4 External Assessment 4.1 Economic Forces In 2016, the Global GDP rate hit a six-year low at 3.1% (ILO, 2017 World Employment and Social Outlook: Trends 2017). With the GDP downward performance, concerns have been raised about how the economy could generate more jobs, improve quality of employment for those employed and how gains on growth are shared (ILO, 2017).4.1.1 OPPORTUNITY: Lower Labor Cost and Labor Availability It is very attractive to do business in a country with low labor cost. As for the case of companies in shared services industry, this is a major benefit as of its objectives service is cost savings. Philippines is one of the countries with the lowest minimum wage (Bloomberg, 2015).Figure 1: Cheaper Wages (data as of 2015)Source: Bloomberg and Everest Group Along with low labor cost is the labor availability. Most of the time, these two are tied up in consideration for choosing a location for investment. According to International Labour Organization, the global unemployment rate was expected to rise to 5.8% in 2017 from 5.7% in 2016. The 5.8% represents over 201 million labour force. Source: ILO’s Trends Econometric Models, November 2016. The Philippine Statistics Authority July 2017 Labor Force Survey data shows that the Philippine unemployment rate is 5.6% or 2.4 million Filipinos. 21.3% of unemployed were college graduates. This means that new investments could create job opportunities to these numbers of Filipinos. 4.1.2 THREAT: Decrease in Oil Prices Oil prices have suddenly dropped from 2014 from over $100 per barrel to under $35 at the end of February 2016 (Rogoff, 2016). Factors that contributed to the low oil prices include lower demand and over supply. The lower demand from China, which has the largest country by population and emerging countries such as Russia, India and Brazil impacted significantly the oil prices. The local production of U.S. and Canada reduce their imports of oil which is another cause of downward oil prices (DePersio, 2015). Another cause of low oil price was the Saudi Arabia’s decision to keep its production stable since it could withstand a longer lower oil price as it holds the largest oil reserve in the worlds. Figure : Oil Price Per BarrelSource : Bloomberg Chevron Corporation is a global energy company and one main source of its revenue is derived from the oil business. The sudden drop of oil prices in 2014 made the organization decide to suspend exploration of its major capital projects and divest some of its businesses that it considered to be not income generating in the long run. In 2016, most of the finance and accounting processes of Chevron Canada downstream business handled locally have been migrated to Manila Shared Service Center (MSSC) and Buenos Aires Shared Service Center (BASSC). In the same year, one of Chevron Canada’s merchants expressed its interest to buy the refinery and marketing business. After careful evaluation, the organization had decided to sell these businesses effective October 2017. The recently migrated processes to Manila and Buenos Aires ceased to operate as the business has been divested. This recent divestment of Chevron Canada downstream business was due to the low oil prices, thus, making it a major threat. 4.1.3 THREAT: Volatility of Exchange Rates Looking in a 10-year trend of Philippine Peso per US dollar rate, the peso had a record low in 2012 averaging 42.2288 and an all-time high of 50.4037 in 2017. The Philippine Peso per US dollar rate from August 2017 to January 2018 has increased by 1.08% (www.exchange-rates.org). Figure : Philippine Peso Per USD DollarSource : XE Currency Charts The exchange rates movement is one of the considerations of offshore companies deciding to invest in a country as it affects budgeting and planning. For MSSC whose annual budget is quoted in US dollar and equipment and supplies are sourced abroad, the volatile exchanges rates has a great impact in carrying out its business. Note: add comparison of Argentinian peso against dollar 4.2 Socio-cultural, Demographic and Environmental Forces4.2.1 Location of Business An article in SSON the following items are important in deciding location of a shared service center; compensation costs, staff availability and turnover, infrastructure costs, tax and regulatory costs, government support and the political climate, labor pool and educational system, language proficiency, physical proximity, experience and maturity in the industry, security and data protection and the comfort factor (Holz, 2012). According to Cushman & Wakefield “Where in the World? Business Process Outsourcing and Shared Service Location Index 2015”, the Philippine ranked 3rd in 2014 and 2nd in 2015 as the top destination of BPO and shared services in the world. The method of rankings was based on the following criteria; 30% conditions, 20% risk and 50% costs. Conditions include infrastructure, education and English proficiency. Risks include economic stability, political stability, corruption perception index and energy security. Lastly, costs include labor, building costs, inflation and property cost. 4.3 Technological Forces4.3.1 OPPORTUNITY: Emerging Technologies The use technology platforms in meeting the requirements of shared service business are essential in today’s digital age. Data analytics, cloud computing, robotics process automation are some of the latest trend in the shared services. One of the top priorities in investments is Robotics Process Automation (RPA) (KPMG, 2017). Robotics Process Automation (RPA) is computer-coded software that automates business process by performing rule-based task using robots (bots) that interact with systems the same way as a human user. The benefits of RPA include improved quality and accuracy, increased productivity, and cost reduction (PwC, 2016). With the aid of RPA, the human portion would involve analysis of data and this would mean that the employee could now focus on providing more value adding services.