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ABS submission – Accenture BPO Services in the context of RCEP - LT 10A
Changes made to the report that was submitted earlier:
1. The PARTS framework has been modified in the original report
2. The co-opetition strategy has been tweaked from what was contained in the report
submitted in term 2
3. MOCAP (Vietnam) has been selected as a partner to Accenture Philippines
4. The modified Redding framework has been used to compare the 2 partners under
the intended co-opetition model.
5. Hofstede’s cultural dimensions have been used as comparison parameters between
the 2 nations.
6. 3 diagrams have been added to the original report as exhibits – (a) The co-opetition
mechanics, (b) The co-opetition advantage; and (c) The modified Redding framework
ASEAN Lab Member: Suhas Ananth Rajkumar
Mitesh Malhotra
Matthew V. Chua
Derrick Candelaria
Adrian Cruz
Nikita Bout
In cooperation with: Patrick Agudo Waterman
ASEAN 2015: Accenture BPO Services in the context of RCEP Asian Business Systems
ASEAN Lab Member: Suhas Ananth Rajkumar
Mitesh Malhotra
Matthew V. Chua
Derrick Candelaria
Adrian Cruz
Nikita Bout
In cooperation with: Patrick Agudo Waterman
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RCEP: Accenture Philippines - IMPLICATIONS on the BPO Industry
Importance of ASEAN
ASEAN is a geopolitical and economic organisation with Indonesia, Malaysia, Singapore,
Thailand, Philippines, Brunei, Myanmar, Cambodia, Laos and Vietnam as its constituent
member countries. ASEAN was formed in 1967 to encourage nation building, to combat a
fear of communism, and to foster economic development. The ASEAN countries have a
combined population of approximately 600 million, and as of 2011 had a combined nominal
GDP in excess of $2 trillion.1
ASEAN is increasingly being recognized as the driver of growth for the 21st Century as ASEAN
is an investment destination for the West and an integral neighbour for China and other
advanced developing nations in the Asia-Pacific. 2015 promises to be a seminal year for
ASEAN with the institution of the ASEAN Economic Community which aims to create a single
market and production base structured on highly competitive yet equitable economic
development that will further support integration of the region into the global economy.2
ASEAN+3 had its genesis in 1997 when the ASEAN bloc wanted to improve its ties with the
People’s Republic of China, Japan and South Korea. Further, ASEAN has good trade relations
with Australia, India and New Zealand, and in 2008-09 these 3 countries signed Free Trade
Agreements with ASEAN. This group of ASEAN-10 + 6 nations formed the basis of ASEAN’s
Regional Comprehensive Economic Partnership (RCEP).
RCEP: Regional Comprehensive Economic Partnership
The Regional Comprehensive Economic Partnership (RCEP), which launched in November
2011 at the East Asia Summit in Bali, aims to be the largest free-trade bloc in the world,
comprising of all 10 ASEAN nations plus 6 other countries which whom the group already
has FTAs: China, India, Japan, South Korea, Australia, and New Zealand. The ASEAN-led
agreement includes more than 3 million people and will account for 40% of world trade.
RCEP 16 clearly overlaps with TPP (Trans-Pacific Partnership) 12, as one agreement links the
region and the latter creates divisions and integrates select ASEAN members to Pacific-to-
1 EC.Europa.eu, European Union Relations with ASEAN. Retrieved. 29 October 2010. 2 ASEAN Economic Community (AEC). http://www.miti.gov.my/cms/content.jsp?id=com.tms.cms.article. Article_b5e22087-c0a81573-aba0aba0-ab12873b. Retrieved 24 April 2013.
2 | P a g e
Pacific. It is important to note, the U.S., however, is notably absent from the RCEP and
China is not currently negotiating in TPP. And through the RCEP and TPP, China and the U.S.
have not given preferential treatment to each other.
As mentioned above, ASEAN has a “spaghetti bowl” of separate FTAs with the China, South
Korea, Japan, India, Australia and New Zealand. The RCEP intends to harmonize various FTAs
rules and regulations into a single unified Regional Economic Agreement. In addition to
mere unification of the FTAs, the RCEP also intends to establish deeper economic
cooperation than ASEAN +1 FTAs. Additionally, the RCEP will reconcile two long-standing
proposals into a large regional trade: the East Asian Free Trade Agreement, which included
ASEAN, China, Japan and South Korea, and the Comprehensive Economic Partnership, which
added Australia, India and New Zealand. 3 The RCEP bridges the two proposals through the
adoption of open succession.4 The RCEP aims to increase trade in goods and services and
eliminate non-tariff trade barriers, and to gradually liberalize services and provide for
greater foreign direct investment in ASEAN and its external trading partners. The GDP of the
ASEAN and non-ASEAN negotiating parties is US$17 trillion.5 The RCEP will cover trade in
goods (creating national treatment for RCEP members), trade in services, investment,
economic and technical cooperation, intellectual property, competition, dispute settlement
and other issues.6
The RCEP opens up significant trade opportunities between the 16 parties to the
partnership. Further, the RCEP intends to be consistent with the provisions of the WTO, thus
eliminating potential conflicts, and paving the way for smooth trade. Export-driven
economies in Southeast Asia are expected to gain greater access to the burgeoning
domestic markets in China, Japan, and India. RCEP is expected to spur investment from
more-developed countries to less-developed ones and integrate them more fully into
3 "Why the RCEP matters for Asia and the world." EastAsiaForum. N.p., 15 May 2013. <http://www.eastasiaforum.org /2013/05/15/why-the-rcep-matters-for-asia-and-the-world/>. Retrieved: 19 June 2013. 4 "ASEAN Framework for Regional Comprehensive Economic Partnership." Association of Southeast Asian Nations. N.p., 2013. Web. <http://www.asean.org/news/item/asean-framework-for- regional-comprehensive-economic-partnership>. Retrieved: June 24, 2013 5 “Will RCEP compete with the TPP?”. Pakpahan, Beginda. November 28, 2012.
http://www.eastasiaforum.org/2012/11/28/will-rcep-compete-with-the-tpp/ Retrieved: June 24, 2013. 6 “Fact Sheet on The Regional Comprehensive Economic Partnership (RCEP)”.http://www.fta.gov.sg/press_ release%5CFACTSHEET%20ON%20RCEP_final.pdf. Retrieved: June 24, 2013
3 | P a g e
regional economic activity. This is an aspect to the RCEP that we would be closely examining
in this study.
Export of Services and the RCEP
Economies-services are often overlooked in high-profile trade negotiations even though
they are part of large and growing segment of world trade. As with lowering barriers to
trade in goods, liberalizing services trade provides many indirect benefits such as lower
prices, improved competition and choice for consumers, and improved productivity.7 For
example, Business Process Outsourcing networks (BPOs), are vital centres of communication
crucial for attaining low fixed costs, smooth customer interaction and achieving sales.
The RCEP will seek to remove non-tariff restrictions and discriminatory measures related to
trade in services. Specifically, RCEP will seek to supplement liberalization of services under
the General Agreement on Trade in Services (GATS) in the WTO for cross-border trade,
consumption abroad, commercial presence and presence of natural persons. Particularly,
cross-border supply covers services flows from the territory of one member into the
territory of another member such as banking or services transmitted via
telecommunications.8
The GATS establishes a framework of rules to ensure that services regulations are
administered in a reasonable, objective and impartial manner and do not constitute
unnecessary barriers to trade. Although completion of RCEP is still undergoing negotiations
and is expected to finish in 2015, the RCEP with registration in the WTO will support GATS
Article V and XXIV considering territorial application for Customs Unions by providing
liberalized preferential treatment only for the RCEP members. 9 Specifically, the RCEP will
create a system of most-favoured nations (MFN) breaking down national treatment barriers
creating a level playing field exclusively for the 16 member nations.
7 James, Sallie. "A Ser vice to th e Economy R emoving Ba rriers to “Invisible Trade”." Cato Institute. N.p., 2009. Web. 23 June 2013. <http://www.cato.org/sites/cato.org/files/pubs/ pdf/tpa-038.pdf>. 8 "The General Agreement on Trade in Services (GATS): objectives, coverage and disciplines." World Trade Organization. N.p., 2013. Web. 19 June 2013. <http://www.wto.org/english/tratop_e/ serv_e/gatsqa_e.htm>. [Also used by LT 11-A in their analysis of TPP] 9 "General Agreement on Tariffs and Trade 1994." WTO ANALYTICAL INDEX. N.p., 2013. Web. 23 June 2013. <https://www.wto.org/english/res_e/booksp_e/analytic_index_e/gatt1994_09_e.htm>.
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This is significant for developed economies in the Asia-Pacific region. For example, the RCEP
countries currently account for almost half (46.5 per cent) of Australia’s services exports and
39.4 per cent of two-way trade in services.10 Through the RCEP, Australia will seek to build-
on the outcomes of existing bilateral and regional agreements, and work towards greater
liberalization of services in the Asia-Pacific region. As the importance of the services sector
is vital to the Australian economy, key services play important roles in enabling trade,
particularly trade through integrated supply chains, the RCEP has considerable potential to
support greater engagement of the Australian services sector in the region with the
development of transparent rules to facilitate expansion of trade in services, including
increased market access.
Several of the barriers that RCEP will aim to tackle include are barriers to commercial
establishment, which include foreign ownership provisions and joint ventures and
restrictions on types of commercial services and quotas. Likewise discriminatory registration
requirements will also be addressed.
The BPO Industry
Due to advancements in information and communication technology, remoteness has
become irrelevant as far as the provision of some services is concerned. This opportunity is
being exploited by the developing countries in Asia, many of whom form a part of the RCEP
alliance. As the western countries move towards re-industrialisation, the services industry
will continue to be concentrated around the developing countries.
The ASEAN nations, with their inexpensive skilled labour, have taken complete advantage of
the difference in labour costs, and can effectively leverage their comparative advantage.
The worldwide BPO industry is estimated to be US$239 billion for the year 2012. Further,
the market is projected to grow at a rate in excess of 5% in 2013. India is the current
worldwide leader in the BPO space with 51% of the market.11 The market is, however, is far
10 "Australia's Trade and Investment Interests in Regional Comprehensive Economic Partnership (RCEP) Participating Countries." Australian Government Dpeartment of Foreign Affairs and Trade. N.p., Dec. 2013. Web. 19 June 2013. <http://www.dfat.gov.au/fta/rcep/rcep-background-paper-interests.html>. 11 "Philippine BPO Industry Facts and Figures." Ecumenical Institute for Labor Education and Research, Inc. N.p., Mar. 2012. Web. 23 June 2013. <http://www.eiler.ph/wp-content/uploads/2012/09/ BPO-briefer1.pdf>.
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from mature, and the present leadership position in the industry could easily be reversed
with careful planning.
The industry is also witnessing a shift in corporate mindset from cost to value. Likewise, the
industry is also expected to witness a consolidation in regulatory frameworks across the
world in recognition of the evolving industry dynamics. Free Trade Agreements – especially
the aspects that pertain to the export of services – will attract greater attention and
scrutiny.12
The BPO industry (Philippines)
The BPO industry is a significant contributor to the GDP of the Philippines, accounting for 5%
of the GDP with revenues in 2011 in excess of US$ 11.56 billion. The Government of the
Philippines has been very proactive with the establishment of Special Economic Zones (SEZs)
which offer a host of incentives and perks, including income tax holidays, tax exemptions,
etc.
Overall, the Philippines accounts for about 6% of the global BPO market, far behind India’s
51%. However, in the contact services segment, the Philippines is estimated to earn US$
7.38 billion, which is more than the US$ 7 billion earned by India. Presently the Philippines
generates most of its BPO revenue (86%) from the US market, and therefore is actively
seeking to leverage the benefits of ASEAN and RCEP to diversify is customer base in order to
eliminate the risk arising from concentration of business with one country. Employee
compensation costs, the primary cost component of any outsourcing operation can be a
tenth to a fifth of that of a domestic U.S. operation.13
The Philippines industry is heavily skewed in favour of the Voice BPO services, with a
majority of the employees coming from this segment (See Chart on the next page).
12
“BPO Set for 5% Growth in 2013”. Berthiaume, Dan. http://bpooutcomes.com/bpo-5-growth-2013/. Retrieved: June 24, 2013 13 "Philippines." Source Line. N.p., 2013. Web. 24 June 2013. <http://www.sourcingline.com/
outsourcing-location/philippines>.
6 | P a g e
Most of the BPO employees are in the contact centre sub-sector. There is a huge potential
for growth in employment in the BPO industry as only 1.7% of the total employed in the
country have been absorbed by the BPO industry. 14
In the financial attractiveness study conducted by A.T. Kearney, Philippines bested India in
the ranking of countries where putting up a BPO is the cheapest. During the Financial Crisis
of 2007, Philippines pressed forward its cost advantage by restricting the increase in
compensation of call centre agents.15
With the internal competition in the Philippines BPO industry, it becomes essential for a
company to have a good brand name and track record to ensure continued growth. This is
where a company such as Accenture (Philippines) had an advantage.
Accenture Philippines (BPO Division)
Accenture Philippines is one of the largest BPO service providers in the country with over
16,000 employees.16 It has two major bases in the Philippines – Manila and Cebu.
Accenture, with more than 2 decades’ experience in BPO service, has a huge advantage over
the other players in the industry. Accenture has secured the market leadership position for
itself in the Philippines. For 5 years running, Accenture has been named the No. 1 Global
14 "Philippines." Source Line. N.p., 2013. http://www.sourcingline.com/outsourcing-location/philippines. Retrieved: June
23, 2013. 15 "Philippine BPO Industry Facts and Figures." Ecumenical Institute for Labor Education and Research, Inc. N.p., Mar. 2012. http://www.eiler.ph/wp-content/uploads/2012/09/ BPO-briefer1.pdf. Retrieved: June 23, 2013. 16
“Accenture denies another batch of layoffs”. Chavez, Leilani. March 22, 2009. http://www.abs-cbnnews .com/business/03/22/09/accenture-denies-another-batch-layoffs. Retrieved: June 24, 2013.
Voice BPO
Animation & Game development
Engineering services
Transcription
IT Outsourcing
Non-voice BPO and KPO
7 | P a g e
Outsourcing Service Provider by the International Association of Outsourcing
Professionals17.
Accenture offers a number of BPO services:
1. Finance and Accounting services
2. Human Resource services
3. Learning
4. Procurement
5. Supply Chain services
Most of the above services are the voice-based BPO services. There is however a huge
untapped market of non-voice based BPO and KPO services that are waiting to be
capitalized upon. In order to survive and thrive in the highly competitive BPO industry,
Accenture would need to think beyond its current competencies. To chart out its possible
future courses of action, Accenture would have to study the internal and external factors
that influence its success and growth.
(See Exhibit 1: SWOT Analysis for Accenture Philippines)
The SWOT analysis provides a number of strategic alternatives available to Accenture to
continue their growth trajectory.
(See Exhibit 2: Strategic Options from SWOT Analysis)
One of the strategic options that appear attractive is the pursuit of aggressive expansion. To
pursue this option, we should refrain from viewing the company in an isolated manner. In
the context of ASEAN, there is a possibility of coopetition while pursuing expansion. Instead
of organic expansion into new and uncertain territories, Accenture could consider coopeting
with other companies already operating in the region, leveraging on the free trade of
services permitted under ASEAN, and thereby offering a bigger basket of services at cost
effective rates.
17 Business Process Outsourcing (BPO): Services Overview. Accenture Website. http://www.accenture.com/ph- en/Pages/service-bpo-overview-summary.aspx. Retrieved: June 24, 2013.
8 | P a g e
The Possibility of Coopetition
Coopetition is a principle of cooperative competition which occurs when a company
interacts in congruence with the other company in order to achieve a higher value creation
as compared from working individually to achieve a competitive advantage.
One of the best tools for gauging the possibility of coopetition is to study the Value Net. The
Value Net is a schematic map designed to represent all the players in the game and the
interdependencies among them.
The Value Net for Accenture Philippines has been charted below
The Value Net indicates that there is a possibility of combining the services of the
Complementors with those Accenture Philippines to offer a more integrated product basket
to their clients.
Using the information from the Value Net, we can start formulating a PARTS analysis for
coopetition.
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Since the Accenture would wish to change the dynamics of the industry, a PARTS analysis
would be invaluable to understand the bigger picture, and to identify the key drivers of
change in the industry.
According to the game theory, there are the following 5 elements that could be changed
in order to derive the most benefit out of the ‘Game’:
1. PLAYERS – by adding a separate specialized player in the non-voice based BPO
segment, Accenture would bring in expertise that would give it a competitive
advantage in the industry, and would also let it tap into newer markets.
2. ADDED VALUES – A bigger basket of services can be offered. Right now a major
portion of Accenture’s revenues come from the voice based operations. Now
Accenture is going to be able to provide more value to its customers with a bigger
and better basket of services available.
3. RULES – Instead of trying to be a one-stop source of services individually, Accenture
can tie up with other companies to bring the same level of value to its customers
without actually having to provide services that are not its strength.
4. TACTICS – The principle of judo economics can be followed here. By combining with
other nations to offer complementary services, Accenture Philippines could expand
their economies of scope. The present stalwarts of the industry will not recognize
the direct competition that they are facing because of the cooperative aspect of this
arrangement. It also would give Accenture Philippines a back door entry to the TPP
market.
5. SCOPE – With the RCEP taking shape, there is a huge opportunity to provide BPO
services to the six countries that are not a part of ASEAN. Further, with a bigger
basket of services, the market can actually be grown as the customers of BPO service
providers would prefer a single window provider of services.
10 | P a g e
Options for Coopetition
Indonesia: Indonesia is a huge provider for BPO services. With a population of
approximately 250 million, it is the fourth most populated country in the world. What makes
Indonesia unattractive, however, is that it offers no particular advantage over the
Philippines. Both are in a relatively similar position in the Voice / Non-Voice BPO segment.
Malaysia: Malaysia does not offer any advantage as far as cost-competitiveness is
concerned. The costs are similar to what one would associate with Philippines, and
therefore there is no synergistic value to be gained from tying up with a Malaysian partner.
Vietnam: The BPO industry in Vietnam is still at a nascent stage of development. In the
technical Non-Voice BPO segment, Vietnam offers the advantage of lower attrition rates,
high levels of technical skill, Government support, and low costs of service. This makes
Vietnam an ideal partner for a coopetition model.
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Vietnam as a partner in Coopetition:
Vietnam has a particular set of strengths and weaknesses that make it particularly suited to
a coopetitive model. Its strengths and weaknesses are complementary to those of the
Philippines. Vietnam has strong technical skills, but it lacks the language skills that make the
Philippines particularly suited to Voice based BPO services.
Accenture Philippines can therefore tie up with a Vietnamese Non-Voice BPO services
provider to provide services that are complementary to its Voice based BPO services. There
will be a creation of an economy of scope, and by offering a wider basket of services,
Accenture Philippines will be able to grow the BPO market. In this way, it could even
leverage the advantages of ASEAN and RCEP to counter the threat of service providers from
India (who in turn are threatened by the rising costs in India).
A tie up with a Vietnamese firm will be a unique form of tapered integration for Accenture
Philippines.
Some of the economic factors that support a decision to shift services to Vietnam are:
1. Lower labour costs and labour availability
2. Favourable tax rates and tax incentives
3. Training mechanisms in place
4. Government support and encouragement
5. Stable business / political environment
6. Different geographical locations also aid Business Continuity.
Considerations to keep in mind while selecting Vietnam as a partner in tapered integration.
1. Agency costs: With tapered integration, there is a strong likelihood that there will be
agency costs. However, the difference in the labour costs should more than cover
the agency costs that will be associated with this tapered integration.
2. Bureaucracy Effects: Having a service center located in a different geographic region
could lead to more bureaucracy. This problem has largely been mitigated thanks to
the improvements in technology which have rendered remoteness irrelevant.
3. Contracting and bounded rationality: There are always certain limitations with
having contract partners. Contracts are limited by bounded rationality, and this is
where having overseas service partners could get cumbersome
12 | P a g e
In the larger context of the arrangement, however, it appears that the benefits far outweigh
the minor considerations.
Accenture Philippines can continue to provide its Voice based BPO services, and for
the Non Voice Based services, it can enter into a tie up with a Vietnamese BPO service
company, which would have been a complementary service provider thus far. By following
this path of tapered integration, Accenture Philippines would be able to offer a large basket
of services. With the freer transfer of services permitted under ASEAN, along with the
consolidated FTA proposed under RCEP, Accenture Philippines should be able to de-risk its
US centric BPO services. The competitive aspect of the co-opetition model would come into
the picture as each company tries to innovate within its area of operation. The recent
“mayday” feature in the tablets released by Amazon.com help to demonstrate the manner
in which voice-based BPO services can compete with the non-voice based BPO services, and
this is the kind of innovation that will drive the BPO industry forward, benefitting all the
parties involved.
(See Exhibit 3: The Co-opetition mechanics)
In the longer term, we believe that a co-opetitive arrangement would help both countries (
and the companies therein) to properly define and leverage their comparative advantages,
and would help the overall development of the economies in the ASEAN countries. The
development of a co-opetitive framework would be crucial in tackling the emerging
economic blocs of India and China
(See Exhibit 4: Regional benefits of co-opetition)
13 | P a g e
Part II – Term 3 report
The Cultural considerations of an international tie-up
In any kind of international tie-up between entities, the most important step is the selection
of the right partner. Once of the concerns of international business is a possible cultural
mismatch that could potentially occur.
For Accenture Inc (Philippines), for a co-opetition model to work, it would need to find a
suitable partner. To capitalise on the growing BPO market in Vietnam, one of the biggest
players is MOCAP. MOCAP Vietnam is the joint stock company of Mitsui& Co. (Japan) Pte
Ltd, Smartmedia JSC (Vietnam), Moshi Moshi Hotline Inc (Japan) and Harvey Nash (UK).
Mocap Vietnam specializes in diversified fields such as call center, market researching,
marketing, consulting and business process operation including sales promotion,
documentation and data processing services.
To study how suitable the partner would be, the modified Redding framework forms a
valuable tool.
(See Exhibit 5: The modified Redding framework)
The Redding framework is comprised of 4 important pillars which we will be studying in
detail. These pillars would help us evaluate how suitable the proposed tie up with MOCAP
might be:
1. Pillar I – The Business systems
a. The Shareholders
Both companies are privately held. While Accenture is 100% held by
Accenture USA, MOCAP is held by a number of investors from different
countries including Japan, Vietnam, UK etc. This multinational holding makes
the companies more global in their outlook, and should make it easier for
the companies to work together. It is when private entities work with
government bodies that there might be a difficulty in styles, but in this
instance such difficulties should not arise.
b. Government encouragement to the BPO industry
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Philippines and Vietnam have taken contrasting approaches to encouraging
the development of the BPO industry. The Philippines government has
permitted setting up SEZs, and has granted tax holidays to BPO firms
operating in the region.
The Vietnam government has taken a more hands-on approach, and
has worked on the infrastructure supporting BPOs. By making arrangements
for technical training, Vietnam hopes to become a big player in the non-
voice based BPO sector.
2. Pillar II – Order
This pillar studies the stakeholders, the governmental structures, the
financial/human/social capital of the country, etc.
Philippines and Vietnam are similar in that they are 2 of the largest receivers
of Foreign Direct Investment among the developing ASEAN countries. Philippines
received US$ 2 billion in FDI in the year 2012, while Vietnam received US$ 10 billion.
Both age demographics indicate that in both the countries more than 50% of the
population is under the age of 25, and this is encouraging to the BPO industry.
The major difference that we see between the 2 countries pertains to their
areas of strength – Philippines has the advantage of strong English-speaking skills
which makes it a preferred destination for voice-based BPO activities, while Vietnam
may not have strong English-speaking capabilities but has strong technical skills
which makes it better suited to the non voice-based BPO activities.
3. Pillar 3 – Meaning
This pillar studies the cultural aspects of the organizations and tries to ascertain
whether the two organizations would be a good cultural fit. Here culture is not a
measurement of each organization’s working style, but is more concerned with the
impact of history and tradition on each nation’s working culture.
To gain a proper understanding of each country’s culture, a good starting
point is its history. Philippines and Vietnam have both been subject to foreign rule
15 | P a g e
for extended periods. This makes them less “Masculine” in nature than other
nations. These aspects will be studies in more detail in the Hofstede analysis that
will follow.
While the Philippines is predominantly catholic, Vietnam has its own
indigenous religions. It must be noted that because of their previous rule under the
French, the Vietnamese are suspicious of the Catholics, and this might have some
impact on inter-country business activities.
The 2 countries are bound, however, by their common stance on the South
China Sea disputes, and as a result the bilateral ties between the 2 nations have
been friendly.
4. Pillar 4 – Coordination
This pillar studies the global issues and the industry in which the companies
operate.
The BPO industry has been growing because of improvements in information
and communication technology that have made distance irrelevant. The Philippines
has seen its industry grow at a compounded annual growth rate of 46% in the last 6
years, while the Vietnam BPO industry grew at 25% in the previous year.
The regional free trade agreements that are going to come into effect will
make it easy for services to be transferred between the countries. The RCEP will
permit for the transfer of services between Philippines and Vietnam, while the TPP
will allow Accenture Philippines to get back door access to markets like USA and
Canada through Vietnam.
On studying the various pillars of the modified Redding framework, there don’t appear to be
any systemic impediments to the intended tie-up working. A more granular cultural study
will therefore be able to confirm if the tie-up would work or not, and for that purpose we
can use the Hofstede system of Cultural Dimensions which will give us a clearer picture.
Hofstede’s cultural dimensions help us better understand the hierarchical, long-term
orientation, risk aversion, collectivist nature and the decisiveness of the cultures being
studied.
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Hofstede’s Cultural Dimensions
When we look at the Hofstede graph above, we see that the 2 countries are similar in most
repects except for the Long Term Orientation. We shall look at each parameter in detail
now:
Power Distance (PDI)
This index measures the hierarchical nature of the nations. We see that both the nations are
hierarchical in nature, as the distance to power is high. This makes for similar working styles
and therefore the two companies should have no problem in this regard.
Individualism (IDV)
Both the countries score low on the individualism graph, and therefore classify as
collectivist. This would make them better working in teams, as there is a smaller culture of
“I” and a bigger culture of “we” – something that would be crucial in the call centre
industry.
Masculinity (MAS)
The masculinity index measures how assertive the people of a country are. Both countries
are not very masculine. Philippines is slightly more masculine, and therefore would be in a
better position to assert their authority over their Vietnamese counterparts, something that
would actually work well in our suggested co-opetition model.
0
20
40
60
80
100
PDI IDV MAS UAI LTO
Philippines
Vietnam
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Uncertainty Avoidance (UAI)
A low uncertainty avoidance score indicates that the countries are very relaxed in their
nature, and change is not seen as a threat. This indicates why BPOs have flourished in these
countries, as low UAI scores are particularly suited to the BPO industry.
Long Term Orientation
The biggest difference between the countries is seen in this index. While the Philippines is
short term oriented, Vietnam is long term oriented. Short term orientations generally
display a greater respect for traditions, while long term oriented nations display a greater
propensity to change. Further, since the development of skills under our suggested co-
opetition model requires investment of financial resources, Vietnam’s high LTO score makes
it an attractive avenue for investment.
Using the modified Redding framework and comparing the 2 countries using Hofstede’s
cultural dimensions, there don’t seem to be any impediments that could threated the
success of the suggested strategy.
The risks of the intended co-opetition strategy
There risks associated with the strategy however. Vietnam’s BPO segment is still in its
nascent stages, and it is uncertain whether it would actually be able to harness its technical
expertise to improve its non-voice based BPO viability. Further, the intended strategy also
depends heavily on the successful signing of the RCEP, TPP and AFTA. While considering
implementing this strategy, there should be careful consideration given to the fact that
there are several factors in play here that are beyond the control of the 2 companies.
The risks, however, are worth taking, as this would give the region a shot at establishing
itself as the BPO destination in the region. As at the end of 2012, India controlled 51% of the
world’s BPO market, and innovative strategies would be required to threaten India’s
dominant position. ASEAN has the capability to become the outsourcing destination, and
governmental and corporate support can help ensure that this becomes a reality.
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Exhibit 1: SWOT Analysis
STRENGTH
1. Well established and well regulated
economy.
2. Inexpensive and skilled labor force.
3. English language benefit
4. Strong customer base as it is among
well known companies
5. Lenient Labour Laws
OPPORTUNITIES
1. Unemployment becomes massive, 25
million people lose jobs in OECD
region (3)
2. Inflation is back in other countries if it
occurs in other non-Philippine RCEP
nations. (5)
3. Emerging Powers Raise their Voices in
International Institutions (20)
4. Reshoring and Re-Industrialization
become economic and political
priorities (28)
5. Productivity is harmonized worldwide
(30)
6. From cheap manpower to cheap
brainpower (32)
7. Remoteness becomes irrelevant (42)
8. Technological divide disappears (43)
9. Regional Free-Trade; Reduced tariffs
for RCEP 10 countries
10. Uniform Regulations: Customs, Rules
of Origin (ROO), Environment,
Technology
11. Increased cooperation between RCEP
signatories, including coopetition
among ASEAN members
Note: Numbers refers to the IMD Roadmap
WEAKNESS
1. Privacy concerns
2. Cultural differences
3. High attrition rates
4. Susceptible to external regulatory
policies
THREATS
1. High volatility of currencies (6)
2. Economic Nationalism on the Rise,
Trade protectionism increases
resulting to favoritism of “National
Champions; “Buy National” mentality
(8)
3. New Global Brands everywhere (14)
4. State Intervention (17)
5. Personal taxes increase (18)
6. Labor cost differences shrink (29)
7. International Tax Consensus is
established and nations tighten tax
policy (31)
8. Regional Integration Initiatives will be
alienated and ineffective such as:
bilateral preferential trade
agreements, ASEAN FTAs
9. Competition among RCEP member
nations in providing services
10. Diverse ASEAN countries (cultural,
economic, political, etc.) will be forced
to cooperate to build a competitive
advantage to ensure benefits from
RCEP, from cooperation member
countries is needed which is currently
not materialized
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Exhibit 2: SWOT – Strategic Options
1. S1O4, S2O4: Outsourcing
With the reindustrialization activities going on in USA and Europe, more service
related activities will be outsourced to countries with well established, and well
regulated economies, and which have an inexpensive and skilled labour force.
Accenture Philippines can look to take advantage of this
2. S5O7, S5O8: Pursue organic growth
With the relatively lenient labour laws in effect in the developing countries, and with
remoteness and technological divides now being rendered irrelevant, Accenture
Philippines can aggressively pursue organic growth in this manner.
3. S1T1: Long Term Contracts and Hedge Risks
Accenture Philippines can enter into long term contracts, and can hedge its currency
risk using forwards/futures contracts.
4. S2T2: Leverage Labour Costs
The huge difference in labour costs should be leveraged, and this will be helpful in
overcoming economic nationalism.
5. S1T5: Higher Margin Services
To counter the threat of an increase in personal tax that might raise costs, Accenture
Philippines should consider moving up the value chain into higher margin services.
6. S4T9: Aggressive Expansion
Accenture Philippines must leverage its strong brand name and pursue aggressive
expansion to prevent competition from other companies within the RCEP.
7. W1O8, W1O10: Lobby for Standardization of Technological Protocols
Taking advantage of the opportunities provided by the RCEP, Accenture Philippines
should lobby for standardization of technological protocols in order to counter
privacy and IPR concerns that may be impeding the growth of the industry.
8. W4O3: Minimize Restrictive Regulatory Policies
With the increasing economic bargaining power of the emerging countries which
form a part of the RCEP, Accenture Philippines must ensure that it minimized
restrictive regulatory policies from the countries to which they are exporting their
services.
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Exhibit 3: The Co-opetition mechanics
Tie up between Accenture Inc
(Philippines) and MOCAP (Vietnam) would harness the
comparative advantages of each country. Accenture
Inc to focus on voice-based, and MOCAP to
focus on non-voice based services
Bigger basket of services can be
offered. MOCAP the credibility associated with Accenture. Gives
Accenture Inc backdoor access to
the TPP markets
Each company is then free to innovate
within its own sector, thus leading to better
BPO products and processes.
Development of the region as an
outsourcing hub thereby generating greater business for
all the parties involved