Strategic Paper

“CONCENTRIC DIVERSIFICATION: A HYBRID BUSINESS MODEL
STRATEGY FOR DEUTSCHE KNOWLEDGE SERVICES PTE LTD

AS A SHARED SERVICE CENTER AND A THIRD PARTY
KNOWLEDGE PROCESS OUTSOURCING”
A Strategic Management Paper presented to the Faculty of the College of

Continuing, Advanced and Professional Studies
of the University of Makati
In partial fulfilment of the requirements for the executive degree

Master in Business Administration major in
Entrepreneurship
By
Sheila Nim Bartolazo
September 2018
UNIVERSITY OF MAKATI
EXECUTIVE MBA PROGRAM i
EXECUTIVE MBA PROGRAM ii
FINAL APPROVAL SHEET
This Strategic Management Paper of MS. SHEILA N. BARTOLAZO with the

title “CONCENTRIC DIVERSIFICATION: A Hybrid Business Model Strategy
for Deutsche Knowledge Services Pte. Ltd., as a Shared Service Center and a Third
Party Knowledge Process Outsourcing”, was strongly recommended for
examination, meritoriously reviewed and satisfactorily accepted by the members of
the panel during the Final Oral Defense on 25 September 2018.
PROF. GERARD BOZ C. TUNGOL, CPA, MDM, MBA

Adviser
Passed per examination conducted by the following examiners:
PROF. JOSEPH D. BERNAT, MAELT, LPT

Panel Member
PROF. LEAH PLATON-PANDICO, LLB, MBA

Panel Member
PROF. JO-DANN N. DARONG, MAEcon

Chairperson
Accepted in partial fulfillment of the requirements for the degree of

Executive Master in Business Administration major in Entrepreneurship.
PROF. LEAH PLATON-PANDICO, LLB, MBA

Program Director, Business Administration Executive Programs
PROF. EDERSON DELOS TRINO TAPIA, MPA, DPA

Dean, College of Continuing, Advanced and Professional Studies
EXECUTIVE MBA PROGRAM iii
NON-DISCLOSURE AGREEMENT / CONFIDENTIALITY AGREEMENT
This CONFIDENTIALITY AGREEMENT (the "Agreement") is by and between, Sheila Nim-

Bartolazo (hereinafter "Disclosing Party"), and University of Makati the undersigned recipient of
information (hereinafter "Recipient").
WHEREAS, Recipient has requested information from Disclosing Party in connection with
consideration of a possible transaction or relationship between Recipient and Disclosing Party.
WHEREAS, in the course of consideration of the possible transaction or relationship, Disclosing

Party may disclose to Recipient confidential, important, and/or proprietary trade secret information
concerning Disclosing Party and his/its activities, including a business idea formulated by
Disclosing Party (the “Strategic Management Paper”).
THEREFORE, the parties agree to enter into a confidential relationship with respect to the
disclosure by Disclosing Party to Recipient of certain information.
1. Definitions. For purposes of this Agreement, "Confidential Information" shall include all
information or material that has or could have commercial value or other utility in the business or
prospective business of Disclosing Party including but not limited to the chosen company.
Confidential Information also includes all information of which unauthorized disclosure could be
detrimental to the interests of Disclosing Party whether or not such information is identified as
Confidential Information by Disclosing Party. By example and without limitation, Confidential
Information includes, but is not limited to, the Company’s Business Plan and plan of operations.
For purposes of this Agreement, the term "Recipient" shall include Recipient, the company he or
she represents, and all affiliates, subsidiaries, and related companies of Recipient. For purposes of
this Agreement, the term "Representative" shall include Recipient's directors, officers, employees,
agents, and financial, legal, and other advisors.
2. Exclusions. Confidential Information does not include information that Recipient can
demonstrate: (a) was in Recipient's possession prior to its being furnished to Recipient under the
terms of this Agreement, provided the source of that information was not known by Recipient to
be bound by a confidentiality agreement with or other continual, legal or fiduciary obligation of
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developed by Recipient without use of or reference to the Confidential Information.
3. Confidentiality. Recipient and its Representatives shall not disclose any of the Confidential
Information in any manner whatsoever, except as provided in paragraphs 4 and 5 of this
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Recipient hereby agrees to indemnify Disclosing Party against any and all losses, damages, claims,
expenses, and result of a breach of this Agreement by Recipient or its Representatives.
4. Permitted Disclosures. Recipient may disclose Disclosing Party's Confidential Information to

Recipient's responsible Representatives with a bona fide need to know such Confidential
Information, but only to the extent necessary to evaluate or carry out a proposed transaction or
relationship with Disclosing Party and only if such employees are advised of the confidential
nature of such Confidential Information and the terms of this Agreement and are bound by a
written agreement or by a legally enforceable code of professional responsibility to protect the
EXECUTIVE MBA PROGRAM iv
confidentiality of such Confidential Information.
5. Required Disclosures. Recipient may disclose Disclosing Party's Confidential Information if

and to the extent that such disclosure is required by court order, provided that Recipient provides
Disclosing Party a reasonable opportunity to review the disclosure before it is made and to
interpose its own objection to the disclosure.
6. Use. Recipient and its Representatives shall use the Confidential Information solely for the
purpose of evaluating a possible transaction or relationship with Disclosing Party and shall not in
any way use the Confidential Information to the detriment of Disclosing Party. Nothing in this
Agreement shall be construed as granting any rights to Recipient, by license or otherwise, to any
of Disclosing Party's Confidential Information.
7. Return or Destruction of Documents. If Recipient does not proceed with the possible transaction
with Disclosing Party, Recipient shall notify Disclosing Party of that decision and shall, at that
time or at any time upon the request of Disclosing Party for any reason, destroy or return to
Disclosing Party any and all records, notes, and other written, printed or other tangible materials
in its possession pertaining to the Confidential Information immediately on the written request of
Disclosing Party. The destruction or returning of materials shall not relieve Recipient from
compliance with other terms and conditions of this Agreement.
8. No Additional Agreements. Neither the holding of discussions nor the exchange of material or
information shall be construed as an obligation of Disclosing Party to enter into any other
agreement with Recipient or prohibit Disclosing Party from providing the same or similar
information to other parties and entering into agreements with other parties. Disclosing Party
reserves the right, in its sole discretion, to reject any and all proposals made by Recipient or its
Representatives with regard to a transaction between Recipient and Disclosing Party and to
terminate discussions and negotiations with Recipient at any time. Additional agreements of the
parties, if any, shall be in writing signed by Disclosing Party and Recipient.
9. Irreparable Harm. Recipient understands and acknowledges that any disclosure or

misappropriation of any of the Confidential Information in violation of this Agreement may cause
Disclosing Party irreparable harm, the amount of which may be difficult to ascertain, and therefore
agrees that Disclosing Party shall have the right to apply to a court of competent jurisdiction for
specific performance and/or an order restraining and enjoining any such further disclosure or
breach and for such other relief as Disclosing Party shall deem appropriate. Such right of
Disclosing Party is to be in addition to the remedies otherwise available to Disclosing Party at law
or in equity. Such right of Disclosing Party is to be in addition to the remedies otherwise available
to Disclosing Party at law or in equity. Recipient expressly waives the defense that a remedy in
damages will be adequate and any requirement in an action for specific performance or injunction
for the posting of a bond by Disclosing Party.
10. Survival. This Agreement shall continue in full force and effect at all times.
11. Successors and Assigns. This Agreement and each party's obligations hereunder shall be
binding on the representatives, assigns, and successors of such party and shall inure to the benefit
of the assigns and successors of such party; provided, however, that the rights and obligations of
Recipient hereunder are not assignable.
12. Governing Law. This Agreement shall be governed by and construed in accordance with the
laws of the City of Makati, without regard to conflict of law principles.
EXECUTIVE MBA PROGRAM v
13. Arbitration. Any controversy, claim or dispute arising out of or relating to this Agreement or
the matters covered hereby shall be resolved solely by confidential binding arbitration in City of
Makati, Metro Manila Philippines under the applicable commercial arbitration rules of JAMS in
existence at the time of commencement of the arbitration, in front of one arbitrator.
Each party shall bear their own attorney fees, expert witness fees, and costs, and half of the
arbitrator’s fees.
14. Counterparts and Right. This Agreement may be signed in counterparts, which together shall
constitute one agreement. The person signing on behalf of Recipient represents that he or she has
the right and power to execute this Agreement.
15. Entire Agreement. This Agreement expresses the full and complete understanding of the
parties with respect to the subject matter hereof and supersedes all prior or contemporaneous
proposals, agreements, representations and understandings, whether written or oral, with respect
to the subject matter. This Agreement is not, however, to limit any rights that Disclosing Party
may have under trade secret, copyright, patent or other laws that may be available to Disclosing
Party. This Agreement may not be amended or modified except in writing signed by each of the
parties to the Agreement. This Agreement shall be construed as to its fair meaning and not strictly
for or against either party. The headings hereof are descriptive only and not to be construed in
interpreting the provisions hereof.
Date: September 25, 2018 Date: September 25, 2018
Sheila Nim-Bartolazo PROF. Ederson Delos Trino Tapia, MPA, DPA
("Disclosing Party") ("Recipient")
By: Executive MBA By: University of Makati
Title: Student Title: Dean of College
Signed in the Presence of:
PROF. Jo-Dann Darong, MAEcon PROF. Gerard Boz Tungol, CPA, MDM, MBA
Witness Witness
EXECUTIVE MBA PROGRAM vi
ACKNOWLEDGEMENT
I thank all who in one way or another contributed in the completion of this Strategic
Management Paper. First, I give thanks to our Almighty God for giving me
wisdom, and ability to finish this document.
I am so thankful to the University Of Makati, College of Continuing, Advanced and

Professional Studies for offering an Executive MBA program. I give profound
thanks to the Professors and lecturers of the program especially to the preceding
program director Professor Jo-Dan Darong for his unwavering support and
assistance. His challenges brought this work towards a completion.
My special and wholeheartedly thanks to my adviser, Professor Gerard-Boz
Tungol who encouraged and directed me. It is with his supervision that this work
came into existence. For any faults I take full responsibility.
I want to recognize as well the help of Prof. Tristan Nabong for editing and
revising my paper given a short notice.
I am also deeply thankful to my informants. Their names cannot be disclosed, but
I want to acknowledge and appreciate their help and transparency during my
research. Their information has helped me complete this manuscript.
My gratitude goes to my fellow proponents as well, particularly those who became
my confidante and lend their helping hands.
Furthermore, I am thankful to DKS Management team for supporting me pursue
my studies. To my direct reports who perform their tasks under minimum

EXECUTIVE MBA PROGRAM vii
supervision thanks a lot, because of that I was able to have additional time on my
research.
I also thank my family who encouraged and prayed for me throughout the time of
my research. Because of them, I have peace of mind that somebody is taking good
care of my daughter while I was at school.
Finally, I am grateful to my husband for his untiring support be it financially,
emotionally and scholarly. Because of him, my EMBA journey became possible
and bearable.
This paper is dedicated to my daughter, hope she will gain insight from it and pursue
excellence in the future.

EXECUTIVE MBA PROGRAM viii
EXECUTIVE MBA PROGRAM ix
Table of Contents
FINAL APPROVAL SHEET ....................................................................... II

NON-DISCLOSURE AGREEMENT / CONFIDENTIALITY
AGREEMENT .............................................................................................. III
ACKNOWLEDGEMENT ............................................................................ VI
TABLE OF FIGURES.................................................................................XII
TABLE OF ACRONYM ........................................................................... XIII
DISCLAIMER............................................................................................ XIV
1 CHAPTER I INTRODUCTION ............................................................2
1.1 Data Information & Sources ...................................................................12
1.2 Methodologies & Frameworks................................................................13
1.3 Scope and Limitations .............................................................................14
1.4 Company Profile ......................................................................................15
1.4.1 Deutsche Bank .......................................................................................15
1.4.2 Deutsche Knowledge Services Pte, Ltd. ..............................................29
1.5 The Author’s Connection to the Chosen Company ..............................32
2 CHAPTER II EXTERNAL ANALYSES/ASSESSMENT .................33
2.1 Industry and Market ...............................................................................33
2.1.1 Definition of Industry ...........................................................................33
2.1.2 Definition of Market .............................................................................37
2.2 Macro Environment (Industry Analysis)...............................................43
2.2.1 Porter’s Five Forces Analysis .................................................................43
2.2.2 CAGE Distance Framework ...................................................................52
2.3 Macro Environment (KPO in the Philippines) .....................................65
2.4 Competitor Analysis ................................................................................77
2.5 Broader Societal Impact of KPO ............................................................88
3 CHAPTER III INTERNAL ANALYSIS...............................................89
3.1 The Leader................................................................................................89
3.2 Financial Analysis ....................................................................................91
3.2.1 Condensed Financial Statements .........................................................92
3.2.2 Financial Ratios ......................................................................................97
3.2.3 Comparative Financial Analysis........................................................102
EXECUTIVE MBA PROGRAM x
3.3 Value Chain Analysis.............................................................................104

3.4 Internal Factor Evaluation Matrix (IFE) ............................................107
3.5 Synthesis of Strengths and Weaknesses using IFE Matrix ................111
4 CHAPTER IV STRATEGIC PLAN ....................................................112
4.1 Vision.......................................................................................................112
4.2 Mission ....................................................................................................114
4.3 Objectives................................................................................................117
4.4 Strategy Formulation.............................................................................120
4.5 Integrating External-Internal Assessment using SWOT Analysis for
Strategy Formulation...................................................................................121
4.6 Evaluation of Current Corporate Strategies .......................................123
4.6.1 Strategic Position and Action Evaluation (SPACE) Matrix ...........123
4.6.2 Internal – External (IE) Matrix .........................................................128
4.6.3 Grand Strategy Matrix (GSM) ..........................................................129
4.6.4 GE McKinsey 9-Box Matrix ..............................................................130
4.6.5 Strategy Summary .................................................................................131
4.7 Competitive Advantage .........................................................................132
4.7.1 Present Competitive Advantages ..........................................................132
4.7.2 Competitive Advantages that are deteriorating.....................................132
4.7.3 Proposed Competitive Advantages .......................................................133
4.8 Proposed Strategies................................................................................134
4.8.1 Description of the Strategy ...................................................................135
4.8.2 The Hybrid Business Model of DKS- Enacting Concentric
Diversification and Market Penetration .....................................................138
4.8.3 Detailed activities and expected output to implement strategy ............140
4.8.4 Gantt chart of activities ........................... Error! Bookmark not defined.
4.9 Functional Area Strategies ....................................................................141
5 CHAPTER V STRATEGY EXECUTION ........................................143
5.1 Evaluation of the company’s capabilities to execute the strategies ...143
5.2 The Balanced Scorecard ........................................................................143
5.3 Discussion of how to manage the change ................................................145
6 CHAPTER VI FINANCIAL ANALYSIS ...........................................147
6.1 Assumptions Used ...................................................................................147
EXECUTIVE MBA PROGRAM xi
6.1.1 Three-Year Financial Projections .........................................................147

7 REFERENCES ......................................................................................157
8 APPENDICES........................................................................................161
EXECUTIVE MBA PROGRAM xii
TABLE OF FIGURES
Table 1. Common Types of Bank and its Functions ..................................................5

Table 2 Kinds of BPO in the Philippines .................................................................10
Table 3 Framework & Matrix used ..........................................................................13
Table 4 Shared Service Centers established by Deutsche Bank Group ...................27
Table 5 High Level Overview ..................................................................................29
Table 6 BPO distribution in the Philippines ............................................................33
Table 7 KPO Type in the Philippines and its Key Player ........................................36
Table 8 Summary of CAGE Distance Framework ..................................................64
Table 9 Result of External Factor Evaluation (EFE) Matrix ...................................77
Table 10 Result of CPM Analysis ............................................................................86
Table 11 Condensed Statement of Financial Position..............................................93
Table 12 Condensed Statement of Comprehensive Income ....................................95
Table 13 Financial Ratio ..........................................................................................97
Table 14 Comparative Financial Ratios .................................................................103
Table 15 Summary of Internal Factor Evaluation (IFE) ........................................111
Table 16 Evaluation of DKS Mission per Fred David ...........................................114
Table 17 Evaluation of the proposed Mission statement: ......................................116
Table 18 Summary of Internal and External Factor using SWOT Analysis ..........122
Table 19 Result of Financial Strength & Environmental Stability Analysis ........124
Table 20 Result of Industry Strength & Competitive Advantage analysis ............125
Table 21 Strategic Position and Action Evaluation Graph ....................................127
Table 22 Total Internal- External Factor (IFE) Weighted Score ...........................128
Table 23 Result of GE McKinsey 9-Box Matrix ...................................................130
Table 24 Summary of Strategies to pursue ............................................................131
Table 25 The Balanced Score Card ........................................................................144
EXECUTIVE MBA PROGRAM xiii
TABLE OF ACRONYM
Acronym Meaning
DBG Deutsche Bank Group
DKS Deutsche Knowledge Services
KPO Knowledge Process Outsourcing
ITO Information Technology Outsourcing
CCO Contact Center Outsourcing
SSC Shared Service Center
CSC Captive Service Center
DE Germany
PH Philippines
IBPAP Information Business Process Association of the Philippines
NEDA National Economic and Development Authority
PSA Philippine Statistic Authority
EXECUTIVE MBA PROGRAM xiv
DISCLAIMER
This study was done in partial fulfillment of the University of Makati Executive
Master in Business Administration Program. Any information found in this
document should not be regarded as official pronouncement of Deutsche
Knowledge Pte. Ltd, the Company used as subject matter of the study. Conclusions
arrived at this report reflect only the personal view of the author and not DKS
management.
Any request to copy or replicate any part of the manuscript should be forwarded to
the author.
EXECUTIVE MBA PROGRAM xv
EXECUTIVE SUMMARY
The purpose of this strategic management paper is to provide a viable strategy to the
Deutsche Knowledge Services Pte. Ltd., in Servicing DBG worldwide. DKS is an
offshore regional headquarters established by Deutsche Bank Group. With service
sectors of back office, middle office and information technology, DKS wide product
offering has been a result of years of experience. It has been operational in the
Philippines for 13 years and its growth is evident with the increase of its workforce
from 200 in year 2005 to 2000 in 2017.
The increase in demand for services in the offshoring and outsourcing industry is met
with the increasing competition among firms in different countries. With key strength
suitable for the industry, Philippines has established itself as one of the top KPO
destinations globally. There are many opportunities and several threats identified
from general environment, industry and competitor analysis. As determined in
internal analysis, DKS has list of strengths to take advantage of the existing
opportunities, avoid threats, and improve on its weaknesses.
Based on several tools and frameworks employed in the strategy formulation stage,
Concentric Diversification has been chosen as the best strategy for DKS. This seeks
increased sales by creating a hybrid business model of a shared services company
and a third party KPO provider. Having its leaders and employees as its force in
driving success for the company, its strategic objective centers on improving the
contributions made by its talented people. Return on employee as its new measure of
company performance recognizes that it is the thinking-intensive resources that drive

EXECUTIVE MBA PROGRAM xvi
up the business value. To achieve its objective, action plans are created for the
implementation of the strategic plan. The strategy implementation are to be
monitored using various evaluation tool.
This paper is divided into the following major parts, namely: external assessment of
the industry and market, internal analysis of the company, strategic plan, strategy
implementation, strategy execution, and financial analysis.

EXECUTIVE MBA PROGRAM 2
1 CHAPTER I INTRODUCTION
“It is not the strongest among the species that survive, nor is it the most intelligent,
It’s those that are most adaptive to change.” - Charles Darwin
"Survival of the fittest" is the most important concept in the business world today.
With the advent of globalization, there is fierce competition between organizations in
several areas. This fast faced scenario has enormous impact to financial
intermediation industry – in which banking sector belong. In order to survive the
organizations such as banks have diversified their operations in a big way. They need
to strategize how to survive in the long-term by finding out how they are able to
reduce their operational costs and at the same time increase their revenues to entice
more investors.
This paper is structured as follows: the proponent first defined role of the bank in the
economy. In addition, the proponent will give an overview, the grounds that led banks
to deliberately adopt outsourcing as one of their corporate strategy. This paper will
also discuss the linkage between Deutsche Bank Group (DBG) as the parent company
and its subsidiary, Deutsche Knowledge Services (DKS) as a shared services arm of
the bank. Lastly, this paper will attempt to propose strategies by using the following
frameworks, guided by its methodologies to help bring about the desired outcomes to
address the following opportunity or question: How can Deutsche Knowledge
Services (DKS) go beyond being a subsidiary of DB Group, from its cost
leadership into service-differentiated company in order to take advantage of the
development in the knowledge outsourcing and offshoring industry?
A summary of the frameworks that will be utilized will be as follows:
Figure 1 Integrating External - Internal Assessment & Strategy Formulation
Banking sector handles cash, credit, and other financial transactions. Banks provide
a safe place to store extra cash and credit. They offer savings accounts, certificates of
deposit and checking accounts. Banks use these deposits to make loans. These loans
include home mortgages, business loans, and car loans. Banking is one of the key
drivers in the economy. Because it provides the liquidity needed for families and
businesses to invest for the future (Amadeo, 2018).
Banks play an important role in supporting economic growth. They exist because
they are an efficient response to the fact that information is costly. Banks specialise
in assessing the credit worthiness among borrowers and providing an ongoing
monitoring function to ensure borrowers meet their obligations. They are rewarded
for these services by the spread between the rates they offer to the accumulated pool
of savers, and the rates they offer to potential borrowers. Banks offer a repository for
savings, and then transform them into long-lived (illiquid) assets – housing loans and
lending to businesses. In addition, banks play a role in providing payment and
settlement services which are necessary for households, business and other financial
institutions to settle day-to-day transactions (Bollord, 2011).
Table 1 below shows some pertinent information on the Common Types of Bank, its
capitalization requirements and sample bank in the Philippines (BSP, 2017 & FDRS,
2016).
EXECUTIVE MBA PROGRAM
5
Table 1. Common Types of Bank and its Functions
Common Types Capitalization by Examples in the

Activities and Licenses Main Customers
of Bank BSP Philippines
Central Banks Manage the monetary system for a Private Banks, Bangko Central ng
government. For example, the Federal Government owned Pilipinas (BSP)
Reserve Bank is the US central bank, for the banks and other
Philippines we do have Bangko Sentral ng financial
Pilipinas. While, for Germany they do have intermediaries
Bundes Bank, these banks are responsible for
managing economic activity and supervising
other local and foreign banks.
Retail Banks This focuses on consumers (or the general General Public 4 billion pesos, up to BDO; Metrobank; BPI;
public) as customers. These banks give credit 15 billion pesos, LBP; PNB; Secutiry
cards, offer loans, and they’re the ones with depending on their Bank; Chinabank; DBP;
numerous branch locations in populated number of branches Unionbank; RCBC
areas.
Commercial Banks Focus on business customers. Businesses Businesses & 4 billion pesos, up to BDO; Metrobank; BPI;
need checking and savings accounts as well. Corporations 15 billion pesos, LBP; PNB; Secutiry
But they also need more complex services, depending on their Bank; Chinabank; DBP;
and the amounts or the number of number of branches Unionbank; RCBC
transactions can be much larger. They might
need to accept payments from customers,
rely heavily on lines of credit to manage cash
flow, and they might use letters of credit to
do business overseas.
6

Investment Banks Help businesses work in financial markets. If Companies 6 billion pesos, up to ABCapitalOnline.com,
a business wants to go public or sell debt to undergoing mergers 20 billion pesos Inc; Asian Alliance
investors, they’ll often use an investment and acquisitions; debt depending on the Investment Corporation;
bank. and equity capital number of their Asian Focus Group Inc.;
raising; valuation; branches BPI Capital Corporation;
and project financing Eastgate Capital
advisory services to Partners, Inc.
restructuring and
asset management
Online Banks Operate entirely online – there are no International clients No information found Ally Bank; Discover
physical branch locations available to visit Bank
with a teller or personal banker. Many brick-
and-mortar banks also offer online services,
such as the ability to view accounts and pay
bills online, but internet-only banks are
different: they often offer competitive rates
on savings accounts and they’re especially
likely to offer free checking.
Mutual Banks Are similar to credit unions because they are Unimpaired capital UCPB; Mertobank;
owned by members (or customers) instead of accounts of at least BDO; BPI AMTC;
outside investors. P650 million Union Bank;Eastwest;
Security Bank PNB;
LBP
Savings and Loans Are less prevalent than they used to be, but General Public Unimpaired capital BPI Family Savings
they are still important. This type of bank accounts of at least Bank; Philippines
was important in making home ownership P650 million Savings Bank; RCBC
mainstream, using deposits from customers Savings Bank; China
to fund home loans. The name savings and Bank Savings;
loan refers to the core activity they perform: Philippine Business
take savings from one customer and make Bank; City Savings
loans to another. Bank; PNB Savings
7

Universal Banks Have a wider scope of activities than Local & Government 6 billion pesos, up to Citi Philippines; AUB;
Commercial Banks. In addition to banks and other 20 billion pesos HSBC; BoC; Maybank
commercial banking activities, universal financial institutions depending on the Philippines; PBCom;
banks are authorized to: and businesses number of their Mizuho Bank Manila
- engage in underwriting branches Branch; Deutsche Bank
- and in other activities of investment AG Manila
houses
- and to invest in equities of non-allied
institutions.
To meet the challenge of competition, leading banks worldwide are focusing their
resources on their core competences and assign some of their non-core activities to
outside players. This process is called as Outsourcing or Services Sharing (Hamel and
Prahalad, 2012). According to Power et al. (2006), outsourcing is made up of two
words – “out” & “sourcing”. Sourcing refers to the act of transferring work,
responsibilities, and decision rights to someone else. Companies must outsource their
work because there are others who can do it cheaper, faster and better. Offshoring
simply means "any country other than your own (Sauer, 2006).
According to Information Technology and Business Process Outsourcing of the
Philippines - IBPAP (2008), offshoring and outsourcing (O & O) companies in the
Philippines can be generally categorized into Captive Centers or Shared Services
Centers (SSC) and Third Party providers or commonly known as Business Process
Outsourcing (BPO).
To further understand below are the common description of the following
terminology as defined by various scholars in this field as follows.
Captive Services Centre (CSC) or Shared Services Centre (SSC) – Rather than
being run as a centralized function, an SSC operates by way of an internal customer
service business. It typically charges the business units for services provided, and
uses service level agreements (SLA) as a contractual arrangement, which specifies
cost, time and quality performance measures.

Business unit management is, therefore, able to focus a greater portion of its time
on external customers and issues of strategic importance by redirecting the role of
local finance to one of decision support and analysis. With shared services,
employees still perform the jobs and the systems should be fully integrated with the
business units’ systems and process. (Deloitte, 2011)
Business Process Outsourcing (BPO) – The practice of hiring a company to
handle business activities for the other company as a third party. In this method of
outsourcing the third party gets a contract to perform specific and specialized
functions on behalf of the hiring company (Bloomberg, 2004).
There are three kinds of BPO in the country according to IBPAP (2012) take a look
at Table 2 to understand their key differences and the actual established companies
in the Philippines.
10
Table 2 Kinds of BPO in the Philippines
Companies in the
Types of BPO Description/Activities
Philippines
Information Concentrates principally on hiring a different company or service provider to International
Technology do Information Technology related activities (e.g. application development, Business
Outsourcing (ITO) or testing and quality assurance). ITO, therefore, is a division of business Machine(IBM);
process outsourcing. ITO portrays a process, whereby an organization Hewlett Packard
chooses to contract out or trade the firm's IT assets, people and/or activities Enterprise(HPE);
to a third party supplier, who, in exchange, provides and manages these HCL
assets and services for an agreed fee over an precise time period (Saitta &
Fjermestad, 2005)
Contact Center Consists of inbound and outbound voice and non-voice operation services Concentrix; Sitel;
Outsourcing for the purpose of sales, customer service, technical support, and others Teleperformace;
(CCO) (IBPAP, 2008) Covergys; Telus
Knowledge Outsourcing of knowledge intensive business processes, which require Accenture; Conduent
Process specialized field expertise. The strong point of KPO is not the cost-saving (formerly known as
Outsourcing but the added-value. It offers a sustainable competitive advantage for ACS); GentPact
(KPO) customers in all knowledge intensive industries by supplying data and Services; SPI
statistical analysis, market and industry research competitive analysis, and Technology
support in legal and administration processes (Mireau, 2007). Unlike voice-
based BPO (call-centers), which is primarily based on cost advantage, and
relatively quickly trainable labor pool, KPO depends on a more limited
resource of highly-skilled, educated employees, and it focuses on delivering
value-added services to the clients (Baldia, 2010). Its prime objective is to
provide clients with useful insights that may assist them in their strategic
decision making process (IBEF, 2008).
Source (IBAP, 2012
KPMG (2017) predict that KPO phenomenon will have far-reaching consequences
for the global financial services’ industry over the next three years. Most global banks
and insurers are expected to adopt KPO strategies.
Acquiring the necessary skill sets, attracting talent, protecting intellectual property
and dealing with conflicting interest is likely to be the major challenges of KPO
industry over the next years (KPMG, 2008). However, organizations with vast
experience in BPO sector are supposed to have a shorter learning process in the KPO.
The Philippines business process outsourcing (SSC/BPO/ITO/KPO) sector takes
pride of the country’s global competitiveness. In 2010, the Philippines posted almost
US$5.70 billion of pure voice-based (call-center) revenues, which make the country
rank globally number one in this category; however, India–its biggest competitor in
the sector–continues to be the leader in the global BPO industry mainly with its strong
presence and capacity in the information technology (IT) (NEDA, 2011).
Further information regarding SSC & KPO will be discussed in chapter II.
1.1 Data Information & Sources

The formulation of this strategic management paper is based on the facts and
information obtained from primary and secondary sources. Personal interview of
some key officer and employees of the company and direct observation of the
proponents were done for the first hand information gathering.
These key officers are as follows:
1. Previous Assistant Vice President for Group Intercompany
2. Supervisor from Accounting Cost Close
3. Senior Analyst from Legal Entity Control
4. Financial Analyst from Balance Sheet Substantiation
Secondary data were sourced through the following references:
Strategic Management: Concepts and Cases, 13th Edition by Fred R. David
Audited Financial Report through Securities & Exchange Commission
Deutsche Bank Group website

1.2 Methodologies & Frameworks

This strategic management paper is based on systematic review prepared by the
proponent on the chosen company using strategic management frameworks as
guided by its methodologies. According to Geddes and Carney (2002), systematic
reviews (or overviews) are synthesis of primary research that use specific, explicit
and therefore reproducible methodological strategies to identify, assemble,
critically appraise ad synthesize relevant information or issues on specific topic.
Methodologies used by the proponents were summarized in the table below:
Table 3 Framework & Matrix used
Tools and Activities

Strategy Formulation David's Strategic Model
9 Essential Components of Mission Statements
BHAG framework for Vision Statements
External Factor Evaluation Matrix (EFE)
Input Stage Competitive Profile Matrix (CPM)
Internal Factor Evaluation Matrix (IFE)
Strengths ‐ Weaknesses ‐ Opportunities ‐ Threats
(SWOT Analysis)
Strategic Position and Action Evaluation (SPACE)
Matching Stage McKinsey 9 Box
Grand Strategy Matrix
Decision Stage Quantitative Strategic Planning Matrix (QSPM)
Strategy
Implementation
Market Segmentation
Market Positioning
Porter's Five Forces
Strategy Evaluation
McKinsey 7S
Norton & Kaplan Balance Scorecard
Definition of these frameworks and tools will be discussed in the succeeding
chapters.
1.3 Scope and Limitations
This study was prepared with the following assumptions and limitations:
• The weights and scores given on matrices were based on personal evaluation made
by the proponent of the data she gathered together with the rating given by her
colleagues during focus group discussions
Weight per respondent Weig

ht
1. Previous Assistant Vice President for Group 20%
Intercompany
2. Supervisor from Accounting Cost Close 20%
3. Senior Analyst from Legal Entity Control 20%
4. Financial Analyst from Balance Sheet Substantiation 20%
5. Proponent 20%
• Projections were made based personal assessment of company and industry
performance
• Data obtained from competitor were from available public websites
• Study did not include operation of the parent company and other DBG legal
entities and subsidiaries.

1.4 Company Profile
1.4.1 Deutsche Bank
Was founded as a foreign trade bank in 1870 to promote and facilitate trade
relations between Germany, other European countries and overseas markets.
Headquartered in Frankfurt am Main, Germany, Deutsche Bank is the largest
bank in Germany and one of the largest financial institutions in Europe and the
world, as measured by total assets of € 1,475 billion as of December 31, 2017.
As of that date, DB employed 97,535 people on a full-time equivalent basis and
operated in 60 countries out of 2,425 branches worldwide, of which 65% were
in Germany.
DB offers a wide variety of investment, financial and related products and
services to private individuals, corporate entities and institutional clients around
the world. Deutsche Bank provides commercial and investment banking, retail
banking, transaction banking and asset and wealth management products and
services to corporations, governments, institutional investors, small and
medium-sized businesses, and private individuals. Deutsche Bank is
Germany’s leading bank, with a strong position in Europe and a significant
presence in the Americas and Asia Pacific.
DB Strategy: We are a leading European bank with a global reach supported

by a strong home base in Germany, Europe’s largest economy.
We serve the real economy needs of our corporate, institutional, asset

management and private clients, providing services in transaction banking,
corporate finance and capital markets, asset management, wealth management
and retail banking.
The fundamental goal of our strategic measures is to make Deutsche Bank a
stronger, safer bank that is well positioned to pursue growth opportunities
through its strong global client franchise.
Our management believes we will be able to achieve this by:
 having capital levels the sufficiency of which are beyond question,

 having a leading CIB franchise with the scale and strength to successfully
compete and grow globally,
 occupying the number one private and commercial banking position in
our home market of Germany,
 giving our world class Deutsche AM division operational segregation that
can support accelerated growth,
 reducing the size of our corporate center and cost base in part through
more front to back alignment and shifting large portions of infrastructure
functions to the business divisions and
 shifting our earnings and business mix more towards stable businesses.
Regions or Sub-regions may comprise one or multiple Countries. In each
Country, for matters of local governance, supervision and external
representation (incl. vis-à-vis local regulators) the Chief Country Officer
(CCO) is the most senior DB officer in a Country. A Regional CEO is appointed
in each Region and is generally supported by a Regional COO.
Deutsche Bank is ranked #1 and received the seal "very good" by German
Institute for Service Quality. The largest national universal banks and the
largest regional banks in Berlin, Hamburg and Munich have been tested in this
Survey.
DB won in Euromoney – Trade Finance Survey 2018 in the following

categories:
Best trade finance providers

 No.1 Western Europe
 No.1. Asia Pacific
 Further 10 domestic No.1 awards
Best service
 No.1 Financing (global)
 Further 11 domestic No.1 Service Awards
Last 2017, for the sixth year in succession Euromoney magazine have named
Deutsche Bank Best Cash Management Provider for Corporates in its domestic
German market and in Western Europe. The Bank also won No.1 positions in
Belgium and the Netherlands.
Highlights of Corporate survey results:
Deutsche Bank remains in No.3 position globally as International Cash
Management Provider of Choice.
Regional category:
 No.1 in Western Europe (6th consecutive year)
 No.2 in Australasia (No.3 in 2016)
 No.4 in Asia (No.6 in 2016)
 No.6 in Central & Eastern Europe (No.4 in 2016)
 No.8 in Middle East (No.11 in 2016)
 No.9 in Latin America (No.9 in 2016)
Domestic Category
 No.1 in Germany (6th consecutive year )
 No.1 in Belgium (2nd consecutive year)
 No.1 in Netherlands
 No.1 in Philippines (No.2 in 2016)
 No.2 in Austria (No.2 in 2016)
 No.2 in India (No.2 in 2016)
The proponent created a company map to show visual representation of DBG

around the globe.
Figure 2 DBG Corporate Map
Source: db.com official websit

Deutsche Bank in the center depicts a parent company which resides in Frankfurt
Germany. Line to the left illustrates that DBG were divided based on its structured
such as branches, subsidiaries and non-structured entities.
DB branches are where banking activities such as accepting deposits or making
loans, financial services etc. It also refers to a commercial banking outlet that
offers banking services to walk-in customers.
DB Subsidiaries is a type DB entity that is located and incorporated in a foreign
country but majority owned by a parent corporation in a different nation. This
particular banking model helps the parent company avoid unfavorable regulations
enforced by the home country. Subsidiary banks don't adhere to regulations that
apply in the home country or nations where the parent company is incorporated.
Instead, they operate under the laws and regulations of the host country.
DB’s Structured & Non-Structured entity engages in various business activities
with structured & non structured entities which are designed to achieve a specific
business purpose. A structured entity is one that has been set up so that any voting
rights or similar rights are not the dominant factor in deciding who controls the
entity. An example is when voting rights relate only to administrative tasks and
the relevant activities are directed by contractual arrangements.

The principal uses of structured entities are to provide clients with access to
specific portfolios of assets and to provide market liquidity for clients through
securitizing financial assets.
Line to the right shows that DB operates in three continents namely Americas,
EMEA & Asia. Americas were divided into two regions such as Latin America &
North America, which composed of the following countries:
Figure 3 DB Americas
Source (DB Aminet, 2018)

APAC was sub-divided into three regions such as Asia, Japan & Pacific. APAC
alone consist of 1,509 entities.
Figure 4 DB APAC
EMEA were divided into four sub regions such as MEA (Middle East & Africa),
Continental Europe excluding Germany, UK including Ireland & Channel Islands
and of course Germany.

Figure 5 DB EMEA
Figure 6 EMEA (DB Aminet, 2018)

Line going down illustrates that Deutsche Bank AG have three banking pillars;
Corporate Investment Bank (CIB), Deutsche Asset Management (DeAM) &
Private & Commercial Bank (PCB):
Corporate & Investment Bank (CIB)

Under CIB, there are three major bank products such as Global Transaction
Banking, Corporate Finance & Global Markets.
Global Transaction Banking is the business division that offers commercial
banking products and services to Corporate and Institutional clients. It includes
technologically advanced domestic and international payment systems,
professional risk management tools for international trade, trust services, bank
agent, deposit and custody securities and related services.
The main product lines of Global Transaction Banking are:
Cash Management - A full range of solutions to meet any cash management need
either globally and locally, including through superior-quality products such as,
for example, cash pooling combined with technological leadership.
Trade Finance - Products and services that respond effectively to the financial
requirements of international trade, including documentary credits, letters of
credit, guarantees and other risk management tools together with structured loans
for exports.
Institutional Cash & Securities Services - Bank provide administrative services
for capital market transactions and other types of financing. Bank also provides
escrow services on securities and cash with ancillary roles.
Corporate Finance - Comprised of regional and industry-focused coverage teams
that ensure the delivery of the entire range of financial products and services to the
bank’s corporate clients. The business includes the Mergers & Acquisitions
(M&A) team as well as the debt and equity capital markets (DCM and ECM)
teams.
Global Markets - Dedicated to building long-term, sustainable relationships with
the bank’s key corporate and institutional clients. It combines a market-leading
institutional sales force, world-class research with trading and structuring expertise
to provide clients with access to liquidity and customized solutions across a wide
range of markets, products and regions.
Deutsche Asset Management (DeAM)
One of the world’s leading investment management organizations. Deutsche Asset
Management offers individuals and institutions traditional and alternative
investments across all major asset classes.

Private & Commercial Bank (PCB)
Deutsche Bank's newly established Private & Commercial Bank (PCB) corporate
division combines the bank's expertise in private and commercial banking with
Postbank in Germany and Wealth Management in one corporate division. Both in
banks’ home market of Germany and internationally, PCB offers their client’s
high-quality advice and a wide range of financial services from a single source.
These range from comprehensive services for retail clients, to solutions for
demanding clients in Private Banking and Wealth Management, to business and
commercial client coverage.
Pink lines on the upper right corner of the map shows that DBG have Three
Captive Centers or Shared Service Centers, which are as follows:

27
Table 4 Shared Service Centers established by Deutsche Bank Group
CSC/SSC
owned by
Number of
Deutsche Location Services offered
Employees
Bank
Group
DKS Pte.
Manila 2000 Financial analysis and reporting, cost management, product
Ltd
control and operations services, as well as change management, IT
and human resources services to the Bank’s internal businesses
DBOI
Bangalore;
Global These centers provide technology and Infrastructure operations
Jaipur; Mumbai 8500
Services support
and Pune
Pvt. Ltd
Provides offshore front-office services to the Bank’s various

business divisions around the globe; Performs cutting-edge
DB Centre Mumbai 1300 modeling, quantitative analytics, extensive structuring and
research, DB Centre assists the Bank in delivering innovative
financial solutions to international clients.
29
1.4.2 Deutsche Knowledge Services Pte, Ltd.
Table 5 High Level Overview

Deutsche Knowledge Services Pte. Ltd
Ownership structure Regional Operating Headquarters (ROHQ)
Regional Chief Executive Officer (CEO) supported by
regional Chief Operational Officer (COO) followed by
Board Chief Country Officer (CCO). COO is the most senior DB
officer in a Country
Management Functional Committee & Executive Committee
Middle Office (Product Control, Book runners, Broker
Services offered dealer supports etc); Back Office (Finance, Accounting,
Reporting & Risk Control services)
Main Clients Deutsche Bank Group
Brief of financials (major Total Assets of 3Bn Php; Total Liabilities 2.6Bn Php;
headings only Assets, Total Head Office Account of 434Mn Php based on
Liabilities and Equity) 2017 audited FS
Source DKS website & SEC, 2017
Deutsche Bank also has a world-class shared services center in the country,
registered last April 2005 in the Philippines Securities and Exchange Commission
as Deutsche Knowledge Services Pte. Ltd. (DKS), a Regional Operating
Headquarters (ROHQ).
DKS is Deutsche Bank's primary global shared service center for Controlling,
providing accounting, reporting, and reconciliation and risk control services. DKS
set up its ROHQ in the Philippines to tap into the significant potential offered by
the country as a global center of excellence due to qualified skilled labor in the
country.
30
It provides financial analysis and reporting, cost management, product control and
operations services, as well as change management, IT and human resources
services to the Bank’s internal businesses. Employs over 2,000 professionals in
the Philippines, the establishment of DKS is another major milestone for DB AG
Group. With its continued growth in capability and transformation, it has become
a vital cog in the strategy of the Bank.
For more than a decade now, DKS (also known as DBG Manila), has consistently
delivered value for the Bank. Various teams in DKS have gone beyond providing
basic support services to the hub locations to delivering more complex, highly
analytical and relevant reports and inputs that drive the fulfillment and their
commitments to their clients and regulators. DKS continue to improve processes
across the range of businesses they support, resulting in more efficient delivery
and lower costs.
The wealth of knowledge and expertise of DKS staff translates into their ability to
support regional and global processes, including high-end analytical value-added
work. DKS tenured members are also often called upon by their counterparts in
the hub locations to fill in job openings and make sure service delivery is
maintained.
31
The company’s revenue is Php 4.12 billion and its net profit is Php 434 million in
year 2017. A total assets of Php 3.05 billion, a total liabilities of Php 2.61 billion
and a total Head Office Account (Equity) of Php 434 million.
Deutsche Knowledge Services Pte Ltd also ranked number 1 among BPO industry
taxpayers, paying P116.88 million in income tax in 2011 (BIR, 2013). Overall,
DBG Manila continues to be a partner to our colleagues in the hub locations.
. One of the DB’s strategy for 2020 is to ‘Sustain the growth of its revenue &
capital’, hence, DKS Pte. Ltd., as a subsidiary can leverage its existing resources,
structures and business model to contribute in DB Group Strategy by exploring
additional revenue streams and/or expanding its services beyond the cost
leadership position it occupies within the group an SSC provider.

32
1.5 The Author’s Connection to the Chosen Company

The author of this paper has been with the bank for almost seven years. The company
together with its management team have been instrumental in all her career
aspirations and continuous personal development. To name a few, last 2015 the
proponent was chosen as top 50 employee to join Chartered Institute of Management
Accountant (CIMA) headquartered in UK, and granted a full scholarship by Deutsche
Bank Group (refer to exhibit B). This year, the proponent received a Recognition
Award as she spearheaded a project titled “Balance Sheet Substantiation,
Rationalization & Reduction (BSSRR). Despite the bank current financial condition,
DBG management was generous enough to grant monetary incentive to high
performer individuals. The proponent used such monetary reward to pursue her
EMBA journey (refer to exhibit C). With that, she is truly grateful and would like to
offer this humble manuscript that can somehow help the bank achieve its overall
corporate strategy by proposing a services expansion/ product development. If such
proposal materialized it will create additional revenue to the organization.

33
2 CHAPTER II EXTERNAL ANALYSES/ASSESSMENT
2.1 Industry and Market
2.1.1 Definition of Industry
At the end of 2010, there were a total of 618 Business Process Outsourcing (BPO)
companies in the Philippines (IBPAP, 2011). DKS is part of the 122 or 20% of
KPOs operating in the country. The company is a captive center or SSC, which
provides offshore services to all DBG entities only.
Table 6 BPO distribution in the Philippines
Percentage Distribution of BPO

Companies, by sector 2010
ESO
13%
Contact Centers
ITO 31%
19%
KPO (Shared and

Transcription 3rd Party)
17% 20%
Source (IBPAP, 2011)

34
Knowledge Process Outsourcing (KPO) is outsourcing of knowledge intensive
business processes, which require specialized field expertise. The strong point of
KPO is not the cost saving but the benefit. It offers a sustainable competitive
advantage for customers in all knowledge intensive industries by supplying data
and statistical analysis, market and industry research competitive analysis, and
support in legal and administration processes (Mireau, 2007). Unlike voice-based
BPO (call-centers), which is primarily based on cost advantage, and relatively
quickly trainable labor pool, KPO depends on a more limited resource of highly-
skilled, educated employees, and it focuses on delivering value-added services to
the clients (Baldia, 2010). Its prime objective is to provide clients with useful
insights that may assist them in their strategic decision making process (IBEF,
2008). Acquiring the necessary skill sets, attracting talent, protecting intellectual
property and dealing with conflicting interest is likely to be the major challenges
of KPO industry over the next years (KPMG, 2008). However, organizations with
vast experience in BPO sector are supposed to have a shorter learning process in
the KPO.
Knowledge Process Outsourcing companies in the Philippines can be generally
categorized into two - captive centers and third party providers. Refer to the below
data for detailed definition.

35
Captive Centers or Shared Services Centre (SSC) – Rather than being run as a
centralized function, an SSC operates as an internal customer service business. It
typically charges the business units for services provided, and uses service level
agreements (SLA) as a contractual arrangement which specifies cost, time and
quality performance measures. Business unit management is, therefore, able to
focus a greater portion of its time on external customers and issues of strategic
importance by redirecting the role of local finance to one of decision support and
analysis. With shared services, employees still perform the jobs and the systems
should be fully integrated with the business units’ systems and process (Deloitte,
2011).
SSC was defined by PwC (2015) as the concentration of the organizations
administrative and support activities, which are traditionally distributed and
duplicated in the business units and group companies. This is how the Shared
Services Center provides these activities with the support required, obtaining
lower costs, increasing internal controls, quality services in its operations,
simplifying and standardizing processes.
Third Party Services Provider – It means sourcing from outside. It is the practice
of hiring a company to handle business activities for the other company as a third
party.
36
In this method of outsourcing the third party gets a contract to perform specific
and specialized functions on behalf of the hiring company (Bloomberg, 2004).
There is various type of BPO in place, but this strategy paper will focus on KPO.
Table 7 KPO Type in the Philippines and its Key Player
Key Players in
KPO in the Registered Company
Philippines
Accenture; Conduent; American Data Exchange; SVU Corp;
SPI Technologies; IBM Global Business; Gentpact;
Third Party
Guico&Kho; Prople Inc; Eximinus BPO; Summersault Inc.;
Providers
Infinit-O BPO; BPO International; RRDonnelley EXL
Asiatype
AIG; Manulife Financial; DKS Pte. Ltd.; HSBC; P&G; Citi;
CSC / SSC Shell Shared Services; Chevron Holdings Inc. Emerson;
BakerMcKenzie & JP Morgan
According to Curran Daly & Associates (CDA, 2017), the Philippine outsourcing
sector is a mature industry and is evolving towards core and higher-value service
offering such as Knowledge Process Outsourcing (KPO).
In 2016, KPO comprised 34% of the country’s outsourcing industry. In 2017, the
Information Technology and Business Process Association of the Philippines
(IBPAP) seeks to increase KPO offering to 42% in anticipation of the impact of
the automation of voice-based services and the rise of Business Process as a
Software model (BPaaS).

37
The Philippines remains an attractive KPO destination owing to a number of
factors. Cost and people skills and availability remain top attractiveness factors.
2.1.2 Definition of Market
The proponent will focus on the German KPO market, as a startup third Party KPO
provider, DKS can bank in on their German roots and sell the Concentric
Diversification strategy.
According to the studies made by conducted by KPMG Institutes (2013), shows
that Finance Accounting and Administration (FAA) BPO market size was at $25
Billion out of the $304 BPO market size with an expected growth of 8.6% in
Europe alone.
Clients are seeking to reduce costs by improving operational effectiveness,
transform and re-engineer processes, and increase the efficiency of regulatory
compliance.
The international demand is generated by different size of companies in different
financial market verticals such as banks, funds, and payment processing
companies.
38
To further support the above demands of KPO market, a study has been made by
German Trade & Invest (2011) shows that The BPO market in Germany is highly
fragmented, with the top 20 BPO providers occupying less than 30 percent market
share.
39
Figure 7 Industries with Highest Growth Prospects in German BPO Market
Industries with Highest Growth

Prospects in German BPO Market
Retail
17% Manufacturing
25%
Utilities
10%
Media
3% Financial
Services
Telecommunicati 40%
ons
5%
Source (NelsonHall, 2013)
Front office and middle office services currently dominate the market, but back
office services are forecast to have the largest growth potential. In addition,
According to NelsonHall, annual growth rates for the German BPO market are
forecast at around 7.2 percent (Dutschmann, 2011).

40
Figure 8 Process with highest growth in German KPO Market
Processes with Highest Growth

Customer
Relationship Prospects in German BPO Market
Management
1% SEPA
Customer Care Loyalty Programs Transactions
2% 1% 4%
Document
Management
3% Credit Card
Processing
11%
Finance and
Accounting
42%
Recruitment
8%
HR Services
(particularly
payroll)
22%
Travel Expenses
6%
Source (NelsonHall, 2013)
The top KPO companies in the Philippines are in high demand and they were
believed to have employed more than 1.3 million of the local at the end of 2017
and forecasted to increase to 1.7 million local employees at the end of 2018.
41
The KPO companies in the Philippines are forecasted to be generating annual
revenue of almost $40 billion by the end of 2023 and providing employment to
more than 2.8 million Filipinos. According to ASSOCHAM, the top BPO
companies in the Philippines have captured almost 50% of the Indian BPO
industry in the past few years to become one of the best destinations for
international companies to set up offshore business centers in the Philippines.
According to the studies conducted by HSF (2013), KPO finance and accounting
is being dominated by big four BPO providers globally. Accenture got 30% market
share with a total of $10Bn, followed by IBM with 15% market share and an
42
equivalent of $5.2Bn, Capgemini with a total of 10.6% share, with $3.7Bn worth
of share value and Gentpact with 10.2% share with a total of 3.6Bn share value.
Figure 9 KPO (Finance and Accounting) Provider Market Share
Source Hsf (2013)

43
2.2 Macro Environment (Industry Analysis)

For the industry analysis, the proponent utilized Porter’s Five Forces (1979) in
order to analyze an industry's attractiveness that shall help companies determine
whether it is profitable to enter such industry. In addition to this, the proponent
employed Ghemawat (2001) CAGE distance framework to understand patterns
of trade, capital, information, and people in top 10 KPO destinations.
2.2.1 Porter’s Five Forces Analysis
Porter's Five Forces is a framework that identifies and analyzes five
competitive forces that shape every industry, and helps determine an
industry's weaknesses and strengths. Frequently used to identify an
industry's structure to determine corporate strategy, this framework can be
applied to any segment of the economy to search for profitability and
attractiveness (Porter, 1979).
2.2.1.1 Intensity of Rivalry among Existing Competitors - High

The degree of competition on the KPO market is strong or high. Existing
services providers are expanding their range of services (e.g. ITO
company such as Accenture and Conduent expanded their services to
cater KPO clients), as well as new service providers are also entering the
market.
44
There is a compound annual growth rate of 4.4% from 2012-2016 in BPO
market (CDA, 2017).
Low initial capital requirements as there is no heavy machinery required.
With cloud computing in vogue, the infrastructure cost using cloud
technology became insignificant. Most of the facilities are leased.
Favorable government policy and commercial laws of the Philippines on
incentives to ROHQ or area headquarters such as tax exemption attracts
business to locate in the country. ROHQ established by multinational
companies do not derive income from the Philippines are not subject to
income tax. (RA 8756, 1999)
2.2.1.2 Threat of New Entrants – Moderate to High

The advent of globalization makes the KPO business a “sunshine”
industry (KPMG, 2013). While this translates to more demands for the
services in coming years, the BPO industry is attracting more
competition. Barriers to entry become lesser due to the following
determinants:
45
Though KPO is human and financial capital intensive, initial capital
requirements are low as the needed infrastructure is generally rented.
Companies tend to operate in technology parks where space and
communication are easily available. Government policies play role in
cultivating the industry through tax holidays, infrastructure and legal
advantages.
Several Asian countries that have significantly larger labor pools and
represent a larger economic force in the world markets are now competing
with the Philippines for some KPO related services. Malaysia is investing
tremendous amount of money in telecom infrastructure and allied
infrastructures to build up business process outsourcing hubs (Tholons,
2013) just like that of India and the Philippines. On the other hand, China
is making dramatic strides in strengthening its outsourcing industry.
According to a study conducted by an international consulting company
McKinsey in 2010, “China is in a remarkable position to become an IT
outsourcing superpower in less than five years’ time.” As a component of
its massive US$858 billion stimulus package, the government targeted 20
of its cities to be developed as bases for outsourcing. The government
recently approved tax breaks and subsidies to boost the growth of its
service outsourcing industry.

46
The emerging countries in KPO industry post a significant threat to the
Philippines since many of the countries offer similar advantages of low-
cost labor. Further information about these countries will be discussed on
Ghemawat CAGE distance framework.
Low switching cost as KPO offers services that do not involve heavy use
of physical assets. People can easily be replaced.
2.2.1.3 Threat of Substitutes – High

The threat of substitute is high; there are third party providers, other
captive centers, consulting institutions, and contractors within and outside
the country. There are firms offering contractual employees for much
lower cost. However, there functions that handles confidential
information which is not desirable to be executed by contractual.
Also, there has been a steady trend observed where big organizations are
starting their own SSC who will be doing their own finance and
accounting processes.
Buyer’s propensity to substitute is high, as organization and corporation
now a days are tech savvy customers.

47
They were open to innovation, automation and substitution for cost
optimization. According to research,
KPO in the Philippines will also get impacted by automation & robotics
as it is expected to reduce costs by as much as 40 to 75 per cent (KPMG,
2016).
Automation could take the lead in KPO services such as IT support,
workflow processes and other types of back-office operations
characterized by high volumes of data and transactions, where queries
and actions are predictable, regular and suitable to automation.
The need to cut costs is leading even contact centers in developing
countries to resort to automation for the provision of basic and frequently
demanded services. In South Africa, for example, a local health-care
company is already using IBM’s artificial intelligence system for its
customer care operations (World Bank, 2016).
The existence of these substitutes makes the industry somewhat

unattractive.
2.2.1.4 Bargaining Power of Buyers - High

Bargaining power is high. Services offered in KPO are generally
undifferentiated, making it easy to switch to other supplier.

48
Customers are not highly concentrated, however large customer’s
purchases represent a major portion of the seller’s total revenue. This is
true even to a captive or SSC such as DKS. There exists a Service Level
Agreement (SLA) wherein if the deliverables and target matrix are not
met, the buyer may not renew the contract or shut down the operations
altogether.
The existence of another captive center or SSC as illustrated previously
in DBG Corporate map shows that if buyer (DBG) can easily transfer the
DKS operation to DBOI without disrupting the daily RTB (run the bank).
There are three captive centers or SSC located in India makes it more
feasible for management to shift offshore service from Manila to India
(vice versa) without disrupting the business.
2.2.1.5 Bargaining Power of Suppliers – Low

Bargaining Power of Suppliers is moderate. There are two major
suppliers for the KPO industry, the human resources and
hardware/software vendors.
Since KPO depends on skilled and knowledgeable work force, their
bargaining power is somewhat moderate to high.

49
Supply of KPO professionals according to NEDA (2010) and IBPAP
(2011) was favorably to the industry, the country has abundant supply of
qualified fresh graduates, board passers and workforce.
Philippines produces about 370,000 college graduates every year (IBPAP
estimates graduates to be more than 500,000), with Metro Manila
producing about 20,000 technical majors each year. The educational
system for legal and accounting professions is also based on Western
systems.
In 2006, the Professional Regulation Commission reported that the
country had 100,000 CPAs. In 2010, the country had 117,339 business
and accounting graduates, 50,734 engineering and architecture graduates,
47,928 IT and mathematics graduates and 12,269 fine arts, mass
communications and humanities graduates (National Statistics Office
and Commission on Higher Education data). In 2015, IBPAP expects the
number of law graduates to reach 2,976 and finance and business field
graduates to reach 129,168. The country also has a large pool of
paralegals and CPAs.

50
This pool of qualified labor force makes the country one of the top
outsourcing destinations in the world. Fresh graduates have generally low
bargaining power due to lack of experience.
The boom of KPO in the country increases the demand for qualified,
skilled and experienced people. Because of this, labor force with
experience in the industry has gained the power to bargain higher salary.
In addition to that, attrition rates are high in the Philippines; employee
retention represents a serious issue in KPO sector, especially in contact
centers but also for back-office operations. The high turnover has been
mostly attributed to the strong result orientation, continuous monitoring
and night-shift work characteristic of KPO jobs, with the concomitant
work-related stress and work-life imbalances. Employee decisions to
leave are often accompanied by a desire to find more rewarding career
opportunities that better match their level of education (Ramesh, 2004;
Noronha and D’Cruz 2006; D’Cruz and Noronha, 2010).
Various initiatives have been promoted to increase employee motivation
to stay, including highly attractive compensation packages (considering
that BPO salaries are already higher than those in other sectors) and the
use of the “early warning system” in human resources management to

51
identify individuals likely to leave and then prioritize immediate
intervention (NASSCOM, 2016c).
On the other hand, hardware and software supplier had limited bargaining
power now a day due to various vendors is offering cheap items in the
market. Cloud computing has further reduced bargaining power of
hardware and software vendors (IBM, 2010).
2.2.1.6 Summary of Assessment
Figure 10 Porter's Five Forces for KPO Industry
Threat of New
Entrants
(Moderate to
High)
Competitive
Supplier Power Rivalry
(High)
Buyer Power
(Low) (High)
Threat of
Substitute
(High)
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Result of the competitive analysis is that KPO is not an attractive industry
given that all the forces have moderate to high assessments.
There are many players in the industry offering the same or standard
services making rivalry among competitors and bargaining power of
buyers high. There are many countries targeting to be top service
providers making threat of new entrants high.
The advent of technology and thrive for innovation created available
substitutes makes the industry unattractive. The level of bargaining power
of skilled and experienced workforce for higher compensation as well as
the high attrition rate makes the KPO industry moderately unattractive.
2.2.2 CAGE Distance Framework
Michael Porter (1998) agreed that distance—in all its dimensions—can
hamper business dealings between companies from different regions and
locations. Geographic, cultural, and institutional proximity provides
companies with special access, closer relationships, better information, and
other advantages that are difficult to tap from a distance.

53
CAGE distance framework helps managers identify and assess the impact of
distance on the industry. Such framework is applicable for KPO industry, to
gauge the distance between the on shoring country and off shoring country.
CAGE distance framework was develop by professor Pankaj Ghemawat
(2001), where “CAGE” is an acronym for Cultural, Administrative
(institutional and political), Geographic and Economic distances among
countries. For this study the proponent will use this framework to pinpoint
the competitive advantage of the Philippines and the parent company which
headquartered in Germany. Also there is a discussion between TOP 10 KPO
destination based on the ranking made by A.T Kearney Global Services
Location Index (2016).
Figure 11 Global Services Location Index (A.T Kearney, 2016)
Based on the above graph, Philippines was ranked 7th based on Global
Service Location Index conducted by A.T Kearney, 2016. This means that
54
Global Corporations can consider doing business in the country that also has
sufficient supply of skilled individuals.
To attest the above claims, take a look at the below application of CAGE
distance Framework that manifest the advantages of the Philippines from the
other countries offering KPO services globally:
2.2.2.1 Cultural Distance (PH vs DE) Halfway

A country’s culture shapes how people interact with each other and with
organizations. Differences in religious beliefs, race, social norms, and
language can quickly become barriers, that is, “create distance.” The
influence of some of these attributes is obvious. A common language, for
example, makes trade much easier and therefore more likely. The impact
of other attributes is much more subtle, however. Social norms—the set
of unspoken principles that strongly guides everyday behavior—are
mostly invisible (Saylor, 2012).
The Philippines is the third largest English speaking country in the world.
The country was ranked high in English proficiency in Asia (EF EPI,
2017). Most Filipinos are university educated; hence, they can speak,
understand and converse in English.
A country formerly colonized by the Spanish, Americans and Japanese,
the Philippines continues to show remnants of its past.

55
The Western culture is still entrenched in people’s everyday lives, and
because of the country’s history of colonialization, Filipinos remain to be
highly adaptable to foreign cultures. Moreover, hospitality is an integral
part of Filipino culture and tradition. These factors make Filipinos easy
to socialize and work with.
As mentioned earlier, Philippines produce ample university graduates and
board passers which can somehow lessen cultural distance.
Given the above information for the Philippines we can conclude that
Cultural distance will not post any barriers, rather will have a
positive/high impact to the KPO industry. However, the Filipino and
German cultures are very different.
India - Is a pioneer in KPO Services, offers mature industry
establishment. India is the second largest English speaking country in the
world (Indian Times, 2009), has a number of good graduate and post
graduate colleges giving quality education.
China - Government has recently made English a priority in schools and
universities, boosting the country’s ability to win business from western
markets (Forbes, 2010).
Malaysia - Population consist of 60% Malay, 30% Chinese & 10% Indian
(Buravytska, 2013). The country has diverse culture. It was a former
British colony.
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Brazil - A tight labor market has shown some skill deficits, especially in
technical fields and engineering (HR Review, 2012).
Vietnam - Many Vietnamese workers still lack of skills such as:
language, technical and behavioral skills. Foreign firms also find it hard
to recruit Vietnamese managers, directors, leaders, etc for their
companies (Vietnam Briefing, 2014).
2.2.2.2 Administrative or Political Distance (PH vs DE) – Halfway

Administrative or political distance is created by differences in
governmental laws, policies, and institutions, including international
relationships between countries, treaties, and membership in international
organizations. The greater the distance, the less likely it is that extensive
trade relations develop (Saylor, 2012).
Outsourcing is now the second largest by GDP contribution in the
country. To assist and support industry growth, the Philippine
government has set up special economic zones managed by the Philippine
Economic Zone Authority (PEZA). Businesses located within these zones
receive tax incentives, holidays, and other forms of government
assistance to encourage their ongoing investment in the country (TBOS,
2012).
57
India - Needs to work on the administrative requirement and bureaucratic
behavior for doing KPO business so as to satisfy 90% of organizations
working in the KPO domain as third party outsourcers (Shodhganga,
2015). Indian Government has been very successful in controlling the
terrorist activities (the Indian Times, 2014).
China - State Council lowered the minimum revenue contribution
requirement for offshore outsourcing from 50% to 35% of a company’s
overall outsourcing revenue (CMoC, 2013).
Malaysia - Malaysia ranks 47th of 180 countries in Corruption
Perception Index (Transparency Internation, 2014). The above ranking
may become barrier to KPO clients as it adds to firms costs.
Brazil - There is an explicitly point stipulated by the Brazilian
Constitution and serve as the “passport” for investors, it can be a
facilitator to the foreign investor (Xavier, 2013).

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Vietnam - Vietnam ranks at 119 in 175 countries being reported in
Corruption Perceptions Index (Transparency International 2014). Such
factors clearly have an uncontrollable impact on any business especially
foreign and non-state-owned organizations.
2.2.2.3 Geographic Distance (PH vs DE) – Far

Geographic distance is about more than simply how far away a country is
in miles. Other geographic attributes include the physical size of the
country, average within country distances to borders, access to waterways
and the ocean, topography, and a country’s transportation and
communications infrastructure (Saylor, 2012).
Over the next decade, the government is set to embark on an ambitious
$180 billion infrastructure spending bonanza, set to transform the
Philippines’ economy. The government is also aiming to construct four
energy facilities that will ensure stable power supply at lower prices; five
flood control facilities that will help protect vulnerable communities as
well as boost their resilience against the impact of climate change; and
three redevelopment programs that will deliver sustainable solutions
including faster telecommunication system (Forbes, 2018).

59
The current administration also passed a new tax reform package, which
is expected to raise sufficient revenues to fund infrastructure spending.
According to Mr. Chua- Philippine Department of Finance (DOF, 2018)
chief economist, up to 70% of newly-raised revenues (estimated to raise
P786 billion over the next 5 years) are earmarked for supporting the
“build, build, build” campaign.
That infrastructure project of the government helps alleviate geographical
distance for a KPO industry.
On one hand, infrastructure has been a major source of concern for
foreign investors, who have been discouraged by the country’s weak
infrastructure and heavy utility costs. Those investments are crucial to
KPO industry, hence, our current condition post a LOW rating in our
geographical distance.
However, the distance between Germany and the Philippines is mitigated
by the regular air connections between the two countries. Flight time from
Frankfurt to Manila is 14 hours 5 minutes. Distance from Frankfurt to
Manila is approximately 10300 kilometers..

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India - Served with both 3G and 4G technology, which has facilitated
several of its technological projects. Furthermore, the country also
possesses one of the strongest IT sectors in the world, promoting constant
IT development, software upgrades and other technological
advancements.
China - Government invested heavily in a modernized
telecommunications network with high-speed broadband connections in
the major cities. It has also developed technology parks to further attract
multinationals to locate here (Forbes, 2010).
Malaysia – It needs to develop its technology to enable it to compete with

the other KPO countries
Brazil - The state governments have some leeway to increase spending
on R&D, including offering incentives for innovation (Country Report,
2013)
2.2.2.4 Economic Distance (PH vs DE) – Far

Germany’s GDP is 3,677,439 USDMM while the Philippines is 313,595
USDMM. Disposable income is the most important economic attribute
that creates distance between countries.

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Rich countries engage in proportionately higher levels of cross border
economic activity than poorer ones. The greater the economic distance
between a company’s home country and the host country, the greater the
likelihood that it must make significant adaptations to its business model
(Ghemawat, 2001).
The Philippines is among the emerging markets in the Asian region given
its sound economic base and highly skilled workforce. GDP growth has
averaged about 5 percent since 2002 and was 6.6 percent in 2012, amid
global uncertainties. In recent years, the country has restored its stability
and its robust economic growth as well as its sound fiscal management.
It has resulted in attaining investment grade status from the Japan Credit
Rating Agency in 2012 up to the present, following similar upgrades from
other rating agencies (NEDA, 2013)
The World Bank expects the Philippine Gross Domestic Product (GDP)
to grow by 6.7% in 2018 and 2019, the highest in Southeast Asia.

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India - Comparing economic performances across different countries for
the year 2014-15, it is seen that there has been an emergence of India
among the few large economies with a propitious economic outlook
(CSO, 2015).
India is a member of BRICS, the acronym coined for an association of
five major emerging national economies: Brazil, Russia, India, China and
South Africa.
China - GDP per capita of 15.1K (PPP, 2015) continuously growing.

Likewise, China is part of BRICS.
Malaysia - Vibrant economy, with GDP growth of 7% p.a (World Bank,

2015)
Indonesia - Small relative to GDP compared with those in many ASEAN
countries (World Bank, 2015). Fiscal shortfall will average the equivalent
of 2.4% of GDP over 2017-21 (EUI, 2017).
Brazil - Seen rapid and consistent economic growth for the past decade,
turning it into one of the world’s most vibrant and most looked at
economies (United Nation, 2011). Brazil is also part of the BRICS
grouping
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2.2.2.5 Summary of Assessment

For cultural distance India ranks near to Germany followed by
Philippines, Indonesia, Malaysia, China, Brazil & Vietnam. Parameters
used were language and cultural affinity as mentioned by Ghemawat
these two factors affect how a certain country do business. For
administrative / political distance, India, Brazil & Philippines do have
close proximity with Germany since their government supports the
growth of KPO industry by providing tax holidays and incentives. In
addition these countries try to strengthen their forces to fight terrorism.
For geographical distance most of the countries are halfway there, as they
have infrastructure projects that will enable smooth KPO services
transactions. Lastly, for the economic distance only China is near with
Germany, as most of the economy in ASEAN countries are emerging.

Table 8 Summary of CAGE Distance Framework
Country India China Malaysia Brazil Vietnam Philippines

Flag
Cultural
Distance with Near Far Far Halfway Far Halfway
Germany
Administrative/
Political
Far Far Far Near Far Halfway
Distance with
Germany
Geographical
Far Halfway Far Halfway Far Far
Distance
Economic
Halfway Near Far Far Far Far
Distance
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2.3 Macro Environment (KPO in the Philippines)
The size of population and per capita income are not adequate to gauge market
demand. Apart from said macro indicators, key indicators concerning a sector
to determine strong market demand for its service or products are interest and
affinity of the people. Therefore, in this sense, it is difficult to talk about a strong
home market, but rather we may link the issue with successful
internationalization of the home market with cultural affinity as mentioned by
Porter (1990).
Now the Philippines have grown to be one of the top outsourcing locations in
the world, second only to India. At its growth rate of 15-18%, the country’s
BPO industry is expected to soon become its biggest GDP contributor (World
Bank, 2015).
2.3.1.1 External Factor Evaluation Matrix (EFE)
With the discussions and analysis of the environment, the list of
opportunities and threats has been developed for DKS. The External
Factor Evaluation (EFE) Matrix indicates the importance of opportunities
and threats relative to being successful in the company’s industry.

66
A rating of firm’s effectiveness of response has been assigned to each
external factor from 1 to 4, where 1 is a poor, 2 is average, 3 is above
average and 4 is superior. Sum of the weighted score determines the
overall nature of DKS. The rating was given by various individual during
Focus Group Discussion conducted by the proponent.
Note: the following individuals with their respective positions are
involved
2.3.1.2 Political
Political Instability
Though the KPO industry outlook is overall very positive (O2P, 2007),
there remain future problems, mainly due to possible policy shifts
introduced by the Philippines Government such as TRAIN law. One
major issue is the possibility of proposed changes to the tax holiday
benefits that currently allow temporary reductions or eliminations of
corporate taxes. This proposal has discussed the reduction of tax holidays
for the outsourcing industry, with the compromise of having their income
tax reduced from 30 percent to 15 percent. According to industry experts,
the threat here is that, though tax costs would decrease, this might serve
as a deterrent for foreign companies to enter the Philippine market due to
a reduction of the country’s competitive advantage. Philippines
Government need to continue to provide increased Government support

67
to speed the development of national infrastructure projects, for this
rapidly expanding industry (Shed, 2017).
Because of these instances, this external factor is given a large weight of

15%.
To reduce the risk of disrupting the business operation for DBG entities
around the globe, DKS created a Business Continuity Plan (BCP) headed
by a certain governance committee. The company has BCP site locate in
Ortigas as an alternate operation space in case Ayala Triangle and BGC
offices are not accessible. Critical employees for every work stream do
have a sitting arrangement in the said BCP site and annually goes to the
said site to test its system infrastructure. In addition, there is a BCP site
in Hong Kong as well that can cater those critical employees in the event
of disability. As mentioned earlier, our colleague from DBOI can perform
some of the tasks if needed. Hence, this effort to mitigate any political
risk event DKS is given a high score of 4.
Investment incentive by the Philippine government
Incentives and tax holidays have helped the Philippines in establishing a
competitive business environment and that is why the weight given for
this factor is 8%. DKS is availing of the preferential income tax rate of
10% being Regional Operating Headquarter (ROHQ) of DBG in the
country.
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Last 2015, DKS filled for a refund or tax certificates amounting Php 51
million and was granted by that amount of Court of Tax Appeals for its
unutilized excess input VAT for zero-rated sales for the 2nd, 3rd & 4th
quarter of 2010. Hence a score of 3 is given to DKS for these actions.
2.3.1.3 Economic
Inflation Rate
Inflation rate affect the purchases and spending of a country. It is
important for companies to keep its price competitive, thus the assigned
weight for higher inflation rate is 10%. Philippine inflation rate has
significantly higher this year with an average of 4.7 (PSA, 2018). This
higher inflation rate is seen as the increase of price in goods and services.
Because of this, DKS spending is tightening its belt by means of cost
efficiency projects. For example, this year instead of the usual expensive
transportation service, the company issued corporate cards to selected
employees that they can be used to pay for their car services by means of
TNVs. TNVs is much cheaper than the normal car services rented by the
company. An average score of 3 is given since the company already taken
into consideration alternative services without sacrificing the benefits for

69
its employee. The company still improve how they will be able to reduce
its spending during higher inflation rate.
Peso depreciation
IBPAP conducted a survey last 2010 indicate that peso depreciation
against US dollar has only minimal impact on their business. A weighted
of only 5% is given to this factor since companies are concerned about
the implications of further strengthening of Peso.
DKS as a subsidiary of a global bank is exposed to foreign exchange risk.
With the company’s exposure being monitored by the internal FX risk
control group, DKS got above average of 3. There is still room for
improvement in protecting the company currency fluctuations. It will
probably useful for DKS to outline the range of exchange rate with action
plans to alleviate the peso fluctuation risk.
Competition in the industry
In KPO industry, particularly that of captive/shared services centers,
competition exists in terms of service quality and price. Since competition
affects the stability and growth of a company, the weight for this factor is
10%. Since DKS has only one client, its market based is limited to the
parent company.
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There is a stiff competition if the level of performance is not met, or if it
is too costly, DBG may terminate a certain process and transfer it to DBOI
or other third party providers. Worst scenario is for management to sell
or completely shut down the center, when competitors offer better
services at a much lower cost with better quality, the captive center is at
risk.
DKS consistently monitors and tract it metrics and performance every
month, to ensure that all KPIs are met or if not KRI commentaries are in
place. DKS always met the agreed SLA throughout the years, reason for
its continuous growing and process migrations. The proponent give the
company an average score of 2 for this factor, since, they can explore
other revenue stream to make sure sustainability and survival.
2.3.1.4 Social
When the culture of a country is at odds with its customers, it may hinder
in establishing a good relationship. Various challenges make take place
such misunderstandings, escalations and errors that might have financial
impact or loss. Hence, a weight of 8% is given to this factor.
DKS is given a high score of 3 because part of its hiring process is looking
at the English proficiency of an applicant and ethical values that would
match to work in a global company.

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The company also hire third party vendor to perform background
screening and to ensure that all information provided by the applicants
were correct and accurate.
In addition, DKS drives various Corporate Social Responsibility such as
scholarship grant for chosen students, tree planting activities, paint a
school project and many more.
2.3.1.5 Environmental
Being a tropical country Philippines encounter extreme weather changes,
with an active earthquake zone located in the Pacific ring belt of fire, it is
not surprising that the country has been named by the United Nations
Office for Disaster Risk Reduction (UNISDR) as “one of the most
disaster-prone countries in Asia.” Such warning poses negative impact
for potential KPO investors.
For example, way back 2014, there was nearly three-minute video created
by Aegis People Support from Malaysia which presented the Philippines
as a disaster-prone country has gone viral though it earned criticisms from
netizens, at the same time created a undesirable impact for startup KPO
companies.
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With this in mind, the IT & Business Process Association (IBPAP)
recently staged the First IT-BPM Business Resiliency Summit at the
Novotel Araneta Center where more than 230 attendees from different IT-
BPM companies were educated in proper response and management
during calamities and natural disasters. Different topics on disaster
preparedness, response, recovery, and resiliency were discussed during
the one-day event. (IBPAP, 2016)
DKS also do have Business Continuity Plan (BCP) as well, as mentioned
earlier to ensure un-interrupted business during calamities and disasters.
The companies do have annual fire and earthquake drills to ensure that
employees are trained to respond during unforeseen events. Also the
company has a DKS call tree, which is activated during disasters to make
sure that their employees are fully accounted for, reachable and in safe
condition. With this, the company got the score of 3.
2.3.1.6 Technological
Strong educational system that will equip the people with skills to meet
the employment requirement in KPO is crucial for the success of the
companies, which is why this factor weights 12%.

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For a KPO there is high demand for creative design talent pool, large
numbers of legal professionals, and certified public accountants (CPAs).
The demand for the IT-BPO and Global In-house Centers (GIC) industry
has meant that the current figures employed in this industry in the
Philippines is 1.4 million. Given the expected 20 percent annual increase
in outsourcing centers, the projected employment figures by 2020 may
well be in the region of 2.5 million. On the other note, there possible
issues and challenges to the BPO/KPO industry, which is lack of educated
employees, due to the Philippine universities being unable to cope with
the high increase in an educated labor force, as well as high turnover rates,
and the rate at which employees are replaced, which can be up to 50
percent of the workforce. (Shed, 2017)
Availability of skilled workforce
In recruiting workforce, DKS do have various HR partners. To name a
few, John Clements consulting, Asia Peopleworks and TATA
consultancy has been assisting the company in identifying a candidate
that would match the company’s needs. Direct and walk-in applicants are
also customary to the company. Also DKS Talent and Acquisition team
is accepting applicant referred by its employees. It even encourages
employee referrals by giving incentives to every successful candidate.

74
Also, DKS Human Resources partners with provincial universities and
recruiting their graduates by offering relocation allowances.
DKS has established rewards and recognition program aiming to develop
high performing individuals through assisting tuition fees for Master’s
Degree and other post nominal designation such Charted Global
Management Accountant (CGMA), Certified Management Accountant
(CMA) & Charted Accountant (CA) which are globally recognized.
Qualified individuals will be endorsed by their managers and calibrated
across DKS to avoid biases. Unlike with the other company who has a
bond, eligible employee of can avail of these incentives without worrying
to stay after getting the degrees.
The proponent can attest of the good quality of recruitment and
development method of DKS that is why the company garnered a score
of 4.
Advances in Technology
Advances in Technology weights 8% because KPO industry heavily
relied on technology to better cater to the needs of its clients. Hardware
and software are constantly checked for obsolescence (IBM, 2010).

75
DKS has been utilizing a combination of internally developed software
and those that external vendors provide. The company offered finance
changes trainings, even sending out their employee to have Six Sigma
certification aim to engender innovation and technological advancement.
The company encourages innovations by creating a separate department
doing Change the Bank (CTB) processes. Each employee need to log a
change/innovative idea that will enable increased efficiencies, better
controls and quality output.
Moreover, the company hired IT engineers and developers to ensure that
all Change Initiative (CI) logged by the employees are being actioned
into. Because of the company responds to advances in technology
keeping the objective of continuous improvement, it was given a score of
4.
Reliable Infrastructure support
Infrastructure plays a vital role in any organization which provides
services to different parts of the globe. On this regard, the weight for
infrastructure support is 10%. DKS is leasing in the center of BGC
Taguig, the building facilities are being managed by CBRE to ensure un-
interrupted business. Since the company is a captive center of a global
bank, workstations and desktop are designed for optimal confidentiality.

76
For those employees working for strictly confidential processes was
segregated by a “Chinese wall”, in which only those that has an access
can enter their work stations. The company also uses upto date systems
to ensure smooth and fast processing of data and information. The
company uses Skype for business to ensure continuous meetings. Meeting
rooms and conference rooms are equipped with top of the line hardware
to foster offshore-onshore relationships. With this the company got a
score of 4.
2.3.1.7 Synthesis of Opportunities and Threats using EFE Matrix

DKS got a total weighted score of 3.35, which is above average score.
The company has yet to take advantage of the existing opportunities in
the industry. Thus strategies can still be put forward to further enhance
and maximize technology advancements, apart from existing investments
in a skilled workforce and possessing reliable infrastructure. On the other
note, the company must strategize to minimize potential adverse impact
of the current threats existing in the countries.

77
Table 9 Result of External Factor Evaluation (EFE) Matrix
DKS
Weigh Weighted
Key External Factor Rating
t Score
Opportunities
Strong Affinity for Western
0.10 3 0.30
Culture (S)
Build, Build, Build Project of the
0.06 3 0.18
Philippine Government (P)
Availability of skilled workforce
0.12 4 0.48
(T)
Advances in Technology(T) 0.08 4 0.32
Reliable Infrastructure support (T) 0.10 4 0.40
Competitive KPO incentive given
0.12 3 0.36
by the Philippine Government (P)
Threats
Political instability and country
0.15 4 0.60
Image (E)
Peso depreciation (E) 0.05 3 0.15
Competition in industry (E) 0.10 2 0.20
Climate changes in the Philippines
0.06 3 0.18
(En)
Inflation Rate (E) 0.06 3 0.18
Total 1.00 - 3.35
2.4 Competitor Analysis
Deutsche Bank of India Global Services Pvt. Ltd. (DBOI) and Accenture are
the two major competitors of DKS. One is external while one is internal. While
DBOI and DKS are both subsidiaries and established by Deutsche Bank as its
own shared services centers, there exists a healthy competition between the two
entities in terms of its performance level in meeting goals and metrics in SLA.
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Even if the company has its own captive centers, Accenture is currently doing
business with the bank in providing services such as Accounts Payable for
Chinese entities. Because of its technological advancements and service
quality, Accenture is chosen by DBG in rendering service needs not capable of
being supplied by its own shared service centers.
2.4.1.1 Competitive Profile Matrix (CPM)
The Competitive Profile Matrix shows the critical success factors for the
three competing firms with corresponding weight and rating. There are five
parameters used as defined by Mr. Joe Tawfik a senior manager of an
international firm explains the following as critical success factors to
determine the competitive advantage of the players in the Outsourcing
industry. The weight is the perceived level of importance in relation to the
firm’s strategic position. The ratings refer to strength and weaknesses, where
4 is major strength, 3 is minor strength, 2 is a minor weaknesses, and 1 is a
major weakness.
2.4.1.2 Advancement in technology

Technology makes KPO possible to any part of the world. There are many
benefits of technologically capable firm make developments one of the
critical success factors. Since application of relevant workflow technologies
can lead to process optimization, faster turnaround time and enhances
quality, this success factor is given a weight of 18%.

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DKS has leveraged on technology in its access protection, network structure,
and operations. Facility of DKS in Net Quad Bldg. BGC Taguig City is
protected by smart badge reader and has a chip with employee’s information
for computer access and tools. System network of DKS is protected by log
in pin imbedded in the smart badge. This security protection is one way to
address information loss.
In addition, critical employee, supervisors and managers were given a
dbRAS Secure ID Token. It is DB’s improved remote access service that
aims to provide a more modern, scalable and easy to use remote access
solution for tele-workers and remote users who require a full network
connection.
In providing service to its customers, the company supports the following
top of the line systems and applications (SAP, Janus Essbase, Intalio
Workflow, Ariba on Demand etc.).
Through the years of service, DKS has automated most of its key processes
and was tagged as DB’s center of excellence for Finance. To date, DKS
catered change the bank process such as innovation and automation. Thus, a
score of 4 is fair enough since the company is tenured to take on additional
process and services.

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DBOI has the same access protection and network structure since it is also
a captive center established by DBG. Hence, the score of 4 is given to DBOI
since some of their tasks are being migrated in Manila recently.
Accenture got a score of 4 as well because the company utilizes latest and
powerful technological developments to gain competitive advantage. It has
Accenture Technology Labs, the organization’s research and development,
which continuously explore emerging technology. Due to its R&D, the
company is among the first to gain knowledge and apply new technologies.
Moreover, partnerships with different companies combine technological
capabilities that improve business agility.
2.4.1.3 Reputation
In choosing the appropriate KPO provider, a good reputation of a firm is one
of the factors to consider. This one critical area to examine when evaluating
an outsourcing provider, companies need to have a close look not only at the
company’s track record but at the actual number of KPI meet or exceeded
the client’s expectation. Hence, a weight of 20% is given.
DKS has gained its reputation through more than 13 years of continuous
operations and service to DBG. The company is known for taking good care
of its employees and is admired for its continuous process improvements.

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As a subsidiary of a global bank DKS already set up its standard in the KPO
industry. Moreover, DKS ranked 10th on 2018 Outsource Accelator, Top 40
BPO companies in the Philippines. Ranked 9th on Bizvibe 2018 Top 10 BPO
companies in the Philippines. As such a score of 3 is given, since, the
company still room for improvement.
DBOI was established a year after DKS. Hence, it is assumed that the
company gained its reputation with the use of DBG brand and global
presence. Since limited information has been found on the company’s
ranking in their country a score of 2 is given to DBOI.
Accenture on the other hand has been undisputed number one BPO
companies in the Philippines by Bizvibe and Outsource Accelator 2018.
Also, the company belongs to Forbes top 100 companies since 2015 up to
the current. These awards reflect the firms three decades of bringing business
value-driven approach to its systems. Thus, a perfect score of 4 was given to
the company.
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2.4.1.4 Organizational Capabilities

Organizational capability is seen on how well the organization’s people,
processes and systems perform better than others. This creates distinction
or uniqueness across companies. It is critical for a company to obtain
strong organizational capability, thus this success factor weighs 22%.
In DKS, leadership is deployed throughout the organization. The company
is group by teams with leaders as direct contact and decision point for the
staff. Managers and team leaders empower others and encourage generation
of new ideas.
Business process improvement, which is part of company’s goals, makes the
execution of task well-organized. Process time is also reduced through
continuous improvement of tasks and systems.
To promote values, DKS has employee “Coffee & Connect” session in
which it is a strategy of its management to discuss and reach its employee.
The company promotes safety by ensuring compliance with its safety
programs. DKS also gives importance to diversity to promote mutual
learning and respect.
There are various committees in DKS that conducts activities to enhance
work life-integration through fun and relaxing activities.

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There is a monthly event for employees to network, facilitates venue for
monitoring opportunities, and encourage community involvement. There are
various organization and support group in DKS to help their employee
manage their professional and personal life such. Because of DKS’s
organizational capabilities, the company obtains a score of 4.
The CCO of DBOI headed DKS way back in 2011 in Manila. This led DBOI
in developing the same management culture and style, which are cascaded
to the entire organization. Just like in DKS, DBOI has the “Coffee &
Connect” strategy. DBOI supports continuous improvement of individuals
still finishing their college degrees or taking up postgraduate degrees as well.
The company has integrated values of working safely, diversity, and striving
for work-life integration. DBOI has also been successful in aligning its
processes and systems with its culture. However, involvement of employees
in decisions and implementations are not widely patronized. Also, some of
their tasks are being migrated here in Manila for streamlining. That is why
DBOI got a score of 3.
The organizational capabilities of Accenture have manifested in company
policies and programs, commitment to talent building, social responsibility
initiatives, and strong support in industry development. Has an array of clubs
and activities that address the diverse interests of their employees.

84
Examples are the Accenture Working Moms Organization that supports
daycare center, nursing moms, workshops on family and parenting; they do
have Lesbian, Gay, Bisexual & Transgender (LGBT) enlightens employees
about gender issue. Accenture has grown into a large scale and sustainable
enterprise, thus, the organizational capability of Accenture garners a score
of 4 as well.
2.4.1.5 Service Quality
These factors are fast becoming a key differentiator for many outsourcing
company. Currently there are many BPOs that look the same by many
accounts. Value-added services can become more important to a client than
the actual delivery of a service. For example, a BPO provider giving a client
high quality insights into their customers as a value-add can be more
valuable than the service delivered.
Since DKS has only one customer which is DBG, customer satisfaction is
given a priority as evident in the metrics of the company. Part of company’s
metrics in measuring the quality service is the designation of response time
in addressing concerns and reduction in errors highly impacting the
customer/entity they are servicing.

85
Escalations affect the performance of the employees and serve as a deduction
in points for the team. DKS is performing beyond expectation of DBG, hence
it was tagged as a center of excellence for Finance, and thus rating of 4 is
fair enough.
DBOI on the other hand got 3 since the company is doing the same metrics
like DKS. However, there are some processes, which are transferred to
Manila from DBOI.
Based on the evaluations made by Forrester Research Inc., (2010)
Accenture received an overall rating of 4.38 out of 5.00 points for Service
Quality. Besides, the company was ranked 1 in 2016 Global Outsourcing
100 by International Association of Outsourcing Professional (IAOP) in
Dublin. Because of this the company score was 3 as well.
2.4.1.6 Synthesis of CPM Analysis
Based on the below weighted scores DKS is somewhat close with Accenture,
factors to improve are Reputation and Size & Growth which can be address
through Concentric Diversification by expanding its services to the third
party clients. (MAIN STRATEGY)

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Concentric diversification is a type of business strategy where a company
acquires or creates new products or services to reach more consumers. These
new products and services usually are closely related to the company's
existing products and services.
Table 10 Result of CPM Analysis
DKS DBOI Accenture

Critical
Success Weight Rating Score Rating Score Rating Score
Factors
Advancement
0.18 4 0.72 4 0.72 4 0.72
in technology
Reputation 0.20 3 0.60 2 0.40 4 0.80
Size & Growth 0.14 2 0.28 3 0.42 4 0.56
Organizational
0.22 4 0.88 3 0.66 4 0.88
Capabilities
Service Quality 0.26 4 1.04 3 0.78 3 0.78
Total 1.00 - 3.52 - 2.98 - 3.74
2.4.1.7 Accenture
A leading global professional services company, providing a broad range of
services and solutions in strategy, consulting, digital, technology and
operations. Combining unmatched experience and specialized skills across
more than 40 industries and all business functions – underpinned by the
world’s largest delivery network – Accenture works at the intersection of
business and technology to help clients improve their performance and
create sustainable value for their stakeholders.

87
With approximately 425,000 people serving clients in more than 120
countries, Accenture drives innovation to improve the way the world works
and lives (ACN, 2017).
2.4.1.8 DBOI Global Services Pvt Ltd
A Deutsche Bank Group company operates the India infrastructure near and
offshore centers. Established in 2006, the centers leverage India’s talented
and well-qualified workforce to build a world-class operations infrastructure
for Deutsche Bank’s global businesses. With over 8,500 professionals, these
centers provide technology and operations support from four strategically-
placed locations– Bangalore, Jaipur, Mumbai, and Pune.

88
2.5 Broader Societal Impact of KPO
Knowledge Process Outsourcing (KPO) has a major societal impact in the
country especially with regard to health and work life balance. The major
workplace stress problems are the irregular work schedule, due to international
time differences. These can disrupt social and family life and the Philippines
is a very conservative country, where the family are of very high importance.
An irregular work schedule also causes problems with transportation, and the
related problems of safety and availability, especially for female employee.
Various case studies have addressed these psychosocial stressors, and that they
may also be a major cause or amplifier with regards to the health issues stated
above.
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3 CHAPTER III INTERNAL ANALYSIS
3.1 The Leader
As mentioned in the previous chapter the company is led by a COO or a Managing
Director and he has an Executive Committee (ExCo). These individuals were
composed of high caliber Filipino leaders. Being known for being family-oriented
culture, the management of DKS is more open in terms of their decision making.
They value inputs and opinion of their subordinates. These strong family sense make
employees approach their bosses to discuss the topics they want to discuss. There is
even a Coffee & Connect session with the ExCo every month in which individual
employee can ask them anything they want.
A certain individual can also reach to their onshore counterpart for mentoring and
coaching without hesitation and menace of cultural discrimination.
The managing director is known for his proactive style and commitment to
continuous learning. This is translated to programs of the company that fosters growth
and development. Each leader has a coordination role on top of the work functions to
ensure that everyone in the organization adheres to the programs of the company.
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The following are the different programs/pillars implemented by the company:

- Health and Wellness
- Diversity and Inclusion
- Learning and Development
- Corporate Social Responsibility
- Social and Sports
DKS has a team based management structure and it has three hierarchies. The line
command is from Managers (VP), to Team Lead (AVP), to Supervisors then to the
staff level.
Figure 12 Management structure
Management promotes open and assertive communication. The style in managing its
employees involves coaching, providing direction and support rather than giving
orders.
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People Empowerment
Employees are organized by team with clearly defined roles and responsibility.
Decisions that are usually taken at managerial levels are being handled instead by
team leads and supervisors. This increases efficiency and flexibility in coping with
changes.
Staff members are expected to make certain decisions in handling regular onshore
concerns and urgent matters. Employees are encouraged to have accountability on
their work and more responsibility in dealing with their counterparts. Hence, staff
members are confident in performing their tasks without regularly consulting their
supervisors and team leads, since there are existing Standard Operating Procedure
(SOP) & guideline in place.
Performance Driven
DKS values personal initiative and achievement. Every activity attributable to the
individual and team is measured and rated. Those who perform and consistently
deliver excellent results are generally rewarded and recognized.
3.2 Financial Analysis
DKS reported a net income of Php 257.59 million in year 2017. This net income is
attributable to the growth Service Fees of DKS by 11% in 2017, from Php 4.12 billion
to Php 4.5 billion. Out of the total revenues derived from the entire BPO companies
in the Philippines, DKS got 1% share in the Revenues.

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Figure 13 DKS share in Revenue for the BPO industry in the Philippines
3.2.1 Condensed Financial Statements
As of 2017, DKS has a total of assets amounting to Php 3.0Bn, and a total liability
of Php 2.6Bn. A total of Php 434Mn head office account with a 2% increase from
last year. There is an 11% increase on the revenue from 2016 to 2017 and it is
mainly attributable to process migration and streamlining.

Table 11 Condensed Statement of Financial Position
Deutsche Knowledge Services Pte Ltd

Manila Regional Operating Headquarters
Statement of Financial Position
As at December 31
2017 2016 2015

Total Current Assets ₱2,756,648,412.43 ₱1,463,530,107.00 ₱1,661,001,649.00
Total Non-Current Assets 294,222,335.56 692,115,369.00 746,639,345.00

Total Assets 3,050,870,747.99 2,155,645,476.00 2,407,640,994.00
Total Current Liabilities 446,014,415.94 600,245,154.00 682,904,062.00
Total Non-Current Liabilities 2,170,004,279.88 1,127,591,774.00 1,192,207,542.00

Total Liabilities 2,616,018,695.82 1,727,836,928.00 1,875,111,604.00
HEAD OFFICE ACCOUNT

Total HEAD OFFICE ACCOUNT 434,852,052.17 427,808,548.00 532,529,390.00
₱3,050,870,747.99 ₱2,155,645,476.00 ₱2,407,640,994.00
Source SEC, 20
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Table 12 Condensed Statement of Comprehensive Income

Statement of Comprehensive Income
For the Period January 1 to December 31
Note 2017 2016 2015

REVENUE
Service Fees 21 ₱4,564,974,476.00 ₱4,128,653,067.00 ₱4,661,908,156.00
TOTAL EXPENSES -4,300,590,270.00 -3,908,315,769.00 -4,292,491,607.00

OPERATING INCOME 264,384,206.00 220,337,298.00 369,416,549.00
OTHER INCOME (EXPENSES) 25,278,674.00 44,545,618.00 -38,231,154.00

INCOME BEFORE INCOME TAX
EXPENSE 289,662,880.00 264,882,916.00 331,185,395.00
INCOME TAX EXPENSE 20 -32,063,788.00 -25,572,385.00 -17,150,122.00
NET INCOME 257,599,092.00 239,310,531.00 314,035,273.00
OTHER COMPREHENSIVE LOSS

(INCOME) 36,094,602.00 -29,996,100.00 33,884,537.00
TOTAL COMPREHENSIVE INCOME
₱293,693,694.00 ₱209,314,431.00 ₱347,919,810.00
Source SEC, 2017

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3.2.2 Financial Ratios
Given that, take a look at the below table for the calculated Financial ratios of the company from year 2015 up to 2017
Table 13 Financial Ratio

Financial Ratio and Analysis
2017 2016 2015

No. Description Formula
Computation Computation Computation
1 Liquidity Ratio
‐ Current Ratio
Current Ratio =
Current assets
6.18 2.44 2.43
divided by
current liabilities
‐ Quick Ratio
Quick Ratio =
(Cash
equivalents +
marketable
securities + 5.99 2.26 2.30
accounts
receivables)
divided by
current liabilities
‐ Cash Ratio
2017 2016 2015

Cash Ratio =
(Cash +
Marketable
Securities) 4.51 1.97 2.17
divided by
Current
Liabilities
‐ Net Working
Capital
Net Working
Capital = Current
Assets less 2,310,633,996.50 863,284,953.00 978,097,587.00
Current
Liabilities
2 Profitability Ratio
‐ Return on Sales
Return on Sales
= Net Income
0.06 0.06 0.07
divided by Net
Sales
‐ Gross Profit
Margin
Gross Profit
Margin = Gross
Profit Divided By
Net Sales
0.06 0.05 0.08
(Revenue)
2017 2016 2015

‐ Return on Assets
Return on Assets
= Net Income
divided by 0.10 0.10 0.15
Average Total
Assets
‐ Return on Equity
Return on Equity
= Net Income
divided by
0.60 0.50 0.59
Average
Shareholders
Equity
3 Solvency Ratio
‐ Debt to Equity
Ratio
Debt to Equity
Ratio = Total
Liabilities
6.02 4.04 3.52
divided by
Shareholders
Equity
‐ Debt to Asset
Ratio (Debt Ratio)
Debt to Asset
Ratio (Debt
Ratio) = Total
0.86 0.80 0.78
Liabilities
divided by Total
Assets
2017 2016 2015

‐ Total Assets to
Total Liability
Ratio
Total Assets to
Total Liability
Ratio = Total
1.17 1.25 1.28
Assets divided
by Total
Liabilities
‐ Noncurrent Assets
to Long Term
Liabilities
Noncurrent
Assets to Long
Term Liabilities =
Noncurrent 0.14 0.61 0.63
Assets divided
by Noncurrent
Liabilities
4 Activity Ratio
‐ Asset Turnover
Asset Turnover =
Net Sales
divided by 1.75 1.81 1.94
Average Total
Assets
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3.2.2.1 Liquidity Ratio
Deutsche Knowledge Service is a highly liquid company in which its cash
balance accounts for more than half of its Total assets. In 2016, current and
quick ratios are calculated at 2.44 and 2.26 respectively in which 2.00 is the
acceptable % to be considered as Liquid. With these liquidity ratios, the
company has enough Cash to cover their entire current maturing obligation
without the need to liquidate their Other Asset accounts to a usable fund.
3.2.2.2 Solvency Ratio
In terms of solvency, the company has the ability to meet and cover its long-
term financial obligation. With a debt- to- asset ratio of 80%, it shows that the
company has not taken on too much debt since the creditor has a relative share
of only 80% to the total resources of the company. Debt to equity ratio on the
other hand is at 4.04% which means that the company is aggressive in financing
its growth with debt. This is quite risky and may result to volatile earnings as a
result of additional interest expense. But the risk is being mitigated by the parent
entity – Deutsche Bank Group by providing funds with lower interest.
3.2.2.3 Profitability Ratio
In terms of Profitability, Gross Profit Margin is relatively low at only 6%, which
is 1 point lower as compared to last year performance of 7%.

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This is understandable considering that the company generates majority of its
revenue through service fees with low mark-up rates charged to the rest of the
Global Entities. With the significantly high cost on compensation and fringe
Benefits, this is a great opportunity to utilize the resources and increase the
revenue by creating another revenue generating center through knowledge
process outsourcing in order to cater increased demands from external clients
in Germany.
3.2.3 Comparative Financial Analysis
Comparing to the competitor and industry average, DKS liquidity ratios is far above
the industry. Higher current ratio may not be healthy if the assets were placed on
low interest earning investments. However, the company has sufficient assets to
support its concentric diversification in the future. Looking at the profitability ratio
the company is at par from the industry average as well, however, gross profit
margin is quit lower than the industry average as the company is not revenue driven
since the sole purpose of the organization is to provide support to the parent
company thereby increase its revenue through cost savings or efficiencies.
Table 14 Comparative Financial Ratios
Financial Ratio Comparative Analysis

Industry
DKS Accenture
No. Average
Description
2016 2016 2016
1 Liquidity Ratio
- Current Ratio 2.44 1.23 1.13
- Quick Ratio 2.26 0.89 0.33
- Cash Ratio 1.97 0.42 0.17
-
- -
Net Working Capital 863,284,953.00
2 Profitability Ratio
- Return on Sales 5.80% 9.89% 10.96%
- Gross Profit Margin 5.34% 31.65% 41.28%
- Return on Assets 10% 15.18% 8.65%
- Return on Equity 50% 38.50% 40.06%
3 Solvency Ratio
- Debt to Equity Ratio 4.04 0.50 0.16
4 Activity Ratio
- Asset Turnover 1.75
Source (NYSE, 2017)
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3.3 Value Chain Analysis
KPO value chain can be related to skill levels and work experience, that is to say, the
human capital inputs of offshore services. Human capital has been found to be a key
determinant of value creation, competitiveness, and success in service exports from
developing countries (Chadee et al., 2011; Graf & Mudambi, 2005; Nyahoho, 2010)
105
Figure 14 DKS Value Chain
Arrow on the bottom shows that these services are the Primary activities of the chosen
company which provide value to the organization.
Refer to the below for further information for the detailed description of each
activities.
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Finance and Accounting (F&A) Support Services - offer a full accounting support
service for the parent company and its subsidiaries around the globe. That includes
preparing and maintaining accounting records, preparation of management reports
and financial statements and compilation of the financial records for annual audit
purposes.
Hedging Activities - is a risk management technique used to reduce any substantial
losses or gains suffered by an individual or an organization.
Vesting Activities - is a legal term that means to give or earn a right to a present or
future payment, asset or benefit. It is most commonly used in reference to retirement
plan benefits when an employee accrues non-forfeitable rights over employer-
provided stock incentives or employer contributions made to the employee's qualified
retirement plan account or pension plan.
Investing Activities - consist of buying and selling long-term assets and other
investments.
On the other hand, back office support processes were place in the middle of the value
chain to show that these sub teams has an equal value in the organization. Back office
supports were subdivided into two, which is the Enterprise Resource Management –
in which the actual infrastructure services happens from Finance and Accounting
down to Records and Management services.

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Human Resource Management supports all the infrastructure employees from
Learning and development down to Compensation and Benefits.
3.4 Internal Factor Evaluation Matrix (IFE)
IFE is a popular strategic management tool for auditing or evaluating major
internal strengths and internal weaknesses in functional areas of an organization
or a business. The information gathered on DKS has led to the identified
Strength and Weaknesses. Weight from 0 which is not important while 1 means
importance was assigned to the factor as being successful in the firm’s industry.
A rating of firm’s strength and weakness had been given to each internal factor
from 1 to 4. 1 means major weakness, 2 minor weaknesses, 3 is minor strength
and 4 is major strength. Sum of the weighted score that came from the internal
Focus Group Discussions (FGDs) determines the overall score of DKS. The
FGDs involved and comprised the following:
Wide range of service offering
The services available to the customers are important in further expansion of its
customer base, which is why this internal factor is given a weight of 8%. Sales
or revenues may be lessening if the company cannot provide the appropriate
service at the right time. As shown in the value chain above, DKS do have to
services pillar, which are the Middle Office & Back Office support services.
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The company has the capability to respond and acquire additional responsibility
and task given that they are already in the industry for more than 13 years. Thus
strength of 4 is given for this factor.
Competent leadership team
Leadership team mobilize an organization, thereby this factor is given a weight
of 15%. The COO together with his ExCo are effective in cultivating an
environment of high-performance, safety and diversity. These leaders already
established their competency in handling changes and adapting to changes
based on DBG requirements. This strength is manifested through DKS
continuously growing since it was established hence a score of 3 is given for
this factor.
Strong company driven programs
This identified strength weights 8% because company programs encourage
growth and development of their employees. As mentioned in the previous
chapters, DKS has vast programs to cultivate the development of their
employees hence; this factor is one of the core strength that is why the company
was given a score of 4 for this factor.
Reliable and Resilient workforce

109
KPO is highly workforce intensive, their employees’ represent the company in
which can enhance or damage the company reputation. For this reasons, this
factor was given a weight of 15%.
DKS has been operational for almost 13 years and it has gained an experienced
workforce.
Many of its qualified employees have been assigned to other business units
within and outside the country on a Short Term Assignment (STA) or on a Long
Term Assignment (LTA). Customer satisfaction feedback indicates that DKS
employees are reliable. Employees are on call and advised to work even on a
Philippine holiday to perform some critical task which shows employee
resiliency. Because of their workforce attitude the company got a score of 3.
Culture that values personal initiatives, safe work practices, and diversity
Culture is a big factor in an organization’s capacity to respond to challenges. It
also contributes to company image. Because culture affects performance, a
weight of 8% was assigned for it.
As mentioned earlier DKS encourages individuals to have a sense of innovation
and foster high performance by means of their rewards and recognition system.
As a result employees are continuously seeking new ways on how to improve
DKS processes. DKS always ensures that the environment of their employees
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are safe and ergonomically. Lastly, the company promotes diversity by creating
committees that will create respect to co-employs regardless of their
differences. Because of this the company got a score of 3.
Technological capability
In the advent of technology, the pressure of speed and accuracy in doing the
services is high. Technological capabilities of a company increases operational
efficiency and eventually lead to customer satisfaction. As mentioned earlier,
DKS have various programs and initiatives in place to ensure continuous
improvement and change initiative. The company leverage with the banks top
of the line systems and technology to attain optimal operational efficiency.
Thus, a score of 3 is given.

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3.5 Synthesis of Strengths and Weaknesses using IFE Matrix
DKS got a total garnered score of 3.11, which shows that the company has internal
strength that can be leverage to build up its distinctive competencies. The company
has weakness on its revenue streams, which can be improve by adopting a hybrid
business model through concentric diversification strategy.
Table 15 Summary of Internal Factor Evaluation (IFE)
DKS
Key Internal Factor Weighte
Weight Rating
d Score
Strengths
Wide range of service offering (O) 0.10 4 0.40
Competent leaders (MT) 0.08 3 0.24
Strong Company Programs (MT) 0.10 4 0.40
Reliable and resilient workforce (HR) 0.15 3 0.45
Culture that values personal initiative, safe
0.08 3 0.24
work practices, and diversity ( C )
Technological Capability (I) 0.08 3 0.24
Liquidity Ratio above competitor & Industry
0.06 4 0.24
Average (F)
Weaknesses
Employee Turnover (HR) 0.15 2 0.30
Lack of initiative to expand services (M) 0.05 3 0.15
Limited Revenue stream (F) 0.10 3 0.30
Expenses (F) 0.05 3 0.15
TOTAL 1.00 ‐ 3.11
O=Operations, F=Financial, M=Management, HR=Human Resource, I=Information Technology
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4 CHAPTER IV STRATEGIC PLAN
4.1 Vision
The proponent used Collin and Porras Big Hairy Audacious Goal Framework
(BHAG) to evaluate the current vision statement of DKS. After thoroughly checking
the proponent concluded that it was in line with the BHAG framework.
DKS vision clearly defined in term of what they want to become, i.e., to be the best,
most admired and innovative financial shared services institution. It is concise, yet
inspirational as they want to partner with their customers, employees and
shareholders in order to have a significant impact on how they do business. Their
vision also contains a specific time frame – Strategy 2020, stating the target year for
DBG to achieve its goal.

113
Figure 15 Vision statement was in line with Collins & Porras BHAG (Big Hairy
Audacious Goal)
114
4.2 Mission
The proponent used Fred David’s nine essential components of a mission statement
to assess the company’s mission statement. DKS’ mission was able to comply with
most of the criteria listed on the said framework but it can be improved by adding the
firm’s concern for survival, growth and profitability.
Table 16 Evaluation of DKS Mission per Fred David
Essential
Items in the Mission Statements Evaluation
Components
We're committed to being the best financial
services provider in the world. By 2020,
1. Customer we will balance Passion with precision to
deliver superior solutions for our clients

(Deutsche Bank Group).
Provide accurate, timely and complete
2. Products or
Services
reporting of DBG's Financial Related
requirements

Manage DB's resources across all relevant
3. Markets
dimensions 
4. Technology None 
5. Concern for
survival, growth, and None
profitability

115
Essential
Items in the Mission Statements Evaluation
Components
A Passion to perform. It's what drives us.
More than claim, this describes the way we
do business
Define and implement a performance

6. Philosophy
management framework for DBG 
We will consistently deliver services that
make a financial contribution and improve
the lives of our clients
By virtue of our success and progressive
management methods, we will have a
7. Self-Concept
significant impact on the way financials 
are managed around the world
8. Concern for
Public Image
None 
9. Concern for
Employees
Develop our People 
The proponent would like to propose the below Mission & vision statement:
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Table 17 Evaluation of the proposed Mission statement:
Essential Items in the Vision and Mission

Evaluation
Components Statements
We're committed to being the best
financial services provider in the world.
1. Customer By 2020, we will balance Passion with
precision to deliver superior solutions for

our clients (Deutsche Bank Group).
Provide accurate, timely and complete
2. Products or Services reporting of DBG's Financial Related
requirements

Manage DB's resources across all
3. Markets
relevant dimensions 
We shall be technologically superior
4. Technology
and innovative SSC that fosters
atmosphere of continuous process 
improvement
We shall imbibe a growth-orientated
5. Concern for survival, and long-term mindset by maximizing
growth, and profitability productivity, cost efficiencies and 
financial stability
A Passion to perform. It's what drives us.
More than claim, this describes the way
we do business
Define and implement a performance

6. Philosophy
management framework for DBG 
We will consistently deliver services that
make a financial contribution and
improve the lives of our clients
By virtue of our success and progressive
management methods, we will have a
7. Self-Concept
significant impact on the way financials 
are managed around the world
We will consistently deliver value-added
services to our clients and make a
contribution to their success. We shall be
a responsible company by observing
8. Concern for Public
Image
business ethics, take care of our
employees, reduce the company’s carbon

footprint and make a contribution to
society by working together with our
stakeholders.
9. Concern for
Employees
Develop our People 
117
4.3 Objectives
By 2021, fundamental goal of our strategic measures is to make DKS a stronger, safer
Shared Services & KPO that is well positioned to pursue growth opportunities
through its strong global client franchise. This can be achieved by targeting to achieve
the following goals by 2021:
 Increase revenues by 20%
 Increasing market share between 5% to 10%
 Reduce attrition rate by 20%
Our approach to achieve corporate responsibility focuses on a three-pronged

sustainability approach to create economic, environmental, and social values.
Using SMART framework the proponent evaluated the company’s objective using
SMART framework. Projections were based on the allocation made in Strategy 2020
of the parent company.
Figure 16 Evaluation of Company's objective using SMART framework
Time Projections
Objective Specific Measurable Attainable Realistic
bound 2019 2020 2021
Finance
To increase revenue by 30% by 2021 ✓ ✓ ✓ ✓ ✓ 5% 10% 15%

To increase the net profit by 12% by
2021 ✓ ✓ ✓ ✓ ✓ 2% 4% 6%
Operation
To acquire additional licenses &

update the existing software to cater
the financials of Medium Enterprise by ✓ ✓ ✓ ✓ ✓
2018
Marketing
To increase market share by at least

5% ‐8% by 2021 ✓ ✓ ✓ ✓ ✓ 1% 3% 4%
Human Resource
Time Projections
Objective Specific Measurable Attainable Realistic
bound 2019 2020 2021
To hire additional software developer

to configure the existing system that
will cater product development thru ✓ ✓ ✓ ✓ ✓ 2019 2020 2021
services expansion 2019
To hire additional experienced

workforce at least 25% by 2021 ✓ ✓ ✓ ✓ ✓ 8% 15% 23%
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4.4 Strategy Formulation
Strategic analysis involves making well-informed decisions based on objective
information. This chapter has therefore employed relevant tools and framework that
will analyze of the company’s short and medium term goals, review its present
strategies, suggest alternatives, evaluate them, and plan for appropriate courses of
actions. The proponent used the SWOT Analysis and SPACE Matrix.
In addition, the internal and external factors discussed in the preceding chapters will
be integrated in the formulation of the strategy. Refer to the diagram below.
Figure 17 Integrating External - Internal Assessment & Strategy Formulation

121
4.5 Integrating External-Internal Assessment using SWOT Analysis for
Strategy Formulation
There four are four types of strategies that can be formulated when the company’s
strength and weaknesses are matched with its external opportunities and threats.
SO Strategies – DKS internal strengths to be utilized to take advantage of the external
opportunities.
WO Strategies – DKS may improve its weaknesses by taking advantage of external
opportunities.
ST Strategies –DKS shall employ its strengths to mitigate impacts of external threats.
WT Strategies – Defensive mechanisms to alleviate the impact of internal
weaknesses and avoid external threats.

Table 18 Summary of Internal and External Factor using SWOT Analysis
Strength Weaknesses Opportunities Threats

1.) Strong affinity for Western/European 1.) Political instability and
1.) Wide range of service offerings 1.) High employee Turnover
culture country Image
2.) Business friendly and advantageous
2.) Competent leaders KPO incentives provided by the Philippine
2.) Lack of initiative to
government such as tax 2.) Peso depreciation
expand its services
3.) Strong Company Programs holidays/incentives
3.) Availability of highly skilled

3.) Limited sources of workforce
4.) Reliable and resilient workforce 3.) Competition in industry
revenue streams
4.) Advances in Technology
5.) Positive culture that values
4.) Climate changes in the
personal initiative, safe work 5.) Reliable Infrastructure support
Philippines
practices, and diversity
6.) Build, Build, Build program of the
6.) Strong technological Capabilities current administration to promote 5.) Inflation Rate
infrastructure in the Philippines
SO Strategies WO Strategies WT Strategies
> State of the art and advance > Intensify HR efforts in

> Maintain strong company programs to > Adopt hybrid business
technology can be used and applied to talent acquisition and
attract more reliable and resilient model to maximize
acquire additional process & service retention for potential and
workforce (S2, S4, T3) revenue (W2, W3, T3)
(S4, S6, O3, O4) hired employees (W1, O3)
> Boost Trainings and development

> Create working group to > Reduce risk by including programs > Increase market share by
programs to equip employees for
expand services to others addressing losses, and over expenditure offering additional services
more complex and additional task
(W2,W3, O2, O4) (S2, S3, S5, T1, T2, T5) (W2, W3, T2)
(S3, S4, O3)
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4.6 Evaluation of Current Corporate Strategies
4.6.1 Strategic Position and Action Evaluation (SPACE) Matrix
SPACE is an acronym of Strategic Position and Action Evaluation. The analysis
allows creating an idea of the appropriate business strategy for the enterprise. The
analysis assesses the internal and external environment and allows designing an
appropriate strategy (AJ. Rowe et al, 1994).
Using SPACE Matrix, the below table shows that DKS financial strength and
opportunities in the industry can dominate in the KPO sector in the Philippines.
On the other note, the company is in a position to use its internal strengths to take
advantage of external opportunities, overcome internal weaknesses, and avoid
external threats.
124
Table 19 Result of Financial Strength & Environmental Stability Analysis
SPACE MATRIX
Environment
Ratin Ratin
Financial Strength (FS) g
al Stability g
(ES)
Political
Revenue increase by 11%
2 instability and ‐3
in 2017
country Image
Net income increase by Peso
3 ‐1
38% in 2017 depreciation
Working Capital of Php
Competition
2.3 billion 168% increase 6 ‐4
in industry
from 2016
Climate
Return on total assets is changes in
3 ‐3
10% for 2017 the
Philippines
Return on Head Office
4 Inflation Rate ‐1
Account (ROE) 68%
Debt to Equity Ratio 20% 3
Total 21 Total ‐12

Average 3.5 Average ‐2.4
DIRECTIONAL VECTOR COORDINATES Y: FS AVE + ES 1.

AVE = 1
Financial strength (FS) - it is influenced by the following indicators: return on
investment, liquidity, debt ratio, available versus required capital, cash flow,
inventory turnover
Environmental Stability (ES) - it is influenced by the following sub factors:
technological change, inflation rate, demand volatility, price range of competitive
products, price elasticity of demand, and pressure from the substitutes

125
Table 20 Result of Industry Strength & Competitive Advantage analysis
SPACE MATRIX
COMPETITIV
INDUSTRY STRENGTH Ratin E Ratin
(IS) g ADVANTAG g
E (CA)
Competitive investment Wide range
incentive by the PH 3 of service ‐3
Government offering
Culture that
encourages
personal
Increase in the availability
4 initiative, ‐1
of new technology
safe work
practices,
and diversity
Ample university
Organization
graduates and board 5 ‐2
al Capability
passer individual
State of the art facilities, Competent
telecommunications, Leadership
adequate and 4 team and ‐2
uninterrupted power reliable
supply workforce
Reputation ‐2
Total 16 Total ‐10

Average 4 Average ‐2
DIRECTIONAL VECTOR COORDINATES X: FS AVE + ES

2
AVE =
126
The analysis describes the external environment using two criteria:

Industry Attractiveness (IA) - it is influenced by the following sub factors:
growth potential, profit potential, financial stability, resource utilization,
complexity of entering the industry, labor productivity, capacity utilization,
bargaining power of manufacturers
The inside environment is also described by two criteria:

Competitive advantage (CA) - it is influenced by the following factors: market
share, product quality, product lifecycle, innovation cycle, customer loyalty,
vertical integration.
127
Table 21 Strategic Position and Action Evaluation Graph
DKS directional vector is located in the aggressive quadrant of the SPACE
matrix. Hence, the following strategies are feasible for them:
 Backward Integration
 Forward Integration
 Horizontal Integration
 Market Penetration
 Market Development
 Product Development
 Concentric Diversification
128
4.6.2
4.6.3 Internal – External (IE) Matrix
This Matrix was based on the weighted score information in the external factor
evaluation (EFE) matrix and the internal factor evaluation (IFE) matrix.
Table 22 Total Internal- External Factor (IFE) Weighted Score
TOTAL IEF WEIGHTED SCORE

IFE 3.11
3.35
STRONG AVERAGE WEAK

3.00 ‐ 4.00 2.00 ‐ 2.99 1.00 ‐ 1.99
3.00 ‐
HIGH
4.00
I. Grow & Build I. Grow & Build III. Hold & Maintain
MEDIUM
EFE
2.00 ‐
V. Hold &
2.99
IV. Grow & Build VI. Harvest & Digest

Maintain
1.00 ‐
VII. Hold & VII. Harvest &

LOW
1.99
IX. Harvest & Digest

Maintain Digest
DKS IFE & EFE weighted score is 2.76, thus it falls to quadrant fifth quadrant.
Therefore using this evaluation, DKS needs to pursue intensive strategies to take
advantage of its strengths.
Strategies like market penetration, market development, diversification, and even
expansion can be considered by the management in order to grow and build the
business. Hence, a hybrid business model of mixing shared and third party clients
can be of great help to strengthen its financials and cope up with the industry
demands.
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4.6.4 Grand Strategy Matrix (GSM)
The Grand Strategy Matrix is based on two evaluative criteria: competitive
position and market growth.
RAPID MARKET GROWTH

QUADRANT I
STRONG COMPETITIVE POSITION

QUADRANT II
➢ Market Penetration
➢ Market Penetration
➢ Market Development
WEAK COMPETITIVE POSITION
➢ Market Development
➢ Concentric Diversification
➢ Product Development
➢ Product Development
➢ Horizontal Integration
➢ Forward Integration
➢ Divestiture Liquidation
➢ Horizontal Integration
QUADRANT II QUADRANT IV
➢ Retrenchment ➢ Concentric Diversification
➢ Concentric Diversification ➢ Horizontal Diversification
➢ Horizontal Diversification ➢ Congclomerate
➢ Divestiture Liquidation ➢ Joint Ventures
SLOW MARKET GROWTH
Competitive position is evident in DKS strong financial position for the past three
years and above average results of its internal assessments. Merged with rapid
market growth of the KPO industry, the company belongs to Quadrant 1

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4.6.5 GE McKinsey 9-Box Matrix
Table 23 Result of GE McKinsey 9-Box Matrix

HIGH
III. Build
I. Protect Position II. Invest to Build
9
Selectively
MEDIU
V. Selectively
IV. Build VI. Expand or
Manage for
M
Industry Attractiveness
Selectively Harvest
Earnings
LOW
VII. Protect VII. Manage for

IX. Divest
0
Position Earnings
0 6 9
LOW MEDIUM HIGH
Business Strengths
KPO is an attractive industry as mentioned by various organization, which is the
reason why it has a high score ranging from 6 to 9. According to previous studies
conducted by various organizations and agencies such as KPMG, Deloitte &
BakerMckinsie, there are huge global opportunities and high market growth rate.
Business strengths of the company on the other hand, include years of providing
quality service; developing a sound corporate culture, strong leadership and
organizational capabilities - these belong to the medium category. Therefore DKS
belongs to Quadrant II of GE-McKinsey 9 box Matrix. With Invest to Build, the
following strategies can be implemented:
 Market Penetration
131
 Market Development
 Concentric Diversification
 Product Development
 Forward Integration
 Horizontal Integration
4.6.6 Strategy Summary
Table 24 Summary of Strategies to pursue

GE Total
ACTIVITIES SWOT SPACE IEM GSM
McKinsey Points
Integration Strategy
Forward Integration 1 1 1 3
Backward Integration 1 1 1 3
Horizontal Integration 1 1 2
Intensive Strategy
Market Penetration 1 1 1 1 4
Market Development 1 1 1 1 4
Product Development 1 1 1 3
Diversification
Strategies
Concentric
1 1 1 1 1 5
Diversification
Unrelated
1 1
Diversification
Defensive Strategies
Joint Venture 0
Retrenchment 0
Divestiture
0
Liquidation
Total 25
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The above table shows that intensive & diversification strategies got the highest
scores compared to integration, and defensive strategies. Therefore, it is
appropriate for DKS to pursue Concentric Diversification and alternative
strategies such as Market Penetration and Market Development.
4.7 Competitive Advantage
4.7.1 Present Competitive Advantages
DKS continuously provides quality services to DBG, side by side, with generating
continuous process improvement provide efficient and accurate financial report
and support.
Currently DKS employees have the opportunity to work with a global brand name.
As a subsidiary of a Global universal bank, they have influence in how services
are delivered. They help shape the service level agreements that govern the
behavior of both parties. As a SSC, DKS actively engaged to craft delivery
capabilities cost structures that will enable the business units to remain
competitive.
4.7.2 Competitive Advantages that are deteriorating
Regardless of such arrangements, the KPO/SSC industry faces a severe skills
shortage. This is demonstrated by both churn rates (now about 25 percent per
annum) and salary inflation (typically around 30 percent per annum). Salary
inflation is also less of an issue in KPO, since KPO by definition is about

133
knowledge arbitrage and access to high-end talent. DKS is not exempted with a
high attrition rate. As a result the company needs to hire a replacement as soon as
possible. Recruiting a licensed or qualified accountant may not be that easy, thus
pose a challenge for the organization.
4.7.3 Proposed Competitive Advantages
Based on the KPMG (2013) surveyed KPO provider’s nominated skill-set
retention as a critical issue. It is a more critical concern with KPO providers than
with BPO providers, reflecting the more demanding KPO learning curve.
Familiarizing new people with the complexities of a client’s methodologies and
operations is time consuming, and includes establishing sound personal
relationships with a client’s staff. So, it is not surprising that KPO providers are
placing a strong emphasis on retention strategies.
Currently DKS applied the following retention strategies to their employees,
which can later be applied to their KPO services.

134
Figure 18 HR Employee retention
Source DB (2016)
4.8 Proposed Strategies
The KPO industry is heralded as the “sunrise industry” in the Philippines today,
thus, DKS should take advantage of the opportunities that available in the
market. The Company needs to be prepared to face the challenge that goes along
with the rapid industry growth.
After applying all the tools and frameworks, satisfying both internal and external
factors affecting it, identifying the strengths and weaknesses, the decision lies with
the Philippine CCO and his ExCo to decide, which way to pursue. However, the
proponent, after thorough research and analysis, proposes the following strategies.
135
4.8.1 Description of the Strategy
Based on the various tools and techniques that were used, DKS should pursue
intensive strategies particularly on Concentric Diversification by creating a Hybrid
Business Model of having both SSC and Third Party provider. It will improve its
competitive position by capitalizing on its high quality services and developing
new ones.
4.8.1.1 Concentric Diversification
Concentric Diversification as defined by scholars like (Turner, 2005; Thompson
& Strickland, 2006; Aggarwal & Samwick, 2003), Johnson et al. (2006) says that
it is a collection of businesses under one corporate umbrella. Lending support to
all the various definitions, diversification is broadly defined in this paper as a sense
of expanding business fields either to new markets, new products or both while
retaining the strong core of the businesses. Santalo and Becerra (2008) allude to
the fact that a company can diversify when its cash flows become increasingly
uncertain.
Turner (2005) suggested that when the core business no longer offers the investor
the acceptable returns for the risk taken, then there is need to diversify.
136
Moreover, Barney (2006) inferred that if the core business no longer offers growth
opportunities, and room for increasing sales and profitability, the business must
diversify.
DKS Pte Ltd, a financial services provider of DBG, has already proven their
execution capabilities on lending supporting-service activities to DBG entities. In
fact, the company belongs to the top BPO companies in the Philippines, which can
be considered as an achievement despite that it is barely an 11-year old SSC. The
company trusted upon its senior executives with vast years of experience in the
banking and financial industry, including making sure that the compay has up-to-
date technology, retaining a reliable and resilient workforce. Therefore, DKS can
leverage on these aforementioned strengths, which can be used and applied in
acquiring new sets of third party clients. Further, the high growth within the KPO
industry has led to an increased demand for service quality This push factor will
inevitably compel DKS to confront product (service) development and will
ultimately result in the service diversification to raise business value by resource
maximization by employing its advance and sophisticated technology and human
resource talent. Finally, as DKS is already at par with the other SSCs in the
Philippines, it can therefore expanding its scope to outside clients apart from the
parent group DK and its other subsidiaries.

137
4.8.1.2 Market Development
The second strategy is the market penetration, which entail massive advertising as
a major action and effort to increase its market share. Considering that DKS belong
to the top BPO Companies in the Philippines, the main and clear objective is to
increase revenue in order to be a top contributor to its parent company. This can
be realized by expand its menu of services. Hence, by generating awareness to its
potential customers of the DKS accomplishments attained to boost its good
reputation and thus entice prospective clients. The menu of services includes:
• Finance and Accounting
• Hedging and Vesting
• FX Management
• Compensation and Benefits
• Business Analysis
• Consultancy
4.8.1.3 Market Penetration
Given that market development involves introducing present products or services
into new geographic areas, market penetration involves the company can focus on
one location as a start-up, then gradually increasing their global reach. This
strategy also involves focusing on selling existing DKS services into existing
markets to gain a higher market share.

4.8.2 The Hybrid Business Model of DKS- Enacting Concentric Diversification and Market Penetration
139
The proponent used Business Model Canvas of Osterwalder (2010), to outline the
propose hybrid business model in which these were formed by the following
building blocks:
Key Partners – DBG as the primary partner followed by the third party KPO
clients and the investors
Key Activities – current services of DKS such as (F&A, Hedging and vesting
activities etc. will be extended to third party clients.
Value Proposition – providing value added services at a low cost.
Key Resources – are the highly skilled and knowledgeable individuals, together
with the top of the line infrastructure and financial applications.
Customer Relationship – the new business model will be driven by Service Level
Agreement (SLA) and will be measured by Key Performance Indication (KPI) and
Key Risk Indicator (KRI) to ensure customer expectations are meet.
Customer Segment – Shared Services and third party clients. As a start-up 3rd
party KPO provider, DKS will initially offer their services to German clients
Distribution Channel – third party customer can be reached through social media,
financial consultation through DB Branches, etc.
Cost Structure – Costs are mainly driven by employee salaries and benefits, IT
and Infrastructure expenses.
Revenue Stream – additional revenue stream can be added through additional
professional fees and charges from the third party client

140
4.8.3 Detailed activities and expected output to implement strategy
Time Person
ACTIVITIES table
Expected output
Responsible
1 Product Development
Feasibility
studies/reports
Tap R&D department to
Q1 of (Ensured that senior
1.1 assess feasibility of a Hybrid Management
2019 management believes
Business Model
the idea is worth
investing)
The team will create
business case that
should set out the costs,
benefits,
implementation risks, Project
Develop a high-level project Q1 of
1.2 likely time period for a Management
road map 2019
return on your team
investment, and the
impact of the
transformation on your
organization
Getting the right
Bring the right people on Q1 of
1.3 quantity and quality of HRD
board 2019
people to work
Time Person
Activities Expected output
table Responsible
Create process designs;

Define technical
Q2 of Operating procedures 3rd Party OM,
1.4 requirements; Develop
2019 and Systems needed PM & IT
service level agreements and
performance measures
Establish a roll out

3rd Party OM,
Develop a clear transition Q2 of plan:
1.5 PM &
roadmap 2019 ‘lft & drop’ or phased
workforce
implementation
Establish a roll out
3rd Party OM,
Q3 of plan:
1.6 Implement and roll out PM &
2019 ‘lft & drop’ or phased
workforce
implementation
141
4.9 Functional Area Strategies
ACTIVITIES OBJECTIVES Time table

Marketing
Promote quality service and To Increase the
2019 to 2021
not cost leadership market share by 20%
Send client satisfaction
survey form, to maintain
quality service
Offer flexible pricing to win
clients
Human Resource
Intensify hiring program
thru massive advertisement, To hire qualified
refer a friend and continue tie workforce that best fit 2019 to 2021
up with universities and for the KPO tasks
colleges
Continue training and

development program for
staff to lessen attrition rate
Initiate career
advancement to all employee

Operations
Ensure quality of service to
To Increase the
continuously meet of even 2019 to 2021
revenue by 20% annually
exceeds client’s satisfaction.
Establish long term
relationship with clients
Ensure compliance with
client's and regulatory
requirement
142

Finance
Monitor recruitment,
operations, IT related and To Increase the
2019 to 2021
administrative expenses & profitability by 10%
cost.
Negotiate better terms with
the suppliers
143
5 CHAPTER V STRATEGY EXECUTION
5.1 Evaluation of the company’s capabilities to execute the strategies
To determine the effectiveness of the strategy implementation, companies need to
track the progress on the goals and objectives outlined in the plan. Strategy evaluation
has to be on a continuous basis to determine whether the developed strategies are still
applicable, considering the internal and external changes. To effectively monitor
DKS performance in achieving its strategic object, the Balance Scorecard shall be
used as its strategy evaluation tool.
5.2 The Balanced Scorecard
Leadership of DKS can better translate the company’s strategy into objectives with
the used of Balanced Scorecard. This tool measures how well the strategic plan is
progressing, which enables management to take corrective actions as, needed.
Whereas the financial measures are the outcome, other equally important measures
indicate success of the strategy implementation.
The Balanced Scorecard measures performance customer, learning & growth,
internal business, and financial perspective.

144
Table 25 The Balanced Score Card
AREA
MEASURE TARGET FREQUENCY
OBJECTIVES
Customer Perspective
Zero
Customer complaints;
High customer
satisfaction 35% increase in Monthly
satisfaction
index satisfactory
response
Meet Service Level Metrics
All metrics are
Agreements embodied in Annually
green in RAG
(SLAs) SLAs
Effective
30% increase in
communication Response time Monthly
response time
practice
Operation Perspective
Reduced
Employee
Attrition rate attrition rate by Annually
attrition rate
10%
Financial Perspective
Increase in
revenues and 30% increase in
Return on profits in revenue and For the period of 3
Employee congruence in 20% increase in years
increase in profit
employees
Marketing Perspective
Increase
Market Share market share in Increase by 1% Annually
3rd Party KPO
145
5.3 Discussion of how to manage the change
As the company changes its strategy in terms of product scope, other changes may
also be needed in the other dimensions. This portion of the paper will try to
evaluate the different dimensions of the company using McKinney’s 7S
framework. During the evaluation, suggested changes in each dimension will also
be discussed.
Figure 19 McKinsey 7S Framework
Change in Strategy – changes in the strategy by adopting a hybrid business
model of having both shared services and third Party KPO provider. This can be
done through Concentric Diversification;

146
Change in shared vision – shared values from the current SSC set up should be
extended to the third party team so that they can embrace that vision moving
forward;
Change in Leadership style – Leadership by example and sharing best practices
between SSC and third parties
Change in Staff – the company should tap and recruit high performing individuals
from SSC to join the newly-created third party staff so that knowledge sharing can
be implemented. In addition, the company should hire knowledgeable and
experienced individuals that best fit with the position;
Change in Skills – the company should develop skills training packages so that
competency of the employees of the 3rd party team can be built;
Change in Systems – the company should leverage with the existing systems that
they have. However, innovation and continuous improvement should be on top
priority, since the initial process for 3rd party is just ‘lift and drop’
Change in Structure – the company should create different work streams and
structures for SSC and 3rd party to have one point of contact and ensure that
different systems develop over time to suit and cater to different markets and
needs, i.e. organizational ambidexterity.

147
6 CHAPTER VI FINANCIAL ANALYSIS
6.1 Assumptions Used
Assumptions used were based on the actual figures generated from audited financial
statements, while projections on the employee salaries were based on the industry
average generated from Payscale and statisca website.
6.1.1 Three-Year Financial Projections
a. Balance Sheet
Projected BS will still maintain high proportion of Current Asset with a range
of 90 to 91% to its Total Assets. Majority of its Assets is still Cash due to Long
term Loans acquired last 2017. Cash is expected to increase year on year driven
by the projected increase in Profit from the new project. Additional cash
generated will also cover the settlement of currently maturing and Long-term
obligation which is projected to be settled in 5 years, reason why there is a 20%
reduction Year on year on the Loan payable balance.
In lieu with leveraging the technology, the company is expected to acquire new
software and hardware to cater the expansion of services provided to the client.
Thus, this leads to an increase in PPE by 8M in 2019 and additional 12M in
2020 which will result to additional depreciation cost in our P&L at around
1.6M in 2019 and 4M in 2020

148
With the changes in the Figures as projected in the Balance sheet, company
remains very liquid as the current and quick ratio is projected to increase further
by 2.58% at the end of 2021. We are also expecting strong Asset to Liability
ratio at 3.11 as compared to 1.17 in 2017. This means that the company would
have sufficient asset at Php3.11 to cover every Php1 debt. Estimated amount of
resources contributed by creditors is expected to decrease from 6.02 in 2017 to
0.47 in 2019 as the company projection to settle its long terms obligation in 5
years.
149
Figure 20 Projected Statement of Financial Position

150
b. Income Statement
Growths in Revenues are estimated to increase significantly by end of the 3
year projected period. This will primarily be attributed to the project expansion
and service development strategy.
Combined with effective marketing strategy to attract offshoring services, it is
expected that the total revenues from 2019-2021 will increase by 5%, 10% and
15% respectively.
In order to achieve it, various training programs will be implemented to further
streamline the process to increase employee competency and service delivery
level. This will enable the company to take on more responsibility and utilize
the existing manpower for the upcoming new projects which will result to fewer
additional resource requirements.
Cost structure was also revised to consider the additional compensation and
fringe benefits for the new resources. Additional occupancy and utilities cost
were also expected to increase to cater the onboarding resources.

151
Company will also invest in the acquisition of new software & licenses and
hiring of temporary IT consultants to configure the existing ERP of the
company.
This is necessary to cater the increasing demands and other unique requirement
of the clients. This will have an impact in our P&L in the form of Depreciation
cost and Overhead salary expense
To execute its marketing plan, company will spend additional cost in Internet
marketing, promotion and advertisements for the next 3 years with projected
cost of Php 5M, 3.5M and 1.5M by the end of 2021.
Over-all the company has a strong projected income statement with expected
increase of 50% in Net profit for 2019 and will be doubled in the next two years.
152
Figure 21 Projected Statement of Comprehensive Income

Table 26 Year on Year Movement (Income)

Statement of Comprehensive Income
2021 2020 2019 2018
REVENUE
Service Fees 6,063,427,347.75 5,272,545,519.78 4,793,223,199.80 4,564,974,476.00
EXPENSES 4,790,637,687.38 4,536,896,259.98 4,380,636,424.06 4,300,590,270.00
OTHER INCOME (EXPENSES) 23,338,904.63 23,431,274.60 23,519,246.00 25,278,674.00
INCOME BEFORE INCOME TAX
EXPENSE 1,296,128,565.00 759,080,534.40 436,106,021.74 289,662,880.00
INCOME TAX EXPENSE 32,063,788.00 32,063,788.00 32,063,788.00 32,063,788.00
OTHER COMPREHENSIVE LOSS
(INCOME) 36,094,602.00 36,094,602.00 36,094,602.00 36,094,602.00
TOTAL COMPREHENSIVE
INCOME 1,300,159,379.00 763,111,348.40 440,136,835.74 293,693,694.00
Year on Year Movement 537,048,030.61 322,974,512.65 146,443,141.74

154
Table 27 Year on Year Movement (FP)

Statement of Financial Position
2017 2019 2020 2021

Total Current Assets 2,756,648,412.43 2,770,584,547.77 3,062,500,593.75 3,898,178,501.28
Total Non-Current Assets 294,222,335.56 302,222,335.56 314,222,335.56 314,222,335.56
Total Current Liabilities 446,014,415.94 454,014,415.94 458,014,415.94 446,014,415.94
Total NonCurrent Liabilities 2,170,004,279.88 1,750,403,579.48 1,330,802,879.07 911,202,178.66
Total HEAD OFFICE ACCOUNT 434,852,052.17 868,388,887.91 1,587,905,634.31 2,855,184,242.24
Total Financial Position 3,050,870,748 3,072,806,883 3,376,722,929 4,212,400,837
Year on Year Movement 21,936,135.33 303,916,045.99 835,677,908

UNIVERSITY OF MAKATI 156
156
157
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8 APPENDICES
A Appendix : Endorsement Form

162
B Appendix : Notes

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“CONCENTRIC DIVERSIFICATION: A HYBRID BUSINESS MODEL

STRATEGY FOR DEUTSCHE KNOWLEDGE SERVICES PTE LTD

A Strategic Management Paper presented to the Faculty of the College of

In partial fulfilment of the requirements for the executive degree

Sheila Nim Bartolazo

FINAL APPROVAL SHEET

This Strategic Management Paper of MS. SHEILA N. BARTOLAZO with the

PROF. GERARD BOZ C. TUNGOL, CPA, MDM, MBA

Passed per examination conducted by the following examiners:

PROF. JOSEPH D. BERNAT, MAELT, LPT

PROF. LEAH PLATON-PANDICO, LLB, MBA

PROF. JO-DANN N. DARONG, MAEcon

Accepted in partial fulfillment of the requirements for the degree of

PROF. LEAH PLATON-PANDICO, LLB, MBA

PROF. EDERSON DELOS TRINO TAPIA, MPA, DPA

NON-DISCLOSURE AGREEMENT / CONFIDENTIALITY AGREEMENT

This CONFIDENTIALITY AGREEMENT (the "Agreement") is by and between, Sheila Nim-

WHEREAS, in the course of consideration of the possible transaction or relationship, Disclosing

4. Permitted Disclosures. Recipient may disclose Disclosing Party's Confidential Information to

confidentiality of such Confidential Information.

5. Required Disclosures. Recipient may disclose Disclosing Party's Confidential Information if

9. Irreparable Harm. Recipient understands and acknowledges that any disclosure or

Date: September 25, 2018 Date: September 25, 2018

Sheila Nim-Bartolazo PROF. Ederson Delos Trino Tapia, MPA, DPA

("Disclosing Party") ("Recipient")

By: Executive MBA By: University of Makati

Title: Student Title: Dean of College

Signed in the Presence of:

wisdom, and ability to finish this document.

I am so thankful to the University Of Makati, College of Continuing, Advanced and

My special and wholeheartedly thanks to my adviser, Professor Gerard-Boz

came into existence. For any faults I take full responsibility.

revising my paper given a short notice.

I am also deeply thankful to my informants. Their names cannot be disclosed, but

I want to acknowledge and appreciate their help and transparency during my

research. Their information has helped me complete this manuscript.

My gratitude goes to my fellow proponents as well, particularly those who became

my confidante and lend their helping hands.

Furthermore, I am thankful to DKS Management team for supporting me pursue

my studies. To my direct reports who perform their tasks under minimum

care of my daughter while I was at school.

Finally, I am grateful to my husband for his untiring support be it financially,

emotionally and scholarly. Because of him, my EMBA journey became possible

excellence in the future.

FINAL APPROVAL SHEET ....................................................................... II

3.3 Value Chain Analysis.............................................................................104

6.1.1 Three-Year Financial Projections .........................................................147

Table 1. Common Types of Bank and its Functions ..................................................5

Master in Business Administration Program. Any information found in this

document should not be regarded as official pronouncement of Deutsche

Deutsche Knowledge Services Pte. Ltd., in Servicing DBG worldwide. DKS is an

offshore regional headquarters established by Deutsche Bank Group. With service

from 200 in year 2005 to 2000 in 2017.

from general environment, industry and competitor analysis. As determined in

opportunities, avoid threats, and improve on its weaknesses.

increased sales by creating a hybrid business model of a shared services company

company performance recognizes that it is the thinking-intensive resources that drive

implementation of the strategic plan. The strategy implementation are to be

monitored using various evaluation tool.

implementation, strategy execution, and financial analysis.

It’s those that are most adaptive to change.” - Charles Darwin

With the advent of globalization, there is fierce competition between organizations in

intermediation industry – in which banking sector belong. In order to survive the

address the following opportunity or question: How can Deutsche Knowledge