Expanding your Business in Philippines: Different Approaches of Market Entry Strategies

account_circle Gabriel Amadeus Valentino

event 12 June 2024

category Economy, Trade, Business

expanding-your-business-in-philippines-different-approaches-of-market-entry-strategies

The Philippines, strategically located in Southeast Asia, is renowned as a gateway to the larger Asian market. Its central position on trade routes connecting China, Japan, and Australia strengthens this reputation. This is further evidenced by the 2021 Philippines trade balance, which highlights both export activity to the United States, China, Japan, Hong Kong, and Singapore, and import activity from China, Japan, Korea, Indonesia, and the United States.

Each country has their own unique strategies, habits, and cultures to be penetrated by the international market. To successfully expand your business in the Philippines,you'll need a comprehensive understanding of your products, the ideal approach for the Filipino market, and other key factors. So, let’s dive deeper into some effective approaches you can utilize.

Product Exporting: Benefits & Challenge

Product exporting strengthens a country's economy by increasing foreign exchange earnings. It also offers greater control over marketing, pricing, and distribution. However, building a distribution network can be time-consuming and requires a thorough understanding of local regulations and customs procedures.

If you're interested in exporting to the Philippines, here are some step-by-step guides to help you enter the Philippine market:

Register as Exporter

Before exporting products to the Philippines, registering as an exporter is crucial. This involves enrolling in the Client Profile Registration System (CPRS) managed by the Bureau of Customs (BOC). This is the primary step for new exporters to comply with legal requirements.

While the CPRS is the main registration, some agencies like the Philippine Economic Zone Authority (PEZA) or Clark Development Corporation (CDC) may have additional requirements depending on your specific situation. It's recommended to research any potential extra steps needed based on your operational location or industry.

Lodgment of Export Declaration

Following your registration as an exporter, you'll need to lodge an Export Declaration through the BOC Portal. This declaration requires details about the shipment, including the Proforma/Commercial Invoice, Packing List, and any additional documents mandated by the Bureau of Customs.

Submission of Documentary Requirements

Using the BOC Portal, you shall create a ticket for the submission of the following documents to the Export Division of the Port of Loading:

Print out of Export Declaration
Proforma/Commercial Invoice
Packing List
Other documents as may be required by the BOC

Processing of Export Declaration

A Customs Operations Officer (COO) will process your Export Declaration based on the selectivity system (Green, Yellow, Orange, or Red). Once cleared, export cargoes proceed to payment of duties and other charges through Authorized Agent Banks (AAB).

Releasing

The Export Division of the Port of Loading will issue an “Authority to Load” for your goods.

Licensing & Franchising

Licensing gives a local company the right to use your brand, technology, or intellectual property in exchange for royalties, whereas franchising allows you to expand by granting others the right to operate under your existing brand and business model. Licensing also opens up new markets that might have been blocked away due to trade barriers, resulting in market expansion.

Franchisees benefit significantly from the franchisor's established brand and reputation. This instant brand recognition makes it much easier to develop a strong local presence and achieve high brand recall among customers. Franchising goes beyond brand recognition, however. It offers a comprehensive support system from the franchisor, including assistance with site selection, training programs, marketing plans, and even financial aid. This comprehensive support structure empowers franchisees to leverage a proven business model, significantly reducing the risk of failure often associated with starting a new business venture.

Joint Ventures

Joint Venture is a business arrangement where two or more parties agree to combine their resources to achieve a specific goal. This goal can be a new project or any other business activity. Partnering with a local Philippine corporation grants you access to established market knowledge, distribution channels, and customer networks. This can significantly ease entry into the Philippine market and avoid potential pitfalls for the international corporation.

Navigating Philippine legal and regulatory frameworks can be complex for foreign companies. By doing joint ventures with a local partner, you can provide valuable guidance and ensure compliance—saving time and resources. Not only that, Philippine corporations often possess deep cultural understanding and strong relationships with local businesses and government entities. This can be invaluable for navigating business practices and securing deals.

In conclusion, there's no one-size-fits-all approach to entering the Philippine market. The ideal strategy depends on your specific circumstances, resources, and risk tolerance. Franchising offers the most streamlined path, leveraging an established brand and support system. Exporting allows you to maintain greater control over your business while still reaching Filipino consumers. Joint ventures provide a deeper market presence but require significant collaboration and planning. The good news is, you have options! Carefully consider these three approaches and choose the one that best suits your goals for success in the Philippines.

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