Internal Factors Evaluation Matrix

WEIGHT RATE WEIGHTED RATE

INTERNAL FACTORS
STREGTHS
 Absolute control on quality due to
strong sustained synergy with other
Consunji-owned businesses, .60
.15 4
particularly with DM Consunji Inc.
(construction)

 Faster Lead Time .10 4 .40

 Cost advantages over key rivals;

developments are priced lower than .10 4 .40
developments by competitors

 The architectural design concepts on its

development projects have a
distinguishable competence for its .05 4 .20
quality amenities and other add-ups for
leisure.

 Strong financial condition; high

equity/cash position .10 3 .30

WEAKNESSES
 Small geographic coverage; lack of
adequate global distribution capability; .15 1 .15
weak dealer networks

 Small capitalization in its developments

compared to large amount
capitalization of the huge and strong .10 1 .10
players in the industry

 Underdeveloped E-commerce and

Research and Development compared
to its competitors; Inferior performance .05 2 .10
in advertising and promotions

 DMCI Homes projects are LIMITED to

residential development. .10 1 .10

 Developments are not located in central

business areas. .05 1 .05

 DMCI is not as good of its competitors

with regards PROPERTY .05 2 .10
INVESTMENT.

TOTAL 1.00 30 2.50

WEAKNESSES

 Small geographic coverage; lack of adequate global distribution capability; weak dealer

networks

DMCI Homes’ has its home office only at Bangkal, Makati City unlike its top

competitor, Ayala Land, who has more offices and corporate centres within and outside

Metro Manila. Aside from its head office at Ayala Ave., Makati, Ayala Land has offices

in Taguig, Manila, Quezon City, Bacolod, Cebu and Davao.

 Small capitalization in its developments compared to large amount capitalization of the

huge and strong players in the industry

Compared to its competitors, DMCI Homes has a relative small capitalization

allotted for real estate development. And because of this small capitalization, it is not

considered to be the primary source of income of DMCI Holdings.

 E-commerce and Research and Development are behind its competitors; Subpar

performance in advertising and promotions

DMCI Homes has weak distribution channels. Commercials of DMCI Homes on

televisions, print ads and other forms of media are rare. They lag behind their competitors in

advertising their property developments.

 DMCI Homes projects are LIMITED to residential development.

Unlike its key competitors, DMCI is limited in developing only the residential

market. It has no experience in developing commercial and office real estate. Avida Land’ s

parent company Ayala Land develops commercial real estate through Ayala Malls. SMDC’ s

parent company SM Prime Holdings focuses on developing and managing shopping malls.

Megaworld also has office and commercial developments, Megaworld coins as township

developments such as Eastwood City.

 Developments are not located in central business areas.

 Unlike its key competitors, DMCI Homes projects are not centrally located. This is a

strategic choice of the company. However, the downside of this is that the accessibility of the

location is a key decision factor of a buyer. Megaworld for instance locates its developments

within business areas such as the Bonifacio Global City.

 DMCI is not as good of its competitors with regards PROPERTY INVESTMENT.

As stated above, DMCI Homes are not located in central business centers. Buyers

consider the property investment. According to a survey conducted by Zipmatch.com, a good

investment property either appreciates quickly or commands a higher rental income. In order to

be a good investment, these factors must consider: affordability and location.

 Weighted
Key External Factors Weight Rating
Score
Opportunities
1. Low mortgage rates 10% 4 .4
2. Promotion of the Philippines as a retirement
haven for foreigners by the PRA 8% 3 .24
3. Growing population with favorable
demographics and a large base of more 5% 4 .2
financially empowered young professionals
4. Continued growth of the BPO sector 4% 4 .16
5. Increasing demand for condominiums & in-
city developments 15% 4 .6
6. Real Estate Property as a long-term
investment for yield/inheritance 5% 2 .1
7. OFW remittances continue to boost the real
estate sector 13% 3 .39
Threats
1. Increasing intensity of competition among the
industry's numerous players 10% 4 .4
2. Heightened risk of flooding due to climate
change 5% 3 .15
3. The Big One 5% 2 .1
4. Land prices will be skyrocketing over the
next five or six years 5% 4 .2
5. Possible manpower shortages 5% 3 .15
6. Dearth in the REIT market due to TRAIN
Law 5% 3 .15
Total 1.00 3.24

THREATS

1. Increasing intensity of competition among the industry's numerous players

According to the National QuickStat conducted by the Philippine Statistics Authority

(PSA), there has been 4,826 establishments engaged in real estate activities as of 2015 -
an indication that DMCI homes must continue leveling up its marketability to stay ahead
of its rising number of competitors.

2. Heightened risk of flooding due to climate change

Based on projection of PAGASA as of 2011, heavy daily rainfall will continue to become
more frequent, as extreme rainfall is projected to increase in Luzon and Visayas in 2020
and 2050. This poses a threat to the current occupants and to the existing projects itself of
the DMCI Homes when not handled properly.None of DMCI Homes’ developments were
severely affected during strong typhoons like “Katsana”, “Yolanda”, “Glenda” and
“Ferdie”. DMCI had the foresight to invest in a good drainage system and choose less
flood prone areas for all its developments.

3. The Big One

A big earthquake may strike the Philippines once the West Valley Fault moves. The west
valley fault traverses various parts of Metro Manila and surrounding provinces. This
includes Quezon City, Taguig, Pasig, Cavite, Muntinlupa and Laguna as identified by
PhiVolcS. Most of the projects of DMCI Homes from high-rise condominiums to
subdivisions -- new projects, under construction, ready for occupancy -- are at these
 places. This big earthquake that will definitely come poses threat to DMCI Homes in the
form of future losses.

4. Land prices will be skyrocketing over the next five or six years

According to Isidro A. Consunji, chairman of construction firm DMCI Holdings Inc.,

land prices will be skyrocketing over the next five or six years, and that prices already
went up some five times in about six years in places like Pasig, Mandaluyong, Mall of
Asia (MOA) in Pasay and Bonifacio Global City (BGC). “That’s good if you are selling
land. But if it’s your raw material, then you will have problems because I think the price
increase is too high,” Consunji said.

This projected increase in land prices can discourage the buyers from investing in real
property due to its higher price.

5. Possible manpower shortages

With the government’s BBB program, the real-estate industry may face another
challenge, this time on the possible manpower shortages.

Villar revealed that the JJJ will cover Filipino professionals in the country and abroad,
and recognized that the government would be competing with private employers,
including salary rates, to get the required number of skilled people to improve the
implementing agencies’ absorptive capacity.

“And with Digong’s [Duterte’s] Build, Build, Build program, the scarcity of labor will be
even more felt,” former 8990 president Januario Jesus Gregorio B. Atencio said.

It will be difficult for DMCI Homes to plan andconstruct new projects with the projected
scarcity of labor. The company must create more competitive salary for its workers.

6. Dearth in the REIT market due to TRAIN Law

A stock corporation established principally for the purpose of owning income-generating

real estate assets is called REIT or real estate investment trust under Philippine laws.
Though it has a great and positive impact in past few years after the approval of the REIT
Law or Republic Act No. 9856 in 2009, due to its benefit from the tax incentives and
additional market capitalization, there’s also a reluctant to form a REIT corporation as of
now because of TRAIN law.

The REIT law provided that the minimum public ownershipMPO shall not be less than
one-third (1/3) of the outstanding capital stock of the REIT. This MPO must be increased
to 67 percent within three years from listing. As early as 2016, the SEC has expressed
willingness to lower the MPO from at least 40% of the outstanding capital stock of the
REIT in the initial year to 33%. With the 12 percent VAT removed by the TRAIN Law,
investors are now expecting the SEC to make good on its promise to amend the MPO
requirement.

As the Philippine REIT market is still in its infancy stage, the imposition of the 67
percent MPO discouraged real estate holding companies from creating REITs, as it
required them not to have majority ownership and control over the REIT. This lack of
control and majority interest clearly discouraged the sponsors from contributing their best
performing real estate properties into the REIT.

With that, DMCI Homes as one of the real estate holding companies investing in REIT
could also be discouraged to continue their investments in REITs. Hence, the value of
their market may eventually decline.
 STRENGTHS
 Greater control of quality due to strong
sustained synergy with other Consunji-
owned businesses, particularly with DM
Consunji Inc. (construction)
 Cost advantages over key rivals;
developments are priced lower than
developments by competitors
 Distinctive competence in architectural
design concepts among its development
projects; quality amenities and other add-
ups for leisure
 Strong financial condition; ample
financial resources to grow and expand
the business; high equity/cash position
 Low property retention ratio to properties
developed
OPPORTUNITIES
 Record liquidity, low mortgage rates
 Promotion of the Philippines as a
retirement haven for foreigners by the
PRA
 Growing population with favorable
demographics and a large base of
more financially empowered young
professionals
 Rising demand for condominiums and
in-city developments; trend towards
smaller unit sizes
 Renewed interest in property as a long-
term investment for yield/inheritance
 Wealth and Incomes are unaffected
during recent crisis
 Income boost from OFW remittance
flows
 Increasing disposable income with
higher propensity to spend
 Emergence of regional growth centers
in provincial areas
 Philippines ranked 2nd worldwide for
BPO market share; Industry
employment to grow 25%
WEAKNESSES
 Small geographic coverage; lack of
adequate global distribution capability;
weak dealer networks
 Small capitalization in its developments
compared to large amount capitalization
of the huge and strong players in the
industry
 Behind rivals in e-commerce capability
and R&D; subpar performance in
advertising and promotions
 Developments are limited to residential-
types alone; No relative experience in
constructing commercial and retail
spaces and other real estate projects
 Developments are not located in central
business areas such as the Makati CBD
and BGC-CBD
THREATS
 Increasing intensity of competition
among the industry's numerous players
which may squeeze profit margins
 Heightened risk of flooding in key
metropolitan areas in Manila which are
deemed below sea level
 Vulnerability to uncontrollable
economic forces such as scares of
terrorism attacks
4.1.1. SWOT/TOWS Matrix

The SWOT/TOWS Matrix assess both internal and external aspects of the business. The SWOT
framework is a tool for auditing an organization and its environment. These are as follows.

a. Product Development Strategies:

Product development strategies are those strategies of improving the current state of DMCI
Homes' primary products which are high-rise residential buildings.

 Utilize the company's cost advantage and low mortgage rates to give the consumers the
marginal propensity to save. (S2, O1)
 Prepare the company for an IPO in the near future. (S4, O2)
  Construct inexpensive high-rise residential buildings specifically catered to foreign
retirees according to their specific tastes and lifestyles. (S2, S3, O3)
 Construct and offer new units with new and innovative architectural design concepts
which are to be priced lower than the company's key competitors without incurring
excessive construction costs. (S1, S2, S3, O5)

 Erect a high-rise residential building that incurs a gradual speed of depreciation and
displays timeless architectural designs.(S3, O6)
 Make use of the company's reputation as a developer offering condominium units that
are relatively cheaper than those of key competitors to attract OFWs to invest in a unit.
(S2, S5, O8)
 Present DMCI Homes as a company constructing units for people who cannot afford to
pay high mortgages to take advantage of their project variety that are limited to
residential-types alone give buyers an image of the company that is family-gracious.
(W4, O1)
 Present the company's units as the cheapest and best substitutes for individuals looking
for a home that can also be considered as a long term investment for their family. (W4,
O6)
 Present DMCI Homes as the most affordable choice among the leading developers of
the country in its marketing strategies.(S2, T1)
 Adopt the latest technological advancement in the field of construction through DMCI
Constructions to reduce the effect of calamities like floods in the existing projects of the
company.(T2, S1)
 Strengthen R&D to modernize facilities according to consumers' preferences. (W3, T1)
 Strengthen risk management organization and processes through increased R&D
spending on quality security control. (W3, T3)

b. Market Penetration Strategies

Market penetration strategies are those strategies through which DMCI Homes would target a
specific segment of the middle-income class and from there build a strong base for their
company to establish a particular market that they would cater to.

 Penetrate the market of young professionals through dynamic, fast-paced and avant-
garde quality condominium units located at the heart of the metro at an affordable
price.(S2, S3, O4)
  Target the portion of the population that has a rising purchasing power due to continuous
increase in income.(S2, S5, O9)
 Take advantage of the areas that are being developed by the construction arm of DMCI
Holdings in aiming for places where the local economy is growing rapidly. (S1, O10)
 Take advantage of the foreign retirees that are seeking for units that will provide them
the convenience of a tranquil residential environment. (W5, O3)
 Make use of developing residential condominium units that would target the rapidly
growing population of financially empowered young professionals.(O4, W4)
 Encourage the market with buying power to purchase a condominium unit as an
investment for the future and make use of the existing wealth in the market by means of
an IPO or by borrowing from banks to increase the company's capitalization. (W2,
W4,O7)
 Target the families of OFWs and encourage them to purchase a unit for their family
member abroad as a form of lifetime investment.(W4,O8)
 Encourage the market with the capacity to buy condominium units as a form of long-term
investment.(W4, O9)
 Expand the market of the company to areas outside the metropolitan that are also
developing fast and cater to the demands for residential condominium units in these
areas where small numbers of developers exist since these areas are still considered as
emerging business districts.(W1, W4, W5, O10)
 Maximize the presence of the company in cities where there is limited space and make
use of the shift in trends toward smaller unit sizes.(W1, O5)

c. Integration Strategies

Integration strategies are strategies for DMCI Homes to look into the possibility of expanding
aside from the usual residential development that they have been doing for years. These
strategies might help in increasing the revenue contribution of DMCI Homes to its parent
company which is DMCI Holdings.

 Utilize the presence of adequate financial resources to take an aggressive position in

expanding the business through vertical integration.(S2, S4, O7)
 Construct residential and commercial units in one. Follow the trend of SMDC and Ayala
Land to increase revenues and create a new brand identity. (S4, O11)