Strategic and Financial Objectives

By relating BDO’s Mission-Vision statement, External Factor Evaluation (EFE) Matrix and

Internal Factor Evaluation Matrix (EFE), there are issues with which the following objectives are

formed to address as such:

1. To increase market share in the industry

Despite BDO being in the primal position in the market, it is going to be too costly

to be complacent especially when the banking industry’s players are very competitive as they

may overtake BDO in the market share. It is also to address BDO’s mission in becoming the

preferred bank in the markets it serves. The increase in market share also contributes to the

increase in BDO’s capitalization to further finance improvement which addresses its mission to

consistently provide innovation products and proactive reinvention to meet market demands.

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

transactions

This is BDO’s answer to the opportunity in the banking industry which is the rise

in the demand of mobile banking applications. In investing more in technology, BDO capitalizes

its strengths which are its strong support units in R&D and I.T. as well as its high capitalization.

Integrating better technology in BDO’s products and services will also translate to a more

flawless delivery of services as well innovated products, both of which are in BDO’s Mission-

Vision statements. Better technology also means safer transactions which answer the issues on

vulnerability of digital assets to breaches and attacks as well as BDO’s security. This objective

answers BDO’s goals in ten folds.

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

 In every business, profit is one of the indicators that such is doing well. As for

BDO, to see whether such objectives are attained, strategies are implemented, it will translate to

profits. The development in technology for BDO will translate to new and better products and

services which will likely increase profit, which will in turn be an increase in interest income, loan

applications, investment and receivables. BDO should start with a 10% increase then gradually

adding 5% each year in growth. Moreover, BDO has a mission to create shareholder value

through superior returns. Aside from such, this will address the decrease of BDO’s capital

adequacy ratio which is to either increase in equity or increase in profit. BDO should start with a

10% increase then gradually adding 10% each year in growth. To further take advantage of

growth, instead of cutting or lessening expenses, BDO should maintain expenses, except when

extremely necessary, especially for operating expenses, but nonetheless, other expenses

should be maintained.

4. To increase BDO’s presence in the rural areas

One of BDO’s weaknesses is its lesser branches and ATM in the rural areas all

over the Philippines. Bank accessibility becomes it weakness. In order to address this, BDO

should establish more bank branches or ATMs in rural areas to serve more clients. This will also

answer BDO’s mission for flawless delivery of services. An increase in profits and market share

will also likely to result.

Recommendations

 Restated Mission-Vision Statement

To be the preferred bank in every market we serve by consistently providing

innovative products and flawless delivery of services, proactively reinventing ourselves to meet

market demands by keeping up and making use of the latest technological breakthroughs,
creating shareholders value through superior returns, cultivating in our people a sense of pride

and ownership, and striving to be always better than what we are today… tomorrow.

 Business Strategies

1. Product Development

One of BDO’s objectives is to invest more in technology to improve mobile

banking applications and other bank transactions. BDO’s mobile banking application should be

developed. Such application should have the basic transactions ready and available with a tap.

Security should also be tightened, like having better password and coding systems as well as

back up systems.

Aside from online services, BDO must use technology to develop its services in

bank branches. This is to address its mission on the flawless delivery of services. Using

machines to make transactions faster or to make queues more organized. BDO has to keep in

mind that quality service should be its priority so as to meet its objectives. To facilitate this

product development, BDO must capitalize on its strong support units in R&D and I.T.

Departments. BDO’s high capitalization is also an indication that the company can afford such

development.

2. Market Penetration

Being one of the top players in the banking industry and having the largest

market share in the industry, BDO should still exert efforts in market penetration. One of its

missions is to be the preferred banking institution in the markets it serves. BDO cannot be

complacent with its current position. Amplification of its marketing strategies using its new

products will help dig a deeper niche for BDO in its current markets. BDO has to develop its

market, but nonetheless it should not lose sight of its current market where foundation is

deeper. This also to address its issue in rural areas – which is already a penetrated market, but
it has to amplify marketing strategies along with other strategies to capture this market.

Establishing more branches or ATMs in rural areas should also increase its presence in the

rural areas.

3. Horizontal Integration

Aside from establishing more branches or ATMs to increase presence, BDO can

acquire rural banks in the areas it needs to penetrate so as to lessen competition and increase

more presence in the area. This will in turn translate to an increase in its relative market share

which is another objective of BDO. Considering BDO’s high capitalization, it would be able to

buy out a rural bank. Moreover, BDO has experienced management as one of its strengths who

may be capable of negotiating to acquire other banks at better prices.

 Organizational Strategies

The strategies would head no change in the organizational structure of BDO as

to the top management. However, with the establishment of new branches in rural areas, it is

recommended that there should be a new position in the Branch Banking Group of BDO, that

instead of per area, it should be per region instead. More so, there should be another manager

to oversee all bank branches in a province. With the acquisition of a rural bank through

horizontal integration, more employees and executives should be hire so as to manage the

newly acquired bank. BDO may also choose to retain the existing employees of the newly

acquired bank.

Strategy Map
 Below is a strategy map for product development wherein it is recommended that BDO

should invest more in technology to improve its mobile banking application. Such step is to fulfill

the strategy for product development.

 Below is a strategy map for market penetration wherein it is recommended that BDO

should establish a rural bank to gain more presence in an already penetrated or serviced

geographical area, which are rural areas.

 Below is a strategy map for horizontal integration wherein it is recommended

that BDO should acquire a rural bank to gain more presence in an already penetrated or

serviced geographical area, which are rural areas and to increase in market share through

buying out or acquiring the competition.

  Financial Projections

With the recommended strategies being mentioned, such will aid in the

achievement of the stated strategic and financial strategies. The implementation of the

strategies will translate to a change in the finances of BDO. The following are the financial

projections for BDO following the strategies and fulfillment of the stated objectives:

1. Statement of Income
 STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 2016

AND PROJECTED FOR DECEMBER 2017, 2018, 2019

(amounts in Million of Philippine Pesos)

Actual Projected

2016 2017 2018 2019

Interest Income P54,104 P59,514.4 P71,417.28 P92,842.46

Interest Expense (P13,440) (P13,440) (P13,440) (P13,440)

Net Interest
P43,166 P46,074.4 P57,977.28 P79,402.46
Income

Impairment Losses (P7,001) (P7,001) (P7,001) (P7,001)

Net Interest
Income after P36,165 P39,073.4 P50,996.28 P72,401.46
Impairment Losses

Other Operating
P31,844 P35,072.4 P42,086.88 P54,712.94
Income

Other Operating
(P43,259) (P43,259) (P47,584.9) (P57,101.88)
Expenses

Profit before Tax P24,750 P30,886.8 P45,498.26 P70,012.52

Tax Expense (P2,104) (P2,625.38) (P3,867.35) (P5,951.06)

Net Profit P22,646 P28,261.42 P41,630.91 P64,061.46

One of BDO’s financial objectives is to have a continuously increasing income while maintaining

expenses except when necessary. The projected income statement reflects its compliance with

the objectives formulated. Moreover, the statement above reflects the result or income from the

implementation of the recommended business strategies. The interest income and other

operating income were computed at increasing rates of 10% whose increase is justified by the

implemented strategies, while expenses for interest and impairment losses were maintained
and the tax expense rate was also remained at 8.50%. Meanwhile, operating expenses

remained the same only until 2017 and increase by 10% in 2018 and 20% in 2019. It is so

because it is in 2018 when the upgraded and improved mobile banking application will be

launched. Such justified the 47.31% change in net profits from 2017. While in 2019, there will be

establishment of the new bank branch and the acquisition of a new rural bank. This supported

the 53.88% change in net profits from 2018 to 2019. The changes in the amounts are justified

using the strategies implemented as well as compliance of the financial objectives.

2. Statement of financial Position

STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED DECEMBER 2016

AND PROJECTED FOR DECEMBER 2017, 2018, 2019

(amounts in Million of Philippine Pesos)

Actual Projected

2017 2018 2019

2016 (Increase by (Increase by (Increase by
10%) 20%) 30%)*

Total Assets P1,672,778 P1,840,055.8 P2,208,066.96 P2,870,487.05

Total Liabilities P1,508,424 P1,659,266.9 P1,991,120.28 P2,558,456.36

Total P164,534 P180,788.9 P216,946.68 P312,030.69

 STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED DECEMBER 2016

AND PROJECTED FOR DECEMBER 2017, 2018, 2019

(amounts in Million of Philippine Pesos)

Stockholders’
Equity

Total Liabilities
P1,672,778 P1,840,055.8 P2,208,066.96 P2,870,487.05
and Equity

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

increase in income translates to an increase in assets because an increase income may be due

to increase in loan receivables, deposits, investments, cash and net property plant and

equipment. The 10% increase in each year is justified by the implementation of the

recommended strategies. In 2018, the increase was justified by the launch of the updated and

improved mobile banking application of BDO. This means more clients can access BDO’s

services and it also translates to a flawless delivery of services. It satisfies further, one of the

formulated objectives which is to invest more in technology to improve its mobile banking

application. While in 2019, the increase is justified by the establishment of a new bank branch

and the acquisition of a rural bank. This also satisfies BDO’s objective which is to increase

presence in rural areas. An increase in market share is to be expected as well, being that the

assets of BDO are also increasing. Liabilities also increased as the assets increase. This

reflects that while there was an increase in assets during acquisition the implementation of the

strategies, there is also a relative increase in liabilities.

3. Financial Highlights
Financial Highlights (in Billion PHP)

*2019 *2018 *2017 2016 2015 2014

Resources 2,870.4 2,208.0 1,840.1 1,672.8 1,241.5 1,097.3

Net Profit 64.1 41.6 28.3 22.6 14.5 10.5

Operating Expenses 57.1 47.6 43.3 43.3 39.5 36.3

Equity 312.0 216.9 180.7 164.4 154.4 97.0

*Projected amounts based on 1 and 2 respectively.

The above table shows the financial highlights of BDO from 2014 to 2016 which are based on

its Annual Reports. While the amounts from 2017 to 2019 are gathered fro the above

statements which are projections supported by the strategies and objectives formulated. It can

be seen that there is a continuous increase in all aspects.

 Departmental Action Programs

1. Product Development

This is to take advantage of BDO’s high capitalization and strong support units in

R&D and I.T. Departments. Such is also to address BDO’s mission to consistently provide

innovative products and flawlessly deliver services. Lastly, this is to take the opportunity of the

rising demand for mobile banking applications.

PRODUCT DEVELOPMENT

ACTIVITIES EXPECTED TIMETABLE DEPARTMENT(S)

 PRODUCT DEVELOPMENT

OUTPUT(S) RESPONSIBLE

Improving BDO’s mobile banking application

- Research and
Development (R&D)
Canvass for software Department
Research on latest 3 months
and systems that are
technology relevant
relevant to bank (January 2017 - Information
to banking and
applications and to March 2017) Technology (I.T)
security.
security systems Department

- Executive
Department
Convene regarding Arrive at a decision on 1 – 2 weeks
research results and which systems and - R&D Department
developments software to purchase (April 2017)
- I.T. Department

- I.T. Department

Purchase software Acquire the software 1 week - Accounting,

and systems agreed and systems agreed Finance, Treasury
upon upon by management (April 2017) Department

Arrive at an improved 3 months

Integrate software
mobile banking Information
purchase to existing (April 2017 to
application that will Technology
mobile banking middle of June
meet market demands Department
application 2017)
and if possible, exceed.

Give the all employees

Brief employees
knowledge regarding
regarding the 1 week
the application as well
features, uses and All Departments
as possible issues that (June 2017)
possible issues and
may arise and how to
its remedies
address them

Testing of mobile Test the application and 1 month - Marketing

application for acquire reviews from Department
employees and users (July 2017)
- Operations
 PRODUCT DEVELOPMENT

Department

select clients - I.T. Department

- R&D Department

- Executive
Convene regarding
Discuss the results of Department
testing results and
the application, 1 month
possible - R&D Department
adjustments to be made
developments and (August 2017)
and other possible - I.T. Department
adjustments to be
issues that may arise
made

- Marketing
Department

Adjustments and Finalize the application 1 month - Operations

final touches to the and test the application Department
application and and acquire reviews (September
2017) - I.T. Department
testing from users
- R&D Department

- Marketing
Department

The final testing of the - Operations

Soft Launch of the 1 month Department
application to all clients
application to all
and acquire reviews for (October 2017)
clients - I.T. Department
final touches
R&D Department

Convene regarding Finalize application that - Executive

soft launch results is going to be ready for Department
and discuss official launch and
adjustments need address all issues for - R&D Department
2 months
flawless release - I.T. Department
(November to
December - Marketing
2017) Department
 PRODUCT DEVELOPMENT

Release of the mobile

Official Release of
banking application January 2018 All Departments
the application
available for all clients

2. Market Penetration

A better and more flawless delivery of services is to be expected when the bank

in accessible. Aside from addressing the objective to increase market share. The establishment

of new branches in rural areas solves BDO’s minimal presence in rural areas. Such strategy

also utilizes BDO’s high capitalization. This also means a larger network of clients which may

translate to more profits that is an answer to BDO’s mission to create shareholder value through

superior returns.

MARKET PENETRATION

EXPECTED DEPARTMENT(S)
ACTIVITIES TIMETABLE
OUTPUT(S) RESPONSIBLE

Establishing new branches in rural areas

Research regarding Gather data and

areas for possible research that will 3 months - R&D Department
establishment of new aid in reaching a
branch, opportunity decision on whether (January to March - Marketing
analysis and market to establish a new 2018) Department
research branch

Convene with Reach a decision 1 month - R&D Department

management to on whether to
discuss data gathered establish a new (April 2018) - Marketing
branch and other Department
details regarding - Executive
such Department

- Accounting &
Finance
 MARKET PENETRATION

Department

- R&D Department

Advertise for bidding Hire a contractor for - Marketing

for contractors on the the design and 1 week Department
design and construction of the
construction of the new new branch from (June 2018) - Operations
branch the bidding Department

Finalize a plan for 3 weeks

Convene and negotiate Executive
the new branch
with contractors (June 2018) Department
ready for execution

- Executive
Department
Settle all necessary
Settle all necessary 2 weeks
requirements - Legal Department
requirements to be
(Purchasing, Legal and (July 2018)
ready for execution - Accounting &
Financial)
Finance
Department

(Contractors)

Execution of plans 5 months - Executive

Construction of the for the Department
new branch establishment of the (July to
new branch November 2018) - Accounting &
Finance
Department

Hiring of new
Acquire talents to 1 month
employees and Human Resource
be as employees for
managers for new (September 2018) Department
the new branch
branch

Integrate and 1 month

Training of new Human Resource
acquaint new
employees (October 2018) Department
employees to BDO

Convene with Come up with 1 month R&D Department

management regarding strategies and
plans for new branch management plans - Marketing
 MARKET PENETRATION

Department

- Executive
Department
for running the new
and strategize (November 2018) - Operations
branch
Department

- Executive
Settlement of all Department
Finalize all necessary
necessary items 1 month
requirements for - Accounting &
and finalization of
conducting operations (December 2018) Finance
contract between
in new branch Department
contractors

- Marketing
Department

- Executive
Department
Formally open new Start of operations
(January 2019)
branch in the new branch - I.T. Department

- Operations
Department

Amplify marketing Promote and - Marketing

strategies in area of advertise new (January 2019) Department
new branch branch in the area - I.T. Department

Convene with Assess the (July 2019) - R&D Department

management regarding performance of the
the progress and new branch and - Executive
operations of new look for areas for Department
branch improvement - Operations
Department

- Accounting &
 MARKET PENETRATION

Finance
Department

3. Horizontal Integration

Such integration is a response to BDO’s weakness which is lesser presence in

rural areas. The acquisition of a rural bank entails a greater relative market share for BDO which

is one of its objectives. This will also utilize BDO’s high capitalization, experienced management

and strong support units in the R&D and I.T. Departments. The acquisition will generate more

profits seeing as the BDO’s network and operations will be expanding. This in turn will address

one of BDO’s mission that is to create shareholder value through superior returns.

HORIZONTAL INTEGRATION

EXPECTED DEPARTMENT(S)
ACTIVITIES TIMETABLE
OUTPUT(S) RESPONSIBLE

Acquiring/buying out a rural bank

- R&D Department
Convene and Reach a decision on
consult with whether to conduct 4 months - Marketing
management research and (January to April Department
regarding analysis regarding 2018)
integration integration - Executive
Department

Achieve a study that - R&D Department

Conduct research,
will be useful in
analyze 2 months - Marketing
reaching a decision
opportunities and Department
to support the (April to May 2018)
assess current
acquiring of a new - Executive
condition
bank Department
 HORIZONTAL INTEGRATION

Come up with a - R&D Department

Look for banks that 1 month
short list of banks
are for possible - Executive
for possible (June 2018)
acquisition Department
acquisition

Come up with pros - R&D Department

Convene and 1 week
and cons in banks
discuss banks on - Executive
in the short list for (July 2018)
short list Department
further analysis

Further research on More in-depth study 1 month

banks in the short on the banks in the - R&D Department
list short list (July 2018)

Convene and - R&D Department

Come up to a
discuss the results
decision on which 2 weeks - Executive
of the concluded
bank to purchase Department
research study on (August 2018)
based on the
the banks in the - Accounting &
research conducted
short list Finance Department

Settle all legal

Negotiations with responsibilities, 3 months
the management of finances and other
(August to October All Departments
the bank to be necessary steps so
acquired as to acquire the 2018)
bank

Accomplish final
Finalize acquisition
steps in acquisition 1 month
and convene with
and to acquaint All Departments
employees (November 2018)
employees with the
regarding such
change

- Executive
Fire or hire Department
Arrange employees and to
1 month - Human
management at arrange
Resource
newly acquired management at the (December 2018) Department
bank newly acquired
bank - Operations
Department

Convene with new Discuss with new 1 month Executive

management management about
 HORIZONTAL INTEGRATION

regarding business
and steps to take in the business (January 2019) Departments
furtherance of

Formally announce Announce to clients,

to the public the shareholders and
(February 2019) All Departments
acquisition of the the general public of
new bank the acquisition

4. Management

It is not necessary that BDO should change it Board of Trustees. BDO has a

good pool of talented managers. BDO’s management needs to be more involved and hands-on

in the banking operations to get to a deeper level of what the bank needs and in which direction

should the bank go. The managers should convene more often to discuss the steps BDO should

take.

5. Marketing

With a growing market share due to the increase in presence in rural areas

through the establishment of a new bank branch and the acquisition of a rural bank, it means

that the number of clients served increase. With this said, there can be an increase in the for

more prospective clients. BDO then should amplify its marketing strategies through a more

dynamic, flexible and productive Marketing Department. Such should be able to compete with

the aggressiveness of the competitors. More training for marketing managers are advised.

6. Accounting and Finance

The Finance Department should align itself with all the transactions and

movements BDO is undertaking. It must be in support with BDO strategies. Being in the

business of banking which is imbedded with public interest and with its fiduciary nature, it is
required that its employees act with utmost diligence in the performance of their duties,

especially in the Finance Department. There is no drastic change to be done by this

department.

7. Operations

With many changes in the operations come 2018 and 2019 due to the

implementation of the strategies. It is required that the Operations Department polish itself and

align itself with the other departments to ensure successful implementation. The Operations

Department may need more employees seeing as that a larger market has to be served by BDO

due to the establishment of a new bank branch and the acquisition of a rural bank.

 Information Technology

Investing in technology is one of the non-financial objectives formulated. Thus, it

should be that BDO’s I.T. Department is developed. It may be fitting for BDO to hire more I.T.

Experts or to open a new segment in the department. More funding is also probable to support

the upgrade of the department and its systems. A better security for digital assets and data is

also needed to support BDO’s operation.

 Human Resource

With the establishment of a new bank branch and the acquisition of a rural bank,

it is implied that BDO needs to hire more employees. In lieu with this, the Human Resource

(HR) Department must increase in competency and be able to hire more talented employees for

BDO’s growing business. The HR Department should strengthen its ties with head hunting

companies. The department should be more efficient and effective also in the training of

employees.

 Research and Development

 The R&D Department is the in-demand department during the commencement of

the implementation of the recommended strategies. This means that to achieve better results

and to aid in better research in the market, operations, etc.; the R&D should be developed.

More researchers should be hired. There must also be better tools and equipment for efficient

gathering of data and better study. This department should not be overlooked. A huge part of

the data that BDO managers are collected by the R&D department.

VIII. STRATEGY EVALUATION, MONITORING AND CONTROL

BALANCED SCORECARD FOR BDO

Objectives Scorecard (KRA) Performance Indicator

Increase in Net Increase by 10, 20 and

Income Statement
Income 30%

Increase in Return on Average

Increase by 20%
FINANCIAL Average Equity Equity; Market Share

Increase in
Capital Liquidity Ratio Increase by 20%
Adequacy Ratio

Increase in Market Share Increase by 20%

 BALANCED SCORECARD FOR BDO

Market Share

Lessen time to Time to develop

Decrease by 6 months
innovate services services
LEARNING &
DEVELOPMENT Increase Number of clients
accessibility of served, market Increase by 10%
services share

Lessen time in
Time to respond of
INTERNAL loading for Decrease by 30 seconds
the mobile banking
PROCESS mobile banking to 1 minute
application
applications

Lessen time to
Time to reach a
convene,
decision on the Decrease by 3 months
negotiate and
acquisition of a bank
acquire a bank

Lessen time to
Time to establish a
establish a new Decrease by 3 months
new branch
bank branch

Increase
customer
Customer Feedback Increase by 30%
satisfaction in
FEEDBACK rural areas

Growth of clients
Number of clients Increase by 20%
(as to number of)

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

measured using performance indicators. Financially, BDO plans to increase by 20% in its

income, capital adequacy ration and equity. While as for Learning & Development, performance

in such is measured using Employee Turnover statistics, Employee Turnover statistics and time

to attend to clients. In internal processes, BDO’s objective is to lessen time for queuing in bank

branches to ensure flawless and efficient delivery of services. Lastly, as to feedback, such is

measured using customer feedback surveys and a data on the number of clients of BDO.