Dmci

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION AND BACKGROUND OF THE STUDY

1.1 Company Profile 5
1.1.1 Brief History and Description of the Company 5
1.2 Vision-Mission Statements, Goals and Core Values 7
1.3 Rationale of the Study 10
1.4.Research design and Methodology 10
1.4.1 Research design 10
1.4.2 Scope and Limitation 11
1.5 Macroenvironmental Analysis 11
1.5.1 Demographic Changes 11
1.5.2 Political and Legal Forces 12
1.5.3 Socio-Cultural Trends 14
1.5.4 Economic Changes 15
CHAPTER 2: INDUSTRY AND COMPETITOR ANALYSIS

2.1 Porter’s Five Forces of Competition 19
2.1.1 Threat of New Entrants 21
2.1.2 Bargaining Power of Buyers 23
2.1.3 Threat of Substitute Products 24
2.1.4 Bargaining Power of Suppliers 25
2.1.5 Rivalry among Competitors 26
2.2 Competitive Profile Matrix 28
2.2.1 Key Competitors of DMCI Homes 29
2.2.2 Critical Success Factors 30
2.3 External Factor Evaluation Matrix 34
2.3.1 Opportunities 34
2.3.2 Threats 37
CHAPTER 3: INTERNAL ANALYSIS

3.1 SWOT Analysis 39
3.2 Financial Statement Analysis 42
3.2.1 Vertical Analysis 43
3.2.2 Horizontal Analysis 45
3.2.3 Ratio Analysis 46
3.3 Internal Factor Evaluation Matrix 51
3.3.1 Strengths 52
3.3.2 Weaknesses 53
CHAPTER 4: STRATEGY FORMULATION, IMPLEMENTATION

AND EVALUATION
4.1 Strategy Formulation 55
4.2 Strategy Implementation 71
4.3 Strategy Evaluation 86
BIBLIOGRAPHY
Breaking Grounds, Building Dreams, Braving New Horizons:

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A Strategic Management Paper on DMCI Homes, Inc.
LIST OF FIGURES
1: Map of Businesses owned by DMCI Holdings 6

2: DMCI Homes' Income Contribution to DMCI Holdings 7
3: Core Values: Integrity 8
4: Core Values: Excellence 8
5: Core Values: Interdependence 9
6: Core Values: Customer Orientation 9
7: Changing Trend of OFW Remittances in Dollars 17
8: Revenues of Selected Real Estate Developers in Residential Developments 19
9: Framework of Porter's Five Forces of Competition 20
10: Residential Revenues of Developers Catering to the Middle-Income Segment 28
11: Graphical Depiction of the Vertical Analysis 44
12: SPACE Matrix Graph 61
13: Grand Strategy Matrix 63
14: Strategy Map 79
15: Finance Function Strategy Map 82

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LIST OF TABLES
1: Philippine Population from 2007 to 2010 12

2: Residential Building Construction in the Philippines (2011) 15
3: Ranges of Monthly Rates and Wage Differentials by Major Occupation Groups 16
4: Disposable Income Among Filipinos 18
5: Competitive Profile Matrix of DMCI Homes and its Competitors 33
6: DMCI Homes External Factor Evaluation 38
7: SWOT Summary 41
8: Common-Size Income Statements from 2007 to 2010 43
9: Comparative Income Statements from 2009 to 2010 45
10: SWOT/TOWS Matrix Rating 53
11: SWOT/TOWS Matrix 57
12: SPACE Matrix 60
13: IFE Table 64
14: Strategy Options 65
15: QSP Matrix 66
16: Financial Projections 73
17: Financial Projections (2011 to 2013) 75
18: Financial Projection (2014 to 2015) 77

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CHAPTER 1
INTRODUCTION AND BACKGROUND OF THE STUDY
1.1. COMPANY PROFILE

1.1.1. Brief History and Description of the Company
David M. Consunji acquired the knowledge of construction when he was a young, concrete
inspector. He was armed with in-depth facts and the precise system about construction through
his Civil Engineering degree that he earned from the University of the Philippines. After some
time, he decided to eventually start his own contracting company.
He incorporated David M. Consunji Incorporated (DMCI) which was founded on December 24,
1954 in a quaint room in Pandacan, Manila. He had a vision of “Building a generation of
Filipinos.”
DMCI started building chicken houses for the Bureau of Animal Industry. This earned him a
reputation for timeliness of service delivery and punctuality, and quality output. After that, the
Tacloban Coca-Cola Plant and Bacnotan Cement Plant projects were awarded to the company.
Through DMCI’s unwavering quest for progression, its development and research aspect paved
the way for the pioneering of several advanced construction application technologies in the
Philippines. Now, DMCI enjoys the patronage of both its new and repeat institutional clients.
In the year 1999, DMCI expanded with its housing division, which was called DMCI Homes. Its
aim was to build progressive condominiums and house and lots. It all began with Lake View
Manors (1999) followed by more innovations like Hampstead Gardens (2001). By the beginning
of the year 2003, DMCI Homes became stronger, more aggressive and even more competitive.
They constructed the East Ortigas Mansions and added more amenities and facilities for its
residents. Villa Alegre Homes and Mayfield Park were then erected in 2004 with more
improvements and amenities such as the installation of elevators.
As the company kept expanding its business operations, DMCI Homes grew as a household
name in the real estate industry. It began to carve itself a niche in the real estate business.

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All in a span of seven years, DMCI Homes has built the most comfortable, resort-like residential
spaces for urban dwellers. The rapid growth rate of DMCI Homes can be attributed to its thrust
to continuously delight its customers. DMCI Homes will perpetually continue to create modern
residential spaces in the heart of the city on a budget.
The company’s head office is located in Bangkal, Makati, though it has several sales and
property management offices across Metro Manila. Isidro Consunji presides as the president of
DMCI Homes. He is also the president and Chief Executive Officer (CEO) of DMCI Holdings.
Figure 1: Map of Businesses Owned by DMCI Holdings
DMCI Homes has immensely contributed to the over-all income of its parent company, DMCI Holdings,
Inc. Based on percentage shown in Figure 2. Though not really considered as the primary income
generator of DMCI Holdings, Inc.., in its existence, it has proven that it could compete with real estate
giants such as Robinson’s Land, AvidaLand and MegaWorld Corporation.

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In 2010, DMCI Homes generated revenues of 7.7 billion which is a 62% increase from the sales and
reservations in 2009 (Figure 2). Out of the 3,428 units constructed, 3,004 were turned over to buyers.
Figure 2: DMCI Homes' Income Contribution to DMCI Holdings
1.2. Vision-Mission Statements, Goals and Core Values
The following is the vision-mission statement of DMCI Homes:
We shall be the best provider of residential communities designed to create a quality

lifestyle that is responsive to the changing needs and preferences of the market we serve.
In doing so, we are committed to ensuring:
 Sustainable growth of our shareholder's investment

 A mutually beneficial relationship with our partners in the business.
 Care for the environment we work in.
 Growth for our people.
while building an organization that espouses integrity, excellence, interdependence and

customer satisfaction.

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According to the investor relations information of DMCI Homes, which can be found in the
company website, its business goal is to provide affordable residential units in urban friendly,
fully serviced communities near places of work, study and leisure. The company identifies
objectives that advance the proposition of “profit with honor”, namely: to ensure customer
satisfaction, sustainable investment growth, mutually beneficial relationship with business
partners, environmental concern, and career development of its people.
DMCI Homes upholds the core values of integrity, excellence, interdependence, and customer
satisfaction.
Figure 1: Integrity
All their actions are guided by what is ethical, fair and right. Believing in profit with honor, they
are committed to good governance and the highest moral standards.
Figure 2: Excellence

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In even the smallest of details, they reject mediocrity and strive for excellence.
Figure 3: Interdependence
With unity in purpose and mutual trust and respect for each other, they work toward shared
aspirations and transcend boundaries along functional and organizational lines.
Figure 4: Customer Orrientation
Their goal is to delight and please their customers. Thus, all activities and programs they
undertake result in innovative projects
Figure 3-6: DMCI Homes' Core Values

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1.3 RATIONALE OF THE STUDY
The real estate industry consists of a collection of industrial and services sectors of the
economy such as construction, brokerage services, mortgage banking, property management,
and even architecture and design.
A number of other sectors of the economy are also intricately linked to the industry. These
include the manufacturing industry of raw materials used in construction, the power industry, the
house financing industry and other upstream and downstream sectors.
The real estate industry is therefore deemed critical to the economic health of the nation as its
impact is felt throughout the economic system.
It is for this reason that the researchers have chosen a company under the real estate industry
as the subject of the strategic management paper. Real estate and housing is the single largest
asset class and wealth holding of individuals and households globally. The development of the
housing sector has been an integral part of Philippine economy. In the Philippines, housing
constitutes a large portion of a household’s expenditure and takes up a substantial part of one’s
income.
The choice of DMCI Homes as the research subject is due to three primary reasons:
1. DMCI Homes caters to the market segment of the middle-income class families.
2. The housing projects of DMCI Homes earned the rating of the very first Triple-A
builder/developer in the country.
3. DMCI Homes is part of a multi-billion peso conglomerate, the DMCI Holdings, Inc.
1.4. RESEARCH DESIGN AND METHODOLOGY

1.4.1. Research Design
Macro-economic data used in the external analysis were gathered from the websites of various
government offices such as Bangko Sentral ng Pilipinas (BSP) and the National Statistics Office

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(NSO). These government offices have projections on macro-economic growth which were
collaborated by projections from economists and other private institutions.
Industry data was gathered from the research done by real estate consultants such as Jones
Lang Lasalle and Colliers International as well as data from Housing and Land Use Regulatory
Board (HLURB). This was supplemented from industry news from the websites of respected
media outlets.
To be able to assess DMCI’s performance relative to its competitors, audited financial

statements were obtained from DMCI Holdings and DMCI Homes as well as its key competitors
from the Securities and Exchange Commission (SEC). Aside from providing financial data, the
published annual reports also served as good sources of internal and competitor information.
Statements from the corporate website of DMCI and its competitors are used to determine
recent developments, marketing activities and other internal and competitor information. To be
able to benchmark the pricing of the company relative to its competitors, various brokers were
contacted online. Competitor prices were benchmarked based on similar projects such as
projects are of similar nature (high rise residential), in close proximity to one another and will be
completed within the same year.
1.4.2 Scope and Limitation
This paper was limited to DMCI Homes’ ventures in the Philippines. The paper focused on how
the company competes in the Philippine market and did not delve into the feasibility of
developing real-estate projects outside the country. The paper also concentrated on the primary
real estate product of DMCI Homes like high rise residential buildings. Its other products and
services such as its resort project and its property management were not focused upon due to
its marginal revenue contribution.

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1.5 MACROENVIRONMENTAL ANALYSIS
1.5.1. Demographic Changes
Demography is defined as the study of population with particular emphasis on changes in terms
of size, distribution and composition.
Population trends are key factors in understanding how the society and the real estate market
change over time. These demographic statistics are an often overlooked but significant factor
that affects how real estate is priced and what types of properties are in demand.
Shifts in demography affect the real estate market in numerous ways, such as a) How could it
affect the demand for homes in popular areas as more people plan to start their retirement? or b)
How could it affect the demand for larger homes if the incomes are smaller?
a. Growing Population
The Philippine population has immensely grown over the years. 2010 posted a 1.8% increase in
population from 2009. The data shown in Table 1 from the Asian Development Bank (2010)
shows the five-year trend of population increase in the Philippines. With 94 million Filipinos
occupying the land, the demand for homes, which is a necessity, would be high and the real
estate industry might look for possibilities of expanding and adding more projects that would
cater to Filipinos looking for a stable home.
The National Capital Region (NCR) has enjoyed a strong real estate market due to many
economic and demographic factors. New housing construction is a major source of employment
and is vital in addressing pent up demand. Fortunately, home ownership is a high priority for
Filipinos with two out of three households owning their home.
Table 1:
Philippine Population from 2007 to 2010
Source of data : Asian Development Bank, 2010

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1.5.2. Political and Legal Forces
Legislation is another factor that impacts property demand and prices. Through deductions and
subsidies, the government can temporarily boost demand for real estate for as long as their
term of office permits. Changes in supply and demand can be determined with the help of
current government incentives such as low mortgage rates, the country as a retirement haven
and, introduction of REITs in the Philippine Market which gives companies more opportunities
for profit.
a. Low Mortgage Rates
Mortgage interest rates are currently at historic lows, and home prices have been low lately as
well. If one is to market for a new home, it’s a smart idea to take advantage of the best
mortgage rates and low home prices.
A low mortgage rate has three effects: A client will pay far less for a home. Even one or two
percentage points off the rate of a property can drastically reduce the total amount of interest
expense for a home resulting to a lower monthly mortgage payment. New homes can be
expensive. A lower mortgage payment allowing a few hundred pesos every month to put in a
savings account for house-related repairs and projects will prove beneficial. If the mortgage is
fixed, the client will be safe from rising interest rates.
b. Philippines as a Retirement Haven
Over the last decade, the Philippines has become a favorite vacation spot for foreigners. These
tourists love the country so much that many of them have decided to invest their retirement
savings and settle here.
The Philippine Retirement Authority (RPA) is implementing the Special Resident Retiree’s Visa
(SRRV) Program to promote the country as a major destination for foreign retirees.
Potential sales can come from condominium purchases by foreign retirees. Foreign retirees are
allowed by the current law to buy condominium developments. These represent potential sales
to a real estate company especially that real estate projects are resort themed with substantial
land area being used for recreational facilities. These are features foreign retirees are
considering when buying a second home.

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c. Introduction of REITs in the Philippine Market
A Real Estate Investment Trust (REIT) is a company that owns and manages income-
generating real estate property such as offices, stores, apartments and industrial estates. It
usually pays 90% of its net income as dividends.
The introduction of REIT in the Philippines receives special tax considerations and typically offer
investors high yields, as well as highly liquid method of investing in real estate, by broadening
the participation of the Filipino to equalize the wealth.
1.5.3. Socio-Cultural Trends
Socio-culture relates the roles of different ethnic groups, gender and culture; with all these
elements combined, it forms a personality. Socio-culture is the way people act and develop
based on ethnic group, gender and traditions. Filipinos have different lifestyles which may affect
the real estate industry.
a. Rising Demand for Condominiums
The growth of the condominium sector has also been helped by the fact that condominiums are
free from the title registration and property appraisal problems which cover land properties in the
Philippines.
According to Condominium Boom in Metro Manila (2011), demand for residential condominiums
in Metro Manila has been boosted by strong economic growth, particularly by the rapid growth
of business process outsourcing firms, including call centers. Call center agents from a new
breed of young urban professionals with tremendous purchasing power. Because most call
center agents work at night, they need condominium units that are right next to their work place.
b. Renewed Interest in Property as a Long-Term Investment for Yield/Inheritance
The increasing number of residential buildings in the first quarter of 2011 indicates that Filipinos
are again viewing properties as long term investments after the crisis that hit the United States
of America in 2008.
According to the National Statistics Office, residential building construction exhibited an

increase of 32.6% amounting to Php28.2 billion from Php21.3 billion during the same quarter of

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2010 and most of these constructions are located in the National Capital Region. The bulk of
these constructions comprise the single type of units followed by apartments as shown in Table
1B.
Table 2:
Residential Building Construction in the Philippines (2011)
Source of data: National Statistics Office, 2010
Table 2 shows that residential constructions are greater than non-residential and other
construction activities. This means that Filipinos are still acquiring properties despite the
economic slowdown that the country is experiencing as an effect of the economic decline in the
United States. This is due to the Filipinos perception of a house as a necessity as his culture
dictates and the preference of most Filipinos to own a house where they would raise their
families.
1.5.4. Economic Forces
Economic environment refers to the nature of the economic system of the country, its structural
anatomy, the economic policies of the government, the organization of the capital market, the
nature of factor endowment, business cycles, the socio-economic infrastructure, etc.
A strategist visualizes the external factors affecting the business, anticipates prospective market
situations and targets maximum profits at minimal expenditures.

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a. Wealth & Incomes Unaffected During Global Crisis
Despite the global financial crisis experienced worldwide, the average family income of Filipino
household is increasing at a steady pace. Table 3 presents data in different occupational groups’
wages.
The steady increase of family income is accounted for by the economic measures taken by the
government that enabled the country to survive the crisis. Families even posted a higher
savings rate in 2009 compared to 2006. The local economy did not really feel the effect of the
said crisis (except for the import and export industry) because buyers’ consumption locally
sustained their operations. Money in the economy is in consumers’ savings accounts. Targeting
these capable individuals to consider buying a unit is an opportunity for DMCI Homes.
Table 3:
Ranges of Ave. Monthly Rates and Wage Differentials by Major Occupation Groups
Source of data : Bureau of Labor and Employment Statistics, 2010 Occupational Wages Survey
b. Growing OFW Remittance
Since 2010, Overseas Filipino Workers remittances continue to flow inside the country despite
the political instability of countries where OFWs are located. Threats of another European
economy crumbling down are just around the corner; however, the remittances that they bring to
the country continue to increase (Figure 7). OFWs have been widely acknowledged as a major

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contributor to the Philippine economy. Remittances not only fuel consumer spending but also
investments in real estate. OFWs and their families in the country are buying real estate not only
for their residence but also as an investment.
The growing remittances from abroad are a key for the government to sustain the growth that
began in mid 2010. This can be an advantage for a company such as DMCI Homes since their
units can be deemed as an investment for migrant workers and their families staying in the
Philippines. Remittances of Overseas Filipino Workers have grown remarkably in the past years.
According to Bangko Sentral ng Pilipinas (BSP), OFW remittances went up by 8.2% to a new
record level of $18.76 billion in 2010 from $17.35 billion in 2009, exceeding the revised 8%
growth forecast set by the BSP for 2010. A significant portion of remittances is spent on housing.
Figure 7: Changing Trend of OFW Remittances in Dollars
c. Increasing Disposable Income
According to the National Statistical Coordination Board (NSCB), property developers built
thousands of new residential units starting 2010 because of the increasing demand from the
new middle class—the Filipinos working abroad, business process outsourcing professionals,
and the college-educated new entrants to the labor force.
Disposable income is the amount of money that households have available for spending and
saving after income taxes have been accounted for. Disposable personal income is often
monitors as one of the many key economic indicators used to gauge the overall state of the
economy.

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Table 4:
Increase in the Disposable Income of Filipinos from 2007-2010
Data from Euromonitor International, a world leader in strategy research for consumer markets
showed a steady increase in the annual disposable income of the Philippines from 2007 to 2011
(Table 4). This signifies a lift on the purchasing power of Filipinos to buy goods and services.
This excess money in the circulation can be headed toward investing in condominium units.
Even income growth for each province is increasing like the revenues in Metro Manila.
d. Emergence of Regional Growth Centers
Growth in other parts of the country is fast. Metro Manila is not the only area in the Philippines
today where business is doing very well. Areas like Cebu and Davao are rapidly catching up.
Aside from the two cities mentioned above, each province of the country also has a growth
center where products and services of the province are traded. Countryside development is
slowly taking place and improvements would mean more demand for specific goods and
services.
Construction projects in these areas are steadily catching up with the developments made in
Metro Manila. This is especially true in CALABARZON to where industries were transferred from
Metro Manila for a larger operational space.

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CHAPTER 2
INDUSTRY AND COMPETITOR ANALYSIS
Ayala Land, Megaworld and Vista Land have the largest market share of the residential industry.
Each of these companies leads in a different market segment. Ayala’s Ayala Land Premier and
Alveo Land dominates the high rise industry of the luxury segment and also has ventures in the
middle income segment through Avida Land and is venturing into the low cost housing via its
Amaia Land. Megaworld is the leader of the middle
Figure 8: Revenues of Selected Real Estate Developers in Residential Developments
2.1. PORTER'S FIVE FORCES OF COMPETITION
The subject under study, DMCI Homes, ranks fifth among the players in the real estate industry.
Concepts from Porter’s five forces of competition were used to analyze five interacting factors
critical for an industry to become and remain competitive. The five forces analysis is used to
understand the dynamics of competition within the industry to which the subject under study
belongs. Figure 9 presents the framework containing the key factors from Porter’s Competitive
Analysis, which impacts DMCI Homes.

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Figure 9: Framework of Porter’s Five Forces of Competition

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2.1.1. Threat of New Entrants --- WEAK
Identifying the possibility and probability of new entrants in the industry is critical because they
can intrude in market share and profitability of existing competitors. New entrants in the
residential real estate industry are relatively weak in terms of competing against the industry
giants. Admittedly in recent times, there are a lot of voluminous players in the residential real
estate industry and only a few of them make a name for themselves and leave an indelible mark
among the buyers.
a. Entry Barrier #1 -- Diseconomies of Scale
Economies of scale give big players in the residential real estate industry access to a larger
market by allowing them to operate with greater geographical reach. As for the new entrants in
the industry, however, size does have its limits. After a point, an increase in output actually
causes an increase in production costs. And this will yield to a much higher spending without
assurance of real-time growth in terms of market penetration.
b. Entry Barrier #2 -- Weak Brand Identity and Differentiation
Brand identity is fundamental to consumer recognition and symbolizes the brand’s difference
from its competitors. However, companies in the residential real estate industry compete in
terms of project theme and designs. The Bali Oasis of Filinvest Land, for example, employed
Indonesian architectural design and thus attracted a lot of potential clients who ended up buying
units in their newly constructed project. For new entrants to get a strong hold of a position, they
need to have innovative concept designs that would trounce the huge players in the industry.
c. Entry Barrier #3 -- High Capital Requirements
Sizeable capital is needed to enter the industry. Large capital is needed for the construction of
high rise residential projects and purchase of land. Huge players in the industry such as
Megaworld has already allotted Php25 billion for its capital and development expenditures in
2011, inclusive of residential, office and retail space. Robinsons Land on the other hand has
announced Php13.5 billion as capital expenditure for year 2011 to expand its property portfolio
which includes the development of shopping malls and other office buildings, the construction of

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residential condos, as well as the construction of new hotels and acquisition of land. Avida Land
of Ayala which caters the ‘affordable’ market has a Php15.18 billion capital expenditure
allocated for residential development alone.
DMCI Homes, the subject under study, has Php8 billion to fund all its projects and ventures for
2011. On the average, an entrant must have a capital of Php15042 billion to pose a significant
threat to aforementioned companies.
d. Entry Barrier #4 -- High Switching Costs
Companies usually employ strategies that incur some sort of high cost in order to dissuade
customers from switching to the competitors. For example, many players in the industry charge
very high cancellation fees for canceling a contract. They usually do this in hopes that the costs
involved with switching to a competitor will be high enough to prevent their customers from
doing so. Thus, it makes new entrants in the industry weak to battle it out with competitors of
established names and reputation.
e. Entry Barrier #5 -- Insubstantial Access to Distribution
New entrants have to establish their distribution in a market with established distribution
channels to secure a space for themselves. However, in the residential real estate industry,
huge companies have already gained huge networks and channels of distribution and this
makes it hard for recent entrants to outplay the industry giants.
f. Entry Barrier #6 -- Low Land Availability
Every business in the industry is dependent, in large part, on the availability of large tracts of
land suitable for development. As the new entrant and its competitors attempt to locate sites for
development, it may become more difficult to locate parcels of suitable size in locations and at
prices acceptable to the standards of the recent entrants.
g. Entry Barrier #7 -- Non-Absolute Cost Advantages
Entities with absolute advantages can produce something using a smaller number of inputs than
another party producing the same product. As such, absolute advantage can reduce costs and

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boost profits. But as for the new entrants, it is quite impossible to be competitive in this segment
because a huge amount of capital is needed to allocate for the funding of raw materials and
construction contractors for a new project; adding to that would be costs attributable to key
persons that need to be hired for the completion of a project.
h. Entry Barrier #8 -- Government Policies
Possible zoning changes, building permits, traffic studies, and the environmental impacts must
be keenly studied first by a new entrant before constructing a project. Eton Properties, a new
entrant in the industry, had one of its construction projects suspended when a lack of building
permit was discovered after the collapse of the building. Lack of sufficient documents leads to
cancellation of construction licenses by the Housing and Land Regulatory Board. Therefore, it is
expected of new entrants to abide by the provisions of the building code and the requirements
deemed necessary by the Philippine government to construct new projects.
i. Entry Barrier #9 -- Expected Retaliation
Competition in the industry has been high. Players are making huge plans on how to outplay
each other. Each has its own strategies for retaliation. The industry has players that easily
retaliate and quickly respond to whatever new gimmicks competitors create to gain advantage
over the others. This makes it hard for new entrants to enter because they cannot easily play in
a game wherein competitors have quick responses to overturn the scenario. The industry has
been much like a game of chess where players need to quickly think to outsmart, outperform
and ultimately dethrone the giant players from their already established positions in the industry.
2.1.2. Bargaining Power of Buyers --- WEAK
The bargaining power of buyers is relatively weak in the high-rise residential real estate industry
in the Philippines. It is because buyers have less power when they are fragmented, and when
companies produce a significant portion of homes, or if switching costs are high. These factors,
which are all present in the status quo, greatly affect the capacity of buyers to bargain for prices
at their advantage.
a. Power #1 – Buyer’s Price Sensitivity and Low Volume Purchase

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Real estate is a high ticket purchase and buyers usually can only afford to buy one home at a
time. Buyer’s lack of ability to buy in bulk prevents buyers from buying significantly off the
developer’s standard price. Individuals cannot purchase real estate properties in bulk due to the
high capitalization required in acquiring such.
Units sold by the DMCI Homes as well as its competitors amounts to, on an average basis,
Php2 million. And this amount is materially significant and high which makes buyers unable to
content the price specified by the developers.
b. Power #2 – High Buyer Switching Costs Relative to Firm Switching Costs
Since homes are such a monumental investment, the cost for a buyer to switch homes is
normally prohibitive. Because there are many buyers competing for houses from a lot of
developers, new home prices are high and buyers have very little room for negotiation unless
they choose to purchase existing homes.
c. Power #3 – Purchase is Very Important to Buyers
Homes are considered basic necessities by everyone. To prove, huge amounts of remittances
by the OFWs go to real estate spending aside from other basic personal necessities. And since
there is a high demand for homes, prices rise in the market. And if prices are high, this prevents
the consumer to bargain better at his/her advantage.
The real estate business has been booming for the last two years after a recovery from the
subprime crisis that hit the United States. People get to have money for spending for their basic
needs. And usually, homers are one of everyone’s priorities.
2.1.3. Threat of Substitute Products --- STRONG
There are only two substitutes available for buyers to choose from. One is renting a property
and the other is owning a residential house that is constructed from the ground up by the owner.
The former is sometimes the option while the latter has always been a formidable choice. This
makes the threat of substitutes against high-rise residential buildings strong.
a. Threat #1 – Buyer’s Propensity to Substitute

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Owning a stable home is one of the priorities of every OFW abroad. OFWs are a new segment
of buyers and are more inclined to buying the alternatives of luxury living. Also, those who
belong to the low-income segment are the ones more inclined to renting rather than owning,
b. Threat #2 – Relative Price Performance of Substitutes
A residential house constructed from the ground up typically amounts to more or less Php3
million which is not far to the amount of owning up a unit in a high-rise residential condominium.
Due to proximity in price range, buyers tend to settle more for a residential-type of house in
subdivisions and villages rather than those high-rise residential units. They find it more fulfilling
as a long term investment and they get to design their own homes specified to how they want it
to look like.
Another major substitute is properties for rent. In the near term, renting is cheaper compared to
buying a new home. Unlike buying a home which requires 10%-30% down payment and
subsequent amortizations, there is a smaller cash outlay in renting a house.
c. Threat #3 – Perceived Level of Product Differentiation
For a buyer, owning a high-rise residential unit is no less different from owning a home in a
subdivision or village. However, what makes high-rise residential condos different from a village
or a subdivision is its luxurious-type of amenities and the quality security that it offers. High-rise
residential condos are usually high-fenced and have only two gateways. On the other hand,
residential subdivisions are quite prone to burglary because of its huge scope of area that are
often overlooked by security personnel manning it. Also, subdivisions or villages are often
sometimes not high-fenced. There is not much difference between owning a house in a
subdivision or a village and choosing to live in a high-rise residential condo unit. They offer the
same amenities but are somehow different in terms of quality and the way developers package
their project.
2.1.4. Bargaining Power of Suppliers --- MODERATE
Suppliers are powerful if there are only a few suppliers, a large number of purchasers, and
significant costs of switching suppliers. The cost of items bought from suppliers e.g. raw

25
materials, components, can have a significant impact on a company’s profitability. If suppliers
have high bargaining power over a company, then in theory the company’s industry is less
attractive. However, the bargaining power of suppliers in the high-rise residential real estate
industry is moderate in the Philippine setting.
a. Power #1 – High Number of Suppliers
Major suppliers of the industry are the construction contractors and raw material suppliers.
Major raw materials in building construction are cement and steel. Raw material suppliers,
construction contractors and other suppliers consume more than 50% of the industry’s revenues.
b. Power #2 – Cost of Inputs Relative to Selling Price of the Product
Every homebuilder requires a large number of inputs beyond land including wood, concrete,
plastic, gravel, oil, gasoline, steel and other raw materials; all necessary components in
homebuilding. Prices for some of these materials are non-negotiable. For instance, the price of
gasoline and oil, which affect all companies equally and do not lead to a strategic advantage for
suppliers. However, the fragmented nature of the supplier market in all other construction
supplier to homebuilding companies severely limits supplier power.
c. Power #3 – Lack of Substitute Inputs
Prices of raw materials such as steel and cement are correlated with the world prices. Local
cement and steel prices are being monitored but not being controlled by the Department of
Trade and Industry. Current raw material prices have stabilized. Competition in the raw material
and construction services industry is stiff due to the numerous raw material providers and
construction contractors. In terms of substitutes, there are no substitutes for major raw materials
and construction services. Overall, bargaining power of suppliers is moderate due to the
numerous suppliers tempered by the lack of substitute to these key inputs.
2.1.5. Rivalry among Competitors --- STRONG
The large amount of initial capital required to build a unit leaves the entire industry to large
companies that have sufficient capital and are willing to risk the required amount of money.
This factor makes competition in the industry tough. Thus, the degree of rivalry among
competitors in the high-rise resident real estate industry is deemed strong.

26
a. Threat #1 -- High Number of Players in the Industry
According to HLURB, in the year 2010, there were already 111 condominium housing projects
registered with the agency. 83 of these condominium projects are being built in the Philippines.
The residential real estate industry is composed of numerous small and large players. The 8
major players in the industry represent only 13% of the market share. There are numerous
market players all over the country with most of the major players servicing key Philippine cities
like Metro Manila. The major players are Megaworld, Ayala Land, SMDC, Vista Land, Filinvest
Land, Rockwell Land, Robinsons Land and DMCI Homes, not to mention small scale
construction companies who agree to build medium rise buildings that can function both as a
condominium and hotel.
b. Threat #2 -- High Exit Barriers
Residential condominium industry is capital intensive. Investments have to be made in land

acquisition and building construction. For instance, Ayala Land has spent Php 7.7 B in 2008 and
8.7 B in 2009 to develop its residential real estate businesses (Ayala Land Premier, Alveo Land
and Avida Land). Exiting the industry will be costly given the large amount of fixed asset
investment. The huge players in the industry cannot just forsake and let go the huge amount
they have invested as capital for their ongoing projects.
c. Threat #3 -- Low Degree of Differentiation
In industries where the products are commodities, there is greater competition present
compared to industries where competitors can differentiate their products, resulting to less
rivalry. In the high-rise real estate residential industry most construction projects rely on almost
the same structural design. Most players also offer all their units bare leaving the buyers to
make their own improvement with each unit. This provides unit owners the freedom to design
their home according to their preference. Hence, there is a low degree of differentiation among
new and implemented projects of every developer.

27
d. Threat #4 -- Strategic Objectives
When competitors are pursuing aggressive growth strategies, rivalry is more intense. DMCI
Homes, for example, has employed the idea of designing vertical communities that are naturally
lighted and ventilated, letting air circulate freely. As a result, residents get a resort-like feeling,
especially with the sky garden and sky patio. The giants in the high-rise residential real estate
industry had strategized to prepare for Real Estate Investment Trust (REIT) listing and those
who are subsidiaries of a holdings company leverages synergies with other business interests
of their parent company.
2.2. COMPETITIVE PROFILE MATRIX
The following are the players who cater to the middle-income market segment of property
buyers with their revenues from real estate sales in 2009 and 2010:
Figure 10: Residential Revenues of Developers Catering to the Middle-Income Segment
Among the market players enumerated in Figure 10, the competitors to be bench-marked
against DMCI Homes were limited down to three - Avida Land, Megaworld and Robinsons Land.
These three real estate developers cater to the same market segment and targets the same

28
market of buyers as DMCI Homes. They represent the three topmost players in the middle-
income segment of high rise residential real estate industry.
In the succeeding part a profile of each of DMCI Homes' key competitors, as identified by the
researchers, is provided to bench-mark the subject under study against its rivals in the industry.
2.2.1. Key Competitors of DMCI Homes
The following are the profiles of the top three (3) competitors of DMCI Homes. They were
chosen on the basis that they cater to the same segment of buyers as DMCI Homes.
a. Competitor #1 - Avida Land
Since Ayala Land Inc. started expanding the reach of their businesses to serve a much broader
segment of the population: from the very rich, to the fast and rising achievers, to the
hardworking middle class who form the backbone of the nation, Ayala Land, Inc. established
Laguna Properties Holdings Inc. (LPHI) in 1991 to provide the housing needs of employees and
junior executives in the Ayala Land-developed industrial estate Laguna Technopark. Since then,
LPHI has developed 27 projects from 13 different locations.
In 2006, the name Laguna Properties Holdings, Inc. was changed to Avida Land Corporation.
This new name is more in tune with Ayala Land's commitment to transform the lives of the
hardworking middle class.
Combined real estate and hotel revenues in 2010 was P3,008.1 million against P2,491.4 billion
in 2009. RLC’s Residential Division accounted for 32% of the Company’s total revenues for that
year. Its realized revenues increased by 35% to P997 million due to increase in completion level
of existing projects.
b. Competitor #2 - Megaworld
Megaworld was founded by Andrew Tan and incorporated under Philippine law on August
24,1989 under the name of Megaworld Properties & Holdings, Inc. Megaworld was primarily
organized to engage in real estate development, leasing and marketing.

29
From 1989 to 1996, it garnered a reputation for building high-end residential condominiums and
office buildings on a stand-alone basis throughout Metro Manila. In 1996, it shifted its focus to
providing office buildings to support BPO businesses when it began development of the
Eastwood City community township.
Since its incorporation in 1989, the Company and its affiliates have launched approximately 222
residential buildings, office buildings and hotels consisting an aggregate of more than 5.7million
square meters.
Megaworld's real estate portfolio includes residential condominium units, subdivision lots and
townhouses, as well as office projects and retail space. Its consolidated revenues for the year
2010 were P20,541.8 million. Real estate sales of residential developments accounted for 64%
of the company's consolidated revenues in 2010.
c. Competitor #3 - Robinsons Land
Robinsons Land, one of the Philippines' leading real estate companies, is involved in the
development and operation of shopping malls and hotels, and is also one of the country's most
reputable developers of mixed-use properties, such as office buildings, residential
condominiums, as well as land and residential housing developments, including socialized
housing projects located in key cities and other urban areas nationwide.
It was incorporated on June 4, 1980 to serve as the real estate arm of JG Summit Holdings, Inc.,
one of the country's largest conglomerates.
In 2010 Robinsons Land posted a net income of P3.59 billion in its fiscal year ending September
2010, higher by 10 percent than the previous period. The higher revenues are particularly from
its hotel operations. Revenues from the residential division fell 26 percent to P3.22 billion due to
lower construction completion.
2.2.2. Critical Success Factors
The researchers have identified eight (8) critical success factors (CSF) for a developer to thrive
and survive in the residential real estate industry. The researchers have taken into consideration

30
more than 20 factors and have narrowed it down to eight which is the maximum requirement for
constructing a competitive profile matrix.
These factors are considered to be of primary concern both to the developer and its target
buyers. In this study, particular weights were assigned to ascertain the importance of each in
contributing to the success of the company.
a. CSF #1 - Adequacy in Capitalization
The residential real estate industry is capital intensive. To put up a project needs more than a
million in capitalization to finance all expenses that are forecasted to be incurred.
Thus, this factor was given a weight of 0.25.
b. CSF #2 - Competitiveness in Pricing
One of the aspects at which a buyer looks into is how a unit is priced reasonably. Compared on
the basis of price are newly constructed projects of DMCI Homes and its rivals that are in
proximity to one another and at similar states of completion.
This was given 0.15 weight by the researchers because of the established price sensitivity of
buyers and their willingness to buy a product that will give them the greatest value for their
money.
c. CSF #3 - Accessibility of Site Locations
Another aspect that buyers consider is the proximity of their home to commercial areas and
educational institutions. Especially for urban dwellers, it is of importance that they get to access
anything they want in a fast and easy way. Hence, this aspect was also assigned a weight of
0.15.
d. CSF#4 - Overall Project Quality
Overall project quality means the quality of amenities and good property design that the
developer sells to buyers. The overall project quality gives an indelible impression to buyers and

31
makes them think if they would be willing to shell out a huge amount of money to buy that one
unit in that particular condominium.
This got a 0.15 weight because amenities add value to what is being sold by the developer.
e. CSF #5 - Scope of Distribution Network
An adequate number of internal and external sales personnel is necessary to move inventories.
Wide reach of distribution should extend to both local and international buyers.
This was given a weight of 0.10 because the company should have adequate number of sales
people to build relationships with prospects and turn them to potential buyers to generate
revenues.
f. CSF #6 - Track Record of Developer
Another factor that customers look upon is the track record of a developer. Buyers tend to
choose developers who have a name and a reputation over small scale developers who are not
known partly due to just a few developments.
A 0.10 weight was given to this factor because the industry is such a competitive arena. It is a
must to have an established name and reputation.
g. CSF#7 - Extent of Marketing Capability
A company must advertise its developments through many forms of media to strongly penetrate
its it market. Through the media, the developments are exposed to potential buyers and creates
an impact in the buyers' minds.
It was given a 0.05 rating because, for companies to compete well, they have to allocate a
budget for marketing activities such as product promotion to increase brand awareness.
h. CSF #8 - Market Share/Financial Position
A strong financial position is important to continue the operation of a business. It must be able to
generate income and pay off its liabilities on time. Because of this it was given a weight of 0.05.

32
Competitive Profile Matrix (CPM) Ratings
From the identified critical success factors in the industry, DMCI and its key competitors were
assigned the following ratings (from 1-5, with 1 as the highest). Table 5 shows the Competitive
Profile Matrix of DMCI Homes and its competitors based on the group’s rating.
Table 5;
Competitive Profile Matrix of DMCI Homes and its Competitors
Robinsons
CRITICAL DMCI Homes Megaworld Avida Land
Land
SUCCESS Weight
FACTORS Rating Score Rating Score Rating Score Rating Score
Adequacy in
1 0.25 1 0.25 4 1.00 3 0.75 3 0.75
Capitalization
Competitiveness
2 0.15 4 0.60 3 0.45 3 0.45 2 0.30
in Pricing
Accessibility of
3 0.15 1 0.15 4 0.60 4 0.60 3 0.45
Site Locations
Overall Project
4 0.15 3 0.45 4 0.60 3 0.45 2 0.30
Quality
Scope of
5 Distribution 0.10 3 0.30 3 0.30 3 0.30 4. 0.40
Network
Track Record of
6 0.10 3 0.30 3 0.30 3 0.30 4 0.40
Developer
Extent of
7 Marketing 0.05 3 0.15 3 0.15 4 0.20 2 0.10
Capability
Market Share or
8 Financial 0.05 2 0.10 4 0.20 3 0.15 2 0.10
Position
TOTAL 1.00 2.30 3.60 3.20 2.80

33
Based on the CSF ratings, Megaworld has the competitive advantage over DMCI and its other
key competitors. Its competitive advantage has allowed Megaworld to be the leader in market
share in the middle income segment.
Megaworld’s strength over the rest of the companies is in the area of capitalization, accessibility
of site location, overall project quality and financial position. Megaworld also has modest ratings
in terms of price competitiveness, scope of distribution network, track record of developer and
marketing capability.
2.3. EXTERNAL FACTOR EVALUATION MATRIX
External Factor Evaluation (EFE) matrix method is a strategic-management tool often used for
assessment of current business conditions. The EFE matrix is a good tool to visualize and
prioritize the opportunities and threats that a business is facing.
External factors assessed in the EFE matrix are the ones that are subjected to the will of social,
economic, political, legal, and other external forces.
2.3.1. Opportunities
a. Record liquidity, low mortgage rates
Rating 2 - Shaving one or two percentage points off of the mortgage rate can drastically reduce
the total amount of interest expense one spends on a home. DMCI Homes can take advantage
of this trend to attract more potential buyers at the segment of the market that they are targeting
because the lower the mortgage rate in the market, the lower a buyer pays for down payment
and the bigger the equity cushion.
b. Introduction of Real Estate Investment Trust (REITs) in the Philippine Market
Rating 1 - REIT has the characteristics of both a fixed income and a variable income instrument.
This gives the investor an advantage, especially those who are not so aggressive but are also
not so conservative. If DMCI Homes consider this, it also has a downside effect because a
decreased demand may have a negative effect on the REIT just like in stocks.

34
c. Promotion of the Philippines as a retirement haven for foreigners by the PRA
Rating 3 –The PRA is mandated to attract foreign nationals and former Filipino citizens to invest,
reside and retire in the Philippines by providing them the best quality of life in the most attractive
package. This particular market might be another potential add-up to the market that DMCI
Homes may cater to in the near future.
d. Growing population with favorable demographics and a large base of more financially
empowered young professionals
Rating 3 – Young professionals choose downtowns as a place of residence. Central business

districts have also been impacted by contributions to the labor force of entrepreneurial activity,
and the purchasing preferences of the young professionals. This, for DMCI Homes, can be
another opportunity market to tap. DMCI Homes can have young professionals as one of their
new key consumer segments.
e. Rising demand for condominiums and in-city developments; trend towards smaller unit
sizes
Rating 4 - Today, more home buyers are seeking the conveniences of Manila condo living and
moving from single detached family dwellings towards the comforts of condominium ownership.
The rising demand is due to the fact that owning a condominium unit is convenient and an
inexpensive housing option. For a starter, expenses on maintenance are lower.
Aside from cheaper running cost, a condominium homeowner is entitled to use all amenities and
facilities in the complex such as fitness gym, swimming pools, basketball courts, tennis courts,
function rooms, children’s center and others. These amenities and facilities are included in the
monthly fees.
Utilization of the rising trend in demand among home buyers would be a key factor in
maintaining a competitive position in the market. If DMCI Homes would utilize the opportunity to
its advantage, it will definitely generate income for the company.

35
f. Renewed interest in property as a long-term investment for yield/inheritance
Rating 2 - Most adults agree that buying a home is the best long-term investment a person can
make. A residential property provides an asset-backed income stream which, despite being
subject to periodical peaks and troughs like anything else, still incurs growth per annum.
And since there is renewed interest, DMCI Homes can likely realize strong capital growth. And
that could be a good point at which to enter the market.
g. Wealth and Incomes are unaffected during recent crisis
Rating 3 - Since the recent crisis have left no impact among home buyers, people in the country
still have that inclination towards spending their money. And the basic things for which they
would spend their money are those which are necessary. A home is a basic commodity. This
opportunity for DMCI Homes would translate definitely to increase in sales since people have
the strong propensity to spend.
h. Income boost from OFW remittance flows
Rating 4 - Strong inflows from overseas Filipino worker remittances continue to boost the real
estate sector, as more developers expand development projects outside Metro Manila. When
remittances became more resilient, DMCI Homes continued to hire more overseas agents and
launch road shows in foreign countries like Japan to entice international clients to choose DMCI
Homes. DMCI has also launched a website specifically for the overseas market.
DMCI Homes can utilize this opportunity to widen the scope of their consumer segment from
middle income to the low cost ones.
i. Increasing disposable income with higher propensity to spend
Rating 4 - Since the marginal propensity to consume indicates that the household sector prefer
buying homes for additional long-term investment with their extra income, DMCI Homes can
take advantage of this opportunity to attract more buyers to their property developments that are
not even in key business districts.

36
j. Emergence of regional growth centers in provincial areas
Rating 3 - Davao is emerging as the center for tourism and recreation and real estate projects.
Its potential is due mainly to its location in the East Asian Growth Area. Cebu, on the other hand,
is now well-established as a high-tech manufacturing center, having one of the most successful
export processing zones. It is also known for its active tourism industry. The following provinces
can give DMCI Homes another market to tap outside of Metro Manila. It can be another target
place for potential buyers.
k. Philippines ranked 2nd worldwide for Business Processing Outsourcing market share;
industry employment to grow 25%
Rating 2 - With more than twice the supply in 2010,office stock across major business districts
inMetro Manila is expected to grow in 2011. There is a significant demand for BPO offices
shaping up in major Central Business Districts, notably in Bonifacio Global City. If DMCI Homes
will penetrate and establish sales offices in business districts it will definitely boost their income
besides that earned from their usual residential constructions.
2.3.2. Threats
a. Increasing intensity of competition among the industry's numerous players which may
squeeze profit margins
Rating 4 - Today's real estate professionals are changing the way they do business: offering
potential buyers the chance to view detailed listings online, using websites to gather leads on
potential customers, and using the internet to match buyers and sellers. DMCI Homes should be
at par with its key competitors in terms of e-commerce capability no matter what.
b. Heightened risk of flooding in key metropolitan areas in Manila which are deemed below
sea level
Rating 2 - None of DMCI Homes' developments were severely affected during the typhoon
"Ketsana". DMCI had the foresight to choose less flood prone areas and invest in a good
drainage system for all its developments.

37
c. Vulnerability to uncontrollable economic forces such as scares of terrorism attacks
Rating 2 - Uncontrollable economic setbacks due to terrorism scares affect investors in general.
And DMCI Homes is widely dependent on the market sentiment. It should be able to counter the
negative effect forces such as those.
Table 6:
DMCI Homes External Factor Evaluation
CHAPTER 3

38
INTERNAL ANALYSIS
3.1. SWOT ANALYSIS
Used was the SWOT analysis to identify DMCI Homes' internal strengths and weaknesses
relative to the external opportunities and threats that surround the residential real estate industry.
The following are the strengths, weaknesses, opportunities and threats identified after an
extensive environmental scanning:
Strengths
 Greater control of quality due to strong sustained synergy with other Consunji-owned
businesses, particularly with DM Consunji Inc. (construction)
 Cost advantages over key rivals; developments are priced lower than developments by
competitors
 Distinctive competence in architectural design concepts among its development projects;
quality amenities and other add-ups for leisure
 Strong financial condition; ample financial resources to grow and expand the business;
high equity/cash position
 Low property retention ratio to properties developed
Weaknesses
 Small geographic coverage; lack of adequate global distribution capability; weak dealer
networks
 Small capitalization in its developments compared to the large amount of capitalization
by the huge and strong players in the industry
 Behind rivals in e-commerce capability and R&D; subpar performance in advertising and
promotions

39
 Developments limited to residential-types alone; No relative experience in constructing
commercial and retail spaces and other real estate projects
 Developments not located in central business areas such as the Makati CBD and BGC-
CBD
Opportunities
 Record liquidity, low mortgage rates

 Promotion of the Philippines as a retirement haven for foreigners by the PRA
 Growing population with favorable demographics and a large base of more financially
empowered young professionals
 Rising demand for condominiums and in-city developments; trend towards smaller unit
sizes
 Renewed interest in property as a long-term investment for yield/inheritance
 Wealth and Incomes unaffected during recent crisis
 Income boost from OFW remittance flows
 Increasing disposable income with higher propensity to spend
 Emergence of regional growth centers in provincial areas
 Philippines ranked 2nd worldwide for BPO market share; Industry employment to grow
25%
Threats
 Increasing intensity of competition among the industry's numerous players which may
squeeze profit margins
 Heightened risk of flooding in key metropolitan areas in Manila which are deemed below
sea level
 Vulnerability to uncontrollable economic forces such as scares of terrorism attacks
Table 7:

40
SWOT Summary
STRENGTHS WEAKNESSES
 Greater control of quality due to strong  Small geographic coverage; lack of
sustained synergy with other Consunji- adequate global distribution capability;
owned businesses, particularly with DM weak dealer networks
Consunji Inc. (construction)  Small capitalization in its developments
 Cost advantages over key rivals; compared to large amount capitalization
developments are priced lower than of the huge and strong players in the
developments by competitors industry
 Distinctive competence in architectural  Behind rivals in e-commerce capability
design concepts among its development and R&D; subpar performance in
projects; quality amenities and other add- advertising and promotions
ups for leisure  Developments are limited to residential-
 Strong financial condition; ample types alone; No relative experience in
financial resources to grow and expand constructing commercial and retail
the business; high equity/cash position spaces and other real estate projects
 Low property retention ratio to properties  Developments are not located in central
developed business areas such as the Makati CBD
and BGC-CBD
OPPORTUNITIES THREATS
 Record liquidity, low mortgage rates  Increasing intensity of competition
 Promotion of the Philippines as a among the industry's numerous players
retirement haven for foreigners by the which may squeeze profit margins
PRA  Heightened risk of flooding in key
 Growing population with favorable metropolitan areas in Manila which are
demographics and a large base of deemed below sea level
more financially empowered young  Vulnerability to uncontrollable
professionals economic forces such as scares of
 Rising demand for condominiums and terrorism attacks
in-city developments; trend towards
smaller unit sizes
 Renewed interest in property as a long-
term investment for yield/inheritance
 Wealth and Incomes are unaffected
during recent crisis
 Income boost from OFW remittance
flows
 Increasing disposable income with
higher propensity to spend
 Emergence of regional growth centers
in provincial areas
 Philippines ranked 2nd worldwide for
BPO market share; Industry
employment to grow 25%

41
3.2. FINANCIAL STATEMENT ANALYSIS
A conduct of a financial statement analysis identifies the key financial strengths and
weaknesses of a particular company by properly establishing relationship between the items in
the balance sheet and the income statement.
With that in mind, the researchers were able to come up with an analysis of significant amounts
that were provided in the notes section of DMCI Holdings.
3.2.1. Vertical Analysis
The researchers have used vertical analysis to prepare and present common size statements.
Each item is stated as a percentage of a sum total of which that item is a part. Key financial
changes and trends were highlighted by the use of the common size statements.
a. Income Statements from 2007 to 2010

(please refer to the next page for the illustration)

42
43
Figure 11: Graphical Depiction of the Vertical Analysis
3.2.2. Horizontal Analysis
Horizontal analysis was employed to compare ratios or line items in DMCI Homes' income
statements over a certain period of time. This is to study the percentage changes in the
comparative income statements of DMCI Homes.

44
Table 9:
Comparative Income Statements from 2009 to 2010
2010 2009 Change in Percent

Peso Change
Revenue 7,704,893 6,963,108 741,785 9.63%
Other Income (expense) - net 177,748 83,018 94,730 53.29%
7,882,642 7,046,126 836,516 10.61%
Cost of sales and services 4,758,532 4,756,934 1,598 0.03%
General and administrative expense (before 1,355,238 1,172,899 182,339 13.45%
depreciation and amortization)
6,113,770 5,929,833 183,937 3.01%
EBITDA 1,768,871 1,116,293 652,578 36.89%
Other income (expenses)
Finance income (cost) 76,981 307,619 (230,638) (299.95%)
Depreciation and amortization (50,786) (51,111) 325 (0.64%)
Pretax income 1,795,066 1,372,801 422,265 23.52%
Provision for income tax 509,067 352,943 156,124 30.67%
Income before income from discontinued 1,285,999 1,019,858 266,141 20.70%
operations
Post-tax income from discontinued operations --- --- --- ---
1,285,999 1,019,858 266,141 20.70%

Net income attributable to non-controlling --- --- --- ---
interest
Net income attributable to equity holders 1,285,999 1,019,858 266,141 20.70%
The income statements reveal that net sales actually increased by 10.61% during 2010. And the
increase in the cost of sales and services which is at 0.03% did not significantly affect the net
income which posted an increase of 20.70%. Although, DMCI Homes has incurred an increase
in expenses of 13.45% it was still able to generate income because of its good performance.
3.2.3. Ratio Analysis
A quantitative analysis of information in DMCI Homes' financial statements was constructed

using the ratio analysis. These ratios were calculated from current year numbers and were then
compared to previous years of operation.

45
a. Liquidity Ratios
Liquidity Ratios are ratios that come off the balance sheet and hence measure the liquidity of
the company on a particular day. These ratios are important in measuring the ability of a
company to meet both its short term and long term obligations.
Current Ratio
This ratio is obtained by dividing the "Total Current Assets" of DMCI Homes by its "Total Current
Liabilities". The ratio is regarded as a test of liquidity for the company. It expresses the working
capital relationship of the current assets available to meet the company's current obligations.
Formula 2009 2010

Current Assets
Current Ratio = 1.90x 1.80x
Current Liabilities
This means that in 2009, DMCI Homes had a strong financial position in the market and that it
has sufficient liquid assets to maintain its operations. However, this strong financial condition
slightly decreased by 0.10 in 2010.
Quick Ratio
This ratio is obtained by dividing the "Total Quick Assets" of DMCI Homes by its "Total Current
Liabilities". The ratio is regarded as an acid test of liquidity for a company. It expresses the true
"working capital" relationship of its cash, accounts receivables, prepayments and notes
receivables available to meet the company's current obligations.
Formula 2009 2010

Quick Assets
Quick Ratio = 0.72x 0.69x
Current Liabilities
This means that DMCI Homes' quick ratio did not improve considerably in 2010. The two ratios
obtained are neither good nor acceptable. It is because a quick ratio of 0.90 or 1.00 is the
acceptable quick ratio in most industries.

46
From the result of the computation, the ratios say that DMCI Homes doesn't have the capacity
to pay its current liabilities if these were due immediately.
Debt to Equity Ratio
This ratio is obtained by dividing the "Total Liabilities" of DMCI Homes by its "Total Equity". The
ratio measures how the company is leveraging its debt against the capital employed by its
owners. If the liabilities exceed the net worth, the creditors have more stake than the
shareowners.
Formula 2009 2010

Total Liabilities
Quick Ratio = 1.54 1.85
Total Equity
This means that DMCI Homes has been aggressive in financing its growth with debt. Both 2009
and 2010 have a high debt to equity ratio. This implies that for every peso of DMCI Homes
owned by the shareholders, it owes 1.54 to creditors in 2009 and 1.85 in 2010.
b. Efficiency Ratios
Efficiency ratios are ratios that come off the balance sheet and the Income Statement. These
ratios are important in measuring the efficiency of a company in either turning their inventory,
sales, assets, and accounts receivables or payables. It also ties with the ability of a company to
meet both its short term and long term obligations. This is because if the creditors do not get
paid on time neither will the company settle accounts on time.
Inventory Turnover Ratio
The ratio is obtained by dividing the "Net Sales" of DMCI Homes by its "Total Inventory". The
ratio is regarded as a test of Efficiency and indicates the rapidity with which DMCI Homes is
able to move its merchandise.
Formula 2009 2010

COGS
Inventory Turnover Ratio = 68.15x 47.36
Inventory

47
This means that DMCI Homes has strong sales because it has a high inventory turnover ratio. It
only takes DMCI Homes one annual inventory turn before fully realizing the sales. And it
actually got better in 2010 because it was able to sell a substantial number of its property
developments.
Accounts Payable to Sales Ratio
This ratio is obtained by dividing the "Accounts Payables" of DMCI Homes by its "Net Sales".
This ratio indicates how much of the suppliers’ money the company uses to fund its sales. The
higher the ratio means that the company is using its suppliers as a source of cheap financing.
The working capital of such companies could be funded by their suppliers.
Formula 2009 2010

Accounts Payable
A/P to Sales Ratio = X100% 59.65% 79.33%
Net Sales
Short term creditors, financial managers & lenders to DMCI Homes might use these accounts
payable ratios as indicators of the company’s financial strength to make punctual payments on
its accounts payable & liabilities outstanding. And since DMCI Homes turned out to have high
ratios of accounts payable against its sales, the company has been efficient in converting its
sales into cash and promptly able to pay its suppliers.
c. Profitability Ratios
Profitability Ratios show how successful a company is in terms of generating returns or profits
on the Investment that it has made in the business. If a business is liquid and efficient it should
also be profitable.
Return on Sales
The return on sales of DMCI Homes determines its ability to withstand competition and adverse
conditions like rising costs, falling prices or declining sales in the future. The ratio measures the
percentage of profits earned per peso of sales and thus is a measure of efficiency of the
company.

48
Formula 2009 2010
Net Income
Profit Margin = X100% 14.47% 16.31%
Net Sales
Since DMCI Homes has quite a high rate of return on sales, it means that it has more sales
peso in providing profit for the company. The increase in the rate in 2010 is significant and
identifies the company as more successful than in 2009.
Return on Assets
The return on assets of DMCI Homes determines its ability to utilize the assets it employed
efficiently and effectively to earn a good return. The ratio measures the percentage of profits
earned per peso of asset and thus is a measure of efficiency of the company in generating
profits on its assets.
Formula 2009 2010

Net Income
Profit Margin = X100% 6.23% 6.24%
Total Assets
This tells us that DMCI Homes was able to generate income from the 6.23% of its invested
capital in 2009 and 6.24% in 2010. DMCI Homes was able to convert what it has invested into
net income for the company.
Return on Equity
The return on equity of DMCI Homes measures the ability of the management of the company
to generate adequate returns for the capital invested by the company owners. Generally a
return of 10% would be desirable to provide dividends to owners and have funds for future
growth of the company.
Formula 2009 2010

Net Income
Profit Margin = X100% 15.85% 17.79%
Total Equity

49
DMCI Homes has high return on equity ratios. This means that the management has been
efficient in utilizing its equity base and generating better returns for its investors.
3.3. INTERNAL FACTOR EVALUATION MATRIX
Internal Factor Evaluation (IFE) matrix is a strategic management tool for auditing or evaluating
major strengths and weaknesses in functional areas of a business. It evaluates how a company
is performing with regard to identified internal strengths and weaknesses of a company.
3.3.1. Strengths
a. Greater control of quality due to strong sustained synergy with other Consunji-owned
businesses, particularly with DM Consunji Inc. (construction)
Rating 4 - The company has an advantage of having been affiliated with a triple A construction
company. Raw materials and construction services are being sourced within DMCI Homes'
parent company which is the DMCI Holdings group. This allows the company to have greater
control over the quality of its projects.
b. Cost advantages over key rivals; developments are priced lower than developments by
competitors
Rating 3 - The synergy with DM Consunji, as stated in the first listed strength, has also allowed
DMCI Homes to control the cost of all its developments. This has given the company the ability
to price its developments lower compared to its competitors.
c. Distinctive competence in architectural design concepts among its development projects;

quality amenities and other add-ups for leisure
Rating 3 - DMCI Homes’ has a resort living theme in its projects. It projects DMCI developments
as a threat against the hustle and bustle of the typical urban jungle. Its developments have more
amenities and more land area allocated to common areas which buyers prefer more.
d. Strong financial condition; ample financial resources to grow and expand the business;
high equity/cash position

50
Rating 2 - DMCI Homes has a strong financial condition because of its proven strong sales
record. It has been able to utilize its capital investments and convert these into income. It is very
liquid and has the ability to pay off its short term liabilities on time.
e. Low property retention ratio to properties developed
Rating 2 - DMCI Homes has turned over 3,004 units to buyers as against to 3,428 units
constructed. Therefore, it has been able to turnover 87.63% of all its constructions to buyers. It
has 12.37% low property retention rate.
3.3.2. Weaknesses
a. Small geographic coverage; lack of adequate global distribution capability; weak dealer
networks
Rating 3 - DMCI Homes has a smaller distribution channel compared to its key competitors. Its
key competitors have more sales offices and partnerships with external brokers both within and
outside the country.
b. Small capitalization in its developments compared to large amount capitalization of the

huge and strong players in the industry
Rating 4 - Compared to its competitors, DMCI Homes has a relative small capitalization allotted
for real estate development. And because of this small capitalization, it is not considered to be
the primary source of income of DMCI Holdings.
c. Behind rivals in e-commerce capability and Research & Development; subpar

performance in advertising and promotions
Rating 2 - DMCI Homes has weak distribution channels. Commercials of DMCI Homes on
televisions, print ads and other forms of media are rare. They lag behind their competitors in
advertising their property developments. This is one of the reason why they are not the leader in
the market that they target.

51
d. Developments are limited to residential-types alone; No relative experience in
constructing commercial and retail spaces and other real estate projects
Rating 3 - Unlike its key competitors, DMCI is limited in developing only the residential market. It
has no experience in developing commercial and office real estate. Avida Land’s parent
company Ayala Land develops commercial real estate through Ayala Malls. Robinson’s and
Megaworld also has office and commercial developments. Their projects combine office and
commercial spaces or what Megaworld coins as township developments such as Eastwood City.
In contrast, DMCI has no experience in building office or commercial spaces.
e. Developments are not located in central business areas such as the Makati Central
Business Districts and Bonifacio Global City – Central Business District (BGC-CBD)
Rating 2 - Unlike its key competitors, DMCI Homes projects are not centrally located. This is a
strategic choice of the company. However, the downside of this is that the accessibility of the
location is a key decision factor of a buyer. Robinsons Land and Megaworld for instance locates
its developments within business areas such as the Bonifacio Global City. Furthermore, they
also construct office and commercial areas aside from residential ones.
Table 10:
SWOT/TOWS Matrix Rating

52
INTERNAL FACTOR IMPORTANCE RATING WEIGHTED
WEIGHT (1 TO 4) SCORE
STRENGTHS
Greater control of quality due to
strong sustained synergy with other
Consunji-owned businesses, 20% 4 0.80
particularly with DM Consunji Inc.
(construction)
Cost advantages over key rivals;
developments are priced lower than 10% 3 0.30
developments by competitors
Distinctive competence in
architectural design concepts among
its development projects; quality 10% 3 0.30
amenities and other add-ups for
leisure
Strong financial condition; ample
financial resources to grow and
5% 2 0.10
expand the business; high
equity/cash position
Low property retention ratio to
5% 2 0.10
properties developed
WEAKNESSES
Small geographic coverage; lack of
adequate global distribution 10% 3 0.30
capability; weak dealer networks
Small capitalization in its
developments compared to the large
15% 4 0.60
amount of capitalization by the huge
and strong players in the industry
Behind rivals in e-commerce
capability and R&D; subpar
5% 2 0.10
performance in advertising and
promotions
Developments are limited to
residential-types alone; No relative
experience in constructing 15% 3 0.45
commercial and retail spaces and
other real estate projects
Developments are not located in
central business areas such as the 5% 2 0.10
Makati CBD and BGC-CBD
TOTAL 100% 3.15

53
CHAPTER 4
STRATEGY FORMULATION, IMPLEMENTATION AND EVALUATION
4.1. STRATEGY FORMULATION
The information gathered from the CPM, IFE and EFE matrices will be used to formulate the
strategies for DMCI Homes. To formulate the strategies, the research employed the following
strategic tools: SWOT Matrix, SPACE Matrix, Internal-External Matrix, Grand Strategy Matrix
and Summary of Strategies.
To select the best strategy to be used by the DMCI Homes, the study employed Quality
Strategic Planning Matrix (QSPM). The strategy with the heaviest weight in QSPM are
discussed in the succeeding parts of this chapter.
4.1.1. SWOT/TOWS Matrix
The SWOT/TOWS Matrix assess both internal and external aspects of the business. The SWOT
framework is a tool for auditing an organization and its environment. These are as follows.
a. Product Development Strategies:
Product development strategies are those strategies of improving the current state of DMCI
Homes' primary products which are high-rise residential buildings.
 Utilize the company's cost advantage and low mortgage rates to give the consumers the
marginal propensity to save. (S2, O1)
 Prepare the company for an IPO in the near future. (S4, O2)
 Construct inexpensive high-rise residential buildings specifically catered to foreign
retirees according to their specific tastes and lifestyles. (S2, S3, O3)
 Construct and offer new units with new and innovative architectural design concepts
which are to be priced lower than the company's key competitors without incurring
excessive construction costs. (S1, S2, S3, O5)

54
 Erect a high-rise residential building that incurs a gradual speed of depreciation and
displays timeless architectural designs.(S3, O6)
 Make use of the company's reputation as a developer offering condominium units that
are relatively cheaper than those of key competitors to attract OFWs to invest in a unit.
(S2, S5, O8)
 Present DMCI Homes as a company constructing units for people who cannot afford to
pay high mortgages to take advantage of their project variety that are limited to
residential-types alone give buyers an image of the company that is family-gracious. (W4,
O1)
 Present the company's units as the cheapest and best substitutes for individuals looking
for a home that can also be considered as a long term investment for their family. (W4,
O6)
 Present DMCI Homes as the most affordable choice among the leading developers of
the country in its marketing strategies.(S2, T1)
 Adopt the latest technological advancement in the field of construction through DMCI
Constructions to reduce the effect of calamities like floods in the existing projects of the
company.(T2, S1)
 Strengthen R&D to modernize facilities according to consumers' preferences. (W3, T1)
 Strengthen risk management organization and processes through increased R&D
spending on quality security control. (W3, T3)
b. Market Penetration Strategies
Market penetration strategies are those strategies through which DMCI Homes would target a
specific segment of the middle-income class and from there build a strong base for their
company to establish a particular market that they would cater to.
 Penetrate the market of young professionals through dynamic, fast-paced and avant-
garde quality condominium units located at the heart of the metro at an affordable
price.(S2, S3, O4)

55
 Target the portion of the population that has a rising purchasing power due to continuous
increase in income.(S2, S5, O9)
 Take advantage of the areas that are being developed by the construction arm of DMCI
Holdings in aiming for places where the local economy is growing rapidly. (S1, O10)
 Take advantage of the foreign retirees that are seeking for units that will provide them
the convenience of a tranquil residential environment. (W5, O3)
 Make use of developing residential condominium units that would target the rapidly
growing population of financially empowered young professionals.(O4, W4)
 Encourage the market with buying power to purchase a condominium unit as an
investment for the future and make use of the existing wealth in the market by means of
an IPO or by borrowing from banks to increase the company's capitalization. (W2,
W4,O7)
 Target the families of OFWs and encourage them to purchase a unit for their family
member abroad as a form of lifetime investment.(W4,O8)
 Encourage the market with the capacity to buy condominium units as a form of long-term
investment.(W4, O9)
 Expand the market of the company to areas outside the metropolitan that are also
developing fast and cater to the demands for residential condominium units in these
areas where small numbers of developers exist since these areas are still considered as
emerging business districts.(W1, W4, W5, O10)
 Maximize the presence of the company in cities where there is limited space and make
use of the shift in trends toward smaller unit sizes.(W1, O5)
c. Integration Strategies
Integration strategies are strategies for DMCI Homes to look into the possibility of expanding
aside from the usual residential development that they have been doing for years. These
strategies might help in increasing the revenue contribution of DMCI Homes to its parent
company which is DMCI Holdings.

56
 Utilize the presence of adequate financial resources to take an aggressive position in
expanding the business through vertical integration.(S2, S4, O7)
 Construct residential and commercial units in one. Follow the trend of SMDC and Ayala
Land to increase revenues and create a new brand identity. (S4, O11)

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4.1.2. Strategic Position and Action Evaluation (SPACE) Matrix
The SPACE Matrix is a strategic management tool that focuses on strategy formulation
especially as related to the competitive position of an organization.
There are four possible sets of strategies in the SPACE matrix which can either be aggressive,
conservative, defensive or competitive. The inputs for the SPACE matrix were matched as
follows; internal factors to financial strength and competitive advantage while external factors to
industry strength and environmental stability.
a. Financial Strength (FS) Ratings: For FS, use +1 (worst) and +6 (best)
Although DMCI Homes shows a strong financial condition and contributes more than 10% to its
parent company in its gross revenues, it has been deemed not enough to contend with other
giants like Megaworld, which caters to the same market segment as DMCI Homes does. With
this, the researchers gave a rating of +5 for its above average financial position in the market.
b. Industry Strength (IS) Ratings: For IS, use +1 (worst) and +6 (best)
A +1 rating was given to the increasing intensity of competition in the industry because this
could cause DMCI Homes' market share to decrease. Increased competitive rivalry in the
industry makes it hard for DMCI Homes to fully penetrate the market of varying consumer
segments.
Heightened risk of flooding in key metropolitan areas in Manila was likewise given a rating of +1
because it will also hinder the growth of development companies particularly DMCI Homes.
Properties which are highly exposed to flood-prone areas have a low property retention rate to
property developed.
A +2 rating was given to vulnerability to uncontrollable economic forces because it will only
indirectly harm the industry or not as directly as the previous two will.

58
c. Environmental Stability (ES) Ratings: For ES, use -1 (best) and -6 (worst)
Low mortgage rates was rated a -1 by the researchers because it poses a great opportunity for
DMCI Homes to utilize its target market by enthusing them to invest in homes. The same reason
goes with the Filipinos' renewed interest in property as a long-term investment for
yield/inheritance.
A rating of -2 was given to the introduction of REITs in the Philippine market. This is because an
REIT IPO needs a huge capitalization and is also exposed to internal and external risks just like
any other investment.
The promotion of the Philippines as a retirement haven for foreign nationals garnered a rating of
-1 from the researchers because it is another opportunity for DMCI Homes to capitalize on. Also,
another market to penetrate would be that of the young professionals which was rated a -1. As
the market demand for condominiums rise, there would also be a demand for new projects. This
is another opportunity for DMCI Homes to give attention to, thus being given a rating of -1.
Wealth and incomes were not affected during the recent crisis and Filipinos are now more
inclined to spend. These two got a rating of -1 because it means that people have the money to
spend for necessities such as homes. The last two were rated -2 because they are specifically
not targeted by the DMCI Homes as of now but they pose huge opportunities to be explored.
d. Competitive Advantage (CA) Ratings: For CA, use -1 (best) and -6 (worst)
Because of the strong synergy of Consunji-owned businesses with each other, the factor was
rated a -2. However, there are only specific partnerships formed within the whole holdings
company. A rating of -2 was likewise given to the low property retention rate of DMCI Homes
because they have large pre-sales than their competitors.
Cost advantages from key rivals and distinctive competence from key competitors were both
rated a -1 because they are the strong competitive advantages of DMCI Homes over the other
numerous players in the real estate industry. A rating of -6 was given to the weak dealer
networks of DMCI Homes because these slow down their turnover ratio. Subpar performance in
advertising as well as in R&D was rated -6 because they already lagged way behind in this

59
aspect of competition. A -5 rating was given to the small capitalization of DMCI Homes The
small allotment of budget of DMCI Holdings to DMCI Homes makes it hard for the company to
compete with top caliber players in the real estate industry. The low capitalization prevents
DMCI Homes to pursue on expansionary activities. The lack of experience in also in building
office or commercial spaces was likewise given a -5 rating. A -4 rating was given to the factor of
developments not located in CBDs.
Table 12:
SPACE Matrix
Financial Strength (FS)
Strong financial condition; ample financial resources to grow and expand the business; high equity/cash 5
position 5
Total 5
Average
Industry Strength (IS)
Increasing intensity of competition among the industry's numerous players which may squeeze profit margins 1
Heightened risk of flooding in key metropolitan areas in Manila which are deemed below sea level 1
Vulnerability to uncontrollable economic forces such as scares of terrorism attacks 2
Total 4
Average 1.3
Environmental Stability (ES)
Record liquidity, low mortgage rates -1
Introduction of REITs in the Philippine Market -2
Promotion of the Philippines as a retirement haven for foreigners by the PRA -1
Growing population with favorable demographics and a large base of more financially empowered young -1
professionals -1
Rising demand for condominiums and in-city developments; trend towards smaller unit sizes -1
Renewed interest in property as a long-term investment for yield/inheritance -1
Wealth and Incomes unaffected during recent crisis -1
Increasing disposable income with higher propensity to spend -2
Emergence of regional growth centers in provincial areas -2
Philippines ranking 2nd worldwide for BPO market share; Industry employment to grow 25% -13
Total (1.3)
Average
Competitive Advantage (CA)
Greater control of quality due to strong sustained synergy with other Consunji-owned businesses, particularly
with DM Consunji Inc. (construction) -2
Cost advantages over key rivals; developments priced lower than developments by competitors -1
Distinctive competence in architectural design concepts among its development projects; quality amenities and
other add-ups for leisure -1
Low property retention ratio of properties developed -2
Small geographic coverage; lack of adequate global distribution capability; weak dealer networks -6
Small capitalization in its developments compared to large amount capitalization of the huge and strong players
in the industry -5
Behind rivals in e-commerce capability and R&D subpar performance in advertising and promotions -6
Developments limited to residential-types alone; No relative experience in constructing commercial and retail
spaces and other real estate projects -5
Developments not located in central business areas such as the Makati CBD and BGC-CBD -4
Total -32
Average (3.6)
CONCLUSION

60
X-Axis (CA Average + IS Average) = (2.3)
Y-Axis (ES Average + FS Average) = 3.7
Figure 12: SPACE Matrix Graph
Based on the strategic management tool, DMCI Homes belongs to the conservative quadrant.
This means that the conservative posture arises when DMCI Homes is financially strong but is

61
unlikely to make significant returns from the business. The strategy is to look for diversification
opportunities in more attractive competitive situations.
DMCI Homes should be more conservative in approach in undertaking strategies in order for
them to maintain or surpass their current position in the market. And since the directional vector
of DMCI Homes is located in the conservative quadrant (upper-left quadrant) of the SPACE
Matrix, this means that DMCI Homes should employ the strategies that would be found in
quadrant 2 of the Grand Strategy Matrix.
4.1.3. Grand Strategy Matrix
A grand strategy matrix is a very useful instrument in creating different and alternative strategies
for an organization. It has four quadrants; each quadrant contains different sets of strategies
and the entire firm along with its respective divisions must fall into one of the quadrants. The
matrix has two dimensions - competitive position and market growth.
a. Competitive Position
DMCI Homes has a weak competitive position brought about by its lack of adequate
capitalization for expansionary activities and limited distribution network and global presence.
Although market share is gradually increasing, it still lags behind its key competitors in terms of
capitalization and diversified product lines within the same industry such as construction of
commercial and retail spaces within constructed high-rise residential buildings.
Furthermore, DMCI Homes lacks presence in key business districts. They often construct
projects outside recognized business districts in Metro Manila like Bonifacio Global City and
Makati CBD. Because of this, they cannot easily penetrate the market of young professionals
who opted to reside within these metropolitan areas.
b. Market Growth Rate
The continued flow of OFW remittances and potential industry sales coming from the BPO
sector and the retirement market will spur growth. Furthermore, the young professionals market
will add up to that growth and continuous evidence for demand.

62
DMCI Homes, however, does not utilize this opportunity. Metro Manila is not the only growth
center in the country. There are a lot of cities in the provinces that are emerging as growth
centers as well. Cebu, for example, has a vibrant hotel industry due to the high influx of tourists.
And this particular city has been a target of foreign retirees because of its serene environment.
To add, OFWs do not reside in Manila alone. More than 50% of OFWs are from the provinces.
And since, most OFWs are from the provinces, DMCI Homes should penetrate the market of
areas that are yet to be infiltrated by its key rivals.
Figure 13: Grand Strategy Matrix

63
Since DMCI Homes falls in quadrant two (2), it means that, the company is a having weak
competitive situation but rapid market growth. Firms positioned in Quadrant II need to evaluate
their present approach to the marketplace seriously.
Although their industry is growing, they are unable to compete effectively, and they need to
determine why the firm's current approach is ineffectual and how the company can best change
to improve its competitiveness. Because Quadrant II firms are in a rapid market growth industry,
an intensive strategy (as opposed to integrative or diversification) is usually the first option that
should be considered.
4.1.4. Internal-External (IE) Matrix
The internal-external matrix is another strategic management tool used to analyze working
conditions and strategic position of a business. The IE matrix is based on an analysis of internal
and external business factors which are combined into one suggestive model.
If the company falls in cell 1,2 and 4, grow and build strategies are recommended. “Hold and
Maintain” strategies are advised for companies falling in cells 3, 5 and 7. Firms should consider
harvest or divest strategies if they fall in cells 6, 8 and 9.
Table 13:
IFE Table
TOTAL IFE RATING

3.15
Strong Average Weak
(3.0 to 4.0) (2.0 to 2.99) (1.0 to 1.99)
High (3.0
TOTAL EFE RATING I II III
to 4.0)
3.25
Medium (2.0
IV V VI
to 2.99)
Low
VII VIII IX
(1.0 to 1.99)

64
Based on the IE matrix, DMCI Homes falls into the first cell. Grow and build are the strategies
recommended for companies which fall in that particular cell. This means intensive and
aggressive tactical strategies. The strategies should focus on market penetration, market
development, and product development. From the operational perspective, a backward
integration, forward integration, and horizontal integration should also be considered.
4.1.5. Summary of Strategies
The various recommended strategies of the SPACE, IE and Grand matrices are tallied to
determine the most common strategy options available to the firm.
Table 14:
Strategy Options
STRATEGY OPTIONS SPACE IE GRAND TOTAL
Forward Integration X 1
Backward Integration X 1
Horizontal Integration X X X 3
Market Penetration X X X 3
Market Development X X X 3
Product Development X X X 3
Related Diversification X 1
Conglomerate Diversification 0
Joint Venture 0
Retrenchment 0
Divestiture X 1
Liquidation X 1

65
Among the strategy options, horizontal integration, market penetration and development and
product development are consistently recommended by the SPACE, IE and GRAND matrices.
4.1.6. Quantitative Strategic Planning Matrix (QSPM)
A QSPM is a high-level strategic management approach for evaluating possible strategies. It

provides an analytical method for comparing feasible alternative actions. The approach of
QSPM attempts to objectively select the best strategy using inputs from other management
techniques and some easy computations.
The researchers have narrowed down the strategies to be evaluated to three - product
development, market penetration and integration strategy. This is because these are the
primary strategies that have been identified in the TOWS matrix analysis and have been further
recommended by the succeeding strategies employed by the researchers.
Through the QSPM, the researchers were able to identify what particular strategy should be
given attention and be implemented and evaluated in the next part of this chapter.
Table 15:
DMCI’s QSP Matrix
Key Factors W Product Market Integration

Development Penetration Strategy
AS TAS AS TAS AS TAS
Strengths
Greater control of quality due to 0.20 4 0.80 2 0.40 4 0.80
strong sustained synergy with
other Consunji-owned businesses,
particularly with DM Consunji Inc.
(construction)
Cost advantages over key rivals; 0.10 4 0.40 4 0.40 4 0.40
developments priced lower than
developments by competitors
Distinctive competence in 0.10 4 0.40 4 0.40 4 0.40
architectural design concepts
among its development projects;
quality amenities and other add-
ups for leisure
Strong financial condition; ample 0.05 4 0.20 4 0.20 4 0.20
financial resources to grow and
expand the business; high
equity/cash position
Low property retention ratio to 0.05 4 0.20 4 0.20 4 0.20

66
properties developed
Weaknesses
Small geographic coverage; lack 0.10 2 0.20 3 0.30 3 0.30
of adequate global distribution
capability; weak dealer networks
Small capitalization in its 0.15 1 0.15 3 0.45 2 0.30
developments compared to large
amount capitalization of the huge
and strong players in the industry
Behind rivals in e-commerce 0.05 1 0.05 2 0.10 2 0.10
capability and R&D; subpar
performance in advertising and
promotions
Developments limited to 0.15 1 0.15 3 0.45 4 0.60
residential-types alone; No relative
experience in constructing
commercial and retail spaces and
other real estate projects
Developments not located in 0.05 2 0.10 3 0.15 3 0.15
central business areas such as
the Makati CBD and BGC-CBD
Sum Weights 1.00 2.65 3.05 3.45
Key Factors W Product Market Integration

Development Penetration Strategy
AS TAS AS TAS AS TAS
Opportunities
Record liquidity, low mortgage rates 0.10 4 0.40 4 0.40 4 0.40
Introduction of REITs in Philippine 0.05 0 0.00 0 0.00 0 0.00
Market
Promotion of the Philippines as a 0.05 3 0.15 4 0.20 3 0.15
retirement haven for foreigners by
the PRA
Growing population with favorable 0.05 3 0.15 4 0.20 2 0.10
demographics and a large base of
more financially empowered young
professionals
Rising demand for condominiums 0.15 3 0.45 3 0.45 3 0.45
and in-city developments; trend
towards smaller unit sizes
Renewed interest in property as a 0.05 3 0.15 3 0.15 3 0.15
long-term investment for
yield/inheritance
Wealth and Incomes unaffected 0.05 3 0.15 4 0.20 3 0.15
during recent crisis
Income boost from OFW remittance 0.15 3 0.45 4 0.60 2 0.30
flows

67
Increasing disposable income with 0.10 3 0.30 4 0.40 3 0.30
higher propensity to spend
Emergence of regional growth 0.05 3 0.15 4 0.20 3 0.15
centers in provincial areas
Philippines ranking 2nd worldwide 0.05 4 0.20 4 0.20 4 0.20
for BPO market share; Industry
employment to grow 25%
Threats
Increasing intensity of competition 0.10 3 0.30 3 0.30 3 0.30
among the industry's numerous
players which may squeeze profit
margins
Heightened risk of flooding in key 0.05 3 0.15 0 0.00 0 0.00
metropolitan areas in Manila which
are deemed below sea level
Vulnerability to uncontrollable 0.05 0 0.00 0 0.00 0 0.00
economic forces such as scares of
terrorism attacks
Sum Weights 1.00 3.00 3.30 2.65
Sum Total Attractiveness Score 5.65 6.35 6.10

< >
The best strategy to pursue is the market penetration strategy because it garnered the highest
total attractiveness score among the three strategies evaluated.
This strategy will be discussed further in the succeeding part of this chapter.
4.2. STRATEGY IMPLEMENTATION
This part of chapter four (4) will discuss the strategies under market penetration as proposed by
the researchers in the TOWS analysis.
Furthermore, through this part, the different departments of the organizational chart of DMCI
Homes are given attention as to what actions they need to undertake in contributing to the
revenues of the company.
Also, a financial projection for a period of five (5) years is included in this part together with the
assumptions and basis of their calculations.

68
4.2.1. Recommended Business Strategies
Since market penetration garnered the highest attractiveness score in the QSPM, it will be the
only strategy that will be focused on in this particular part of strategy implementation. Based on
the TOWS analysis, the following are the strategies formulated by the researchers which were
labelled as market penetration:
a. Penetrate the market of young professionals through dynamic, fast-paced and avant-
garde quality condominium units located at the heart of the metro at an affordable
price.(S2, S3, O4); Make use of developing residential condominium units that would
target the rapidly growing population of financially empowered young professionals.(O4,
W4)
It has been the edge of DMCI Homes to construct resort-themed condominiums at a lower price
compared to their competitors without compromising its quality. The generation of young
professionals that has emerged in recent years is constantly growing and continuously adding
up to the demand for residential-type of buildings which are near their workplace.
DMCI Homes should penetrate the key business districts in Manila because it is where the large
population of young professionals are concentrated. These young professionals have the mind-
set of buying life-time investments that are close to their workplace and to other commercial
establishments. This generation of the youth are those who want to live in a dynamic setting
where everything they want is as close and as easy to grasp by the hand.
Areas such as the Bonifacio Global City and Makati CBD should be penetrated by the DMCI
Homes in particular. The company usually builds condominiums outside of these two business
districts that is why they lag in behind competitors like Megaworld and Avida Land who have
established their presence in the aforementioned business areas.
If DMCI Homes could not establish even a single project within the key business districts, they
should have at least establish sales offices across those. This is to compromise their lack of
presence within the area by not having a single project but at least by having a sales office that
would in turn attract potential buyers to their projects near those business areas. It would be

69
more strategic if DMCI Homes would establish an office, like for example in Bonifacio Global
City, to monitor the performance of each sales office strategically located in the area.
b. Target the portion of the population that has a rising purchasing power due to continuous
increase in income.(S2, S5, O9); Target the families of OFWs and encourage them to
purchase a unit for their family member abroad as a form of lifetime investment.(W4,O8)
The portion of the population who has the rising purchasing power are those who are classified
under the middle-income segment of buyers. This segment is primarily comprised of OFWs who
remit their income from abroad to their families in the Philippines.
To strongly penetrate the market of OFWs, DMCI Homes should capitalize in establishing sales
offices abroad. DMCI Homes is behind its competitor in terms of its scope of distribution network.
But since DMCI Homes cannot compete in establishing a global distribution network against its
competitors, the researchers advise to modernize the existing website, dmciinternational.com,
which acts only as a catalogue of its projects with only a brief description of a development and
contact information.
The website can be improved to allow for an interactive open house that will allow users to
explore in 3D a selected project of the DMCI Homes. The website will also build its e-commerce
capability by allowing for online reservations that will allow for real time inventory monitoring and
online payment of reservations.
By enhancing its website, DMCI can strengthen its limited distribution network and tap tech
savvy buyers both locally and abroad.
c. Take advantage of the areas that are being developed by the construction arm of DMCI
Holdings in aiming for the places where the local economy is growing rapidly. (S1, O10);
Expand the market of the company to areas outside the metropolitan that are also
developing fast and cater to the demands for residential condominium units in these
areas where small numbers of developers exist since these areas are still considered as
emerging business districts.(W1, W4, W5, O10); Maximize the presence of the company

70
in cities where there is limited space and make use of the shift in trends toward smaller
unit sizes.(W1, O5)
The construction arm of DMCI Holdings which is a sister company of DMCI Homes has been
winning bids in constructing highways and other related private and government initiated
infrastructure construction projects. Some of these projects are located outside of the metro and
are mainly in provinces. DMCI Homes could take advantage of this and bid for untapped
surrounding areas for residential development.
To utilize the synergy among the businesses under DMCI Holdings, DMCI Homes could be the
first to construct a community of high-rise residential buildings in provincial areas to give
potential buyers an urban feel. This will in turn contribute to considering provincial areas as
emerging growth centers that would help boost the economy of the country.
To add up, tapping the provincial areas for development would have DMCI Homes garner a
huge market share in the industry because there are only a few developers in those areas, most
of which are not known in the metro.
d. Take advantage of the foreign retirees that are seeking for units that will provide them
convenience of a tranquil residential environment. (W5, O3)
Since the country is being promoted as a retirement haven for foreigners, DMCI Homes could
use this opportunity to expand their target market and cater to those who are not even Filipinos.
This particular market, if tapped, could generate revenues for the company.
To penetrate this particular market, DMCI Homes should establish a presence within foreign
countries where a huge number of foreigners show interest in retiring in the Philippines, This
would again end up in establishing international sales offices to widen the distribution network of
the company.
Also, the Philippine Retirement Authority has made a list of foreigners who have plans of staying
in the Philippines right after they retire. DMCI Homes could use this information to gain insight
as to what particular nationalities show intention of having the last years of their lives in the
Philippines.

71
DMCI Homes should partner with the Philippine Retirement Authority, if possible, to secure
foreign retirees’ preference for DMCI Homes.
e. Encourage the market with the buying power to purchase a condominium unit as an
investment for the future and make use of the existing wealth in the market by means of
an IPO or by borrowing from banks to increase the company's capitalization. (W2,
W4,O7); Encourage the market with the capacity to buy condominium units as a form of
long-term investment.(W4, O9)
Homes are considered to be lifetime investments. They do not depreciate but rather appreciate
in value. This mind-set has been prevalent among Filipinos. And the disparity, in terms of value,
of owning a unit in a condominium is none than that of owning a residential house.
This mentality among Filipino buyers should be reiterated in ad campaigns of DMCI Homes.
The company should use an intensive integrated marketing approach to its potential buyers.
This will affect the brand awareness of Filipino buyers relative to DMCI Homes.
In pursuing an intensive integrated marketing approach, DMCI Homes should also strengthen
its public relations. Events outside of the country like international real estate conferences
should be utilized by the company to introduce innovations in their developments and introduce
DMCI Homes to the global market.
With increased capitalization in marketing and promotions and effective advertising, there is a
possibility that it would deliver sales globally. And with the funds gathered, DMCI Homes could
look into the possibility of doing an IPO to be independent of that of DMCI Holdings.
Also, DMCI Homes could look into the opportunity of borrowing money from banks for
capitalization. With their stable financial condition, DMCI Homes could now borrow a huge
amount of money to finance all their expenditures in every new project.
4.2.2. Recommended Organizational Strategies
Market penetration strategies will be implemented by the marketing, sales and customer care
divisions. Additional roles will be added to existing departments in the company.

72
a. Additional personnel to support international sales divisions
This is in line with market penetration strategy to extend further its presence to the OFW market
and foreign retirees market. Additional personnel will be used to manage and support the
operations of the different international offices of DMCI Homes. These new personnel will be
used to develop partnerships with brokers abroad and to help DMCI Homes comply with foreign
regulations.
b. Additional personnel to institutional sales
A corporate sales unit will be added to form partnerships with companies in line with the market
penetration strategy to target young professionals. The new unit will forge partnerships with
corporate institutions to provide housing solutions to their employees.
c. Concentrate DMCI Homes as the sole real estate arm of DMCI Holdings
To reduce operating cost and increase focus and functionality, DMCI Holdings should
concentrate all of its property businesses to DMCI Homes. Currently, there is a small portion of
its housing business belonging to its construction arm. These projects should be transferred to
DMCI Homes to fully utilize the property development experience of DMCI Homes.
4.2.3. Financial Projections
The following table shows the comparison of values in the income statement of DMCI Homes
taken from the notes section of the consolidated income statement of DMCI Holdings from 2007
to 2010. The items in the first column are the basis of the items that need calculations for the
financial projections of DMCI Homes. Below the comparison table are the assumptions and the
bases of the projected values for DMCI Homes for a period of five (5) years, from 2011 to 2015.
Table 16:
Financial Projections
2007 2008 2009 2010

Revenue 2,455,167 4,736,635 6,963,108 7,704,893
Other Income (expense) - net 34,761 70,054 83,018 177,748
2,489,928 4,806,689 7,046,126 7,882,642
Cost of sales and services 1,258,498 2,984,329 4,756,934 4,758,532

73
General and administrative expense 1,245,950 892,889 1,172,899 1,355,238
(before depreciation and amortization)
2,504,448 3,877,218 5,929,833 6,113,770
EBITDA 14,520 929,471 1,116,293 1,768,871
Finance income (cost) 78,479 82,209 307,619 76,981
Depreciation and amortization (20,362) (34,871) (51,111) (50,786)
Pretax income 43,597 976,809 1,372,801 1,795,066
Provision for income tax (17,724) 218,421 352,943 509,067
Income before income from discontinued
operations 61,321 758,388 1,019,858 1,285,999
Post-tax income from discontinued --- --- --- ---
operations
61,321 758,388 1,019,858 1,285,999
Net income attributable to non-controlling --- --- --- ---
interest
Net income attributable to equity holders 61,321 758,388 1,019,858 1,285,999
a. Specific Financial Statement Assumptions
2007 2008 2009 2010 Growth
Sales and
7,475 9,846 8,687 14, 715 29.78%
Reservation
Recognized Real
3,548 4,737 4,301 7,705 34.48%
Estate Revenues
% of Sales
47% 48% 50% 52%
Recognized
*Values are in million, unless volume is indicated.
 The table above shows the increasing trend of sales and reservation and the percentage
of revenues recognized from it. The researchers have come up with the average growth
of the first two items through the computation of the historical average growth rate of the
values provided above.
 Since the researchers were able to obtain only the income statement from the notes
section of the 2007 to 2010financial reports of DMCI Holdings, the parent company of


74
the subject under study, the researchers will project values only for that particular
financial statement.
b. General Revenue and Expense Assumptions
The following assumptions formulated for this research will be affecting the revenue item in the
income statement of DMCI Homes:
 According to Jones Lang Lasalle Leechiu, a leading property consultant in the world, the
strength in the Philippine real estate market will likely last until 2015. Hence, there is an
evidence for the continuous surge on demand for properties.
 The Cost of Sales will follow the average historical growth rate from 2007 to 2010
because there are no specific strategies geared towards lowering production cost any
further. Current production setup where there exists an operational synergy between
DMCI Homes and its construction sister company will be retained.
 Provision for Income Tax will follow the average historical growth rate from 2007 to 2010
assuming that taxation policies regarding property developments do not change.
 Finance Income (cost) will follow the average historical growth rate from 2007 to 2010
because there are no specific strategies geared towards incurring that particular item.
 Depreciation and Amortization will follow the average historical growth rate from 2007 to
2010 assuming that there is no bubble in the industry that would affect how DMCI
Homes values its property developments which are dependent on interest rates.
 Other income (expense) will follow the historical growth rate from 2007 to 2010 because
there are no specific strategies that are deemed by the researchers that would affect that
particular item.
Table 17:
Financial Projections (2011 to 2013)
2011 2012 2013

Revenue 8,818,466.93 9,876,682.96 11,061,884.92
Other Income (expense) - net 190,000 210,000 225,000
9,008,466.93 10,086,682.96 11,286,884.92
Cost of sales and services 5,584,029.63 6,254,113.19 7,004,606.77

75
General and administrative expense 2,092,093.10 2,343,144.27 2,624,321.58
7,676,122.73 8,597,257.46 9,628,928.35
EBITDA 1,332,344.20 1,489,425.50 1,657,956.57
Finance income (cost) 285,453.77 319,708.23 358,073.21
Depreciation and amortization -88,184.67 -98,766.83 -110,618.85
Pretax income 1,135,075.10 1,268,484.10 1,410,502.21
Provision for income tax 341,293.28 382,248.48 428,118.29
Income before income from 793,781.82 886,235.62 982,383.92
discontinued operations
Post-tax income from discontinued --- --- ---
operations
Net income attributable to non- --- --- ---

controlling interest
Net income attributable to equity 793,781.82 886,235.62 982,383.92
holders
c. 2011 Economic Indicators Assumptions that would affect the industry
The following are the assumptions applied in the research that will be affecting the items
projected in the income statement of DMCI Homes:
 GDP is estimated to grow to 16,776.63 billion pesos

 Unemployment Rate is estimated to remain to 7.2%
 Value of Oil Imports is estimated to grow to 572.09 billion pesos
 Average Consumer Prices is estimated to be at 174.214
 Gross National Savings as a percentage of GDP is estimated at 18.66%
 Investments as a percentage of GDP is estimated at 15.75%
d. 2012 Economic Indicators Assumptions that would affect the industry
The following are the assumptions made by the researchers that will be affecting the items in
the income statement of DMCI Homes:

76
 Unemployment Rate is estimated to remain to 7,2%
e. 2013 Economic Indicators Assumptions that would affect the industry
 GDP is estimated to grow to 18,985,73 billion pesos

 Unemployment Rate is estimated to be at 7%
 Investments as a percentage of GDP is estimated at 16%
Table 18:
Financial Projection (2014 to 2015)
2014 2015
Revenue 12,389,311.11 13,876,028.44
Other Income (expense) - net 229,000 232,000
12,618,311.11 14,108,028.44
Cost of sales and services 7,845,159.58 8,786,578.73
General and administrative expense 2,939,240.17 3,291,948.99
10,784,399.75 12,078,527.72
EBITDA 1,833,911.36 2,029,500.72
Finance income (cost) 401,042 449,167.04
Depreciation and amortization -123,893.11 -138,760.28
Pretax income 1,556,762.47 1,719,093.96

77
Provision for income tax 479,492.49 537,031.59
Income before income from 1,077,269.98 1,182,062.37
discontinued operations
Post-tax income from discontinued --- ---
operations
Net income attributable to non- --- ---

controlling interest
Net income attributable to equity 1,077,269.98 1,182,062.37
holders
f. 2014 Economic Indicators Assumptions that would affect the industry

g. 2014 Economic Indicators Assumptions that would affect the industry


78
4.2.4. Strategy Map
A strategy map is a diagram that is used to document the primary strategic goals being pursued
by an organization.
Figure 14: Strategy Map
4.2.5. Departmental Programs
The implementation of the market penetration strategies will basically rely on equal division of
labor among the departments of the business organization and their functional programs and
action plans.
a. Sales and Marketing Department
The marketing department will lead in the planning and execution of the integrated marketing
communications plan of the company to raise brand awareness (O4, W4 -target the rapidly

79
growing population of financially empowered young professionals; W5, O3 - Take advantage of
the foreign retirees)
Overall advertising message will be that DMCI Homes delivers their dream to have a quality
house they can call home. The marketing department will contract an advertising company to
propose and execute the ad campaign based on this message.
DMCI will utilize several forms of media to deliver and promote brand awareness among its
target markets. TV advertisements will focus on the DMCI brand as a property developer that
offers optimal quality and value for money. Events will also be organized to inform both external
brokers and buyers of the features and unique selling propositions of specific developments.
DMCI will participate in real estate fairs and organize buyer conventions.
The sales division will lead in the effective execution of the e-commerce strategy. Sales will link
the inventory management system to the enhanced website so both buyers and brokers are
made aware of specific units that are still available. Sales will also assign sales personnel to
handle the reservations coming online and ensure that adequate follow-ups are made to convert
the reservations into actual sales.
The sales team will coordinate with other departments for the other components of the website.
Marketing will provide the sales team the ad content of the website. Construction will provide
pictures and updates of current projects to be able to update buyers of the status of their
investment.
As indicated in the TOWS matrix analysis, young professionals will be targeted as a possible
new market to tap. To be able to innovate a housing solution to these young professionals,
together with marketing, finance and construction, the sales department should formulate a
corporate housing package specifically geared towards them.
Another market penetration strategy is to tap the OFW segment. The sales department will lead
this initiative by forging partnerships with various external brokers in countries where DMCI has
established no presence yet.

80
b. Construction Department
Construction will chair monthly meetings with sales to determine forecasted demand for units.
Sales department will provide indication as to the type of units that are in demand (e.g. studio
type, 1 BR unit, 2 BR unit, tandem).Construction will design its developments based on the
projection provided by sales.
Synergy with businesses under the DMCI Holdings will be strengthened to reduce cost and
manage quality better. All of the construction and steel fabrication requirements of DMCI Homes
will be coursed through DMConsunji (construction) and AG&P (Steel fabrication). Additionally,
DMCI Homes’ purchases will be priced lower since it is an internal counterparty of these DMCI
subsidiaries.
DMCI Homes’ raw material requirements will be integrated to DMCI Group’s requirements. This
will give DMCI additional bargaining power to lower the acquisition price of its raw materials and
reduce DMCI Homes’ build cost.
c. Business Development Department
The Business Development division will lead in the company’s expansionary strategy in the key
business districts. The business development will approach the BGC administration and other
realtors to acquire new tracts of land.
d. Finance Department
The finance function strategy map tells all the things that the Finance Department should do in
assisting the other departments of DMCI Homes.

81
Figure 15: Finance Function Strategy Map
e. Human Resources Department
Human resources will need to hire and train additional personnel to man the different strategies
of DMCI such as the improvement of its distribution channel. As a motivational tool for its
employees, DMCI will send high performing sales personnel to international sales offices. HR
will also launch training to prepare new hires for the real estate licensure exam which is a
requirement by the government.
To encourage partnerships with external brokers, HR will increase the commission rate of
brokers. This will support the strategy to attract additional brokers by compensating them higher
than other property developers do.

82
4.3. STRATEGY EVALUATION
The final stage in strategic management is strategy evaluation and control. All strategies are
subject to future modification because internal and external factors are constantly changing. In
the strategy evaluation and control process, it is determined whether the chosen strategy is
achieving the organization's objectives or not.
4.3.1. Balanced Scorecard
A balanced scorecard is a performance management tool used to translate strategy to

operational terms and make the strategy a continuous process.
a. Financial Perspective
Financial Objective Targets Financial Metrics

Revenue growth and mix Quarterly growth for segment Sales growth by segment
Annual revenue will come from Percentage of revenue from
Revenue growth and mix
new product. new products
Annual revenue will come from Percentage of revenue from
Revenue growth and mix
new customer segment new customers
Increase profitability in new
Revenue growth and mix customer segment by the end of Customer profitability
the year.
Increase profitability of new
Revenue growth and mix product line by the end of the Product profitability
year.
Reduce the percentage of
Percentage of unprofitable
Revenue growth and mix unprofitable customers by the
customers
end of the year.
Increase cost reduction rate by
Cost reduction/productivity Cost reduction rate
the end of the year.
Reduce general and
administrative expenses as a Indirect expenses as a cost of
Cost reduction/productivity
percentage of sales to meet sales
competitors' expense ratios.

83
Increase research and
Research and development as
Asset utilization development as a percentage of
a percentage of sales
sales by the end of the year.
Increase working capital by the
Asset utilization Working capital ratio
end of the year.
Improve economic value added
Market performance Economic value added
by the end of the year.
b. Customer Perspective
Customer Objective Targets Customer Metrics

Market share Increase market share in new Market share by peso
target market by the end of the
year.
Market share Increase the number of units Market share by units
sold by the end of the year.
Market share Contract with at least 75% of all Percentage of key customers
customers within target market within target market
Customer acquisition Increase number of proposals by Proposal rate
Customer acquisition Increase proposal win rate by Win rate
Customer profitability Reduce percentage of Percentage of unprofitable
unprofitable customers by the customers
end of the year.
Customer satisfaction Increase customer satisfaction Customer satisfaction
(as measured by external percentage
survey) so that all customers are
"somewhat" or "very" satisfied.
Customer satisfaction Reduce the number of Number of unresolved issues
unresolved issues by the end of
the year.
Customer satisfaction Reduce the number of returns Number of customer returns

84
c. Operations Perspective
Internal Objective Type Targets Business Process Metrics

Innovation A small percentage of revenues Percentage of sales from new
will come from new product line. products.
Innovation New developments will be Time to market for new
brought to market. developments.
Operations Purchase price variance on raw Purchase price variance
materials will decrease.
Operations The cost to produce one unit will Process cost
decrease from $35/unit to
$32/unit by the end of the year.
Post-sales service Warranty costs will be reduced Warranty and repair costs
by at least 50% by the end of
the year.
Post-sales service Warranty issues will be resolved Cycle time for warranty and
within a faster time frame. repair issues
d. Learning and Growth Perspective
Learning Objective Type Targets Learning and Growth Metrics
Reduce overall turnover by end

Employee retention Annual turnover percentage
of year.
Reduce voluntary turnover

Voluntary annual turnover
Employee retention percentage by the end of the
percentage
year.
Reduce turnover of key

Key personnel turnover
Employee retention personnel by the end of the
percentage
year.
Ensure that 75% of employees

Employee satisfaction feel involved with key decisions Involvement with decisions
Ensure that 90% of top-rated

employees feel they receive
Employee satisfaction Recognition
positive recognition for their
achievements.

85
4.3.2. Contingency Planning
A contingency plan is a plan devised for an exceptional risk which is impractical or impossible to
avoid. That is why the researchers have included a contingency plan in early preparation for
events that might happen although totally unforeseen.
a. Downside Potential Events
Key Concerns Action Plans
 Re-allocate resources to boost local home

sales and countries which are not hardly
Decline in OFW income remittance severed by any crisis.
 Lessen exposure to foreign countries affected
by a financial crisis.
Decline of demand in the BPO market  Re-allocate resources to retail market
Raw materials and contract prices rise  Slightly increase prices to cover material costs
b. Upside Potential Events
Key Concerns Action Plans
 Re-allocate resources to foreign countries with

Unexpected rise in OFW income
increased OFW population with faster
remittance
remittance growth
 Continue partnerships with other corporation

Sudden surge of demand in the BPO
to offer an affordable housing package
market
solution to their employees

86
4.4. Conclusion and Recommendation for Further Study
The researchers suggest that the following controls be done:
 Review the fundamental bases of the organization’s strategy.

 Measure the organizational performance; this activity includes comparing expected
results to actual results, investigating deviations from plans, evaluating individual
performance, and examining progress being made toward meeting stated objectives.
 Take corrective actions if necessary; it is necessary if some changes occur in the
company and it requires resorting to changes not suitable to present strategies.
We conclude that the strategy to be implemented on DMCI Homes be Market Penetration - seek
increased market share for present products or services in present markets through greater
marketing offers by increasing the number of sales persons, increasing advertising expenditures,
offering extensive sales promotion items, or increasing publicity efforts. By increasing primarily
in advertising and promotion, DMCI Homes can provide more information to the public about
their property developments.
The researchers believe, however, that further research is needed for the improvement of the
study. We, therefore. acknowledge and welcome any effort that would bring progress to this
strategic management paper.

87
BIBLIOGRAPHY
Dela Cruz, Roderick. Philippines’ per capita income hits $2,000, finally. Manila Standard Today.
Date retrieved: 2011 September 23. http://www.manilastandardtoday.com/insideNews.
htm?f=2011/april/4/news2.isx&d=2011/april/4
Demographic and Economic Indicators. Euromonitor.com Date retrieved: 2011 September 16.
http://www.euromonitor.com/philippines/country-factfile
DMCI Information. DMCI Corporate Website. Date retrieved: 2011 September 05.
www.dmci.com.ph
National Labor Statistics. Date retrieved: 2011 October 4.

http://www.bles.dole.gov.ph/PUBLICATIONS/LABSTAT%20UPDATES/vol15_25.pdf
National Statistics Coordination Board. Date retrieved: 2011 October 4. csb.gov.ph
Philippines: High Yields on Metro Manila Condominiums, OECD & Governmental Bodies
Information. Date retrieved: 2011 October 5. http://www.oecdrccseoul.org/article/philippines-
high-yields-on-metro-manila-condominiums
Wong, Chiu-Ying. GUEST POST: REITs in the Philippines. Date retrieved: 2011 October 7.
http://blogs.inquirer.net/moneysmarts/2008/10/24/guest-post-reits-in-the-philippines/

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TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION AND BACKGROUND OF THE STUDY

CHAPTER 2: INDUSTRY AND COMPETITOR ANALYSIS

CHAPTER 3: INTERNAL ANALYSIS

CHAPTER 4: STRATEGY FORMULATION, IMPLEMENTATION

Breaking Grounds, Building Dreams, Braving New Horizons:

1: Map of Businesses owned by DMCI Holdings 6

Breaking Grounds, Building Dreams, Braving New Horizons:

1: Philippine Population from 2007 to 2010 12

Breaking Grounds, Building Dreams, Braving New Horizons:

INTRODUCTION AND BACKGROUND OF THE STUDY

1.1. COMPANY PROFILE

Breaking Grounds, Building Dreams, Braving New Horizons:

Figure 1: Map of Businesses Owned by DMCI Holdings

Breaking Grounds, Building Dreams, Braving New Horizons:

Figure 2: DMCI Homes' Income Contribution to DMCI Holdings

1.2. Vision-Mission Statements, Goals and Core Values

The following is the vision-mission statement of DMCI Homes:

We shall be the best provider of residential communities designed to create a quality

In doing so, we are committed to ensuring:

 Sustainable growth of our shareholder's investment

while building an organization that espouses integrity, excellence, interdependence and

Breaking Grounds, Building Dreams, Braving New Horizons:

Breaking Grounds, Building Dreams, Braving New Horizons:

Figure 4: Customer Orrientation

Figure 3-6: DMCI Homes' Core Values

Breaking Grounds, Building Dreams, Braving New Horizons:

1.4. RESEARCH DESIGN AND METHODOLOGY

Breaking Grounds, Building Dreams, Braving New Horizons:

To be able to assess DMCI’s performance relative to its competitors, audited financial

1.4.2 Scope and Limitation

Breaking Grounds, Building Dreams, Braving New Horizons:

Source of data : Asian Development Bank, 2010

Breaking Grounds, Building Dreams, Braving New Horizons:

a. Low Mortgage Rates

b. Philippines as a Retirement Haven

Breaking Grounds, Building Dreams, Braving New Horizons:

1.5.3. Socio-Cultural Trends

a. Rising Demand for Condominiums

b. Renewed Interest in Property as a Long-Term Investment for Yield/Inheritance

According to the National Statistics Office, residential building construction exhibited an

Breaking Grounds, Building Dreams, Braving New Horizons:

Source of data: National Statistics Office, 2010

1.5.4. Economic Forces

Breaking Grounds, Building Dreams, Braving New Horizons:

b. Growing OFW Remittance

Breaking Grounds, Building Dreams, Braving New Horizons:

Figure 7: Changing Trend of OFW Remittances in Dollars

c. Increasing Disposable Income

Breaking Grounds, Building Dreams, Braving New Horizons:

d. Emergence of Regional Growth Centers

Breaking Grounds, Building Dreams, Braving New Horizons:

INDUSTRY AND COMPETITOR ANALYSIS

Figure 8: Revenues of Selected Real Estate Developers in Residential Developments

2.1. PORTER'S FIVE FORCES OF COMPETITION

Breaking Grounds, Building Dreams, Braving New Horizons:

Breaking Grounds, Building Dreams, Braving New Horizons:

a. Entry Barrier #1 -- Diseconomies of Scale

b. Entry Barrier #2 -- Weak Brand Identity and Differentiation

c. Entry Barrier #3 -- High Capital Requirements

Breaking Grounds, Building Dreams, Braving New Horizons:

d. Entry Barrier #4 -- High Switching Costs

e. Entry Barrier #5 -- Insubstantial Access to Distribution