FAR EASTERN UNIVERSITY

Case: Digital Divide Data

Entrepreneurship & Management of New Ventures

MBA 711
FEU-Makati

Submitted by:
Group 5
De Torres, Ma. Lourdes Bernabeth
Figueroa, Billy
Jo, Rafael
Jose, Luz Jordana Sanson

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I. Case Background
DDD’s CEO and a co-founder Jeremy Hockenstien and four others decided to create an
IT outsourcing business that would provide data entry and digitization services in Phom
Penh, Cambodia that provide employment and education to the disadvantaged youth.
This would result in young people trained in technology and English, the prospect of
future gainful employment based on their DDD work experience.

Digital Divide Data (DDD) entered its ninth year of operations, since its inception in 2001
as a small IT outsourcing company DDD had grown into an internationally recognized,
nonprofit social enterprise. DDD and its staff of 500 served clients in the United States
and Western Europe from two offices in Cambodia and one in Laos. Its annual operating
revenues hovered around US$2 million, and it had trained and provided scholarships to
over 1, 300 disadvantage youth.

In 2003, They decided to open two new offices outside the Phnom Penh. The first was in
Battambang, Cambodia second largest city of nearly one million people. Second,
Vientiane, Laos.

Two of DDD’s three offices were in the Kingdom of Cambodia. Located in Southeast
Asia, Cambodia shared borders with Thailand, Laos and Vietnam. With population of 15
million, of which 80% lived rural areas, Cambodia was one of the poorest countries in
the region. GDP per capita in 2007 was US$ 1, 600 (PPP); over one-third of Cambodians
lived on less than $.50 a day.

Cambodia’s poverty had been at crisis or near- crisis levels since the days of Pol Pot’s
Khmer Rouge regime (1975-1979). Prior to the global economic crisis of 2008, the
Cambodian economy had been growing at double digit rates, boosted by booming
industrial and services sectors that reduced the country’s historic reliance on the

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agricultural sector; the garment industry alone accounted for 80% of export earnings
and employed 3million people. Between 2004-2006, foreign direct investment
skyrocketed from $340 million to $ 2.6 billion. Despite its progress, the country still had
a long way to go before a thriving business sector was up running. The country ranked
138 out of 178 countries. 76% had a fairly literacy rate, Cambodia suffered from a high
drop-out rate between primary and secondary schools with only 24% enrolled in high
school.

DDD’s board of directors set two parallel goals: grow its existing operations to 1500
people, while exploring ways for the company to expand globally and to help more
people in farther reaches of the world. In the past DDD’s expansion efforts had been
challenged by local particularities such as labor shortages, lack of basic business
infrastructure, and variation in labor poor skill sets.

DDD’s board of directors had identified four potential strategies for expansion;

Organic Growth – DDD would have to go through the process of vetting and negotiating
with potential partners.

Partnership with a local entrepreneur with an existing business- A partnership would

give DDD access to a committed local partner with detailed knowledge of the local labor
pool, legal requirements and business practices. Its also facilitate rapid expansion, since
such a partner might already have business, a labor force and the required physical
facilities.

Social Franchising- It required the development of a “business in a box” concept: a

standardized set of manuals and procedures for recruitment, training, project
management, and daily operations.

Partnership with an International Organization- In order to potentially benefit from

DDD’s IT outsourcing expertise and brand, the NGO would provide the capital and
human resources required for a fast- paced expansion.

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II. Statement of the Problem

What strategy can Digital Divide Data use to expand their business?

III. Assumptions

1. Transforming lives – They had trained and

provided scholarships to help disadvantaged young adults even
this is costly
and without assurance that these young adults will retain to
DDD after the training.
2. Expansion- They expand globally without knowing the
challenges in between.
3. They open new offices even without proper research if it is
profitable or not.

IV. Areas of Consideration

1. Demographic state of possible expansions sites
2. socio economic state of possible expansion site
3. Limited resources for expansion

V. Framework (e.g. SWOT, Porter”s etc)

Global Strategies and Differences in Internal and External Business Environments

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To adopt a global strategy as part of a corporation’s management strategy, it is

first necessary to analyze the differences in internal and external business
environments. In doing so, we must be cognizant of countries and regions that are
important to the global strategy. This is particularly important when considering
business in countries such as China and India that have significantly different
business environments from those in developed nations. In reality, some countries
already have production centers and must be examined from the perspective of
existing overseas networks. Moreover, in the case of parts manufacturers, it may
be necessary to examine entry into specific countries because of key customer
demands. In our discussion, we assume that the important countries have already
been decided upon when contemplating a global strategy.
First, we must understand the differences in business environments that exist
between the domestic market and the countries in question. National barriers exist
even in a “flattened world”; therefore, we must first grasp the significance and
types of barriers and move on to examine the strategies to overcome them. In
proposing the CAGE framework to explain the differences in domestic and
foreign business environments, Ghemawat states four kinds of distances between
a home and a foreign country (Ghemawat 2007). We explain the CAGE
framework as follows:
• Cultural distance: differences in language, customs, religion, etc.
• Administrative distance: differences in foreign investment policy,
regional economic blocs (the existence or absence of free trade
agreements), political proximity, currency, lack of colonial ties, etc.
• Geographic distance: differences in transportation costs and times,
time zones, etc.
• Economic distance: differences in income levels and wages,
transparency in commerce practices, characteristics of corporate systems,
etc.

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Each of these principles is explained with specific examples. We use Ghemawat’s

examples that examine the distance between China and India from the perspective
of a US corporation (Table 2.1).
Table 2.1
CAGE analysis: favorable conditions of China and India for US firms

Cultural aspects Administrative Geographical Economy

aspects aspects aspects

Indi English- Common ruler Specialized labor

a speaking, (from the
westernized colonial era)
elite

Legal customs High

profitability

Political Westernized
familiarity business customs

Low political
risk

Chin Standardized Ease of doing Proximity to Large market

a language business west coast of
US

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Chinese- Economic zones Ports and road Access to

Americans infrastructure abundant labor
and capital

East Asian Supply chain

manufacturing network of
network foreign firms

Source: Compiled from Ghemawat (2007), Table 2.2 (p. 46)

Low language barriers make India very attractive (short cultural distance). India
was formerly a British colony, and English is widely spoken, this is not so in the
case of China. In addition, a significant portion of India’s elite are westernized,
and have been to the UK and more recently to the US for further education. The
founder of the CAGE framework, Ghemawat, is of Indian origin; he was
employed at the Harvard Business School which also has several Indian
professors. Moreover, there exist strong US–India elite class connections. On the
other hand, China’s cultural attractiveness lies in its homogenous language and
people; moreover, there are many Chinese Americans. In contrast, language and
customs vary greatly in India by region, making it difficult to take a one-size-fits-
all approach across the Indian region in terms of expanding business operations
there.
In terms of administrative distance, India and the US have similar legal systems,
as the economic systems were built by a common colonizer—the UK. Moreover,
India’s political system is said to be somewhat pro-American. Conversely,
relations between China and the US have been somewhat strained in the past.

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From the Indian perspective, a further attraction is the “low long-term risk” that
the country poses, although some may argue that point. An Indian characteristic
is its entrenched democratic political system, which contrasts with the one-party
rule of communist China. India follows a democratic political process to bring
about major policy changes, while China most likely does so through a top–down
approach. Therefore, in China, companies must always conduct business with an
awareness of this inherent political risk.
Alternatively, the ease with which businesses can be created is a major attraction
of China. In addition, it also provides incentives to foreign investments, such as
the economic zones. China is said to be a country not of the “rule of law” but of
the “rule of men,” thereby making the dealing of several business procedures
simple and at the discretion of civil servants. India, however, has several business
regulations, which need to be adhered to strictly. For such purposes, conducting
business operations in China is certainly more attractive. In addition, economic
zones in China were first created in the 1980s, and this program has been a
success, with many zones existing today, particularly along the coast. However,
recently the Chinese government imposed stringent regulations toward foreign
firms that build simple production centers within its borders; India has taken cues
from China’s model of economic zones and has implemented a similar program.
In terms of geographical attractiveness, compared with India, China is relatively
closer to the west coast of the US, and has the necessary infrastructure-support,
such as harbors, in place. This deems China as more attractive than India. In
assessing these regions as manufacturing centers, geographical proximity is an
important factor. Southeast Asia has well-developed infrastructure and a
production network of component and product manufacturers that extend beyond
national borders. Vietnam, Laos, and Myanmar neighbor China, and are
connected via expressways. For example, the Pearl River Delta area of Shenzhen

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and Guangzhou has manufacturing agglomerations in electronics and textiles.

Moreover, travel routes are available from these areas to Bangkok via continental
expressways. While India’s major cities are situated along the coast, the traffic
network between the major cities remains incomplete because of the central
mountain region, thus hindering the creation of manufacturing centers.
In terms of economic attractiveness, India has many engineers in software and
other fields. In addition, the market is not as competitive as China, making
profitability relatively higher for companies doing business there. Furthermore,
managements in India are familiar with the Western style of business, perhaps
because of westernization of the elite class. Conversely, China’s corporate system
is built on nationalized companies, and corporate governance is often not
transparent. As illustrated, India has superior soft-business infrastructure, while
China has a large market with high wage levels. Moreover, the Chinese labor
force is far superior to that of India and has more capital. Another benefit of
conducting business operations in China is the relatively greater number of
foreign firms in the domestic supply chain system and in other business activities,
thereby making it easier to form local partnerships.

Other framework we used to identify the main problem is SWOT Analysis:

STRENGTH
a. DDD transform lives
WEAKNESSES
a. Small IT sourcing company.
b. They put new office in an area with proper research.
OPPORTUNITIES
a. DDD continues to thrive and work towards a world where everyone-
regardless of location or background.

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THREAT-
a. DDD competitors are large IT company like Aptara Inc., Apex Data
Services and SPI Global.

VI. Alternative Courses of Action (at least 4)

1. Partnership with small IT outsourcing firm

To address the issue of DDD as the DDD’s three offices were

lacked a standardized system for project management and the
operational processed were not documented.

By 2008, DDD recruited Western expatriate volunteers to work with the current
management.
2. Recruitment and Training
Adv. DDD offers short training for new staff that last about six months and they
deploy it on the respective client projects. The objective of DDD was to maximize
the company’s social impact.
Disadv. Each office of DDD has different practices as in Phnom Penh the
recruitment was outsourced to CIST but in Battambang it was done in-house.

3. Require newly trained operative to render at least 2 years of service to DDD

Adv. DDD would get ROI from their initial investment on the operator
disadv. This might not fit with the socio responsible format of DDD.

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VII. Action Plans

Activity Responsible Person/s, Dept/s., Timeline

Team/s, etc.

Capacity and Contract HR Department 3 – 6 months

Allocation
- As the 3 offices of
DDD had imbalances
in terms of the
employee’s duties

3. Recruitment and Training 5. HR Department 6. 1 – 6 months

4. Providing proper training

and better benefit for the
new staff and existing
employees to overcome
the labor shortage

7. Joint Venture with Local 9. Marketing Department 10. 1 – 2 years

Entrepreneurs

8. Providing clear mission

that they can offer to the
local entrepreneur who
have and have not IT
outsourcing

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VIII. Recommendation
a. DDD should focus first on providing a better training for the new
staff and giving better benefit that they can offer so they won’t
need to find another company. As indicated on the case of DDD,
10% of the employees will continue to work with DDD and
pursuing management roles and the 90% moved to local firms,
usually higher-paying positions.

b. DDD’s HR department should consider proper employment

allocation to the three offices to avoid imbalances. If retraining
would require considerable financial and human resource, they can
use employee who just started its training. The HR might consider
maximizing its recruitment to the office who need most.

c. Since Battambang is less developed, DDD might consider closure

of the office in Battambang as people was not computer oriented
and it will take time for them to teach computer related courses.
This will help the company to lessen its cost and focus more on the
two other offices.

d. DDD should consider the environment of potential expansion sites

to better cater to the need of the market and to better understand
what kind of employees should work on said site

e. DDD should have measures in place so that DDD’s social

franchising would not affect its profitability and ability to expand.

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IX. Conclusion

DDD continues to prioritize its social enterprise through its various

sponsors and donors with this they are able to help disadvantaged youth
and at the same time training future potential operators that can work for
them. DDD is a proof that an organization can be profitable and still be
socially conscious while DDD has problems in diversifying due to lack of
funding and proper infrastructure to provide for their trainees we see that
by improving their adaptability in certain environments such as catering to
a specific market or training operators in skills that are suitable to the
market they are in (for example in Cambodia there has been a surge of
digitalization ever since their economy bounced back after the deposition
of their dictator) DDD can focus on certain trends and cater to growing
industries per city and it would also help if they would have a certain
measures in place to ensure that they at least get a return on their initial
investment on the operators they train for free to ensure a balance between
profitability and social responsibility.

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