EXECUTIVE SUMMARY

In the advent of the 19th century, banks have played a major role in the
economy of both the Philippines and the Asian countries. Banks, such as Hong Kong
- Shanghai Banking Corporation, played a major role in the success of Hong Kong
and China. In the Philippines on the other hand the Bank of the Philippine Islands
previously known as El Banco Español Filipino de Isabel II started the history of
banking.
Considering BPI’s impact to the economy and its level of influence and
stability; this paper, more than analyzing and studying the banking industry, will focus
on the Bank of the Philippines Islands (BPI). It aims to propose strategies that can
add to the growth of BPI and simultaneously provide a positive impact to the nation.
Currently, BPI is one of the leading local banks in the country with a net income of
Php 16B and a total asset of 985M. The competitive profile matrix of this paper
included the two biggest competitor of BPI. These are Banco de Oro (BDO) and
Metropolitan Banking Corporation (Metrobank). BDO having the biggest total asset
and Metrobank as gaining more power on loans are threats to the position of BPI in
the banking industry.
To be able to properly propose strategies and have a more detailed analysis
on BPI, this paper uses various strategy tools such as Competitive Profile Analysis,
External Factor Evaluation (EFE), Internal Factor Evaluation (IFE), Strength-
Weakness-Opportunity-Threat Analysis (SWOT), Porter’s Five Forces of Competitive
Analysis, Quantitative Strategic Planning Matrix (QSPM), SPACE Matrix, Internal-
External Matrix (IE), Grand Strategy Matrix, BCG Matrix and Financial Analysis. In
the competitive profile matrix, BPI scored 3.05 which is higher compared to its two
competitors; BDO with 2.80 and Metrobank with 2.50. This score considers the total
financial status and income generation through different products and services of
banks. In the previous scoring, BPI is outnumbered by both competitors because it is
usually ranked either 1 or 2 in terms of financials. Looking however to the total
parameters noted in CPM, BPI scored highest proving the balance of the bank in the
different aspect of the business.
The result of the different tools shows the competitiveness of BPI. Its EFE
with a rate of 3.15 shows how the bank addressed the external issues and
opportunities as well as how it copes with the demands of the environment. In the
IFE, BPI scored 3.11 telling us how it utilizes its strength and how it addresses its
weaknesses. It shows that BPI is strong on how it handles technology as a matter of
fact, its distribution network utilizes not only the branch or the physical
establishments but it also the internet. Furthermore, its mobile banking, phone

Strategic Management Paper: Bank of the Philippine Islands 1

banking and internet banking facility are other distribution networks that are
continuously improved by technology. Its risk management system and good
corporate governance structure are good enough to ensure check and balances that
benefits the shareholder’s value.
BPI’s external opportunities includes forecasted economic growth for 2014,
the 7 percent growth for the second quarter of 2013, the increasing OFW
remittances, the strong Philippines Business Sector composed of the micro, small
and medium enterprises, the continuous advancement of technology, the stable
perception of the international community to the status of our country, the good credit
review of various international institutions, the strong implementation of Credit
Information Systems Act, and the Implementation of Basel III. These opportunities
are providing a positive outlook on the future of the bank. The threats on the other
hand are the increasing number of non-banking financial institutions competing to the
various bank products, decrease in lending and savings interest rate, the low level of
banking transaction among Filipinos and the Increasing and entry of new rules and
regulations of the industry. These threats though evident, are properly addressed by
BPI with the exception of the increasing and entry of new rules and regulations in the
industry because BPI is not at forefront on questioning policies implemented by the
government.
Looking at all the results of the strategy tools, the strategic issues involve
would be to further penetrate the market both local based and overseas based. It
must also consider to make the products and services of BPI available to the Filipino
people and to inform the clients of its tailor-fit product and services.
In the QSPM decision stage, three factors are seen to be the key strategies
that should be considered in this strategic management paper. The scores are as
follows, Increase Market Penetration with 5.59, Market Development with 4.33 and
Horizontal Integration with 4.71. From the three strategies, Increase Market
Penetration would seem to be the best avenue in order to reach the goal of 30
percent growth in income and 10 percent growth in Market Share. Specific actions
would be to increase the distribution, improve promotion and position a competitive
pricing. The bank should (1) Strengthen its sales force through increase in Field
Sales Officers, Relationship Managers, Branches, EBC; (2) Improve, more friendly
and accessible yet secured Alternative Banking Channels such as Mobile, Phone
and Online banking; (3) Creation of a cashless society, availability of POS terminal or
tap terminal for payment not only in malls but in restaurants and micro, small and
medium enterprises; (4) Full implementation of Bank of the Future. Although in
QSPM it only ranked 2nd, the bank should also consider Horizontal integration

Strategic Management Paper: Bank of the Philippine Islands 2

through acquiring small banks that can also serve as another means of market
penetration. In the industry, in order to grow the businesses the management should
keep a close and keen eye to the competitors and learn to offer merger or acquisition
if necessary. The horizontal integration however should not be considered in the first
3 years projection but on the year after 2015. Thus this paper would recommend a
different strategy paper focused on horizontal integration in order to ensure a
thorough understanding on the financial issues on mergers and acquisition of direct
competitors and other financial institutions. The strategy objective for BPI on 2013-
2015 is to have a 30 percent increase -year on year- on its income with the support
of a 10 percent increase in market share on deposit, loans, capital and asset. The
result of EFE, CPM and IFE proves that BPI can reach this forecasted goal.

Strategic Management Paper: Bank of the Philippine Islands 3

I. INTRODUCTION
In order to have a competitive strategy for BPI it is important to understand its
strategies over the past century. It currently has 8 subsidiaries with more than 12,
000 employees. BPI is one of the best banks in the country in terms of revenue, size
and even to employee handling.

I.1 History and Description of the Business

Bank of the Philippine Islands, also known as BPI, is the second’s largest
financial institution in the country. It holds a notable market share in deposits both in
local and international currency, lending both collateralized and clean facility, asset
management and trust business and overseas Filipino remittances and other
transactions. Moreover, BPI offers facilities such as credit line and business loan for
small, medium and micro enterprises, agribusiness loans, crop loans, project finance,
business expansion loans and insurance services. Along with this it participates in
the finance and operating leasing business, government securities dealership,
securities distribution and foreign exchange business. It is known to be the leader in
electronic banking. Providing services and introducing technologically advanced
facility in banking such as automated teller machines, a point-of-sale debit system,
kiosk banking, phone banking, internet banking, mobile banking and the talk to me
project which is a customer service application and social network where everyone
can narrate their experiences, questions and other concerns and be given a
response real time anywhere and anytime.
History of BPI started when the history of banking in the Philippines and at
some point South-East Asia started. During the Spanish Colony, there were notable
increase in trade between Spain and the Philippine Archipelago. This scenario paved
the need for a banking facility in the country. In 1828, King Ferdinand VII forges a
creation of a public bank in the Philippines. This was the first attempt to have a
banking facility in the country however; this was not formalized until the middle of the
century under the colonial governor Antonio de Urbiztondo y Eguia who took his post
in year 1850. Thus on 1851, El Banco Espanol Filipino de Isabel 2 was established in
the Royal Custom House in the fortress town of Intramuros. The bank was named to
give honor to then reigning queen of Spain Isabel 2. Joining the bank’s policy board
was Antonio de Ayala making the Ayala family and as centuries pass by, the Ayala
Corporation closely related with the bank and with the industrial development of the
Philippines.1

1
History of BPI is also the history of banking industry. Though detailed history of the bank can be found in BPI
Magazine. My BPI Mag retrieved at the world wide web (2013)

Strategic Management Paper: Bank of the Philippine Islands 4

 Being the first and only public bank in the country and in all Southeast Asia, the
bank was granted the authority to issue the first paper money in the Philippines. The
operation started in 1851 as the bank issued its first peso fuertes, or “strong pesos”.
In 1869, Queen Isabel 2 was dethroned thus changing the bank’s name to El Banco
Espanol Filipino. In 1892, the bank moved to Binondo district across the Pasig River
and in 1897 it opened its first branch office in Ilolo. In 1898, the Philippines became a
U.S. possession. Few more years, as mandated by the Treaty of Paris BPI became
a 100% Filipino Institution. In 1907 they petition that the name be change to Bank of
the Philippine Island and in 1912 it became known as Banco de Islas Filipinas.
During this year the bank also opened its second branch office in Zamboanga. As
these changes happen in the government, BPI still continued its money-issuing
function but not exclusive and in 1949 it finally lost its money-issuing privilege.2
As the independent country began its regime, it started to create variety of
banking reforms designed to stimulate growth in the banking system. The creation of
banks including those in the rural areas was strengthened during this era. As part of
the bank reforms, BPI became privately owned. In 1969, Ayala Corporation took
majority share in BPI and this started BPI as the center of Ayala’s banking and, later,
insurance interests. Ayala Corporation started its campaign for BPI expansion. Its
growth came through a stream of acquisitions, starting in 1974 with its purchase of
the Peoples Bank and Trust Company. In 1985 the company acquired Family Bank,
the major mortgage and savings bank in the Philippines and renamed it BPI Family
Bank. In addition to this, BPI extended in the international community through the
purchase of Asian International Bank based in New York. As BPI expands, it also
pioneered in many aspects in the banking industry thus in 1981, the bank became
the first in the country to offer an access to Automated Teller Machines. Two years
after, it offered Express Teller system first in the country to offer 24-hour access to
banking services. Finally in 1987, it introduced the first debit-card system. Then
came 1991 where it introduced its Express Banking Centers located in shopping
malls which aims to operate as a mini-bank providing service different to the normal
banking hours. Clients were given the chance to transact in banks and apply for new
accounts or credit card, home and car loans even on weekends. Competition
became strong during these times specially that the international banks are coming
into the country. As such in 1995 BPI acquired First Cavite Savings then City Trust
Banking Corporation which boosted the number of branch to more than 400. In 1998,
the bank introduced the 24-hour call center paving way to a broad range of banking

2
Ibid.

Strategic Management Paper: Bank of the Philippine Islands 5

service over the phone. In 1999, Far East Bank and BPI came to a merger which
gave BPI the insurance subsidiary FEB Mitsu Marine. In 2000, it launched the first
Filipino bank with its own online bank, BPI Direct. Along with this is the acquisition of
FGU Insurance Corporation, Universal Reinsurance Corporation, Ayala Life
Assurance, Ayala Health Care and Ayala Plans. This paved way to BPI’s chance to
be the first bancassurance company in the country. In 2001, FGE merged with FEB
Mitsui Marine, thus the birth of BPI/MS Insurance Corporation.3
In 2003, along with its merger to Malayan Reinsurance Corporation forming
Universal Malayan Reinsurance Corporation, BPI bought DBS Bank Philippines
which enabled the company’s thrift banking component to claim the leadership spot
in the country. BPI has more than 1,200 branches nationwide. BPI with its 162 years
of existence remains a top player in the financial institution in the country. Among the
biggest local players in the country, it is the only bank that have a department that
handles process improvement which compose of units that handles corporate social
responsibility, total quality management projects and provides lean six sigma training
to officers and staffs. BPI, having been established for a century, value training and
good quality in job thus it provides thorough and proper training to all its employees.
They have good tie-ups with business schools and other professional schools that
provide training to its employees.

I.2 BPI Products and Services

Similar to other financial institutions, BPI offers product and services to its
client. Its product offerings are identified as Deposit products, Loans, Debit Cards,
Credit Cards, Prepaid Cards and Insurance which provides revenue from its net
interest income and accounts for about 62% of total Revenue of the bank. Its service
offerings are Mobile Banking Services, Phone Banking Services, Internet Banking
Services, ATM Services, Cash Acceptance Services, and Bills Payment Services,
Prepaid Cell phone Reloading Services, Remittance Services, Asset Management
Services and Foreign Exchange Services. The revenue from the service are from the
investment banking and corporate finance fees, securities trading gains, credit card
membership fees, rental of bank assets, income from insurance subsidiaries and
service charges and from the charges to the repossessed properties which
comprised of 38% of the total revenue of the bank.4
BPI’s product and services are tailor-fit to its clients as such for each client
segment, the bank have a particular product and service offering. The segment is not

3
Ayala Now (2001). BPI 150 Years. Volume 5, Number 4, July - August 2001
4
2012 Integrated Annual and Sustainability Report Bank of the Philippine Islands

Strategic Management Paper: Bank of the Philippine Islands 6

only through income or revenue that can be generated but also of demographics.
Clients are segmented by age and by personality in order to identify which product is
suitable for them.

I.3 BPI Target Market

The thrust of BPI is to provide services and products that cater the needs and
wants of its client. As such the target market are artificial and juridical persons who
have the capacity to earn and engaged to transactions in the bank such as
mortgage, investments, lending and others.
BPI also focuses on local and foreign markets. In order to compete in the
international community, it expanded and created subsidiaries in US, Hong Kong,
Middle East and Australia. As such, BPI’s target market has expanded international.

I.4 BPI Community

As part of its mission of empowering the Filipino people, BPI has various
organizations that enhance the talents and skill of its employee. BPI has created a
community that serves the nation. Currently, BPI has a good number of employees,
presented below.

Table 1. BPI Manpower5

Employee Officer Staff Total

Unibank 3,545 8,274 11,819

Insurance 124 498 622

51% ownership

Total 3,669 8,772 12,441

BPI has various unions that cater to the needs of its rank and file employees.
New Collective Bargaining Agreements for BPI (the mother company) was signed
last May 31, 2011 and is effective until March 31, 2014.

5
2012 Integrated Annual and Sustainability Report Bank of the Philippine Islands

Strategic Management Paper: Bank of the Philippine Islands 7

 I.5 BPI Subsidiaries
1. BPI Family Savings bank established in 1985. It is the retail arm of BPI. It provides
housing loans, auto finance, Small-Medium-Micro Enterprises.
2. BPI Direct Savings Bank established in 2000. It is the online banking of BPI.
Transactions are all internet and mobile based. Such that branches are also cyber.
3. BanKo (BPI Globe Banko) established in 2009. It is the first mobile-based, micro
finance focus savings bank in the Philippines.
4. BPI International Finance Limited, Hong Kong established in 1974. The deposit
taking company in Hong Kong.
5. Bank of the Philippine Island Europe established in 2007. Officially opened for
service October 1, 2007 and license is provided by Financial Service Authority in
2008.
6. BPI Express Remittance Corporation USA established in 1990. This serves as the
remittance center for overseas Filipino workers.
7. BPI Capital Corporation established in 1992 and merged with FEB Investment in
2002. This focuses on corporate finance and securities distribution business.
8. BPI Leasing Corporation established in 2001. This is a quasi-bank focus on lease
finance which BPI Inherited from Citytrust Investment Phils Inc in May 1998.
9. BPU/MS Insurance Corporation established in 2000 and strengthened in 2002
with the merger with FGU Insurance Corporation and FEB Mitsu Marine Insurance
Company. This is a non-life insurance company formed through the
aforementioned mergers.
10. Ayala Plans, Inc established in 2000. This is a pre-need insurance company
acquired through the merger with Ayala Insurance Holdings Corp.

Strategic Management Paper: Bank of the Philippine Islands 8

 II. RESEARCH DESIGN AND METHODOLOGY
II.1 Research Design
The researcher used historical analysis in addressing the issues and in
identifying critical factors in the paper. Strategy objectives, goals and issues were
identified through the different events and conditions of the economy and the banking
industry lifted in the different scholarly materials. Various audited financial statements
and annual reports of the industry lifted from SEC, news paper articles mainly local,
scholarly journals, interviews and reports of experts, industry updates, economic
research and analysis, periodical reports and government publications are used in
analyzing the external forces.
In order to ensure that the data from the company are credible, combination of
interviews from the expert and published reports of the bank in their company
website were utilized. Apart from this, lecture from Prof. Hilda Theodore was also use
as a guide in making the strategic management paper.
Furthermore, text books were also used most importantly Fred David’s
Introduction to Strategic Management. This text book was used in order to
understand the necessary theoretical framework for this strategic management
paper. SWOT Matrix, BCG Matrix, IE Matrix, Grand Strategy Matrix, SPACE Matrix,
Summary of Strategies and QSPM were the strategic tools used in this paper.

II.2 Scope and Limitation

This paper gives a brief analysis on the banking industry but is limited to the
Universal banks. It will provide a strategic objective to the Bank of the Philippine
Islands for the year 2013-2015 and will also provide a projected income for the said
years.
For purposes of data gathering, all financial data gathered are for the year
2010-2012. The strategy tools however are made with consideration to the 2013
reports. Environment scanning and other conditions pertaining to the economy and
politics consider the 2013 reports. Financial forecast on the other hand will start 2013
since the paper was started at the middle of 2013.
Although the paper will consider analyzing Universal Banks, it will only focus on
the top 3 Universal Banks in the country namely BPI, the primary company, and BDO
and Metrobank which are the competitors. To note, in the industry, the top 3 banks
already gained 40 percent of the market concentration ratio.

Strategic Management Paper: Bank of the Philippine Islands 9

 III. VISION AND MISSION
III.1 Bank of the Philippine Islands’ Statement of Purpose.

“WE BELIEVE in the central role that private enterprise plays in economic
development.

WE BELIEVE that our corporate mission is to be the leading private financial

institution in the Philippines in terms of professional competence, service quality,
responsible corporate citizenry, and overall growth and stability; and to be an
established ASEAN financial institution with a creditable worldwide outreach.

WE BELIEVE that we have a responsibility to manage the business for the maximum
benefit of our customers while adopting the highest standard of integrity; to offer the
widest possible range of financial services that is responsive to their needs; and to
adopt an objective attitude towards change and innovation, ever mindful of improving
service quality and operating efficiency.

WE BELIEVE that we have a responsibility to develop the potential of our employees

to the fullest by providing an environment conducive to their personal and
professional growth; and to foster a value system held in common throughout the
institution in order that we may all share a coherent sense of purpose and direction.

WE BELIEVE that we have a responsibility to attain, over time and within exacting
standards of prudent management, the highest possible return of investments of our
shareholders.”6

6
Bank of the Philippine Island Statement of Purpose

Strategic Management Paper: Bank of the Philippine Islands 10

 IV. EXTERNAL ANALYSIS

IV.1 Philippines Economic Condition and Philippine Stability

Philippines’ Economy 2012 Report

In 2012, the Philippine economy has expanded by 6.6 percent exceeding the
government’s target of 5 to 6 percent.7 Philippines in 2012 have shown good
performance compared to other 5 ASEAN countries, as a matter of fact Philippine’s
ratio of fixed capital to GDP increased from 18.7 percent to 19.3 percent. The higher
growth was also due to the strong private consumption and construction. In 2012, the
public spending and net export also recovered. These are evidence of the good
condition of the Philippine Economy.8
Private consumption drove GDP growth at 6.1 percent and contributed 4.3
percent points to the overall growth. Banko Sentral ng Pilipina said, as reported in
their Consumer Expectations Survey, that 12 percent of the total participants
purchased real estate properties through the remittance sent to them. This again
proved the growth on construction spending in the country.

Figure 1. Philippine growth in 2012 was among the highest in the region.9

7
World Bank Economic Update last May2013. Retrieved at
www.worldbank.org/content/dam/worldbank/document/EAP/Philippines/PhilippineEconomic
8
ibid.
9
ibid.

Strategic Management Paper: Bank of the Philippine Islands 11

 Figure 2. Private consumption continued to drive overall growth.10

Figure 3. The growing share of non-essential consumption to total private

consumption growth reflects middle class.11

10
ibid.
11
ibid.

Strategic Management Paper: Bank of the Philippine Islands 12

 Figure 4. The recovery of public construction drove overall investment
growth.12

Remittance has also been one of the major players in the Philippine Economy.
As a matter of fact, it is a key player in the stability of the country since the 21st
century. The OFW saved the country in so many financial crises, it is the reason why
the increase inflow of remittance and the increase number of Filipinos deployed
abroad is a good sign for the economy. Also this would mean strong remittance and
strong need for banks as the avenue to transmit remittances.
The government in 2011 is expecting a 5 percent growth in remittances yet in
2012 the total growth was at 6.4 percent. This is a clear indication on the success of
remittance in the country. Apart from OFWs, there are also good reports on the
import and export transactions in the country. 2012 is the recovery of the trading
business in the country. According to the report from World Bank, the trade deficit
narrowed in 2012 as export increase faster than imports.13

12
ibid.
13
ibid.

Strategic Management Paper: Bank of the Philippine Islands 13

Figure 5. Remittances continued to perform strongly in 2012 and supported the
growth of domestic demand.14

Figure 6. The trade deficit narrowed in 2012 as exports grew much faster than
imports.15

14
ibid.
15
ibid.

Strategic Management Paper: Bank of the Philippine Islands 14

 The National Statistical Coordination Board (NSCB) announced that the
Philippine domestic product (GDP) grew by 7.8 percent in the first quarter of 2013.
This is reportedly faster than China with a 7.7 percent growth rate, Indonesia with 6
percent, Thailand with 5.3 percent, Vietnam with 4.9 percent.16 Clearly, the
Philippines unexpectedly expanded its economy faster compared to the next giant
economy, China. As presented in the previous graphs, the GDP of the Philippines is
due to the strong performance of the manufacturing and construction sectors, as well
as the increase in government and consumer spending.

Relevance: One of the key indicators for an economic stability is GDP; as such a
growth in GDP is a growth in the economy. The financial and banking industry is
greatly benefited with this growth. The increase in GDP means increase in business
in the country which directly increases business to the financial institutions and
banks. This is an opportunity for business expansion not only in terms of corporate
accounts and transactions but also individual transactions and accounts. This
increase in economy can impact the deposit transactions for the banks similarly
increase in loan availment and repayment and increase in investments.

Philippines Economy Towards the Future

As year 2012 showed improvement in the Philippine economy majority of credit
reviewers and economist are giving positive feedback to the future of the Philippines.
2013 is said to continue the growth in GDP as well as increase in remittances. UN
Economic and Social Commission for Asia and the Pacific’s latest forecast claimed
that the fast growth in the Philippine economy could be more effective if there will be
continuous progress on the public-private partnership through the upgrade of the
country’s rating to investment grades. An economic growth of 6 percent to 7 percent
is forecasted by UNESCAP for 2013.17
World Bank reported that the strong remittance and capital inflows supported
the large foreign exchange surpluses. Remittances remained as the key driver of the
Philippine’s economic growth and healthy external accounts. In the early months of
2013, Philippines reached almost USD 90 billion gross international reserves.18 This
continuous growth of the Philippine economy, robust external balances and
improving fiscal position is the reason of the Fitch Ratings in the first quarter of 2013,
from BBB- to BB+. After this, Standard & Poor’s followed an upgrade of the country’s

16
NSCB Report (2013). Philippine Economy. Retrieved at http://www.nscb.gov.ph/sna/2013/2nd2013/2013qpr2.asp.
17
Philippine Star report April 18, 2013 stated that the Philippine Economy to grow 6.2 percent in 2013 per UN
18
supra 7.

Strategic Management Paper: Bank of the Philippine Islands 15

credit rating to BBB- noting that the country has a strong external position, moderate
inflation and declining reliance on foreign currency debt.19
Furthermore, the Asian Development Bank stated that the 2013 Asian
Development Outlook was exceeded in the first half of 2013. A growth of 7.6 percent
was seen first half of 2013 and fixed investment growth accelerated to 12.7 percent
outpacing a 5.6 percent rise in private consumption. Report says that there is an
expected loss of momentum in growth but the forecast for 2013 is still raised to 7.0
percent and for 2014 is nudged up to 6.1 percent.20

Figure 7. The strong remittance and capital inflows sustained large foreign
exchange surpluses.21

19
ibid.
20
Asian Development Bank (2013). Asian Development Outlook 2013: Asia’s Energy Challenge.
21
supra 18.

Strategic Management Paper: Bank of the Philippine Islands 16

 Figure 8. Gross international reserves reached almost USD 90 billion in early
2013.22

Relevance: The Philippine economy with its continuous growth and continuous good
rating from different industries are giving opportunity for financial and banking
industries to increase its business. It allows strong investment market to be
participated by banks and most importantly, it gives confidence to clients, both
individual and corporate to participate in the products and services of banks in the
country. A continuous positive outlook to the Philippine economy can also increase
foreign direct investments in the country providing more employment to the people
who in turn can benefit financial institutions and banks.

Inflation
The primary measure of price inflation in an economy is inflation rate. It is
inflation that reflects the increase or decrease of the purchasing power of money.
The rise in prices of goods and services of an economy over a period of time is
inflation and currently, Bank Sentral ng Pilipinas is looking into 3 to 5 percent inflation
rate for 2013.
In 2012, the Philippines have a reported 3.2 percent inflation which according
to BSP proves a positive impact to the Philippine economy. Last August 2013, the
inflation rate was said to be 2.1 which is the lowest ever since August 2009.23 This
decrease is mainly due to the annual decrease in housing, water, electricity, gas and
other fuels index. According to census, the downtrend was can also be associated

22
ibid.
23
NSO 2013. Summary of Inflation Report Consumer Price Index (2006=100): August 2013

Strategic Management Paper: Bank of the Philippine Islands 17

with the slower annual increments in the indices of food and non-alcoholic
beverages, alcoholic beverages and tobacco, clothing and footwear; furnishing,
household equipment and routine maintenance of the house and even transport.

Figure 9. Inflation Rates in the Philippines All Items.24

Figure 10. Inflation Rates25

24
ibid.
25
ibid.

Strategic Management Paper: Bank of the Philippine Islands 18

 According to the governor of Bangko Sentral ng Pilipinas, Mr. Amando
Tetangco, Jr, the downside risk associated with the continued weakness in global
economic growth will contribute to an inflation environment that is manageable.26

Relevance: Inflation is a key player in an economy. A high rate of inflation can

discourage investors in the country which may lead to a slow long term growth and
low rate of inflation on the other hand can cause low interest rate that can encourage
enterprises to borrow money for working capital and expansion of projects. According
to BSP, the inflation rate for 2013-2014 will be at 3-5 percent which compared to
2012 and 2011 shows stability. The stable environment of inflation can provide
confidence among consumers thus increasing the spending among people and even
the government. The increase in commodity spending will further boost the economy
as such translating to an increase in lending and deposit business for the banking
industry.

Interest Rates
Bangko Sentral ng Pilipinas through its governor Mr. Armando Tetangco Jr.,
said that they will keep interest rates low for the next few years.27 Although there are
pressures to increase rates to ensure that foreign money will not leave the country,
BSP would rather keep policy rates at their current level instead of reacting to the
current volatility of the financial market. The Philippine fundamental are said to have
build a safeguard to the volatilities in the market thus there is no need to deviate from
the current policy stance. Mr. Tetangco said that there might be refinements in some
policy.28

Relevance: The interest rates are directly affecting the banking industry. A policy that
will lower rates can assist the country in the increasing money supply. This will
lessen the negative effect of global crisis however too low interest rates can cause
too much money supply thus can make demand increase causing consumer prices
to increase beyond what can be tolerable. This will greatly impact the stability of the
banking industry and any financial institutions.

26
The Philippine Star (2013). Gov’t expects favorable inflation rates for 2013 - 2014. Retrieved at
http://www.philstar.com/breaking-news/2013/01/05/893459/govt-expects-favorable-inflation-rates-2013-2014
27
Dumlao, Doris (2013). BSP seen to adjust settings to temper inflation. Rate of rise consumer prices hit 3% in Q4
28
ibid.

Strategic Management Paper: Bank of the Philippine Islands 19

 IV.2 Political, Government and Legal Rules and Policies
Similar to other industries in the country, Banks are monitored by the
government through the Bangko Sentral ng Pilipinas. There are also different set of
rules and policies that banks should adhere in order to smoothly operate. In the
previous policies of the government and the international community, Basel I and
Basel II had been properly operational. The local banks have strong efforts in this
said two agreements however, the current trend in the economy and with the issues
during the financial crises, Basel III where introduced. Similarly, the Philippine
government with its effort to ensure that the transactions being made in local banks
are genuine had implemented the Credit Information System Acts.

Basel III Implementation in the Philippine Banks

The Basel Committee on Banking Supervision through its members of the
board have decided a new global regulatory on banks’ capital adequacy and liquidity.
Basel III came to existence because of the deficiencies in financial regulations as
evident during the recent global financial crisis. This new policy intends to strengthen
the bank capital requirements and introduce the new liquidity requirements and bank
leverages.
The purpose of Basel III is to simplify the bank capital into Tier 1 and Tier 2,
with Tier 1 composed primarily of bank liquidity and retained earnings plus additional
going concern or Hybrid Tier 1 capital and Tier 2 capital composed of just lower Tier
2 capita.29 Daily Tribune stated that BPI is ready for Basel III implementation, with a
CAR of 14.5 percent less than 1 percent of this is tier 2, and the CAR will be 13.5.
This according to the Vice-President of BPI for Global Banking said that the bank
doesn’t need to rely on any capital-raising activity in preparation for it.30 The hybrid
bonds reliance and capital rising is not necessary because everything is stable.
Furthermore, hybrid bonds and capital-raising is unstable in the coming years. This,
however, makes BPI conservative and might be losing opportunities of increasing
revenue through capitalization.
Bangko Sentral ng Pilipinas stated that as of end of June 2012, the average
CAR is at 16.9 percent which surpassed the 10.0 percent domestic regulator
minimum and 8 percent international norm.31
The reason for the increase in capital support of the industry is the assumed
risk which have been stabilize by Banks’ initiative of either through retained earnings

29
BizNews Asia Magazine, Vol 8 No. 26, October 31, 2010 p. 24
30
Velasco, Ed (2013). BPI has enough capital for Basel 3. Retrieved at
http://www.tribune.net.ph/index.php/business/item/17865-bpi-has-enough-capital-for-basel-3
31
ibid.

Strategic Management Paper: Bank of the Philippine Islands 20

or issued capital instruments to match the rise in their risk-weighted assets (RWAs).32
The higher corporate and consumer loans and to investments in debt securities
issued by in-rated counterparts helped in the increase in RWA.
The initiatives made by BSP together with the local banks made the Philippine
banking system’s CAR on consolidated basis at 17.6 percent which is higher to other
Asian countries such as Indonesia with 17.3 percent, Malaysia with 17.3 percent,
Thailand with 14.8 percent and South Korea with 14.0 percent.33

Figure 11. Capital Adequacy Ratio.34

Relevance: The Basel III standard aims to further strengthen the local banks in the
Philippines and enable them to be prepared in the adverse effects of future financial
crisis. The approach of Bangko Sentral ng Pilipinas makes the banking system of our
country internationally stable and efficient. Furthermore, the former BPI has stated
that they are prepared in the Basel III implementation. As a matter of fact, they
believe that the capital adequacy ratio of BPI can sustain the bank amidst any crisis
in the future. As a matter of fact, the bank believe that hybrid bonds and capital rising
is not necessary for BPI.

Credit Information System Acts of the Philippine

Credit Information System Acts (CISA) of the Philippine also known as
Republic Act No. 9510 aims to address the need for reliable credit information

32
Banko Sentral ng Pilipinas Report on Risk-weighted assets.
33
ibid.
34
supra 7.

Strategic Management Paper: Bank of the Philippine Islands 21

concerning the credit standing and track record of borrowers.35 This law will establish
a comprehensive and centralized credit information system for the dissemination of
fair and accurate information relevant to credit and credit related activities pertaining
to the financial system.
The accessibility of the information to participating financial institutions and
banks will allow a better and more comprehensive credit analysis. Furthermore, it
can provide a better credit market to the industry. The processes for different banks
in doing their credit investigation can be expedited.

Relevance: The creation of CISA can protect the financial sector from risk of
providing good credit evaluation to those who have been financially not capable for
loans. The 2008-2009 financial crises as we are aware have been due to the too
much exposure of banks to customers with insufficient funds to amortize the facilities
they have acquired. BPI and other banks can easily identify if client have exposure to
other banks thus can minimize cases of past due or non-performing loans.

IV.3 Technological Advancement

Globalization through technological Advancement
The current trend of the 21st century is globalization through the fast means of
communication and transactions, the Internet. It is uncommon in the current
generation to have no knowledge or capability to access the internet. As a matter of
fact, the online facility had become the major tool in communication not only for
businesses but for individuals. In the survey made by Citigroup of Company,
Filipinos are now comfortable using online transactions in banking.36 Ms. Bea Tan,
the Citi Philippines consumer business manager said that the company is currently
seeking a marked shift to online and mobile banking as a matter of fact, in Asia they
are already looking at 98 percent transactions are made not on branches. The survey
covered 3.500 online respondents across seven countries including Australia, India,
Indonesia, Korea, Singapore and Taiwan. And it showed that 75 percent of the
people covered are now ding almost all their banking transactions through their
computer, tablet or mobile phone.37
The study made by Citigroup proved the online poll of Business World last
20013 stating that 70 percent of their respondents said that they do e-bank and of
those, 45.33 percent prefer internet banking, 22.4 percent prefer ATM transactions,

35
Republic Act No. 9510. Implementing Rules and Regulations of the Credit Information System Act (CISA)
36
Dumlao, Doris C. (2013). More Filipinos warming up to online banking, Citi Survey Shows. Retrieved at
http://business.inquirer.net/115213/more-filipinos-warming-up-to-online-banking-citi-survey-shows
37
ibid.

Strategic Management Paper: Bank of the Philippine Islands 22

15.421 percent prefer phone banking and only 5.84 percent would rather transact
physically to their branch.38 The acceptance of the people to alternative channels in
banking is paving way to a faster and more efficient means of transacting in banks.

Relevance: Majority of the big banks, specially the Universal and Commercial banks
have already established their alternative banking facilities. This move of the banks is
paving way to a cost-efficient means of transacting in the banks. Furthermore, it is
optimizing the technological advances of the generation. The Bank of the Philippine
Island is the pioneer of almost all technological advancement in the banking industry.
It is the first bank to offer ATM and ATM machines, the first bank to introduce debit
card and even online, and phone banking. BPI created the 24/7 banking which
serves as the alternative banking facility for its clients. BPI 24/7 facility had an
increase of 15 percent transactions to roughly 10 Million which represents around 70
percent of the bank’s total deposit monetary transactions. The BPI mobile banking
grew its user base faster with a growth rate of 50 percent. Showing how aggressive
BPI is in utilizing the advancement in technology.

IV.4 Other External Factors

Filipino Financial and Banking Literacy
Although Philippines had become one of the major sources of intellectual
workers across the world, majority of its citizen are not yet considering banks as one
of the tool that can assist them in their finances. As a matter of fact, in the report
gathered by Philippine Daily Inquirer, the Philippines is considered as one of the
laggards in the Asia-Pacific region in terms of utilizing financial services.39
The country ranked 12th out of the 15 countries in terms of proportion of
working age population who have accounts with banks or any financial institutions. In
the results study made by US Agency for International Development, only 26.56
percent of Filipinos aged 15 years old and above have accounts with banks and
other financial entities.
The countries that the Philippines are better at in terms of having an account
are Indonesia and Vietnam with only 20 percent and Cambodia with less than 10
percent. The highest rankings on the other hand are Japan, South Korea and Hong
Kong. Other countries are better than the Philippines such as, Mongolia, Thailand,
Malaysia and China with over 60 percent working age individuals with financial

38
ibid.
39
Remo, Michelle V. (2012). Philippines Lags Behind Peers in Bank Penetration, Survey Shows. Philippine Daily
Inquirer.

Strategic Management Paper: Bank of the Philippine Islands 23

accounts and Laos with 27 percent slightly higher than the Philippines. 40 The said
result was also consistent with BSPs reports. As a matter of fact, BSP have
requested banks in the country to expand their services and branch out. They are
seeking them to use technological infrastructure in order to widen the reach of the
banks in the other remote areas in the country.

Relevance: The growing economy of the Philippines means the growing capacity of
the citizens to transact business with banks and other financial institutions. However,
the low level of financial literacy of the people can hamper the growth that it can
contribute to the banks. If the citizens will store their money to different ways other
than to banks and financial institutions, the money supply in the economy might not
be enough in order to control inflation and rates. If savings are kept to their houses
and other places, opportunity cost will increase. As such, it is important to ensure
that the people know how to properly utilize the money they earn and even the
means of savings. The Bank of the Philippine Island is addressing this through its
corporate social responsibility dubbed as BPI: On Call Financial Wellness. This
project aims to reach all areas in the country and provide Bank officers that can
explain to them what Financial Wellness all about and how banks can assist them in
achieving this. BPI On Call Financial Wellness started in 2008 and initially started
with 48 Bank officers. Currently, the department houses more than 150 Bank Officers
that not only sell the products and services of BPI but most importantly provide
financial wellness seminar to different people. They have projects with schools,
Baranggays Centers, companies and government offices. This move of BPI doesn’t
only in support to the call of BSP but also to ensure a stable market share in the
country.

Growing Micro, Medium and Small Enterprises

The Micro, Medium and Small Enterprises are businesses that are engaged in
industrial, agribusiness and/or services that falls into the category of either single
proprietorship, cooperative, partnerships or corporation whose total assets with the
inclusion of arising from loans but exclusive of the land of which the particular
business office and equipment are situated must have value falling under the
following categories and number of employees identified below:

40
ibid.

Strategic Management Paper: Bank of the Philippine Islands 24

Micro: Php 3,000,000 or less - 1-9 employees
Small: Php 3,000,001 to Php 15,000,000 - 10-99 employees
Medium: Php 15,000,001 to Php 100,000,000 - 100-199 employees (More than 200
employees are already large)

Department of Trade and Industry in 2011 report said that there are 820,255
businesses operating in the country. Of this, 816,759 are MSME in the country
making it 99.6 percent of the total business enterprise operating in the country. 41
From the total number of MSME, 91.0 percent are micro enterprises and 8.6 percent
are small enterprises. The remaining .4 percent is medium enterprises. The trend of
having more than 95 percent of MSME operating in the country has been noted since
2009.42
Majority of the business are operating in NRC with a total employment
contribution of 61 percent. This is the total jobs generated by all types of businesses
in year 2011. The 61 percent are composed of micro enterprises with 28 percent
contribution, 25.9 percent by small enterprises and 7.1 percent from medium
enterprises.43
The value-added, MSME contributed a total of 35.7 percent. This comprise of
manufacturing contribution with 6.87 percent share, wholesale and retail trade and
repair contribution of 6.58 percent followed by financial intermediation with a share of
6 percent, such that, the economy is greatly affected by the MSME. Apart from this,
the MSME are providing job opportunities among the Filipino people. Its contribution
is strong that the MSME can dictate the future of an economy. They have to be
supported by the government in order to ensure their stability. 44

41
Department of Trade & Industry Philippines. Micro, Small and Medium Enterprises. Report 2011.
42
ibid.
43
ibid.
44
ibid.

Strategic Management Paper: Bank of the Philippine Islands 25

 Figure 12. Geographical Distribution.45

Figure 13. Employment Contribution.46

45
ibid
46
ibid.

Strategic Management Paper: Bank of the Philippine Islands 26

 Figure 14. Value Added.47

Relevance: As noted above, the MSME are major player in the economy, they
provide job opportunities as well as contribute to the growing GDP in the country.
The continues growth of this segment is supporting the healthy economy of the
country opening more opportunities for Banks and other financial institutions. A
strong economy is a strong opportunity for financial institutions and banks. BPI
addressed this opportunity by launching products that would cater specifically to this
MSME. The Ka-negosyo brand was created in 2009 and launched in 2010 giving
products exclusive to MSME. These products are both deposit and loan. The
dilemma however in this strategy is the possibility of migration of the existing client to
the new product with similar investments. There might be a transfer of funds and/or
investment rather than additional investments.

47
ibid.

Strategic Management Paper: Bank of the Philippine Islands 27

 V. INDUSTRY AND COMPETITOR ANALYSIS
V.1 Market and Industry Segment
The banking system in the country is monitored by the monetary board of
Bangko Sentral ng Pilipinas. The banks are categorized, as mandated in the
Republic Act 8791, as Universal Banks, Commercial Banks, Thrift Banks, Rural
Banks, Cooperative Banks and Islamic Banks. BSP provided a legal definition of the
following banks and are given reserve requirements.

Table 2. Types and Bank Categories in the Philippines.48

Reserve
Type of Bank Characteristics
Requirements

Universal Bank 18%

These two represent the largest single group,
resource-wise, of financial institutions in the
country. Offers the widest variety of banking
services among financial institutions. They are
Commercial Bank 18% authorized to engage in underwriting and other
functions of investment houses and to invest in
equities of non-allied undertakings (BSP)

Composed of savings and mortgage banks,

private development banks, stock savings and
loan associations and micro-finance thrift banks.
It is engaged in accumulating savings of
depositors and investing them. They also
provide short-term working capital and medium-
Thrift Bank 6%
and long- term financing to businesses engaged
in agriculture, services, industry and housing,
and diversified financial and allied services, and
to their chosen markets and constituencies,
especially small - and medium- enterprises and
individuals (BSP)

48
www.bsp.gov.ph.BSP Mandate and Policies. Retrieved last September 10, 2013

Strategic Management Paper: Bank of the Philippine Islands 28

 Reserve
Type of Bank Characteristics
Requirements

Rural Bank

4% and 2% for These are the most popular banks in the rural
time deposit communities. Their purpose is to promote and
expand the rural economy in an orderly and
effective manner by providing the people in
the rural communities with basic financial
services. Rural and cooperative banks help
farmers through the stages of production, from
buying seedlings to marketing their produce.
The difference between these banks is from
their ownership. The rural banks are privately
owned and managed while the cooperative
banks are organized and owned by
cooperatives or federation cooperatives (BSP)
4% and 2% for
Cooperative Bank
time deposit

There’s only one and only Islamic Bank in the

country, the Al-Amanah Islamic Bank.
Established by Former President Ferdinand
Marcos, in 1973 with a capitalization of 100
Islamic Bank n/a million. This bank covers the provinces of
Basilan, Cotabato, Lanao del Norte, Lanao del
Sur, Palawan, Sulu, Taw-Taw, and Zamboanga
del Norte and Sur - or places with large Muslim
populations.

Currently, BSP is supervising a total of 24, 962 financial institutions in the

country. These are composed of head offices, branches and other offices of the
Universal, Commercial, Thrift, Rural, Cooperative and Islamic Banks.49 Over the past
few years, there are two famous banks that declared bankruptcy, Banco Filipino and
Export Bank; as such BSP is once again imposing heavy policy to banks.

49
ibid.

Strategic Management Paper: Bank of the Philippine Islands 29

 Table 3. Physical Network of Financial Institutions under BSP Supervision.50

V.2 Bank of the Philippine Islands Market Aspects and Market

Segments
In 2009, a study was made indicating that in urban areas the general banking
market is older. Majority of the banking markets are aged 35 and belong to the class
A, B and C of the society.51 The study also shows that 60% of the market is women
and among those 60%, 76% are married. It was also mentioned that majority of the
market in the banking industry are entrepreneurs, housewives and employees.

50
Banko Sentral Report at www.bsp.gov.ph/physicalnetwork
51
Ang, Alvin (2009). “Remittances and Household Behavior in the Philippines” ADB, Economics Working paper
Series No. 188. Manila: Asian Development Bank

Strategic Management Paper: Bank of the Philippine Islands 30

Furthermore, a study made by US Agencies said that there are only few Filipinos at
aged 15 who have bank accounts.52
The Bank of the Philippine Islands has segmented its market similarly as to
how the research mentioned above segmented their study. Having an equip research
team in BPI; they have segmented their market into four categories, the affluent
market, the aspirant market, the early nesters and the Juan Dela Cruz family.
Furthermore, from the segmented market, BPI has also segmented their product
offering and client type. They have clients who belong to the private banking,
preferred banking, mass market and OFW categories. Below are the different
characteristics of the different market segment.

Table 4. BPI Market Segmentation.53

Market Segment Personality Possible Client Segment

Affluent • Complex Financial Needs Private / Preferred

• Knowledgeable about banking and the
product offerings
• Financially Experience and Engaged
• Wealthiest segment, goal is to enjoy life
and its retirement

Aspirant • Well educated and stable income Preferred / Mass Market

• Middle class parents with upper class’
aspirations
• Knowledgeable and experience to
mainstream banking
• Requirements are on housing and car
loans

Early Nesters • Entry level to banking and limited to Preferred / Mass Market
financial activities
• Short term financial concerns and
orientation
• Young
• Emerging middle class getting started
with family and career

52
Supra 39
53
BPI Segmented their Market base in capacity and personality. After which products are segmented accordingly.

Strategic Management Paper: Bank of the Philippine Islands 31

 Market Segment Personality Possible Client Segment

Juan Dela Cruz • Moderately expanding bank activities Preferred / Mass Market
Family • Assets are accumulating
• Savings as the answer to life-stage
needs
• With Financial Stability

Having a market segment based on characteristics, BPI also developed a

segment based on emotive needs. It is categorized into four types, the Spenders, the
Status-seekers, the Savers and the Managers. Among the categories, the banking
customers and non-banking customers are segregated. Spenders are focused on
their lifestyle, their future goals and a freedom from how they manage their finances.
The status-seekers on the other hand have superiority search, looking for prestige
and the focus is to gain power. The savers on the other had area assuring,
supportive, and protective and security focused while the Managers are competent,
organized, thinkers, product and technology driven.
Having a well defined market; BPI has also created products and services
that are suitable for each market segment. It has products that are bundled to
insurance and investments. Below are the different product type and the different
services that the BPI offers to its client. Other products of its subsidiaries are not
allowed to be transacted in the physical office while others are allowed by BSP.

Strategic Management Paper: Bank of the Philippine Islands 32

 Table 6. BPI Delivery Channels.54

Having various products and services, BPI has created different avenues in
order to ensure the availability of their products and services to the market.
In their annual report of 2012, they stated numerous ways of engaging to its
internal and external clients. BPI has always been advocating technology as a
means of reaching their clients as such over the years they have been consistent in
utilizing it to the benefit of its client base. Below is their diagram.

54
Lifted from BPI Annual Report of 2013

Strategic Management Paper: Bank of the Philippine Islands 33

 Figure 15. How BPI Get connected.55

55
ibid.

Strategic Management Paper: Bank of the Philippine Islands 34

 Table 8. BPI Common Products56

Deposit Loans Credit Cards Investments Insurance

Grow your Dream

BPI Save-UP Classic Card
BPI Ka-Negosyo
BPI Save-up in
loan Lowest Interest Special
A savings account cooperation with
Rate and local Deposit
that have an the Savings
(Credit Line, merchandisers Accounts
insurance 10x of the Account
Franchise Loan
total savings
and Regular Term
Loan)

BPI Maxi-Saver
(Checking and
Savings) Blue Card
Build your Dream ALFM
A savings account Master Card and Growth BPI Get Started
that gives additional BPI Housing Loan intended for the Funds
1% interest if no practical user
withdrawals are
made

Edge Card / Mini-

BPI Get Started
Edge Card
Drive your Dream ALFM BPI Auto
A savings account
For young Mutual Insurance (BPI
that has an
BPI Auto Loan professionals and Funds MS)
insurance 5x of the
easy on the go
total savings value
holders

BPI Leasing
Sky Miles
All other bank
BPI Regular Provides Time
assurance
Savings Account requirements for Intended for the Deposits
products
heavy equipments, travelers
operating assets

Amore
All other
BPI Regular Prestige Card that investment
Checking Account has exclusive perks products of
for Ayala BPI
Companies

56
BPI Provide all bank product and services mandated by BSP and rebrand it according to the market segmentation

Strategic Management Paper: Bank of the Philippine Islands 35

 Deposit Loans Credit Cards Investments Insurance

BPI Easy Saver

Account

A savings account
that doesn’t have
maintaining balance

BPI Jump Start

Account

A savings account
that is intended for
age 9-16 years old
NA

BPI Passbook
Account

Ka-Negosyo Account

A savings account
intended for
entrepreneurs or
business owners

BPI OFW Account

(BPI Direct)

V.3 Porter’s Five Forces of Competitive Analysis

There are currently 38 commercial banks in the country, 20 of which are
Universal Banks. The banks are categorized as private domestic banks (19),
subsidiaries of foreign Commercial Banks (16) and government controlled banks (3).
BPI is a Universal Bank and is in tight competition with BDO and Metrobank
respectively. Below are the top 10 commercial banks in the country.

Strategic Management Paper: Bank of the Philippine Islands 36

 Table 9. Competitors in the Philippine Commercial Banks57

Competitive Rivalry
The most intense competitive force in Porter’s Five Forces is probably
Rivalry. In the book Strategic Management by Fred David, it states that the intensity
of rivalry among competing firms increase as the number of competitors increase.
Similar happens as the demand for the industry’s product declines, as competitors
become more equal size and capability and as price cutting becomes common.
Furthermore, when the capacity of consumers to switch brand is easy, when the
demand of consumer is growing slowly or declines when barriers to exist the market
is high, when fixed cost are high, when rival firms are diverse in strategies and when
mergers and acquisition are common in the industry, rivalry is intensely increasing.

Total Market Share and Market Growth

Looking at the table above, it shows us that the top 3 banks have an average
of concentration ratio of 45% total market share in all categories. If we look into the
loans portfolio, the top 3 banks already gained 53% of the total market share. Thus
almost half of the pie has already been captured by three banks leaving the
remaining percentage to be shared by the 35 commercial banks. This is an evidence
that entry to the banking industry means that the business should have a strong
tolerance level towards competition. The differences in percentage of the top 3 banks
are close enough that there is a struggle in maintaining a market leadership.
BSP shows that the Banking Industry had been performing well comparing to
banks in our neighboring continents. As a matter of fact, the current credit standing of

57
Consilidated report accessed at the world wide web, http://www.affordablecebu.com/ load/banking/top_10_largest
_commercial_banks_ in_the _philippines/13-1-0-3808 July 2012 retrieved August 10, 2013. Following data are
validated to the different reports from the bank identified

Strategic Management Paper: Bank of the Philippine Islands 37

Philippine banks and the recognition given by international community are evidence
of the healthy market growth in the bank.58

Distribution Networks and Consumer Demand

The three major players are widely distributed nationwide. They are
distributed based on branches and ATMS. Furthermore, they can also be accessed
through digital marketing such as online and phone banking. BDO is aggressively
increasing its branch and ATMS nationwide, currently it has 795 branches and
around 1,800 ATMs, there are said to be 50 more branches that will soon be opened.
Metrobank on the other hand have 800 branches and 1,600 ATMS nationwide with
no reports of expansion. While BPI is eyeing to have the Branch of the future but
currently with a total of 831 branches and 2,008 ATMS and around half the number
of its ATM is the total number of depository machines.
Branches of BDO and BPI are located very close from each other while
Metrobank ensures that the proximity level of its each branch is far from each other.

Product Differentiation, Interest Rates and Services Offered

All commercial banks offer similar products such as deposit, loans,
investments and trust products. They also offer services that would cater remittances
and insurances. Interest rates are also similar specially those that are basic such as
regular ATM and checking accounts. Services offered vary from generic type to
tailor-fit type.
The products offered by each bank are branded with different image. This is
where they can market the product. This is also the avenue to provide a better rate to
a more closely similar to the competitors’ product. When it comes to lending, there’s
a different approach on how to market because this is the bank’s product where
interest can be haggled. Thus this is where banks have a tight competition.
Furthermore, services offered by bank are usually one of the biggest factors of
customers’ decision. BDO have an equal service across customer, Metrobank have
OFWs and Filipino segmentation. BPI has client segmentation such as Mass Market,
Preferred Market and Private Banking Market.

58
Domingo, R & Remo M reported that Standard & Poor’s gave a better credit rating from BB+ to BBB-, . Apart from
this, Fitch Ratings gave its first investment grade for the Philippines. This shows the strength of Market in the country.
The Investment rating of Fitch and S&P will translate to actual investments over the short to medium term. The
Philippines can then catch up with its Southeast Asian neighbors.

Strategic Management Paper: Bank of the Philippine Islands 38

Low Switch Cost for Customers and Strategic Stakes are High
Having similar products and having a board rate mandated by BSP, it is easy
for client to switch from one bank to another. The process of transferring funds from
each bank and the process of transferring loans from one bank to another will not
incur too much on the side of the client but can be damaging for the bank.
Banks in the country have almost the same products and are located close to
each other. It is common that clients have banking transaction with two or more
banks in the area the client is located. Such that the potential for a firm to lose
market position or have a great gain is very high. Stake holders or clients are directly
transacting to each bank located in the area exposing the client to services and
products that are similar to every bank. This scenario can make client decide to
transact to a bank that might give emotional attachment to him and her. Thus there
must be a strong relationship built between banks and clients.

High Exist Barriers and High Fixed Cost

Banking industry is a very popular business. Apart from this, investments both
on people and machines are very expensive. The permits provided by the Central
Bank are limited and regularized. The Banko Sentral ng Pilipinas’ strict policies in
providing license to operate a branch makes opportunity cost higher when an
industry decides to close a bank. This explains why majority of banks would rather
acquire other banks and align them to their policies and structures rather than getting
a new license. And this is also the reason why loosing banks would rather merge
rather than be persecuted by its investors and loose both its credibility and its
license. Only few loosing banks have that courage to declare insolvency and
bankruptcy.

Potential for Substitute

The 21st century currently exploits the technological advances to the benefits
of humanity. Technological advances such as online facilities and new machines are
utilized everyday in order to make people’s life easier. As such, financial institutions
are currently faced with many substitutes conceptualized with the use of new
technologies. These substitutes can be categorized as Commercial and Thrift Bank
counterparts, Quasi-Financial Institution and Telecommunication Companies. These
categories use technology to provide products and services that can serve as an
alternative to the products and services of Universal Banks.

Strategic Management Paper: Bank of the Philippine Islands 39

Telecommunication Companies
The Telecommunication Industries plays a big role in the business
development of the country. As a matter of fact, it is a powerful industry in the current
generation because it is the industry that provides online network and serves as the
bridge to communication accessibility. The two players in the Telco Industry is none
other than Globe and Smart which currently provides financial services to its clients.
Globe with its G-cash product allows its client to transfer funds anywhere and
anytime. It is even used to pay bills to partner establishments while Smart with its
Smart Money provides similar services. Other than these, the two Telco’s have
points system to every transactions made by their clients. These point systems give
rewards depending on the number of usage. This industry has efficient electronic and
mobile services in purchasing goods and services internationally and locally.

Quasi-Financial Intermediaries
Quasi-Financial Intermediaries are institutions that are not banks but are
subject to regulation of BSP’s monetary board. These institutions are engaged in
acquiring funds other than deposits from more than 19 creditors in order to re-lend it
to their clients. These quasi-financial intermediaries are segmented into two groups,
those institutions with quasi-banking functions and other non-bank financial institution
that are subsidiaries and affiliates of other banks and quasi-banks. The non-bank
financial institutions are investment houses, financing companies, pawnshops, and
non-stock savings and loan association.

Commercial and Thrift Bank Counterparts

Commercial banks generally functions similar to Universal bank however the
process of obtaining facilities are relatively faster and requirements can be less
tedious. Products and services that are offered by Universal Bank which requires
tedious requirements can be made easy for Commercial Banks because of the
process legally mandated to them. Universal Bank have investments house while
commercial bank can mediate in investment house such that they can offer that
product but can provide a more intense service to them due to lower bulk of
transactions.
Thrift bank on the other hand provides better rates to loans and investments.
Therefore, Universal Bank’s investment products can have an alternative product in
Thrift Banks with the advantage of lower risk since it will only be placed to low-risk
placements. Thrift banks have lower reserve requirements by BSP thus they have

Strategic Management Paper: Bank of the Philippine Islands 40

the capability to adjust their spread in order to provide better and competitive rates to
other products of the bank including investments.

Potential Entry of New Competitors and Entry Barriers

Entrance of new players in the industry are faced with barriers such as capital
requirements, marketing resources, strong brand recognition, capability to adhere to
technology requirements and the endurance to adhere to the regulatory policies of
the central bank.

Capital and Asset Requirements

Banko Sentral ng Pilipinas requires a capital requirement for Universal Bank
amounting to Php 5.4 Billion Pesos. Apart from this, there’s an 18% reserve
requirements. This requirement of BSP hinders other financial institutions to convert
to Universal Bank and at the same time serves as a barrier for business owners to
establish a Universal Bank. Furthermore, BSP is limiting its issuance of permit to
operate banks in order to control the monetary transactions in the country. It is
avoiding circumstances where banks can no longer sustain its existence damaging
its depositor and other investors.

Government Regulations and Banking Policies

In Republic Act No. 8791 the states recognizes the vital role of banks
providing an environment conducive to the sustained development of the national
economy and the fiduciary nature of banking that requires high standards of integrity
and performance. In furtherance thereof, the State shall promote and maintain a
stable and efficient banking and financial system that is globally competitive, dynamic
and responsive to the demands of a developing economy.59 This act identified the
classification of banks such as Universal Banks, Commercial Banks, Thrift Banks
composed of Savings and mortgage banks, Stock savings and loan associations and
Private development banks, Rural Banks, Cooperative Banks and Islamic Banks.
The following classifications should adhere to the policies mandated by BSP being
the authorized supervisor of the banks in the country. BSP through the Monetary
Board prescribes Ratios, Ceilings and limitations or other forms of regulation for the
different bank classifications. As a matter of fact, the Securities and Exchange
Commission is not allowed to register articles of incorporation of any bank unless

59
Retrieved at www.pdic.gov.ph/index.php?nid1=10&nid2=4. General Banking Act. An Act providing for the
regulation of the organization and operations of banks, quasi-banks, trust entities and for other purposes.

Strategic Management Paper: Bank of the Philippine Islands 41

accompanied by a certificate of authority issued by the Monetary Board. The
requirements are generally stated at Section 14 of the Republic Act No. 8791.
The heavy requirements of the government serve as the barrier for
businessmen to enter the Universal Banking business. The common practice is for
the existing banks to move towards Universal Banks; however similar policies and
regulations are required to these banks which make it again difficult for these banks
become Universal Banks.

Brand Image and Brand Equity

The three major players in the Universal Banking industry -Metrobank, BDO
and BPI- have long been existing in the country. The three have established their
brand names and their brand equity. Looking at the business profile of the three
major players in the industry, they all are grounded with a strong marketing
foundation and are linked to corporations that have established their brand image.
The current collapse of banks that are either rural or do not have similar
length of tenure compared to the top 3 players in the industry made people more
cautious in choosing the banks they will build relationship with. Filipinos are keener in
choosing the bank that can provide their needs and handle their finances.

Technological Advancement
The continuously growing technological advancement in the country and the
availability of advance technology to provide financial services serve an entry point
for business that are align to financial services. Since there are more flexible policies
to transactions online but with limited services offered, this key factor makes it easier
to for businesses to penetrate the financial services business. It thus pushes for
businesses to be a substitute to Universal Banks.

Bargaining Power of Suppliers

In Banking Industry, the main supplier in the business is BSP for it dictates
market rate and policies. Other than government is the employees as the supplier of
services provided to its clients and other juridical and artificial persons that invest to
the Universal Bank in order to have sufficient funds in regulating the bank.

Banko Sentral ng Pilipinas regulating Financial Products and Services

BSP supplies financial products to the banking industry through T-bills, T-
bonds and SDA. The rates of these products are mandated by BSP along with the
regulated amount of transaction fees. This creates a competition through sourcing

Strategic Management Paper: Bank of the Philippine Islands 42

which bank to purchase the financial products and the differentiation are the
efficiency, accessibility and service to the general customers. The Financial Services
on the other hand is also mandated by the bank. The liquidity requirements for banks
the volume of transaction to be engaged by the bank and the value of peso to be
released in the market is mandated thus the main source of competition is to how the
products are being branded by the banks. Promos of banks also makes product of
each bank better than the others.

Employee Engagement and Retention

Bank employees are considered to play a major role in the industry. Since
financial institutions are service oriented business, its employee is suppliers of in
terms of man power to handle the transactions in the bank. They are also the source
for marketing and a live and walking source of advertisement.
Experienced and experts and well trained employees are in demand to the
industry thus employees can easily move from different banks to another bringing
with them all their trainings. Since banks are service oriented business, there are
instances that if employee leaves a bank, its client also follows him or her. The
transfer of a bank employee can also be a transfer of a potential and existing client.

Bargaining Power of Buyers

Prof. David Fred stated that consumers gain increasing bargaining power
under a circumstance where buyers can inexpensively switch to competing brands or
substitutes, when they care particularly important to seller, when sellers are
struggling in the face of falling consumer demands, when they are informed about
sellers’ products, prices and costs and when they have discretion in whether and
when they can purchase the products.60

Switching to Banks is generally inexpensive and rates are generally the same
Rates and even product offering are regulated by BSP making a similar price
of transaction with different banks. Apart from this, the modern technology makes
bank transactions such as transfer of funds or loan take out accessible. Clients can
easily demand for transfer of funds through manager’s check or telegraphic transfer
with a minimum cost. Loan takeouts are also easy to request since applications and
approvals of loan to banks are fast and easy. These factors increase the bargaining

60
David, Fred R. Strategic Management: Concepts and Cases, 12th Edition; p. 120

Strategic Management Paper: Bank of the Philippine Islands 43

power of buyers allowing them to leverage in the rates and services that banks
provide.

Information Availability and Easy Access to other Banks

The continuing technological advancement in the country makes information
available to everyone. The improvements in internet and mobile banking also makes
banking industry connected to its client 24 hours a day 7 days a week and at the
same time this makes banks interconnected.
The availability of information online can make clients compare products and
services of different banks. Apart from this, the availability of social networks makes
people know and learn the experiences of different clients to other banks across the
country. This can give them more idea which bank to transact and gives them the
avenue to search for the proper financial service they need and the bank who can
best serve them. In this sense, the bargaining power of buyers in the banking
industry is high.

V.4 Competitive Profile Matrix (CPM)

Competition in banking industry is very strong that entry of new business is
difficult. The strongest competition that BPI has in the industry is Banco De Oro
Incorporated and Metrobank Corporation. These two players have proven their worth
both in deposit and loans and currently pushing for investment and with insurance.

Banco de Oro (BDO)

BDO is currently the biggest bank in terms of assets. It is owned by the SM
Group of Companies and oversees by the SY family. SM Group of Companies is the
country’s largest conglomerates and owner of the SM Malls and SM Supermarkets.
BDO is a product of the mergers and acquisition, the most notable and the reason of
BDO becoming one of the largest banks in the country is the merger of BDO and
Equitable PCI in 2006. In 2007, BDO came to existence removing the EPCI on its
name.
BDO is now a full-service universal bank with 15% market share in terms of
total resources. It provides a complete number of industry-leading products and
services to the retail and corporate markets which includes lending in corporate,
middle market, SME and consumer. BDO also have serves in deposit taking, foreign
exchange, brokering, trust and investments, credit cards, corporate cash
management and remittances. Its subsidiaries offers leasing and financing,

Strategic Management Paper: Bank of the Philippine Islands 44

investment banking, private banking, insurance brokerage and stock brokerage
services. Currently, it operates 795 branches and 1800 ATMS nationwide.
In 2008, Fitch Ratings announced that a BDO Unibank rating is stable given a
benign economic condition. The merger between BDO and Equitable PCI bank is a
good strategy for BDO since it benefited on the well developed operations in fee-
generating areas such s MAIC insured trust banking and its good franchise among
commercial entities and consumers. This announcement of Fitch was proven by the
year on year revenue growth of BDO of raging from 12-14 percent bringing Php 9.6
Billion revenue in the first quarter of 2013.61 In the monthly email of Pres. Nestor Tan
to its employee it congratulates the senior management for the 14 percent growth for
first half of the year and if everything is stable, the growth will continue to double the
expected revenue for 2013.

Metropolitan Banking Corporation

Metrobank is established on September 5, 1962 and since then maintain the
spot of being the premier universal bank and among the foremost financial
institutions in the Philippines. It is the second largest bank in the Philippines in terms
of total resources with 13.78 percent market share. The bank started as a single
branch in 1963 at Binondo and slowly grew with currently owning 760 domestic
branches and 40 foreign branches, subsidiaries and representative offices. In 1990 it
opened a bank in London, Taichung, Tokyo and Korea. This made Metrobank the
first Filipino bank in Korea. A decade after, (2001) it became the first Philippine bank
in China when it opens a branch in Shanghai and a decade after, (2010) inaugurated
its wholly-owned subsidiary, Metropolitan Bank (China) Limited, the first foreign bank
established in Nanjing. Today, it has 1,600 ATMS nationwide and maintains its spot
as the second largest bank in terms of assets. Its profit jumped 40% to 15.4 billion
from 11 billion in 2011.62
Metrobank is said to have an 8 percent increase in deposits resulting to Php
738.7billion. The increase fueled the 15 percent year-on-year expansion in net loans
and receivables to Php 525.7 billion with the consumer and commercial middle
market as the key factor for growth. The bank is expected to have a 7 percent
increase in revenue but due to the observed rapid growth in the bank it can reach
double by end of 2013. An evidence of the organize process of Metrobank, it
receives various awards such as Best Managed Company - Medium Cap by Asia

61
Dumlao, Doris. BDO Projects 43% Profit Growth in ’13. Philippine Daily Inquirer retrieved at
http://business.inquirer.net/117889/bdo-projects-43-profict-growth-in-13
62
Roda, Julito G. Metrobank’s Profit Jumps 40%. Manila Standard retrieved at
http://manilastandardtoday.com/2013/03/08/metrobanks-profit-jump-40/

Strategic Management Paper: Bank of the Philippine Islands 45

money; Corporate Governance Asia Annual Recognition ward by Corporate
Governance Asia, Gold trusted Brand Award by Reader’s Digest and the first ranking
in financial reputation in the Philippines by the Wall Street Journal Asia.

Table 10. Critical Success Factors, Respective Weights and Rationale

Critical Success Factors Weight Rationale

Marketing and Advertising 10% Distribution channel and competitive price will be
effective if proper exposure to what the product
and services can give to its client. Marketing and
Advertising is the best way to communicate the
benefits of a product and a service. It is also in
this manner that customers will be aware of the
presence of a certain product.
Marketing and Advertising encompass the tri-
media. It should be print, digital and radio. Apart
from this, social networks and online marketing
is also part of this.

Market Penetration and 15% It is important to give heavier weight to Market

Distribution Channels Penetration and Distribution Channels because it
provides accessibility to the product and services
of the bank. The value of Customer Service
Quality and competitive price will not be worth it
if there’s no perfect avenue to market the
product and service with competitive price and
good customer service.

The distribution channels are the directly

proportional to market share. As a marketers
would say, where product is available sale is
possible.

Customer Service Quality 15% In the industry of Banking and Finance, products
and services are similar. The differentiation can
only be through the Brand Image of the product
or service offering and the service or manner the
product is delivered. Having said so, Customer
Service Quality is a major concern of client in
engaging business with banks and should be
given heavier weight in the key success factors.

Customer Service Quality, Market Penetration

and Distribution Channels and Price
Competitiveness holds the biggest weight among
the other critical success factors primarily
because of the fact that these are the major
consideration of consumers in a service oriented
industry.

Strategic Management Paper: Bank of the Philippine Islands 46

 Critical Success Factors Weight Rationale

Research and 5% The R&D of a company is a way to ensure that

Development products and services will follow the trend of the
country while providing the needs of the clients.
Established R&D in banks will give clients a
better image of a bank.

Market Share 10% The size and market share of a portfolio

determines its strength, position and influence in
the entire market. Customers generally choose
companies based on actual or perceived actual
size.

Profitability 10% Profitability is the basis of investors in a

business. Certain customers are also particular
on the profitability status of a company.

Customer Loyalty 5% Customer Loyalty is also given 5% because this

is a reflection of the good service of the bank
and the quality of products it provides. If clients
have strong loyalty to a company it only shows
that the company have established a good
standing that whatever economic status or
whatever branding, marketing strategy of
competitors, their clients will remain loyal to
them.

Product Quality 10% Quality encompasses the correct packaging of a

certain product. In the case of banking industry,
the right and proper loan package, the proper
orientation of a deposit product and a product
offered to clients not only because of a need to
sell but because it is the product need of the
client.

Price Competitiveness 15% Price competitiveness provides not only limited

to the interest rates, maintaining balance, terms
in loan, flexibility in loan amortization and fees to
transaction but also the freebies and point
system that client gain every availment and
transaction to the bank.

The key point in the Price Competitiveness

Critical Success Factors is its value. Price
Competitiveness is Product Price Value. It is the
best value with consideration to the product
quality, the service offered and the freebies it
provides.

Strategic Management Paper: Bank of the Philippine Islands 47

 Critical Success Factors Weight Rationale

Employee 5% The Employee competitiveness is the capability

Competitiveness of an employee to handle inquiries of customers.
It also involves training given to employees to
empower them.

Employee is the biggest investment in a

company thus a company with competitive and
empowered employee is a company gearing
towards success in a long-term.

Table 11. Critical Success Factors for BPI, BDO and Metrobank and the
Rationale

Competitive Profile Matrix (CPM)

BPI Metrobank BDO

Critical Success Factors Weight Rating Score Rating Score Rating Score

Marketing and Advertising 0.10 3 0.30 2 0.20 4 0.40

Market Penetration and Distribution
0.15 4 0.60 2 0.30 3 0.45
Channels
Customer Service Quality 0.15 4 0.60 3 0.45 2 0.30
Research and Development 0.05 4 0.20 2 0.10 1 0.05
Market Share 0.10 2 0.20 3 0.30 4 0.40
Profitability 0.10 3 0.30 2 0.20 4 0.40
Customer Loyalty 0.05 2 0.10 4 0.20 1 0.05
Product Quality 0.10 4 0.40 3 0.30 2 0.20
Price Competitiveness 0.15 1 0.15 2 0.30 3 0.45
Employee Competitiveness 0.05 4 0.20 3 0.15 2 0.10
0 0.00 0 0.00 0 0.00 0 0.00
0 0.00 0 0.00 0 0.00 0 0.00
Totals 1.00 3.05 2.50 2.80

Strategic Management Paper: Bank of the Philippine Islands 48

 Table 12. Critical Success Factors Rationale Scores

Critical Success Factors Rationale for Scores

Marketing and Advertising Generally, the number of billboards in the main road in the
Metro, the commercials visible to tri-media and the active
participation of the bank are considered in the scoring.
BDO in this case are utilizing this critical success factors
given the fact that they have visibility in all SM Malls,
Supermarket and Hypermarkets. Other than that they have
billboards scattered in the major roads not only in the
Metro but also in provinces. On top of this, BDO have
started to use celebrities in advertising the bank.

BPI has also utilized tri-media in Marketing and

Advertising. Other than this it has a bigger share in the
digital marketing compared to billboards and television
advertisement. It uses celebrities but not as aggressive as
BDO. On the other hand, Metrobank is not as visible as
the two major players. Metrobank can be seen in
magazine and company flyers. As such, the score of this
critical success factor is graded in that 4, 3 and 2.

Market Penetration and Market Penetration and Distribution Channels are

Distribution Channels measured on the number of branches, ATMS and
subsidiaries that can serve the clients.

Other than this, the banking hours are also considered.

BPI’s banking hours is usually 9-4:30 pm and those
located in Ayala Malls are open until 5:30pm while BDO is
9-5:30pm with branches open until 7pm specially those
who are in SM Malls. For Metrobank, branches are open
from 9am to 3pm.

Although Metrobank have good number of branches

locally and internationally, its banking hours are far from at
par to the two major banks.

Strategic Management Paper: Bank of the Philippine Islands 49

 Critical Success Factors Rationale for Scores

Customer Service Quality BPI is always on top when it comes to customer service
for the reason that thrust of the bank is customer centricity.
Bank transactions are free and are accommodated by their
branches nationwide. Apart from this, its employee is
trained to be customer centric aims to always “WOW” a
client. Branches of BPI have couches and magazines to
keep clients busy while on waiting for queue

Metrobank also caters well to its client however it doesn’t

provide banking everywhere thus charging fees with
transaction fees every time they don’t transact to their
branch of account. They branch however have a set of
chairs similar to what we see to government agencies
where mono-blocks chairs are lineup for clients to sit while
waiting for queue.

BDO on the other hand is graded 2 because although they

have employees that have a good customer service, they
have all types of charges in transacting to branches which
they don’t have account with. Also, there’s no chair that
clients can sit while waiting for queue.

Research and Development R&D are measured on the quality of product introduce by
banks and the manner each product and service is
branded.

To be able to gauge the strength of R&D of the major

players in the industry, its product offering are reviewed,
the product segmentation are compared to the target
market. Above all, the adaptability of the bank to the
technological advancement in the present generation.

Of all the three Banks, only BPI have new outlook for
Banks. It is the bank who studies online facility and digital
marketing. It is also the first bank who introduced ATMs.
Today, it is also the first bank to convert traditional banks
to the Bank of the Future. As such, it scored 4. Metrobank
is also well research when it comes to positioning the bank
off shore. However, it doesn’t show action to the rapid
change in technology. Lastly, BDO doesn’t show any signs
of adapting to the rapid change and had been using old
fashioned systems.

Market Share Market share score is based on the table of Competitors in

the Philippines (noted at the Porter’s Five Forces).

There it shows that majority of the market share are taken

by BDO while spot 2nd is battled by BPI and Metrobank
depending on what type of product it is. However, market
share can be justified through the number of branches and
ATMS that banks have thus giving the second spot to BPI.

Strategic Management Paper: Bank of the Philippine Islands 50

 Critical Success Factors Rationale for Scores

Profitability Profitability is based on the ADB’s report on annual

revenue growth of the major players of the bank.

Customer Loyalty Customer Loyalty is measured with alliance to Customer

Service Quality. But with consideration to the number of
accounts clients have. In BPI majority of its client bank not
only with BPI similar with BDO. However, reviews online
shows that Metrobank clients only bank with Metrobank.

Product Quality BPI scored in the product quality because its product is
segmented to its different target market. As a matter of
fact, it provides tailor-fit products and has financial
advisors that coach clients on which product and service
should they avail. Metrobank on the other hand offers
conservative product which makes them ensure quality of
products while BDO sell all types of product to all segment
to any target market. As such the quality of product which
is the exact bank product and service in not package well
with quality.

Price Competitiveness Price competitiveness includes rates and freebies. BDO is

graded four since among all banks, BDO is known to have
greater capacity to lessen lending rate and provide
freebies specially that they have SM group of companies
to support them.

BPI and Metrobank maintains a certain standard in rates

and freebies. Rate brakes are already given before asking
for it but it cannot be lower than the presented rate for the
reason that it ensures the quality of product with the price
it gives. This however should be reviewed by the two
banks because it can hamper in the increase of market
share.

Employee Competitiveness Across all banks, BPI is the only bank that has tie-ups with
business schools that provides training to its employee. It
has currently a tie-up with Harvard School of Business
which provides training for Stepping Up for Management.
Metrobank have seminars and trainings to its employee
depending on which account they are handling while BDO
is currently in the process of developing modules for its
employee trainings.

V.5 External Factor Evaluation (EFE) Matrix

The opportunities and threats with the impact to the company are identified in
the environment competitive scan with the following corresponding factor.

Strategic Management Paper: Bank of the Philippine Islands 51

 Table 13. External Factor Evaluation Matrix

External Factor Evaluation Matrix (EFE)

Opportunities Weight Rating Weighted Score

1. Forecasted economic growth of 6% for 2014 and 7.5% 0.10 4 0.40
growth second quarter of 2013
2. Increase in OFW remittances 0.10 3 0.30
3. Strong Philippine Business Sector composed of Small, 0.10 3 0.30
Medium and Micro Enterprises
4. Technological Advancement 0.10 4 0.40
5. Stable perception of the international community to 0.10 4 0.40
the country
6. Good credit reviews from various institutions 0.05 4 0.20
7 Strong Implementation of Credit Information Systems 0.05 3 0.15
Act (CISA)
8 Implementation of Basel III 0.05 3 0.15
9
10 TOTAL WEIGHT = 2.3

Threats Weight Rating Weighted Score

1. Increase number of non-banking financial institutions
competing for remittances, loans, electronic cash and 0.10 3 0.30
fund transfers
2. Decrease in lending and savings interest rate 0.10 2 0.20
3. Low level of banking transaction among Filipinos 0.10 3 0.30
4. Increasing and entry of new rules and regulations in
0.05 1 0.05
the industry

TOTAL WEIGHT = .8
TOTALS 1.00 3.15

The EFE Matrix presented a 3.15 rating for BPI positioning it to above
average in its manner of responding to the changes and events in the external
environment. Having a rating of 3.5 means BPI is responding well to the demands of
the external environment. It is taking advantage of the opportunities of the external
environment but if we look into the response to its threat, there are key factors that
BPI is not responding well. This however doesn’t mean there’s a lack in the
company’s way of handling the threat but it can also mean that leaving the key factor
alone would mean making the threat less strong for the company.

Strategic Management Paper: Bank of the Philippine Islands 52

 BPI response to the growing economy, technological advancement, stable
perception of the international community and good credit review is superior such
that these allows them to pioneer systems and even banking practices in the country.
With the use of the growing economy, BPI did not hesitate on investing in new
technology which also provides a good image to the bank locally and internationally.
BPI is good in using both the threats and opportunities to strengthen their image,
their revenue and their total performance.

Rationale for Scoring with BPI’s Response to the Opportunities and Threats
In order to ensure that the rating provided to BPI is at most rational and
quantifiable, there are particular events and data that have been considered. Below
are the factors that affected the ratings provided to BPI.

Table 14. EFE Matrix Rationale

Opportunities Weight Ratings Rationale

Forecasted economic 0.10 4 Economic stability has direct impact to

growth of 6% for 2014 and financial institutions. As a matter of fact,
7.5% growth second quarter history shows that respectable
of 2013 economic forecast leads to increase
earning capacity of banks.

The improving economy increased the

net income of BPI from Php 12.8 billion
of 2012 to 16.3 billion in 2012. It has
reached a 27% increase from the
previous year thus translating to a Php
17.5% return on equity and 1.9% return
on assets making BPI country’s most
profitable bank and the most valuable
stock market capitalization.

(THEN) President Aurelio Montinola III

said that 2012 is BPI’s banner year and
BPI aims a 12 to 15% loan growth rate
in 2013.

Strategic Management Paper: Bank of the Philippine Islands 53

 Opportunities Weight Ratings Rationale

Increase in OFW 0.10 3 Bank of the Philippine Islands stated

remittances that remittances from Filipinos abroad
reach US$23.8 Billion in 2012 which is
a 6.4% growth from 2011 exceeding
the 5% target of the government.

The OFW saved the country in so many

financial crises, this is the reason why
the increase inflow of remittance and
the increase number of Filipinos
deployed abroad is a good sign in the
economy. Also, this would mean strong
remittance and strong need for banks
to be the avenue to transmit
remittances.

The increase in OFW will grow

economy and will start business to
banks. Also, this will increase the
income generated to remittances. The
opportunity given by OFWs utilized by
BPI through expanding their business
for Filipinos abroad through
strengthening BPinoy the OFW brand
of BPI. It also strengthens BPI Direct
which can be use by Filipinos abroad.

Strong Philippine Business 0.10 3 Department of Trade and Industry in

Sector composed of Small, 2011 report said that there are 816,759
Medium and Micro MSME in the country making it 96.6%
Enterprises of the total business enterprise
operating in the country. The trend of
having more than 95% of MSME
operating in the country has been in
trend since 2009.

BPI addressed this opportunity by

launching products that would cater
specifically to this MSME. The Ka-
negosyo brand was created in 2009
and launched in 2010 giving products
exclusive to MSME. These products
are both deposit and loan. The dilemma
however in this strategy is the
possibility of migration of the existing
client to the new product with similar
investments. There might be a transfer
of funds and/or investment rather than
additional investments.

Strategic Management Paper: Bank of the Philippine Islands 54

 Opportunities Weight Ratings Rationale

Technological Advancement 0.10 4 The 21st century exploits technology to

the advantage of humanity. Internet
and mobile banking made it easier to
transact with banks and at the same
time easier to know the products and
services by other banks. Apart from
this, the usage of online facility can
reduce operating costs as services
inside the branch will be limited
including usage of utilities and
perishable materials are limited.

BPI in response to this enhanced their

digital banking through ensuring a
friendly process to its internet banking
and mobile banking called 24/7
banking. Apart from this, it created a
BPI talk to us which is positioned to the
social media and response to inquiries
immediately.

The BPI 24/7 facility had an increase of

15% transactions to roughly 10 Million
which represents around 70% of the
bank’s total deposit monetary
transactions. The BPI mobile banking
grew its user base faster with a growth
rate of 50%.

Stable perception of the 0.10 4 The international community has great

international community to respect to the economy and politics
the country outcome of the country. President
Benigno Aquino III is recognized by the
international community as a
performing leader in the country.
Investors are moving into the country
thus helping in the continuous growth in
the economy.

The good recognition by different states

to the Philippines was utilized by BPI
through strengthening their subsidiaries
in the international community. It
deployed tenure Bank Managers in
Korean, US and Europe to strengthen
and market the Bank. It also operated
the BPI Global which caters the need of
international community.

Good credit reviews from 0.05 4 The current reviews of the different
various institutions institution regarding the good credit
standing of the country are giving
strong opportunities for BPI to expand
and market their products and services.
S&P gave good rate to the country
along with Fitch and Right.

Strategic Management Paper: Bank of the Philippine Islands 55

 Opportunities Weight Ratings Rationale

Strong Implementation of 0.05 3 The bank with its current resources and
Credit Information Systems technological advances can easily
Act (CISA) implement the strengthen CISA. It
enhanced its system to accommodate
the CISA requirements. BSP is
requiring list of all mandatory client
information and shall be submitted to
SEC monthly. The required data is
unfortunately cannot be found in the
current system. The system
enhancements are currently in place to
be able to satisfy the CISA data
requirements mandated to financial
institutions.

Implementation of Basel III 0.05 3 Daily Tribune stated that BPI is ready
for Basel III implementation, with a
CAR of 14.5% less than 1% of this is
tier 2, and the CAR will be 13.5. This
according to the Vice-President of BPI
for Global Banking said that the bank
doesn’t need to rely on any capital-
raising activity in preparation for it.

The hybrid bonds reliance and capital

rising is said not necessary because
everything is stable. Furthermore,
hybrid bonds and capital-raising is
unstable in the coming years. This,
however, makes BPI conservative and
might be losing opportunities of
increasing revenue through
capitalization.

Threats Weight Ratings Rationale

BPI have roughly 27% market share in

the Philippine remittance services
market. BPI should improve this
market share specially that there are
Increase number of non-
new banks engaging aggressively to
banking financial institutions
remittance services market.
competing for remittances, 0.10 3
loans, electronic cash and
BPI should start to strengthen tie-ups
fund transfers
with other remittance center abroad
and expand the OFW market through
intense marketing campaign.

Strategic Management Paper: Bank of the Philippine Islands 56

 Threats Weight Ratings Rationale

The current decrease in savings

interest and lending interest tends
creates tight competition to banks.

BPI being conservative has been

Decrease in lending and reluctant in giving the lowest possible
0.10 2
savings interest rate rate for clients. In SME Business loan
rate for example, BPI gives rates at 8%
while competitor can give 7% or even
lower. This if not addressed by BPI can
entice clients for loan migration.

The increasing deposit rate of BPI

when compared to the number of
household income which had been
declining through the years. If this
decline is addressed, it can translate to
higher market share for deposit for the
banking industry.

In 2008, BPI rebranded a program that

has been existing since 2006 called
BPI On Call. Primarily, BPI on call aims
to migrate corporate accounts to BPI
and help the employees in their
banking issues. After two years, BPI
Low level of banking strengthened this through creating a
0.10 3
transaction among Filipinos marketing management training for top
graduates form prestigious university
for one year. They were trained to
empower Filipino through their
knowledge in banking and finance as
they market the bank. The pilot team
had a one year training composed of
40 top graduates. They were able to
rebrand BPI: ON Call to BPI Financial
Wellness and where able to tap more
than 200 companies’ nationwide and
around 100 branggays nationwide. This
project did not only help middle market
to save but also the mass market.

Strategic Management Paper: Bank of the Philippine Islands 57

 Threats Weight Ratings Rationale

In order to protect consumers against

certain practices of certain companies
the government is creating and
enhancing rules and regulations. BSP
is the regulatory body of banks and had
been strict in implementing rules and
regulations.

BPI had been strict in following the

rules and regulation set by BSP. At
Increasing and entry of new some point certain immediate
rules and regulations in the 0.05 1 marketing needs are hampered due to
industry these policies. Also, not allowing
projects or events that would benefit
consumers for reasons that a rule
doesn’t include exclude these projects
or event’s process is detrimental for
growth. This can be either sell closed
or lost.

Strategic Management Paper: Bank of the Philippine Islands 58

 V.6 Strategic Issues based on the External Factors
Over the past few years, banking industry had been in good condition for the
Philippines. The major opportunities seen for this industry are the continuing growth
of the Philippine economy, the improving response of the people to banking and
financing, the good credit ratings of the international community to the country and to
the banking industry and most importantly, the continuous growth of OFW
remittances and other import and export businesses that is making the country more
progressive.
To help the banks and other financial institutions in ensuring that the
transactions made to them are authentic, CISA had already been implemented and
hopefully will find a full implementation by the year end. This is not only protecting
the banks but the clients who might be subjected to too much exposure once they
have established good credit standing. The tendency is to expose their financial
liabilities when a client can have access to loans and other lending institutions and
CISA can help the bank to know what type of financial advice they can provide to this
type of clients.
An emerging market such as the Philippines is a good business for banking
industry. The current influx of different businesses which will translate to financial
transactions is a sign of a healthy banking industry. BPI should therefore exploit this
chance and start to aggressively market its product and services. It is important to
ensure that a good market share in the business.

Strategic Management Paper: Bank of the Philippine Islands 59

 VI. COMPANY ANALYSIS
VI.1 Vision and Mission Analysis and Recommendation
From BPI’s statement of purpose, it is important to note that the bank as the
oldest bank in the country is providing not only a quality banking experience but also
creating bankers that is competent internationally. As such, below is the analysis and
recommendation for its vision and mission.

Table 15. Vision and Mission Criteria and Evaluation

Evaluation
Criteria

1. Focused concept
“What do we want to •Established ASEAN financial institution with a creditable
become?” worldwide outreach.
•Leading private financial institution in the Philippines
•professional competence
Yes •service quality
•responsible corporate citizenry
•overall growth and stability

2. Plausible chance of
success •No specific timeframe as to when this goals going to be
“Does it give a clear attained
indication as to when it • Or will it be a continuous effort of the bank that will be pass
No
should be attained?” on from generation to generation

3. Noble Purpose
“Is it concise enough •Specific and clear
yet inspirational?” •Appealing to the emotion using words and phrases that is
Yes very humane
• Statement is too focused on format and standard.

4. Goal Oriented
“Is it inspirational •Clearly stated
“the bank envisions to be an established ASEAN
financial institution with a creditable worldwide
outreach and the leading financial institution in the
Philippines equipped with values shows the intensity
Yes of aiming something great for the future”
•Makes the statement of purpose very
inspirational.

Strategic Management Paper: Bank of the Philippine Islands 60

 The statement of purpose of BPI clearly stated that it envisions itself to be the
established ASEAN financial institution with a creditable worldwide outreach. It is
also clearly mentioned that it aims to be the leading private financial institution in the
Philippines in terms of professional competence, service quality, responsible
corporate citizenry, and overall growth and stability; though the statement of purpose
mentions particular goals of the bank, there was no specific timeframe as to when
these goals are going to be attained or will it be a continuous effort of the bank that
will be pass on from generation to generation
The construction of the statement of purpose is specific and clear. There was
an effort to try to appeal to the emotion using words and phrases that is very humane
however the manner of constructing the entire statement is focused on format and
standard. The emotions are not felt. It could have been more inspirational if
statements and words are constructed and chosen with passion. The aspiration
factor of the purpose is clearly stated. The part where it states that the bank
envisions to be an established ASEAN financial institution with a creditable
worldwide outreach and the leading financial institution in the Philippines equipped
with values shows the intensity of aiming something great for the future. This makes
the statement of purpose very inspirational.

Table 16.Criteria for the Recommend Mission and Vision

Criteria Evaluation
Customers
“WE BELIEVE that we have a responsibility to manage the business
for the maximum benefit of our customers while adopting the highest
standard of integrity; to offer the widest possible range of financial
services that is responsive to their needs; and to adopt an objective
attitude towards change and innovation, ever mindful of improving service
quality and operating efficiency.”
This promise of the bank show a “customer-centric” product and services.

Products/Services
“...to offer the widest possible range of financial services that is
responsive to their needs; and to adopt an objective attitude towards
change and innovation, ever mindful of improving service quality and
operating efficiency.”
Clearly stating a quality and type of products that is being offered

Strategic Management Paper: Bank of the Philippine Islands 61

Markets X “...our corporate mission is to be the leading private financial institution
in the Philippines...”
“... to be an established ASEAN financial institution with a creditable
worldwide outreach...”
The Market is identified specially when the ASEAN and Philippines is
mentioned. This though limits the market of BPI comparing to the current
trend of banks which is gearing towards the global community.

Concern for “WE BELIEVE that we have a responsibility to attain, over time and
survival, growth & within exacting standards of prudent management, the highest possible
profitability return of investments of our shareholders.”

Technology
“...and to adopt an objective attitude towards change and innovation,
ever mindful of improving service quality and operating efficiency.”
In improving service quality BPI is utilizing technology as evidence is the
24/7 banking and its initiative to allow technological advancement in the
banking industry

Philosophy
The bank has a Philosophy imbibed in its corporate values. It covers
seven values such as Customer Service, Excellence, Loyalty, Teamwork,
Integrity, Concern for People and Social Responsibility. This is clearly
shown in its mission vision.

Self-concept X The mission vision did not provide the current status of the bank, its
competitive advantage and unique selling proposition. Though it mentions
of the pursuit of becoming a financial institution of excellence and integrity.

Concern for public

image “...we have a responsibility to manage the business for the maximum
benefit of our customers while adopting the highest standard of integrity...”

The above statement addresses the company’s concern for public image.

Strategic Management Paper: Bank of the Philippine Islands 62

Concern for
employees ”WE BELIEVE that we have a responsibility to develop the potential of
our employees to the fullest by providing an environment conducive to
their personal and professional growth; and to foster a value system held
in common throughout the institution in order that we may all share a
coherent sense of purpose and direction.”

Clearly states the concern of the bank to its employee. BPI had always
been known for its good management to employees and its effort to
empower them.

Concern for nation- X BPI is very concern with its impact to the nation. As a matter of fact part
building of its seven corporate values is social responsibility. This however is not
presented in the mission vision statement.

VI.2 Recommended Statement of Purpose

In order to elude passion and commitment below is the recommended statement of
purpose for BPI.

“WE BELIEVE in the central role that private enterprise plays in economic
development and participate in nation building.

WE BELIEVE that our corporate mission is to be the leading private financial

institution in the Philippines in terms of professional competence, service quality,
responsible corporate citizenry, and overall growth and stability; and to be an
established ASEAN financial institution with a creditable worldwide outreach from
generation to generation.

WE BELIEVE that we have a responsibility to manage the business for the maximum
benefit of our customers while adopting the highest standard of integrity; to offer the
widest possible range of financial services that is responsive to their needs; and to
adopt an objective attitude towards change and innovation, ever mindful of improving
service quality and operating efficiency.

WE BELIEVE that we have a responsibility to develop the potential of our employees

to the fullest by providing an environment conducive to their personal and
professional growth; and to foster a value system held in common throughout the
institution in order that we may all share a coherent sense of purpose and direction.

Strategic Management Paper: Bank of the Philippine Islands 63

WE BELIEVE that we have a responsibility to attain, over time and within exacting
standards of prudent management, the highest possible return of investments of our
shareholders.

WE BELIEVE that our purpose is not only to gain more businesses but to help the
nation in building a better society for the next generation”

VI.3 Internal Audit and Risk

In order to ensure that targets and standards of BPI are aligned to all the
management and employees, BPI has measures of checking system. In order to
properly present the manner how BPI does it, four categories are created. These are
the financial audit which is similar to the financial reports generated and published;
the management audit which is the check and balances of the management and
employees as to whether or not the goals, targets and even policies are made with
consideration to the employees and to the management; the market segmentation
audit which categorizes the different target market of the bank and how it grows from
quarterly basis; lastly, the distribution and sales audit which is focus on ensuring that
all products and services of BPI are transmitted to clients and to prospective clients.
Along with the internal audit, BPI has identified risk management to different unit of
the Bank. This is made to ensure that the risk taken by the banks would meet the
standards and parameters of its Risk Unit and the government’s parameters.

Type of Risk

Credit Risk
BPI’s Credit Policy Group (CPG) is managing the bank’s overall credit risk. This
is anchored to a comprehensive set of policies established underwriting process.63
This group is responsible in ensuring the consistency of the risk that banks undertake
with the acceptable parameters of the bank and the regulatory units. CPG complied
with the regulatory requirements on single borrower’s limit (SBL), directors, officers
and related interest (DOSRI), real estate loans ceilings and mandatory lending to
SMEs except for agricultural; / agrarian lending.64
BPI’s loan portfolio is diversified with no concentration wit any sector.
Commercial loans are said to have 75 percent of the total loan portfolio and 25

63
Supra 4
64
ibid.

Strategic Management Paper: Bank of the Philippine Islands 64

percent are coming from consumer loans. In 2012, CPG reviewed 14 lending units of
BPI with credit performance assessment of generally acceptable. Although there are
increasing loan portfolios, BPI have managed to improve the quality of asset in terms
of non-performing loan (NPL) amounts and ratio. According to BPI, its gross 90-days
ratio stood at 2 percent, the lowest in the last five years and loan reserves cover
improved further to over 96% from 88 percent in 2011.65
Apart from the continuous effort of CPG to mitigate credit risk, they regularly
monitor the scoring models. It also leads the Bank’s transition to the Basel Internal
Ratings Based Approach. The credit risk exposure is assessed using credit rating
models which take into account the existing exposure to the counterpart, the
counterpart’s probability of default, and the value recoverable from the counter party
in the event of default.66 The total credit risk weighted asset b using the regulatory
standardized approach, it amounting to Php 539 Billion and is composed of on-books
credit exposure after risk mitigation at Php 529.6 Billion, off-balance sheet items at
Php 6.2 Billion and counter party risk-weighted assets in the trading book of Php 3.2
Billion.

Market Risk
BPI’s Risk Management Office’s (RMO) Market Risk Management Unit
(MRMU) supports the Finance and Risk Management Committee (FRMC) in
managing the exposures of the bank to the different risk such as market risk, liquidity
risk and interest risk. The Pre-settlement risk and value at risk (VaR) models for
derivatives were improved in 2012 in order to ensure that risk exposures are
accurately captured and reports are mitigated to an automated market risk system. In
same year, the RMU or Risk Management Unit was established to serve the Banks’
model risk managers and conduct the independent validation of the Bank’s risk
models.67 This is validated with SGV & Co. Ernst & Young.
The total outstanding investments in structured products as of end 2012 were
USD 238.1 Million. This is composed of investments in credit-linked notes at 59
percent of total, Range Accrual and Callable Range Accrual Notes were at 27
percent; Capped Floaters and Gold-Linked notes at 12 percent and 2 percent. The
market risk is measured using VaR model. A total market risk-weighted asset is Php
29.3 Billion end of 2012 in terms of capital usage using the standardized approach.

65
ibid.
66
ibid.
67
ibid.

Strategic Management Paper: Bank of the Philippine Islands 65

From the Php 29.3 Billion, foreign exchange accounted for half followed by interest
rate exposures at 47% and equity exposure at 3 percent.

Operating Risk
The Operating Risk Management Committee (ORMC) monitors the operating
risk through reviewing the key risk indicators, risk and control self-assessments and
incident management. ORMC is supported by the Risk Management Office’s ORMU.
The management of risk appetite parameters that have been set forth in the group’s
policies and standards on transaction authority and keep operational risk indicator
limits are managed and handled by the line management.68
The different units supporting the risk management in operations are the
Security and Technology Risk Management, the Business Continuity Management
and the Central Security Office. The Legal Service Division is also supporting the
bank’s ORMC.

Financial Monitoring
BPI since 2008 has shown a consistent increase on its net income, revenues
and total capital. In the total asset BPI have a slight decrease in 2011 due to a shift
on goal which is the Bank of the Future. BPI’s Return on equity is similarly improving;
its return in asset had been growing year on year since 2008.

68
ibid.

Strategic Management Paper: Bank of the Philippine Islands 66

 Figure 16. BPI Net Income and Revenue 2012.69

Figure 17. BPI Total Assets and Total Capital 2012.70

69
ibid.
70
ibid.

Strategic Management Paper: Bank of the Philippine Islands 67

 Figure 18. Total Loans, Total Deposits and Total Trust under Management71

Figure 19. Return on Equity, Return on Assets and Net Interest Margin.72

It is also important to note that in 2012, BPI has a total of Php 8.2 billion
economic distribution. 18 percent are payment to suppliers and contractors 22
percent taxes paid to the government, 31 percent, which is the highest are dividends
paid to stockholders, and 29 percent salaries and benefits paid to employees.

71
ibid.
72
ibid.

Strategic Management Paper: Bank of the Philippine Islands 68

 Figure 20. BPI Economic Contribution.73

Management Monitoring
The bank ensures that strategies and goals of the bank are properly cascaded
to its employee ensuring that everyone is gearing towards same goal. Management
always has a 5 year plan for the business. As a matter of fact, BPI has always been
known for identifying a long-term goal but using an implementation that is short term.
Every after 2 years, units and division heads are gathered in order to provide
different strategies in attaining the 5 year plan of the bank. In 2007, the bank
envisions BPI is the top in mind bank of every Filipino thus in 2008, it started to
aggressively penetrate the market. On the 3rd year of the plan there were changes in
the ways to achieve the 5 year goal but today it was able to deliver.
The bank is giving two means of evaluating the business and the people. There
is evaluation in June and another in December. The evaluation in June will affect the
strategies in getting targets for the year. Having this type of management monitoring,
the bank can easily change the short and medium term strategies in order to align to
the long-term goal. BPI has always been known for a good system in planning. As a
matter of fact, its goals and are define, measurable and attainable.

73
ibid.

Strategic Management Paper: Bank of the Philippine Islands 69

Market Segmentation Monitoring
As mentioned in the previous part of the paper, the Bank segmented its market
on the basis of emotive needs and stages of life. Its product and services are then
segmented on the needs of this market identified.
BPI considers the fact that everyone will go through the stages of life and the
emotive needs as such, every product should be tailor fit to that needs of the clients.
This strategy makes banking more personalized and need driven.

Distribution and Sales Monitoring

BPI has a total of 820 branches with 18 business centers, 17 Remittance
centers and 2.68 ATMs. Apart from this, they also have Relationship Managers to
every branch and Area Sales Officers to every Area offices. As such BPI has been
aggressive in making itself available to the market.
Currently, BPIs ATM machines also hold an electronic deposit machines will
can make deposit transactions 24/7. It has also strengthened the use of tri media not
only in advertising but most importantly in customer service. BPI with its effort to be
visible in any part of the world is proving a positive impact to its market share.

VI.4 Internal Factor Evaluation (IFE) Matrix

The internal factors that are affecting the company’s growth are identified and
rated below. Strengths and weaknesses of the company show how the company
addresses the issues in their internal environment.

Table 17. Internal Factor Evaluation Matrix

Internal Factor Evaluation Matrix (IFE)

Strengths Weight Rating Weighted Score
1. Customer Centric Thrust and bank anywhere feature 0.15 4 0.60
Technological Advancement and Digital Banking
2. 0.10 4 0.40
which enables 24/7 banking hours
Good Corporate Governance Structure with Corporate
3. 0.05 4 0.20
Social Responsibility
Distribution System with more than 800 branches and
4. more than 1,500 ATMs and more than 500 depository 0.10 3 0.30
machines
First Bank of the Future (most technologically advance
5. 0.05 4 0.20
branch)
6. Excellent Risk Management 0.05 3 0.15
7. Excellent Employee training and management 0.05 4 0.20
Good Process Improvement System through TQM
8. 0.05 3 0.15
department

Strategic Management Paper: Bank of the Philippine Islands 70

9. Established tenure in the banking industry 0.03 3 0.09
Good product branding, product segmentation and
10. 0.10 4 0.40
product target

Weaknesses Weight Rating Weighted Score

BPI’s consistent 3rd rank in its market share in various
1. 0.05 2 0.10
indicators in the industry
2. Shorter Branch Banking Hours 0.10 1 0.10
Higher lending interest rates, higher prices for
3. investment products and at par interest rate to 0.10 2 0.20
deposits
Slow pace of renovating the Bank offices that caters
4. 0.02 1 0.02
operations and back room transactions
5. 0 0.00 0 0.00
6. 0 0.00 0 0.00
7. 0 0.00 0 0.00
8. 0 0.00 0 0.00
9. 0 0.00 0 0.00
10. 0 0.00 0 0.00
TOTALS 1.00 3.11

The IFE rating of BPI is 3.11 giving them an above average position in the
matrix, showing that the company has more significant strengths than weaknesses.

Strategic Management Paper: Bank of the Philippine Islands 71

 Table 18. Internal Factor Evaluation Rationale

Strengths Weight Rating Rationale

Highest weight is given to this factor

because it should be the core
competency measurement of any
service oriented company. Looking at
how BPI uses this factor, they have
greatly utilized and use it to rebrand the
bank.
BPI has implemented series of reforms
in order to satisfy clients. They have a
bank anywhere facility that allows client
to transact to all banks nationwide
without extra charges and they have
same day clearing for BPI checks. Apart
Customer Centric Thrust from this, they have centralized data
0.15 4
and bank anywhere feature warehousing which allows them to
process loan applications faster.

In order to monitor this customer centric

factor, they have created measures in
order to ensure that clients are really
satisfied. They have smiley chips that
are given to clients and they will have to
drop it to satisfy box if they are satisfied
and sad box if not. Every after work, it is
tallied and reports are generated. Apart
from this is the mystery clients or as
called Phantom Caller.

Since the birth of the 21st century,

technology became the competitive
advantage of companies. To be able to
cope with technological savvy clients,
companies should have the best and
the most advance technology.

In the case of BPI, technology was

greatly utilized and they have created
various alternative channels to banking
Technological Advancement
such as internet, mobile, phone and
and Digital Banking which 0.10 4
social network banking.
enables 24/7 banking hours
BPI’s internet banking was said to be
one of the most visited website in the
country giving a roughly 5Million page
hit monthly and being the 1st most
visited sites among financial institutions
in the country. Its mobile banking on the
other hand grew 100% on their user
base comparing to 2011 and 2012.

Strategic Management Paper: Bank of the Philippine Islands 72

 Strengths Weight Rating Rationale

It is important that the Corporate

Governance of a company is graded
high but it is equally important to note
that CSR should be part of looking into
the CGS of a company because this
gives more meaning to success of the
company.

Good Corporate Governance is a

system of checks and balances among
the Board of Directors, management,
and stockholder value through ethical
conduct, reportorial accuracy and
transparency, and compliance to all
laws and regulations. Corporate Social
Responsibility is the initiative of a
company to extend its success to the
nation through projects that is providing
Good Corporate
sustainable growth.
Governance Structure with
0.05 4
Corporate Social
BPI’s governance politics and
Responsibility
guidelines are specified in the bank’s
Corporate Governance Manual that
supplements and complements the AIF
and By-laws. BPI considers the BSP
capital adequacy, asset quality,
management quality, earnings, liquidity
and sensitivity to market risk or
CAMELS rating as a measure of its
governance quality. In 2012, the rating
of BPI is 4 which is highest among local
banks.
BPI’s CSR on the other hand is visible
in their projects that promotes and
protects the environment through its
support for a carbon free environment
along with its project BPI Ingat
Kalikasan.

Branches are the major channels of

distribution for banks as they are
primarily used to expand their
commercial and consumer based
Distribution System with clients.
more than 800 branches
and more than 1,500 ATMs 0.10 3 Currently, BPI has more than 800
and more than 500 branches and it is providing 24 hours
depository machines banking services through its call centers
and over 1,500 ATMS nationwide. Apart
from this, new depository machines are
also available in large branches and
malls.

Strategic Management Paper: Bank of the Philippine Islands 73

 Strengths Weight Rating Rationale

Having a generation that is technology

savvy, BPI is currently in transition to
make its bank the Bank of the Future
where transactions such as payments,
deposits and withdrawal can be
First Bank of the Future facilitated by machines in the branches
(most technologically 0.05 4 which will allow 24/7 banking even in
advance branch) branches.

Currently, the branches are supported

by BEA the queuing system of the
branches which makes queuing faster in
banks.

BPI Group manages important risks

which are identified as the credit risk,
liquidity risk, market risk and other
operational risk.

BPI Group has a risk management that

covers all perceived areas of risk
exposure as it continuously prepare for
and uncover hidden risk. The BPI Board
of Director is the principal risk and
capital manager and the only strategic
risk taker. The BODs provides written
Excellent Risk Management 0.05 3 procedure for the management as well
as the procedures for the management
of foreign exchange risk, interest rate
risk, credit risk, equity risk and
contingency risk. Also, the personnel
committee of the board approved the
creation of Chief Risk Officer position at
the Operating Management Level. It is
the responsibility of the Chief Risk
Officer to establish policies and controls
all the risk taking activities of the bank.

The only bank that have tie-up projects

to different Business Schools in the
world such as Harvard and AIM in order
to provide training to its Officers and
Excellent Employee training Staff.
0.05 4
and management
HR requires minimum of 5 trainings to
its employee and there are series of
trainings which are modular.

Strategic Management Paper: Bank of the Philippine Islands 74

 Strengths Weight Rating Rationale

BPI is the only bank in the country that

has a department handling the Total
Quality Management of the bank and
would require its officer to be belt
holders of Six Sigma.
Good Process Improvement
System through TQM 0.05 3 The TQM department has yearly
department competition for projects for total quality
management. It also provides the six
sigma training for the employees who
are participating.

Being the oldest bank in the country and

having ranked the most profitable bank
Established tenure in the over the years. And the only bank that
0.03 3
banking industry maintained a double-digit ROE over the
past 5 years.

The bank that provides product that is

tailor-fit to different target markets.

The different product line has different

Good product branding, product branding such as: Maxi Saver
product segmentation and 0.10 4 Account for preferred client, Easy Saver
product target Account for class C and D clients and
many other products that are properly
segmented.

Weaknesses Weight Rating Rationale

A total resource, deposit liabilities

and gross loan portfolio of BPI has
been consistently ranked as 3rd.

BPI’s consistent 3rd rank in Measures had been implemented

its market share in various 0.05 2 to increase BPI market share.
indicators in the industry However due to unforeseen
resignation of the Officers trained
to do the market study to increase
market share of BPI; it is on a
slow pace.

Strategic Management Paper: Bank of the Philippine Islands 75

 Weaknesses Weight Rating Rationale

The main competitor of BPI in the

banking hours is BDO which
operates 8:30 to 5:30pm and even
7pm for the branches located in
Malls. BDO has also branches
Shorter Branch Banking that operate on weekends and
0.10 1
Hours holidays.

BPI’s response of only through

advancement in technology but no
signs of having a regular branch
operating on a weekend.

BPI UITF investment products are

relatively higher than main
competitors BDO. BPI charges
1.5% management fee for the
Higher lending interest
investment products while BDO
rates, higher prices for
0.10 2 charges a minimum of 1%.
investment products and at
par interest rate to deposits
BPI’s loan interest is higher
compared to BDO which can even
give a 2% rate brake from its
published rate.

Although the banking facilities are

technologically advance with BPI.
The back room and other
branches are not yet updated.
Printers are still dot-matrix and
computers are still out modeled.
The big computers are taking too
Slow pace of renovating the
much space in the work station
Bank offices that caters
0.02 1 and the printers are making the
operations and back room
transaction slower.
transactions
These facilities should be
improved because services that
require personal assistance will
suffer if the machines are not
updated and are out modeled and
slow processing.

Strategic Management Paper: Bank of the Philippine Islands 76

 VI.5 Strategic Issues Based on Internal Factors
The Bank of the Philippine Islands has shown its strength in growing its
business through increasing its distribution network. One of its promising service is
Bank Anywhere which allows every branch of BPI to accommodate BPI clients’ free
of charge. Having this kind of facility, BPI proves its value of customer centricity.
Furthermore, BPI has proven its place in the technological advancement of
banks and is continuously improving this in their 24/7 banking facility. BPI’s risk
management is also seen to be very strong as a matter of fact, it CAMEL scored 4,
the highest rating given to a local bank. BPI proven to have a high
One of the weaknesses of BPI although it is customer centric, is the image of
being bank of the elite. This hampers the increase in market share of the bank
across all products. It however addresses this issue through strengthening its
distribution system. It strengthens its financial wellness program in order to reach all
levels of people and inform them of the benefits of banking. It is in this way that the
bank penetrates the market and simultaneously implements their corporate social
responsibility.

Strategic Management Paper: Bank of the Philippine Islands 77

VII. STRATEGY FORMULATION
The CPM, EFE and IFE have lead this paper to formulate different strategies
based on the strategy formulation

VII.1 Strength-Weakness-Opportunity-Threat
Based on the SWOT Matrix the four strategies such as SO, WO, ST and WT
strategies can be easily identified. The strengths identified can assure that the
company is equipped to combat the continuous horizontal integration strategy of its
competitor. Furthermore, the given opportunities can strengthen the strategy of BPI
to penetrate the market.

Table 19. SWOT Matrix

STRENGTHS WEAKNESSES

BPI’s stable rank in its market

Customer Centric Thrust and
share in various indicators in
bank anywhere feature
the industry

Technological Advancement
and Digital Banking which Shorter Branch Banking Hours
enables 24/7 banking hours

Higher lending interest rates,

Good Corporate Governance
higher prices for investment
Structure with Corporate
products and at par interest
Social Responsibility
rate to deposits

Distribution System with

Slow pace of renovating the
more than 800 branches and
Bank offices that caters
more than 1,500 ATMs and
operations and back room
more than 500 depository
transactions
machines

First Bank of the Future

(most technologically
advance branch)

Excellent Risk Management

Excellent Employee training

and management

Good Process Improvement

System through TQM
department

Established tenure in the

banking industry

Strategic Management Paper: Bank of the Philippine Islands 78

 Good product branding,
product segmentation and
product target

OPPORTUNITIES SO STRATEGIES WO STRATEGIES

SO1. Increase distribution

system through merger
with other banks. As
evident in the previous years,
there are increasing mergers
from small and big banks.
BPI can merge to other small
banks or even to rural or
thrift banks in order to WO1. Increase marketing
increase its branches and strategies to generate new
dominate more areas in the leads both for OFW and new
country. This will increase accounts. Develop projects to
market share, strengthen its encourage OFW to use BPI
Forecasted economic
network system and increase facilities and services in their
growth of 6% for 2014 and
the Bank’s capital. remittances and even
7.5% growth second
Furthermore, the bank investments. Develop projects
quarter of 2013
anywhere facility of BPI can that will focus on increasing
even be highlighted. With the new accounts for the bank and
mergers with other banks, market the loan products of
the bank anywhere facility BPI. (W1, W3, O1, O2, O4,
will be strengthened and be O5, O6)
utilized which in turn can
strengthen the image of BPI
as customer centric. The
bank can be freely reached
by more people across the
globe and its product will be
advertised more. (S1, S4,
S10, O1, O3, O5, O6, O8)

Strategic Management Paper: Bank of the Philippine Islands 79

 SO2. Enhanced banking
technology for easier and
faster banking service. BPI
is the leading innovator when
in the banking industry. WO2. Utilize the 24/7
However, its competitors are banking facility of BPI.
also fast gearing towards Encourage and educate
technological advancement clients how to use the
as such it is important that mobile, internet and phone
BPI improve its technology. It banking of BPI. In addition to
is important to consider this, the digital banking through
improving the system to the the use of social networks
different products of the bank should also be advertised to
Increase in OFW such as that focus on loans clients. This can decrease
remittances specially those which belong operational cost for BPI and
to the micro, small and similarly banking cost for the
medium businesses and clients. At the same time
corporate payroll services. providing other venues of
There should be faster and banking. The 24/7 banking can
automated process on this. combat the increasing
The TQM Department of BPI branches of other competitors.
can assist in developing new (W1, W2, W3, W4, O2, O4,
system and new technology O7)
that make Bank services and
processing faster and easier
for both employee and
customers. (S2,S4,S5, S7,
S8, O4,O7)

SO3. Strengthen and

improved remittance and
global banking. BPI should
enhance and strengthen BPI WO3. Enhance the product
remittance service in the and services for the Micro,
country and abroad through Small and Medium
the help of the branches and Enterprises. The Ka-Negosyo
the ATM networks or through facilities should be advertised
partnership to other along with the enhancement of
Strong Philippine Business merchants and quasi how to avail this facility. The
Sector composed of Small, financial institutions in the micro-site of Ka-negosyo
Medium and Micro world. This initiative will should be improved. These will
Enterprises make the existing and encourage these enterprises to
prospective OFW clients to bank with BPI. With their
transact with BPI and avoid strong and increasing number,
the “shopping” of service it can be a good client base for
areas for OFWs. If the global BPI. (W1, W3, O3, O4, O5,
banking will be established O6, O8)
well, the distribution of BPI
worldwide will be better. (S1,
S2, S6, S9, S10, O2, O5,
O6, 07)

Strategic Management Paper: Bank of the Philippine Islands 80

 SO4. Introduction of new
product and services of
BPI with improved features
and better freebies. New WO4. Improve the pace of
product should be launched transformation from the old
along with its improved BPI to the new Phase of BPIs
services using new Bank of the Future. The good
technology. BPI has a strong review of BPI in the
foundation of employee that international community, the
Technological conceptualizes new product increasing economic growth
Advancement and services for the bank and the continuous
along with new marketing technological advancement
strategy that can assist in can assist the Bank in its
introducing new products. continuous renovation from the
New products, services old face of BPI as the Bank of
along with a strong the future. (W4, O1, O4, O5)
marketing style can increase
the new accounts of the bank
and even the investors. (S2,
S7, S8, S10, O3, 04, O5, O7)

SO5. New product and

services for the Micro,
Small and Medium
enterprises. Having a strong
market for MSMEs BPI
should start to focus on
providing assistance and
Stable perception of the
encouraging the MSMEs to
international community to
bank. The Ka-negosyo event
the country
should be strengthened to
having a more focus and
more way to empower the
MSMEs. The franchising
facility of BPI should be
improved. (S7, S8, S10, O1,
O3, O4)

SO6. Improve the

advertisement and use the
tri-media. In order to
promote the products and
services of the bank, BPI
should use the new medium
Good credit reviews from of advertisement. This can
various institutions be cost efficient and this can
provide a good venue to
explain the product and
service of BPI ensuring an
increase in market share.
(S1, S2, S4, S9, S10, O3,
O4, O5)

Strategic Management Paper: Bank of the Philippine Islands 81

Strong Implementation of
Credit Information
Systems Act (CISA)

Implementation of Basel III

THREATS ST STRATEGIES WT STRATEGIES

ST1. Open the possibility

WT1. Develop a marketing
of mergers or acquisition
strategy to penetrate more
to financial institution
market and increase client
including the quasi
base and deposit accounts.
Increase number of non- institutions. Merger of
This strategy is with support
banking financial banks can increase the
from ST5 since it will utilize the
institutions competing for distribution strategy of BPI.
Field Sales Officers and
remittances, loans, As such the bank can cater
Marketing Officers of the bank
electronic cash and fund to more clients globally. The
to increase the deposit clients
transfers bank anywhere facility of BPI
and even increase loan
can be utilized if there are
application and investments for
more branches of BPI. (S1,
the bank. (W1, T1, T4)
S2, S3, S6, S9, T1, T2, T4)

ST2. Strengthen
relationship and
partnership to financial
institutions and other
institutions that can
support the remittance
WT2. Develop a campaign
process and global
educating clients of the 24/7
banking for BPI. Having a
banking of BPI. This will give
strong technology and the
them the choice to do banking
well established transactions
anywhere anytime with BPI.
Decrease in lending and made through BPI can be
Thus client will appreciate BPI
savings interest rate more effective if there are
even with lesser branches and
better relationships to other
even with a shorter branch
financial institutions abroad
banking hours. (W1, W2, W3,
facilitating remittances
W4, T1, T3, T4)
transactions for BPI. Better
partnership can help BPI
provide service to OFW
which they don’t have quasi-
branches. (S2, S3, S4, S7,
S9, T1, T4)

Strategic Management Paper: Bank of the Philippine Islands 82

 ST3. Combat interest rate
competition with better
WT3. Increase marketing
service and improved
campaign for loans and add
banking experience. The
incentives and freebies to
technological advances and
deposit products depending
the bank anywhere facility of
on the amount placed. The
BPI should be emphasize
current decrease of loan
Low level of banking providing BPIs client an easy
interest can encourage clients
transaction among way of transacting to any
to apply for loan. In order to
Filipinos branch globally with no extra
combat the decreasing rate on
charges and with an
regular savings on the other
experience similar to their
hand, bank should initiate
home branch. A good service
programs that can entice
is always better as to
clients to save higher amount
lowering interest rate which
of deposit. (W2, W3, T2, T3)
can cause a risk to the bank.
(S1, S2, S3, S7, T2, T3)

ST4. Continue and

strengthen the Financial
WT4. Intensify the Financial
Wellness Project of BPI.
Wellness Program through
The lack of interest with
BPI: On Call, the corporate
Banking by the Filipino
program of BPI. In order to
people can be addressed
inform more people of the
through strengthening the
benefits of banking especially
Financial Wellness Program
to the young professionals, the
Increasing and entry of of BPI. This project is
Financial Wellness Program of
new rules and regulations educating the Filipino people,
the Field Sales Officers should
in the industry starting from the younger
be partnered with the BPI: On
generation, of financial
Call for the corporate accounts
literacy and the benefits of
of BPI. These will empower the
banking. This positions BPI
payroll clients of BPI and teach
as the bank that doesn’t only
them how to properly invest
sell bank product and
and deposit. (W1, W3, W4, T1,
services but promotes
T3)
Financial Literacy. (S1, S3,
S7, T3)

ST5. Improve the quality of

Field Sales Officer and
Marketing Officer of BPI.
Improving and strengthening
the FSO and MOs of BPI can
assist in acquiring new
clients for the bank. This will
also help the bank promote
its product and provide a
personalized or tailor-fit
product and services to its
clients. As such the Bank s
addressing the threat on the
increasing competition while
promoting financial literacy
among Filipino people. (S1,
S2, S7, T1, T2, T3)

Strategic Management Paper: Bank of the Philippine Islands 83

 VII.2 SPACE Matrix
The graph below presents how dominating BPI in the banking industry. The
matrix shows that the bank can pursue an aggressive strategic position. The strategy
for this position is market penetration, market development, product development,
backward integration, forward integration, horizontal integration, diversification or a
combination of these.74 These means that BPI should over come internal
weaknesses and avoid external threats as it exploits the external opportunities
through utilizing its internal strengths.

Figure 21. SPACE Matrix Strategic Position Profile

74
David, Fred R. (2011). Strategic Management 13th Edition. Prentice Hall

Strategic Management Paper: Bank of the Philippine Islands 84

 VII.3 Internal-External Matrix
BPI is positioned in cell I with an IFE score of 3.11 and an EFE score of 3.15.
This means that strategy for BPI is to “Grow and Build”.75 The strategies will have to
be an intensive which includes market penetration, market development and product
development or integrative which includes backward integration, forward integration
and horizontal integration.

Table 20. Internal-External Matrix

TOTAL IFE RATING

3.11

STRONG AVERAGE WEAK

3.0 TO 4.0 2.0 TO 2.99 1.0 TO 1.99

HIGH
TOTAL EFE I II III
3.0 to 4.0
RATING
3.15 MEDIUM
IV V VI
2.0 to 2.99

LOW
VII VIII IX
1.0 to 1.99

VII.4 Grand Strategy Matrix

There are four quadrants in the strategy matrix which as shown in figure 22.
These are evaluated based on two dimensions, the competitive dimension and the
market industry growth. As noted in the previous chapters, among the 37 banks, the
three holds 40 percent of the market concentration ratio. This only proves that the
competitive dimension of BPI has competitive advantage. In the industry growth, on
the other hand, banking industry has proven its share in the contribution to the
economy. The three major banks noted in this paper are the top three banks holding
the biggest shares in the industry.
BPI as shown in figure 22 is located in quadrant I which means that the
recommended strategies would be market penetration, market development, forward
integration, backward integration, horizontal integration and concentric diversification.

75
ibid.

Strategic Management Paper: Bank of the Philippine Islands 85

 Figure 22. Grand Strategy Matrix

VII.5 BCG Matrix

There are three segments that BPI operates, the consumer banking, corporate
banking and investment banking. These three have different coverage and product
offering. Since there are no data regarding the revenues, profit, market share and
growth rate of the three business segments of the banking industry. BCG is used in
BPI as on entity relative to its competitors.

Figure 23. BCG Matrix

Strategic Management Paper: Bank of the Philippine Islands 86

 VII.6 Summary of Strategies
Based on the different methods used, the best strategies that can assist the
bank in the current trend in the market are market penetration, market development
and horizontal integration. These three belongs to intensive and integrative type of
strategies.

Table 21. Summary of Strategies

TALLY TABLE

STRATEGY OPTIONS SWOT SPACE IE GSM TOTAL

INTEGRATION STRATEGIES
1 Forward Integration x x x 3
2 Backward Integration x 1
3 Horizontal Integration x x x x 4

INTENSIVE STRATEGIES
4 Market Penetration x x x x 4
5 Market Development x x x x 4
6 Product Development x x x 3

DIVERSIFICATION STRATEGIES

7 Related Diversification

8 Unrelated Diversification

VII.7 Quantitative Strategic Planning Matrix (QSPM)

The QSPM result shows that the best strategy for 2013-2015 of BPI is market
penetration. Below are the scoring and the rationale of the scores.

Table 22. Quantitative Strategic Planning Matrix (QSPM)

Increase
Market Horizontal
Market
Development Integration
Penetration
Opportunities Weight AS TAS AS TAS AS TAS
1. Forecasted economic growth of
6% for 2014 and 7.5% growth 0.10 2 0.20 3 0.30 4.00 0.40
second quarter of 2013
2. Increase in OFW remittances 0.10 3 0.30 2 0.20 4.00 0.40
3. Strong Philippine Business
Sector composed of Small, 0.10 2 0.20 4 0.40 3.00 0.30
Medium and Micro Enterprises
4. Technological Advancement 0.10 3 0.30 2 0.20 4.00 0.40
5. Stable perception of the
international community to the 0.10 3 0.30 2 0.20 4.00 0.40
country

Strategic Management Paper: Bank of the Philippine Islands 87

6. Good credit reviews from various
0.05 3 0.15 2 0.10 4.00 0.20
institutions
7. Strong Implementation of Credit
0.05 0 0.00 0 0.00 0.00 0.00
Information Systems Act (CISA)
8. Implementation of Basel III 0.05 0 0.00 0 0.00 0.00 0.00

Threats Weight AS TAS AS TAS AS TAS

1. Increase number of non-banking
financial institutions competing
0.10 4 0.40 3 0.30 2.00 0.20
for remittances, loans, electronic
cash and fund transfers
2. Decrease in lending and savings
0.10 4 0.40 3 0.30 2.00 0.20
interest rate
3. Low level of banking transaction
0.10 4 0.40 2 0.20 3.00 0.30
among Filipinos
4. Increasing and entry of new rules
0.05 1 0.05 1 0.05 4.00 0.20
and regulations in the industry

Increase
Market Horizontal
Market
Development Integration
Penetration
Strengths Weight AS TAS AS TAS AS TAS
1. Customer Centric Thrust and
0.15 4 0.60 3 0.45 2.00 0.30
bank anywhere feature
2. Technological Advancement and
Digital Banking which enables 0.10 3 0.30 2 0.20 4.00 0.40
24/7 banking hours
3. Good Corporate Governance
Structure with Corporate Social 0.05 0 0.00 0 0.00 0.00 0.00
Responsibility
4. Distribution System with more
than 800 branches and more
0.10 4 0.40 2 0.20 3.00 0.30
than 1,500 ATMs and more than
500 depository machines
5. First Bank of the Future (most
0.05 3 0.15 2 0.10 4.00 0.20
technologically advance branch)
6. Excellent Risk Management 0.05 0 0.00 0 0.00 0.00 0.00
7. Excellent Employee training and
0.05 4 0.20 3 0.15 1.00 0.05
management
8. Good Process Improvement
System through TQM 0.05 0 0.00 0 0.00 0.00 0.00
department
9. Established tenure in the banking
0.03 0 0.00 0 0.00 0.00 0.00
industry
1 Good product branding, product
0.10 4 0.40 3 0.30 1.00 0.10
0. segmentation and product target

Strategic Management Paper: Bank of the Philippine Islands 88

 Weaknesses Weight AS TAS AS TAS AS TAS
1. BPI’s stable rank in its market
share in various indicators in the 0.05 0 0.00 0 0.00 0.00 0.00
industry
2. Shorter Branch Banking Hours 0.10 4 0.40 3 0.30 1.00 0.10
3. Higher lending interest rates,
higher prices for investment
0.10 4 0.40 3 0.30 2.00 0.20
products and at par interest rate
to deposits
4. Slow pace of renovating the
Bank offices that caters
0.02 2 0.04 4 0.08 3.00 0.06
operations and back room
transactions

TOTALS 5.59 4.33 4.71

Table 23. Rationale for QSPM Scoring

Opportunities Rationale for Scoring

Forecasted economic growth of

The growth of the Philippine economy is directly
6% for 2014 and 7.5% growth
proportional to the growth of businesses in the country
second quarter of 2013
translating to a healthy banking industry. As the
Philippines become a develop state, the Filipino people
will have the capacity and the confidence to use and
avail of the products and services of the bank as such it
is important to consider increasing the branches of
banks and minimizing the competition, thus this strategy
is Horizontal integration. One of the action plans for
Horizontal integration is acquisition of smaller banks and
or merger with competitors. As such a score of 4 is
given to Horizontal integration. Market Development
Strategy on the other hand is given 3 because
expanding the businesses through mergers and
acquisition; it is important to ensure that the market is
created well, thus the need for bank should be created
or develop. Lastly, Market penetration is given a score of
2 because the implementation of the two strategies
would mean visibility and increase in distribution which
is market penetration. Market Penetration hence the
impact of the first 2 strategies.

Increase in OFW remittances

As seen in the previous data, OFW saved the economy
of the Philippines. Furthermore, its income is still seen to
increase in the coming years. With the projected growth
of OFW remittances it is proper to acquire, merge or
partner its competitors and other smaller financial
businesses in order to ensure market share.
Furthermore, it is important to make the distribution
system of the bank wide across country thus it has to
strengthen strategies on market penetration.

Strategic Management Paper: Bank of the Philippine Islands 89

Strong Philippine Business With the strong and increasing SMMEs in the country, it
Sector composed of Small, is better to develop products and new type of services
Medium and Micro Enterprises for this sector. As such Market Development scored 4.
The SMMEs can not only support the growth of banking
industry but the entire economy including job
opportunities to Filipinos.

Technological Advancement BPI as always been known for its good utilization of
technology and as technology shows a big role in the
growth of different businesses, it is important that BPI
should start partnership or merger with corporation that
may improve the technology of the bank. As such 4 is
scored to Horizontal Integration. As side from this,
technology should be used to penetrate the market as
such it is given a score of 3.

Stable perception of the The good perception of the international community to

international community to the the country may allow a strong impression to the
country banking industry as such the bank should consider
expanding to the Philippine’s neighboring countries
through merger and partnership.

Good credit reviews from The good credit reviews from various institution to the
various institutions banking industry is providing confidence to foreign
investors in the country allowing a more progressive
status of the economy which also can help the bank to
expand through acquiring its competitors and the micro
financial businesses that will increase assets of the bank
and increase means of penetrating the market.

Strong Implementation of Credit This two assist the banking industry in ensuring that
Information Systems Act (CISA) banks exposure to risk is minimize and that further
economic crisis can be avoided. The CISA on the other
Implementation of Basel III hand is giving a database for the banks that can help the
industry on their credit analysis. As such the three
strategies cannot be affected by these two factors.

Threats Rationale for Scoring

Increase number of non- With the increasing number of competitors, it is

banking financial institutions important that BPI should consider strengthening their
competing for remittances, Market Share thus Market penetration is given a score
loans, electronic cash and fund of 4. The best strategy in order to ensure that BPI will
transfers improve or maintain its current status to provide a best
way of reaching its client base and further increases its
number of new accounts.

Strategic Management Paper: Bank of the Philippine Islands 90

Decrease in lending and With the current trend of interest rates, BPI can mitigate
savings interest rate the negative impact through ensuring a stable market
share specially that the banking industry’s success is
most often directly proportional to the its number of
businesses done or client base. As such a score of 4 is
given to market penetration.

Low level of banking transaction Similarly, the way to battle the indolence of the people in
among Filipinos banking is to increase its market penetration. With high
volume of client base means high volume of people
learning about banking. BPI should strengthen its BPI:
On Call Financial Wellness in order to increase low level
of banking transaction among Filipinos.

Increasing and entry of new With the new rules and regulations to banking industry,
rules and regulations in the the best way in order to ensure stability amidst this
industry threat is to increase its market capitalization and asset.
The business should grow and to be able to this,
licenses of other financial institutions should be
acquired, thus Horizontal integration is scored at 4.

Strengths

Customer Centric Thrust and The image of BPI has been changing from an
bank anywhere feature aristocratic bank to a friendly and customer centric as
such it is the right time to ensure that more clients will
experience this. As such to utilize this strength, the bank
should increase market penetration.

Technological Advancement BPI’s strength in technology will help the bank in

and Digital Banking which providing services for its client. These will allow the bank
enables 24/7 banking hours to easily integrate different businesses in their system as
such it can be used to fast tract and even take
advantage on mergers and acquisitions of other banks
or financial institutions. As such Horizontal integration is
scored 4.

Good Corporate Governance This factor contributes to the growth of the Bank,
Structure with Corporate Social however have not been affecting any of the strategies.
Responsibility The good GCGS of BPI can help Horizontal Integration
however this will only happen if the transition period of
merger and acquisition had been finished.

Distribution System with more

The good distribution system of BPI provides a good
than 800 branches and more
avenue of market penetration as such utilizing this will
than 1,500 ATMs and more
allow increase in market share of BPI.
than 500 depository machines

Strategic Management Paper: Bank of the Philippine Islands 91

First Bank of the Future (most Having the advantage of becoming the first bank of the
technologically advance branch) future, Market penetration is scored 4 because this can
provide a new banking experience to the clients and as
such will ease them from the usual problem in branches.
With the bank of the future BPI can aggressively
increasing its market share.

Excellent Risk Management The excellent risk management of BPI can affect the
good standing of BPI in the international community.
This then affects the image of BPI. As such its impact
had already been measured in the previous factors in
QSPM. Thus it is not already considered in the scoring.
It is however important to note that with the good risk
management of BPI portfolio of clients can increase
which also can provide better income for the bank.

Excellent Employee training and The excellent employee program of BPI is allowing each
management employee to be a walking advertisement of what the
Bank can offer as such, it can be used to increase
market penetration. As a marketing experts would say,
the best marketing strategy is word of mouth
advertisement and with a knowledgeable employees,
clients will be more entice to bank with BPI

Good Process Improvement The TQM of BPI though had been regarded as a good
System through TQM support in ensuring process improvement with BPI, it is
department not included in the scoring because it is focus on internal
development of the bank as such the three main
Established tenure in the
strategies are not affected by it. Similarly with the tenure
banking industry
of the bank to the industry.

Good product branding, product The comprehensive and good branding of the product
segmentation and product and services of BPI makes selling BPI easy. As such
target this contributes 4 to the strategy of increase market
penetration.

Weaknesses Rationale for Scoring

BPI’s stable rank in its market The stable rank of BPI in the market share is not
share in various indicators in contributing or diminishing the value of BPI as such it
the industry was not scored in the three strategies. Although the
obvious approach for this weakness is increase market
penetration.

Shorter Branch Banking Hours The trend of the banks today is to increase its banking
hours; BPI however is seen not to directly compete on
this ground. The reason is it increases its alternative
banking channels. As such, to ensure that this will not
decrease BPIs position in the industry, the bank should
create avenues for banking. Thus it should increase
means to penetrate the market.

Strategic Management Paper: Bank of the Philippine Islands 92

 Higher lending interest rate and The high fees in BPIs investment products can be
higher prices for investment addressed through providing excellent service and other
products and at par interest rate benefits such as freebies or preferred lanes in the Bank.
to deposits As such there should be other features provided to the
products. This can be enhanced through the means of
penetrating the market. Adding value to the product
being sold.

Slow pace of renovating the The slow transition of BPI the bank of the future should
Bank offices that caters be addressed with a development of new market. As the
operations and back room transition of bank of the future slows down, the bank
transactions should create different market segment that can
alternatively divert the attention of its client to the slow
growth of BPI’s branch and back room transactions.
Thus market development is scored 4 on this.

VII.8 Summary of QSPM Result

BPI being one of the most established banks in the country has shown good
response in its environmental and internal issues. The scores shown in the previous
strategy tools shows that BPI have reach a success as such it is important that it
maintains its standing and enhance its reach to the Filipino people. As such, the best
strategy in order to achieve this is to increase its market penetration. In order to do
this, BPI should make its product and services more visible to all classes of the
society. Also, it should strengthen its market to the MSMEs and OFWs. Since BPI
also scores 4.77 in horizontal integration, BPI should consider seeking opportunities
of merger and acquisitions to competitors, quasi financial institutions and foreign
banks. This will strengthen BPIs market share not only in the country but to the other
continents. Lastly, BPI should consider creating new markets with the use of its
products developed and rebrand by its marketing team. The increasing market share
of BPI’s competitors, BDO and Metrobank, and with the continuous growth of
Eastwest Bank and PBCom, BPI should consider increasing marketability.
The summary would direct the study to focus on market penetration as the
main strategy. BPI has already optimized its resources in improving its products and
services, as such it is important to ensure the availability of its products and services
to the majority if not all prospect clients.

Strategic Management Paper: Bank of the Philippine Islands 93

VIII. STRATEGIC OBJECTIVES AND RECOMMENDED STRATEGIES
The Bank of the Philippine Island had proven its value to the banking industry.
From the centuries of its existence, it has paved way for a better banking facility in
the country and in Asia. With its fine and systematic approach in banking, it served
as a structure to other banks in the country. However, as the economy of the country
grows new competitors are aggressively taking over the position of the bank in terms
of its market share and financial status. As such, the bank should utilize its resources
in order to increase its market share in the industry. BPI is expected to gear towards
market penetration strategy and horizontal integration. These two scored highest in
QSPM and is seen to be an effective way of ensuring BPI’s position of leadership in
the banking industry.
Initially, the objective of this paper to achieve a 19.844B of revenue by 2015
with an increase of 10% market share on asset, deposit and capital market share.
However, upon consideration of the growing economy of the country and with the
increasing credit rating of banking industry in the Philippines it is adjusted to a 30%
year on year growth from 2013 to 2015 with a similar increase of 10% year on year
on asset, deposit and capital market share. The 30% increase in revenue year on
year is already conservative considering the growth rate of the BPI and other banks
for the past years and considering the Basel III requirement of the banking industry.
Also, as of April of 2013, BPI’s revenue had already reached Php 17B which is the
total revenue of 2012.76 As such, it can be assumed that by end of 2013, the revenue
growth of BPI can reach 30%.

VIII.1Strategic Objective
The strategic Objective of BPI is to achieve 38,717.6B revenue by 2015 with an
increase market share of 10% on Asset, Deposit and Capital Share.

VIII.2 Recommendation for Business and Organizational Strategies

Market Penetration
In the Marketing for Managers class, Prof. Enrique Soriano noted that there are
four important action plans to consider in developing marketing plan strategies. This
is similarly identified as the 4Ps of marketing the Product, Price, Place and
Promotion. It is highly recommended to utilize these factors in doing a strategy for
market penetration.

76
supra 7

Strategic Management Paper: Bank of the Philippine Islands 94

 Fred David define market penetration strategy as the factor that assist in
increasing market share for existing products and services in an existing market
through exploiting marketing means. The strategy is said to be done through an
extensive advertisements of the existing products and services and emphasizing the
features and benefits that it offers.77 It can also be done through rebranding existing
products and positioning it to different market. These initiatives can then saturate the
market with the products and services of the bank. Below are the strategies
generated through the SWOT analysis.

Table 24. Strategies and Action Plans

MARKET PENETRATION

SPECIFIC STRATEGIES / ACTION

STRATEGIES
PLAN

PLACE / Distribution

SO2. Enhanced banking technology for 1. Re-launching of BPI Application for

easier and faster banking service. BPI Apple and Android phones.
is the leading innovator in the banking
industry. However, its competitors are Rationale: This will allow more usage of
also fast gearing towards technological the BPI application making the services
advancement as such it is important that of the bank available anytime, anywhere.
BPI improve its technology. It is important Furthermore, if the application will be
to consider improving the system of the one of the most downloaded apps, it will
different products of the bank such as be means of promoting the bank and
loans facilities specially those which can encourage more people specially
belong to the micro, small and medium the younger category to bank with BPI.
businesses and corporate payroll
services. There should be faster and
automated process on this. The TQM
Department of BPI can assist in
developing new system and new
technology that make Bank services and
processing faster and easier for both
employee and customers. (S2,S4,S5, S7,
S8, O4,O7)

77
supra 74

Strategic Management Paper: Bank of the Philippine Islands 95

 2. Inclusion of the BPI Technology
Projects to financial wellness program
and focusing on the benefits of using
technology in banking

Rationale: The Financial Wellness

Program of BPI as seen in the previous
report, have created an impact to the
knowledge of the Filipinos regarding
banking, If the BPI technology will have
a part in the program, it can provide an
insight as to how it should be properly
used in banking and how it can lessen
cost of the clients in bank transactions. It
can also provide guidelines how to avoid
fraud in online, phone and mobile
banking.

3. Creation of a community based micro-

site for BPI clients which are
categorized per client portfolio.

Rationale: Online community based

micro-site that is segmented per client
portfolio can create an avenue for
people to interact based on their needs.
The bank’s clients in this manner can
even seek opinion from other clients who
are experts on different fields. This will
create a community supporting each
other’s needs such as businesses or
supply needs. And BPI through this can
introduce the products that can also
assist the clients. BPI can administer the
queries of the clients and can even
promote their products.

4. Creation of a cashless society,

availability of POS terminal or tap
terminal for payment not only in malls
but in restaurants and micro, small
and medium enterprises

Rationale: The availability of POS or Tap

terminal in all stores makes banking
available to everyone. This innovation
will allow banks to facilitate money
transactions not only to big corporation
but to also to retail market which in the
long term can increase income to the
bank and can make the bank strong in
its influence to the money supply in the
country.

Strategic Management Paper: Bank of the Philippine Islands 96

 5. Full implementation of the Bank of the
Future

Rationale: The bank of the future will

change the image of banking to the
Filipino community. This will remove the
stigma that banking can only be for
savings and for investment. This will
revolutionize banking from a notion that
it is for the rich and to those who can
afford to a facility that can service people
in handling their finances including
payment of bills and all other
transactions that includes money.

SO3. Strengthen and improved 1. Tie-ups with international remittance

remittance and global banking. BPI center making BPI its partner bank in
should enhance and strengthen BPI the Philippines
remittance service in the country and
abroad through the help of the branches Rationale: This will encourage OFWs to
and the ATM networks or through remit using the BPI facility. Furthermore,
partnership to other merchants and quasi this will also be a means of promoting
financial institutions in the world. This the bank to our fellowmen off shore.
initiative will make the existing and
prospective OFW clients to transact with 2. Exclusive Micro-site for OFWs and
BPI and avoid the “shopping” of service partner remittance centers
areas for OFWs. If the global banking will
be established well, the distribution of BPI Rationale: The exclusive micro-site can
worldwide will be better. (S1, S2, S6, S9, create a community of BPI OFWs. This
S10, O2, O5, O6, 07) can further strengthen the banking
confidence of OFWs to BPI and can also
ST2. Strengthen relationship and encourage other OFWs.
partnership to financial institutions
and other institutions that can support 3. Increase Marketing Officers for
the remittance process and global International Market
banking for BPI. Having a strong
technology and the well established Rationale: A dedicated Marketing Officer
transactions made through BPI can be based on each country that BPI has a
more effective if there is better remittance center can improve sales.
relationship to other financial institutions Furthermore, the Marketing Officer can
abroad facilitating remittances also provide financial wellness and can
transactions for BPI. Better partnership even provide advices to the OFWs in
can help BPI provide service to OFW that country. Having one MO assigned to
which they don’t have quasi-branches. each country can assist the needs of the
(S2, S3, S4, S7, S9, T1, T4) clients abroad.

Strategic Management Paper: Bank of the Philippine Islands 97

 ST5. Improve the quality of Field Sales 1. Increase distribution channels through
Officer and Marketing Officer of BPI. strengthening its sales force and
Improving and strengthening the FSO and increasing their numbers on the first
MOs of BPI can assist in acquiring new quarter of the year 60% from internal
clients for the bank. This will also help the and 40% external hiring:
bank promote its product and provide a
personalized or tailor-fit product and a. Field Sales Officers - Focus on
services to its clients. As such the Bank s increasing new RMs (accounts),
addressing the threat on the increasing cross-selling accounts,
competition while promoting financial penetrating all market through
literacy among Filipino people. (S1, S2, Financial Wellness and
S7, T1, T2, T3) personalized baking
b. Relationship Managers - Focus
on increasing the portfolio of
preferred market through
introducing new products and
services, implementing Coffee
Talk for the existing clients and
their friends / colleagues
c. Cash Management Officers -
Focus on the corporate
accounts. Ensure that all
corporate products be
introduced to corporate
prospective and clients

Rationale: During last quarter of the

year, resignation and request for post
transfer is increasing in BPI, thus there
must be new-hires for first quarter. This
will provide ample time for training and
turn-over period. 60% internal hiring
must be considered in order to lessen
the training period for the post and 40%
in order to have fresh ideas that can help
the bank in strategizing.

Strategic Management Paper: Bank of the Philippine Islands 98

 PROMOTION

SO6. Improve the advertisement and 1. Active and creative status for the
use the tri-media. In order to promote the social network
products and services of the bank, BPI
should use the new medium of Rationale: BPI has developed a team
advertisement. This can be cost efficient called Digital Marketing Team. These
and this can provide a good venue to are officers of the bank that handles BPI
explain the product and service of BPI Talk to Us. If this facility can be more
ensuring an increase in market share. creative and will use a better means of
(S1, S2, S4, S9, S10, O3, O4, O5) communicating to its client base, it can
improve the image and brand of BPI. As
such they should create a more
emotionally capturing means of talking to
clients.

2. Implementation of the Community

base micro site of BPI

Rationale: The Community base micro-

site of BPI can not only increase the
banking knowledge to its clients which
can result to higher banking transactions
but it can also be an avenue to
encourage client to have BPI accounts.
As a matter of fact, this micro-site will be
an independent and costless means of
advertising.

ST4. Continue and strengthen the 1. Position BPI Financial Wellness not
Financial Wellness Project of BPI. The only a project for BPI Field Sales
lack of interest with Banking by the Department but as an independent
Filipino people can be addressed through department that handles the Financial
strengthening the Financial Wellness Wellness image of the Bank
Program of BPI. This project is educating
the Filipino people, starting from the Rationale: Since BPI Financial Wellness
younger generation, of financial literacy had paved its way in the market,
and the benefits of banking. This positions capturing the students and the young
BPI as the bank that doesn’t only sell professionals, it is better to utilize it as a
bank product and services but promotes unit that will focus on imaging BPI as a
Financial Literacy. (S1, S3, S7, T3) bank that harbors financial literacy. This
movement will make an image of a bank
that not only focuses on generating
income but on ensuring the welfare of
every client. As such, supporting the call
of Banko Sentral ng Pilipinas to help the
Filipino people in having financial
literacy.

Strategic Management Paper: Bank of the Philippine Islands 99

 WT2. Develop a campaign educating 1. Inclusion of benefits and functions to
clients of the 24/7 banking of BPI. This banking of technology in the BPI
will give them the choice to do banking Financial Wellness Program
anywhere anytime with BPI. Thus client
will appreciate BPI even with lesser Rationale: The continuous effort of the
branches and even with a shorter branch Field Sales Department of BPI to
banking hours. (W1, W2, W3, W4, T1, T3, generate accounts with the use of
T4) Financial Wellness program should be
utilized by the bank to ensure that the
technology aspect will also be given
emphasis. This is necessary because
the trend in the global market is to be
advance in technology and to utilize this
advancement to the people’s advantage.

PRODUCT

SO4. Introduction of new product and 1. Create IT unit to handle micro site
services of BPI with improved features and ensure security
and better freebies. New product should Rationale: To be able to handle the
be launched along with its improved community base micro-site, BPI should
services using new technology. BPI has a establish an IT unit that will ensure the
strong foundation of employee that security of the site. With the current
conceptualizes new product and services partnership if IBM with BPI, this can
for the bank along with new marketing easily be made.
strategy that can assist in introducing new 2. Re-launch the BPI Application and
products. New products, services along websites
with a strong marketing style can increase Rationale: To be able to reach the
the new accounts of the bank and even market and be able to capture the
the investors. (S2, S7, S8, S10, O3, 04, attention of the industry, BPI should re-
O5, O7) launch the projects pertaining to
technological advancement. This should
be done simultaneously in order to
ensure that the market will understand
the message it is presenting. And it
should be done at the beginning of the
year to give the clients the time to
understand the new phase of BPI.

Strategic Management Paper: Bank of the Philippine Islands 100

 SO5. New product and services for the 1. Create a team to handle the
Micro, Small and Medium enterprises. community based micro-site of BPI
Having a strong market for MSMEs BPI focus on different segments of market
should start to focus on providing
assistance and encouraging the MSMEs Rationale: The current marketing team
to bank. The Ka-negosyo event should be of BPI that handles the digital marketing
strengthened to having a more focus and should consider having a unit that will
more way to empower the MSMEs. The handle the community based micro-site
franchising facility of BPI should be of BPI. This will ensure that every topic
improved. (S7, S8, S10, O1, O3, O4) in the site will be participated well and
that a moderator should maintain a
harmonious environment in the site. The
micro-site for MSMEs should allow
suppliers, traders, distributors and other
businessmen to interact with the clients
of BPI to be able to make the site more
business generating to everyone.

WT4. Intensify the Financial Wellness 1. Independent Unit that will handle the
Program through BPI: On Call, the Financial Wellness of BPI which will
corporate program of BPI. In order to not only focus on selling but to the
inform more people of the benefits of image and branding of the bank.
banking especially to the young
professionals, the Financial Wellness Rationale: Having a team that will focus
Program of the Field Sales Officers on financial wellness of the bank can be
should be partnered with the BPI: On Call more effective than making the sales
for the corporate accounts of BPI. These officers deliver the wellness program.
will empower the payroll clients of BPI and The bank should consider having a team
teach them how to properly invest and that the sole function is to do the
deposit. (W1, W3, W4, T1, T3) Financial Wellness seminar. This soft
selling strategy and the Field Sales
officers on the other hand will be present
to ensure that selling will be intensified.
As such the Financial Wellness Seminar
will have a better image and that the
products and services being marketed to
the participants would seem to be a tool
in order to have financial wellness.

Strategic Management Paper: Bank of the Philippine Islands 101

 PRICE

ST3. Combat interest rate competition 1. Increase value on servicing products

with better service and improved through the strengthened Marketing
banking experience. The technological Officers of the bank
advances and the bank anywhere facility
of BPI should be emphasize providing Rationale: The interest rates have
BPIs client an easy way of transacting to always been mandated of the market
any branch globally with no extra charges and BSP; as such the best way to
and with an experience similar to their compete with it is to provide a better
home branch. A good service is always service and better people to discuss the
better as to lowering interest rate which products with. As such establishing the
can cause a risk to the bank. (S1, S2, S3, micro-site and the other means of
S7, T2, T3) reaching out to the clients can help the
bank competitive even if rates similar to
other banks. As evident, people will
always choose to do business with those
that they find organize and humane thus
if BPI shows this attitude, then they will
gain more in market share and they will
be the top of mind Bank in the country.

In the specific strategies, it can be identified that BPI should consider creating a
separate unit that will handle the community based micro-site. Furthermore, there is
also a need to ensure that the BPI Financial Wellness Program be an independent
unit to the Field Sales Department. In doing this the bank is creating an image that
none of any banks have already conceptualized. It will start to be the bank that
promotes financial literacy.
In addition to this, it is important that BPI maintain a strong field sales unit in
order to ensure that the sales activity of BPI is expanding. Having the different
marketing tools that BPI has, the field sales must have ease in selling the products
and services of the Bank.

VIII.3 Financial Projections

Projected Income Statement and Balance Sheet

Assumptions:
Increase in sales: 30% year on year
Increase in Selling Expense: 35% year on year
Increase in G & A Expense: 25% year on year
Tax Rate: 35%
Increase on Long Term Loans: 12%

Strategic Management Paper: Bank of the Philippine Islands 102

 Table 25. Income Statement

Table 26. Balance Sheet

Strategic Management Paper: Bank of the Philippine Islands 103

 BPI’s total projected net income for 2013 is at 19B with a total asset of 1.2B.
This is with a 30% year on year growth. It has a higher projection based in the
historical CAGR of 7.5% because it is expected that by 2013-2015, BPI is
intensifying its position in the market. Furthermore, the international community is
continuously having high respect to the economy of the Philippines. All of these good
events in the Philippines will greatly support the strategies for BPI’s success.

Strategic Management Paper: Bank of the Philippine Islands 104

 IX. DEPARTMENTAL PROGRAMS
IX.1Strategy Map Implementation
The diagram below shows how the different strategies and action plans are
linked together in order to ensure each strategies are link and the operation of the
plans are similarly link.
Figure 24. Strategy Map

Strategic Management Paper: Bank of the Philippine Islands 105

 IX.2 Departmental Actions and Functional Strategies

Marketing Team
The marketing team is important in ensuring that the best products and
services that are conceptualized are properly packaged and promoted. It is also the
responsibility of the marketing team to intensify the marketing activities for the
different products. They should also ensure that marketing collaterals are created on
time and have distributed to all sales unit of the unibank.
This is where the Community Base-Micro Site Marketing Unit will come from.
Currently, there is a digital marketing unit in BPI; however, it is important to note that
there is a more intense work in the community in base-micro site because of the
constant change in topics inside the site such that there should be a moderator that
is creative. This moderator should ensure that there is a harmonious and interesting
flow of conversation in the micro-site.

Action Plans:
To ensure strong competitiveness, the bank should have a marketing team that
focuses on the tri-media. Since the direction of this paper is to penetrate the market
specially the MSMEs, the OFWs and the Young professionals, the marketing team
should ensure that the marketing collaterals are prepared in accordance to these
demographics.

1. Young Professionals & Young Adult: Products on savings should be made

available to this market. Awareness campaign should be made to this segment.
Intensified seminar on financial wellness should be available to them and they
should be made comfortable to the 24/7 Banking and similarly to the community
base micro-site.
a. 4th quarter of 2013, the Financial Wellness should be intensified to
the schools and to offices. The benefits of technology in banking
should also be part of the seminar.
b. 1st quarter of 2014 - The Digital Team in the marketing department
should start to finalize the community base micro-site of the
different products and services of the bank. There must be specific
micro-site for the Ka-negosyo members and similarly to the other
deposit account of BPI.

Strategic Management Paper: Bank of the Philippine Islands 106

 c. 3rd week of 2014 - The IT team must finish the system for the
micro-site. By 4th quarter of 2014, the marketing team can have a
soft launch of the community base micro-site.

2. Micro, Small, Medium Enterprises Product: The MSME market is getting stronger
in the Philippine economy, as such BPI created particular products for them. This
is the Ka-Negosyo which comprises of loans, deposits and credit cards. To ensure
that the ka-negosyo will maintain its position in this market, the marketing team
should continue improving their product and services.
a. 4th quarter of 2013 - Marketing team should start to finalize the
collateral for the MSMEs and cascade to the sales unit. They
should also consider changing the features of the other products
such as providing clean loan facility and the franchise facility. The
marketing team should consider discussing the need of the clients
through the Relationship Managers, Field Sales Managers and
Cash management because they are directly communicating to the
clients thus giving them an idea what the clients wants and needs.
b. 1st quarter of 2014 - The events for the MSMEs should be
participated by the marketing team and they should be calendared.
The community base micro-site for MSME should be studied and
developed by this time.
c. 4th quarter of 2013 - The community base micro-site should have a
soft launch participated by selected clients. This is to ensure that
the site is secured and will serve its purpose.

3. OFW Products and Services: The marketing team must ensure that the products
and services are made available in the different distribution system of the bank.
The BPinoy project which is intended to provide seminars to the OFWs on how to
be financial literate should be strengthened. This should not only be limited to
seafarers but should be made available to all OFWs. BPI should consider working
with POEA regarding this.
a. 4th quarter of 2013 - BPI should start to communicate with POEA
regarding the BPinoy project that can also work with the Financial
Wellness Team of BPI. Similarly all marketing collateral should be
prepared for the 2014 projects.

Strategic Management Paper: Bank of the Philippine Islands 107

 b. 1st quarter of 2014 - Marketing team should ensure that the 24/7
banking and services will be explained to the OFWs and that the
community-base micro-site intended for OFWs should also be
conceptualized.
c. 4th quarter of 2014 - The community base micro-site should have a
soft launch similar to the MSME micro-site; there are selected
clients who can participate.

Financial Wellness Group

Currently, the Financial Wellness Projects are handled by the Field Sales
Division. The Field Sales Managers handles the seminars along with their selling
projects. To be able to better utilize the selling strategy of the Field Sales Division,
the wellness project should be handled by a smaller group that focuses only to
promote Financial Wellness. They will be responsible in ensuring that the financial
needs of the clients can be supported by the BPI products. In this case, the sales
team can benefit the seminar.

Action Plans:
a. 1st quarter of 2014 - Proposal for an independent unit to handle the
Financial Wellness project
b. 2nd quarter of 2014 - Selection of who will handle the unit, taken
from the Field Sales Division Group since they are handling the BPI
On Call: Financial Wellness Program
c. 3rd quarter of 2014 - Finalizing the unit and the projects to be made
in 2015
d. 4th quarter of 2014 - Finalized the projects for 2015 and the unit
should start to roll out their program to all the bank divisions and
groups
Finance
The finance group is responsible in allocating funds for each unit depending on
the need of the unit and its contribution to the total profit of the Bank. As such, the
Finance team is expected to create the budget for the proposed Financial Wellness
Group and the new community base micro-site for the marketing unit. By End of
2013, Finance team should consider reviewing the budget provided for 2014 to be
able to ensure the smooth flow of the plans for the new units and groups of BPI
management.

Strategic Management Paper: Bank of the Philippine Islands 108

Action Plans:
a. Review the budget for marketing to ensure enough funds for the
new community base micro-site
b. Consider changing the budget for the Field Sales Division
considering that the Financial Wellness Program will be
independent from them. The budget for the Financial Wellness
Program will now be solely for their projects
c. By end of 2014 and ad hoc committee should be made to assess
the profitability of the new units and divisions and would review the
sales generated of these sales units and marketing unit, translating
to income of the bank.

Human Resource Banking Group

Development and empowerment of employees is the responsibility of the
Human Resource Banking Group. The HRBG must ensure that culture of BPI is
developmental and that the employees are getting the training that they need in order
to develop their personality and their career. Since the strategy of the paper is to
increase the sales unit of the bank, HRBG should consider moving internal unibanker
to the sales department of the bank.

Action Plans:
a. 4th Quarter of 2013 - Ensure that the open box of sales unit be
replenished in order to ensure that manpower will be sufficient by
2014
b. 1st Quarter of 2014 - New set of the Management Trainee should
be completed. HR should consider moving staff to this training
specially those who have direct participation in projects on OFWs,
MSMEs and Financial Wellness. The sales councilors of the 24/7
Banking unit should be one of the choices for the Management
Trainee program
c. 2nd week of January 2013 should be the calendared team building
of the sales unit
d. 3rd quarter of 2014 should be the scheduled planning for the sales
and marketing unit. This planning is usually initiated by the HRBG.

Strategic Management Paper: Bank of the Philippine Islands 109

 X. STRATEGY EVALUATION AND PERFORMANCE METRICS

X.1 Balanced Scorecard

Goals - Dashboard
๏ Above Expectations
๏ Meet Expectations
๏ Average
๏ Below Expectations
๏ Needs Improvement

Financial Perspective

Objective Target Actual Status Remarks

๏ 50% and
2013: > 30% above
Growth In Net ๏ 49 - 40%
2014: > 30% - -
Income ๏ 39 -30%
2015: > 30% ๏ 29 - 20%
๏ below 20%

๏ 50% and
2013: >30% above
Growth in
Current Asset ๏ 49 - 40%
2014: >30%
(Inclusive of ๏ 39 -30%
Deposit)
2015: >30% ๏ 29 - 20%
๏ below 20%

๏ 50% and
2013: > 30% above
Growth in ๏ 49 - 40%
2014: > 30%
Total Asset ๏ 39 -30%
2015: > 30% ๏ 29 - 20%
๏ below 20%

Strategic Management Paper: Bank of the Philippine Islands 110

 Customer Perspective

Objective Target Actual Status Remarks

๏ Not necessary to
visit the branch
to avail of the
bank products
๏ Transactions
aside from
application can
be made online
Increase inclusive of
Applications follow-up to
Online facility
online are applications and
that can
available for all - even viewing of -
accommodate
products for status
application of
2014
BPI Products ๏ Applications can
be made online
๏ Online facility
are only for
instructions on
how to apply and
marketing
collateral
๏ Status Quo

2013
Branches will ๏ Above 50% of
have the depository
depository machine
machines in its ๏ 50% of the
branches depository
machine is
Increase
2013: 50% installed
number of
Branches that
from total ๏ Reach 30%
have
branches increase in
Depository depository
Machine
2014: 75% machines
from total ๏ Increase 15%
branches from the total
number of
2015: 100% existing
from total depository
branches machine
๏ Status quo

Strategic Management Paper: Bank of the Philippine Islands 111

 2014
๏ Above 75% of
the depository
machine
๏ 75% of the
depository
machine is
installed
๏ Reach 50%
increase in
depository
machines
๏ Increase 25%
from the total
number of
existing
depository
machine
๏ Status quo

2015
๏ Full operational
of the depository
machine
๏ 100% of the
depository
machine is
installed
๏ Reach 75%
increase in
depository
machines
๏ Increase 50%
from the total
number of
existing
depository
machine
๏ Status quo
Increase
branches in
Provincial ๏ Above 15%
areas 15% in 3 increase in 2015
years ๏ 15% increase in
Increase 2015
Branches in 2013: 5%
Provincial Increase ๏ at least 10%
Areas increase in 2015
2014: 5% ๏ at least 5%
Increase increase in 2015
๏ Status quo
2014: 5%
Increase

Strategic Management Paper: Bank of the Philippine Islands 112

 In year 2015

2 hours lead ๏ Exceeding the

time for auto lead time target
loan in 2015
๏ Meeting the lead
4 hours lead time target in
Improve
time for home 2015
processing
time for loan
loan ๏ Meeting 50%
applications lead time target
2 days for in 2015
business loan ๏ Meeting 25%
clean facility lead time target
in 2015
1 day for ๏ Status quo
business loan
fully secured

๏ Crediting
simultaneous in
booking
๏ Crediting of loan
amount 2 hours
Real time
Improve after booking
crediting of
crediting of loan amount ๏ Crediting of loan
loan amount versus booking amount one day
after loan time after booking
approval date
๏ Crediting of loan
amount on the
2nd day of
booking
๏ Status quo

๏ Increase 51%
and above from
previous year
Increase POS ๏ Increase 31-50%
Availability of from previous
and TAP
POS and Tap year
terminal at
terminal
stores and
least 30% year ๏ Increase 29-30%
shops
on year from previous
nationwide
compared to year
previous year ๏ Increase 10-20%
from previous
year
๏ Status quo

Strategic Management Paper: Bank of the Philippine Islands 113

 Internal Perspective

Objective Target Actual Status Remarks

๏ Exceeds
30% of the
target
๏ Exceeds
the 10%
Increase new Accounts target but
accounts for increase by not higher
OFW, MSMEs than 30%
and Young 2013: >10%
Professional 2014: >10% ๏ Meets the
Market 2015: >10% 10%
Target
๏ Meets 5%
of the
target
๏ Status quo

๏ Exceeds
30% of the
target
๏ Exceeds
Cross Sell the 10%
Products target but
Increase cross increase by not higher
sell product to than 30%
existing clients 2013: >10% ๏ Meets the
2014: >10% 10%
2015: >10% Target
๏ Meets 5%
of the
target
๏ Status quo

๏ Exceeds
30% of the
Increase total target
number of ๏ Exceeds
Increase bank
institutions that the 10%
awareness to
Financial target but
people
Wellness not higher
translating to
Program is than 30%
new accounts
on mass
conducted. ๏ Meets the
market 10%
products
2013: >10% Target
2014: >10% ๏ Meets 5%
2015: >10% of the
target
๏ Status quo

Strategic Management Paper: Bank of the Philippine Islands 114

 ๏ Achieved
January of
2014
๏ Achieved
in the 2nd
quarter of
In January the year
2014 include including
Include all other networks February
network in the such as SUN and March
24/7 Banking cellular to ๏ Achieved
Online Banking 3rd
facility Quarter of
the year
๏ Achieved
last
quarter of
2014
๏ Status quo

๏ January of
2014 the
project is
fully
operationa
l with 50%
member
active
๏ 3rd quarter
of 2014
program is
In 2015 50% of ready for
the account implement
Increase usage holders of BPI ation
of Community should be part
Base micro- of the ๏ Soft
site Community launch in
Base micro- the 3rd
site quarter
๏ 4th quarter
of 2014
soft
launched
๏ Concepts
have not
yet been
tested at
2nd
quarter of
2014

Strategic Management Paper: Bank of the Philippine Islands 115

 Learning and Growth Perspective

Objective Target Actual Status Remarks

Lower turnover 5% lower ๏ 0-2% lower

rate to sales turnover rate turnover
unit of the bank rate
versus
previous
year
๏ 5% lower
turnover
rate
versus
previous
year
๏ 6-10%
lower
turnover
rate
versus
previous
year
๏ 11-10%
lower
turnover
rate
versus
previous
year
๏ Status quo

Develop a Review ๏ Before

better performance December
performance metrics last of 2013
metrics for the December ๏ Started
bank personnel 2013 - January reviewing
2014 on
December
2013
๏ Started
reviewing
on January
of 2014
๏ Started
reviewing
after
January
2014
๏ Started
reviewing
after
February
of 2014
๏

Strategic Management Paper: Bank of the Philippine Islands 116

Acquire new Recruit 200 ๏ 200
talents employees ๏ 199-150
(staff and
๏ 149-100
officers yearly)
๏ 99-50
๏ 49 below

Ensure that All employees ๏ 100%

BPIs culture of should have at employees
customer least one BPI enroll to
centricity is seminar / the HR
imbibe to its training trainings
employee and
seminars
๏ 75% of the
employees
enroll to
the HR
trainings
and
seminars
๏ 50 % of the
employees
enroll to
the HR
trainings
and
seminars
๏ 25% of the
employees
enroll to
the HR
trainings
and
seminars
๏ Status quo

-End-

Strategic Management Paper: Bank of the Philippine Islands 117

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