Marlane Villa-Real, chairman and chief executive officer of Buena Mano Crafts, Inc., a manufacturer and exporter of handicraft, said that while export sales declined to stiff competition from China and other Asian countries three years ago, exporters have been participating more in domestic trade fairs.

Villa-Real disclosed that the local market now comprises around 20 per cent of its total sales, while that of a furniture company is much higher at 40 per cent.

‘Over the years, we have found out what the Filipinos are looking for. We already produce for the domestic market and it is enough to cover our overhead cost. Thus, when we price our products for exports, we don’t have to add as much anymore’, she said.

She pointed out that this brings down cost of exportable products, making Philippine goods become more competitive in the international market.

Questions

1 Why is the company using marginal cost pricing for its export goods?
2 How might the company raise its prices to make a higher contribution fo fixed costs?