The US recently announced it would levy anti-dumping penalties against Canada. These actions specifically target softwood timber, dairy, and steel. While the full effects are yet to be fully assessed, and opposition has been raised by an unexpected source: Florida.
The Philippines is a small island nation located between the Pacific Ocean and the South China Sea. Its geography, climate and large labor force has allowed it to focus on the agriculture and manufacturing sector throughout the past decades. Because of cheaper alternatives, and of lack of investment and technology advancement, the country has fallen behind its neighbors in these fields. However, it has two characteristics that have helped it find its niche and create competitive advantage. Namely: Hospitality and English.
Large multi-national companies have been shifting their call center operations from India to the Philippines. Though India boasts a population more than ten times that of the Philippines, by the end of 2011, about 400,000 Filipino customer service representatives spent their nights talking to mostly American consumers as compared to the 350,000 in India.
Companies like JPMorgan Chase, telecommunications operator AT&T, and the travel booking service Expedia work with call centers in the Philippines. As a country with the largest number of youth in the East, schooled in Western culture, the Philippines seems a great choice. European and Indian companies have followed the same trend to the Philippines.
The Philippines is a strategic choice for many reasons. The country is located in the middle of South East Asia just an hour away from Hong Kong and four hours from Singapore, where the main Asian offices of many corporations are located. Many jobseekers hold university degrees ranging from chemical engineering to communications in addition to their mastery of English. The Philippines also has a 95.4% literacy rate according to a United Nations Development Program Survey. In contrast, India has a 74% mean literacy.
Though English is the official language for both countries, there are key differences between the two countries. Filipinos start learning American English in the first grade. In addition, common themes in American culture such as the NBA, hamburgers, and the television show “Friends” have become part of the Filipino growing up experience. In contrast, Indian public schools introduce British English in the third grade. Cricket is the national pastime.
The Philippines has “a unique combination of Eastern, attentive hospitality and attitude of care and compassion mixed with what I call Americanization,” said Aparup Sengupta, chief executive of Aegis Global. The outsourcing firm based in Mumbai, India, acquired Manila-based People Support in 2008 and now employs roughly 13,000 Filipinos.
Compared to India, Philippine infrastructure is better suited to handle the utility needs of call center operations. Contrary to India, there are almost no blackouts which greatly lessen the cost of generators and diesel fuel. Cities in the Philippines are also relatively safer and have better public transportation, eliminating the need for companies to bus their employees to and from the office.
Firms that initially focused on cost reduction now find that this is not enough. Companies that pay an average of $250 a month in India have shifted their operations to Philippines despite the higher monthly costs of $350 per month – a 40% increase. The question has shifted from “How much?” to “How well can you do it?” In an increasingly competitive environment, firms have seen that service has started to play a much larger role.
The Philippines’ global market share of the call center industry is expected to increase to 32% by 2016 up from 24% in 2010. In the next 5 years, revenues are projected to reach $14.7 billion with employment doubling to above 800,000 employees.
Western executives are expecting the Philippines to continue growing fast and to move up to higher-value services like accounting and insurance claim processing. But, similar to India, companies are struggling to cope with increasing domestic inflation and a shortage of skilled professionals. For now, however, companies remain optimistic of the opportunities and the services the country has to offer.
Contributed by Quintin Eusebio and Ireene Leoncio, both of Georgetown University
Sources: “Philippines Unemployment Rate.” TradingEconomics.com. Trading Economics, 01 Oct. 2011. Web. 12 Feb. 2012. <http://www.tradingeconomics.com/philippines/unemployment-rate>.; Ho, Abigail M. “Contact Center Revenues Seen to Hit $14.7B.” Philippine Inquirer [Manila] 1 Aug. 2011, Inquirer Business sec. Print.; “Phl Contact Center Industry to Double in 5 Years.” Phil Star. Philippine Star, 15 Aug. 2011. Web. 12 Feb. 2012. <http://www.philstar.com/Article.aspx?articleId=716721>.
Earlier this week the CNN Business Blog commented on the relationship between China and the EU in “Is Love in the Air for the EU and China?”.
Here is what I think about it…
It may not be love between the EU and China but necessity. The Europeans badly need money to prop up the weak member States. There is simply not sufficient supply (or willingness) to make the necessary transfers. In contrast, China has accumulated lots of surplus, some of which it may be willing to invest abroad in order to keep the overall economic machine (and therefore their own economy) alive. So if the Europeans can find a match between their needs and China’s capabilities, then this might be a marriage made in heaven (for the time being at least)!
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