Submitted By:

Matienzo, Millicent S.J.

4ALM

Submitted To:
Prof. Ricardo Palo

San Beda College Manila

March 5, 2015

EXECUTIVE SUMMARY
Banco de Oro Unibank, Inc. or BDO is a universal bank in the Philippines
involved Finance and Insurance industry and provides financial services that extends not
only to personal banking, but also corporate banking. It is owned by the SM Group of
Companies one of the countrys largest conglomerates, which is in turn owned by
Henry Sy. BDO is now the largest bank in the Philippines in terms of assets, loans and
deposits. Its market niche touches the corporate market, the middle market banking
segment and the retail or consumer market.
In the conducted external analysis of BDO (4.3.1.) and its competitor analysis
(4.2.2.), it is shown that BDOs is equipped in taking effective advantage of opportunities
and minimizing threats. The analysis show that there are opportunities present for BDO
to take, such that of the rise in demand for mobile banking applications, increase in
automotive loans and the unification into a single market come the 2015 ASEAN
Economic Integration which pose as challenges that BDO should overcome. However,
there are also threats that BDO should minimize. In the internal analysis (5.8) and the
financial analysis (5.3), it was shown that BDO is in a position that is proactively
upgrading and striving to cater to its clients and providing quality services. It shows the
strengths of BDO as a business, which should be utilized more in answer to
opportunities. Meanwhile, such analysis also showed BDOs weaknesses that should be
mitigated. it was also found that BDO is in a position to aggressively take on the
challenges posed by the opportunities stated. In doing so, the objectives for BDO
formulated were to increase in net income while maintaining expense, increase in
market share, increase in presence in rural areas and to invest more in technology. In
order to achieve such, based on the strategy formulation matrices (6.1. to 6.7.), it was
recommended for BDO to pursue intensive strategies which are that of product
development and market penetration and also horizontal integration.

I. INTRODUCTION
1. Nature of Business
Banco de Oro Unibank, Inc. or BDO is a universal bank that is involved in
providing financials services to individuals and corporate markets and specializes in
lending, deposit-taking, Foreign, Exchange, brokering, trust and investments, credit
cards, corporate cash management and remittances in the Philippines. BDO belongs to
the SM Group of Companies, one of the country's largest conglomerates, with
businesses spanning between retail, mall operations, property development, and
financial services owned by tycoon Henry Sy.
BDO provides services for both individuals and corporations. As for individuals or
also called as personal banking, it offers eBanking; with services such as phone
banking, ATM banking, online banking and mobile banking, trust and investments,
account management, credit card management, loans, remittances and insurance. BDO
also offers services to corporations such as cash management services, trade facilities,
investment banking, treasury, foreign exchange, investment advisory services,
insurance, leasing and financing, trust and investments and corporate credit card
management.

2. BDOs History
BDO had its beginnings on January 2, 1968 as it started as a thrift bank having
the name Acme Savings Bank while having only two branches in Metro Manila. In
November of 1976, Acme was acquired by Henry Sy and was renamed as Banco de Oro
Savings and Mortgage Bank.
In December of 1994, Banco de Oro became a Commercial Bank, and to portray
its new status as a bank, it was renamed Banco de Oro Commercial Bank, and in
September of 1996, BDO became a universal bank, which made BDO to change its
name to its current, Banco de Oro Universal Bank.
BDO is one of the banks owned by a Chinese-Filipino in the Philippines.
Examples of other include Metrobank and Chinabank. In order to remain competitive and
strengthen itself through vision, innovation and value, in 1997, BDO became involved in
insurance services by establishing a subsidiary called BDO Insurance Broker, thus
making it a, bancassurance firm.
In 1999, it expanded its insurance through partnership with Assicurazoni Generali
S.P.A., one of the worlds largest insurance firms, and Jerneh Asia Berhad, a member of
the Kuok Group in Malaysia. In March 2000, BDO partnered up with its insurance
affiliates, Generali Pilipinas Life Assurance Company and Generali Pilipinas Insurance
Company.
On June 15, 2001, BDO merged with Dao Heng Banks Philippine subsidiary.
The merger increased the number of BDOs branches from 108 branches prior to the
merger to 120 after the merger. BDOs expansion through its increasing number of
branches had become one of BDOs competitive advantages, and as it reached out to its
increasing number of depositors. The bank further expanded in April 2005, United
Overseas Bank sold 66 out of 67 of its Philippine subsidiarys branches to BDO, and as
it set to rationalize its operation from retail to wholesale banking, BDO, on March 22,

2006, after all United Overseas Bank completed its integration into BDO network, it
increased the number of its BDO branches to 220.
On August 5, 2005, BDO and SM investments, bought 24.76% of the shares of
Equitable PCI bank, the Philippines third-largest bank, and 10% of an Equitable PCI
affiliate, Equitable Card Network, one of the Philippines largest credit card issuers, from
the Go Family. On December 27, 2006 both Banco de Oro Universal Bank and Equitable
bank had agreed to merge, thus making the Banco de Oro-Equitable PCI bank. As of
February 2007, it became known as Banco de Oro Unibank, Inc.
As of March 31, 2014, BDO is the countrys largest bank in terms of total
resources, capital, customer loans, total deposits, and assets under management and
has about 23,600 employees. In December 2014, BDO had acquired Mindanaos largest
rural bank.

II.

RESEARCH DESIGN AND METHODOLOGY

In order to accomplish this paper the data requirements include that of financial
statements, operational highlights, financial projections and recent surveys. Industry
studies, trends, economic conditions are also required regarding the industry analysis.
To achieve the comparison between the subject company and its competitors,
information and background regarding top competitors are sought. Lastly, to complete
the paper, internal information on BDO is also gathered.
Sources are gathered mostly from BDOs website and annual reports.
Correspondence through phone calls and emails with BDO representatives were also
used. Other secondary sources were also gathered from the National Statistics
Coordination Board, National Statistics Office, National Economic Development
Authority, World Bank, Bangko Sentral ng Pilipinas websites.
The financials for the years 2014 to 2016 are merely projected and should not be
taken as actual statements of BDO. Although this paper is submitted in 2015, it was
written in 2014, thus the study was based on 2013 information. It is also assumed that,
for financial projections, the tax treatment were the same and that there were no
dividend payments during the years projected. There are no direct citations found
throughout the paper for consistency purposes in the format. However, all the references
used are found in the bibliography. This is so as not to constitute as plagiarism.
It should be noted further this paper is limited only Banco de Oro Unibank, Inc.
who operates in the Philippines, however it must be said that there are BDO branches
abroad. The paper is focused mainly on industries serving in the financial and insurance
sector and that the study is for studying the performance of the company and its
strategic position.

III. COMPANYS MISSION AND VISION

3.1 Corporate Mission-Vision Statement

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.

3.2. Evaluation of the Mission-Vision Statement

The vision statement was found to be as what answers the question What do
we want to become. BDO answered such question almost as though immediately
because the answer to such is found at the very beginning of the statement. BDO states
that it desires To be the preferred bank in every market we serve... Upon first glance,
the vision of the company is evidently clear, thus making it a viable mission-vision
statement.
The mission statement, it is evaluated based on Fred Davids Framework and
Characteristics of a Mission Statement. BDOS mission statement is not lengthy in
character as it has fifty five words which follows that such statements are to be only up
to two hundred and fifty words in length. Moreover, the mission statement is broken
down to be able to fully comprehend and evaluate the mission statement.

COMPONENTS
1. Customers

PRESENC
E
Yes

SPECIFIC STATEMENT
In the phrase in every market we serve
implies that BDOs pool of customers is
large and diverse seeing as that it uses

the markets instead of customers. It may

be implied that these markets are BDOs
customers who are willing to transact and
invest with BDO as their preferred banking
institution.
2. Products Or Services

Yes

With

the

statement

consistently

providing innovative products and flawless

delivery of services, BDO aims to
provide its customers with products that is
adaptive to the needs of its clients and as
well

as

with

the

advancement

of

technology. More so, BDO aims to deliver

such products with its swift and efficient
service. The statement is concise as to
mentioning its products and services.
3. Markets

Yes

BDO mentions the statement proactively

reinventing ourselves to meet market
demands. It states its aim to satisfy its
clients through reinvention and innovation.
It

is evidently clear

that

BDO

has

addressed its plans to meet market

demands.
4. Technology

No

The mission-vision statement made no

mention of how BDO will make use of
technology as to improve their business. It
makes it unclear to clients on the bank will

be catering to the needs and demands of

the clients.
5. Concern For Survival,
Growth And Profitability

Yes

With the phrase creating shareholders

value through superior returns implies
that BDO is not only concerned with
maximizing

profits

but

also

with

maximizing their shareholders wealth.

They

are concerned with more than

gaining customers. BDO is also engaged

in retaining and satisfying their clients.
Moreover, striving to be always better
than what we are today tomorrow
provides BDOs concern for its growth.

6. Philosophy

Yes

Cultivating in our people a sense of pride

and

ownership

show

that

BDO

is

concerned with its shareholders and

employees . It also gives its people a
sense of belongingness in the company.
BDO instills in its people pride in being
part of the company and its successes.
Such ensures that people will desire to
remain and patronize the company.
7. Self-Concept

Yes

BDO thinks of itself as a preferred banking

institution for its markets and has its sights

set on becoming as such to all markets

through striving to be always better
than what we are today tomorrow. This
implies that BDO is committed to progress
and its clients.
8. Concern For Public
Image

Yes

There was a of BDOs concern for its

public image other than in its aim for
being the preferred banking institute in
every market.... However, BDO has a
separate

corporate

sustainability

statement and its environmental concerns.

9.
Concern
Employees

For

Yes

BDO shows its concern for its employees

through cultivating in our people a
sense of pride and ownership. BDO
wants its employees to be proud of their
membership in the company and being
part

of

its

accomplishments

and

milestones.

Overall, BDOs mission-vision statements gives a clear picture of what it aims to

be as a company. However, there are factors from the Fred Davids Framework that are
absent in the companys statement, but nonetheless, BDOs mission-vision statement is
a useful tool to map out BDOs plans for its business and clients as well as a tool for
clients to briefly glimpse of what BDO is.

3.3. Recommendations on Communicating the Mission And Vision Statement

The mission and vision statements are important for establishing the Banks
identity as well as communicating to its stakeholders the nature of its business. In order
to do this, BDOs needs to go beyond putting up its statements inside company
headquarters and bank branches. Such statements instilled in the hearts of its
employees which may result to increased employee productivity and deep sense of
belongingness. This will lead to a contribution to an overall success.

As to the general public and its customers, as well as potential investors, local or
foreign, BDOs employees must show the embodiment of these statements. They may
show success stories of BDO personnel in application of their mission and vision
statements. This is aside from the common practice of posting its mission and vision
statements in ATM screens and bank branches. Generally, it needs to consistent in the
companys behavior, statements and actions, and must bridge that gap between
employees to employees, employees to top management, the corporation to its
customer and collectively support the vision mission to the reality.

IV. EXTERNAL ANALYSIS

4.1. General Environment
4.1.1. Political, Legal and Government Aspects

According to Republic Act No. 8791 or the General Banking Law of 2000,
in its Declaration of Policy, it recognizes the fiduciary nature of banking that requires the
highest standards of integrity and performance. This is why it is upon the State to
promote and maintain a stable and efficient banking and financial system by creating
and upholding laws not only intended for the supervision of banking and financial
institutions but also for the protection and benefit of the clients of such banks and
financial institutions.
The banking industry is an industry that is imbued with public interest that
requires itself to be regulated by the government. Mainly, the General Banking Act of
2000 governs all banking institutions through the Bangko Sentral ng Pilipinas and its
Monetary Board. It is imposed in the Monetary Board, the governance, supervision,
authority over such banking and financial institutions as well as to provide policy
direction. Aside from BSP Circulars, the banking industry is protected by the Philippine
Deposit Insurance Corporation. Being an industry generally involved with money,
capitalization requirements are specific and must strictly be followed. As well as
managerial requirements especially for universal and commercial banks.
4.1.2. Economic Developments
In 2013, the Philippines had earned roughly P11,546,104,000,000 as its
Gross Domestic Product according to National Statistics Coordination Board. From the
year 2000, the countrys GDP continually increases. It is in 2013 that the Philippine
Economy expanded by 7.2%. There were boosts in several sectors, especially in the
service sector. However, there were also slow downs in certain sectors such as imports
and construction. Also contributing to these slow downs are the impact of typhoons that
hit the country, which may have reduced the GDP growth.

Philippine financial markets experienced large volatilities as investors

responded to the tapering of the United States stimulus program, wherein stock and
bond prices fell significantly. However, monetary and fiscal policy supported growth.
While government finances continue to improve due to tax improvements and efficient
spending. On the other hand, remittances and export of services were more or less
unaffected by the slow growth in advanced economies. Cash remittances increased by
6.4% in the previous year, along with the increasing demand for skilled Filipino workers.
The services sector remained the main source of growth which expanded
by 7.1%. This explains the resilient growth of financial intermediation and other business
activities. Manufacturing grew by 10.5% due to the strong domestic demand for food,
chemical products, communication products, basic metals, etc. While agriculture barely
contributed to the growth as several decline in the production of corn, coconut,
sugarcane and banana occurred.
One major economic change to be seen is the preparation and the actual
integration in 2015 of the ASEAN community. This movement unifies the markets of
Southeast Asian nations into one. Aligning each member country to another through
political and economic measures. The banking industry is one of the sectors that is
predicted to be affected by such integration as the Philippines opens its doors to foreign
investors. However, foreign competitors will be on the prowl as well. Nonetheless, there
has been no indication regarding a change the General Banking Law and the guidelines
and requirements in establishing banks in the Philippines, thus saving the local banking
industry from penetration.
4.1.3. Socio-cultural, Demographic, Lifestyle Changes
The Philippines is a society that is confronted by many socio-cultural

challenges, such a rapid population growth, ethnic, religious and poverty problems. The
Philippines, being under the rule of Western powers for centuries, has left a mark which
had become a part of the Filipino identity. Over the years, the country had been witness
to many cultural and lifestyle trends that have influenced the banking industry.
The Philippines has a dense population but with an uneven distribution. It
has an estimated population of 101,112,799 Million and fifty percent of which is urban,
especially in Metro Manila, which has the highest density. For the last quarter of 2014, it
was recorded that the Philippines had a 6% unemployment rate, making the employment
rate at 94%. With, the large percentage of Filipinos who are employed, this contribute to
the growth of the banking industry. Their profit indicates the ability to engaged in banking
and financial activities.
Lifestyle and business trends affect the banking industry. Aside from
young adults to the elderly, banking trends for the young have been prevalent recently.
Junior savings accounts, jumpstart accounts and other savings plan for children. Also,
an increase in the number of universities and colleges partner up with banks in the
collection process of tuition fees.
4.1.4. Technological Developments
The banking industry is not easily swayed by technological trends,
however, when such a trend does, it leaves a huge impact. Banks are developing new
branch formats that consist of sturdier alternatives to the traditional bank branch.
Banking customers also now handle their banking transactions via smartphones and
tablets than through other channels. This makes the mobile banking channel a key
element in earning customer loyalty. Mobile banking is coupled with transactions with
other banking channels so as to deliver seamless service. There was a reported rise in

the use of a banks mobile banking application by 19% in the previous year. Despite the
large patronage of mobile banking, there is still a decline in the usage of bank branches,
ATMs and even online banking.
However, there is an increase in omnichannel consumers. Omnichannel
means accessing with more than one banking channels. Despite mobile banking rising
to mass appeal, clients still prefer combining digital and physical channels in banking.
Bain and Company, Inc. sees that this is critical for effective service, marketing and
selling, because customers expect to be able to hop from one channel to another. Said
company also provided that banks that pull ahead in loyalty by investing heavily in
mobile to better experience will reap financial benefits. While banks that lag investing in
such advantage will miss reaping the financial benefits as well as fall behind in
investment.
Behind this advantage, however, comes a small problem: hidden
defection. These small hidden defects that result to lesser customer satisfaction which
may result to bank switching. Banks that fail to respond against these defects risk profits.
Aside from defection, which is an entirely internal concern, there also exist a threat of
security breaches and attacks. Several causes of which is the crumbling personal
relationships between managers and customers and a reputation for security, also the
increase of digital assets in the banking and financial institutions.
4.2. Industry and Competitor Analysis
4.2.1. Porters Five Forces Model
PORTERS FIVE FORCES MODEL
Rivalry among competitors
High
Threat of substitutes
Medium
Threat of new entrants
Low

Bargaining power of suppliers

Bargaining power of consumers

Low
Medium

Rivalry Among Competitors

The banking industry, being as it is, an industry that is difficult to penetrate
as the government regulates the establishment and organization of banks in the country.
This implies that there are not so many banks operating in the Philippines. Competition
in the banking industry is very tight.
As for rivalry among competitors based on the differentiation of products,
rivalry is also tight. Most banks offer the same financial services; lending, credit card
services, foreign exchange, insurance, remittances, etc. Most banks usually differ in its
rates and on the manner of delivery, nonetheless, services offered are relatively same.
With respect to strategies, the competition is also high. Each bank has its own strategy
to outperform another.
Threat of Substitutes
Considering the difficulty in entering the banking industry and the
competitive rates and charges, there remains a possibility of substitutes to cater clients
who are not able to transact with banks. The business of lending extends to pawnshops
and lending houses which may be a become a substitute. Even pawnshops now have
remittances services. Nonetheless, the threats are still relatively low to medium because
not all banking services can be substituted by other channels such as the credit card
services. Although the switching from a primary banks services to avail of another is
another kind of threat of substitute is due to the differences in service rates and interests
caused by the competitive pressure brought about the tight competition in the banking
industry.

Threat of New Entrants

Being imbued with public interest and its nature being fiduciary, the
banking industry requires itself to be regulated. The law provides for strict compliance in
the requirements for the establishment of banks in the Philippines. Capitalization
requirements is relatively high so as to keep banks liquid in its operations. Such
requirement is necessary so as to protect to who invest and transact with banks and so
as to prevent frequent cessation of banks. As for brand loyalty, most customers prefer
more established banks which have proven themselves through the test of time.
There is also the scarcity of important resources. Capital is not the only
element that gives banks the ability to operate. Technology and qualified and expert
staffing are also important. High switching costs for customers especially in terms of long
term contracts and transactions hinders the threat of new banking institutions.
Considering these factors, it is easily said that the threat of new entrants is low.
Bargaining Power of Suppliers
Such bargaining power is low. The services provided by the banking
industry cannot be easily substituted. While differentiation of services are also limited.
There is also the possibility of forward integration. Taking all these factors it shows that
suppliers have little power the banking industry. Banks high capitalization gives them the
ability or at least the possibility of control over its suppliers.
Bargaining Power of Consumers
The consumers bargaining power is a major force which affects the level
of competition in the banking industry. However, their bargaining power is only medium.
There may be stiff competition in banks, nonetheless, their services cannot be easily
replaced or substituted. Consumers do not have much power in controlling banks and

their services. Moreover, the governments regulation also hinders banking in constantly
changing and updating their services without compliance with the requirements.

BDO

BPI

COMPETITORS
METROBANK

Critical Success
Weighted Rate
WS
Rate
WS
Rate
WS
Factors
Financial Position
.30
4
1.20 4
1.20
4
1.20
Customer Loyalty
.12
3
.36
3
.36
3
.36
Customer Service
.22
4
.88
4
.88
3
.66
Market Share
.16
4
.64
3
.48
4
.64
Innovation
.08
4
.32
4
.32
2
.16
Management
.12
4
.48
4
.48
4
.48
TOTAL
1.00
3.88
3.72
3.50
Ratings: 4 = Major strength, 3 = Minor strength, 2 = Minor weakness, 1 = Major
weakness
4.2.2. Competitive Profile Matrix

Metropolitan Bank & Trust Co. was incorporated on September 5, 1962 by a

group of Filipino businessmen principally to provide financial services to the FilipinoChinese community. It is one of the largest banking and financial institutions in the
Philippines. It is engaged in banking, financing, leasing, real estate and stock brokering
services. It is a multi-awarded bank with a solid track record for over fifty years. The
bank offers its full range of services to large local and multinational corporations, middle
market, small market entrepreneurs, high net worth individuals and retailers.

Bank of the Philippine Islands, Inc. is a commercial banking institution in the

Philippines. BPI offers a wide range of services such as corporate banking, insurance,
securities distribution, consumer banking and lending and foreign exchange. The bank is
also known as the oldest bank in Southeast Asia. BPI is also a high-rated and multiawarded bank.

The Banking industry generally considers financial position, customer loyalty,

customer service, market share, innovation and management. Financial position is given
the heaviest weight seeing as that the banking industry is primarily in the business of
circulating, saving, lending, investing money and securities. A stable financial position of
a bank is a must.

Banks are regulated by the Government through the Bangko Sentral ng Pilipinas
whose powers emanate from the General Banking Act of 2000. The Act mandates that
establishing universal and commercial banks require high capitalization. With such
capitalization, equates to profit. BDO, BPI and MTC are ranked equally based on their
respective profits for the previous year which is roughly 18,000-22,000 (in Million PHP).
Moreover, the financial position of a bank is what appeals to clients usually when
choosing, because such financial position, will in turn, affect the banks capability to
serve its clients.

Customer service received the second heaviest weight seeing as that the
services provided by the bank attracts the clients. These banking and financial services
are the lifeblood of the bank, without such services, there will be no business - no
service to be acquired by the clients. A bank with a wide range of services is preferable
for clients to so as to save the hassle of transacting with different banks to accommodate
their needs. BDO and BPI, with such wide range of services and, further, the
accessibility of such services play as a major strength against its competitors. Whereas,
MTC has lesser services and lesser accessibility than both BDO and BPI.

Bank assets are also critical success factors. BDO and MTCs market share are
relatively higher than that of BPIs thus receiving a higher rating. Such ranking
contemplated the banks receivables and deposits.

Market Share, 2013

COMPETITORS
METROBANK

BDO

BPI

P4,919

P3,404

P3,466
In Billion PHP

Customer loyalty and management are given similar weight seeing that the way
how the bank is being managed affects its clients. Client satisfaction with the banks
services and its management contributes to the clients retention and loyalty with the
bank. All three banks received equal ratings for both factors.

Lastly, innovation in the banking industry is a critical success factor due to the
fact that technology has been integrated in banking and financing solutions such as
mobile and online banking. Further innovations that suit and adapt to social trends and
clients needs also contribute to client retention. BDO and BPI are rated higher than MTC

considering their services such as e-Banking, mobile banking, online banking and phone
banking; and remittance services.

4.3. Summary and Conclusion

4.3.1. External Factor Evaluation Matrix
KEY EXTERNAL FACTORS

WEIGHT

RATING

WEIGHTED SCORE

Rise in demand for mobile banking

applications
Increase in loyal Omnichannel
customers

.20

.80

.12

.48

Harnessing mergers and acquisitions

to access the talents needed

.03

.09

Boosts in automotive loans

.05

.02

Unification into a single market come

2015 ASEAN Economic Integration

.20

.60

Increase in strength and profits from

remittances from OFWs

.10

.30

.05

.02

.03

.09

.07

.21

OPPORTUNITIES

THREATS

Bank switching due to hidden

defection

Decrease in online, ATM and branch

usage due to rise in mobile
applications.

Possibility of crumbling reputation for

security and relationships between
managers and customers

Vulnerability to security breaches and

attacks due to increase in digital
assets in banking and financial
institutions

TOTAL

.15

.60

1.00

3.11

Ratings: 4=Superior, 3=Above average, 2=Average, 1=Below Average

4.3.2. External Factor Evaluation Analysis

The unification and integration of markets in the Southeast Asian Region
in the 2015 Economic Integration gives the banking industry a platform and motive for
product and market development. Seeing as there will be new markets, a development
of products is an opportunity for gaining potential foreign customers as well as to adapt
to future trends and remain competitive with other banks come the integration. The
change is necessary, thus, development is relatively possible. This is why Opportunity 5
has the greatest weight in the matrix.

Opportunity 1 has been given the same great weight in the matrix. Aside
from the future integration, the adaptation of the people of mobile banking continues to
rise. Banking customers now handle more of their banking interactions, on average, via
smartphones and tablets than through any other channel and the mobile channel has
become a key element in the bid to earn customer loyalty as Bain and Company, Inc.
reports. In line with this, it gives BDO the opportunity to make most of the new mobile
capabilities, especially when not all banks are not capable of such services yet.

Omnichannel means accessing with more than one banking channel.

Despite mobile banking rising to mass appeal, clients still prefer combining digital and
physical channels in banking. Bain and Company, Inc. sees that this is critical for
effective service, marketing and selling, because customers expect to be able to switch
from one channel to another. It gives BDO the chance to access more clients by
focusing on Omnichannel customers, thus it is given the second heaviest weight in the
matrix.
The

Philippine

economic

condition

also

had

provided

probable

opportunities to the banking industry. As the service sector remains strong, banks and its
services continue to remain strong. Moreover, the increase in demand for skilled Filipino
workers abroad in turn give an increase in remittances.

This rise in mobile banking is also susceptible to threats. There is this

hidden defection of customers who go to another provider for additional products. As
well as dependence on mobile banking reduces customer and bank managers
interaction and relationship. ATM usage will also be threatened to decrease, as increase
in mobile banking continues. Most of these threats are interrelated that is why their
weights are also in close ranking with the others. However, the greatest weight in threats
is given to Threat 5, wherein the scope of mobile banking continuous widening, the
susceptibility of the banks information and client database to security breaches also
increased.

V. COMPANY ANALYSIS
5.1. Management
There are twelve duly elected Board of Directors for BDO. Henry Sy, Sr., aged
90, is BDOs Chairman Emeritus. He is the Founder and Chairman of SM Group of
Companies. His pioneering of the SM Malls, Shoemart Department Store and
Supermarket, earned him the title of the Philippines Retail King. He also become known
as the richest man in the Philippines.
Teresita T. Sy-Coson, aged 60, is the current Chairperson of BDO. Ms. SyCoson is also the Vice-Chairperson of SM Investments Corporation. Likewise, she also
holds other management positions in BDO affiliates and in the SM Group.
Jesus A. Jacinto, Jr., aged 66, serves as the Vice Chairman of the Board of
BDO and is concurrently the Chairman and President of BDO Insurance Brokers, Inc.
He also holds several key positions is the Banking industry, such as CityTrust Banking
and Citibank N.A.
Christopher A. Bell-Knight, aged 69, is the Director of BDO. He previously
served as BDOs Adviser for several years. He was the Vice President and Country

Head of The Bank of Nova Scotia. Mr. Bell-Knight had over four decades of experience
in the banking industry and a fourth of which was spent in credit and marketing.
Atty. Jose F. Buenaventura, aged 79, is an independent director of BDO. He
also has been a Senior Partner of the Romulo, Mabanta, Buenaventura, Sayoc & De los
Angeles Law Firm. Likewise, he serves as Corporate Secretary of Country Club
Development Corp., The Country Club, Inc. and Peter Paul Philippine Corp., and is the
Assistant Corporate Secretary of Johnson & Johnson Philippines, Inc.
Jones M. Castro, Jr., aged 65, serves as an independent director of BDO. He
served as Area Head for South and Southeast Asia of the Wells Fargo Bank, San
Francisco from 2009 to 2011. Mr. Castro likewise had over four decades of experience in
the Banking industry.
Chai Hong Cheo, aged 61, serves as one of BDOs directors. He also serves as
Managing Director of Group Credit (Middle Market) & Corporate Planning & Strategy at
United Overseas Bank Ltd. He also has over thirty years of experience in corporate
banking and finance.
Atty. Antonio C. Pacis, aged 73, is one of BDOs directors. He also serves as
Managing Partner of Pacis & Reyes Attorneys. Mr. Pacis also serves as a Corporate
Secretary of EBC Srategic holdings Inc., Armstrong securities Inc. and Paluwagan ng
Bayan Savings Bank.
Josefina N. Tan, aged 68, is one of BDOs directors. Ms. Tan serves as a
Secretary and Treasurer of PP & P Insurance Underwriter and East Star Realty Corp.
Ms. Tan serves as a Secretary of Precy Beauty Centre. She also serves as Vice
Chairman of the Board of Trustees of Miriam College.
Nestor V. Tan, aged 56, serves as a director of BDO and its President and Chief
Executive Officer. He was associated with Bankers Trust Company in New York, as Vice
President and the Barclays Group in New York and London, where he served as

Planning Director and Head of Strategic Planning for Corporate and Institutional
Services Group.
Jimmy T. Tang, aged 78, is one of BDOs independent directors. Mr. Tang serves
as the Chairman and President of the Avesco Group of Companies and as the President
of the Federation of Filipino-Chinese Chamber of Commerce and Industry. He also
serves as the President of Avesco Marketing Corporation.
Gilberto C. Teodoro, Jr., aged 49, is also one of BDOs independent directors.
He serves as a member of the Board of Directors of Philippine Geothermal Production
Company, Incorporated, Canlubang Sugar Estate and member of the Board or Advisors
of Seawood Resources, Incorporated. He serves as an Independent Director of BDO
Unibank, Inc. Mr. Teodoro served as Secretary of National Defense from 2007 to 2009
and was a Member of the Philippine House of Representatives from 1998 to 2007.

5.2. Marketing
Banco de Oros marketing division is headed by Mr. Rafael G. Besa, who is
Senior Vice President and Group head of Marketing Communications for Banco De Oro.
His division is made up of several marketing communicators and marketing
communication managers who are practicing advertising, branding, direct marketing,
marketing promotions and public relations for the BDO.

BDOs marketing unit is tasked with broadening its market through commercials,
advertising and promotions by showing BDOs different services and products as well as
its promotional offers. It also branches out its advertising by teaming up with other BDO
affiliates like the SM Group.

5.3. Finance and Accounting

Financial Performance Indicators

Return on Average
Equity
Return on Average
Common Equity
Return on Average
Assets
Net Interest Margin
Capital
Adequacy
Ratio

2013

2012

2011

14.2%

11.3%

11.4%

14.5%

11.5%

11.7%

1.6%

1.3%

1.0%

3.2%

3.4%

3.5%

15.5%

19.2%

15.8%

2012
1,241.5
14.5
39.5
154.4

2011
1,097.3
10.5
36.3
97.0

Financial Highlights (in Billion PHP)

Resources
Net Profit
Operating Expenses
Equity

2013
1,672.8
22.6
43.3
164.4

Based on the table above, it shows steady 56% growth for BDO since 2011 in
terms of profit. The lending the business was one of its strongest points both in the large
corporate, middle market and small and medium enterprise segments as well as in the
personal loan sector, more particularly with automotive loans. It can also be noted that
there was a decrease in operating expense for BDO since 2011.
It was mentioned in one of BDOs reports that there was a seesaw ride in
equities, nevertheless, there was a huge increase in equity from 2011 to 2012 and
continues to increase in 2013.

5.4. Production and Operations

BDO is a full-service universal bank established and operating in the Philippines.
It provides a wide range of industry-leading products and services including Lending,

Deposit-taking, Foreign Exchange, Brokering, Trust and Investments, Credit Cards,

Corporate Cash Management and Remittances in the Philippines. Dennis Velasquez is
the Executive Vice President and Head of Central Operations. The bank through its
operations satisfying customers remain at the front of establishing high standards as a
sales and service-oriented, customer-focused force. BDOs banking services in the
Philippines are either for Personal Banking and Business (Corporate) Banking.

PERSONAL
eBanking
o Online, Mobile, ATM and
Phone Banking Options
Savings, Checking Accounts and
Time Deposits
Trusts and Investments
Loans
o Personal, Home, Auto and
Business Loans
Credit Cards
Remittances and Insurance
Private
Bank
and
Wealth
Management Services

BUSINESS
Cash Management Services
Project Finance, Working Capital
and Small Business Loans
Foreign Exchange and Trade
Facilities
o Trade Settlement, Letters of
Credit, Trust Receipts and
Export Bill Purchases
Investment Banking
Business Insurance
Trusts and Investments
Leasing and Financing
Corporate Credit Cards and
Merchant Accreditation

Aside from conducting operations in the Philippines, BDO also established itself
in Hong Kong and keeps offices in other countries such as United States of America,
England, Germany, New Zealand and Japan. Anthony Chua serves as BDOs Executive
Vice President and Head for Global Operations. While Lorna Tan serves as one of
BDOs Senior Vice Presidents and as Chief Executive of BDO Hong Kong branch. The
BDO branch in Hong Kong offers Deposits for Savings and Checking Accounts in US

Dollars and HK Dollars, Deposit Related Services, Commercial and Industrial Loans,
Trade Services, Debit Cards and Remittance Services.

5.5. Research and Development

Research and Development is essential in every company despites its high
rankings. It shows that such companies still strives for improvement. The banking
industrys trends and development is not so much as fast-paced seeing as it is a strict
industry regulated by the State. Nonetheless, the banking industry still develops over
time.
For BDO to cope up with trends in the industry and as well as to better serve its
clients it has different subsectors and group leaders for development. Enrico Hernandez
is a Senior Vice President and Head of Information Technology Development. Belinda
Fernandez is another Senior Vice President and Head of the Treasury Group for Product
Development. Maria Lourdes de Vera, another Senior Vice President and Head of Trusts
and Investments Group for Product and Market Development. Lastly, Noel Andrada is
another Senior Vice President and Head of Trusts and Investments Group for Business
Development.

5.6. Information Technology (MIS)

Technology is at the core almost all developments in industries across the globe,
the banking industry is no exception. A well-maintained Management

Information

System and IT Department is needed. Ricardo Martin is the Head of the Information
Technology Group. The department is tasked in controlling information online, especially
confidential client information and database. It also goes in hand with the Marketing
Group so as to establish its presence on the Web and for disseminating information
across BDO groups.

In its IT operations, BDO has implemented systems that make branch-based and
electronic services available to clients for a reasonable cost and for longer periods of
time. BDO puts itself if not ahead or at least at par with the local banking industry.

5.7. Human Resource

At the helm of every company is its employees and personnel. The Human
Resource group is tasked the hiring and firing of employees, as well as compensation,
performance evaluation, settlement of employee related conflicts and other matters
related to the banks employees. Evelyn Salagubang is a Senior Vice President and
Head of Human Resources Group.

5.8. Internal Factor Evaluation Matrix

KEY INTERNAL FACTORS

WEIGHT

RATING

WEIGHTED SCORE

.15

.45

.06

.18

.08

.24

.12

.48

.25

1.00

.08

.32

.10

.10

STRENGHTS

Experienced management

International presence

Up-to-date electronic banking

services

Strong support units in I.T. and R&D

High capitalization

Skilled workforce

WEAKNESS

Security in data assets

Less branches in Rural Areas

Decrease in Capital Adequacy Ratio

in 2013

Slow Customer Service

TOTAL

.08

.16

.04

.04

.04

.08

1.00

3.05

Ratings: 4=Major Strength, 3=Minor Strength, 2=Minor Weakness, 1=Major Weakness

5.9. Internal Factor Evaluation Analysis

The Internal Factor Evaluation Matrix (IFE) provides BDOs strengths and
weakness which are rated whether such factors are major or minor strengths and
weaknesses. The rate of four suggests a major strength while three a minor strength. As
for weaknesses, a rate of one suggests a major weakness while the rate of two implies a
minor weakness.
According to the IFE Matrix, BDO has three major strengths, which are its strong
support units, high capitalization and experienced management. Based on BDOs annual
reports and financial statements, the firms financial performance continues to improve
over the years such as the 8.1% increase in Net Profits from 2012 to 2013 as well as its
increased resources from P1,097.3 Billion in 2011 to P1,672.8 Billion in 2013.
BDO boasts its IT Department as one of its support units in providing for better
service for longer periods of time to consumers. While Security, being a major
weakness, BDO compensates through its Risk Management Group to address situations
on managing operational, credit and reputational risks. It also addressed the security

concern through investing in backup systems that will allow operations to continue with
limited disruption to customer services.
Aside from its major strengths, BDOs experienced management, upgraded
electronic banking services and its international presence are also considered as its
minor strengths. Given the fact the BDO is managed by one of the most successful
business owners and as well as experienced international bankers makes BDO a wellsupervised and managed banking and financial institution. Moreover, its upgraded
electronic banking services puts BDO at least a notch higher over its competitors who
offer no such service or an underdeveloped electronic banking service. It puts BDO in a
competitive stand over other banks. BDOs presence in Hong Kong and in other
international offices makes its banking services available to a wider scope of clients,
thus providing more service which may equal to more profit. As well as its ties with
international companies makes BDO open to more opportunities.
Having mentioned security as one of BDOs weaknesses, there is also BDOs
weak presence in rural areas, slow customer service and a decrease in capital adequacy
ratio. A weak presence in rural areas may show that its marketing strategy is either
ineffective or unfocused. BDO has less branches in rural areas which make its services
unavailable in these places.
Capital adequacy ratio is that which determines the banks capacity to meet the
time liabilities and other risks. A decreased capital adequacy ratio may show a
diminishing ability of BDO to meets its liabilities and risks. However, it is not at an
alarming rate of decrease, nevertheless, such decrease must be noted.
VI. STRATEGY FORMULATION
6.1. Strengths, Weaknesses, Opportunities and Threats (SWOT) Matrix

SWOT

STRENGTHS
(S1) Experienced
management

WEAKNESSES
(W1) Security in data
assets

MATRIX

OPPORTUNITIES
(O1) Rise in demand for
mobile banking applications
(O2) Increase in loyal
omnichannel customers
(O3) Harnessing mergers
and acquisition to access
the talents needed
(O4) Boosts in automotive
loans
(O5) Unification into a
single market come 2015
ASEAN Economic
Integration
(O6) Increase in strength
and profits from remittances
from OFWS
THREATS
(T1) Bank switching due to
hidden defection
(T2) Decrease in online,
ATM and branch usage due
to rise in mobile
applications
(T3) Possibility of crumbling
reputation for security and
relationship between
managers and customers
(T4) Vulnerability to security
breaches and attacks due
to increase in digital assets
in banking and financial
institutions

(S2) International presence

(S3) Up-to-date electronic
banking services
(S4) Strong support units in
I.T. and R&D
(S5) High capitalization
(S6) Skilled workforce
SO STRATEGIES
1. Improvement of both
mobile applications and
branch banking system to
increase number of
omnichannel customers.
(S3, S4, S5, O2)
2. Improvement of mobile
banking applications. (S5,
O1, O6)
3. Reach more markets
with new and improved
services (S2, S4, S5, O4,
O5, O6)
4. Provide better remittance
service by innovating
transfer system (S2, S4,
S5, O6)

(W2) Less branches in rural

areas
(W3) Decrease in capital
adequacy ratio
(W4) Slow customer
service

ST STRATEGIES
1. Improve security
measures and data
protection (S3, S4, S5, T1,
T3, T4)
2. Amplify marketing
strategies for other banking
channels (S4, S5, T2)

WT STRATEGIES
1. Improve mobile banking
and its security (W1, T1,
T3, T4)
2. Acquaint employees with
better and more efficient
systems of service (W4, T3)
3. Amplify advertising for
clients and investors to
increase (W2, W3, T2)

WO STRATEGIES
1. Acquire employees who
will help improve security
measures (W1, O3)
2. Acquire competitor banks
or smaller banks to
increase equity (W3, O3,
O5)
3. Use of improved mobile
banking applications and
amplified marketing
strategies (W2, W4, O1)

Based on the matrix above, the following strategies were generated; a) product
development

through improvement of mobile banking applications, branch banking

systems for security, better customer service and increase customer loyalty and increase
profit; b) market development to take advantage of the upcoming ASEAN Economic

Integration; c) market penetration through amplified marketing strategies to increase

rural area presence; and d) horizontal integration to increase equity and assets which
will in turn increase capital adequacy

6.2. Strategic Position and Action Plan Evaluation (SPACE) Matrix

INTERNAL STRATEGIC POSITION
FINANCIAL STRENGTH (FS)
RATINGS
Return on investment
6
Liquidity
5
Responsible Risk Management
5
Average:
5.33
COMPETITIVE ADVANTAGE (CA)
RATINGS
Market share
-1
Customer Loyalty
-2
Technological know-how
-2
Vertical integration
-1
Average:
-1.5
EXTERNAL STRATEGIC POSITION
ENVIRONMENTAL STABILITY (ES)
RATINGS
Barriers of entry into market
-1
Competitive pressure
-4
Price range of competing products
-2
Technological changes
-2
Average:
-2.25
INDUSTRY STRENGTH (IS)
RATINGS
Financial stability
5
Resource utilization
5
Potential for growth
6
Capital intensity
6
Average:
5.5
Directional Vector Coordinates: X Axis: -1.5 + (5.5) = 4
Y Axis: -2.25 + (5.33) = 3.08

Conservative

Aggressive

(4, 3.08)

Defensive

Competitive

The graph above shows that BDOs directional vector point to the upper right
quadrant, the Aggressive quadrant. This shows that BDO is in a prime condition to use
its strengths and take advantage of opportunities. It is also in such condition to
overcome weakness and mitigate threats. Intensive and diversification strategies are
more aligned to address this situation.

6.3. Boston Consulting Group (BCG) Matrix

This Matrix allows an organization to manage its portfolio to businesses by
assessing its relative market share position and the industry growth rate. Having the
largest market share in the Banking industry based on, assets, deposits, loan

receivables, branches in operation, ATMs and assets under management, ahead of

Metrobank Co. by at least 48% in market share and with a high market growth rate, BDO
can be considered in the Stars position in the Boston Consultancy Group (BCG) Matrix.
Having considered BDOs large market share and its industry growth rate, the strategies
appropriate may either be market penetration, market development and product
development as intensive strategies, or related diversification.

Stars

6.4. The Internal External (IE) Matrix

In the Internal Factor Evaluation (IFE) Matrix, BDO received a total weighted
score of 3.05 which suggests that BDOs strengths are capable of mitigating its
weaknesses, thus making it one of the strongest and most stable banks in the
Philippines. While in its External Factor Evaluation (EFE) Matrix, BDO received a total
weighted score of 3.11 which suggests that the external environment of the industry and
BDOs response to opportunities and threats.

Plotting these scores in the Internal-External (IE) Matrix, it appeared that such is
plotted in Cell I, the Grow and Build region. In such region, it suggests that the firm
should pursue intensive and vertical integration strategies such as market development,
product development, market penetration, horizontal integration, backward integration
and forward integration strategies.

6.5. The Grand Strategy Matrix (GSM)

Rapid Market Growth

1.
2.
3.
4.
5.
6.
7.

Q4

Market Development
Market Penetration
Product Development
Forward Integration
Backward Integration
Horizontal Integration
Related Diversification

Weak Competitive Position

Strong Competitive Position

Q3

Q2

Slow Market Growth

In the above illustration, BDO is located in Quadrant I. This entails that BDO has
a very strong strategic position. This means the BDO has an established competitive
advantage and makes use of it as long as possible. Strategies such as market
penetration, market development, product development and the vertical integration
strategies are relevant for such firms positioned in Quadrant I. With such position, it
means that firms can afford to take advantage of external opportunities and handle risks
aggressively if necessary.
6.6. Summary of Strategic Formulation Tools

STRATEGIES
Market Development
Market Penetration

STRATEGIC FORMULATION TOOLS

TOWS SPACE
BCG
IE
GSM

Forward Integration

Backward Integration

Product Development
Horizontal Integration

Related Diversification
Unrelated
Diversification

TOTAL
5
5
5
3
2
2
3
1

In sum, the most prevalent strategies that came up in the previous matrices
presented, market development, market penetration, product development garnered the
highest total. Related diversification closely followed. While vertical integration strategies
and unrelated diversification trained in the end.

6.7. The Quantitative Strategy Planning Matrix (QSPM)

From the above matrices presented, such had revealed several strategies that
are compatible with BDOs position in the industry. The QSPM indicates which of these
strategies are the best. It is to evaluate alternative strategies based on the previously
present internal factors of BDO and the external factors of the banking and financial
industry.

STRATEGIC ALTERNATIVES
Market
Developmen
t

Internal
Strength
Experienced
management
International
presence
Up-to-date
online banking
services
Strong support
units in I.T.
and R&D
High
capitalization
Skilled
workforce
Internal
Weakness
Security in
data assets
Less branches
in rural areas
Decrease in
capital
adequacy ratio
Slow customer
service
Total
Opportunities
Rise in
demand for
mobile
banking
applications
Increase in
loyal
omnichannel
customers
Harnessing
mergers and
acquisition to

Market
Penetration

Product
Development

Horizontal
Integration

AS

TAS

AS

TAS

AS

TAS

AS

TAS

.15

.06

.24

.06

.12

.18

.08

.12

.36

.36

.48

.36

.25

1.00

.75

.75

1.00

.08

AS

TAS

AS

TAS

AS

TAS

AS

TAS

.10

.08

.16

.32

.08

.24

.04

.12

.04

.08

.16

.04

.04

.04

.16

.04

1.00
W

AS

TAS

.20

.40

.60

.80

.20

.12

.12

.48

.24

.36

.03

AS

TAS

AS

TAS

AS

TAS

access the
talents needed
Boosts in
auto-loans
Unification into
a single
market come
2015 ASEAN
Economic
Integration
Increase in
strength and
profits from
remittances
from OFWS
Opportunities
Bank
switching due
to hidden
defection
Decrease in
online, ATM
and branch
usage due to
rise in mobile
applications
Possibility of
crumbling
reputation for
security and
relationship
between
managers and
customers
Vulnerability to
security
breaches and
attacks due to
increase in
digital assets
in banking and
financial
institutions
Total
Total of Sum of
Attractiveness
Score

.05

.10

.20

.05

.05

.20

.80

.40

.20

.60

.10

AS

TAS

.05

.05

.15

.20

.05

.03

.03

.06

.16

.12

.07

.15

.15

.15

.60

.60

AS

TAS

AS

TAS

AS

TAS

1.00
3.57

3.69

4.02

3.96

VII. OBJECTIVES, STRATEGY RECOMMENDATIONS AND ACTION PLANS

7.1. Strategic and Financial Objectives
By relating BDOs Mission-Vision statement, External Factor Evaluation (EFE)
Matrix and Internal Factor Evaluation Matrix (EFE), there are issues with which the
following objectives are formed to address as such:

1. To increase market share in the industry

Despite BDO being in the primal position in the market, it is going to be
too costly to be complacent especially when the banking industrys players are very
competitive as they may overtake BDO in the market share. It is also to address BDOs
mission in becoming the preferred bank in the markets it serves. The increase in market
share also contributes to the increase in BDOs capitalization to further finance
improvement which addresses its mission to consistently provide innovation products
and proactive reinvention to meet market demands.

2. To invest more in technology to improve mobile banking applications and

other bank transactions
This is BDOs answer to the opportunity in the banking industry which is
the rise in the demand of mobile banking applications. In investing more in technology,
BDO capitalizes its strengths which are its strong support units in R&D and I.T. as well
as its high capitalization. Integrating better technology in BDOs products and services
will also translate to a more flawless delivery of services as well innovated products,
both of which are in BDOs Mission-Vision statements. Better technology also means

safer transactions which answer the issues on vulnerability of digital assets to breaches
and attacks as well as BDOs security. This objective answers BDOs goals in ten folds.

3. To have a continuously increasing net income while maintain expenses

In every business, profit is one of the indicators that such is doing well. As
for BDO, to see whether such objectives are attained, strategies are implemented, it will
translate to profits. The development in technology for BDO will translate to new and
better products and services which will likely increase profit, which will in turn be an
increase in interest income, loan applications, investment and receivables. BDO should
start with a 10% increase then gradually adding 5% each year in growth. Moreover, BDO
has a mission to create shareholder value through superior returns. Aside from such, this
will address the decrease of BDOs capital adequacy ratio which is to either increase in
equity or increase in profit. BDO should start with a 10% increase then gradually adding
10% each year in growth. To further take advantage of growth, instead of cutting or
lessening expenses, BDO should maintain expenses, except when extremely necessary,
especially for operating expenses, but nonetheless, other expenses should be
maintained.

4. To increase BDOs presence in the rural areas

One of BDOs weaknesses is its lesser branches and ATM in the rural
areas all over the Philippines. Bank accessibility becomes it weakness. In order to
address this, BDO should establish more bank branches or ATMs in rural areas to serve
more clients. This will also answer BDOs mission for flawless delivery of services. An
increase in profits and market share will also likely to result.

7.2. Recommendations

7.2.1. Restated Mission-Vision Statement

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 by keeping up and making use of the latest
technological breakthroughs, 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.

7.2.2. Business Strategies

1. Product Development
One of BDOs objectives is to invest more in technology to improve
mobile banking applications and other bank transactions.

BDOs mobile banking

application should be developed. Such application should have the basic transactions
ready and available with a tap. Security should also be tightened, like having better
password and coding systems as well as back up systems.
Aside from online services, BDO must use technology to develop its
services in bank branches. This is to address its mission on the flawless delivery of
services. Using machines to make transactions faster or to make queues more
organized. BDO has to keep in mind that quality service should be its priority so as to
meet its objectives. To facilitate this product development, BDO must capitalize on its
strong support units in R&D and I.T. Departments. BDOs high capitalization is also an
indication that the company can afford such development.

2. Market Penetration
Being one of the top players in the banking industry and having the
largest market share in the industry, BDO should still exert efforts in market penetration.

One of its missions is to be the preferred banking institution in the markets it serves.
BDO cannot be complacent with its current position. Amplification of its marketing
strategies using its new products will help dig a deeper niche for BDO in its current
markets. BDO has to develop its market, but nonetheless it should not lose sight of its
current market where foundation is deeper. This also to address its issue in rural areas
which is already a penetrated market, but it has to amplify marketing strategies along
with other strategies to capture this market. Establishing more branches or ATMs in rural
areas should also increase its presence in the rural areas.

3. Horizontal Integration
Aside from establishing more branches or ATMs to increase presence,
BDO can acquire rural banks in the areas it needs to penetrate so as to lessen
competition and increase more presence in the area. This will in turn translate to an
increase in its relative market share which is another objective of BDO. Considering
BDOs high capitalization, it would be able to buy out a rural bank. Moreover, BDO has
experienced management as one of its strengths who may be capable of negotiating to
acquire other banks at better prices.

7.2.3. Organizational Strategies

The strategies would head no change in the organizational structure of
BDO as to the top management. However, with the establishment of new branches in
rural areas, it is recommended that there should be a new position in the Branch
Banking Group of BDO, that instead of per area, it should be per region instead. More
so, there should be another manager to oversee all bank branches in a province. With
the acquisition of a rural bank through horizontal integration, more employees and

executives should be hire so as to manage the newly acquired bank. BDO may also
choose to retain the existing employees of the newly acquired bank.

7.3. Strategy Map

7.3.1 Below is a strategy map for product development wherein it is
recommended that BDO should invest more in technology to improve its mobile banking
application. Such step is to fulfill the strategy for product development.

Increase in
capital
adequacy

Increase in
equity

Financial

Increase in net
income

Feedback

Innovate
products
using latest
technology

Increase
customer
satisfaction

Learning & Growth

Growth in
number of
clients

Decrease
load
Internal
Process
time for
mobile bank
application

7.3.2. Below is a strategy map for market penetration wherein it is recommended

that BDO should establish a rural bank to gain more presence in an already penetrated
or serviced geographical area, which are rural areas.

Increase in
capital
adequacy

Increase in
equity

Financial

Increase in net
income

Feedback

Learning & Growth

Increase
customer
satisfaction

Growth in
number of
clients

Conduct studies
and researches
for the
establishment of
a new bank
branch

Internal
Process
Improved
accessibility
of services

7.3.3. Below is a strategy map for horizontal integration wherein it is recommended that
BDO should acquire a rural bank to gain more presence in an already penetrated or
serviced geographical area, which are rural areas and to increase in market share
through buying out or acquiring the competition.

Increase in
market share

Increase in
equity

Financial

Increase in net
income

Feedback

Learning & Growth

7.4. Financial Projections

Increase
customer
satisfaction

Growth in
number of
clients

Conduct
studies and
researches for
the acquisition
of a rural bank

Decrease in
time to acquire
another bank or
business

Internal Process

With the recommended strategies being mentioned, such will aid in the
achievement of the stated strategic and financial strategies. The implementation of the
strategies will translate to a change in the finances of BDO. The following are the
financial projections for BDO following the strategies and fulfillment of the stated
objectives:

7.4.1. Statement of Income

STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 2013
AND PROJECTED FOR DECEMBER 2014, 2015, 2016
(amounts in Million of Philippine Pesos)
Actual
Projected

Interest Income
Interest Expense
Net Interest
Income
Impairment Losses
Net Interest
Income after
Impairment Losses
Other Operating
Income
Other Operating
Expenses
Profit before Tax
Tax Expense
Net Profit

2013

2014

2015

2016

P54,104
(P13,440)

P59,514.4
(P13,440)

P71,417.28
(P13,440)

P92,842.46
(P13,440)

P43,166

P46,074.4

P57,977.28

P79,402.46

(P7,001)

(P7,001)

(P7,001)

(P7,001)

P36,165

P39,073.4

P50,996.28

P72,401.46

P31,844

P35,072.4

P42,086.88

P54,712.94

(P43,259)

(P43,259)

(P47,584.9)

(P57,101.88)

P24,750
(P2,104)

P30,886.8
(P2,625.38)

P45,498.26
(P3,867.35)

P70,012.52
(P5,951.06)

P22,646

P28,261.42

P41,630.91

P64,061.46

One of BDOs financial objectives is to have a continuously increasing income

while maintaining expenses except when necessary. The projected income statement
reflects its compliance with the objectives formulated. Moreover, the statement above
reflects the result or income from the implementation of the recommended business
strategies. The interest income and other operating income were computed at increasing
rates of 10% whose increase is justified by the implemented strategies, while expenses

for interest and impairment losses were maintained and the tax expense rate was also
remained at 8.50%. Meanwhile, operating expenses remained the same only until 2014
and increase by 10% in 2015 and 20% in 2016. It is so because it is in 2015 when the
upgraded and improved mobile banking application will be launched. Such justified the
47.31% change in net profits from 2014. While in 2016, there will be establishment of the
new bank branch and the acquisition of a new rural bank. This supported the 53.88%
change in net profits from 2015 to 2016. The changes in the amounts are justified using
the strategies implemented as well as compliance of the financial objectives.

7.4.2. Statement of Financial Position

STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED DECEMBER 2013
AND PROJECTED FOR DECEMBER 2014, 2015, 2016
(amounts in Million of Philippine Pesos)
Actual
Projected
2014
2015
2016
2013
(Increase by
(Increase by
(Increase by
10%)
20%)
30%)*
Total Assets

P1,672,778

P1,840,055.8

P2,208,066.96

P2,870,487.05

Total Liabilities

P1,508,424

P1,659,266.9

P1,991,120.28

P2,558,456.36

Total Stockholders
Equity

P164,534

P180,788.9

P216,946.68

P312,030.69

Total Liabilities and

Equity

P1,672,778

P1,840,055.8

P2,208,066.96

P2,870,487.05

One of the financial objectives of BDO is to have a continuously increase in net

income (7.3.1.). The increase in income translates to an increase in assets because an
increase income may be due to increase in loan receivables, deposits, investments,
cash and net property plant and equipment. The 10% increase in each year is justified

by the implementation of the recommended strategies. In 2015, the increase was

justified by the launch of the updated and improved mobile banking application of BDO.
This means more clients can access BDOs services and it also translates to a flawless
delivery of services. It satisfies further, one of the formulated objectives which is to invest
more in technology to improve its mobile banking application. While in 2016, the
increase is justified by the establishment of a new bank branch and the acquisition of a
rural bank. This also satisfies BDOs objective which is to increase presence in rural
areas. An increase in market share is to be expected as well, being that the assets of
BDO are also increasing. Liabilities also increased as the assets increase. This reflects
that while there was an increase in assets during acquisition the implementation of the
strategies, there is also a relative increase in liabilities.

7.4.3. Financial Highlights

Financial Highlights (in Billion PHP)
*2016
Resources
2,870.4
Net Profit
64.1
Operating Expenses
57.1
Equity
312.0

*2015
*2014
2013
2,208.0 1,840.1 1,672.8
41.6
28.3
22.6
47.6
43.3
43.3
216.9
180.7
164.4

2012
1,241.5
14.5
39.5
154.4

2011
1,097.3
10.5
36.3
97.0

*Projected amounts based on 7.4.1 and 7.4.2 respectively.

The above table shows the financial highlights of BDO from 2011 to 2013 which
are based on its Annual Reports. While the amounts from 2014 to 2016 are gathered fro
the above statements which are projections supported by the strategies and objectives
formulated. It can be seen that there is a continuous increase in all aspects.

7.5. Departmental Action Programs

7.5.1. Product Development

This is to take advantage of BDOs high capitalization and strong support

units in R&D and I.T. Departments. Such is also to address BDOs mission to
consistently provide innovative products and flawlessly deliver services. Lastly, this is to
take the opportunity of the rising demand for mobile banking applications.

PRODUCT DEVELOPMENT
EXPECTED
ACTIVITIES
TIMETABLE
OUTPUT(S)
Improving BDOs mobile banking application
Research on latest
technology relevant
to banking and
security.

Canvass for software

and systems that are
relevant to bank
applications and
security systems

Convene regarding
research results
and developments

Arrive at a decision on
which systems and
software to purchase

Purchase software
and systems agreed
upon
Integrate software
purchase to existing
mobile banking
application
Brief employees
regarding the
features, uses and
possible issues and
its remedies
Testing of mobile
application for
employees and
select clients

Acquire the software

and systems agreed
upon by management
Arrive at an improved
mobile banking
application that will
meet market demands
and if possible, exceed.
Give the all employees
knowledge regarding
the application as well
as possible issues that
may arise and how to
address them
Test the application and
acquire reviews from
users

3 months
(January 2014
to March 2014)

1 2 weeks
(April 2014)

1 week
(April 2014)

DEPARTMENT(S)
RESPONSIBLE
- Research and
Development (R&D)
Department
- Information
Technology (I.T)
Department
- Executive
Department
- R&D Department
- I.T. Department
- I.T. Department
- Accounting,
Finance, Treasury
Department

3 months
(April 2014 to
middle of June
2014)

Information
Technology
Department

1 week
(June 2014)

All Departments

1 month
(July 2014)

- Marketing
Department
- Operations
Department
- I.T. Department

- R&D Department
Convene regarding
testing results and
possible
developments and
adjustments to be
made
Adjustments and
final touches to the
application and
testing

Soft Launch of the

application to all
clients

Discuss the results of

the application,
adjustments to be made
and other possible
issues that may arise

Finalize the application

and test the application
and acquire reviews
from users

The final testing of the

application to all clients
and acquire reviews for
final touches

Convene regarding
soft launch results
and discuss
adjustments need

Finalize application that

is going to be ready for
official launch and
address all issues for
flawless release

Official Release of
the application

Release of the mobile

banking application
available for all clients

1 month
(August 2014)

1 month
(September
2014)

1 month
(October 2014)

2 months
(November to
December
2014)
January 2015

- Executive
Department
- R&D Department
- I.T. Department
- Marketing
Department
- Operations
Department
- I.T. Department
- R&D Department
- Marketing
Department
- Operations
Department
- I.T. Department
R&D Department
- Executive
Department
- R&D Department
- I.T. Department
- Marketing
Department

All Departments

7.5.2. Market Penetration

A better and more flawless delivery of services is to be expected when
the bank in accessible. Aside from addressing the objective to increase market share.
The establishment of new branches in rural areas solves BDOs minimal presence in
rural areas. Such strategy also utilizes BDOs high capitalization. This also means a
larger network of clients which may translate to more profits that is an answer to BDOs
mission to create shareholder value through superior returns.

MARKET PENETRATION
EXPECTED
ACTIVITIES
TIMETABLE
OUTPUT(S)
Establishing new branches in rural areas
Research regarding
Gather data and
areas for possible
research that will
3 months
establishment of new
aid in reaching a
(January to
branch, opportunity
decision on whether
March 2015)
analysis and market
to establish a new
research
branch

Convene with
management to
discuss data gathered

Reach a decision
on whether to
establish a new
branch and other
details regarding
such

Advertise for bidding

for contractors on the
design and
construction of the new
branch

Hire a contractor for

the design and
construction of the
new branch from
the bidding

1 week
(June 2015)

Convene and negotiate

with contractors

Finalize a plan for

the new branch
ready for execution

3 weeks
(June 2015)

1 month
(April 2015)

Settle all necessary

requirements
(Purchasing, Legal and
Financial)

Settle all necessary

requirements to be
ready for execution

2 weeks
(July 2015)

Construction of the
new branch

Execution of plans
for the
establishment of the
new branch

5 months
(July to
November 2015)

Hiring of new
employees and
managers for new
branch

Acquire talents to
be as employees for
the new branch

1 month
(September
2015)

DEPARTMENT(S)
RESPONSIBLE

- R&D Department
- Marketing
Department
- R&D Department
- Marketing
Department
- Executive
Department
- Accounting &
Finance
Department
- R&D Department
- Marketing
Department
- Operations
Department
Executive
Department
- Executive
Department
- Legal Department
- Accounting &
Finance
Department
(Contractors)
- Executive
Department
- Accounting &
Finance
Department
Human Resource
Department

Training of new
employees

Integrate and
acquaint new
employees to BDO

Convene with
management regarding
plans for new branch
and strategize

Come up with
strategies and
management plans
for running the new
branch

Finalize all necessary

requirements for
conducting operations
in new branch

Settlement of all
necessary items
and finalization of
contract between
contractors

1 month
(October 2015)

1 month
(November 2015)

1 month
(December 2015)

Formally open new

branch

Start of operations
in the new branch

Amplify marketing
strategies in area of
new branch

Promote and
advertise new
branch in the area

(January 2016)

Convene with
management regarding
the progress and
operations of new
branch

Assess the
performance of the
new branch and
look for areas for
improvement

(July 2016)

(January 2016)

Human Resource
Department
R&D Department
- Marketing
Department
- Executive
Department
- Operations
Department

- Executive
Department
- Accounting &
Finance
Department
- Marketing
Department
- Executive
Department
- I.T. Department
- Operations
Department
- Marketing
Department
- I.T. Department
- R&D Department
- Executive
Department
- Operations
Department
- Accounting &
Finance
Department

7.5.3. Horizontal Integration

Such integration is a response to BDOs weakness which is lesser
presence in rural areas. The acquisition of a rural bank entails a greater relative market
share for BDO which is one of its objectives. This will also utilize BDOs high

capitalization, experienced management and strong support units in the R&D and I.T.
Departments. The acquisition will generate more profits seeing as the BDOs network
and operations will be expanding. This in turn will address one of BDOs mission that is
to create shareholder value through superior returns.

HORIZONTAL INTEGRATION
EXPECTED
ACTIVITIES
TIMETABLE
OUTPUT(S)
Acquiring/buying out a rural bank
Reach a decision
Convene and
on whether to
consult with
4 months
conduct research
management
(January to April
and analysis
regarding
2015)
regarding
integration
integration
Achieve a study that
Conduct research,
will be useful in
analyze
reaching a decision
2 months
opportunities and
to support the
(April to May 2015)
assess current
acquiring of a new
condition
bank
Come up with a
Look for banks that
short list of banks
1 month
are for possible
for possible
(June 2015)
acquisition
acquisition
Come up with pros
Convene and
and cons in banks
1 week
discuss banks on
in the short list for
(July 2015)
short list
further analysis
Further research on More in-depth study
1 month
banks in the short
on the banks in the
(July 2015)
list
short list
Convene and
Come up to a
discuss the results
decision on which
of the concluded
2 weeks
bank to purchase
research study on
(August 2015)
based on the
the banks in the
research conducted
short list
Negotiations with
Settle all legal
3 months
the management of
responsibilities,
(August to October
the bank to be
finances and other
2015)
acquired
necessary steps so

DEPARTMENT(S)
RESPONSIBLE
- R&D Department
- Marketing
Department
- Executive
Department
- R&D Department
- Marketing
Department
- Executive
Department
- R&D Department
- Executive
Department
- R&D Department
- Executive
Department
- R&D Department
- R&D Department
- Executive
Department
- Accounting &
Finance Department
All Departments

Finalize acquisition
and convene with
employees
regarding such

Arrange
management at
newly acquired
bank
Convene with new
management
regarding business
and steps to take in
furtherance of
Formally announce
to the public the
acquisition of the
new bank

as to acquire the
bank
Accomplish final
steps in acquisition
and to acquaint
employees with the
change

1 month
(November 2015)

All Departments

Fire or hire
employees and to
arrange
management at the
newly acquired
bank

1 month
(December 2015)

- Executive
Department
- Human
Resource
Department
- Operations
Department

Discuss with new

management about
the business

1 month
(January 2016)

Executive
Departments

Announce to clients,
shareholders and
the general public of
the acquisition

(February 2016)

All Departments

7.5.4. Management
It is not necessary that BDO should change it Board of Trustees. BDO
has a good pool of talented managers. BDOs management needs to be more involved
and hands-on in the banking operations to get to a deeper level of what the bank needs
and in which direction should the bank go. The managers should convene more often to
discuss the steps BDO should take.
7.5.5. Marketing
With a growing market share due to the increase in presence in rural
areas through the establishment of a new bank branch and the acquisition of a rural
bank, it means that the number of clients served increase. With this said, there can be
an increase in the for more prospective clients. BDO then should amplify its marketing
strategies through a more dynamic, flexible and productive Marketing Department. Such

should be able to compete with the aggressiveness of the competitors. More training for
marketing managers are advised.

7.5.6. Accounting and Finance

The Finance Department should align itself with all the transactions and
movements BDO is undertaking. It must be in support with BDO strategies. Being in the
business of banking which is imbedded with public interest and with its fiduciary nature,
it is required that its employees act with utmost diligence in the performance of their
duties, especially in the Finance Department. There is no drastic change to be done by
this department.

7.5.7. Operations
With many changes in the operations come 2015 and 2016 due to the
implementation of the strategies. It is required that the Operations Department polish
itself and align itself with the other departments to ensure successful implementation.
The Operations Department may need more employees seeing as that a larger market
has to be served by BDO due to the establishment of a new bank branch and the
acquisition of a rural bank.

7.5.5. Information Technology

Investing in technology is one of the non-financial objectives formulated.
Thus, it should be that BDOs I.T. Department is developed. It may be fitting for BDO to
hire more I.T. Experts or to open a new segment in the department. More funding is also
probable to support the upgrade of the department and its systems. A better security for
digital assets and data is also needed to support BDOs operation.

7.4.6. Human Resource

With the establishment of a new bank branch and the acquisition of a
rural bank, it is implied that BDO needs to hire more employees. In lieu with this, the
Human Resource (HR) Department must increase in competency and be able to hire
more talented employees for BDOs growing business. The HR Department should
strengthen its ties with head hunting companies. The department should be more
efficient and effective also in the training of employees.

7.4.7. Research and Development

The R&D Department is the in-demand department during the
commencement of the implementation of the recommended strategies. This means that
to achieve better results and to aid in better research in the market, operations, etc.; the
R&D should be developed. More researchers should be hired. There must also be better
tools and equipment for efficient gathering of data and better study. This department
should not be overlooked. A huge part of the data that BDO managers are collected by
the R&D department.

VIII. STRATEGY EVALUATION, MONITORING AND CONTROL

FINANCIAL

BALANCED SCORECARD FOR BDO

Objectives
Scorecard (KRA)
Performance Indicator
Increase in Net
Increase by 10, 20 and
Income Statement
Income
30%
Increase in
Return on Average
Increase by 20%
Average Equity Equity; Market Share
Increase in
Liquidity Ratio
Increase by 20%

Capital
Adequacy Ratio
Increase in
Market Share
LEARNING &
DEVELOPMEN
T

INTERNAL
PROCESS

FEEDBACK

Market Share

Increase by 20%

Lessen time to
innovate services

Time to develop
services

Decrease by 6 months

Increase
accessibility of
services
Lessen time in
loading for
mobile banking
applications
Lessen time to
convene,
negotiate and
acquire a bank
Lessen time to
establish a new
bank branch
Increase
customer
satisfaction in
rural areas
Growth of clients
(as to number of)

Number of clients
served, market
share

Increase by 10%

Time to respond of
the mobile banking
application

Decrease by 30 seconds
to 1 minute

Time to reach a
decision on the
acquisition of a bank

Decrease by 3 months

Time to establish a
new branch

Decrease by 3 months

Customer Feedback

Increase by 30%

Number of clients

Increase by 20%

The above matrix shows objectives of BDO to monitor performance by using

scorecards measured using performance indicators. Financially, BDO plans to increase
by 20% in its income, capital adequacy ration and equity. While as for Learning &
Development, performance in such is measured using Employee Turnover statistics,
Employee Turnover statistics and time to attend to clients. In internal processes, BDOs
objective is to lessen time for queuing in bank branches to ensure flawless and efficient
delivery of services. Lastly, as to feedback, such is measured using customer feedback
surveys and a data on the number of clients of BDO.

VIII. BIBLIOGRAPHY

1. http://investing.businessweek.com/research/stocks/people/person.asp?
personId=10198974&ticker=BDO:PM
2. https://www.bdo.com.ph/corporate-governance/board-and-shareholder-matters
3. https://www.bdo.com.ph/corporate-governance/board-committees-andmemberships

4. http://www.reuters.com/finance/stocks/companyOfficers?symbol=BDO.PS
5. https://www.bdo.com.ph/hong-kong-home
6. https://www.bdo.com.ph/about-bdo/domestic-international-network
7. http://www.eiu.com/industry/Financial-services
8. http://www.bsp.gov.ph/downloads/Publications/2014/LTP_1qtr2014.pdf
9. http://www.bain.com/publications/articles/european-banking-bain-report.aspx
10. http://www.bain.com/publications/articles/rebooting-it-why-financial-institutionsneed-a-new-technology-model.aspx
11. http://www.bain.com/Images/BAIN_BRIEF_Building_the_retail_bank_of_the_futu
re.pdf
12. https://www.equitymaster.com/research-it/sector-info/bank/Banking-SectorAnalysis-Report.asp
13. http://www.bain.com/publications/articles/customer-loyalty-and-the-digicaltransformation-in-p-and-c-and-life-insurance.aspx
14. http://www.wavespartnership.org/sites/waves/files/documents/WAVES%20Policy
%20Note%20Philippines.pdf
15. http://www.worldometers.info/world-population/philippines-population/
16. http://data.worldbank.org/indicator/SP.DYN.CBRT.IN
17. http://web0.psa.gov.ph/sites/default/files/2014%20PIF.pdf
18. http://www.nscb.gov.ph/poverty/default.asp
19. https://www2.fdic.gov/SDI/SOB/
20. http://www.philstar.com/business/2014/01/30/1284723/philippine-economyexpands-7.2-2013
21. http://www.bain.com/Images/BAIN_BRIEF_Why_cybersecurity_is_a_strategic_is
sue.pdf
22. http://www.bsp.gov.ph/downloads/regulations/gba.pdf
23. https://www.metrobank.com.ph
24. http://www.bpi.com.ph
25. Baxter, M., & Vater, D. (2013). Building the retail bank of the future. Boston,
Massachusetts: Bain & Company.
26. Baxter, M., Berez, S., & Padmanabhan, V. (2013). Rebooting IT: Why financial
institutions need a new technology model. Boston, Massachusetts: Bain &
Company.
27. Ali, S., Dixon, J., & Padmanabhan, V. (2014). Why cybersecurity is a strategic
issue. Boston, Massachusetts: Bain & Company.
28. Philippine Economic Update 2013 (World Bank Document)
29. Wealth Accounting and Valuation of Ecosystem Services (WAVES): Country
Report on the Philippines
30. Philippines in Figures 2011 to 2014 (National Statistics Office)

APPENDIX

9.1. Financial Highlights 2011

9.2. Financial Highlights 2012

9.3. Financial Highlights 2013

9.4. Statement of Income 2013

9.4. Statement of Financial Position 2013