UP College of Business Administration

2006: Volume 13, Number 1
Issue Editors: Helena Agnes S. Valderrama and

Lorna I. Paredes

Industry Report: The Problem of Sustainable Competitive Advantage in Philippine Call Centers

Aileen S. Alava

Facing high expectations as the newest “sunshine industry”, the call center industry in the Philippines appears to have dimmer prospects in the coming years. Having experienced rapid growth from 2000 to 2003, the industry experienced a slowdown in growth from 2004 to 2006, raising the question of how sustainable the country’s competitive advantage is against neighboring competitors such as India and China. This paper uses Porter’s Diamond Model to analyze the factors resulting in competitive advantage between nations, and provides industry player and market information on the Philippine call center industry, as well as updates on how the industry’s participants are seeking to address the industry’s challenges.

Philippine Corporate Governance: Issues and Reforms

Erlinda S. Echanis

This paper describes the macro structure for corporate governance in Philippine firms and their impact on internal corporate governance. The paper also assesses the strengths and weaknesses of corporate governance reforms initiated by regulatory agencies in the Philippines. Selected cases of corporate governance failures in some firms in the Philippine financial services sector are also presented. Weaknesses in corporate governance mechanisms in these cases were categorized into: 1) decision processes; 2) violation of regulations; 3) weaknesses of regulatory agencies; and 4) financial reporting standards. The paper ends with some recommendations addressing some of these weaknesses and other necessary reforms to improve corporate governance in Philippine firms.

Technology Management and Catch-up Competitiveness: What the Philippines can Learn from South Korea and Taiwan

Roger D. Posadas

This paper gives a brief introduction to technology management and catch-up competitiveness and describes the technological learning and catch-up efforts undertaken by South Korean and Taiwanese latecomer firms. It also gives an overview of the extent of Philippine firms’ technological laggardness and dependence. It then expounds on the lessons in technology management and catch-up competitiveness that the Philippines can learn from South Korea and Taiwan and concludes with a set of recommendations for the attainment of Philippine technological and industrial catch-up.

Relationship Between Strategic Orientation and Organizational Performance: An Exploratory Study of Philippine Companies

Aliza D. Racelis

Questions have always been posed about organizational performance and its many determinants. The study and explanation of business competitiveness is a recurring theme examined by academics, consultants, and practitioners (Aragón-Sánchez and Sánchez-Marín, 2005). While firm performance is a multi-aspect phenomenon that is found to be influenced by a multiplicity of factors, such as culture, leadership, human resource management practices, the environment, market orientation, and overall company strategy, the growing literature on ‘strategic thinking’ or ‘strategic management’ points to competitive strategic management as one of the more influential determinants of firm success. This study is an attempt to corroborate claims that strategic orientation is related to higher organizational performance. Using the Ozen and Ulengin (2001) framework for the identification of strategic “thoughts”, a content analysis of annual reports of Philippine firms is performed to gather data relating to both those strategic variables and organizational performance variables.

The financial performance variables that turned out having any significant relationship with the strategy variables are Profit Margin and Debt Ratio. Likewise, the only strategy variables that turned out having any significant relationship with the organizational performance variables are: 1) consistent brand and image strategies, 2) producing products that have competitive advantages, and 3) developing core business areas through investment. While the sample size needs to be enlarged, the implication of these findings for practitioners is that strategic orientations shown to have a significant relationship with financial performance should lead managers to consider adopting those specific strategic orientations in their regular planning routine.

First Time Adoption of IAS 39: Impact on Selected Philippine Universal Banks

Dani Rose C. Salazar

The adoption of IAS 39 (Financial Instruments: Recognition and Measurement) in the Philippines for fiscal year ended 2005 was felt most strongly by the banking sector. As of December 31 of that year, Philippine banks reported aggregate financial assets and financial liabilities of P7.1 trillion that are subject to the provisions of IAS 39. Using a sample that included the biggest universal banks in the country, this study finds that adoption of IAS 39 resulted in three main adjustments to the banks’ financial condition and results of operations: 1) recognition of previously unrecognized assets and liabilities, (mainly derivative instruments); 2) re-measurement of existing assets and liabilities; and 3) reclassifications within asset accounts in the balance sheet. The net financial impact of these adjustments was a decrease of almost P15 billion in the sampled banks’ reported assets, an increase of P650 million in their liabilities, and a decrease in their capital or equity of P15.33 billion. The decline in assets and capital arose principally from impairment losses recognized by the banks on their loans and receivables in compliance with IAS 39 measurement rules.

HR Involvement in Corporate Governance

Vivien T. Supangco

This study examined the relationship between the involvement of the human resource management function in formulating corporate governance mechanisms and the quality of their implementation. It also looked at the relationship between the quality of implementation of corporate governance mechanisms and performance. Of interest were two governance mechanisms: strategic plan elements and behavioral control practices. This study was based agency theory, institutional theory, and the resource-based view of the firm. The results revealed that quality of implementation resulted in higher performance. Specifically, quality of implementation of strategic plan elements not only explained performance but also served as an important enabler of quality of implementation of behavioral control policies. The importance of HR involvement, however, was realized in its impact on quality of implementation.

Credit Decision and Rationing Rules: A Study of Informal Lenders in the Philippines

Normito R. Zapata, Jr.

This paper investigated the rationing rules being used by informal lenders in dealing with micro-entrepreneurs. The two-stage model of borrowing was tested using a sample of 108 entrepreneurs from the public market of Los Baños, Laguna. The results showed that those who are less educated, married, and/or have large household size are more likely to borrow from the informal lenders. On the other hand, the average daily sales of the enterprise seem to be the main factor that the lenders consider in rationing credit. Businesses with smaller asset size and lower daily sales experience greater rationing from informal lenders. As a result, it is more difficult for them to expand their earning capacity. Therefore, government microfinance programs should focus in this underserved sector.