A C K N O W L E D G M E N T
We would like to give our most sincere appreciation and thanksgiving to those who help us in making this study possible, complete, and excellent.
To our Almighty God, for giving us the opportunity to experience this kind of challenges that develop our skills and ability.
To our families, for giving us unconditional love and support especially in terms of financial.
To Professor Sofronio “toti” Dulay , for sharing us moral support and unceasing guidance all throughout the making of this research. As well as motivating us through his teachings and made us a responsible students.
To the Securities and Exchange Commission Mandaluyong branch, for giving us Banco De Oro’s company and financial information to make our research possible.
To the author of the websites that we used for gathering data, for giving the most essential information for this study.
This research would not be possible without the people who were gratuitously sharing their time to help us.
Executive Summary
Banco De Oro is the largest bank in the Philippines in terms of assets, loans and deposits. The bank is the product of the Banco de Oro-Equitable PCI Bank merger that was planned by SM Group of Companies. Banco de Oro Universal Bank is the fifth-largest bank in the Philippines, and Equitable PCI Bank is the third-largest bank. It was closed on December 27, 2006 with the formation of Banco de Oro Unibank, Inc. Today, it has a total of 685 branches and a wide-reaching ATM network. Its innovative products and excellent quality of service brings the company to continuous victories.
The researchers gathered and analyzed several data to determine the strength and weaknesses of Banco De Oro.
The researchers suggest three market strategies which are the market penetration, market development and product development to maintain its position as the leading commercial bank in the Philippines,
INTRODUCTION
Despite the generally difficult regional conditions which prevailed as a result of the onset of the Asian, the banking industry of the Philippines has seen a reformation that will carry out by both the banking director and the government. The reform process has resulted in improved banking industry, with industry income touching new heights in 2007. Moreover, the Philippine banking industry has been undergoing consolidation that will further strengthen its position as new entities will increase the competition level. Thus, the Philippine banks entered the crisis period in a relatively well capitalized and robust condition.
INDUSTRY ANALYSIS
There are several forces shaping the Philippine Banking Industry. These forces are not in the control of the bank hence it is important to understand how and in what way they affect the banks.
In analyzing an industry, it is also useful to determine if the industry is a global industry, that is, an industry that requires global operations to compete effectively
Industries differ widely in their economic characteristics, competitive situations, and future outlooks. Understanding industry structure is the logical starting point for strategic analysis at the business level.
Political and Legal Forces
Political-legal forces include the outcomes of elections, legislation, and court judgments, as well as the decisions rendered by various commissions and agencies. These factors shape the rules of competition, operational costs and supply chain requirements. The political sector of the environment presents actual and potential restriction on the way an organization operates. Such as developments in the political and legal environment which might affect business decisions strongly.
Regulations restricting market entry are among those that have a very direct impact on competition. In the Philippine banking sector, such regulatory restrictions have had adverse effects on the sector’s structure, conduct and performance while the liberalization of these restrictions has led to a more competitive banking sector.
In addition the basic system of government and the laws the system promulgates, the political environment might include such issues as monitoring government policy toward income tax, relative influence of unions, and policies concerning utilization of natural resources.
In general, the impact of government is far-reaching and increasing.
Economic Forces
Economic forces refer to the nature and direction of the economy in which business operates. Economic factors have a tremendous impact on business firms. The general state of the economy (e.g., depression, recession, recovery, or prosperity), interest rate, stage of the economic cycle, balance of payments, monetary policy, fiscal policy, are key variables in corporate investment, employment, and pricing decisions.
The economical situation of a country is paramount to the operation of the banks. A thriving economy means good earnings, decent salaries, more purchasing power, and great business for the banks. The available purchasing power in an economy depends on current income, prices, savings, and debt and credit availability.
The impact of growth or decline in gross national product and increases or decreases in interest rates, inflation, and the value of the dollar are considered as prime examples of significant impact on business operations.
To asses the local situation, an organization might seek information concerning the economic base and future of the region and the effects of this outlook on wage rates, disposable income, unemployment, and the transportation and commercial base. The state of world economy is most critical for organizations operating in such areas.
The Philippine economy seems comparatively well-equipped to weather the global financial crisis in the short term, partly as a result of the efforts over the past few years to control the fiscal deficit, bring down debt ratios, and adopt internationally-accepted banking sector capital adequacy standards. Also Climate change is an emerging threat to agriculture and overall growth, and also could further complicate fiscal consolidation efforts.
Social Forces
A social force includes traditions, values, societal trends, consumer psychology, and a society’s expectations of business. Moreover, social issues can quickly become political and even legal issues. Social forces are often most important because of their effect on people’s behavior. For an organization to survive, the product or service must be wanted, thus consumer behavior is considered as a separate environmental behavior. Determining the exact impact of social forces on an organization is difficult at best. However, assessing the changing values, attitudes, and demographic characteristics of an organization’s customers is an essential element in establishing organizational objectives.
Demographic Forces
Demographic forces talks about who are there customer like the income level, age, gender, ethnicity, occupation, education, family size and life style of the people. The working age of 18 – 65 years comprises the 60% of the population. There is one male one female ratio. In education 92.6% percent of the population can read and write and approximately spends 12 years of schooling. An estimate of 3 children is born in every woman. The Philippines has a labor force of roughly 36 million and 50% of which is under services, 15% in the industry and 35% in agriculture. Unemployment rate increase from 7.4% to 7.5%, 30% of the population lives below poverty line. The lifecycle of the customer they have that are transacted in there company like deposit or withdrawing and also the income the customer they have. And the age of the customer that are transacting in there company.
Technological Forces
Technological forces influence organizations in several ways. A technological innovation can have a sudden and dramatic effect on the environment of a firm. First, technological developments can significantly alter the demand for an organization or industry’s products or services.
Technological change can decimate existing businesses and even entire industries, since its shifts demand from one product to another. Moreover, changes in technology can affect a firm’s operations as well its products and services.
Online banking
Online banking is the new front-office technology. Banks allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank, credit union or building society. Some banks employ a “click-and-mortar” implementation strategy in which the banks add a transactional Internet site to their physical offices and ATM networks. A transactional site allows customers to make transactions on-line such as accessing accounts, transferring funds, applying for a loan, etc.
Online banking has become trendy today, although there are substantial differences by bank size in implementation strategies.
Information System
Information System is the combination of information technology and people’s activities, using that technology to support operations, management, and decision-making. Used as the intermediaries which the banks and other creditors shares information relevant to the creditworthiness of loan applicants. These systems collect information from financial institutions, trade creditors, public records, and other sources, aggregate and summarize the information, and then provide credit reports or credit scores to lending institutions.
BANCO DE ORO UNIBANK
PORTER’S FIVE FORCES ANALYSIS
Porter’s competitive forces model is the framework for he industry analysis and business strategy development. These forces include the intensity of rivalry from traditional competitors, threat of new market entrants, threat of substitute products and services, bargaining power of customers and bargaining power of suppliers.
Basis: Industry Analysis and Company Profile
Competitors give a strong impact to the company. Patriotism or loyalty to their products and services are also considered. Having an advantage and control to their suppliers, they have a moderate impact to Banco De Oro.
It is for a fact that sales are based from the customers. Preferences of the buyers are very important. Substitute products also give a strong impact for these will give customer more alternatives or choices. It is possible for the customers to get those familiar and trusted one rather than to the newly introduced company.
Possible new entrants are weak because the competition in banking industry is already high.
Industry Rivalry
At the center of the five forces model is industry competition among rival firms drives profits to zero. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences.
Profile of Competitors
We have identified 3 major competitors of Banco de Oro which are: Metrobank, Bank of the Philippine Islands and Philippine National Bank.
The Metropolitan Bank and Trust Company, commonly known as Metrobank. It established Metrobank Foundation, Inc. in 1979, putting emphasis on both business success and community contribution. The Foundation has since become one of the largest and most respected charitable organizations in Asia. It has a diverse offering of financial services, from regular banking to insurance. Metrobank has also been steadily expanding internationally. Metrobank is the second largest bank in the Philippines.
Bank of the Philippine Islands. Is the oldest bank in the Philippines still in operation and is the country’s third largest bank in terms of assets, the country’s largest bank in terms of market capitalization, and the country’s most profitable bank. It is also one of the best banks in the Philippines. Recently, BPI was awarded by Finance Asia as the as the best cash management bank in the Philippines. Finance Asia also named BPI as the best trade finance bank in the Philippines. BPI has two subsidiary banks – BPI Family Savings Bank and BPI Direct. It is owned by the Ayala Corporation – the largest conglomerate in the Philippines.
BPI is also the oldest bank in Southeast Asia and has a long and distinguished history that spans over a century. While it is considered by many as an old institution, BPI is trying, with moderate success, to promote itself as a dynamic institution that caters to its various clients, which hail from various sectors of Philippine society. It has a branch network of 831 branches is by far the largest branch network of any bank in the Philippines.
Philippine National Bank. One of the largest banks in the Philippines, ranking fourth in terms of assets. It was established by the Philippine government on July 22, 1916, during the American colonial period, and became the first universal bank in the Philippines in 1980. It was privatized in 1989. PNB currently has over 100 branches throughout Asia, Europe, the Middle East and North America.
Potential for new entrants
The second force in Porter’s model is the possible new entrant. Currently there is no new commercial bank entering in the Philippines banking industry. Barriers can be a factor because it reduce the rate of entry of new firms, thus maintaining a level of profits for those already in the industry.
Bargaining Power of Suppliers
Supplier power refers to the ability of providers of inputs to determine the price and terms of supply. Suppliers can exert power over firms and industry by raising prices or reducing the quality of purchased goods and services, so reducing profitability. The suppliers of Banco De Oro are composed of investors, suppliers of pass books, atm machine, atm card, deposit slips, and withdrawal slips. These suppliers considered the source of cash of a bank and also it provides the materials to BDO for their daily transactions with their clients.
Bargaining Power of Buyers
The power of buyers is the impact that customers have on a producing industry. The force of the buyer’s bargaining power is proportional to the ability of buyers to force down prices, bargain for higher-quality products or more services, and pit rival organizations against one another. Main customers are investors or businessmen, pensioners, loaners, as well as ordinary people who want to open a bank account to secure their money and make it grow.
Substitute Products
Another force in Porter’s five forces model is the threat of substitute products. Substitute refers to product or services in other industries. Substitute for banks are cooperatives, pawnshops, microfinance and loan sharks.
Cooperative- A business owned and controlled equally by the people who use its services or who work at it. Agusan del Norte Cooperative Bank, Bataan Cooperative Bank Camiguin Cooperative Bank are some of the cooperatives here in the Philippines.
Pawnbroker (or pawnshop)- is an individual or business that offers secured loans to people, with items of personal property used as collateral. The word pawn is derived from the Latin pignus, for pledge, and the items having been pawned to the broker are themselves called pledges or pawns, or simply the collateral. M Lhuillier and Cebuana Lhuillier are some of the well known pawnshops here in the Philippines.
Microfinance- is the provision of financial services to low-income clients or solidarity lending groups including consumers and the self-employed, who traditionally lack access to banking and related services. More broadly, it is a movement whose object is “a world in which as many poor and near-poor households as possible have permanent access to an appropriate range of
high quality financial services, including not just credit but also savings, insurance, and fund transfers.
Loan sharks/usurers/five six lenders- is a person or body that offers unsecured loans at high interest rates to individuals, often enforcing repayment by blackmail or threats of violence. They prey on those who are in desperate need, who just close their eyes even if the interest rates are shamefully high - from 5% to 20% per month.
Company Profile
BDO Leasing & Finance, Inc. is a BDO Unibank subsidiary that has distinguished itself to be on the leasing edge of the leasing and finance industry. Reputed for exceptional service and innovation, it has strengthened its market leadership year after year. Healthy financial results, increased marketing capability, and the trust of a continuously growing client base make BDO Leasing strongly positioned to remain strides ahead of competition.
BDO is owned by the SM Group of Companies, one of the country’s largest conglomerates and owner of the SM chain of malls. It is one of the largest banks in the Philippines, ranking fifth in terms of assets, loans and deposits. More importantly, BDO is an institution that does more than honor its past; it continues to improve on its present, and moves with innovation and dynamism toward an even stronger future.
BDO we’re building a strikingly different business, focused on exceptional client service. They employ exceptional people - and help them get on with the job, without needless bureaucracy. Their systems work to support people, not the other way around. Training is tailored to their needs and centered on first-hand experience. That’s why they get such excellent results.
Corporate Core Values
___________________________________________________________
Commitment to Customers
We are committed to deliver products and services that surpass customer expectations in value and every aspect of customer services, while remaining to be prudent and trustworthy stewards of their wealth.
Commitment to a Dynamic and Efficient Organization
We are committed to creating an organization that is flexible, responds, to change and encourages innovation and creativity. We are committed to the process of continuous improvement in everything we do.
Commitment to Employees
We are committed to our employees’ growth and development and we will nurture them in an environment where excellence, integrity, teamwork, professionalism and performance are valued above all else.
Commitment to Shareholders
We are committed to provide our shareholders with superior returns over the long term.
Corporate Mission
______________________________________________________________
To be the preferred bank in every market we serve by consistently providing innovative products and flawless delivery of services, proactively reinventing ourselves to meet market demands, creating shareholders value through superior returns, cultivating in our people a sense of pride and ownership, and striving to be always better than what we are today… tomorrow.
Philosophy
______________________________________________________________
We seek to preserve and enhance the value of our clients’ assets by achieving returns that outpace predefined market benchmarks.
We encourage diversification among asset classes and individual securities to mitigate price/market volatility. With these, we seek to grow and protect our clients’ wealth for the enjoyment of their successors and their heirs.
We customize investment strategies to address each client’s unique circumstances, as well as specific preferences for income, liquidity and risk.
Where appropriate, we pursue cross-border investment opportunities to enhance returns and provide additional diversification.
Awards & Recognition
______________________________________________________________
The international publication Euromoney named BDO as the “Best Private Bank in the Philippines for the year 2008”- and this award is attained for two consecutive years. By the year 2009, Finance Asia recognize as the “Top Bank in the Philippines’ Best Managed Companies”. BDO Private Bank provides the emerging affluent and wealthy market segment with a wide range of resources, expert objective advice, and customized solutions to help build and safeguard their wealth. It was earlier named Best Private Bank by Finance Asia Magazine and Best Private Wealth Management House by Alpha Southeast Asia Magazine.
For the second straight year, Banco De Oro (BDO) was named the “Top Commercial Bank on Overseas Filipinos Remittances for 2010” by the Bangko Central ng Pilipinas (BSP). BDO, which bagged the same award in 2009, attributed its solid performance on its strong market presence and steady expansion of remittance partners worldwide.
In the 2010 Reader’s Digest Trusted Brand Asia Gold Award, BDO was recognized as one of the preferred choice in their provided service or product line.
Banco De Oro Unibank, Inc. (BDO) bagged four citations from the Hong Kong-based independent institutional investment publication, Alpha Southeast Asia Magazine, in its 3rd Annual Best Financial Institution Awards.
BDO won the Best Cash Management Bank award, while their subsidiary BDO Private Bank was named the Best Private Wealth Management House, and BDO Capital & Investment as the Best Investment Bank and Best Bond House.
The awards are the first and only regional awards that focused on Southeast Asia in the areas of debt, equity, investment banking, brokerage, Islamic financing, private wealth management, trade financing and cash management.
The BDO Group received awards for Best Local Bank, Best Private Wealth Management Bank, Best Investment Bank, Best Bond House and the Bank of Philippine Islands is the winner of Best Cash Management Bank, Best Trade Finance Bank and Best SME Bank.BDO Group is accredited for its resilient operations with strong financials.
Board of Directors, Advisers to the Board & Corporate Officers
as of May 28, 2010
Chairman Emeritus
Mr. Henry Sy. Sr
Chairperson
Ms. Teresita T. Sy
Vice Chairperson
Ms. Corazon S. de la Paz-Bernardo
Vice Chairman
Mr. Jesus A. Jacinto Jr.
Director
Mr. Christopher A. Bell-Knight
Director (Independent)
Mr. Teodoro B. Montecillo
Director
Mr. Lee Wai Fai
Director
Atty. Antonio C. Pacis
Director
Mr. Henry T. Sy Jr.
Director
Ms. Josefina N. Tan
President & Director
Mr. Nestor V. Tan
Director (Independent)
Mr. Jimmy T. Tang
ADVISERS TO THE BOARD
Mr. Senen T. Mendiola
Mr. Alberto V. Reyes
Mr. Jose T. Sio
Mr. Washington Sycip
Mr. Jesus G. Tirona
Corporate Social Responsibility
The Bank established the BDO Foundation Inc. as its corporate social responsibility (CSR) arm and channel for its internal and external outreach program. It aims to respond to the needs of the marginalized sector of society for decent shelter, sustainable livelihood and practical education.
As one of the highlights for the year, it donated land to the City of Taguig valued at P17 million for
site development. Partnering with Gawad Kalinga Foundation Inc., it aims to build the social infrastructure and community for the informal settlers in the area.
BDO Foundation also donated P12 million for the construction of a micro-finance center in Laguna for the CARD MRI (Center for Agriculture and Rural Development- Mutually Reinforcing Institutions) Development Institute. The partnership with CARD-MRI aims to train people on using micro-finance and livelihood skills to help them alleviate poverty and develop the economic potentials of the countryside.
On a smaller scale, it also donated P1.5 million to a school in Cebu for building an audio-visual room.
Recently, the Foundation donated P2.8 million to Gawad Kalinga for the building of 28 homes in Bulacan. The houses will be located in Blocks 4 and 5 of D’Dreamland Ville in Barangay Kaypian, San Jose del Monte City. These form part of a 3.2-hectare property owned by the Makati local government and will be called BDO Foundation-GK Community. The groundbreaking ceremony was held last May to mark the start of the construction.
In a move to integrate its CSR programs in the Bank’s business, it launched the BDO Volunteer Program, generating over six hundred employee sign-ups in its maiden year. The program, which is aligned to BDO’s mission and core values, aims to develop volunteerism as a BDO lifestyle.
The BDO Volunteer Program is divided into four basic activities: BDO Speakers Bureau, for conducting lecture series; BDO Skills Trainers, for facilitating arts and crafts training sessions; BDO Community Builders, for assistance in developing communities, and; BDO Fund Raisers for assistance in fund-raising to support the Foundation’s initiatives.
Ultimately, the Bank through BDO Foundation Inc. aims to be a major catalyst in the creation of opportunities for the under-privileged and in the country’s socio-economic development.
Credit Ratings
Notice of Annual Meeting of Shareholder
Definitive Information Statement
Statement of Management’s Responsibility
for Financial Statements of BDO
Independent Auditor’s Report
Financial Statements of BDO - PART1
Independent Auditor’s Report
Financial Statements of BDO - PART2
Independent Auditor’s Report &
Financial Statements of BDO - PART3
Independent Auditor’s Report &
Financial Statements of BDO - PART4
Minutes of the 2008 Annual Meeting of Shareholders
Email Us
Email: mailto:irandcorplan@bdo.com.ph
Financial Statement Reports
EXTERNAL AND INTERNAL ANALYSIS
00000
Basis: Industry Analysis
External Factor Evaluation (EFE) Matrix
EFE Matrix is based on the external environment analysis of any business that will give you the possible opportunities and threats facing the BDO.
Key External Factors
Weight
Rating
Score
EXTERNAL OPPORTUNITIES
1. Population growth rate1.931%
2. OFW remittances expand by 8%
0.025
0.20
2
4
0.05
0.80
3. Urbanization of 65% total population
0.035
4
0.14
4. Growth rate (7.3%)
0.015
3
0.045
5. Global expansion
0.05
4
0.20
6. Innovation in banking technology
0.05
4
0.20
7. Joint venture to large scale organization
0.10
4
0.40
8. Recruit qualified employees
0.05
1
0.05
EXTERNAL THREATS
1. Higher Competition
0.20
4
0.80
2. Increased market share of competitors
3. Net services
0.095
0.015
2
2
0.19
0.3
4. Global financial crisis
0.08
4
0.32
5. Unsteady exchange rate (9.3%)
0.03
2
0.06
6. Inflation rate boomed to 9.6%
0.03
1
0.03
7. Increase unemployment Rate (7.4-7.5)
0.015
2
0.3
8. Climate change
0.01
1
0.01
TOTAL
1.0
3.895
Legend:
Rating: 4-major strength 3-minor strength 2-minor weakness 1-major weakness
Based on the EFE matrix above BDO scores 3.895. The weighted score indicates that the company responds in an effective way to the existing opportunities and threats in the industry.
Basis: Analyzation
Internal Factor Evaluation (IFE) Matrix
Key Internal Factors
Weight
Rating
Score
INTERNAL STRENGTHS
1. Most No. of remittance abroad
0.20
4
0.80
2. International strong brand recognition
0.05
3
0.15
3. BDO branches in SM malls
0.05
3
0.15
4. Banking service alliance with other firms
0.10
4
0.40
5. BDO offers kabayan savings Account, a special account for Filipinos overseas and their beneficiaries
0.045
2
0.09
6. Strong financial performance
0.015
2
0.03
7. Well-trained employees
0.02
2
0.04
8. Advanced Infrastructure
0.05
3
0.15
9. Online services
0.02
2
0.04
10. Friendly staff
0.01
1
0.01
11. Longer banking hours
0.01
1
0.01
INTERNAL WEAKNESSES
1. Partnership with schools and other firms
0.20
4
0.80
2 Few branches in rural areas
0.05
4
0.20
3. Closing accounts without prior notice
0.03
3
0.09
4. Ineffective marketing promotions
0.04
3
0.12
5. High Bank Service Charges
0.02
2
0.04
6. Higher Maintaining Balance
0.02
2
0.04
7. Slow customer service
0.02
3
0.06
8. Lack of inventory management skills due to decentralized Management
0.05
3
0.15
TOTAL
1.0
3.37
Basis: Analyzation and Company Profile
Based on the IFE Matrix, BDO scores 3.37. This translates that the company is higher than average rate, and it has strong internal position.
Its wide distribution of local branches of ATM machines in SM malls increases the popularity of BDO to the people. This indicates that the company has a good internal structure even though it still its has weaknesses which can be solve by proper management.
Competitive Profile Matrix
______________________________________________________________
WEIGHT
BDO
Metrobank
BPI
PNB
Rating
Score
Rating
Score
Rating
Score
Rating
Score
1. Advertisement
0.05
2
0.10
2
0.10
2
0.10
2
0.10
2. Service Quality
0.30
4
1.20
4
1.20
3
0.90
3
0.90
3. Local branches
0.15
4
0.60
3
0.45
4
0.60
3
0.45
4. Management
0.10
4
0.40
4
0.40
4
0.40
3
0.30
5.Customer Loyalty
0.05
4
0.20
4
0.20
3
0.15
2
0.10
6.Customer Service
0.25
3
0.75
3
0.75
4
1.00
3
0.75
7.Brand Awareness
0.10
4
0.40
4
0.40
4
0.40
3
0.30
TOTAL
1.00
3.65
3.50
3.55
2.90
Basis: Company Profile, Industry Analysis and Analyzation
After a close evaluation of the external analysis of the banking industry and SWOT analysis, it is crucial to consider internal operational effectiveness of Banco de Oro in the form of identifying critical success factors of the company within the financial sector.
Service quality and customer service are the most important critical success factors in the industry because it can attract more customers.
As BDO receive 3.65, its rivalries Metrobank receives 3.50, BPI with 3.55 while PNB with 2.90 in the competitive profile matrix, we can conclude that BDO shall be facing higher competition level among the other competitors.
STRATEGIC TOOLS
TOWS Matrix
Strengths
Weaknesses
1. Most no. of remittance abroad.
2. International strong brand recognition
3. BDO branches in SM malls
4. Banking service alliance with other firms
5. BDO offers kabayan savings Account, a special account for Filipinos overseas and their beneficiaries
6. Strong financial performance
7. Well-trained employees
8. Advanced Infrastructure
9. Online services
10. Friendly staff
11. Longer banking hours
1. Partnership with schools and other firms
2. Few branches in rural areas
3. Closing accounts without prior notice
4. Ineffective marketing promotions
5. High bank service Charges
6. Higher maintaining balance
7. Slow customer service
8. Lack of inventory management skills due to decentralized management
Opportunities
S-O Strategies
W-O Strategies
1. Population growth rate1.931%
2. OFW remittances expand by 8%
3. Urbanization of 65% total population
4. Growth rate (7.3%)
5. Global expansion
6. Innovation in banking technology
7. Joint venture to large scale organization
8. Recruit qualified employees
1.Expansion in rural areas by putting up additional branches (S3, O3)
2.Expansion of OFW services (S1,S5,O2)
3. Employ competitive employee (S6, O8)
1. Improvement in E-banking system (W4, O6)
2.Strategic alliances by partnering other competitors or other business to achieve greater market (W1,O7)
3. Introduce products on internet as a form of advertisement (W4, O6)
Threats
S-T Strategies
W-T Strategies
1. Higher competition
2. Increased market share of competitors
3. Net services
4. Global financial crisis
5. Unsteady exchange rate (9.3%)
6. Inflation rate boomed to 9.6%
7. Increase unemployment Rate (7.4-7.5)
8. Climate change
- Attractive marketing strategies and programs (S2, T1, T2)
- Benchmarking system (S4,T1)
1. Tie-up with large scale organizations (W1,T1)
2. Strategic distribution channel(W2,T1,T2)
3. Provide letter of notice and accommodations for customers (W3,T3)
Basis: IFE and EFE Matrices
TOWS Matrix of Banco de Oro, keeping in mind its SWOT analysis. Following is the detailed analysis of BDO TOWS matrix:
Based on the analysis, BDO uses the following strategies: Market Penetration, Market Development, and Product development.
For Market Penetration, the company seeks to increase their current products in current markets through marketing efforts by putting advertisement on social network and distribution channel.
For Market Development, the company looks for new markets in which current products can expand, by branching-out in rural areas.
For Product development, the company considers new product possibilities by hiring qualified employees and improving the quality of their service.
BCG Matrix
Credit Cards, ATM, Loans, Opening of Kabayan Savings Account, BDO Remittances
None
Foreign Exchange
Structured Products
(It is a type of deposit that is long term normally more than 10 years.)
high
Business
Growth
Rate
low
hhigh low
Relative Position (Market Share)
Stars. It represents the popular or high marketable services of BDO such as credit cards, ATM and Loan, opening Kabayan savings account and BDO remittances. These services offered by the BDO are usually preferred by the customers. The credit cards can make it easier to buy things, especially to those who don’t like to carry large amounts of cash besides, it is very convenient. ATM is useful for the people who are usually withdrawing money because it can make their withdrawal easier instead of going to the bank. One of the advantages is that great numbers of Filipinos go to the mall often; they choose to open BDO accounts so they can bank and shop at the same time under the same roof. Loans are provided to people for such critical circumstances which may occur at any time. In anyone’s life a situation may come when all of sudden you require cash; there’s a moment when you do not want to borrow cash from your relatives. By opening Kabayan savings account is very useful for the OFWs who are regularly giving money to their relatives in the Philippines and BDO remittances is very convenient for OFW families receiving remittances from abroad.
Cash Cow. Itrepresents the division of a company that provides a steady and significant cash flow. BDO provides a foreign exchange wherein it gives the company a big amount of money but needs to improve its market share growth. To improve the flow of its transaction they need to use product development strategy. BDO can improve the abilities of their employees so that they can provide a good customer service and increased the availability of their technologies.
Dog. Structured products, it is the type of deposit that is long term normally more than 10 years. It has been classified as a dog because it has a weak market share and low market growth rate. It can use retrenchment to gain a market share only by reducing it assert reduction.
Question Mark. None, because all of the services that the BDO offers are still acquire by the customers and also in operation.
Space Matrix
Conclusion
Internal strategic position
External strategic position
Y-axis
Total y-axis score:
-2.00+(+5.86)= +3.86
Financial Strength (FS)
(score: +6 best, +1 worst)
Environmental Stability (ES)
(score: -1 best, -6 worst)
Operative Earnings per share
+6
Technological Changes
-1
Revenues increased
+5
Inflation rates
-2
Liquidity
+6
Barriers to entry
-3
Working Capital
+6
Demand Variability
-2
Overall Cash flow ratio
+6
Price or interest range of competing products
-2
Return on investment
+6
Competitive Pressure
-1
Net Income
+6
Risk involved in the business
-3
Average: +5.86
Average: -2.00
X-axis
Total x-axis score:
-1.5+(+5.83)= +4.33
Competitive Advantage (CA)
(score: -1 best, -6 worst)
Industry Strength (IS)
(score: +6 best, +1 worst)
Market Share
-1
Growth Potential
+6
Expansion of local/ foreign branches
-2
Profit Potential
+6
Service Quality
-2
Resource Utilization
+6
Customer Loyalty & reputation
-1
Technologies Know-how
+6
User friendly website
-1
Increase in OFW remittances
+5
Product Life Cycle
-2
Productivity
+6
Average: -1.5
Average: +5.83
Grand Strategy Matrix
Y-axis
Weak Competitive Position
Strong Competitive Position
X-axis
Slow Market Development
Basis: Industry Analysis, Analyzation and Company Profile
The results from Strategic Position and Action Evaluation Matrix (SPACE Matrix) and Grand Strategy Matrix, shows that Banco De Oro falls under the aggressive quadrant or quadrant 1. It is located at the coordinates of +4.33 for x-component and a y-component of +3.86. It shows that the Banco De Oro has an admirable position to use its Industry Strength in order to improve their external opportunities, overcome weaknesses, and avoid threats.
BDO has set of possible strategies such as market development, market penetration, product development, forward integration, backward integration, horizontal integration, horizontal diversification and concentric diversification depending on detailed conditions that face the company.
Aggressive Position
Banco De Oro is the largest bank in the Philippines in terms of assets, loans and deposits. The bank is the product of the Banco de Oro-Equitable PCI Bank merger after the boards of both Banco de Oro Universal Bank and Equitable PCI Bank agreed to merge on December 27, 2006. It has a total of 685 branches and a wide-reaching ATM network. This merger is only one part of the “second wave” of mergers and acquisitions in the Philippine banking industry.
Internal External Matrix
______________________________________________________________
The IFE Total Weighted Score
Weak 1.0 to 1.99
Average 2.0 to 2.99
Strong 3.0 to 4.0
I
II
III
IV
V
VI
VII
VIII
IX
Medium 2.0 to 2.99 The EFE Total Weighted Score Low 1.0 to 1.99
High 3.0 to 4.0
Basis: EFE and IFE Matrices
Based on the EFE and IFE matrices in the previous chapters, with the resultant scores at 3.895 and 3.37 respectively, the combined effect of the external and internal analysis falls in cell I for IFE Total Weighted Score of 3.37 and cell IV for EFE Total Weighted Score of 3.895. The result of the above internal/External Matrix can be described as grow and build strategies; Intensive (market penetration, market development and product development) or integrative (backward integration, forward integration and horizontal integration) strategies can be most appropriate to this division
Quantitative Strategic Planning Matrix
STRATEGIC ALTERNATIVES
MARKET
MARKET
PRODUCT
PENETRATION
DEVELOPMENT
DEVELOPMENT
KEY FACTORS
WEIGHT
AS
TAS
AS
TAS
AS
TAS
INTERNAL FACTORS
STRENGTHS
1. Most No. of remittance abroad.
0.20
3
0.60
4
0.80
3
0.60
2. International strong brand recognition
0.05
4
0.20
4
0.20
4
0.20
3.BDO branches in SM malls
0.05
3
0.15
4
0.20
4
0.20
4. Banking Service alliance
0.10
4
0.40
3
0.30
3
0.30
5. BDO offers kabayan Savings Account, a special account for Filipinos overseas and their beneficiaries
0.045
3
0.135
3
0.135
4
0.18
6. Strong financial performance
0.015
2
0.03
2
0.03
4
0.06
7. Well-trained employees
0.02
2
0.04
3
0.06
3
0.06
8. Advanced infrastructure
0.05
4
0.20
4
0.20
4
0.20
9. Online services
0.02
4
0.08
4
0.08
4
0.08
10. Friendly staff
0.01
2
0.02
4
0.04
4
0.04
11.Longer banking hours
0.01
1
0.01
3
0.03
2
0.02
WEAKNESSES
1. No partnership with schools and other firms
0.20
4
0.80
4
0.80
4
0.80
2. Few branches in rural areas
0.05
4
0.20
4
0.20
4
0.20
3. Closing accounts without prior notice
0.03
3
0.09
3
0.09
3
0.09
4. Ineffective marketing promotions
0.04
2
0.08
3
0.12
3
0.12
5. High Bank Service Charges
0.02
1
0.02
2
0.04
1
0.01
6. Higher Maintaining Balance
0.02
1
0.02
2
0.04
1
0.01
7. Slow customer service
0.02
3
0.06
3
0.06
4
0.08
8. Lack of inventory management skills
0.05
3
0.15
2
0.10
3
0.15
due to decentralized management
SUB TOTAL
1.00
3.285
3.525
3.4
EXTERNAL FACTORS
OPPORTUNITIES
1. Population growth rate 1.931%
0.025
4
0.10
4
0.10
4
0.10
2. OFW remittances expand by 8%
0.20
3
0.60
4
0.80
4
0.80
3. Urbanization of 65% total population
0.035
3
0.105
4
0.14
2
0.07
4. Growth rate (7.3%)
0.015
3
0.03
3
0.03
3
0.03
5. Global expansion
0.05
4
0.20
4
0.20
4
0.20
6. Innovation in banking technology
0.05
4
0.20
4
0.20
4
0.20
7. Joint venture to large scale organization
0.10
4
0.40
4
0.40
4
0.40
8. Recruit qualified employees
0.05
4
0.20
3
0.15
4
0.20
THREATS
1. Higher competition
0.20
4
0.80
4
0.80
4
0.80
2. Increased Market Share of Competitors
0.095
3
0.285
3
0.285
3
0.285
3.Net services
0.015
1
0.015
1
0.015
1
0.015
4. Global Financial Crisis
0.08
4
0.32
4
0.32
3
0.24
5. Unsteady Exchange Rate (9.3%)
0.03
2
0.06
2
0.06
3
0.09
6.Inflation Rate boomed to 9.6%
0.03
3
0.09
2
0.06
3
0.09
7. Increase unemployment rate (7.4-7.5)
0.015
3
0.045
4
0.06
3
0.045
8. Climate change
0.01
-
-
-
-
-
-
SUB TOTAL
1.00
3.45
3.62
3.565
SUM TOTAL ATTRACTIVENESS SCORE
6.735
7.145
6.965
Basis: Industry Analysis, EFE, IFE and TOWS Matrices
AS=Attractiveness Score; TAS=Total Attractiveness Score
AS: 4-highly attractive 3-reasonably attractive 2-somewhat attractive 1-not attractive
Based on the above matrix, the total attractiveness score of market penetration, market development and product development is 6.735, 7.145 and 6.965 respectively. The highest TAS is market development that would mean it is the most attractive strategy among market penetration and product development.
CONCLUSION
We therefore conclude that market development is the most effective strategy. Second, is product development and lastly, market penetration as we seen from QSPM.
First, BDO should focus more on market development strategy to attract new potent customers and to increase their sales by putting BDO branches in semi-urban areas, large scale organizations, and by doing business operation outside the country.
Next, BDO should strategize through product development by continuously improving their products and services. By doing research and development to satisfy customer wants and needs.
Lastly, BDO should improve their market penetration strategy by putting advertisement on trendy markets today such as internet and TV commercials. Although BDO is the leading bank in the country and it is necessity to the people to save money, still BDO should improve their brand awareness to increase their target market not only here in the Philippines but also outside the country. Having a full knowledge of the market it can also have a big impact in the process of penetration of a foreign market. To continuously gain, build and sustain a competitive advantage over the competitors, BDO needs to maintain or increase the market share of their current product and services by combining with pricing strategies, advertising, sales promotion and other resources.
If BDO can properly execute these three strategies, surely BDO can achieve the overall goals and it can gain, build and sustain a competitive advantage among others.
Strategy Recommendation
Based on the matrices and strategy formulation that was analyzed by our group. We recommended that BDO should focus on improving intensive strategy. This includes market penetration, market development and product development.
Recommended Business Strategies
_____________________________________________________________
Market Penetration
A market penetration strategy seeks to increase market share of the current product or services in the existing market. This strategy adopted by the firms to raise their sales revenue without making changes in the products or services. The other dimension of market penetration is the existing market which means firm already offering products or services to the customer but can forecast that the existing sales figures can be improved by working on marketing penetration strategy.
Market penetration strategy can be implemented by offering sales, Increasing sales force, increase distribution and promotion of products, more expenditure in marketing and advertising activities will results in increasing sales. It is not guaranteed that market penetration fully works after investing in sales and marketing of products and services, a firm should go for this strategy only if any below of the desirable situation exists.
Based on our CPM, BDO acquired a rating of 2 under advertisement; therefore BDO should invest more in advertising nationwide to promote brand awareness as well as the products and services being offered. Advertising includes TV advertisements, internet, print ads and radio advertisements. Market penetration is often used by banks because it is necessity to people to save money.
Merger, Acquisition and Partnership
Banco de Oro-Equitable PCI Bank merger (2004–2006) was a plan by the SM Group of Companies and Banco de Oro Universal Bank, the fifth-largest bank in the Philippines, to merge with Equitable PCI Bank, the third-largest bank. The merger was part of a long-term goal of Banco de Oro to become one of the largest names in the Philippine banking industry. It was formally closed on December 27, 2006 with the formation of Banco de Oro Unibank, Inc.
The merger of both banks results in the merged company having a market capitalization of two billion dollars. Aside from that, it would also have to consolidate the large Equitable PCI branch and ATM network under the Banco de Oro banner.
Objectives in merging with this bank are the following:
Less competition
Increase the target market of BDO
To hold greater share
Expand its branches in rural areas
To maintain its position as number one preferred bank in the Philippines
Market Development
A market development strategy involves selling present products or services in new markets. Actions like targeting promotions, opening sales offices and creating alliances to operationalize a market development strategy, normally it involves wider strategy shifts, additional capital, and greater risk than a market penetration. Examples of market development efforts include reaching new segments and market expansion.
Market expansion
An effective strategy for many banks is to expand their market by
adding branches to rural areas or partnership with large scale organizations like universities. This can lead to more customers and increase in brand awareness. Market expansion step will result in estimates for delivering new capabilities to current markets, and potential new markets for existing products. These estimates include alternative industries and geographic areas. Market Expansion also identifies alternative technology, additional uses for products, determines any changing market conditions, and measures relative costs for diversifying into targeted markets
BDO has only one branch outside the country and is located at Hong Kong. Global expansion strategy is very risky because putting business in other country has many factors to consider. Although Global expansion in Asia is a great opportunity for BDO.
Product Development
Product development is used to describe the complete process of bringing a new product or service to the market. There are two parallel paths involved in the product development: one involves the idea generation, product design and detail engineering; the other involves market research and marketing analysis. Banks typically see new product development as the first stage in generating and commercializing new products within the overall strategic process of product life cycle management used to maintain or grow their market share.
Proposed Vision and Mission Statement
______________________________________________________________
Statement of the current vision and mission statements
Corporate Mission
To be the preferred bank in every market we serve by consistently providing innovative products and flawless delivery of services, proactively reinventing ourselves to meet market demands, creating shareholders value through superior returns, cultivating in our people a sense of pride and ownership, and striving to be always better than what we are today… tomorrow.
Recommendation of the revised V.M statements
The mission statement of Banco de Oro should consider the following:
l Customers. The Customers are the most important people for any organization. They are the resource upon which the success of the business depends. The company must provide the highest standard of Customer Care possible and to always aim for excellence. A customer who feels good doing business with you and through you, the company is more than likely to stay with you and recommend you to others.
l Employees. The greatest asset of any business lies in its human capital, the employees. Employees are central to the smooth functioning of a business and to provide quality service. Looking after key personnel is crucial to successful management.
l Investors. Investors are also important because the capacity of production of the economy depends on the capital available to produce. The existences of capital increase when the companies buy new tools, new buildings, new computers, new machines etc, etc, in order to help produce consumption goods. Investment is a flow that increases the existence of capital in the economy.
l Community. The community is its business environment and the society it serves. Business organizations give attention to their community relations for good reason. Organizations can exist and make a profit only as long as the public allows them to exist Proposed Vision-Mission statements
Proposed Vision-Mission statements
To be the leading bank in the market we serve by consistently upbringing innovative and high quality of product and services. By providing training and programs for employees to meet the needs of internal and external customers, and achieving the best returns for the shareholders.
Proposed Plans
______________________________________________________________
Product
v Express ATM Machines
Express ATM Machine will be provided for BDO clients which allows online transaction. With the help of this facility you can now deposit, withdraw or pay your bills without hustle! You can do it 24/7 a day.
How to use it? Follow its step-by-step procedures:
- Insert your card.
- Select language desired.
- Select whether deposit, savings, withdraw or bills payment
- Enter your account number
- Insert Cash
- Get transaction record
Express ATM machine has its added features to fully complete its services. Check out the other services of Express Deposit Machines:
ü Balance Inquiry
ü Fund Transfer
v E- Savings Account ( Economic Savings Account )
BDO E-Savings Account. Is an ATM account for the students and for the people who has low level income like blue collar workers, starting entrepreneurship, and saving for their future. Funds can be deposited or withdrawn trough the Master ATM machine or any in the BDO branches.
Details in E-Savings Account:
* Savings Account
* Minimum maintaining balance of Php 100.00 only
*No transaction charges
Advertisement and Promotions
Advertising is a great importance in our world of competition. It is important for both seller and buyer. Even the government cannot do without it. Advertisement tells about qualities of each brand and we can easily select. While, promotions as a marketing tactic can be a contest, trials, give-always, rebates, point of purchase displays, etc. Sales promotion is part of the marketing mix. Typically promotions are only one part of the marketing program to sell a product or service. The importance of promotions is in increasing demand for the product or service in the marketplace.
ACTION PLANS
Action plans typically includes deciding who is going to do what and by when and in what order for the organization to reach its strategic goals. The design and implementation of the action planning depend on the nature and needs of the organization.
Activities
Objectives
Person/s Involved
A companywide effort to continuously improve the ways of people, machines, and systems accomplish work such as surveys, feedback forms, training and programs for employees
It is designed to meet the needs of internal and external customers
Increase customer satisfaction
To improve their knowledge, skills and abilities
Human Resource Department
Research and Development Department
Partnership, merger, and acquisition with large scale organizations
To eliminate other competitors
To hold a greater share
Human Resource Department
Provide advertisement on trendy markets today such as internet and TV commercials
To increase brand awareness
To attract customers
Marketing Department
Giving rewards program for BDO cardholders
To get the customers loyalty
Sales
Department
Giving rewards and promotions to employees
To promote employee relations
Human Resource Department
Financial Implications
Through effective advertisement and sales promotion, there will be an increase in brand awareness, potential customers, and an increase of sales.
With continuously improving the product and services of BDO, by providing training and programs for employees and also giving promotions and rewards for them as well as develop a rewards program for account users, there will be an increase of customer satisfaction
Bibliography
http://www.mba-tutorials.com/strategy/522-market-penetration-strategy.html
http://www.helium.com/knowledge/293796-why-employees-are-important-to-a-business
http://www.beginnermoneyinvesting.com/html/the_importance_of_investment.htm
http://www.blurtit.com/q399143.html
http://answers.yahoo.com/question/index?qid=20080728191548AAxEJ51
http://managementhelp.org/plan_dec/str_plan/actions.htm
