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PHILIPPINES: The Services Capital of the World

The Philippines is considered a world leader in the services industry. The success of the
Services industry in the Philippines can be explained through the use of Porter’s Diamond
Framework. Michael Porter’s Diamond Model (also known as the Theory of National
Competitive Advantage of Industries) is a diamond-shaped framework that focuses on
explaining why certain industries within a particular nation are competitive internationally,
whereas others might not. According to the National Economic and Development Authority
(NEDA), the Philippine economy posted a 6.1% growth in the fourth quarter of 2018, driven by
the Services sector which posted the highest share to GDP of 56.2%, followed by Industry
(34.8%), and Agriculture, Hunting, Forestry and Fishing (8.9%).

Services have been one of the strongest and fast-growing sectors of the Philippine
economy. While this performance is considered as stellar by most analysts, there is still huge
potential for increasing value-added in services outputs, as well as deepening participation in
global value chains. The following statements are discussion on the factors of National
Competitive Advantage of the Service Industry in the Philippines

The Competitive Factors. The Philippine population is comprised mostly of very young
workforce with mean age of 24. This means that the workforce consists young, strong,
innovative and idealistic population. It is also an advantage of Philippine firms because the
human resources are abundant. Firms in the Philippines also hold advantage on its high literacy
rate, English proficiency both in oral and written and the Filipino trait of being flexible. The
firms in the Philippines such as the Business Process Outsourcing Companies (BPOs) are
thriving because of lower labor costs compared to other Native English Speaking Nations (for
instance America and Australia). The same is true with the health care industry, Filipinos are
known for being hospitable and having close family ties. Aside from the fact that there is an
oversupply of Nursing or related degrees, Filipinos display a more sensitive and compassionate
assistance to their patients. Thus, other Nations would prefer to hire Filipino nurses.

The Firm, its strategy structure and rivalry. Firms in the Philippines has an advantage
in the BPO industries because of the competitive factors such as the age, English Proficiency,
interpersonal skills and knowledge on technology. According to Porter, technology and
knowledge (know-how are the two most important preconditions in achieving the national
advantage. In 2015, Philippines is known to be the leader in BPO industries, though, Philippines
is competing head on with India , but studies show that Multi-National Companies (MNCs)
would prefer hiring Filipinos because of a more neutral accent, higher education attainment and
lower labor costs.

The Demand Conditions. Because of Globalization, competing firms and nations utilize
resources to cope with the science and technology to make operations standardized, easier and
faster. MNCs would also be looking for cost-effective decision making leading to choosing the
Philippines and its people to do the services tasks.
The Factor Conditions. Although it is very evident that there is more to improve in
terms of the methods and techniques, facilities and machineries, tools and equipment, the
infrastructure, the laws that govern it and other related factors; Philippines is thriving to be at par
with its neighboring Asian Countries.

The Related and Supporting Industries. Tourism perhaps is one of the fastest growing
industries in the Philippines, with this growth, the supporting industries would also move in the
same direction.