Post by felixdcat on Apr 2, 2009 4:22:54 GMT -5
by:
Gener Luis Morada
When the news broke about the world financial crisis in the third quarter of last year it seems that the Philippines would not feel its effect. Government constantly reassured us that the Philippine economy is such a stable condition that it would be able to weather the storm of this impeding crisis that is about to hit the country. Now 24 days into the new year, it seems that the situation is worst that what government would like us to believe. For the last three days, the Philippine Daily Inquirer has for its headline the deteriorating unemployment situation in the country with the announcement of closure and lay offs by some multinational companies.
Intel's closure was not really a surprise. For rumors has been going around since last year that it would close its plant in General Trias, Cavite. I believed that it is just using the global financial crisis as an excuse to relocate to another country. It was a matter of the state of business competitiveness of the Philippines as compared to the other emerging markets in Asia. Who would have guessed that 40 years down the road China would reawaken to be an industrial giant of Asia closely followed by Vietnam who in the 1960's was just a country wreck in turmoil.
Even Labor Secretary Marianito Roque is alarmed with the deteriorating situation. From December 1, 2008 to January 19, 2009 a total of 15,600 local workers have lost their jobs and over the same period 19,000 local workers have their shifts or working hours reduced. This data does not include the thousands of Overseas Filipino Workers who are coming home due to closure of their companies abroad. One would also have to take into consideration that the unemployment rate would futher increase once the new batch of college graduates comes into the picture after their graduation this coming March of 2009.
“The closure of the Intel plant is just the “tip of the iceberg” and the Arroyo government should brace for more layoffs, plant shutdowns and dire economic indicators that will continue beyond 2010, economic and labor experts said on Friday.
“The most optimistic forecast is that the US economy will recover in 2010. The Philippines’ recovery will come after that. The Philippines’ recovery cannot precede that,” said Benjamin Diokno, a former labor secretary at a labor forum at the Asian Institute of Management sponsored by the Blas F. Ople Policy Center.
And even if the US and other major economies recover next year, their revival “will not be a strong one,” he said.”
newsinfo.inquirer.net/inquirerheadlines/nation/view/20090124-1852...
The Internet Cafe Industry in the Philippines
I am an internet cafe owner and I have been involved in the various activities to improve the conditions of the internet cafe industry in the Philippines but I have to say that these efforts have been futile for up to today the industry is still at a sorry state. The situation is turning from bad to worst each year that it would take a miracle to save the industry from eminent failure. This is brought about by the following factors:
1.The internet cafe industry never left beyond being a backyard industry – the industry has been around for a number of years now but it has never fully develop to its maturity. It is still consider to be a backyard industry in which most of the internet cafes in the country are small time operations mostly located in the homes of their operators. Except for Netopia who is considered to be the big player in the industry the rest are just small time players with an average of 10 computers per operations.
2.Uncomprehensible level of competition – it seems that most people would like to own their own internet cafes rather than setting up a different form of business enterprise. Who could blame them for it seems to be a very easy business venture. You just set up your shop and just wait for the rest of the day for the customers to come in. Nothing to manufacture, no backbreaking work to do and if you get bored while waiting then it would be the best excuse for the operator to play their favorite online games or surf the internet. On the average there are about 5 to 6 internet cafes operating in a particular barangay more can be found if that area is near a school or a university targeting the students as their customers.
3.Operators of internet cafes are very much satisfied with their operations - most of the internet cafe operators are just very much happy with the business model that they are operating on right now. Most of them are dependent on computer rentals as the main source of livelihood that they hardly spend the time to do research on how to diversify their business model. This could be attributed to the fact that most internet cafe operators are gamers themselves. Their primary motivation of setting up their internet cafe is that it would provide them the best opportunity to play their favorite games for free with a source of income as a bonus.
If they are not gamers then there would be those who are in it just because for them its a good investment. These are the people who went into the business without actually having a background in information technology. These are people who saw from their neighbors that it is a good business to invest in and they went in without the necessary knowledge about the business. Worst there are some people who refuses to learn about the business and are just in it for the money. There are a few who has the passion for it. These are people who are engage in the IT industry and see the internet cafe as an alternative source of income.
4.Those unrealistic prices – the level of competition is now unbearable in the industry that most of the players are now engaged in cut throat competition by offering prices in unrealistic levels. From as high as P100 per hour when the industry started out in 2002 with a dial up connection and slow computers, it is now down to P10.00 or less per hour with the profiliation of fast internet connections and affordable computer systems. Internet cafe associations tried to regulate the prices in their areas but are faced with an uphill battle of how to enforce a regulated pricing scheme in an unregulated environment.
The problem could be traced to the manner in which the internet cafe operators and the community in general percieved the operations of the internet cafe. The internet cafe industry does not enjoy a good reputation in the community. Often percieved to be on the same level of the videoke bars, billard establishments and other business related to entertainment, it has not contributed to the importance that the internet cafe plays on a particular community. Often considered to be a gaming center, people still percieved it to be just that and not as a center in which offers access to the internet wherein there are other things to do than gaming. So not unless the internet cafe owners themselves would realize the important role he and his internet cafe is providing the community will this problem of pricing be given solution to. He must first realize and be proud in that the internet cafe plays an important role in the community which is connecting the community to the outside world through the internet.
Basically these are the issues that has been a problem to the internet cafe industry in general but take note that there are other issues as well. Stiff regulations by the local government, issues related to the use of pirated software in their operations, the unavailabilty of support to improve the conditions of the industry and so on that it all adds up that one will wonder where will the internet cafe industry lead to in the future.
Global Financial Crisis and the Internet Cafe
Basically the mood in the internet cafe industry is one of defiance in relation to the effects of the global financial crisis that is hitting the Philippines. Many would still not believe that it would affect the industry as a whole considering the number of people who are still wanting to engage in this business. The industry players would have to realize that no matter what they think or believe in, it would still hit the internet cafe industry and it would hit it hard. Indicators in the last few months since the news of the global financial crisis has been formally announced is not very promising:
1.Decreasing Markets and Sales -if you would go through the different forums of internet cafe operators like in ULOP.net and Pinoy DSL Network Portal, internet cafe operators had reported weak sales figures during the holiday season in 2008 which is very much alarming since it is this period wherein the internet cafe is making a killing. Most of reports coming in since the start of the new year has been very alarming for on the average the internet cafe operators lost as much as 50% of their business as compared to the same period last year.
2.Increase number of closures- surely there are a lot of people who would still want to engage in operating an internet cafe but one must also look at the high level of mortality rates among industry players. On the average those who are engaging in this industry have an average lifespan of two years. Most of time due to the high level of competion and uneven pricing scheme the average internet cafe operators gives up after incurring a huge amount of loss in their operations. In our own experience in the Internet Cafe Association of Imus, Inc (ICAII) we have found out that most of the members that had signed up at the start of ICAII three years ago have closed their internet cafes and moved on to other fields of business. Most are new players while there are some who have chosen to continue their operations, they are having a hard time in coping with the worsening situation.
3.Affordable hardware and DSL services – due to the continuing economic melt down, computer hardware manufacturers and telephone companies are now offering their products at rock bottom prices. If in 2002 the average price of a computer unit was well above P40,000.00 now you can buy one for about P15,000.00 and the computer specs are not really that bad. DSL services were as high as P5000.00 per month a few years ago now you could get a reasonable service for less than P700.00 per month worse there are companies offering prepaid DSL services for as little as P20.00 per hour. These brings in additional competitors in the internet cafe market since now that people could well afford to buy their own computer units and DSL services at home.
What is Ahead?
Based on the previous indicators the internet cafe industry is facing some very challenging times for 2009 and the rest of 2010 till signs of an economic recovery would come. We would be faced with the following scenarios:
1.Decline in sales figures – computer rental business would never be outdated since there would still be people needing to access the internet. People would be spending less in terms of computer rentals as their spending power decreases. They would have to prioritized their spending habits to much more important things. A recent survey in the United States revealed that about 30% of the respondents said that they would not be spending money to buy new clothes for 2009. If that could happen in the United States think about the situation here in the Philippines wherein it is slowly feeling the affects of the global financial crisis. As our OFWs comes home the internet cafes would be loosing business on instant messenging services or chat. As the worsening economic conditions hits there would be more children attending public schools or would not be able to study anymore due to the lack of money to finance their studies. It would mean less students doing their projects and less time in playing their favorite games.
2.As more people are being laid off and as the deterioration in the overseas employment sectors gets worst, more and more people would want to engage in business to invest what ever money that they have received from being laid off from work. The internet cafe business has always been and will always be an appealing investment opportunity for people who would like to have their own business enterprise. More people will set up their respective internet cafes irregardless of the number of internet cafes closing down during the year.
3.Prices for computer rental per hour can become lower – nobody would like to see this to happen but as competition gets more higher with the increase in number of players in the industry and the shrinking market, internet cafe operators would resort to offering special promotions just to get people into their respective internet cafes. What they don't realize is that through this promos the current rate of P10 per hour could go down to as much as half to P5.00 per hour for computer rental. Impossible you might say but I have seen internet cafes offering as low as P7.50 per hour through their promotions what would prevent this from further deteriorating?
2009 The Year of Challenge for the Internet Industry in the Philippines
All is not lost for the internet cafe industry in the Philippines for 2009. Faced with the challenges that lies ahead as the global financial crisis takes it toll. It would be a chance for the players of the industry to consider what lies ahead as challenges for change instead of being obstacles.
1.Go beyond the Jeepney Mentality – since its invention the jeepney was considered to be a purely Filipino invention that they did not believed that something could take its place in the transportation sector. The manufacturers of the jeepney fell into a sense of compliancy that they did not consider making innovations in the basic jeepney design. When Toyota came out with the AUV design into the market it made a great impact on the riding public that now instead of the jeepney being the king of the road it is steadily being replaced with the FX taxis which offers greater comfort to the riding public.
The same is true with the internet cafe owners. They should not be satisfied with their present business models. It could have worked in the past but it might not survive the challenges of the future. The internet cafe operator should change his mindset of relying purely on computer rental but should learn new skills in information technology that they could incorporate into their business model.
2.Don't put your eggs into only one basket – successful entrepreneurs would tell you that in order to be successful in business one must be able to set up a variety of business enterprise that would compliment each other. They have not concentrated their effort and money in a single enterprise that if one suffers they would have another one that they could rely on to. As the internet cafe owner develops his market, he should try to find out other needs of his customers so that he could also cater to their needs. Go beyond the basic internet cafe services by providing additional services based on the needs of your customers.
3.Professionalize the industry – the basic problem that is facing the internet cafe industry such as the use of pirated software and the pricing issue could be solved by professionalizing the players of the internet cafe industry. The internet cafe associations in each municipality should strive in educating their members in order to professionalized them. These issues could be solved most especially in pricing if the internet cafe owner realizes that he belongs to a very dynamic industry that contributes to a lot of changes that is happening in the community. The world of today is far more different compared to in the past and the internet cafe owner plays a very important role in the community in as an internet access provider or connecting the community to a much bigger world of the internet.
4.Expand and Upgrade – internet cafe owners would think that this is a very crazy preposition. Why in a time of crisis would you further expand and upgrade the facilities considering the shrinking market? This would be the best time to expand and upgrade considering the prices of computer hardware is at its lowest level. One would have to consider that the internet cafe industry is still an industry based on numbers. The more computers that you have most especially in gaming the better since there are players who would like to play in large groups. A much faster computer system in numbers would be much better in attracting customers than any type of promotions.
5.Create new markets and services – go beyond computer rental as the basic services. Add additional services in your internet cafes such as tutorial services on computer operations to students, out of school youths and the elderly. Cater to other markets like the bloggers and subscribers of social networking sites not only gamers. As schools and other business enterprise looks for opportunities to save money on their operations, the internet cafe owners should consider creating a business model on outsourcing.
Gener Luis Morada
When the news broke about the world financial crisis in the third quarter of last year it seems that the Philippines would not feel its effect. Government constantly reassured us that the Philippine economy is such a stable condition that it would be able to weather the storm of this impeding crisis that is about to hit the country. Now 24 days into the new year, it seems that the situation is worst that what government would like us to believe. For the last three days, the Philippine Daily Inquirer has for its headline the deteriorating unemployment situation in the country with the announcement of closure and lay offs by some multinational companies.
Intel's closure was not really a surprise. For rumors has been going around since last year that it would close its plant in General Trias, Cavite. I believed that it is just using the global financial crisis as an excuse to relocate to another country. It was a matter of the state of business competitiveness of the Philippines as compared to the other emerging markets in Asia. Who would have guessed that 40 years down the road China would reawaken to be an industrial giant of Asia closely followed by Vietnam who in the 1960's was just a country wreck in turmoil.
Even Labor Secretary Marianito Roque is alarmed with the deteriorating situation. From December 1, 2008 to January 19, 2009 a total of 15,600 local workers have lost their jobs and over the same period 19,000 local workers have their shifts or working hours reduced. This data does not include the thousands of Overseas Filipino Workers who are coming home due to closure of their companies abroad. One would also have to take into consideration that the unemployment rate would futher increase once the new batch of college graduates comes into the picture after their graduation this coming March of 2009.
“The closure of the Intel plant is just the “tip of the iceberg” and the Arroyo government should brace for more layoffs, plant shutdowns and dire economic indicators that will continue beyond 2010, economic and labor experts said on Friday.
“The most optimistic forecast is that the US economy will recover in 2010. The Philippines’ recovery will come after that. The Philippines’ recovery cannot precede that,” said Benjamin Diokno, a former labor secretary at a labor forum at the Asian Institute of Management sponsored by the Blas F. Ople Policy Center.
And even if the US and other major economies recover next year, their revival “will not be a strong one,” he said.”
newsinfo.inquirer.net/inquirerheadlines/nation/view/20090124-1852...
The Internet Cafe Industry in the Philippines
I am an internet cafe owner and I have been involved in the various activities to improve the conditions of the internet cafe industry in the Philippines but I have to say that these efforts have been futile for up to today the industry is still at a sorry state. The situation is turning from bad to worst each year that it would take a miracle to save the industry from eminent failure. This is brought about by the following factors:
1.The internet cafe industry never left beyond being a backyard industry – the industry has been around for a number of years now but it has never fully develop to its maturity. It is still consider to be a backyard industry in which most of the internet cafes in the country are small time operations mostly located in the homes of their operators. Except for Netopia who is considered to be the big player in the industry the rest are just small time players with an average of 10 computers per operations.
2.Uncomprehensible level of competition – it seems that most people would like to own their own internet cafes rather than setting up a different form of business enterprise. Who could blame them for it seems to be a very easy business venture. You just set up your shop and just wait for the rest of the day for the customers to come in. Nothing to manufacture, no backbreaking work to do and if you get bored while waiting then it would be the best excuse for the operator to play their favorite online games or surf the internet. On the average there are about 5 to 6 internet cafes operating in a particular barangay more can be found if that area is near a school or a university targeting the students as their customers.
3.Operators of internet cafes are very much satisfied with their operations - most of the internet cafe operators are just very much happy with the business model that they are operating on right now. Most of them are dependent on computer rentals as the main source of livelihood that they hardly spend the time to do research on how to diversify their business model. This could be attributed to the fact that most internet cafe operators are gamers themselves. Their primary motivation of setting up their internet cafe is that it would provide them the best opportunity to play their favorite games for free with a source of income as a bonus.
If they are not gamers then there would be those who are in it just because for them its a good investment. These are the people who went into the business without actually having a background in information technology. These are people who saw from their neighbors that it is a good business to invest in and they went in without the necessary knowledge about the business. Worst there are some people who refuses to learn about the business and are just in it for the money. There are a few who has the passion for it. These are people who are engage in the IT industry and see the internet cafe as an alternative source of income.
4.Those unrealistic prices – the level of competition is now unbearable in the industry that most of the players are now engaged in cut throat competition by offering prices in unrealistic levels. From as high as P100 per hour when the industry started out in 2002 with a dial up connection and slow computers, it is now down to P10.00 or less per hour with the profiliation of fast internet connections and affordable computer systems. Internet cafe associations tried to regulate the prices in their areas but are faced with an uphill battle of how to enforce a regulated pricing scheme in an unregulated environment.
The problem could be traced to the manner in which the internet cafe operators and the community in general percieved the operations of the internet cafe. The internet cafe industry does not enjoy a good reputation in the community. Often percieved to be on the same level of the videoke bars, billard establishments and other business related to entertainment, it has not contributed to the importance that the internet cafe plays on a particular community. Often considered to be a gaming center, people still percieved it to be just that and not as a center in which offers access to the internet wherein there are other things to do than gaming. So not unless the internet cafe owners themselves would realize the important role he and his internet cafe is providing the community will this problem of pricing be given solution to. He must first realize and be proud in that the internet cafe plays an important role in the community which is connecting the community to the outside world through the internet.
Basically these are the issues that has been a problem to the internet cafe industry in general but take note that there are other issues as well. Stiff regulations by the local government, issues related to the use of pirated software in their operations, the unavailabilty of support to improve the conditions of the industry and so on that it all adds up that one will wonder where will the internet cafe industry lead to in the future.
Global Financial Crisis and the Internet Cafe
Basically the mood in the internet cafe industry is one of defiance in relation to the effects of the global financial crisis that is hitting the Philippines. Many would still not believe that it would affect the industry as a whole considering the number of people who are still wanting to engage in this business. The industry players would have to realize that no matter what they think or believe in, it would still hit the internet cafe industry and it would hit it hard. Indicators in the last few months since the news of the global financial crisis has been formally announced is not very promising:
1.Decreasing Markets and Sales -if you would go through the different forums of internet cafe operators like in ULOP.net and Pinoy DSL Network Portal, internet cafe operators had reported weak sales figures during the holiday season in 2008 which is very much alarming since it is this period wherein the internet cafe is making a killing. Most of reports coming in since the start of the new year has been very alarming for on the average the internet cafe operators lost as much as 50% of their business as compared to the same period last year.
2.Increase number of closures- surely there are a lot of people who would still want to engage in operating an internet cafe but one must also look at the high level of mortality rates among industry players. On the average those who are engaging in this industry have an average lifespan of two years. Most of time due to the high level of competion and uneven pricing scheme the average internet cafe operators gives up after incurring a huge amount of loss in their operations. In our own experience in the Internet Cafe Association of Imus, Inc (ICAII) we have found out that most of the members that had signed up at the start of ICAII three years ago have closed their internet cafes and moved on to other fields of business. Most are new players while there are some who have chosen to continue their operations, they are having a hard time in coping with the worsening situation.
3.Affordable hardware and DSL services – due to the continuing economic melt down, computer hardware manufacturers and telephone companies are now offering their products at rock bottom prices. If in 2002 the average price of a computer unit was well above P40,000.00 now you can buy one for about P15,000.00 and the computer specs are not really that bad. DSL services were as high as P5000.00 per month a few years ago now you could get a reasonable service for less than P700.00 per month worse there are companies offering prepaid DSL services for as little as P20.00 per hour. These brings in additional competitors in the internet cafe market since now that people could well afford to buy their own computer units and DSL services at home.
What is Ahead?
Based on the previous indicators the internet cafe industry is facing some very challenging times for 2009 and the rest of 2010 till signs of an economic recovery would come. We would be faced with the following scenarios:
1.Decline in sales figures – computer rental business would never be outdated since there would still be people needing to access the internet. People would be spending less in terms of computer rentals as their spending power decreases. They would have to prioritized their spending habits to much more important things. A recent survey in the United States revealed that about 30% of the respondents said that they would not be spending money to buy new clothes for 2009. If that could happen in the United States think about the situation here in the Philippines wherein it is slowly feeling the affects of the global financial crisis. As our OFWs comes home the internet cafes would be loosing business on instant messenging services or chat. As the worsening economic conditions hits there would be more children attending public schools or would not be able to study anymore due to the lack of money to finance their studies. It would mean less students doing their projects and less time in playing their favorite games.
2.As more people are being laid off and as the deterioration in the overseas employment sectors gets worst, more and more people would want to engage in business to invest what ever money that they have received from being laid off from work. The internet cafe business has always been and will always be an appealing investment opportunity for people who would like to have their own business enterprise. More people will set up their respective internet cafes irregardless of the number of internet cafes closing down during the year.
3.Prices for computer rental per hour can become lower – nobody would like to see this to happen but as competition gets more higher with the increase in number of players in the industry and the shrinking market, internet cafe operators would resort to offering special promotions just to get people into their respective internet cafes. What they don't realize is that through this promos the current rate of P10 per hour could go down to as much as half to P5.00 per hour for computer rental. Impossible you might say but I have seen internet cafes offering as low as P7.50 per hour through their promotions what would prevent this from further deteriorating?
2009 The Year of Challenge for the Internet Industry in the Philippines
All is not lost for the internet cafe industry in the Philippines for 2009. Faced with the challenges that lies ahead as the global financial crisis takes it toll. It would be a chance for the players of the industry to consider what lies ahead as challenges for change instead of being obstacles.
1.Go beyond the Jeepney Mentality – since its invention the jeepney was considered to be a purely Filipino invention that they did not believed that something could take its place in the transportation sector. The manufacturers of the jeepney fell into a sense of compliancy that they did not consider making innovations in the basic jeepney design. When Toyota came out with the AUV design into the market it made a great impact on the riding public that now instead of the jeepney being the king of the road it is steadily being replaced with the FX taxis which offers greater comfort to the riding public.
The same is true with the internet cafe owners. They should not be satisfied with their present business models. It could have worked in the past but it might not survive the challenges of the future. The internet cafe operator should change his mindset of relying purely on computer rental but should learn new skills in information technology that they could incorporate into their business model.
2.Don't put your eggs into only one basket – successful entrepreneurs would tell you that in order to be successful in business one must be able to set up a variety of business enterprise that would compliment each other. They have not concentrated their effort and money in a single enterprise that if one suffers they would have another one that they could rely on to. As the internet cafe owner develops his market, he should try to find out other needs of his customers so that he could also cater to their needs. Go beyond the basic internet cafe services by providing additional services based on the needs of your customers.
3.Professionalize the industry – the basic problem that is facing the internet cafe industry such as the use of pirated software and the pricing issue could be solved by professionalizing the players of the internet cafe industry. The internet cafe associations in each municipality should strive in educating their members in order to professionalized them. These issues could be solved most especially in pricing if the internet cafe owner realizes that he belongs to a very dynamic industry that contributes to a lot of changes that is happening in the community. The world of today is far more different compared to in the past and the internet cafe owner plays a very important role in the community in as an internet access provider or connecting the community to a much bigger world of the internet.
4.Expand and Upgrade – internet cafe owners would think that this is a very crazy preposition. Why in a time of crisis would you further expand and upgrade the facilities considering the shrinking market? This would be the best time to expand and upgrade considering the prices of computer hardware is at its lowest level. One would have to consider that the internet cafe industry is still an industry based on numbers. The more computers that you have most especially in gaming the better since there are players who would like to play in large groups. A much faster computer system in numbers would be much better in attracting customers than any type of promotions.
5.Create new markets and services – go beyond computer rental as the basic services. Add additional services in your internet cafes such as tutorial services on computer operations to students, out of school youths and the elderly. Cater to other markets like the bloggers and subscribers of social networking sites not only gamers. As schools and other business enterprise looks for opportunities to save money on their operations, the internet cafe owners should consider creating a business model on outsourcing.