“The economies of scale in production, where producing more of the same product means that its unit price gets cheaper; in distribution, getting (their products) to every corner of the Philippines if they wanted, and in marketing, they can afford to buy expensive tri-media space,” says Africa.
He maintained that the capability of these firms to adjust to market conditions should not be underestimated. Big companies have shown how they are capable of adjusting their prices to suit the consumers. He cited the strategy of Coca-cola company when it came out with the P6-bottle called “Sakto” and the mobile phone companies’ decision to sell mobile phone pre-paid load in smaller denominations.
Africa said that it is possible for medium-scale enterprises to survive only if the niche it is carving out does not attract the attention of the large-scale ones.
“If it’s a profitable niche… it’s very likely that these big firms will diversify their products to also capture the profits from that small niche market. Big companies are always after profits and if the opportunity is there, the only question for them is if they have the capacity and it’s worth their while,” he said.
If this happens, Africa said that big firms would either start making these products, or buying out the medium-scale firms.
Using the back door
Africa said that such firms must not rely on their own individual abilities to overtake multinational corporations, because it is not a matter of managing the business well, but the kind of economic environment the government is creating to support some businesses, and control or limit others.
In the end, even if the entrepreneurs of the medium-scale variety are sanguine about their prospects for the next few years, if the government does not support them, they will have to use the back door of the ice cream industry for their backyard operations to continue. (Bulatlat.com)