Leading Philippine Manufacturer Battles Low-End Competition by Targeting Overseas Workers

As low-priced competitors gain share from mid-range home furnishings manufacturers in the Philippines, market leader Mandaue Foam Inc is sustaining growth by strategically targeting the Philippines’ large population of overseas workers.

Mandaue defies mid-range downfall

Despite the struggles of its mid-range peers, Mandaue has seen continued growth in its home furnishings business over the past two years. Between 2009 and 2011, the company achieved a 12% increase in value sales and raised its market share from 22% to 23%. While expansion in the number of Mandaue’s single-brand stores aided growth, it is the company’s efforts to target the Philippines’ large and growing population of overseas workers that are delivering the greatest gains.

Overseas Filipino workers (OFW): A major consumer base

According to Euromonitor International research, the Philippines currently registers the world’s fourth largest sum of inflow remittances. In 2011, this inflow totalled US$23 billion and accounted for more than 10% of the country’s GDP (US$225 million in 2011). This is largely due to the country’s substantial number of OFW, which the Philippine Overseas Employment Administration estimated to be between 9.5-12.5 million in 2010.

Top Five Recipients of Inflow Remittances 2011 (US$mn)

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Source: Euromonitor International

Reaching overseas earnings via online retailing

By developing its internet retailing offer, Mandaue is seeking to capture some of its domestic market’s sizeable remittance inflow. An online product catalogue and ordering platform will allow consumers living abroad to purchase a wide range of the company’s home furnishings offer for delivery to addresses in the Philippines.

This strategy is likely to work well for Mandaue, which boasts a large and diverse product portfolio across nearly every home furnishings category and enjoys a strong reputation for quality among Filipino consumers.

At the same time, the company will need to implement a number of complementary measures if it is to ensure success. Delivery coverage will need to be extended outside its current restrictions to major cities in a limited number of the country’s 80 provinces. While expanding its delivery infrastructure, Mandaue will also need to keep delivery prices relatively low to continue to keep lower-end competition at bay.