VI.

STRATEGY FORMULATION

Strengths, Weaknesses, Opportunities and Threats (SWOT) Matrix

STRENGTHS WEAKNESSES

(S1) Experienced (W1) Security in data

management assets

(S2) International presence (W2) Less branches in rural

SWOT (S3) Up-to-date electronic

areas

banking servicesq a (W3) Decrease in capital

MATRIX adequacy ratio
(S4) Strong support units in
I.T. and R&D (W4) Slow customer service

(S5) High capitalization

(S6) Skilled workforce

OPPORTUNITIES SO STRATEGIES WO STRATEGIES

(O1) Rise in demand for 1. Improvement of both 1. Acquire employees who

mobile banking applications mobile applications and will help improve security
branch banking system to measures (W1, O3)
(O2) Increase in loyal
increase number of
omnichannel customers 2. Acquire competitor banks
omnichannel customers.
or smaller banks to
(O3) Harnessing mergers (S3, S4, S5, O2)
increase equity (W3, O3,
and acquisition to access
2. Improvement of mobile O5)
the talents needed
banking applications. (S5,
O1, O6) 3. Use of improved mobile
(O4) Boosts in automotive
banking applications and
loans
3. Reach more markets amplified marketing
(O5) Unification into a with new and improved strategies (W2, W4, O1)
single market come 2015 services (S2, S4, S5, O4,
ASEAN Economic O5, O6)
Integration
4. Provide better remittance
(O6) Increase in strength service by innovating
and profits from remittances transfer system (S2, S4,
from OFWS S5, O6)

THREATS ST STRATEGIES WT STRATEGIES

 STRENGTHS WEAKNESSES
SWOT
(T1) Bank switching due to 1. Improve security 1. Improve mobile banking
hidden defection measures and data and its security (W1, T1,
protection (S3, S4, S5, T1, T3, T4)
(T2) Decrease in online, T3, T4)
ATM and branch usage due 2. Acquaint employees with
to rise in mobile 2. Amplify marketing better and more efficient
applications strategies for other banking systems of service (W4, T3)
channels (S4, S5, T2)
(T3) Possibility of crumbling 3. Amplify advertising for
reputation for security and clients and investors to
relationship between increase (W2, W3, T2)
managers and customers

(T4) Vulnerability to security

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

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

Strategic Position and Action Plan Evaluation (SPACE) Matrix

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

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 BDO’s 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.

Internal – External (IE) Matrix

In the Internal Factor Evaluation (IFE) Matrix, BDO received a total weighted score of 3.05

which suggests that BDO’s 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 BDO’s 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.

The Grand Strategy Matrix (GSM)

 I n t h e a b o v e i l l

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.

Summary of Strategic Formulation Tools

 STRATEGIC FORMULATION TOOLS

STRATEGIES TOWS SPACE BCG IE GSM TOTAL

Market Development 5

Market Penetration 5

Product Development 5

Horizontal Integration 3

Forward Integration 2

Backward Integration 2

Related Diversification 3

Unrelated Diversification 1

n 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.

Quantitative Strategy Planning Matrix (QSPM)

From the above matrices presented, such had revealed several strategies that are compatible

with BDO’s 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 Market Product Horizontal

Development Penetration Development Integration

Internal
W AS TAS AS TAS AS TAS AS TAS
Strength

Experienced .15 - - - - - - - -
 STRATEGIC ALTERNATIVES

management

International
.06 4 .24 1 .06 2 .12 3 .18
presence

Up-to-date
online banking .08 - - - - - - - -
services

Strong support
units in I.T. .12 3 .36 3 .36 4 .48 3 .36
and R&D

High
.25 4 1.00 3 .75 3 .75 4 1.00
capitalization

Skilled
.08 - - - - - - - -
workforce

Internal
W AS TAS AS TAS AS TAS AS TAS
Weakness

Security in
.10 - - - - - - - -
data assets

Less branches
.08 2 .16 4 .32 1 .08 3 .24
in rural areas

Decrease in
capital .04 3 .12 1 .04 2 .08 4 .16
adequacy ratio

Slow customer
.04 1 .04 1 .04 4 .16 1 .04
service

Total 1.00

Opportunities W AS TAS AS TAS AS TAS AS TAS

Rise in
demand for
mobile .20 2 .40 3 .60 4 .80 1 .20
banking
applications

Increase in .12 1 .12 4 .48 2 .24 3 .36

loyal
omnichannel
 STRATEGIC ALTERNATIVES

customers

Harnessing
mergers and
acquisition to .03 - - - - - - - -
access the
talents needed

Boosts in
.05 2 .10 4 .20 3 .05 1 .05
auto-loans

Unification into
a single
market come
.20 4 .80 2 .40 1 .20 3 .60
2015 ASEAN
Economic
Integration

Increase in
strength and
profits from .10 - - - - - - - -
remittances
from OFWS

Opportunities W AS TAS AS TAS AS TAS AS TAS

Bank
switching due
.05 1 .05 3 .15 4 .20 1 .05
to hidden
defection

Decrease in
online, ATM
and branch
.03 1 .03 2 .06 4 .16 3 .12
usage due to
rise in mobile
applications

Possibility of .07 - - - - - - - -
crumbling
reputation for
security and
relationship
between
managers and
 STRATEGIC ALTERNATIVES

customers

Vulnerability to
security
breaches and
attacks due to
increase in .15 1 .15 1 .15 4 .60 4 .60
digital assets
in banking and
financial
institutions

Total 1.00

Total of Sum of
Attractiveness 3.57 3.69 4.02 3.96
Score

MCKINSEY’S 7-S MODEL

The McKinsey 7s Framework as shown above will be used to conduct the company analysis for

BDO. It will identify the internal aspects that should be aligned in order for the company to be

successful.

SHARED VALUES

The shared or “core” values that BDO has are the following:

Commitment to Customers

We are committed to deliver products and services that surpass customer expectations in value

and every aspect of customer services, while remaining to be prudent and trustworthy stewards

of their wealth.
Commitment to a Dynamic and Efficient Organization

We are committed to creating an organization that is flexible, responds, to change and

encourages innovation and creativity. We are committed to the process of continuous

improvement in everything we do.

Commitment to Employees

We are committed to our employees’ growth and development and we will nurture them in an

environment where excellence, integrity, teamwork, professionalism and performance are

valued above all else.

Commitment to Shareholders

We are committed to provide our shareholders with superior returns over the long term.

BDO placed its commitment to the three most important people that makes the company

successful. The customers, as they are the primary people that they give service to. The

employees, as they are the ones who directly provide the company’s services to the customers.

The shareholders, who invested and owns a share in the company’s stock. Also, they are

committed to an ever changing organization that responds to changes internally and externally.

The organizational chart above shows the hierarchy of the people and departments in BDO. It

shows that at the top of the hierarchy are the Board of Directors and the Chairman. All final

decisions regarding the company will come from them. Then after them is the Corporate

Secretary who assists them. There are different committees in charge of different aspects of the

company that are equally functioning and important. They have subsidiaries under them such as

Internal Audit, Compliance, Risk Management, and Trust and Investments. After the

committees, are the management groups that are being handled by the President. The
subsidiaries under the Relationship, Product, and Support and Delivery Management Groups

are in charge of the daily operations and are directly providing service to the customers.

The following are the Board of Directors:

Teresita T. Sy – The Chairperson. She is a 67 years old Filipino that has been a

member of Board of Directors of BDO since 1977.

Jesus A. Jacinto, Jr. – The Vice Chairman. He is a 70 years old Filipino that was elected

as Vice Chairman of the Board since May 25, 1996.

Nestor V. Tan – Director. He is a 60 years old Filipino that is the President and CEO of

BDO.

Christopher A. Bell-Knight – Director. He is a 73 years old Canadian that was elected

last July 27, 2013.

Jose F. Buenaventura – Independent Director. He is a 83 years old Filipino that was

elected last April 19, 2013.

Jones M. Castro Jr. – Independent Director. He is a 69 years old Filipino-American that

was elected last April 20, 2012.

Antonio C. Pacis – Director. He is a 77 years old Filipino that was elected last June 25,

2004.

Dioscoro I. Ramos – Independent Director. He is a 59 years old Filipino that was

elected last January 9, 2016.

Josefina N. Tan – Director. She is a 72 years old Filipino that was a Director from

February 3, 2001 to August 2005 and was re-elected in July 27, 2007.

Jimmy T. Tang – Independent Director. He is a 82 years old Filipino that was elected

last July 27, 2002.

Gilberto C. Teodoro, Jr. – Independent Director. He is a 53 years old Filipino that was

elected last April 25, 2014.

All Directors has experiences in Banking and are also currently holding positions in

different companies.

STAFF

BDO’s staff comprises of the following:

Branch

Branch Accountants

Branch Managers

Branch Operations Officers

Service Officers

Non-Branch

Account Brokers

Account Officers (Insurance, Loans, Leasing, Investment, Trust)

Auditors

Business Development Officers

CI/Appraisers

Collection Officers

Customer Service Officers

Credit Analysts (Risk Management)

Credit Officers (Loans)

Information Technology Officers

Loan Documentation Officers

Merchant Acquiring Officers

Product Marketing Officers

Programmers/Analysts

Sales Officers

Settlements Operations Officers

All employees must have backgrounds in accounting, banking and finance, business,

management, sales and programming. Their specific skills and competency differs depending

on the job.
SKILLS

In BDO, since they are part of the Banking Industry, the following skills are important:

Customer Service

Technical Skills

Problem Solving

Team Work

Numeracy Skills

Time Management

Leadership Skills

To make sure that all of their employees will maintain and even improve their skills, BDO

offers BDO Life Training Plan. It includes four program: (1) New Employees On-boarding

Program (2) Staff Development Program (3) Supervisory Development Program (4)

Management Development Program.

STRATEGY

The Bank’s strategy is focused on three (3) core areas, namely:

 1. Building a diversified and sustainable earnings stream on client acquisition through

branch expansion, provincial lending and deposit taking initiatives, and increased fee income

via cross-selling.

2. Creating operating leverage by building a platform that supports future growth and an

innovative digital strategy.

3. Prudently managing its balance sheet by conservatively provisioning for risk,

complementing current funding with long-term funding sources and ensuringsufficient capital to

support growth.

Following these three core areas as a guide for their strategies, BDO successfully

implemented the following initiatives:

• One Network Bank (ONB) — which pilot testson micro-SMEs (small- and mediumsized

enterprises) lending model. This was conducted in six areas in Davao and Iloilo.

• BDO Life —Financial Advisor(FA) coverage of BDO branches was raised in the end of

2017 vs. June 2016 to 89% vs. 84% respectively.

• BDO Nomura — initiated a research on over 40 Philippines stocks.

• Digital Initiatives —introduction of biometrics (fingerprintauthentication for mobile

banking),creating a virtual bank and different initiatives to support modern IT.

With these initiatives, BDO received various awards and recognition such as Best Bank

in the Philippines, Best Retail Bank in the Philippines, Best Corporate Institutional Bank in the

Philippines, Best Investment Bank in the Philippines, Bank of the Year, and Best Private Bank in

the Philippines, proving that their strategy was successful and gave them competitive

advantage.