Real estate market and property consultancy in Hanoi, some strategic solutions for Vietnamese property consultancy companies

vietnam national university, HANOI
school of business







Nguyen Trung Dung




REAL ESTATE MARKET AND PROPERTY CONSULTANCY IN
HANOI, SOME STRATEGIC SOLUTIONS FOR VIETNAMESE
PROPERTY CONSULTANCY COMPANIES







master of business administration thesis

Hanoi - 2007
vietnam national university, HANOI
school of business





Nguyen Trung Dung





REAL ESTATE MARKET AND PROPERTY CONSULTANCY IN
HANOI, SOME STRATEGIC SOLUTIONS FOR VIETNAMESE
PROPERTY CONSULTANCY COMPANIES







Major: Business Administration
Code: 60 34 05

Master of business administration thesis




Supervisor: dr. TA NGOC CAU




Hanoi - 2007


vi
TABLE OF CONTENTS
ACKNOWLEDGEMENTS i
ABSTRACT ii
TÓM TẮT iv
TABLE OF CONTENTS vi
LIST OF ABBREVIATIONS viii
LIST OF TABLES ix
LIST OF FIGURES x
APPENDIX xi
INTRODUCTION 1
1. BACKGROUND 1
2. OBJECTIVES OF THE STUDY 2
3. SIGNIFICANCE OF THE STUDY 3
4. SCOPE AND LIMITATIONS OF THE STUDY 4
5. METHODOLOGY 4

5.1. Research Method 4
5.2. Data Collection and Analysis Method 5
6. THESIS’S LIMITATION 6
7. OUTLINE 6
CHAPTER 1: LITERATURE REVIEW 8
1.1. REAL ESTATE MARKET 8
1.1.1. The Definition for Real Estate & Real Estate Market 8
1.1.2. The Main Participants in Real Estate Market 8
1.1.3. Demand 9
1.1.4. Supply 9
1.1.5. The Adjustment Mechanism 10
1.1.6. Line of Real Estate Related Business 11
1.2. THE PROPERTY CONSULTANCY 12
1.2.1. Why Property Consultancy? 12
1.2.2. Traditional and Modern View 13
1.2.3. Market Maturity 13
1.2.4. Services Offered 14
1.3. ENVIRONMENTAL ANALYSIS 14
1.3.1. Societal (Macro-environment) Analysis 15
1.3.2. Industry Analysis 15
1.3.3. Internal Analysis 16
1.3.4. SWOT 17
CHAPTER 2: HANOI REAL ESTATE MARKET 18
2.1. MACRO-ENVIRONMENTAL FACTORS 18
2.1.1. Introduction 18
2.1.2. Political Factor: 18
2.1.3. Population and Life Style 18
2.1.4. GDP 20
2.1.5. Foreign Investment 20
2.1.6. Legal and Policy 22

2.1.7. Financial Market 25
2.1.8. Master Urbanization Plan 26


vii
2.2. HANOI REAL ESTATE MARKET 28
2.2.1. Residential Market 28
2.2.2. Serviced Apartment Market 33
2.2.3. Office Market 38
2.2.4. Retail Market 42
2.2.5. Hotel&Tourism Market 47
2.2.6. Industrial Market 50
CHAPTER 3: PROPERTY CONSULTANCY IN HANOI 53
3.1. HISTORY 53
3.2. KEY SERVICES OFFERED IN HANOI 54
3.2.1. Exclusive Agency, Exclusive Right to Sell or Lease 54
3.2.2. Open Brokerage/Agency 55
3.2.3. Tenant Representation 56
3.2.4. Property Management 57
3.2.5. Research 59
3.2.6. Valuation 60
3.2.7. Investment Sales & Acquisition 61
3.2.8. Project Development 61
3.2.9. Legal Services 62
3.2.10. Financial Services 63
3.2.11. Real Estate Investment 64
3.3. DEMAND AND KEY CONSIDERATIONS IN SELECTING CONSULTANT 65
3.3.1. Demand and Key Clients 65
3.3.2. Key Factors In Determining Choice of Consultant 67
3.4. CONSULTING COMPANY 73

3.4.1. Market Share & Supplying Competence 73
3.4.2. Company Models 74
3.4.3. SWOT for Vietnamese Companies 78
CONCLUSIONS AND RECOMMENDATIONS 79
REFERENCES 87
APPENDIX A 88
APPENDIX B 93















viii
LIST OF ABBREVIATIONS

GDP: Gross Domestic Product
FDI: Foreign Direct Investment
WTO: World Trade Organization
Colliers: Colliers International
Savills: Savills Vietnam Ltd

CBRE: CB Richard Ellis

























ix

LIST OF TABLES

Table 2.1: Hanoi’s population from 2003-2006………………………………………
18
Table 2.2: Hanoi’s GDP from 2003-2006……………………………………………
20
Table 2.3: Transaction Rate by Kind of Property…………………………………
29
Table 2.4: Price of Sales by Grade……………………………………………………
31
Table 2.5: Rental of Apartments Including Tax (Not serviced apartments)………
31
Table 2.6: Supply of Hanoi Serviced Apartment Market…………………………
36
Table 2.7: Classifying Office Buildings……………………………………………….
38
Table 2.8: Standard Area & Average Rental Rate for Retail Models In Hanoi…
44
Table 2.9: The Rate of Retail Format by Area Use…………………………………
46
Table 2.10: List of Markets Will Be Converted Into Shopping Centers……………
47
Table 2.11: Hotels in Hanoi 2006……………………………………………………
48
Table 2.12: Average Rental of Industrial Zones…………………………………….
51
Table 3.1: Reasons for Using a Consultant…………………………………………
65
Table 3.2: The Type of Clients That the Consultants Deal With the Most………
66
Table 3.3: The Way Clients Got Real Estate Consultant……………………………
67

Table 3.4: Evaluate the Performance of Current Consultant……………………….
68
















x
LIST OF FIGURES

Figure 1: Thesis Outline
7
Figure 1.1: The Adjustment Mechanism of Real Estate Market
10
Figure 1.2: Traditional and Modern View of the Real Estate Market
13
Figure 1.3: Porter’s Five Forces Model
16
Figure 1.4: Another Model of Industry Analysis

16
Figure 1.5: SWOT Analysis
17
Figure 2.1: Housing Supply Vs Actual Demand in Hanoi
30
Figure 2.2: Hanoi New Stock For 2008-2010: 7,634 units
32
Figure 2.3: Trend of Apartment & Villa Supply 2007-2020
33
Figure 2.4: Demand and Rentals of Hanoi Serviced Apartment Market
35
Figure 2.5: Limited Supply during Period 1998-2007
36
Figure 2.6: Future Supply of Hanoi Serviced Apartment Market
37
Figure 2.7: Monthly Take-up and Occupancy Rate of A&B Office
39
Figure 2.8: Hanoi’s New Supply of Grade A&B Office
40
Figure 2.9: Average Rental (Net) of Grade A&B Office
40
Figure 2.10: New Stock of Grade A, B&C Office (2007-2010)
41
Figure 2.11: INCOME GROWTH (PER CAPITA PER MONTH)
42
Figure 2.12: RETAIL SALES & YEAR ON YEAR GROWTH RATE DURING 1996-2007
43
Figure 2.13: Hanoi’s GDP per capita & Population
43
Figure 2.14: Leaseable Area and Rental Rates of Shopping Centers in Hanoi

45
Figure 2.15: Significant Future Shopping Center in Hanoi
46
Figure 2.16: Comulative Stock and New Supply of 4, 5 Star Hotel Room
49
Figure 2.17: Requirement for Hotel Room (2005-2010)
50
Figure 3.1: The Consultant with Best Reputation for Exclusive Agency
55
Figure 3.2: The Consultant with Best Reputation for Open Brokerage/Agency
56
Figure 3.3: The Consultant with Best Reputation for Tenant Representation
57
Figure 3.4: The Consultant with Best Reputation for Property Management
59
Figure 3.5: The Consultant with Best Reputation for Research
60
Figure 3.6: The Consultant with Best Reputation for Valuation
60
Figure 3.7 the Consultant with Best Reputation for Investment Sales&Acquisition
61
Figure 3.8: The Consultant with Best Reputation for Project Development
62
Figure 3.9: The Consultant with Best Reputation for Legal issues
63


xi
Figure 3.10: The Consultant with Best Reputation for Financial Services
64

Figure 3.11: The Consultant with Best Reputation for Real Estate Investment
65
Figure 3.12: Most Common Complaint from Clients
69
Figure 3.13: Importance of Factors Determining Choice of Consultant
70
Figure 3.14: How Well Consultants Understand Their Clients
71
Figure 3.15: Fee Structure Preferred by Clients
73
Figure 3.16: Market Share by Turnover
73
Figure 3.17: Recognition of the Consulting Companies
74






APPENDIX
APPENDIX B: Questions for Clients
APPENDIX B: Questions for Consultants


1
INTRODUCTION
1. BACKGROUND
Hanoi is an important center of real estate industry in Vietnam and Asia as well.
Due to great potential, Hanoi real estate market is becoming a favoured destination

for domestic and foreign investment. During the end of the year 2007, real estate
market in Hanoi has recovered from a long time of freezing and showed new fever
“It is the third fever”. It is easy to see that price of all properties is rising strongly.
In order to explain the situation and give out the forecast for the upcoming years, it
is necessary to analyze the market deeply and carefully based on mix-factors.
Although, it has fluctuated strongly in the pass, Hanoi real estate market is still been
seen as a primary market. “Boom” demand and positive policies that make Hanoi
real estate market more attractive for investment, especially foreign investment.
Hanoi real estate market will continue to boom in many years upcoming that brings
great opportunities and threats. Hanoi real estate market is always a center public
discussion especially for problems such as: Shortage of supply, escalation of price,
speculation, unclearness of market, and effects of new policies…However, practical
and theoretical researches on Hanoi real estate market are few, immaterial and
unsystematic
The property consultant is an important factor of real estate market that leads or
plays the role of conductor in real estate market. Thanks to the real estate market,
property consultancy in Hanoi has become a profitable business. Today, the demand
for property consultancy in Hanoi is diversified and increasing very fast that put a
strong pressure on consultants. Key clients those who are users of real estate related
consultant services including property developers, property companies, domestic
institutional investors, international investors and larger domestic corporations. The
foreign consultancy firms with their good reputation and brand, high


2
professionalism that become market leaders. Foreign consultants can provider a
diversified list of services or highly specific services. Vietnamese consultancy
companies are also improving their competence to hold the market share. However,
Vietnamese consultancy companies still haven’t clear strategies that help them to
win in an environment of full opportunities and challenges. So far there aren’t still

any professional researches on the subject of property consultancy in Vietnam or
Hanoi.
2. OBJECTIVES OF THE STUDY
The objectives of this thesis focus on:
For Hanoi real estate market, the general objective of the thesis is to present and
analyse key issues of market at this present time and make some forecast about the
trend of market in the near future. In order to get the general objective, the thesis
focuses on the following specific objectives:
 Analyse the effect of macro-environmental factors such as: Political,
economic, social, legal and policy.
 Analyse the characteristics of demand and supply as well as factors which
affect demand, supply and price of Hanoi real estate market at this present
time. The analyses also provide some forecast for some upcoming years,
especially for the period of 2007-2012.
For property consultancy in Hanoi, the general objective of the thesis is to present
and analyse key issues of property consultancy market and the comparison between
foreign and Vietnamese consultancy companies. In order to get the general
objective, the thesis focuses on the following specific objectives:
 Analyze the development of property consultancy in Hanoi
 Present and analyze key services which are offered in Hanoi


3
 Analyze the demand, key clients and customer behaviour in determining
choice of consultant.
 Analyze the market share, supplying competence and internal environment
of property consultancy companies in Hanoi
From the presentation and analyses of real estate market and property consultancy
in Hanoi, this thesis will make some strategic solutions that can apply for
Vietnamese property consultancy companies to improve their business.

3. SIGNIFICANCE OF THE STUDY
The presentation and analysis for key issues of Hanoi real estate market at this
present time and outlook for some upcoming years in this thesis will has the
following significances:
 Lay the foundation for researches on Hanoi real estate market in a
methodical, comprehensive and systematic view. This thesis will be a good
basis for further researches
 Systematize separate researches on Hanoi real estate market
 Help to explain some public discussions especially for problems such as:
escalation of price; the trend of supply and demand; effects of economic
growth, financial market, foreign investment and new policies.
 Help to provide useful and selective information for making decisions related
to the real estate business and investment as well as new policies
The presentation and analysis for key issues of property consultancy in Hanoi at this
present time in this thesis will has the following significances:
 Lay the first foundation for research on this subject
 Help to understand the role of consultant in real estate market
 Bring deep knowledge on property consultancy in Hanoi


4
 Provide useful and selective information for clients, investors and property
consultants
 Help to make some strategic solutions for property consultancy companies,
especially Vietnamese companies, which are playing in a big game full of
opportunities but also full of challenges
4. SCOPE AND LIMITATIONS OF THE STUDY
This study is focused on the presentation and analysis for key and basic issues of
Hanoi real estate market and property consultancy in Hanoi and making some
strategic solutions for Vietnamese consultancy companies to improve their business

in a market of full opportunities and challenges. The research is focused on key and
basic issues; it doesn’t enter the specific branches of real estate market and property
consultancy. The recommendations on strategic solutions also stand on the basis of
overall view
5. METHODOLOGY
5.1. Research Method
Both qualitative and quantitative methods were used in this research. In some parts
of the research consists of, amongst other data, observation of the real estate market
and consultants business and therefore a descriptive method was used. In the other
parts of the research is of both a qualitative and quantitative nature. Qualitative, as it
tries to describe the real estate market and views of actors in real estate consultancy
and clients with regard to future trends. Quantitative as certain sections of the
statistical data, questionnaires were formulated in a way that they could be grouped
and results were given a numerical value.


5
5.2. Data Collection and Analysis Method
The research was conducted by reviewing available literature that was relative to
the subject, though this material was primarily limited to articles from the press and
real estate-related industry magazines, paper. Several masters thesis within similar
fields were found and certain information contained within them was used and
relied upon. The lack of research, published papers and data relating to the subject
area, has meant that it was not possible to carry out an empirical study.
The information used in the sections of this research was gathered from real estate
market, informal discussions with staff members at the chosen companies (primary
data). This was supplemented by using publicly available information (secondary
data) about the real estate market and property consultancy companies from sources
such as: Web sites, brochures and marketing information and market reports when
available. In addition, some figures were obtained from Hanoi Statistics Department

and other internal information. The accuracy of the data received from these
additional sources was, wherever possible, checked with the relevant
person/company/department before being relied upon.
Although observation was used in the most parts of the study, the main focus was
placed on the primary data received from the interviews / questionnaires. In order to
improve response rate and increase the amount of data collected, the questionnaires
were not mailed. In most cases the questionnaires and related discussions were
conducted face-to-face, though some of the questionnaires were conducted by
telephone, email. Questionnaires and informal interviews were conducted with both
the consultants and the clients, one consultant considered as ten clients. The
companies that were interviewed on the “consultant side” were placed into the
categories such as: Domestic and international property consultants, legal and
accountancy firms. On the “client side”, those users of property related consultant
services that were interviewed were: Property companies, property developers,


6
domestic institutional investors, international investors and large domestic
corporations. The data was collected using a structured survey with numbered
questions and for most answers there were multiple-choice responses. Two separate
questionnaires were constructed, one for the property consultants and one for the
clients.
6. THESIS’S LIMITATION
 This thesis focuses only on key and basic issues of Hanoi real estate market
recently and in the near future.
 Professional property consultancy is still quite new in Vietnam, so representative
features may be not popular. It is still new and becoming developed dramatically
in 5 past recent years.
 The questionnaire is conducted with the purpose on interviewing key clients and
consultants and in some cases, some relevant interviewees can not attend the

interview thus collecting and analyzing information is not extremely exact.
 Other restriction is that recommendation is for only key strategic solutions that
help Vietnamese property consultancy companies to improve their business.
7. OUTLINE
The thesis is divided into three chapters:
Introduction
Chapter 1: Literature Review
Chapter 2: Hanoi Real Estate Market
Chapter 3: Property Consultancy in Hanoi
Conclusions and Recommendations


7
Figure 1: Thesis Outline

Introduction
Chapter 1
Literature Review
Chapter 2
Hanoi Real Estate
Market
Chapter 3
Property Consultancy
in Hanoi
Conclusions
&
Recommendations

8
CHAPTER 1: LITERATURE REVIEW
1.1. REAL ESTATE MARKET
1.1.1. The Definition for Real Estate & Real Estate Market
Real estate is a legal term that encompasses land along with anything permanently
affixed to the land, such as buildings. However, in some situations the term "real
estate" refers to the land and fixtures together, as distinguished from "real property,"
referring to ownership rights of the land itself.
Real estate market is place where exchanges or transactions of real estate such as
buying, selling, leasing, investment… take place that define the price and volume of
real estate exchanged. The real estate market is broadly divided into three
categories, residential, commercial, and industrial by purpose of use. Some main
features of real estate market are: decentralization, imperfect market, supply limited,
supply responds slowly to shifts in demand
1.1.2. The Main Participants in Real Estate Market
 Owner/User - These people are both owners and tenants. They purchase
houses or commercial property as an investment and also to live in or utilize
as a business.
 Owner - These people are pure investors. They do not consume the real
estate that they purchase. Typically they rent out or lease the property to
someone else.
 Renter - These people are pure consumers.
 Developers - These people prepare raw land for building which results in
product for the market.
 Facilitators - This includes banks, real estate brokers, lawyers, and others
that facilitate the purchase, sale and lease of real estate.


9
 Government - Affect the real estate market by making, implement and

control the policies related to real estate
The owner/user, owner, and renter comprise the demand side of the market, while
the developers comprise the supply side. Facilitators and government comprise the
both sides of the market
1.1.3. Demand
Demand of real estate refers to how much (quantity) of real estate is desired by
buyers. The quantity demanded is the amount of real estate people are willing to
buy at a certain price; the relationship between price and quantity demanded is
known as the real estate demand relationship. The main determinants of the demand
for real estate are:
 Demographic
 Income
 Consumer preferences
 Price of property
 Cost and availability of credit
 Investor preferences
 Policy
1.1.4. Supply
Supply of real estate represents how much the market can offer. The quantity of real
estate supplied refers to the amount of real estate are willing to supply when
receiving a certain price. The correlation between price and how much of real estate
is supplied to the market is known as the supply relationship. The main
determinants of the supply for real estate are:


10
 Land resource
 Infrastructure
 Investment and financial market
 Real estate development and business costs

 Policy
1.1.5. The Adjustment Mechanism
In the diagram to the right, the stock of housing supply is presented in the left panel
while the new flow is in the right panel. There are four steps in the basic adjustment
mechanism. First, the initial equilibrium price (Ro) is determined by the intersection
of the supply of existing housing stock (SH) and the demand for housing (D). This
rent is then translated into value (Vo) via discounting cash flows. Value is
calculated by dividing current period rents by the discount rate, that is, as
perpetuity. Then value is compared to construction costs (CC) in order to determine
whether profitable opportunities exist for developers. The intersection of
construction costs and the value of housing services determine the maximum level
of new housing starts (HSo). Finally the amount of housing starts in the current
period is added to the available stock of housing in the next period. In the next
period, supply curve SH will shift to the right by amount HSo.

Figure 1.1: The Adjustment Mechanism of Real Estate Market


11
1.1.6. Line of Real Estate Related Business
Real estate consultancy/agency
 Market research
 Valuation/rating
 Lawyers, tax consultants, auditors
 Real estate agents/agency
Real estate development
 Developers
 Construction companies/ Contractors
Real estate financing
 Commercial banks

 Mortgage banks
 Leasing companies
 Other financial institutions
Corporate real-estate management and property operators
 Office real estate
 Retail real estate
 Recreational real estate
 Industrial real estate
 Hotels and restaurants
 Logistics real estate
 Infrastructure real estate
 Public sector
 Service real estate/Social real estate
 Residential real estate
Real estate investment
 Open-end real estate funds
 Closed-end real estate funds
 Share-based vehicles eg REITs
 Insurance companies
 Insurance companies/Pension funds
 Pension funds


12
 Portfolio management
Real-estate project management
Facility-management services
 Full-service providers
 Facility managers
 Parking-space management

Architecture and planning (not engineering and planning specialists)
 Architecture
 Urban development
 General planning
1.2. THE PROPERTY CONSULTANCY
1.2.1. Why Property Consultancy?
Main reasons consultants are hired are:
 Insufficient expertise in-house
 Independent/objective advice
 Gaining additional help/resources
 Insufficient manpower in-house
 Quick resolution of issue
When clients come knocking upon the door of a consulting firm, they are looking
for something they have not the capacity to do or undertake in their own firm.









13
1.2.2. Traditional and Modern View


Traditional View
Modern View

Figure 1.2: Traditional and Modern View of the Real Estate Market
The key difference between traditional view and modern view of the real estate
market is the appearance of international scope and property consultants. When the
real estate market is close the international scope is absent that happen at period of
low developed market in general and real estate market in particular. At period of
high developed market, it also means the appearance of international factors and
professional consultants.
1.2.3. Market Maturity
Property markets may be analyzed with relation to how “mature” they are. Market
maturity defined as a function of the degree of diversification of user and investor
opportunities, flexibility of adjustment of property interests, market openness, the
existence of information and research systems, professionalism and standardization
of property rights and market practices. This evolution follows a roughly common
direction, i.e. towards the development of market structures and practices more akin
to those prevailing in the fully mature property markets of the world’s financial
centers. What can be seen is that a “mature” market, in general, displays the
following characteristics:


14
 A diversified rental sector.
 A complex property investment market.
 Openness to non-local players.
 More transparency in the functioning of the market.
 A wide use of sophisticated valuation procedures.
 Information gathering systems.
Perhaps another aspect of market maturity is that other actors come onto the market
and offer services that were once the domain of real estate professionals/specialists.
This can be seen in more recent times as many professionals that are educated

within other disciplines have moved into the market. Lawyers, accountants and
management consultants are a few examples of these “other” professions. The trend
is that more firms are moving into the market and offering services they didn’t
before.
1.2.4. Services Offered
The services offered by consultants can generally be placed into one of five main
business areas: Valuation, investment, leasing, sales, management and corporate
services. Some of these categories were expanded in order that the different sub-
markets within the specific fields could be included, e.g. Property management
which was divided into three sub-groups; residential, office and shopping centers.
1.3. ENVIRONMENTAL ANALYSIS
Environmental scanning is a concept from business management by which
businesses gather information from the environment, to better achieve a sustainable
competitive advantage. To sustain competitive advantage the company must also
respond to the information gathered from environmental scanning by altering its
strategies and plans when the need arises. Environmental scanning usually refers


15
just to the macroenvironment, but it can also include industry analysis and the
company's internal environment.
1.3.1. Societal (Macro-environment) Analysis
It is a part of the external analysis when doing market research and gives a certain
overview of the different macro-environmental factors that the company has to take
into consideration. It is a useful strategic tool for understanding market growth or
decline, business position, potential and direction for operations. Models that often
used as PEST, STEP, STEEP, PESTEL, PESTLE, LEPEST, STEEPLE,
STEEPLED. Some key factors of Macro-environment are:
 Political factors include areas such as tax policy, employment laws,
environmental regulations, trade restrictions and tariffs and political stability.

 Economic factors are economic growth, income, investment…
 Social factors often look at the cultural aspects and include: population,
lifestyle, social issues, the habits of the consumer …
 Legal factors refers to government legislation that places constraints or
obligations upon a business; businesses must adapt to changes in the law
quickly in order to avoid prosecution
1.3.2. Industry Analysis
Industry analysis is the analysis made in a specific sector or industry. Industry
analysis investigates the general fundamentals of the equities within the industry but
more importantly investigates the state of external factors and how they should
affect the particular industry or sub sector. Industry analysis means defining the
industry; identifying the dominant economic characteristics, the forces of change at
work in the industry as well as the key survival factors and evaluating the
attractiveness of the industry. Porter's 5 forces analysis is a framework for industry
analysis and business strategy development.


16

Figure 1.3: Porter’s Five Forces Model

Figure 1.4: Another Model of Industry Analysis
1.3.3. Internal Analysis
An internal environmental scan involves looking at the present capabilities of the
organization (infrastructure, hardware, personnel, abilities, structure, etc) and that
information can be compared to what the organization will need in the future to
achieve its strategic goals. Identify the company’s resources, capabilities, core
competencies, and value chain activities. Evaluate its financial results/condition.
Identify the company’s key result areas, current strategies and objectives.
Firms have assets that are tangible and intangible. Tangible are financial, physical,

human and organizational (formal reporting structure and systems). Intangible are
technological & reputation or product name. These resources represent inputs into
production of a good or service. The firm’s ability to achieve a competitive


17
advantage is reflected in its knowledge base and the ability of its resources to
successfully exploit its capabilities. Core competencies are resources and
capabilities that are a source of competitive advantage for the firm. They should be
somewhat unique to that organization. These resources have strategic value when
they contribute to the development of capabilities, core competencies, and
ultimately to a competitive advantage.
1.3.4. SWOT
Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis are a strategy
development tool that matches internal organizational strengths and weaknesses
with external opportunities and threats. SWOT Analysis is the key component of
strategic development. It can prompt actions and responses. Successful businesses
build on their strengths, correct their weaknesses and protect against internal
vulnerabilities and external threats. They also keep an eye on their overall business
environment and spot and exploit new opportunities faster than competitors. SWOT
analysis is a tool that helps many businesses in this process. SWOT analysis is
based on the assumption that if managers can carefully review such strengths,
weaknesses, opportunities, and threats, a useful strategy for ensuring organizational
success will become evident to them.

Figure 1.5: SWOT Analysis