AYALA CORPORATION

A. Case Abstract

The Ayala Group of Companies, often referred to as Ayala Corporation, is one

of the oldest and largest conglomerates in the Philippines. Founded in 1834 by
Spanish-Filipino businessman Domingo Róxas and Spanish partner Antonio
de Ayala, the group has evolved into a diverse conglomerate with interests in
various sectors.

Ayala Group operates across several industries, including real estate, banking
and financial services, telecommunications, water infrastructure, energy,
industrial technologies, and healthcare. Some of its major subsidiaries and
business units include Ayala Land (real estate development), Bank of the
Philippine Islands (banking), Globe Telecom (telecommunications), AC
Energy (energy), and Manila Water (water utilities).

B. Vision Statement

To be the leading Philippine conglomerate by 2030, recognized globally for its

integrity, social responsibility, and excellence, and with businesses that create
long-term value for shareholders, customers, employees, partners, and the
communities it serves.

C. Mission Statement

We are a group of companies bound by a common purpose: to create value that

benefits society and uplifts the lives of the Filipino people. We do this by
nurturing relationships with all our stakeholders, creating innovative solutions,
and achieving operational excellence in the service of our customers and
communities. With our unique and complementary strengths, we build and
sustain profitable, long-term growth.

D. External Audit

Opportunities

1. The Philippines' infrastructure needs present opportunities for Ayala to

invest in projects such as transportation, energy, and urban development.
2. The rising demand for residential and commercial spaces in urban centers
creates opportunities for Ayala Land to expand its real estate ventures.
 3. With the increasing importance of technology, Ayala can leverage its
existing businesses to drive digital transformation and offer innovative
services to customers.
4. Growing emphasis on sustainability and environmental consciousness
opens doors for Ayala to invest in green technologies and eco-friendly
practices.
5. Ayala can explore expansion opportunities in neighboring Southeast Asian
countries to diversify its geographic presence.

Threats

1. Fluctuations in the Philippine economy can impact consumer spending,

business investments, and the overall financial performance of the
conglomerate.
2. Ayala faces competition from both local and international players across
its various business sectors, which could potentially erode market share and
profitability.
3. Changes in regulations or government policies could affect the
conglomerate's operations, particularly in sectors like utilities and real
estate.
4. Rapid technological advancements can lead to the obsolescence of existing
business models, requiring Ayala to continuously innovate and adapt.
5. Political instability, trade tensions, or conflicts in the region could impact
the conglomerate's operations, especially if it expands beyond the
Philippines.

CPM – Competitive Profile Matrix

 Ayala Group of Alliance Global SM Prime
Companies Group Holdings
Critical Success Weighted Weighte Weighte
Weight Rating Rating Rating
Factors Score d Score d Score
Market
0.15 3 0.45 4 0.6 3 0.45
Leadership
Financial Stability 0.12 4 0.48 3 0.36 3 0.36
Innovation
0.10 3 0.30 2 0.20 4 0.40
Capability
Diversification 0.10 4 0.40 3 0.30 3 0.30
Brand Reputation 0.10 4 0.40 2 0.20 3 0.30
Geographic
0.08 3 0.24 2 0.16 4 0.32
Presence
Regulatory
0.08 4 0.32 3 0.24 3 0.24
Compliance
Customer-Centric
0.07 3 0.21 3 0.21 4 0.28
Approach
Technological
0.07 4 0.28 2 0.14 4 0.28
Innovation
Total 1.00 3.08 2.41 2.93

External Factor Evaluation (EFE) Matrix

Key External Factors Weight Rating Weighted Score

Opportunities
1. The Philippines' infrastructure needs
present opportunities for Ayala to invest in
projects such as transportation, energy, and 0.15 3 0.45
urban development.

2. The rising demand for residential and

commercial spaces in urban centers creates
opportunities for Ayala Land to expand its 0.12 4 0.48
real estate ventures.

3. With the increasing importance of

technology, Ayala can leverage its existing
businesses to drive digital transformation and 0.10 4 0.40
offer innovative services to customers.

4. Growing emphasis on sustainability and 0.10 3 0.30

environmental consciousness opens doors for
Ayala to invest in green technologies and eco-
friendly practices.

5. Ayala can explore expansion opportunities

in neighboring Southeast Asian countries to
0.08 2 0.20
diversify its geographic presence.

Threats
1. Fluctuations in the Philippine economy can
impact consumer spending, business
investments, and the overall financial 0.10 2 0.20
performance of the conglomerate.

2. Ayala faces competition from both local

and international players across its various
business sectors, which could potentially 0.10 3 0.30
erode market share and profitability.

3. Changes in regulations or government

policies could affect the conglomerate's
operations, particularly in sectors like utilities 0.10 3 0.30
and real estate.

4. Rapid technological advancements can lead

to the obsolescence of existing business
models, requiring Ayala to continuously 0.08 4 0.32
innovate and adapt.

5. Political instability, trade tensions, or

conflicts in the region could impact the
0.07
conglomerate's operations, especially if it 2 0.14
expands beyond the Philippines.

TOTAL 1.00 3.05

E. Internal Audit

Strengths

1. The Ayala Group's extensive portfolio spans across multiple industries,

 reducing its reliance on a single sector and providing stability during
economic fluctuations.
2. Ayala is known for its strong reputation for quality, innovation, and
ethical business practices. This positively impacts customer trust and
loyalty.
3. The conglomerate's financial strength and stability are key factors that
enable it to undertake large-scale projects and investments.
4. Ayala has achieved market leadership in several industries it operates in,
such as real estate (Ayala Land), banking (Bank of the Philippine
Islands), and telecommunications (Globe Telecom).
5. The Ayala Group has a history of adopting and integrating innovative
technologies into its various businesses, helping it stay ahead in
competitive markets.

Weaknesses

1. A significant portion of Ayala's operations is concentrated in the

Philippines, making it susceptible to economic fluctuations and
regulatory changes within the country.
2. The diverse range of businesses within the conglomerate might lead to
management and coordination challenges, potentially affecting
decision-making efficiency.
3. Operating in various industries exposes Ayala to a wide range of
regulations that could impact its operations and profitability.

Financial Ratio Analysis (December 31, 2022)

GROWTH RATES
Sales Qtr vs Yr Ago Qtr 16.64%
Net Income YTD vs YTD 13.15%
Net Income Qtr vs Yr Ago Qtr -3.16%

PROFITABILITY RATIOS
Gross Profit (Sale of Goods and Services – Cost of Sales and 0.20
Margin Services) / Sale of Goods & Rendering of Services

Net Profit Margin Net Profit / Sale of Goods & Rendering of Services 0.07

Return on Equity Net Income to Owners of the Parent / Total 4.6%

Stockholders' Equity
Return on Net Income to Owners of the Parent (Common) / 7.7%
Common Equity Common Equity Attributable to Owners of the Parent
 (Average)
Return on Assets Net Income / Total Assets 3.10%
Price/Earnings Price per Share/ Earnings Per Common Share (Basic) 16.47%
Ratio

FINANCIAL LEVERAGE RATIOS

Assets-to-Equity Total Assets / Total Stockholders’ Equity 2.48
Ratio
Interest Rate Earnings Before Interest and Taxes (EBIT) / Interest 2.79
Coverage Ratio and other Financing Charges
Debt Ratio Short-term Debt + Long-term Debt / Total Assets 0.37

Debt-to-Equity Ratio Short-term Debt + Long-term Debt / Total 0.93

Stockholders’ Equity
Net Debt-to-Equity Net Debt / Total Stockholders’ Equity 0.80
Ratio
LIQUIDITY ANALYSIS RATIO
Liquidity Cash & Cash Equivalents + Short-term Investments / Current 0.25
Ratio Liabilities
Current Ratio Current Assets / Current Liabilities 1.75
Quick Ratio Quick Assets / Current Liabilities 1.00
Solvency Total Assets / Total Liabilities 1.67
Ratio

OTHER RATIO

Book Value Per Common Equity Attributable to Owners of the Parent / 552.64
Share Outstanding Common Shares
 Net Worth Analysis (December 31, 2022)
1. Stockholders’ Equity + Goodwill 367,062,529,000 + 33,286,376,000 400,348,905,000
2. Net income
Method x 5 = 27,397,791,000 x 5
Average 136,988,955,000
150,197,549,420
3. Share price = P 5 0 / 4 2 . 2 0 x 2 7 , 3 9 7 , 7 9 1 , 0 0 0 32,461,837,678
4. Number of Shares Outstanding x Share Price = 619.81M x P50 30,990,500,000

Internal Factor Evaluation (IFE) Matrix

 Weight
Key Internal Factors Weight Rating ed
Score
Strengths
1. The Ayala Group's extensive portfolio spans
across multiple industries, reducing its reliance on a
single sector and providing stability during 0.15 4 0.60
economic fluctuations.

2. Ayala is known for its strong reputation for

quality, innovation, and ethical business practices. 0.14 4 0.56
This positively impacts customer trust and loyalty.

3. The conglomerate's financial strength and

stability are key factors that enable it to undertake 0.12 4 0.48
large-scale projects and investments.

4. Ayala has achieved market leadership in several

industries it operates in, such as real estate (Ayala
Land), banking (Bank of the Philippine Islands), 0.13 4 0.52
and telecommunications (Globe Telecom).

5. The Ayala Group has a history of adopting and

integrating innovative technologies into its various
businesses, helping it stay ahead in competitive 0.11 4 0.44
markets.

Weaknesses
1 . A significant portion of Ayala's operations is
concentrated in the Philippines, making it
susceptible to economic fluctuations and regulatory 0.10 2 0.20
changes within the country.

2. The diverse range of businesses within the

conglomerate might lead to management and
0.10 2 0.20
coordination challenges, potentially affecting
decision-making efficiency.
3. Operating in various industries exposes Ayala to
a wide range of regulations that could impact its 0.15 2 0.30
operations and profitability.
TOTAL 1.0 3.30

F. SWOT Strategies
SO Strategies

1. Leverage the conglomerate's innovation-focused culture to drive digital

transformation across all businesses. Invest in cutting-edge technologies like
AI, IoT, and block-chain to enhance customer experiences, streamline
operations, and create new revenue streams. (S5, O3).

2. Capitalize on the strong brand reputation by taking a leadership role in

sustainable development initiatives. Invest in green technologies, eco-
friendly real estate projects, and renewable energy ventures to align with
global sustainability trends. (S2, O4)

3. Leverage the diversified portfolio and consider expanding operations into

promising Southeast Asian markets. Use the conglomerate's expertise in
various sectors to tap into emerging economies and establish a regional
presence. (S1, O5)

4. Capitalize on the growing need for infrastructure development in the

Philippines. Invest in large-scale transportation, energy, and urban
development projects to contribute to the country's progress while generating
sustainable returns. (S3, O1)

WO Strategies

1. Streamline the conglomerate's complex organizational structure when

undertaking large-scale infrastructure projects. Implement efficient project
management practices to ensure seamless coordination, timely execution, and
optimal resource allocation. (W2, O1)

2. To mitigate over reliance on the Philippine economy, form strategic

partnerships with local businesses in targeted Southeast Asian markets.
Collaborate to enter new markets and navigate regulatory challenges while
leveraging local expertise. (W1, O5)

3. Embrace the growing emphasis on sustainability by proactively enhancing

regulatory compliance related to green technologies and sustainable
practices. This approach can help improve public perception and minimize
potential regulatory hurdles. (W3, O4)

4. Leverage digital transformation to simplify the customer experience across

diverse businesses. Develop integrated digital platforms that provide
seamless access to various services and products, enhancing customer
loyalty. (W2, O3)

ST Strategies

1. Leverage the conglomerate's market leadership position to proactively

engage in mergers or acquisitions that would enhance its competitive
advantage. This could involve acquiring key competitors or businesses that
complement Ayala's existing portfolio. (S4, T2)

2. Strengthen the focus on innovation by investing in research and

development. Stay ahead of potential technological disruptions by
consistently updating and upgrading products, services, and business
processes. (S5, T4)

3. Use the diversified portfolio to strategically allocate resources to

businesses that are less affected by economic downturns. This diversification
can help mitigate the impact of economic volatility on the conglomerate's
overall performance. (S1, T1)

4. Leverage the conglomerate's market leadership position to quickly adapt to

changes resulting from geopolitical factors. Monitor regional and
international developments and adjust strategies accordingly to minimize
negative impacts. (S4, T5)

WT Strategies

1. Simplify the organizational structure by implementing clearer reporting

lines and efficient decision-making processes. This streamlined structure can
enhance agility and responsiveness, helping the conglomerate stay
competitive. (W2, T2)

2. Given the threat of geopolitical factors and economic volatility, focus on

expanding operations beyond the Philippines. Diversify the geographical
presence to minimize risks associated with being overly reliant on a single
market. (W1, T5)

3. Develop a dynamic regulatory compliance strategy that takes into account

potential changes in regulations. Anticipate regulatory shifts and proactively
adjust business practices to remain compliant and minimize disruption. (W3,
 T3)

4. Develop business models that are resilient to economic volatility. Tailor

offerings to local markets and consumer needs, enabling the conglomerate to
maintain steady revenue streams even during economic downturns. (W1, T1)

G. SPACE Matrix

Financial Strength (FS)

Extensive portfolio across industries 5 Environmental Stability (ES)

Financial strength for large-scale projects 5 Strong reputation for quality, innovation, ethics -4

Market leadership in key industries 5 Adoption of innovative technologies -4

Financial Strength (FS) Average 5.0 Innovative products and capabilities -4

Adherence to regulations and sustainability -4

Competitive Advantage (CA) Environmental Stability (ES) Average -4.0

Leveraging existing businesses for digital transformation -5

Investment in green technologies -4 Industry Strength (IS)

Competitive Advantage (CA) Average -4.5 Infrastructure investment opportunities 5

Demand for real estate expansion 4
Expansion into Southeast Asian markets 3
Economic fluctuations impacting performance 5
Intense competition affecting market share 4
Regulatory changes impacting operations 4
Technological disruptions affecting business models 5
Political instability and trade tensions 3
Industry Strength (IS) Average 4.1

x-axis: 4.1 + -4.5 = 0.4

y-axis: 5.0 + -4.0 = 1.0

H. Grand Strategy Matrix

I. The Internal-External (IE) Matrix

GROW and BUILD

J. QSPM

Strategic Alternatives
Explore
Extend operations
opportunities to
beyond the
enter new
Philippines and
industries or
explore growth
sectors that are
opportunities in
aligned with
other countries,
Ayala's core
especially in the
strengths and
ASEAN region.
Key Internal Factor Weight values.
Strengths AS TAS AS TAS
1. The Ayala Group's extensive portfolio spans
across multiple industries, reducing its reliance
on a single sector and providing stability during 0.15 4 0.60 3 0.45
economic fluctuations.

2. Ayala is known for its strong reputation for

quality, innovation, and ethical business
0.14 4 0.56 4 0.56
practices. This positively impacts customer trust
and loyalty.
3. The conglomerate's financial strength and
stability are key factors that enable it to 0.12 4 0.48 3 0.36
undertake large-scale projects and investments.
4. Ayala has achieved market leadership in
several industries it operates in, such as real
estate (Ayala Land), banking (Bank of the
0.13 4 0.52 4 0.52
Philippine Islands), and telecommunications
(Globe Telecom).

5. The Ayala Group has a history of adopting

and integrating innovative technologies into its
various businesses, helping it stay ahead in 0.11 4 0.44 3 0.33
competitive markets.

Weaknesses
6. A significant portion of Ayala's operations is
concentrated in the Philippines, making it
0.10 4 0.40 2 0.20
susceptible to economic fluctuations and
regulatory changes within the country.
7. The diverse range of businesses within the
conglomerate might lead to management and
0.10 3 0.30 3 0.30
coordination challenges, potentially affecting
decision-making efficiency.
8. Operating in various industries
exposes Ayala to a wide range of
0.15 3 0.45 3 0.45
regulations that could impact its
operations and profitability.
SUBTOTAL 1.0 3.75 3.17
 Extend Explore
operations opportunities
beyond the to enter new
Philippines and industries or
explore growth sectors that are
opportunities in aligned with
other countries, Ayala's core
especially in the strengths and
Key External Factors Weight ASEAN region. values.
Opportunities AS TAS AS TAS
1. The Philippines' infrastructure needs 0.15 3 0.45 4 0.60
present opportunities for Ayala to invest in
projects such as transportation, energy, and
urban development.
2. Ayala is known for its strong reputation for 0.12 4 0.48 4 0.48
quality, innovation, and ethical business practices.
This positively impacts customer trust and loyalty.

3. With the increasing importance of technology, 0.10 3 0.30 4 0.40

Ayala can leverage its existing businesses to drive
digital transformation and offer innovative
services to customers.
4. Growing emphasis on sustainability and 0.10 3 0.30 4 0.40
environmental consciousness opens doors for
Ayala to invest in green technologies and eco-
friendly practices.
5. Ayala can explore expansion opportunities 0.08 4 0.32 2 0.16
in neighboring Southeast Asian countries to
diversify its geographic presence.
Threats
1. Fluctuations in the Philippine economy can
impact consumer spending, business investments,
0.10 4 0.40 4 0.40
and the overall financial performance of the
conglomerate.
2.Ayala faces competition from both local and
international players across its various business
0.10 3 0.30 3 0.30
sectors, which could potentially erode market
share and profitability.
3.Changes in regulations or government
policies could affect the conglomerate's
0.10 4 0.40 3 0.30
operations, particularly in sectors like
utilities and real estate.
4.Rapid technological advancements can lead 0.08 4 0.32 3 0.24
to the obsolescence of existing business
models, requiring Ayala to continuously
innovate and adapt.
5.Political instability, trade tensions, or conflicts
in the region could impact the conglomerate's
0.07 4 0.28 2 0.14
operations, especially if it expands beyond the
Philippines.
SUBTOTAL 1.0 4.2 3.42
SUM TOTAL ATTRACTIVENESS SCORE

K. Recommendations

Given the higher TAS values for the strategic alternative "Extend operations
beyond the Philippines and explore growth opportunities in other countries,
especially in the ASEAN region," it is recommended that Ayala Group
seriously consider pursuing this expansion strategy. This approach is likely
to capitalize on its strengths, mitigate weaknesses, leverage opportunities,
and align with its long-term growth objectives. Expanding into new markets
can diversify revenue streams, reduce country-specific risks, and position
the conglomerate for increased competitiveness and success in the future.
However, before making a final decision, Ayala Group should conduct a
thorough feasibility study, market analysis, and risk assessment to ensure
the viability and potential benefits of this expansion strategy.

L. EPS/EBIT Analysis
Stock Price: P50
Tax Rate: 25%
Interest Rate: 5%
# Shares Outstanding: 619.81M

Common Stock Financing Debt Financing

Recession Normal Boom Recession Normal Boom

EBIT 10,000,000 25,000,000 50,000,000 10,000,000 25,000,000 50,000,000

Interest 0 0 0 500,000 1,250,000 2,500,000

EBT 10,000,000 25,000,000 50,000,000 9,500,000 23,750,000 47,500,000

Taxes (25%) 2,500,000 6,250,000 12,500,000 2,375,000 5,937,500 11,875,000

EAT 7,500,000 18,750,000 37,500,000 7,125,000 1,781,250 35,625,000

Number of Shares 619.81M 619.81M 619.81M 619.81M 619.81M 619.81M

EPS 1.21 3.0 6.0 1.15 2.87 5.74

M. Epilogue