Bestfit Manufacturing Incorporated

• Main Author: Alobba, Eldred P.
• Format: text
• Language: English
• Published: Animo Repository 2000
• Subjects: Footwear industry > Philippines; Bestfit Manufacturing Inc
• Online Access: https://animorepository.dlsu.edu.ph/etd_masteral/3955
• Institution: De La Salle University

The leather footwear industry account for 10% of the entire Philippine footwear industry. The present statistics indicate that for the last three years (1995-1998), the industry registered a negative growth. Notwithstanding the decline in industry performance, there remains to be a big room for improvement as there still exists a large domestic supply gap for leather footwear in the country. The present 1998 figures showed that with the demand of 108,719M pairs of shoes, the present shoe industry has only supplied 51,635M pairs, or a gap of 57,334M pairs. The magnitude of the supply gap indicates the enormous opportunity in the domestic market that is not presently satisfied or effectively reached by the existing domestic leather footwear industry even with imports. However, as in other industries, the leather footwear industry is also confronted with increasing prices of raw materials, scarcity in working-capital, expensive labor costs and the militant character of the Philippine labor force. BESTFIT is one of the more than 2,000 leather shoe manufacturers in the country. But unlike other players in the industry, BESTFIT opted to specialize in military shoes and safety boots with the AFP and the PNP as its main market. BESTFIT is majority owned by AFP-RSBS, a pension fund of the Armed Forces of the Philippines. BESTFIT's main product lines are combat shoes and dress shoes which account for 84% of its total production structure. Because of its affiliation with the Armed Forces of the Philippines, the company was expected to garner a majority share of the AFP market. However, the company fell short of stakeholder's expectations when it landed third among its direct competitors (Filboots and Gibson) in the combat shoes market. The company's current share in the market is far below its break-even volume. BESTFIT could hardly increase its current market share due to uncompetitive pricing. It has been noted that BESTFIT's competitor could go as low as 30 - 40% lower than BESTFIT's market prices. For four years, the company has been suffering from major financial set-backs. The company is heavily indebted with a commercial bank and with RSBS. RSBS (as the company's major creditor and stockholder) has already threatened to foreclose the company's mortgaged assets, divest its equities and close down the company. BESTFIT is presently beset by major problems which need to be urgently addressed if the company were to survive. Low sales volume, high operating costs, lengthy production downtime, heavy indebtedness and a cash-strapped position are among its most immediate concerns. Although the company has already initiated various strategies to address its problems, these are not sufficient to resuscitate the company. Among the company's present concerns, the most critical are those which relate to the company's low sales volume, high operating costs and cash-flow problems. This study will attempt to propose various strategies to bail out the company from the present crisis.