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How a Small Business Start up a Philippines Company


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Small Business enterprises contribute the economics of Taiwan. With limited market size and scale in Taiwan itself, small business enterprise has to find way to compete in the global market. The article is a case study about how a small Internet advertising company should strategically look for resources itself in the situation of globalization in order to maintain its competitive advantages.

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How a Small Business Start up a Philippines Company

  1. 1. A Case Study On How a Small Business Start up a Philippines Company San Diego State University MSBA MGT-790 Sean Yeh September 9, 2008
  2. 2. Contents <ul><li>Company Summary </li></ul><ul><ul><li>History / Product & Service / Industry / </li></ul></ul><ul><li>The Key Issues </li></ul><ul><li>ANALYSIS </li></ul><ul><ul><li>Go Global or Not </li></ul></ul><ul><ul><li>Why Philippines </li></ul></ul><ul><ul><li>How to access the Filipino Workforce </li></ul></ul><ul><ul><li>How to manage the Filipino workers </li></ul></ul><ul><li>SOLUTION AND RECOMANDATION </li></ul>
  3. 3. Company Summary <ul><li>AIA started up from 2003 / </li></ul><ul><ul><li>after the Dot com bobble / Company Form : LLC </li></ul></ul><ul><li>Vision and Mission: Total Solution on Internet Advertising </li></ul><ul><li>History: 4 stages </li></ul><ul><ul><li>Stage I: Uncertain Era ; </li></ul></ul><ul><ul><ul><li>Traditional vs. Internet Advertising </li></ul></ul></ul><ul><ul><li>Stage II: Focus on Internet Advertising; </li></ul></ul><ul><ul><ul><li>believe in the future of Internet Industry </li></ul></ul></ul><ul><ul><ul><li>compete with freelancers </li></ul></ul></ul><ul><ul><li>Stage III: Change Strategic Group </li></ul></ul><ul><ul><ul><li>getting rid of freelancers “red ocean” </li></ul></ul></ul><ul><ul><ul><li>hunting the elephants </li></ul></ul></ul><ul><ul><ul><li>change industry: from Fashion to financial industry and pharmaceutical industry </li></ul></ul></ul><ul><ul><li>Stage VI: What’s Next? </li></ul></ul><ul><ul><ul><li>march out the boundary or stay ? </li></ul></ul></ul>
  4. 4. Product and Service: <ul><li>We provide the following product and services: </li></ul><ul><ul><li>Web Base Systems </li></ul></ul><ul><ul><li>Internet Marketing </li></ul></ul>Official Website for an Enterprise Internet Application Programming for marketing Multi Media Animation design CRM System Internet Media Agency Internet Public Relation E-paper Marketing BLOG Marketing keyword Marketing Web Base Systems Internet Marketing
  5. 5. Industry <ul><li>Internet advertising industry </li></ul><ul><li>Industry life cycle : growth stage </li></ul><ul><li>nearly 60% of Taiwan residents on line (11,8 million people) </li></ul>
  6. 6. Strategic Group mapping and Competitor analysis Presco SOHO AIA Agenda Template Master High Low High Price Quality stage1 stage2 stage3 Stage4?
  7. 7. The Market of the industry: Our Sales <ul><li>Gross Sales in first half of 2007 is more than the aggregate number in year 2006 </li></ul>250 510 680 759 0 100 200 300 400 500 600 700 800 2004 2005 2006 First half of 2007
  8. 8. Current problem <ul><li>Weakness </li></ul><ul><ul><li>Not enough: </li></ul></ul><ul><ul><ul><li>capacity for the current market. </li></ul></ul></ul><ul><ul><ul><li>high quality and lower cost human resources. </li></ul></ul></ul><ul><ul><ul><li>English speaking human resources </li></ul></ul></ul><ul><ul><ul><ul><li>In order to gain high budget clients (MNC companies) </li></ul></ul></ul></ul><ul><li>Threat </li></ul><ul><ul><li>The cost of hiring Taiwanese is high. </li></ul></ul><ul><ul><li>English speaking Taiwanese workforce is expensive. </li></ul></ul>S O
  9. 9. THE KEY ISSUES <ul><li>Issue1: Whether go aboard? </li></ul><ul><li>Issue2: Why AIA should choose Philippines? </li></ul><ul><li>Issue3: How to use the Filipino workforce? </li></ul>
  10. 10. ANALYSIS - Whether go aboard <ul><li>Good Reason: </li></ul><ul><ul><li>Flattener no.5: The World is Flat </li></ul></ul><ul><ul><ul><li>Outsourcing -The ten factors that flattened the world </li></ul></ul></ul><ul><ul><li>Future Trend of Outsourcing </li></ul></ul><ul><ul><ul><li>$6 trillion of global industry </li></ul></ul></ul><ul><ul><ul><li>make companies more productive and more competitive </li></ul></ul></ul><ul><ul><li>Profitable in the Long Run </li></ul></ul><ul><ul><ul><li>more profitable than stay at home </li></ul></ul></ul><ul><ul><li>Technology Innovations </li></ul></ul><ul><ul><ul><li>Internet applications / communication technology </li></ul></ul></ul><ul><ul><ul><li>empower the small business to compete with large MNCs </li></ul></ul></ul><ul><ul><li>&quot;tribal&quot; concerns </li></ul></ul><ul><ul><ul><li>language, culture and/or niche markets </li></ul></ul></ul><ul><ul><li>Fast Speed </li></ul></ul><ul><ul><ul><li>Small business </li></ul></ul></ul><ul><ul><ul><li>quickly respond to the market change </li></ul></ul></ul>
  11. 11. ANALYSIS - Whether go aboard (cont.) <ul><li>Bad Reasons : </li></ul><ul><ul><li>Liability of Size </li></ul></ul><ul><ul><ul><li>small size company </li></ul></ul></ul><ul><ul><ul><li>limitation of the resources </li></ul></ul></ul><ul><ul><ul><li>more risky in global ventures </li></ul></ul></ul><ul><ul><li>Lacking of Global Experiences </li></ul></ul><ul><ul><ul><li>No sufficient foreign language skill </li></ul></ul></ul><ul><ul><ul><li>No experiences in foreign country </li></ul></ul></ul><ul><ul><li>No Global Culture in the Organization </li></ul></ul><ul><ul><ul><li>Usual focus on inbound business </li></ul></ul></ul><ul><ul><ul><li>Culture not enough to sustain a MNC </li></ul></ul></ul><ul><ul><li>Negative Attitude of Manager in the Organization </li></ul></ul><ul><ul><ul><li>usually pose negative attitudes </li></ul></ul></ul><ul><ul><li>High Entry Barrier and Low Profit in the Beginning </li></ul></ul><ul><ul><li>Cultural Diversity </li></ul></ul><ul><ul><ul><li>language, traditions, </li></ul></ul></ul><ul><ul><ul><li>the way societies organize themselves, </li></ul></ul></ul><ul><ul><ul><li>their conception of morality and religion, </li></ul></ul></ul><ul><ul><ul><li>and the way they interact with the environment </li></ul></ul></ul>
  12. 12. Should AIA Go Global or Not? <ul><li>A small business / With limited resources </li></ul><ul><li>Organization: </li></ul><ul><ul><li>lack of global experiences </li></ul></ul><ul><ul><li>lack of global culture </li></ul></ul><ul><li>GO Global Because </li></ul><ul><ul><li>For survive: More competitive </li></ul></ul><ul><ul><li>For potential: More market size </li></ul></ul><ul><li>Method </li></ul><ul><ul><li>Find a country </li></ul></ul><ul><ul><ul><li>Is geographically or culturally close </li></ul></ul></ul><ul><ul><ul><li>Can make an advantage in AIA’s value chain </li></ul></ul></ul><ul><ul><ul><li>Can empower AIA to compete with large competitions </li></ul></ul></ul><ul><ul><li>Forming the Global Culture in the organization: </li></ul></ul><ul><ul><ul><li>To make AIA organization believes ~ </li></ul></ul></ul><ul><ul><ul><ul><li>that AIA can start any business in any place of the world. </li></ul></ul></ul></ul><ul><ul><ul><ul><li>that AIA can allocate any activity of their value chain in any part of the world. </li></ul></ul></ul></ul>
  13. 13. ANALYSIS - Why AIA should choose Philippines <ul><li>Where can we choose? </li></ul><ul><ul><li>Eastern China, Vietnam, Singapore, Philippines and Indonesia </li></ul></ul><ul><li>How to choose? </li></ul><ul><ul><li>Evaluate By Location </li></ul></ul><ul><ul><li>Evaluate By Wages (Workforce Cost) </li></ul></ul><ul><ul><li>Evaluate By Language and Culture </li></ul></ul><ul><ul><li>Evaluate By Economic and Politics </li></ul></ul>
  14. 14. ANALYSIS - Why AIA should choose Philippines (cont.) <ul><li>Location </li></ul><ul><li>Distances </li></ul><ul><li>Time Zone </li></ul>
  15. 15. ANALYSIS - Why AIA should choose Philippines (cont.) <ul><li>Wages (Workforce Cost) </li></ul><ul><li>GDP </li></ul><ul><li>Salary </li></ul><ul><li>Literacy rate </li></ul>
  16. 16. ANALYSIS - Why AIA should choose Philippines (cont.) <ul><li>Language and Culture </li></ul><ul><li>Language </li></ul><ul><li>Traditions </li></ul><ul><li>Social </li></ul><ul><li>Morality </li></ul><ul><li>Religion </li></ul>
  17. 17. ANALYSIS - Why AIA should choose Philippines (cont.) <ul><li>Economic and Politics </li></ul><ul><li>Intellectual property </li></ul><ul><li>Fundamental Infrastructure </li></ul><ul><li>Economic Growth </li></ul><ul><li>Gov. Relation </li></ul><ul><li>Gov. Regulations </li></ul><ul><li>Tax </li></ul><ul><li>Terrier </li></ul><ul><li>bribes </li></ul>Regulations
  18. 18. ANALYSIS - Why AIA should choose Philippines (cont.) <ul><li>Philippines is the better Choice </li></ul>objective subjective
  19. 19. Philippines is the better Choice (cont.) <ul><li>Advantage: </li></ul><ul><ul><li>Growing Economy </li></ul></ul><ul><ul><ul><li>GDP growth rate: 7.3% </li></ul></ul></ul><ul><ul><li>Workforce Advantages </li></ul></ul><ul><ul><ul><li>Low-wage labor </li></ul></ul></ul><ul><ul><ul><li>Quality IT staff and engineers </li></ul></ul></ul><ul><ul><ul><li>3rd large English-speaking country in the world </li></ul></ul></ul><ul><ul><li>ASEAN Free Trade Agreement (AFTA) </li></ul></ul><ul><ul><ul><li>Member of ASEAN </li></ul></ul></ul><ul><ul><ul><li>Tariffs and non-tariff barriers </li></ul></ul></ul><ul><ul><li>Business process outsourcing (BPO) </li></ul></ul><ul><ul><ul><li>Rank#1 of knowledge-based jobs </li></ul></ul></ul><ul><ul><ul><li>Rank#3 of offshore service </li></ul></ul></ul><ul><ul><ul><li>Rank#4 of Labor quality in ASIA </li></ul></ul></ul><ul><ul><ul><li>High-end outsourcing (legal, web design, medical, software) </li></ul></ul></ul><ul><ul><li>Government Laws and Incentives for foreign investments </li></ul></ul><ul><ul><ul><li>Fiscal and non-fiscal incentives </li></ul></ul></ul><ul><ul><ul><li>Registered to BOI,PEZA,CDC,SBMA, CEZA, ZEZA etc. </li></ul></ul></ul>
  20. 20. How to use the Filipino workforce <ul><li>Outsource </li></ul><ul><ul><li>To Filipinos / Local Company </li></ul></ul><ul><li>Build an Organization </li></ul><ul><ul><li>Form of Company: Corporation </li></ul></ul><ul><ul><li>Enterprise Type: Internet advertising company </li></ul></ul><ul><ul><ul><li>the foreign equity is at least 30%; the other 70% of equity has to hold in Filipinos </li></ul></ul></ul><ul><ul><li>Tax and Registration issues </li></ul></ul><ul><ul><ul><li>income tax 35% </li></ul></ul></ul><ul><ul><ul><li>SEC,BOI,PEZA,… </li></ul></ul></ul>
  21. 21. How to manage the Filipino workers <ul><li>Organizational Culture Preference </li></ul><ul><ul><li>Clan Culture </li></ul></ul><ul><ul><ul><li>Very friendly place to work / people share a lot of themselves </li></ul></ul></ul><ul><ul><ul><li>Leaders: mentors / parent figures </li></ul></ul></ul><ul><ul><ul><li>Organization: hold by loyalty or tradition </li></ul></ul></ul><ul><ul><ul><li>Commitment is high. </li></ul></ul></ul><ul><ul><li>Market Culture </li></ul></ul><ul><ul><ul><li>a result-oriented organization </li></ul></ul></ul><ul><ul><ul><li>major concern : getting the job done </li></ul></ul></ul><ul><ul><ul><li>People: competitive and goal-oriented </li></ul></ul></ul><ul><ul><ul><li>Leaders: hard drivers, producers, and competitors who are tough and demanding. </li></ul></ul></ul>
  22. 22. How to manage the Filipino workers (cont.) <ul><li>Establish a comprehensive training program </li></ul><ul><ul><li>Training can influence the job performance </li></ul></ul><ul><ul><li>Pre-job training </li></ul></ul><ul><ul><ul><li>To introduce company organization, mission, culture and rules </li></ul></ul></ul><ul><ul><li>Cultural training </li></ul></ul><ul><ul><ul><li>cultural adaptive workshop: </li></ul></ul></ul><ul><ul><ul><ul><li>by using videos or relative documents </li></ul></ul></ul></ul><ul><ul><ul><ul><li>to help foreign workers reduce cultural shocks with work Taiwanese </li></ul></ul></ul></ul><ul><ul><li>On-job training </li></ul></ul><ul><ul><ul><li>solve language barrier problems (Taiwanese and Filipino) </li></ul></ul></ul><ul><ul><ul><li>language training </li></ul></ul></ul><ul><li>Incentive based system </li></ul><ul><ul><li>material incentives: bonus or raise </li></ul></ul><ul><ul><li>Can satisfy basic living expenses and enhance productivity </li></ul></ul>
  23. 23. SOLUTION AND RECOMANDATION <ul><li>Main Strategy: GO GLOBAL </li></ul><ul><li>ENTER PHILIPPINES </li></ul><ul><li>Method </li></ul><ul><ul><li>PHASE ONE: OUTSOURCEING </li></ul></ul><ul><ul><li>PHASE TWO: BUILD LOCAL COMPANY </li></ul></ul><ul><li>Location </li></ul><ul><ul><li>Option 1: In Makati </li></ul></ul><ul><ul><li>Option 2: Near University of Philippines </li></ul></ul>
  24. 24. Thank you