Innovativeness of food processing SMEs in Region 8 : Marine Processors of Samar / Ramil Talam Uy

Year : 2012

Number of Pages : 81 leaves

Adviser : Prof. Nestor O. Rañeses

Executive Summary

This paper entitled Innovativeness of Food Processing SMEs of Region 8 : Marine Processing of Samar aimed to determine the level of innovativeness of dried squid and fish processors of Samar province, specifically, the major producers in Daram and Catbalogan City. The general objective of this paper is to assess the level of innovativeness of the dried squid and fish processors of Samar in terms of : 1. Technology innovativeness both in product or process 2. The level of innovativeness. Specifically, the research aimed to : 1. Describe the types of innovations engaged in by the sector/processors 2. Provide information regarding the environments of which these innovative activities were conducted 3. Determine the factors that drive their innovation performance, the barriers to innovation, and the effects of innovation to the sector/firm 4. Identify strategies to implement appropriate government program/s that will aid Samar provinces dried squid and fish processors to penetrate the mainstream market and 5. Provide recommendations that will propel innovativeness among Region 8's food processing SMEs. The survey was conducted using the Philippine Institute for Development Studies (PIDS) survey questionnaire. The said questionnaire was used by the National Statistics Office (Central Office) when they conducted the Survey on Innovation Activities (SIA) in 2009. The design of the study was a qualitative design using primary and secondary data and was conducted using the one on one interview method. The data obtained in this study was made through a purposive sampling conducted to the identified dried squid and fish processors in the identified major producing areas in Samar. Listing provided by DTI Samar showed that there are 3 major areas in Samar which are engaged in the dried fish and dried squid production namely : Daram, Zumaraga and Catbalogan City. Data gathering was conducted in the late part of December 2011 and early part of January 2012. The first area visited by the researcher was Daram and this was followed by Catbalogan City. In the month of January, the researcher aimed to conduct data gathering in the municipality of Zumaraga but unfortunately, the weather did not cooperate and it was so risky for the researcher to cross the rough seas by motorized banca. The weather conditions got worst which prompted the researcher to request from his adviser if he could forego interviewing the remaining 17 target respondents since there were already sufficient numbers of respondents gathered during the first league of the survey. The said request was approved. In the final count, there were 32 respondents in the conducted survey and all respondents were existing and major processors of dried squid and fish in Daram and Catbalogan City, Samar. The result of the survey showed that having knowledge on the demand and market requirements and how this knowledge is applied in the business process is a good determinant on the innovations in the products, process, and even organization, and being an innovator in general. It was found out the two respondents (dried squid processor) who introduced process and product innovation gathered the knowledge (Information) from their customers (external source of information) and they managed this information to develop an innovative product which is not yet available in the market. At the time of the survey, they were the only producers of dried squid with eyes taken off which is not the usual practice of dried squid producers. It was different with the 26 respondents in Catbalogan City, which, the knowledge they acquired (provided to them by a government agency) was not properly managed, thus, the innovation infused both in the process and product were not sustained.

Cost was always the common identified significant barrier to innovation. All of the respondents claimed that cost of innovation was regarded as high (mechanical dryer, moisture meter, packaging, communication gadgets e.g., computer with internet access, cellphones) thus, not able to infuse/adopt innovation. There were also claims that lack of knowledge (most of the respondents barely reached highschool) and lack of market information as some of the significant barriers to innovation. Effects of the innovation to the product were cited critical other than innovation in the process. 28 out of 32 of innovation active respondents rated improving the quality of their product as highly important. The improvement that was mentioned included increased shelf life, packaging and taste. Some of the respondents said that innovation will provide them opportunities to penetrate new markets. There were responses also that said innovation is highly important to improve their flexibility in production. Increasing the range of goods was also widely reported product related effects. It was surprisingly noticed that there was no claim that innovation could reduce materials and energy cost. Indirectly, another effect of the innovation was that it strengthened customers and processors relationships. Of the 28 innovative processors, 2 (7.14 percent) claimed that internal and market sources, especially, from their customers as most important source of information for innovation. This further suggests that some processors rely on their own experiences and knowledge acquired coupled with information from clients or customers for sources of information for innovation. Information from institutional sources, specifically, from the government or public research institutions (during the interview, Samar State University was mentioned as possible source of innovation information) were considered with highest importance. 26 out of 28 innovative processors (92.85 percent) availed of government support in its innovation activities. All respondents (32) value technical support, training, tax rebates, infra support, R&D funding, subsidies, and loans and grants from the government. Using Michael Porter's Five Force of Competitive Model, the sector showed their competitiveness specifically on the threat of substitute products since there is no prevailing products similar to that of dried fish and squid. The sector is also competitive in terms of raw materials since the supplies can be availed within their community. Market is not a problem since they already have a captured market locally and there is a potential to expand its markets if an incremental innovation in the product, process and marketing will be introduced. There was also an innovation applied by the sector as shown in the value chain conducted and included in the study. Though not incremental, the innovation along the value chain has provided in some ways value added to the production of the dried squid and fish in Daram and Catbalogan City, Samar. The value adding activities mentioned were concentrated in the operations specifically in the processing of dried fish (marinating in soy sauce, etc) and dried squid (taking off the eyes). In the total assessment of the dried squid and fish processing sector of Samar, in their own ways, the processors in Daram and Catbalogan City introduced innovation mostly in their product rather than in their process or marketing. Furthermore, when asked to give suggestions on how government can encourage innovation in their establishments, majority of the respondents claimed that innovation is not a primary concern, capital for the enterprise survival is more important. The respondents further commented that it would be better if government can lend capital to small processors without going through the usual banking procedures on loans. Based on the result of the survey and interviews to the 32 dried fish and dried squid producers in the island municipality of Daram and Catbalogan City, Samar, the researcher is highly recommending that agencies like DOST and DTI, and other institutions, should collaborate to encourage innovations to the sector to be more competitive in the local and global market milieu. It is also highly recommended that government programs for small enterprises, especially, programs that encourage innovations (like DOST SETUP and DTI's OTOP) should intensively be promoted to this sector. Information regarding market demands and market potential of the dried fish and dried squid should be provided and likewise readily accessible by the sector for them to be able to expand its market. Other important issues that also need to be considered as highly important to the sector is the standardization of the processing clustering of all the player within the sector access to technologies (e.g. mechanical dryers) intensified government programs for SMEs, etc. are highly recommended to make the sector in focus competitive and this could be attained only if all the players in the sector, most importantly, the dried squid and fish processors in the area themselves will open and welcome innovation in their sector. It is also recommended that a program should be created for the dried fish and dried squid sector in Samar. The said program will be created in cooperation of the processors/producers, DOST, DTI, LGU and SSU.