MARKET EXPANSION TRAINING THRU MICRO BANKING OFFICE (MBOs)

1. MARKET EXPANSION TRAINING THRU MICRO BANKING OFFICE (MBOs) 2-day Seminar/Workshop Place

2. Day 1 AM

3. Day 1 PM

4. Day 2 AM

5. Day 2 PM

6. Rules Have FUN !!! Be YOURSELF !! Be INVOLVED ! EXTENDED WORK HOURS!

7. Remember ... • We learn from each other. • MABS does not know everything nor have asked all pertinent questions ... • ... But we have made this training as informative (and fun!) as much as possible. • Most importantly, YOU determine how your learning spells success in the field!

8. Learning Objectives • Understand the reasons behind expanding bank operations. • Develop a step-by-step knowledge in MBO expansion to reach and serve MF clients. • Identify other microfinance products and services to be used to expand market reach.

9. Workshop 1A A. Instructions: • Read the case. • Read the news articles. • Study the bank status report. • You have 15 minutes.

10. PAR 1 = 10% PAR 7 = 8% PAR 30 = 5%

12. Workshop 1B B. Instructions: • Divide into groups of five. • Discuss the questions below. • Choose a representative. • Fill up the SWOT Analysis Table. • Complete the activity in 10 minutes. • Present to the entire class your key points in 5 minutes. Questions: • What are the opportunities and competitive threats faced by RB NOY? • What are the operational issues that RB NOY must address? • What are the courses of action that RB NOY must do in the next 6 months?

13. SWOT Analysis

14. Workshop 1C C. Instructions: • Discuss with your group the question for or against expansion. • Answer the questions: What is your position? Is your group for expansion or not? Why? • Complete the activity in 10 minutes. • Present to the class your final position and explain the reasons behind the decision in 5 minutes.

15. Case for or against expansion For Expansion Against Expansion ?? • ??

16. Break Time!

17. Workshop 2 Instructions: • Look back to your SWOT Table. • Complete the SWOT Table. What are the emerging strategies for each quadrant? (S-O, S-T, W-O, W-T) • Choose a viable set of strategies. Given RB Noy’s situation, what are its top three viable strategic options? Which strategy is an expansion strategy? • Complete the activity in 15 minutes. • In 5 minutes or less, explain to the class why your group chose those strategies.

18. SWOT Analysis

19. Case for Expansion

20. Case against Expansion

21. Exploring Various Expansion Strategies

22. The Strategy Challenge S-O Strategy • Enter new territories in Visayas through new branches/MBOs. S-T Strategy • Maintain the current markets among farmers, traders, LGU employees, and microentrepreneurs by introducing better designed products. Business focus shall remain on farmers (30%), micro (20%) and SMEs (30%) totalling 80% of loans allotted to these sectors. • Improve IT systems and credit processes to support overcome competition.

23. The Strategy Challenge W-O Strategy • Implement a total quality thrust in the bank. • Implement a centralized and integrated IT infrastructure for all units by 2007. • Institute organizational development plan for personnel. W-T Strategy • Develop fee-based services and alternative financial services beyond lending such as remittances, collection services, ATM, new MF products (MF Agri/HMF), etc. • Improve risk management and good governance towards globally acceptable best practices. • Build-up of equity via plowback of profits. Reduce dividends.

25. Mergers & Acquisitions • 1974: Fast-tracked its growth by merging with Peoples' Bank and Trust Co. • 1981: Acquisition of Commercial Bank and Trust Co. • 1982: Acquisition of Ayala Investment and Development Corporation, Makati Leasing and Finance Corporation • 1983: Acquisition of Family Bank and Trust Co.

26. 1996: Acquired CityTrust Banking Corporation • 2000: Acquired Ayala Insurance Holdings Corporation and Far East Bank and Trust Company • 2002: Acquired DBS Bank Philippines • 2005: Acquired Prudential Bank and Trust Co.

27. Product Diversification • 2000: BPI became the first bancassurance firm after it acquired the insurance companies of the Ayala Group • FGU Insurance Corporation • Universal Reinsurance Corporation • Ayala Life Assurance, Inc. • Ayala Health Care, Inc. • Ayala Plans, Inc. • 2009: Completed sale of its 51% stake in Ayala Life to Philamlife to form the BPI-Philam Life Assurance Corporation. 

28. Market Re-segmentation • 2000: BPI introduced its Internet bank, BPI Direct Savings Bank • 2010: Partnered with its sister firm, Globe Telecom, in establishing Globe BanKO, a mobile savings bank with microfinance as its main thrust. • Followed by the launch of the BPI Family Ka-Negosyo program, a reinforced program to fit the financing requirements of micro and small entrepreneurs, signaling BPI's foray into small and micro-entrepreneurship. • BPI “Micro deposit” ATM account...

29. Mergers & Acquisitions Pro Con Risk of failure due to incompatible culture and processes Over-paying for acquisition Internal dissent Employees turn-over • Rapid gain of market share • Secure critical technologies • Fill-up gaps in product lines • Have faster product roll-out • Acquire talent Manage the acquisition process by assigning a top executive to over-see the integration process with focus on managing social and cultural fit.

30. Product Diversification Pro Con Time-consuming preparation and change of internal processes Reconfigure IT support structure Heavy cost in initial product roll-out Risk of market rejection • Used to enter new market niche • Answer customer needs of existing market • Protect core products and market • Deliver top-line revenue growth Appoint product management unit to lead product research, design, and process improvements in coordination with other bank departments.

31. Customer Re-segmentation Pro Con Risk of poor market uptake High cost of investment for small markets Complexity of managing multiple markets and delivery channels High incremental cost with potentially lower incremental profits per new customer. • Discover new market segments • Support profitable market segments • Boost investments in key technologies and products • Expand sources of demand from existing products Market research unit and financial planning unit must carefully consider cost implications as you go to a different market niche. Impact on per unit cost or profits must be considered.

32. Producers Bank

33. 1995: Incorporated October 1995, started with one branch in San Jose City, Nueva Ecija. • 1996-2000: Opened 8 branches all in Nueva Ecija. • 2003-2006: Opened, acquired, or moved 20 branches in Isabela, Baguio, Pangasinan, Aurora, Pampanga, Zambales, Bulacan, and Camarines Sur and Pasig City. • 2010: Totaled 51 branches with presence in all regions of Luzon.

34. Branch expansion

37. In millions, Php YEARS

38. Geographic Expansion Pro Con Capital intensive Burn-out of assigned employees Complex management control systems Heavy investment in IT infrastructure Lax internal controls • Expand market reach • Diversify geographic risk • Enhance brand recognition • Tap new clients from the same market segment • Increase resources (loans, deposits) • Channel for additional products/ services Key executive should focus on putting together interdisciplinary team for market research, construction, IT, HR, and branch operations opening.