Ippc presentation 8 16-14 (final4-jre) (3)

International
Public
Procurement
Conference
(IPPC 2014)
***
Dublin,
Ireland
RENALYN C. ESTILLER
Joseph R. Estiller
Dr. Alex C. Gonzaga
Dr. Zeny Lontoc
De La Salle University-
Dasmarinas -
August 16, 2014
FACTORS INFLUENCING THE
CHOICE OF INCOTERMS OF
SELECTED SEMICONDUCTOR
AND ELECTRONICS
COMPANIES OF PHILIPPINE
ECONOMIC ZONE AUTHORITY
IN CALABARZON TOWARDS A
LOGISTICS MANAGEMENT
MODEL

• Introduction
• Methodology
• Results and Discussion
• Conclusions and
Recommendations

International Commercial Terms or simply incoterms are the official
internationally recognized trade terms, formulated and published by the
International Chamber of Commerce (ICC) (ICC, 1999).
Incoterms was first established in 1936 by
International Chamber of Commerce.
There are many reasons why incoterms were
introduced. The purpose is to: provide with a set of
international rules for the interpretation of trade terms,
minimize the uncertainties of different interpretation, and it
relates to the rights and obligation of the parties involved in
the contract of sale of tangible products .

Background of the Study
Relationship Quality, such as satisfaction
with the suppliers, commitment with the
suppliers, trust with the suppliers and conflict
with the suppliers were the main factors
which contribute in choosing the incoterms
(Shangina, 2007) .
Relationship
Quality
Relationship
model
In the Philippines, the semiconductor and
electronics companies used this model, in
choosing the incoterms.

Background of the Study
This study added 13
variables
• Mother company’s decision
•Freight Cost
•Customs Regulations
• Supplier’s decision
• Written incoterm’s policy
•Shipment’s country of
origin
• Buyer’s understanding of
incoterms
•Mode of shipment
•Company practices
•Value of goods •Volume of shipment
• Insurance
•Terms of spending

Traditionally, the belief is that relationship factors
play a role in choosing the incoterms, no one has
tried to investigate this belief.
In the Philippines, most of the players have
inherent belief that relationship factors play
significant role in choosing incoterms.
Thus, the study of Shangina (2007) has remained
unexplored.

THEORETICAL FRAMEWORK
A model of factors affecting the choice of Incoterms 2000 Shangina (2007)

Carland, C.C. and Carland, C.W. (1996)
explained that entrepreneurial drive was affected by
the personality of the entrepreneur and there were
other factors that influence entrepreneurial drive as
some said external factors mainly influence a
person’s entrepreneurial actions.
Generally, this study aimed to develop an incoterms model
for the semiconductor and electronics companies in
CALABARZON Region. Specifically:
1. To describe the profile of semiconductor and electronics companies in terms
of the following:
a. province;
b. PEZA location;
c. size of the company;
d. number of company employees
e. years of company operations; and
f. nationality
Objectives of the Study
2. To find out the significant relationships between the semiconductor
and electronics companies’ choice of incoterms and their:
– mother company’s decision;
– supplier’s decision;
– written incoterms policy;
– buyer’s understanding of incoterms;
– customs regulations;
– company practices;
– freight cost;
– shipment’s country of origin;
– mode of shipment
– value of goods
– volume of shipment;
– terms of spending;
– satisfaction with suppliers;
– trust with suppliers;
– commitment with suppliers; and
– conflict with suppliers?

ACTUAL STRATIFIED SAMPLE RESPONDENTS BY PROVINCE
In summary, there were 60 actual company-
respondents.
The 60 actual samples turn-out is a 10-
respondent better than the 50 required and
computed samples and twice as large as the
minimum 30 to 32-sample rule-of-thumb
requirement of a normally-distributed sample
size according to the Central Limit Theorem
(Annis, 2013).

QUESTIONNAIRE
A multipurpose questionnaire was used to get other
information from the respondents such as demographic
data, the size of company, number of employees, years of
company operations, importation and other research inquiry
information.
The survey questionnaire was arranged in two parts. The
first part was made to solicit demographic profile of the
respondents, while the second part was for inquiries related to
the choice of their incoterms.

DESCRIPTIVE ANALYSIS: was used to describe the demographic
profile of the company-respondents.
CORRELATION ANALYSIS: was used to find out the significant
relationships of the importation elements and supplier-relationship
elements (independent variables) and the choice of incoterms
(dependent variables).
Utilized cluster analysis because of the high dimensionality of
variables.
Used multinomial logistic regression statistical tool to find-out
the significant relationships of the importation elements and
supplier-relationship elements.

SUMMARY AND DISCUSSION
Mostly
CIF
Mostly
EXW
Mostly
FOB
Mostly other
incoterms Total
Batangas 5 3 5 1 14
Cavite 7 3 3 1 14
Laguna 5 9 9 7 30
Total 17 15 17 9 58
Summary of Clustered Choice of Incoterms Distribution per Province
in Special Economic Zone, CALABARZON, 2013

Full Model Multinomial Regression
Likelihood Ratio Test Result of Respondents’
Choice of Incoterms and their Importation Elements
and Supplier’s Relationship in
Special Economic Zones of CALABARZON, 2013
Factors Affecting The Choice Of Incoterms Of Selected Semiconductor
And Electronics Companies Of Philippine Economic Zone Authority In
CALABARZON Towards A Logistics Model
Results and Discussions
Independent variables Chi-Square p-value
Mother company’s decision (MCD)
1.599 .660
Supplier’s decision (SD)
1.913 .591
Written incoterms policy (WIP)
4.582 .205
Buyer’s understanding of incoterms
(BUI) 4.433 .218
Customs regulations (CR)
7.130 .068
Company practices (CP)
5.386 .146
Insurance (I)
1.287 .732
Freight cost (FC)
7.639 .054
Satisfaction with supplier (SS)
2.151 .542
Trust with supplier (TS)
3.098 .377
Commitment with supplier (CS)
3.230 .358
Conflict with supplier (CFS) 5.174 .159
R Squared = .709

Final Model Multinomial Regression Likelihood Ratio Test Result of Respondents’
Choice of Incoterms and Customs Regulations and Freight Cost Importation
Elements in Special Economic Zones of CALABARZON, 2013
Independent variables Chi-Square p-value
Customs regulations (CR)
6.535 .088
Freight cost (FC) 8.693 .034
R Squared = .257

Actual flow of
relationship model
discovered in the
study about choice
of Incoterms of
semiconductor and
electronics companies
in special economic zones,
CALABARZON

Proposed Incoterms
Logistics Management Model
for customs regulation and
freight cost in semiconductor
and electronics companies
in special economic zones,
CALABARZON

CONCLUSIONS
AND
RECOMMENDATIONS

The choice of incoterms is significantly affected by two
factors, the customs regulation and the freight cost in the
semiconductor and electronics companies in Philippine Economic
Zone Authority in CALABARZON. Specifically:
This finding contradicts the null hypothesis stating that
the semiconductor companies’ choice of incoterms is not
significantly affected by customs regulations, and freight cost.
On the other hand, this finding accepts the null hypothesis
stating that the Philippine semiconductor companies’ choice of
incoterms is not significantly affected by their mother
company’s decision, supplier’s decision, written incoterms
policy, buyer’s understanding of incoterms, company practices,
insurance, shipment’s country of origin, mode of shipment,
value of goods, volume of shipment, terms of spending,
satisfaction with suppliers, trust with suppliers, commitment
with suppliers, and conflict with suppliers.
CONCLUSIONS

• Choosing the right incoterms one should understand
what the incoterms means.
• In the case of EXW, the importers should realized
that the term means minimal obligation to the seller
• There is a risk for importers in choosing EXW due
to loss of control over transportation movement,
how export documentation is presented to relevant
governments,etc.
• The buyer bears all risk including customs
regulations and freight cost
RECOMMENDATION

• Mostly CIF is best to use when the importation element is
related to freight cost, especially if the shipments are with high
value.
• CIF will help to facilitate the insurance and claims.
• Mostly FOB is best to use when the importation element is
related to customs regulations, especially if the shipments are
regulatory goods and high risk.
• Subsequently if the importer has no control over releasing
factors which deals with customs issues, using mostly FOB will
help to facilitate customs related issues in the origin.
• Mostly EXW is advisable to use when the importer would like
to control the shipment consolidation, and the goods are with
low value.
RECOMMENDATION

The results of this study were meant to provide important
information to relevant persons and institutions:
(a) for future researchers and academic institutions, for
relevant case material for procurement, logistics and
supply chain management
(b) for government, importers and chamber of commerce,
as this study provides details and information of the
Philippine Economic Zone choice of incoterms.
(c) for procurement and logistics managers and
practitioners, as this paper can supply a source of
information to build a better decision in their choice of
incoterms; and
RECOMMENDATION

• It is highly recommended that all
procurement and logistics practitioners,
including assigned in semiconductor and
electronics companies will make use of this
study and consider the customs regulations
and the freight cost in choosing their
incoterms.
RECOMMENDATION

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