A MARKET STUDY ON RATTAN FURNITURE PRODUCTS

A Research Proposal
Presented to the
Faculty of the School of Business and Economics
University of San Carlos
Cebu City, Philippines

In Partial Fulfillment
of the Requirements for the course
BUSINESS RESEARCH (BA 109N)

By
ALSOLA, QUENNIE MARIE A.
LAUREL, DEMI C.
LEPON, LINDY JILL S.
MANUEL, MARGIE R.
TAN, STEPHANIE C.

Chapter 1
INTRODUCTION
Rationale of the Study
Hailed as the furniture capital of the Philippines, Cebu lives up to its
reputation as it steadily enjoys a substantial percentage share of the
countrys furniture export sales, which is over 60 percent of the total annual
figures, yet Cebu manufacturers comprise only 20 percent of the entire
Philippine furniture industry. Manifestations of the considerable strength
amidst soaring prices was evident, when despite the plummet of the peso,
the Cebu furniture still registered a positive growth.
Most of the significant achievements in the industry were done in the
last ten years. From the fledging start in the rattan pole trading, the furniture
industry has grown into one of the major contributors to Philippine economy,
with furniture classified among the top five export commodities in the
country.
Moreover, Cebus furniture industry is now the forerunner of the
provinces thrust toward global competitiveness. Due to its rich tradition in
furniture-making as well as its impressive track record both as a major export
earner and net exporter, the Cebu furniture industry has long been
considered as having one of the greatest potentials in the world market. True
enough it has been included in the list of 15 export winners under the
Medium Term Development Plan.

Cebu has all the potentials of becoming a major player in the

international scene. At present it already served the European, North
American, the Middle East, and the Asian markets, thus making it a furniture
resource of great promise.
The company gears towards product development to further keep its
edge over their competitors. The scarcity of raw materials, also affecting the
company, has anything but discouraged nor limited the very talented
Cebuano furniture designers into creating beautiful furniture made from
combinations of traditional and indigenous materials such as sea grass,
abaca (Manila hemp), arorog, and butay (Coconut twig) mixed with wood,
bamboo, rattan, stone, and wrought iron. These designs are expertly
handcrafted by the finest craftsmen in the area, giving attention to the
tinniest detail that make up the essence of each piece.
Rattan furniture is well known to be very durable. We must also
support locally made products. We should be proud that the Philippines,
especially Cebu, is leading the furniture industry.
This study will uncover ways on how to promote rattan furniture to
people. This will explain why people should choose rattan furniture rather
than furniture from other countries because comparing them doesnt really
bring out that much difference. We will describe here the features that rattan
furniture has over imported furniture and the sources where the materials for
making the product is taken. We will also identify the possible competitors in
the furniture business.

THE PROBLEM
Statement of the Problem
The main purpose of this study is to know rattan furniture products
better. Specifically, it will attempt to achieve the following research
objectives:
1. To determine the competitive features of rattan furniture products.
2. To be acquainted with the sources and suppliers of rattan materials.
3. To classify the competitors.
4. To identify the possible customers.
a. High-end customers
b. Export and local market
5. To study how to counter barriers of new entry rattan products in the
industry.
Statement of Assumptions
1. It is assumed that there are no problems with the supply of rattan in
making the furniture.
2. Products introduced by the companies engaged in rattan business
have best quality and reasonable prices that can make buyers
patronize their rattan furniture products.
3. Rattan business companies increased their attention to the most
effective ways of marketing their furniture products such as branding.

Statement of Hypothesis
The rattan furniture product will make a huge mark in the furniture
business in the Philippines and in other countries. With its excellent features
and usefulness, it is not impossible that it will boom the furniture industry.
The demand for rattan furniture products will increase, here and abroad.

Significance of the Study

This study will help the companies making rattan furniture know ways
on how to making their furniture products attractive to the people and in
order to sell them with quality. This will also help people know more about
rattan furniture products and let them discover that they do not need to find
for furniture from other countries because we have more furniture products
that are of the same quality as the imported ones. This study will make you
even want to buy products locally than those imported products.
This study would be beneficial to the following:

To the furniture companies that they may define competitive strategies

and improve their existing marketing strategy.

To the rattan-made furniture that they will be promoted locally,

nationally and globally.

To the local rattan furniture makers that they may maintain their
standing in the export market.

To those who are primarily dependent on the rattan furniture products

for income and employment that they will improve their socioeconomic conditions.

Organization of the Study

Chapter 1 tells about the rationale of the study, the statement of the
problem, the statement of assumptions, the statement of hypotheses, and
the significance of the study.
Chapter 2 focuses on the theoretical background of the study. It shows
the review of related literature and the theoretical and conceptual
frameworks.
Chapter 3 is mainly about the field work of the study. It states the
research environment on where we will conduct our study, the research
respondents to whom we will give the surveys, the research instruments
used in the study, and the research procedures in gathering the data and
how these data is treated.
Chapter 4 entails the presentation of the data, the results of the study
and the discussion on how to solve the problem.
Chapter

consists

of

the

summary,

recommendation based from the results of the study.

Definition of Terms

conclusion,

and

the

1. Abaca a strong fiber obtained from the leafstalk of a banana (Musa

textilis) native to the Philippines called also Manila hemp
2. Bamboo any of various woody or arbores cent grasses of tropical and
temperate regions having hollow stems, thick rhizomes, and shoots
that are used for food
3. Furniture consists of large products such as tables, chairs, or bed.
4. Rattan made from woven strips of stem of a plant which grows in
Southeast Asia.
5. Sea Grass any of various grasslike plants that inhabit coastal areas.
6. Wrought Iron a commercial form of iron that is tough, malleable, and
relatively soft, contains less than 0.3 percent and usually less than 0.1
percent carbon, and carries 1 or 2 percent of slag mechanically mixed
with it.

Chapter 2
THEORETICAL BACKGROUND
Review of Related Literature
Manufacturers use rattan to make umbrella handles, walking sticks,
furniture, basket, ship cables, and chair bottoms. Rattan is strong, bends
easily, and lasts long. His statements regarding rattan show us reasons why

people prefer rattan furniture. Furthermore, rattan palms have strong, tough,
slender, many jointed stems of uniform diameter (Seigler, 1991).
In a rattan-based small scale cottage industries in urban and semiurban, most of the entrepreneurs (70%) managed their capital from their
own sources and the remaining entrepreneurs (30%) usually took capital
from large-scale rattan-based industries to which they were compelled to sell
their products with fixed and nominal prices. Processing is the key issue for
further development and utilization of rattan. All types of well decorated
furniture like sofa set, chair, table, rocking chair, bed, Mora, cradle,
decorative partition, bookshelf, different types of basket, and walking stick,
were copiously produced in the industry. Productivity depends on the
availability of raw material which means that if raw materials are available
throughout the year then, the production per month throughout the year
remains constant.
Profitability varies depending on quality of finished products, which in
turns depends mostly on the quality of the raw material and the efficiency of
the tools used. Scarcity of rattan was the leading constraint in the rattanbased small scale cottage industries, which were struggling for existence. To
ensure a sustainable supply, rattan should be regenerated and cultivated in
the forests and outside the traditional forestlands. Prospects of any industry
depend on availability of raw materials, its cheapness and proper marketing
facilities (Miah and Rahman, 2002).

In tourism marketing, it states, In recent decades, the world economy

has experienced from the primary (agrarian) and secondary (industrial)
sector to the tertiary (service) sector. In this fast changing environment,
rules in all circles of life do not stay constant. Experiences are more
customer-involved than services. In customer experiences, some relevant
concepts

are:

customer

expectation,

customer

perception,

customer

satisfaction, and customer value.

To define more about the relevant concepts of customer experiences,
first will be customer expectation. It is what an individual expect from a
manufacturer in exchange for the payment made. Ergo, customers expect a
good quality (strong, tough, and durable) of rattan furniture and even less
expensive. Second, customer perception is based on customers subjective
evaluation of what they gain in exchange for what cost involved. An example
is the payment made. Third, customer satisfaction is the end state of a
psychological process based on customers experienced. To apply, if the
customer gets satisfied with the product, then theyll most probably spread
their experiences and opinion to others. A customers promotion will lead
other people to be your customer which began from customer satisfaction. It
is believed that satisfaction depends on the comparison of the customer
expectation and perception. Lastly, customer value can be defined as the
difference between benefits that a customer gains and costs to the
customers from the consumption process. A company should take effective
measures to maximize customer value in the delivery of services and

experiences by enhancing perceived benefits or reducing perceived costs

(Hsu, Killion, Brown, Gross, and Hurray 2008).
Theoretical Framework
Michael Porter of the Harvard Business School presented five
forces analysis which serves as the framework for industry analysis and
business strategy development. These are the 1) bargaining power of
customers, 2) bargaining power of suppliers, 3) threat of new entrants, 4)
competitors and 5) threat of substitute products and services. These are
shown in the illustration below.

Figure 1: Porters Five Forces Model

Threat of New Entrants This measure how easy or difficult it is for
new entrants to enter into the industry. This will include economies of scale,

capital requirements, access to production inputs, financing and distribution

channel.
Increase in the number of firms and expansion of capacity in response
to the growing demand for rattan products suggests that the industry is not
characterized by high entry barriers. However, this does not imply that entry
or exit is completely easy. High capital, skill requirements and scarcity of raw
materials are the major considerations in establishing a rattan manufacturing
firm. Large capital is needed to put up factory, pay workers and obtain raw
materials. The skill requirement is related to the high degree of product
differentiation and the pressure to maintain quality standards for rattan
products. (Pabuayon, 1988)
Bargaining Power of Buyers This includes the number of customers,
the buying volumes, differentiation, price elasticity, brand identity and
switching costs. According to Porter (1988), buyers most of the time
influence cost and investment for powerful buyer demand costly service.
In rattan production the type, design and quality of the products
produce by manufacturers are based on the purchase order made by the
buyer.

Some

manufacturers,

especially

having

continuous

production

considered their past sales record and market surveys. Buyers are also able
to establish preference for certain rattan variation in quality, design,
packaging, reputation and the services provided.
Bargaining Power of Suppliers This relates to what your suppliers
can do in relationship with you. This will also determine the costs of raw

materials and other inputs. This will typically involve the number and size of
suppliers, switching costs, unique service or product and the ability to
substitute.
Raw materials are one of the biggest factors that rattan manufacturers
consider. Different studies have found out that there are scarce for raw
materials. In order for the rattan firms to continue to produce they have
rattan concessions to assure the availability of the materials. Some also have
their local suppliers and some large firms have to import to meet their large
raw material requirements.
Threat of Substitute Products and Services This includes relative
price performance of substitutes, switching costs and buyer propensity to
substitute. On a free market, buyers always have the choice if there is a
viable alternative. Substitution means the same product is sources by two or
more distributors.
Product differentiation occurs in rattan manufacturing. Furniture
products vary in terms of kind, function or use, design, size, shape, and
quality. Other rattan products substitutes are wood, bamboo, plastics and
metals. Variations also arise upon the form of rattan used and species as well
as other materials are used in combination with rattan, the type of finishing
touches like color, whether natural or dyed.
Competitors It is the major determinant of the competitiveness of the
industry. This involves the competition online and offline companies, the

level

of

advertising,

powerful

competitive

strategy

and

competitive

advantage through innovation.

There are a lot of rattan furniture companies in the Philippines that are
available. These companies are located in major urban areas produce rattan
furniture for the domestic market and for export. Rattan furniture nowadays
is no longer involved in the use of advertising but instead they adopt
innovation through the use of technology by the use of internet and having it
on-line. Rattan manufacturers are now patronizing the other Philippine
furniture products.

Conceptual Framework
Using the four Ps we will be able to find ways on how to properly
promote rattan furniture products. The diagram follows:

Figure2: Conceptual Diagram (Four Ps of Marketing)

Price It will determine the affordability of the product. It will also be

helpful in determining the price strategy to use. It will be very helpful in
assessing the right price rate to use.

Place This will help us know on what location there are abundant
sources of raw materials, where we will place the warehousing, the
plantation, and the company and the proper location to put up the business,
where the products will be saleable. In the export aspect, it will help us
determine the countries to where rattan furniture products will be
demandable in the market.
Product This will give us the features of rattan furniture, its
advantages and disadvantages against other furniture. This will tell us on
what to develop in the product for it to be saleable. The rattan furniture
products should be durable and strong for it to boom in the market.
Promotion This will help us find ways to how we sell the rattan
furniture. It would be very helpful to the company if there is a very good
advertising for the product.

Chapter 3
RESEARCH METHODOLOGY
Our study will use the descriptive method in coming up how rattan
products reach the market and the manner to which it is promoted. The data
needed for this study will be obtained through the use of survey and
interviews as well as questionnaires.
Research Environment
The group identified some rattan users within the Cebu area and will
conduct our research on the vicinity to complete the study.

For the

condominium, we chose, Crown Regency Residences Cebu Hotel located near

V. Rama Avenue in Guadalupe. For the hotel, we chose Marco Polo Plaza
Hotel at Cebu Veterans Drive Nivel Hills, Apas. For restaurant, we chose
SumoSam at Ayala Center Cebu. For the resort respondents, we chose Cebu
white sands at Maribago Beach. And for the export local markets, we chose

Rattan furniture Philippines Cebu located in Liloan. We chose these markets

because they use rattan furniture in their business.

Figure 3 : Crown Regency Location

Figure 4: Marco Polo Location

Figure 5: Sumo Sam

Location

Figure 6: White

Sand Beach Resort Location

Figure 7: Rattan furniture Philippines Cebu Location

Research Respondents
Our respondents are classified in three types, high-end costumers
under which are hotels, condominiums, resorts, bar and restaurants, and
subdivisions; export local markets and company advertising departments.
Chosen high-end customers must have used in their furniture or fixtures
rattan made products that adds beauty and attraction to their structure and
have continued patronage from the aforementioned companies products. In
random, some of the manufacturers staffs will be made to answer the
questionnaire base on their gained experience and knowledge on the
promotional aspects of the rattan products in their respective companies.
Lastly, the export local markets are rattan industries aforementioned whose
primary customers are global.
Their

unbiased

comments

and

observations

are

taken

into

consideration especially in terms of customer satisfaction and feedback.

Comments are mostly based on the expected service provided by rattan

product suppliers.
Our respondents would consist of 3 administrators from the five
companies we enumerated earlier. From these respondents, we will choose 3
of them in which we will focus the data we will use in analyzing the study.
The sampling method used in this study is convenience sampling.
Convenience sampling is non-probability sampling which allows the
researchers to gather date from respondents who are currently available.
The researchers will identify five market areas in this research
environment. The researchers count a total of 15 customers of rattan
furniture products specifically, 3 each from condominiums, hotels,
restaurants, resorts, and export local markets. From which a sample will be
taken using this formula:

n=

Nz2p(1-p)___
NE2+z2p(1-p)

Where: Total population (N) = 15

Confidence level (z) = 1.96
Promotion (p) = 50%
Margin of error (E) = 5%
Table 1
Allocation of sample size
n=2.89

MARKET

No. of customers
(N)

Percentage

Sample size

Crown Regency

20%

2.89

Marco Polo

20%

2.89

Sumo Sam

20%

2.89

White Sand Beach Resort

20%

2.89

Rattan Furniture
Philippines Cebu

20%

2.89

15

100%

14.44

TOTAL

Computed as follows:
n=

15(1.962)(.5)(.5)
15(.052)+(1.962)(.5)(.5)

=14.406
0.9979

=2.89

Research Instruments
We

will

use

survey

questionnaires

in

checklist

type.

This

questionnaire is will be used to gather data of how rattan furniture products

be promoted. It consists of 16 questions which are about how customers
assist rattan furniture products and how competitors strategies affect
customers.
Research Procedures
Gathering Data
This is a research that is utilized by survey and observation methods.
The questionnaires will be given to each respondent. After presenting the

questionnaire and after the respondents answered it, it is then collected and
interpreted.
Treatment of Data
From the results of the survey, we have to come up with the marketing
practices of the selected rattan company.

Chapter 4
PRESENTATION OF DATA, INTERPRETATION, AND ANALYSIS

The study uses primary and secondary data to know competitive

features, competitors, sources and suppliers, possible customers, and how to
counter barriers for new entrants.
After conducting surveys in different establishments, we found out the
answers to some of our questions that are essential for the study. With this
we will be able to give solution to the problem and give recommendations on
how to make rattan furniture better and more attractive for the customers.

In this chapter, we will show primary and secondary data gathered

while making the study. Some of the data are based on the answers of the
respondents from different establishments. While some are from different
articles, books, and websites. Some of the data that we have gathered will
be shown in graphs and tables. In this way, the reader will be able to
comprehend better.
Furthermore, the confidentiality of the respondents will be ensured by
not disclosing their names or personal information in the research. Only
relevant details that helped in answering the research questions are
included.
Competitive features and systems
Rattan furniture is old fashioned as some may say. But to others it is
not. It has features that people will like to have in their place of comfort.
According to some websites, rattan furniture is eco-friendly furniture, it is
easy to clean, it has a human-centered design, and most especially, it is
comfortable. Customers would look out for factors that would help them in
deciding on whether to buy rattan furniture or not.

Figure 8: Factors that people consider before buying rattan furniture.

As shown above, many rated satisfaction 5 (as 5 being the highest).
This means that people will see if they will be satisfied by the furniture if

they buy it. Satisfaction will be followed by quality and style. These factors
will be considered side by side. Many of us will really look for quality furniture
for our homes and at the same time stylish enough to satisfy our desire.
Others factors are the price and who made the furniture (manufacturer).
These are the factors that people usually think about before buying rattan
furniture.

Figure 9: Competitive areas of rattan furniture in lieu of the market.

Rattan furniture is really known because of its features. Customers will
always look for good features in a product, features that will satisfy both
their needs and desires. Pricing is second as a competitive area. One of the
features of rattan furniture is that it is a product that has high quality and
best price. What you pay is what you get. When it comes to promotions,
many rated it 4, but by looking at the graph some are not satisfied with the
promotions for rattan furniture.
Sources and suppliers
Most people are familiar with rattan baskets and woven rattan furniture
the classic tropical or "bamboo" look. However, Rattan is actually a type of
climbing palm that can grow hundreds of feet long. Highly durable, we are
excited to develop rattan products to include in our product offering next
year. In fact, the rattan baskets we use to contain our dyed leaves have just

now started to break, after years of use and abuse. Shown at left picture are
rattan seedlings. (http://www.nativeleaf.com/Materials.html)

Figure 10: Rattan (Calamus)

Agusan province is the largest rattan-producing area in the country
with 4.9 million linear meters production in 2003. It is also the major supplier
of rattan to the furniture industry in Cebu. (FRAME Philippines Rattan Value
Chain Study, February 2006)
Competitors
There are three major furniture-making areas in the country: Cebu,
Metro Manila, and Pampanga. Study surveys were conducted in Cebu and
Metro Manila. Metro Cebu, which is a conglomeration of four cities: Cebu
City, Mandaue, Lapu-Lapu, and Talisay, has the largest-sized rattan, stone
craft, and metal furniture industry in the country, whereas the furniture
cluster in Pampanga is the second largest. Cebu province accounts for more
than 60 percent of the countrys annual furniture export sales.

Upon going some of the studies about rattan products, competition is

on the international side. Based on research questionnaires we gathered,
many believe that rattan furniture here in the Philippines, especially Cebu,
can really compete internationally. But despite this belief many still said that
exporting our rattan furniture is the only way for it to be in the market.
According to the survey, 67% of the respondents have bought rattan
products. And 60% of them rated the product 5 (being the highest) and 40%
rated it 4. Some of them even said that it is practical to have rattan furniture
in the house. Because of its durability, it can last long and can even be
inherited through generations.
It is estimated that 80 to 90 percent of raw rattan poles go into
exported furniture. A decade ago when cheap, low quality furniture started to
flood exports markets from China and Indonesia, the Philippines successfully
positioned its furniture with customers who care more about quality and
fashion than price. The Philippines enjoys having skilled craftsmen who are
reputed to be among the worlds best. Through excellent design flair, the
Philippines is considered to be a trendsetter among furniture-producing
countries in Asia earning the title Milan of Asia. (FRAME Philippines Rattan
Value Chain Study, February 2006)
Possible Customers
High-end Customers. Hotels, condominiums, beach resorts are some
of the establishments that use rattan furniture. They usually buy rattan

furniture because of the comfort it gives to their valued customers. And

because rattan furniture can blend in easily with any motif they have. It has
many designs, may it be vintage or modern.
Export and local market. As said a while ago, rattan furniture can
and is competing internationally. Many countries like the United States,
Japan, and many more are buying rattan furniture here in the Philippines.

Figure 11: Main export destinations of Philippine furniture

New entrants
It is difficult for new entrants to enter the rattan furniture industry.
According to the survey results, 33% rated it 5 (very difficult), 40% rated it 4
(difficult), and 27% rated it 3 as moderate. Many of the respondents would
consider the manufacturer of the rattan furniture. If you are new in the
industry many may think that your furniture is not as good as the pioneering
ones.
A growing number of manufacturing firms have started selling directly
to

retailers

and

agents

in

international

markets

and

are exploring

nontraditional markets (e.g., the Middle East, Spain, and China) to

complement existing markets in North America and Japan. This enhances
traditional channels and brings new sources of value addition for the
products. An organized marketing information system would help this
strategy be more successful.
The Center for International Trade Expositions and Missions (CITEM) is
also helping manufacturers through marketing campaigns, trade missions,
and participation in prestigious trade fairs abroad. The Cebu Furniture
Industries Foundation (CFIF), in particular, has a very sophisticated
marketing program and exhibit (see box).
The Chamber of Furniture Industries of the Philippines (CFIP) creates
incentive-based programs that support member manufacturers who pioneer
in expanding global markets. In connection with this strategy, CFIP also
suggests that new products introduced in the market be exclusively
produced, first by the firms that created the products, until these have been
fully accepted by the market. This strategy is intended to bring appropriate
returns to developers of the new products and encourage others to also
develop new designs and products. (FRAME Philippines Rattan Value Chain
Study, February 2006)

CHAPTER 5
CONCLUSION AND RECOMMENDATION
Conclusion
After gathering all data, we conclude that the market is no that
ignorant about rattan products. Therefore, rattan manufacturers need more
to dwell on rattan products be improved in terms of pricing, features, styles
or designs and the promotion. The study suggest to be more focus in terms
of prices and be aware of the different substitutes and how rattan products
could be the first choice among other substitutions.
Upon thorough investigation on the data, the researchers have
gathered and compiled that leads us to a conclusion that rattan products are
sellable and can compete both locally and internationally. 67% of the
respondents answered that they have bought rattan products; 40% of these
buy/will buy rattan furniture, 26% buy/will buy rattan home decors and 26%

buy/will buy souvenir items. Despite the price 53% of the respondents
answered it is practical to own rattan products for it has good quality, style
and the satisfaction it can bring to them. This data gathered says clearly that
majority of the respondents patronize rattan products and promoting it won't
be much of a problem. For the competition in this line of business 73%
answered there is a strong competition between the existing companies and
this makes it difficult for the new entrants to survive.
Rattan furniture shows prestige and pride thus local market may not
afford but it doesn't mean that exporting is the only market.There are a lot of
Filipinos that is willing to buy good quality rattan products despite of it's
expensive price.

Recommendation
We suggests that we should only not do or sell our rattan products for
exports but also let the Filipinos buy and experience the beauty of our own
rattan products.