By Daxim Lucas
Philippine Daily Inquirer
First Posted 00:01:00 04/16/2009
MANILA, Philippines -- Local businesses have some of the shortest planning horizons among peers in East Asia, partly because more firms are engaged in industries that are subject to rapidly changing trends, the results of a recent international study reveal.
According to the annual Grant Thornton international business report, the majority of Philippine privately held businesses have a planning cycle of only a year or less.
Fifty-five percent of surveyed local firms fell into this category, with the rest of the respondents tapering off as the planning horizon moves farther.
In comparison, most common planning period for businesses in the region - favored by 49 percent of all respondents - is one to three years, the report showed. Companies in mainland China are the longest-term planners with 44 percent of them planning for three years or more.
The results were released by audit firm Punongbayan & Araullo, the local partner of Grant Thornton.
"In the Philippines, most privately held businesses belong to the services sector restaurant businesses, business process outsourcing (BPO), professional services, manpower supply, etc. which needs to be able to adjust quickly to changing trends; this explains the shorter planning cycle," the report said.
In the Chinese survey, most private businesses belonged to the manufacturing sector an industry which needs longer planning cycles.
The survey also asked business leaders what initiatives they implemented to boost profitability and which of these have been most successful for their organizations.
According to businessmen, product innovation is the most successful initiative for boosting profitability, with 20 percent of firms in the region citing it as their most effective tool.
By comparison, 23 percent of Filipino business leaders who were surveyed said that
"conducting a productivity review" was the most successful initiative for expanding their bottom lines.
Outsourcing followed closely with 21 percent of respondents favoring this method.
"These two efforts are both closely related to efficiency and cost reduction," said Greg Navarro, managing partner and CEO of Punongbayan.
"With a productivity review, companies can revisit their processes and
supply chains, address inefficiencies, and emerge with an operating
procedure that gives them more bang for their buck."
"This may involve outsourcing certain functions, which is what an increasing number of businesses in more advanced markets are doing," he added.
The other most successful initiatives for local private firms are product innovation (19 percent), pricing strategy (14 percent), and cost cutting (7 percent).