Environmental

Scanning
Engr. Ped Salvador, Ph.D.
May 6, 2016

Introduction
Business

decisions are influenced by two sets of

factors
Internal factors (The Internal Environment
External Factors( The External Environment)
Business

Environment presents two challenges to

the enterprise
The challenge to combat the environmental threats
Exploit the business opportunities

Environmental

Scanning is one of the first steps in

Strategic Management
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Environmental Scanning
Refers to the study and interpretation of the
political, economic, social and technological
events and trends which influence a business,
an industry or even a total market.
Wikipedia

What is environmental scanning?

Definition:
The

process of collecting, analyzing,

and distributing information for
tactical and strategic purposes
A corporation uses this tool to
avoid strategic surprise and to
ensure its long-term health
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What is environmental scanning?

Other characteristics:

Often refers only to the environment that is

external to the organization
(also called the macro-environment)

Good strategic planning requires

information both on internal and external
organizational factors.

Factors affecting Environmental

Scanning
External
Environment

Events
Trends
Issues
Expectation
s

Internal
Environment

Infrastructur
e
HR
Hardware
Abilities
Structure
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Tools of environmental scanning?

SWOT ANALYSIS:

One cycle in the strategic planning process

P
O
R
T
E
R
S
F
I
V
E
F
O
R
C
E
S

Source: Porter, Michael. Competitive Strategy. New

York

PEST-A scan of the external macro-environment in

which the firm operates can be expressed in terms of the
following factors:
Political
Economic
Social
Technological
The acronym PEST (or sometimes rearranged as
"STEP") is used to describe a framework for the analysis
of these macro environmental factors.

Micro
Environment

Macro
Environment

. PEST analysis: An
environmental scan
for business
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Political Factors :-Political factors include

government regulations and legal issues and
define both formal and informal rules under
which the firm must operate. Some examples
include:
tax policy
employment laws
environmental regulations
trade restrictions and tariffs
political stability

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Economic Factors :-Economic factors

affect the purchasing power of potential
customers and the firm's cost of capital. The
following are examples of factors in the
macro economy:
economic growth
interest rates
exchange rates
inflation rate

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Social Factors
Social factors include the demographic and
cultural aspects of the external
macroenvironment. These factors affect customer
needs and the size of potential markets. Some
social factors include:
health consciousness
population growth rate
age distribution
emphasis on safety

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Technological Factors :-Technological

factors can lower barriers to entry, reduce
minimum efficient production levels, and
influence outsourcing decisions. Some
technological factors include:
R&D activity
Automation
technology incentives
rate of technological change

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Why ?????????
Macro environmental and industry scanning are
useful as they reveal current conditions of
market.it help managers to predict the future
characteristics of the organizational
environment and hence make decisions today
that will help the firm deal with the
environment of tomorrow

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Philippine Real Estate

Environmental Scanning
Using PEST Model
Engr. Ped Salvador,Ph.D.
November 10, 2011

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Political Factors

Internal Security
-Security concerns is still a continuing constraint in Philippine
development
-Internal security remains a weak spot, persistently
highlighted by foreign embassies in travel advisories, with law
enforcement hobbled by corruption, lack of police resources,
and easy availability of guns on the street.
-Recent report of another coup d etat due to military
discontentment of latest ambush on young soldiers
President Image
-President Benigno Aquino III is seen to finish his electoral
term due to people majority mandate and popularity ratings
despite criticisms for lack of drive.

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Political Factors

South China Sea

-Tensions has arised since the middle of the year, after a
number of incidents with Chinese ships in waters claimed by
both countries off the Philippine coast. But the issue of
sovereignty, and therefore ownership of the minerals and gas
beneath the seabed, remains unresolved.

Middle East Countries and North African Politics

- Turning to Democratic rule will transform the area to a more
open business and economic activities.
-OFW workers has lot of chances to seize the opportunities
and acquire all its benefits.

Source: Philippine Daily Inquirer, ABS CBN News

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Economic Factors

Gross Domestic Product

Source: Business Monitor International
YearGDP

2010

ANALYSIS

7.6%

2011 5.0%
2012 4.5%

-Highest in the last two decades

-Resurgent growth in capital
formation
-Authorities continue to tighten liquidity

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Gross Domestic Product

Source: Asian Development Bank

Year

GDP

Analysis

2011 4.7% -Subdued government spending

and exports
-Government more cautious
amidst anti-corruption drive
2012 5.1% -Brighter prospects for investments, a major
GDP contributor
-Increased investments as supported by upgrades in
sovereign credit ratings
-Higher outlays on infrastructures as supported by PPP
-Resilient consumer spending

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Gross Domestic Product

Source: NSCB

Philippine economy continued to decelerate, posting a 3.4

percent growth during the second quarter of 2011 which
is less than half the booming 8.9 percent growth in 2010.
NET PRIMARY INCOME (NPI) - 2.8 per cent drop
GROSS NATIONAL INCOME (GNI) - from 9. 2 per cent
(2010) declined to 1.9 percent (lowest growth for the last
4 years)
GDP grew by 0.6 percent while GNI grew by a slower pace
of 0.4 percent in the second quarter of 2011.
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FACTOR/INDICATORS:
1. slow down in manufacturing performance and ever-resilient service sectors brought by
European debt crisis and fragile recovery of trade.
2. political turmoil in the Middle East and North Africa, economic uncertaintain in westen
countries.
3. rebound of sugarcane, corn, and palay, agriculture, hunting,forestry and fishery sector
posted 2.2 percent growth in the second quarter from 1.8 percent in the first quarter of 2011.
4. industry declined by 3.0 percent from a 3.1 percent gain in the previous quarter. the
strong performance of the manufacturing sector ably supported by mining & quarrying was
negated by the huge contraction of construction and the decline of electricity, gas & water.
5. services sector posted a 2.4 percent growth for the second quarter of 2011 from 1.3
percent in
the previous quarter, as all subsectors recorded positive growth.
With projected population reaching 95.6 million, per capita GDP grew by 1.5 percent but per
capita
GNI stood still while per capita HFCE grew by 3.5 percent.
http://www.nscb.gov.ph/sna/2011/2nd2011/2011qpr2.asp

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Gross Domestic Product

Source: Glouble Sourced Patterns-N.Y.
Year

GDP

Analysis

2011
4.8%
-Government spending
compression
-Surge in world oil prices
2012
5.5%
-Prolonged weakness of global
economy
-Political unrests in M.E. and North
Africa and disaster in Japan

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Philippine Competitiveness
Source: Philippine Daily Inquirer
Year
WEF-GCI Ranking(142 countries)
2010-2011
85
2011-2012
75
-Philippines climbed by 10 spots due to significant gains in
macroeconomic environment, technological readiness and good
market efficiency
-Highest since 1994 and was also among the highest jumps
among 142 economies surveyed. A reversal from a 4-year trend.
-Philippines though has lowest scores in the area of
infrastructure that includes quality of roads, ports, railroads and
electricity supply

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Fiscal and Monetary Management

Year % Inflation
2011 4.89%
2012 4.30%
-The global financial crisis had a minimal effect on the Philippines
banking sector, due to its limited exposure.
-Taking advantage of investor interest in emerging markets before the
current global turmoil, the Philippines made a number of debt swaps
and global peso bond issues to lengthen average maturities, reduce
currency exposure and interest costs, and deepen domestic markets.
-Reflecting that improved fiscal management, with the deficit set to
fall below 3 percent of gross domestic product this year, Fitch in June
2011 raised its rating on the Philippines to just one notch below
investment grade.
Source:

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Fiscal and Monetary Management

Monetary authorities see the countrys merchandise

exports expanding by nine percent to 10 percent this
year and by 12 percent next year after surging by 33.8
percent last year.

Imports, on the other hand, would grow by 17 percent to

18 percent this year and by 18 percent next year after
jumping 26.9 percent last year.

The BSP official said strong domestic demand and rising

capital formation would continue to be a steady source
of economic growth this year and next year.
Source: The Philippine Star
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Inflation rate refers to the

percentage rate of change of the
price level over time.

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Budget Deficit
Year
2010
2011

Budget Deficit
3.2% of GDP
2.6% of GDP

-The government's strength has been on economic

management, Including reducing the budget deficit by
improving revenue collection and controlling spending,
but the worsening outlook for the global economy will hit
the Philippines.
-The continuous reduction of budget deficit would provide a
starting point for a gradual improvement in a number of
policy areas with increased expenditure on infrastructures,
health care and social welfare.
Source: ABS CBN News, Reuters, The Philippine Star

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Overseas OFW Remittances

Source: GMA News TV
YEAROFW RemittancesValue
2010 7.8%
$18.76B
2011 4.5%
-The Philippine Overseas Employment Administrations (POEA)
latest overseas employment statistics showed that the
number of deployed new hires in 2008, which was pegged
at 377,000, slightly dropped to 349,000 in 2009 and to
342,000 in 2010.
- The amount of remittances from overseas Filipino workers
(OFWs) would likely become stagnant in the coming years as
deployment of new hires drops.
-Risk on prolonged backlash against migrant workers in the
developed countries as unemployment remains high

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The POEA halts the deployment of OFWs recently in 41 countries because

of their failure to comply with the requirements that are stated in Republic
Act 10022 or the Amended Migrant Workers and Overseas Filipinos Act of
1995.
- Under Republic Act 10022, the DFA is required to certify host countries if
they have labor laws, multilateral conventions, bilateral agreements with
the Philippines, or other concrete measures to protect the rights of OFWs.
-POEA certified 76 compliant countries which are mostly from Europe and
America. The recent list of compliant counties makes the total number of
compliant countries to 125.
Source:http://www.ofwguide.com
/article_item-1627/POEA-Bans-OFW-Deployment-in-41-Countries.html#ixzz
1cyKcj1St

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Labor Force Statistics

Source: NSO
Year
2010
2015

Labor Force
38.9 M
43.6 M

-Export of labor will continue

-11 M are living abroad and still growing
-1 M continue to leave yearly to boost remittances
-Filipinos English language skills remain to be a
competitive advantage

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Unemployment Rate
Year
2010
2011

% Unemployment
7.9%
7.3%

-Job creation remains lackluster.

-Continuous policy and governance reforms are needed
to boost jobs.

Source: NSO

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Unemployment rate is defined as the

level of unemployment divided by the
labor force.
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Social Factors
Source: NSO

Population Growth
Year
2010
2011
2012

Population
99.9 M
101.8 M
103.8 M

% Growth

-A modest decline in population growth rate is

forecasted from 2.3% to 1.9% as incomes rise and
female participation in the workforce increases.
-A continuous debate on Reproductive Health,
Responsible Parenthood and Population Bill is
undergoing in the House of Representatives

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Technological Factors
New technologies to improve efficiency and maximize sales and
customer service such as
-Magicgate Software has developed new tools that can supply
topography videos, interactive site maps, automated reservation, online
form generation, customized area maps, vectorized site plans. The
software is very useful to estate development projects.

-Real Estate Management ERP that will handle and process such
operations like
*Broker Management
*Inventory Management
*Billing, Collection, Recovery
*Customer Inquiry, Customer Service
*Project management

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Technology Factors

Use of Prefab Technology in Construction of Housing

-Reduction in construction cost by 15-30 percent
compared to conventional materials/systems.
- Not labor-intensive and less construction time. If
prefabricated components are used, only three to
four people are needed to construct a 30 square
meter house in 2-3 weeks are used.
-Durable and can withstand earthquakes and
typhoons.
-No maintenance and no painting required.
-No heavy machinery required.
-Very flexible.
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Real Estate Industry Outlook

Source: BMI International October 2011

Confidence has returned to the Philippines property sector in

2011, as foreign investment and improved infrastructure
underpinned real growth in rental rates and yields.

Despite issues with oversupply in several areas, office space

rental increased by about 10% in 2011. As a result,
conditions are positive in all commercial sectors: office, retail
and hotel, as well as in residential property.

Residential housing remains in short supply, with the Manila

Times reporting in July 2011 that there is a shortage of 3M
homes. However, the residential market is suffering from
increasingly stringent residential property loan rules brought
in after a fraud incident concerning 'ghost borrowers'.

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Real Estate Industry Outlook

A survey done by Global Investor Sentiment Survey released by Colliers

International, property investors are still optimistic about the property
possibilities in the Philippines due to the strong demand for
Manila office spacesand residential units.
-in Metro Manila, about a million square meters of new office space is
expected to complete by 2013. While pre-selling of high-rise condominiums
increased to 90 projects which translates to more than 25,000 additional
units.
-the number of residential units across major CBDs is expected to reach
more than 60,000 units in 2013 at an average growth of 15 percent
annually.
- These two segments are driving the growth in the industry.

Source: Philippine Real Estate Blog

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Real Estate Industry Outlook

Some of the key opportunities in the real estate market are:

-The government is trying to resolve the conflict in the
South China Sea and end 40 years of insurgency from the
rebel group the Moro Islamic Liberation Front (MILF) by
offering the prospect of autonomy. A more settled region
will improve the perception of the country in the eyes of
foreign investors.
-The Philippines is one of the fastest urbanizing countries in
East Asia. With an English-speaking and relatively low-cost
workforce, it is ideally placed to participate in high-demand
services such as business process outsourcing.

CREBA is pursuing a direction of alliance with DOT since the

more the tourists the better chances of getting real estate
investors (20th CREBA National Convention)
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Real Estate Industry Outlook

The industry is driven by the continued growth of OFW

remittances, which supports private and household
expenditures, the growth coming from the offshoring
and outsourcing in the Philippines, and the current
regime of low interest rates.

Many residents in cities in the Philippines continue to

experience poverty, environmental degradation and
living in slums or other inadequate housing
arrangements. Economic development has created
rural-to-urban migration.

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Risks Management

2012 is foreseen to characterize considerable downside risk

due to continuous economic troubles in the United States,
Europe and Japan.

Weaker than expected economic growth in industrial

countries would hurt the prospects for export of goods and
services, inflows of remittances and investment.

A lack of progress on the government reform efforts,

including public-private partnerships would erode investor
sentiment.

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Risks Management

Continued political unrest in the Middle East and North Africa causing a
reduction in overseas remittances, economic difficulties in the US and the
eurozone and commodity price fluctuations pose risks to private consumption
growth.

The country opened up the market for real estate investment trusts (REITs)
after passing the Act Providing the Legal Framework for Real Estate Investment
Trusts and for Other Purposes in February 2010. It allowed investors to benefit
directly from a propertys income rather than investing only in the developer.
However, in July 2011, the tax agency added 12% value added tax (VAT) on the
transfer of REIT assets and the Bureau of Internal Revenue (BIR) added 30%
income tax, severely reducing its attractiveness to developers.
- Despite President Benigno Aquino III's pro-foreign direct investment (FDI)
policies, the changes in the law affecting REITs mean developers that had
planned to set trusts up have stopped. In August 2011, mall developer SM
Prime Holdings dropped its plans to raise US$500mn via a REIT and Ayala Land
dropped its plans to raise US$400mn following the tax rises by the BIR and the
tax agency.

Source: BMI Philippine Real Estate Q4 2011Report

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Summary

The region has been remarkably resilient to the global economic

slowdown. While regional growth slowed as the economies of their large
trading partners (notably the United States
and Europe) went through a recession, the slowdown was in most cases
moderate and the recovery in 2010 and 2011 has been very strong.

Domestic insurgencies, terrorism and security issues negatively impact

the Philippines ability to attract much needed foreign investment.

The global economic slowdown led to a decline in

demand for exports from the Philippines, reduced domestic
consumption, slowed remittance inflows, and resulted in real GDP
growth of less than 1% in 2009. A strong rebound of 7.3% growth began
in 2010, followed by more moderate growth of about 5% in 2011, which
is expected to continue in 2012.

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Summary

A poor investment climate has resulted in inadequate

infrastructure. This will be a long-term drag on economic
growth until remedied.

With one of the highest population growth rates in Asia, the

Philippines still struggles with poverty.

The Philippines has worked to reduce its still relatively high

government debt. These fiscal consolidation efforts have
prompted sovereign credit rating upgrades.

President Benigno Aquino III will continue to handle office

under a strong public mandate to implement economic and
political reforms.

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End
Thank You!

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