Furniture manufacture remains one of the major industries in the country that has a number of micro, small and medium sized enterprises. The total number of furniture companies is estimated at about 15,000 nationwide by the Department of Trade and Industry (DTI). Employment generation of the sector is also considerable with a total of between 700,000 to 800,000 workers among manufacturers, subcontractors and suppliers.

In 2005, the world imports amounted to a total of US$96.5 Billion worth of furniture, a robust 9% increase from 2004. The United States is still the largest market of furniture, importing US$32 Billion in 2005, or 34% of total world furniture imports. Together with the US, Germany, the United Kingdom, France and Canada are the top five (5) global furniture markets, accounting for about 61% of world imports. On the supply side, China recently surpassed Italy as the global leader in furniture exports, exporting US$13.5 Billion in 2005. China boasts of a strong foreign direct investment policy, high labor productivity at low cost, low export logistics costs, and a huge domestic middle-class market, factors which helped propel its growth in the global furniture market.

Aside from China, another country worth noting in furniture is Vietnam. With similar cost advantages, and benefiting from stiff tariffs imposed by the United States on Chinese furniture imports, the Vietnam furniture industry is now the fastest growing furniture exporter in the world, shipping US$ 1.1 Billion in 2005, almost triple its exports in 2002.

The Philippine furniture export industry has not fared well in the global market since the early part of this decade. In 2006, local furniture exports reached US$275 million, down by 9% from its level the previous year. The industry has still not been able to reach the levels of exports it experienced at the start of the decade
when exports totaled US$381 million.

The US remains as the country’s largest export market for furniture, accounting for US$167 million or some 61% of total furniture exports in 2006. Japan, on the other hand, imported almost US$24 million for the same year, close to double its imports of Philippine furniture in 2005. The US, Japan, Australia, the UK, and Italy are the industry’s five leading export markets.

The local furniture sector remains under intense global and regional competitive pressures. It presently faces numerous issues including crippled productivity, increasing costs of doing business and scarcity of reasonably priced local material. While foreign trade buyers still find design innovation and creativity to be the most valuable competitive advantage of Philippine-made furniture, most firms are unable to price competitively, thus unable to effectively protect their market share. A global downward price pressure influenced by a weakening US dollar and unstoppable competition from China and Vietnam, for example, severely affect Philippine manufacturer-exporters’ viability and competitiveness.

The domestic furniture market on the other hand, has been expanding steadily, influenced by the recent boom in the Philippine real estate and construction market. About 70 percent of domestic consumption happens in and around the National Capital Region, mostly supplied by furniture manufacturer-retailers in Metro Manila, Pampanga, and Regions III (Central Luzon) and IV (CALABARZON). Local manufacturers, however, also face a number of concerns in the local market. Import-liberalization and the recent U.S. dollar devaluation vis-à-vis the Peso, have increased the inflow of imported furniture to the country, posing stiff competition for furniture firms catering to the domestic market.

The furniture value chain analysis has yielded a number of findings on what contribute to the overall decline in competitiveness of local furniture. There is still a lack of good quality raw materials, which is compounded by wastage at the supplier level due to insufficient materials handling skills, storage facilities and equipment. The industry remains heavily dependent on subcontractors but reliability of components supplied by subcontractors still need significant improvement. At the operations phase of the value chain, worker productivity needs to be further raised and more investments in modern machineries are needed to raise overall competitiveness of furniture firms. There are no industry standards as yet that could help guide and optimize firms’ manufacturing activities.

In marketing, the industry generally lacks resources to mount a sustained promotional and marketing program. Shifting target markets to the medium and high end segments entail much investment in marketing collaterals and promtional activities. There is also heavy dependence on the US market and efforts need to be directed at opening up and expanding exports to other countries.

To address the challenge at hand, an industry-wide competitive strategy shift is needed. The industry should consider a Focus-Differentiation strategy for the global market. This approach needs to be adopted by the major stakeholders including the manufacturer-exporters, the furniture industry business support organizations (BSO) and appropriate government agencies.  The Focus-Differentiation strategy will concentrate export marketing efforts and resources towards specific target niche markets. These include the middle-to-high-end furniture trade/retail buyers in the industry’s ten major export markets and the ten high-growth furniture markets. The strategy will also attempt to differetiate Philippine furniture from the rest of the competition, through aggressive product design and development, productivity breakthroughs, and other “differentiation” initiatives, to increase the perceived-value of local products in selected markets.

All together, these efforts aim to ultimately improve competitiveness of Philippine furniture/furnishings. To dramatically differentiate Philippine furniture from the global competition, however, requires resources. Significant investments need to be made in market research, product design and development, quality assurance, productivity improvement and sustained development of indigenous material sources. These are decisions that the industry must make and given the intense competitive pressure in the world market, these decisions have to be made soon.


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