. Try attending any business expo in Asia or Philippines. This is where you gain real life experience on what competition, demand and supply are all about. you will gain the right experience and how the other competitors are marketing their products. It will also give you an idea that there are plenty of investors out there. No need to start the basic and branding something that will not exist. Branding takes years. Even China has a big challenge with branding. Leverage the knowledge of others and allow your product to penetrate with less amount of money. Think of Contract. I have many friends in the Philippines that are very successful in contracting. Then R&D for higher quality , lower price, new design, new taste, new packaging and many more to keep with up demand. This is where branding starts.
Yes there’s plenty of something out there. Think Think think.
Leytenian,
you mean sub contracting?
It still has to do with branding.
The established brand risks its name by doing so.
So the prospective subcontractors still has to prove themselves to the established companies.
that’s how Bill gates and Allen did it.
After reading the January 1, 1975 issue of Popular Electronics that demonstrated the Altair 8800, Bill Gates called the creators of the new microcomputer, MITS (Micro Instrumentation and Telemetry Systems), offering to demonstrate an implementation of the BASIC programming language for the system.[5] Gates had neither an interpreter nor an Altair system, yet in the eight weeks before the demo he and Allen developed the interpreter. The interpreter worked at the demo and MITS agreed to distribute Altair BASIC.[6] Gates left Harvard University, moved to Albuquerque, New Mexico where MITS was located, and founded Microsoft there.
The rest is history.
=============================
r an d for higher quality?
think of colgate, just add one test tube of wachamacolit from the old one and you already have Colgate Total.
Look what happened when they tried to imitate Pepsi and failed(new Coke)later have to go back to the original to have coke classic.
R and D was not for quality that time. the competitors where creaming them so a new gimmick must arise.
Quality is overrated,it is just perceived.
R and D is not for Quality. R and D can also be for cost cutting.
Look at the Do-it-your self pre fab cabinets.
para wag masira,wag mo gamitin.
=====================================
Now to Nike.
Remember the mini series of commercial of Bo Knows,if i recall correctly,that is where just do it started. They were trying to promote a cross- training shoes named after Bo Jackson,because he is a professional football player and at the sametime a professional baseball star,but he got injured.
So Screw Bo Jackson and enter Michael Jordan.
=======================================
me run on ideas na naman ako nabura ko yung transition sa colgate to coke.
dapat may:
Moving on to Coke…..
Look what happened when they tried to imitate Pepsi and failed(new Coke)later have to go back to the original to have coke classic.
at least sigurado ako, martial arts is world wide.
Yung Yantok na ginagamit sa Arnis…….
Nung me martial artist cum wrestler sa WWE na ang pangalan ay Steve Black Man,
Everytime he does exhibition with his yantok,the announcers called it Filipino sticks.
di ko alam kung pano tawagin ang yantok sa ibang lugar.
=======
as for Koreas have KIMCHI, we have our bagoong,but we don’t sell it as bagoong we sell it as fish paste.
kailangan ba lagyan ng Filipino Fish paste, yung KIMCHI given na na Korean ito.
==============================
Yantok = Short Sticks
With regards to “Singapore Noodles”, ask any local Singaporean if there is a dish called Singaporean noodles and they will laugh at your face. There is NO such thing as a “Singaporean Noodle” dish. In Zurich, the Singapore Noodle is cooked with chicken and curry. In New York, the Singapore Noodle is a seafood noodle dish.
Similarly, there is no “Cantonese Noodles” or “Hongkong Noodles”. Again ask the Hongkies.
I live all my life in Manila and as far as I know, Adobo is a chicken dish cooked in vinegar and soy sauce. But did you know that just 60 kilometers up north of Manila (Pampanga), their Adobo doesn’t use soy sauce at all?
Ty Mikey akala ko may kung ano pang tawag.
ganun walang pancit canton???
Eh lumpiang shanhai,wala din?
lutong MACAO? (joke lang)
ps
me pork adobo,me chicken adobo basta me suka,toyo o walang toyo tulad ng sinabi mo.
Branding to eradicate poverty. CLASSIC…stupidity.
hahaha
I can not help but laugh reading all these theories that you can find in marketing and economics books aauthored by experts who themselves can not solve global poverty problem.
Who in their right minds (which means corporations/businessmen/CEO/jey officers who profit from poor people) would eradicate poverty?
The big corporations who make use of poor people in Africa to become guinea pigs for their new products especially the pharmaceuticals.
Who in their right minds (the minds of the politicians who depend on the votes of the toothless voters who would vote even for a dog in exchange for a few hundreds)would solve poverty and give everyone a job that will make people self-reliant? Do they want to lose their constituencies?
Only Benigno,( applause) who recommends economies-of scale for all when many industries can not apply this in their production because theirs are custom-built types of product.
Only Benigno who recommends the low-profit/high volume be applied to products that can not be sold in volume.
Who would reduce poverty that would eliminate the customers who are buying the cheap/low margin/tainted/faked/products of China?
Have you read the news about babies of wealthy families as victims of tainted milk?
Sheesh.
Branding to solve poverty, my foot.
Rice in California is branded Milagrosa a few years back. Filipinos buy them on the belief that they are buying Philippine product,only to find out, that rice was being repacked by non-Filipino entities in that state. The rice is not even the rice variety that was cultivated in the Philippines.
Truth in Branding? My foot.
leytenian,
Your comments about productive people making goods for Pier 1 and the warehouse clubs caught my attention. That sort of business is a start, it’s better than nothing, but I think the point is that is as high as people aim. People who buy those goods don’t buy them because they came from the Philippines, they buy them because they came from Pier 1. Or because they were available at Sam’s Club. Those products add value to the companies that are selling them to consumers, not to the Philippines producers.
It’s really not that much different from sending workers overseas; yes, there is a direct, short-term financial benefit, but they are still nothing more than basic commodities. If Pier 1 finds a better supply of tacky wicker furniture from China or Indonesia, that’s where they’ll get it. Malaysia and Vietnam grow mangoes, too. So, where does the Philippines get an edge on the competition? BRANDING. Is Nike a better shoe than the ones you can get for 1/10 of the price out of the MSE catalog? No, of course not. BRANDING.
I’ll go one or two better than Nike: in the States, any adhesive bandage is called a “Band-Aid”, no matter who made it, and almost everyone calls what you call a cotton bud a “Q-Tip”. Those are both trademarks of Johnson & Johnson, but they are brands so powerful that they have lent their names to all products of the same type.
Why set your sights any lower than that kind of achievement? Why is producing stuff for Pier 1 to sell “good enough”? Pwede na yan. It’s why India is flogging this country like a rented mule in the BPO business. It’s why anyone outside this country who even knows what Pinoy food is thinks it falls somewhere between disgusting and tasteless.
And whoever said, “Oh, but the Philippines is known for tourism” I’ve got news for you: No, you’re not. You’re known for having a constant rebellion, lots of hookers, and being a place where you have to put your wallet in your front pocket if you want to hang on to it. I know those are horrible stereotypes, but that is the perception. The people who champion the tourism industry need to stop asking opinions from people who have already been here, and start finding out what everyone else thinks. In other words, take the first steps in BRANDING.
@ Cat
you brought up alot of points! all of which are conversations in and of themselves… :) (i.e. medical safeguards in trade, medical ethics in developing countries, fraud in trade… all good stuff to talk about)
just to stick to the econ of scale stuff, what do you mean by:
“…who recommends economies-of scale for all when many industries can not apply this in their production because theirs are custom-built types of product.”
What is a custom-built type of product? is it a product such as athletic shoes (opposed to agri products)? or are you talking about selling architectural services (which is the epitome of custom built, i.e. your building and my house are totally different services being rendered) ?
isn’t it true that using production technology that has econ of scale is even more useful for custom-built types of consumer goods?
Generally, i agree that its hard to scale up services, but its always possible to set a premium for it if the provider has better technology, higher skils, a good reputation (which can only be sustained IF you have good technology and high skills). Further, competition due to lowering telecom costs is bound to knock off a bit off that premium…
@Ben
when you say indian BPO is trouncing RP’s, is it because of branding? How? I thought that branding is a consumer-goods/mass production based phenomenon (because it demand is affected by psychological needs, etc). Services, especially targeted business services like BPOs dont have much of that, and success requires that they service their customers requirements efficiently to compete. Now, like in any differentiated industry, some kind of marketing is required (brand equity, etc), but ultimately in services, the ability to get the job done, at the cheapest possible way, or with better technology and service level, is the key.
Yes?
naks me pa scalability ka pa. tangninang framework yan pang kinder. anong scalability pinagdadakdak mo dyan? nakakita ka lang ng graph sa economics 101 akala mo genius ka na. me pa output ka pa at input bwahahahaha. at ginagamit mo pa ang economies of scale. ewwwwwwwwwwwwww. pa genius epek. hehehehe.
psssst. remember this?
You truly are a piece of shit. Trying to make money off negativity.
Your so-called “solutions” page is a joke. If you truly are one of the
“migrant” class that you lionize, why don’t YOU do something positive
and create jobs here in the Philippines?
I grew up and got educated in the US. I took my experiences and
contacts and brought them here to create jobs for fellow Pinoys. I
didn’t wallow in negativity and self-hate like you obviously do. I put
my money where my mouth is. Why can’t you?
Why don’t you take off those Overture/Yahoo PPC ads as a first step to
show you’re serious about helping fellow Pinoys? Your pages look like
you’re just trying to make money off the misery of Filipinos. I”m sure
your mother and father are very proud of you–scratching your nuts in
some foreign country being a parasite to their national development and
giving nothing of value back except bashing the land of your heritage.
You and people like you make me sick. You are part of the problem why
the Philippines is so currently fucked up–expatriates who leave and
bash their homeland without doing anything tangible to remedy the
situation.
Do you honestly think your high and mighty moralizing and condemnation
of the Philippines creates even one job or anything of tangible value
here?
So what if you have a shit job (assuming you are even employed!) in
some First World country, does that mean you are the equal of your
hosts? Does that mean you have the right to destructively criticize
the Philippines? If you are SERIOUS about wanting to effect change why
don’t you put your MONEY where your MOUTH is? Oh… I forgot… your
site is BEGGING for donations
http://groups.google.com.ph/group/soc.culture.filipino/browse_thread/thread/324e7d8b09df2517?ie=utf-8&oe=utf-8&q=benign0#56a1ea6317f1afea
(boldface added by moi)
Hey Madcat, as it seems your recent tililing rampage was really all about just a single assumption you make about what i assert (as evident above), I might first ask you this:
Where exactly did I tout branding as a solution to Pinoy-style poverty?
Answer the above and we’re ready to rock ‘n roll, dudette. ;)
Jumping off on what GabbyD and Ben mentions in their last comments, let’s qualify scale further. Scale is not just about quantity, it’s about value. As shown in the two charts I exhibited, the y-axis represents value.
For example: The italian supercar industry — that elite set of coach builders that go by those exotic names: Ferrari, Lamborghini, Bugatti, etc. — do not manufacture in large volumes. But the value they create is scalable. Their brand is worth more than the aggregate value of their company’s physical assets and labour output.
There are also lots of family-run businesses in, say, Germany — a country known for specialised custom-built heavy-engineering-and-design-value-added capital equipment. They’ve cornered a market niche for high-quality technologically-advanced products much the same way as Swiss watches, though no more functionally effective than cheap Chinese digital watches, continue to be much sought-after products.
Compare that to the Philippines which has battallions of artisans churning out quaint but undifferentiated handicrafts that are, frankly, quite a hard-sell in a world market flooded with cheap trinkets churned out from China.
I’d respond to Winnie Joy as well, except that I struggle to make sense of her Wowowee-style language. :D
you are all into theories why not just read promotion, pricing and costing.
Cost of production may be 10 cents but the promotion and distribution costa are more than a hundred per cent.
Are you even aware of this.
Benigno, nakakahiyang pinagsusulat mo. Magbasa ka pa nga.
Scalability, my foot.
Ben,
you made a very good point on,
“If Pier 1 finds a better supply of tacky wicker furniture from China or Indonesia, that’s where they’ll get it. Malaysia and Vietnam grow mangoes, too. So, where does the Philippines get an edge on the competition?”
That’s what contract is all about, legal contract for 3-5 years will minimize the risk. This is where pinoy business people must think on how to improve their products to have a competitive advantage.
“The people who champion the tourism industry need to stop asking opinions from people who have already been here, and start finding out what everyone else thinks. In other words, take the first steps in BRANDING.”
This is exactly the job of our Department of Tourism. This department has not done anything to clean up the bad publicity. Whoever manage this department do not understand branding and competitive advantage. I would suggest to replace the team by someone who have specific industry experience like a former, international travel agent or in the business of travel.
Again, our country are manage by corrupt politicians who drags the many smart pinoys in this country. Our politicians can be bought by chinese businessmen , who are actually known for business corruption in the world, not pinoy. :) tell me about it?
KG,
yes subcontrating no problem, or outsourcing ( manufacturing sector) but for legal purposes, Contract will protect the business and the manufacturer from getting out of it. Both parties must comply with the contract according to design, time of delivery and many other legal issues such as product warranty.
Ben,
“So, where does the Philippines get an edge on the competition? BRANDING. Is Nike a better shoe than the ones you can get for 1/10 of the price out of the MSE catalog? No, of course not. BRANDING.”
Yes but here’s another one in legal context.
Warranty or implied warranty of Merchantability.
If Pinoy will create a brand to sell to the world, how is it going to deliver quality service if access to product warranties/merchantability is not guaranteed. There’s plenty of things to consider.
But what we are discussing here should create an awareness and motivation to many smart pinoys in our country. :) think think think
wow pa intellectual epek pa rin si benign0. hehehe nakakita ka lang ng grapha akala mo authority ka na sa economics of scale at scalability. bwahahahaha.
ang ginagawa mo bistado na. nag so solicit ka ng mga ideas at concept ng ibang tao. gago! wooooooooooooot!!! hehehe.
eto pa:
A dialogue with Alecks Pabico of the PCIJ:
Alecks : You’re a repeat offender, Benign0. I’ve lost count how many times I’ve had to come in to remind some of you here, especially you, of the rules of the blog. So don’t give me this crap and pretend that you never felt alluded to. No point arguing your case now.
Hey Madcat, of course you are right. But even if “promotion and distribution costa are more than a hundred per cent”, well, 100% of 10 cents is still 10 cents. So adding “promotion and distribution costs” which by your reckoning amounts to another 10 cents on top of production costs, that just makes 20 cents — which leaves a $99.80 premium for Phil Knight to pocket.
I’ll take your advise to “read more” if you take my advise and use a calculator for a change. :D
Btw, WJ, just so everyone knows, you can read the full brilliant dialogue I had with the eminent Alecks Pabico (from which you cut-and-paste the above excerpt) by clicking here. It’s kinda related to my recent blog entry “Attack of the Killer Shawarmas“.
Enjoy! :D
hehehe. yang everyone knows syndrome mo gas gas na! don’t you think that the reposting is not intended for everyone? hmmmm. pang ilang forum mo na ba ‘to? pa humble epek pa! kumita na rin yan! yang mga sira ulo na katulad mo dapat binibitin ng patiwarik!
SCALABILITY YOUR ASS! Bwahahaha…. walang ka kwenta kwentang graph!!! hehehehe. nakakatawa ka talaga benign0. You don’t even know the tool you’re using….. oooops… no need to elaborate. baka may mapick ap ka na naman. ang dapat sa ‘yo tawanan na lang ng tawanan.
Well, suffice to say, I do observe that hanggang tawa na lang talaga ang mga Pinoy (aside from kamot ng ulo) in their regard for the multitude of challeges that face them everyday.
I was wrong about you WJ. You actually do constribute something to this forum. :D
naks pa humble ka na naman…. hehehehe. gas gas na nga yan. tsaka bakit mo tinitira ang mga pinoy? tapos sinasabi mong pinoy ka. tangna ka ah. ano gusto mo? kurutan?
GabbyD,
Yes, it is because of branding. Branding is applicable to any product, not just tangible or mass-marketed goods. You’re entirely correct that quality and performance are critical for success, but those alone are not enough to achieve superiority or even survival; if they were, 95% of all new restaurants wouldn’t close within five years. Or most of the world’s computers would be running on the Apple OS instead of Windows. Branding is how the Indians make their BPO services stand out above those of the Philippines, even though that particular business is just as competently handled in Pasig as it is in Mumbai.
Don’t think of it as “branding” so much as “reputation-building”. It’s a cumulative effect; the Indians had to start with aggressively marketing their competence and their availability, and as time has passed — time in which, as you’ve realized, the talk is backed by performance — they have to concentrate less on why they’re a good choice for a potential BPO client, and more on “Hey, we’re India. This is what we do, and everyone knows it. Your own reputation will improve because of the competence your choice of India for your BPO services will show to your customers and competitors.”
leytenian,
You hit the nail right on the head. A contract arrangement, or any other opportunity to expose your products to a wider marketplace is a starting point. That buys you enough time to figure out how to make your product so necessary to the consumers (not the distributor, but the people who buy the junk from Pier 1), that the demand will determine whether or not Pier 1 keeps importing your stuff, and not objective factors. Once that happens, you don’t need Pier 1 any more.
In my work, I meet a lot of business people who understand this — it’s not an alien concept — but for all the heart, emotion, and mysticism that is a part of the Pinoy personality, they seem to have a hard time with the intangibles that one needs to be able to understand in order to build a unique brand. Specifically, they do not want to, or cannot, step outside themselves and see what other people see. That’s my point about tourism, and it applies to any product, rattan chair or call center or an entire physical country. It’s not good enough to be good; you have to have a brand that causes people to make that association instantly. And if you do that part right, you don’t even have to be good. Jamaica, for example, is an abysmal shithole compared to the Philippines. But it has such a brand mystique as a “tropical paradise” that people who have never even been there write songs about it.
And I have to be honest (by way of making a spoiler and shameless plug for my next piece on Get Real, coming soon) most of the people in my community — the modern day colonists, the detestable EXPATS — are not helping much, by leaving everything we know behind and pretending everything is happy and wonderful here in the land of the sun. So if it makes you feel any better, you’re not the only ones with low summits and near horizons.
after all a series of blah blahs… in the end… another self adulation process. huhuhuhuhu. see, like you said… i’m useful for… a useless prick. DONATIONS!!! PULEEEZ!!! DONATIONS AGAIN!!!
MORE than a hundred PER Cent OF COST, it is different from 100 per cent.
And that’s only for promotion and distribution which could be considered variable costing.
What if I use FULL COSTING which is normally what is applied in costing the product.
Variable costing is used more on determining the break even point of the product aka how many units will the company has to sell to incur no loss nor profit.
I don’t use calculator, that’s so jurassic. I use accounting software or financial model which makes the cost analysis and costing techniques, break even analysis, variance analysis for the different stages of production. hmmm. if you use calculator, the product has already been shipped and you have not even calculated the losses, wastage in terms of materials and labor applied.
So you think it is as simple as that?
Be a bit more clear, Madcat. Is it 100 dollars per cent of cost or 100 cents per cent of cost that you are describing.
This one of yours is quite baffling though:
You are saying that “a hundred PER Cent” is different from “100 per cent”.
Aside from differences in capitalisation and the way you express the quantity 100 (in the earlier you spell it out and in the latter you use arabic numerals), the two seem to be the same to me.
Careful, careful… :D
I have a financial calculator :)
That’s still Jurassic.
Yes, because of the word MORE which you intentionally omitted. So iif it is more than THAN A HUNDRED PER CENT it could be 101 to nth times.
@Ben
thanks for the reply. you want to call it reputation building in the BPO industry. But from the conversation in this post, branding allows firms to attach a premium on the price of the good.
is it your contention that BPOs in india are more expensive (premium, markup) than RPs, but demanders go to india anyway?
that is a bold claim, considering outsourcing is driven by cost differences.
if its true, i’d like to learn more about it! :) if you can share some resources that’d be great!
@Cat
i agree that there are distributional costs, etc., and that these can be large, but you don’t believe athletic shoes are a high margin business? that, i think, is not a controversial statement. no? comparatively vis-a-vis other industries?
@Gabby D,
Even though the Indians will tell you they’re less costly on the front end, from people who are more deeply involved in that business than I am I’ve been told that the long-term costs are pretty comparable. Starting wages are about the same; India has an edge in staffing capabilities at the supervisor/middle manager level; the Philippines has an edge in location and set-up requirements; and so on.
So while it’s true that branding allows a company to attach a premium to a product, it does not necessarily follow that they will. Look at very price-competitive industries like cell phones for instance. Cell phones from all manufacturers these days are virtually identical at similar price points; my Samsung and my wife’s Sony Ericsson cost almost exactly the same, and have exactly the same technical features. So where does a product in a highly competitive environment find added value to attract a customer? Branding. There’s a set of intangibles that take effect when I hear “Samsung” or “Sony Ericsson” that makes me, as a consumer, stop and look at the Samsung phone and go “eh” at the S-E one. An overwhelming number of Pinoy consumers do the same thing when they hear “Nokia”. Branding matters most when you can’t get an edge any other way, through price or quality or service.
And to back up your point about Nike’s margins: their pre-tax net (from their 2007 10-K report, which you can find online, it’s public info) is about 14%. So that’s $14.00 for every 10-cent shirt stitched together in Cavite, after “losses, wastage in terms of materials and labor applied.” Not a bad racket, if you ask me.
thanks ben! i still dont get it…
if the RP firms and Indian firms had exactly the same cost and service quality, but indian firms have a greater market share, you contend that it is because of reputation?
my alternative would be a first mover effect: since they are there already, they wouldnt move anymore… but you are saying something more: New demand for these services would still be drawn to india because of reputation….
But what does reputation give these businesses that are looking to outsource? It cant just be good feelings… firm level outsourcing decision is big bucks, and they’ll rationalize using the bottom line… they must be getting something…
what are they getting: either there must be heterogeneity in cost (some firms will find india more attractive coz they are cheaper in all the most relevant ways for the majority of demanders — u mentioned this), OR there is a quality difference in service provision relating to availability of talent/skills or infrastructure (stuff you mentioned too)…
to steal market share, RP firms have to offer something more, cost side, or quality side…
parenthetically, i wonder what the country market share stats are… its hard to get data from the net.. news stories from the web tell me that India is the leader, but other countries are gaining shares too..
In the consumer market, u mentioned cell phones. on a market segment basis, for the non-iphone segment- its pretty price competitive. you mentioned 2 models: both have similar features, and both have the same prices (roughly). price competition dulls the premium that brands have. Both of these companies spend a fortune on ads and marketing, but they cannot charge too high a premium due to powerful price competition.
Now you are telling me that Samsung has a higher market share than SE, and its driven by the brand. Its possible, since for consumers, feeling and associations (psychological factors) are important drivers for purchasing behavior. [i'd also add that product tie-ins with mobile phone companies can also affect market share]
Now, if they offered new features, now we’re talking!… enter the iphone, which created a market for a new kind of feature laden mobile…
its an exciting time for the high end phone market. the iphone is now the top selling phone in America. But there are lots of entrants to this market, Blackbery storm, and the Android enabled phones are coming on line… Good news for the consumer! :)
anyway, good stuff to chat about…
good news: Deutsche Bank to expand outsourcing in Philippines
@Gabby D,
You know, one thing we haven’t put into the equation is scale; I don’t know how much the sheer size of the Indian population and workforce gives them an advantage. But then again, it’s an advantage that can be negated by a competing superior brand and product. If it is purely a cost judgment, then it is possible I am diminishing the importance of the front-end costs; it bears further research, I think. But another thing, which we haven’t discussed and is routinely cited by potential BPO clients, is the negative aspect of the Philippine brand, the perception of political and social instability.
As for the cell phones, you misread me — a little. I don’t know that Samsung has a bigger market share than SE because of their branding. They actually might, but I haven’t researched that yet, either. What I said was Samsung has a bigger share of MY market because of their branding. Just as SE has a bigger share of my wife’s because of theirs. But you make a good point: if I decide to move up to the next level of phones, the first thing I will look at is capabilities and other objective features — the all-important quality aspect of a product. And then, if I again find similar quality attributes, I will have to make my choice based on the intangibles of branding.