Maxion, Daceler B.

BACC 103 WS 12:30-15:00

University of the Cordilleras
BSBA 1C
July 2020

Porter’s Diamond Analysis on Philippine Business Industry

A. Factor Endowments
1. Utilities (electricity) in the Philippines are expensive
compared to other countries, second country in Asia just after
Japan which affects the potential for growth of Filipino
businesses considering that companies from other countries could
easily perform their day-to-day operations without acquiring too
much costs in utilities which in turn will lead to more
productivity which is desirable when companies wish to expand
their reach globally.
2. Skilled and Professional laborers who choose to leave
the country are regarded as modern heroes of the Filipino due to
their contributions in the countries dollar remittances which is
good for the economy. But these skilled and professional
laborers who leave the country to work overseas may also
contribute to “why s” of Filipino companies not making it in the
global arena. According to PSA, as of September 2019, 26.1% of
the 2.2 million OFWs are service, sales workers, craft, and
related trade workers while 17.2% are technicians, associate
professionals, and professionals. These highly-skilled and
professional laborers might have a lot more contributions to the
country if they stay and devote their skills and knowledge to
the domestic business.
3. The department of science and technology reported that
the Philippines ranked 90th when it comes to infrastructure in
the global competitiveness report, world economic forum from
2015-2016 which is somehow good especially that it is an
improvement from the result from 2011-2012 where the country
placed 105. However the very fact that the Philippines is still
in that developmental stage when it comes to basic requirements
to global competitiveness like infrastructure, makes it
difficult for some of the local businesses to have a good chance
in competing at the global market.
B. Demand Condition
Consumer spending accounts for 66% of the country gross
domestic product which means that the Filipino people do their
part in creating demands for industry products and services
which are crucial. Large market means more challenges for
businesses but it also provides them opportunities to grow and
become better companies. This gives local businesses the
opportunity to scale new heights for growth and expansion as
well as gain early insights on what consumers from across the
borders need.

C. Related and Supporting Industries

1. Absence of Superior Internet Provider hinders many giant
corporations and businesses in the Philippines to perform at a
capacity desired in the global market especially now that many,
if not all, businesses need to have a virtual/digital presence
to keep up with all the technological development that
continuously change the market. Philippines’ 5.5 Mbps average
internet connection speed is the slowest among 15 Asia-Pacific
countries.
2. Stated in the discussion of factor endowments, the
country could use a lot more improvements in its infrastructure
which means it need more programs to support its construction
industry. Despite the existence of the “Build! Build! Build!”
program of the government, the construction sector still needs
extra attention especially that only 56% of the flagship
infrastructure projects in the government’s list are set still
to be completed by 2022 and the government’s plan to fund the
projects relies heavily on loans.
D. Firm Strategy, Structure, and Rivalry
1. Too much bureaucracy in the Philippine government makes
it expensive and time consuming to register businesses in
compliance with certain requirements. Many entrepreneurs in the
Philippines aim for duly registered businesses and wish to have
income tax returns but it is a bit difficult to achieve that
given the country’s political climate
2. Structural Problems- according to John Nye, economist
who was a part of a strategic dialogue between Philippines and
the United States, the roots of underdevelopment lie in the
underlying structure of the Philippines’ economy, which is
mostly rural, agricultural, and suffers from low productivity.
He also compared the Philippines to China whose had one of its
most successful development stories when it decided to move its
rural workers from rural inlands to highly productive coastal
regions.
 3. Rivalry, the Lack Thereof- It goes without saying that
there are well-known business rivalries in the Philippines but
in the big picture one cannot also deny how almost each industry
in the Philippines are being dominated by certain players. This
becomes a problem when the lack of intense rivalry will lead
these dominating players to complacency. Yes, they might be the
biggest players in their respective industries within the
Philippines but compared to their global counterparts, they may
be very far behind. Having more intense rivalry will force these
players to continuously improve and innovate which will
definitely lead to further growth.

References:
https://carnegieendowment.org/2012/04/27/economic-and-political-
challenges-in-philippines-event-3645
https://www.business-to-you.com/porter-diamond-model/
https://businesstips.ph/8-things-that-hinder-the-success-of-
filipino-entrepreneurs/
https://businessmirror.com.ph/2018/08/07/average-electricity-
price-in-phl-2nd-highest-in-asia-think-tank/
https://psa.gov.ph/content/total-number-ofws-estimated-22-
million
http://dost.gov.ph/knowledge-resources/news/58-
infographics/infographics-2016/1396-trend-in-philippine-
rankings-in-global-competitiveness-factors-2010-2016.html
https://www.financeasia.com/article/consumers-hold-the-key-to-
philippines-growth-in-2020/458172
https://www.rappler.com/newsbreak/in-depth/265526-where-are-we-
on-build-build-build-program
https://www.manilatimes.net/2018/06/03/business/phs-economic-
competitiveness-is-slow-internet-a-
factor/403610/#:~:text=The%20Philippines'%205.5%20Mbps%20aver
age,the%20slowest%20at%201.4%20Mbps.