Building business strategy for military insurance corporation in the period of 2011 - 2015

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER
OF BUSINESS ADMINISTRATION PROGRAM




CAPSTONE PROJECT REPORT

BUILDING BUSINESS STRATEGY FOR
MILITARY INSURANCE
CORPORATION IN THE PERIOD OF
2011 – 2015





Group Number : 08
Student’s name : Le Nhu Hai
Nguyen Manh Hieu
Bui Duc Nam
Nguyen Anh Tuan ( 1972 )

HA NOI 2011
DECLARATION
We hereby commit that this capstone project report is our independent work
with the assistance and support of the Board of Directors and Board of Management
of Military Insurance Corporation, Vietnam Insurance Association. Data and
information used in this report are real data and information objectively and
honestly collected for the purpose of this capstone project.

On behalf of Group 8
Group Leader


Le Nhu Hai

3
CONTENTS
LIST OF TABLES 6
LIST OF FIGURES 6
LIST OF ABBREVIATIONS 7
INTRODUCTION 8
CHAPTER 1: THEORETICAL BACKGROUND ON BUSINESS
STRATEGY AND BUILDING BUSINESS STRATEGY 10
1.1. Concept of Business strategy 10
1.1.1. Definition of Business strategy 10
1.1.2. Roles of Business Strategy to enterprises 11
1.1. 3. Types of business strategies. 11
1.2. Strategic Management Process 12
1.2.1. Strategic planning agreement, identification of mission and direction of the
organization. 13
1.2.2. Analysis of factors affecting enterprises 13
1.2.2.1. External environment analysis 13
1.2.2.2. Internal Environment Analysis 18
1.2.3. Identification of long-term objectives and build development strategy for an
enterprise 20
1.2.4. Determination of action plans and implementation of strategy solutions. 20
1.2.5. Strategy Evaluation: 20
1.3. Instruments to be used for strategy formulation and evaluation 22
1.3.1. External Factor Evaluation (EFE) Matrix 22
1.3.2 Internal Factor Evaluation (IFE) Matrix: 23
1.3.3. Internal-External (IE) Matrix: 24
1.3.4. SWOT Matrix: 25
1.3.5. Qualitative Strategic Planning Matrix (QSPM) 26

CHAPTER 2: BUSINESS REALITY OF MILITARY INSURANCE
CORPORATION 27
2.1. Overview of Military Insurance Corporation 27
2.2. Business performance of MIC in the period of 2008-2010. 29
2.3. Analysis of MIC's business environment 30
2.3.1. Analysis of macro environment of insurance firms 30
2.3.1.1. Legal factors and development policies of the Government 30

4
2.3.1.2. Economic factors 31
2.3.1.3. Cultural and social factors 33
2.3.1.4. Science and technology factors 33
2.3.2. Analysis of micro environment of insurance firms 34
2.3.2.1. Development reality of insurance sector in Vietnam 34
2.3.2.2. Competition in insurance sector in Vietnam 35
2.3.2.3. Competitors 37
2.3.2.4. Clients 38
2.3.2.5. Substitute products 39
2.3.3 Analysis of internal factors affecting the operation of MIC 39
2.3.3.1. Human resources 40
2.3.3.2 Financial Accounting 41
2.3.3.3 Business management system 42
2.3.3.4 Product research and development 42
2.3.3.5. Operation network and distribution channels 43
2.3.3.6. Information technology 44
2.3.3.7 Insurance revenue structure divided according to customers 45
2.3.3.8. Investment activities 46
2.3.4. Instruments used for strategy formulation and selection 47
2.3.4.1. SWOT Analysis 47
2.3.4.2. External Factor Evaluation (EFE) Matrix 50

2.3.4.3. Internal Factor Evaluation (IFE) Matrix 51
CHAPTER 3: FORMULATION, SELECTION OF BUSINESS
STRATEGIES AND IMPELEMENTATION SOLUTIONS FOR MIC IN
THE PERIOD OF 2011-2015 52
3.1. Identification of Strategic Goals 52
3.2. Formation of business strategies for MIC in the period of 2011-2015 53
3.2.1. Based on SWOT Matrix 53
3.2.2. Business Strategy Selection 56
3.3. Business acceleration strategies of MIC 58
3.3.1 Solutions for developing a network of insurance agents 58
3.3.2. Measures for research and development of new products 59
3.3.3. Solutions for innovation of managment struture and development of human
resources. 60
3.3.4. Solutions for finance 61
3.3.5 Solutions for investment operations 62

5
3.3.6. Solutions to the innovation of IT application 64
3.3.7. Solutions for brand development 65
3.3.8. Solutions to coporate culture building 66
3.4 Recommendations 67
CONCLUSION 72
REFERRENCE 73

6
LIST OF TABLES
Table 2.1: Business Performance of MIC in the period of 2008-2010
Table 2.2: Social-economic developments of Vietnam in the period of 2006-2010
Table 2.3: Numbers of insurance companies classified by types of insurance (by
31/12/2010)
Table 2.4: Scope and scale of Vietnam‟s insurance market (2006-2010)
Table 2.5: Revenues and market shares of competitors of MIC in 2009 and 2010
Table 2.6: Financial ratios of competitors of MIC in 2009 and 2010
Table 2.7: Labor structure of MIC in 2010
Table 2.8 : Insurance Revenue Structure divided according to customers
Table 2.9: Investment Profile Structure of MIC in the period of 2008-2010
Table 2.10: External Evaluation Factor Matrix of MIC
Table 2.11: Internal Evaluation Factor Matrix of MIC


LIST OF FIGURES

Figure 1.1 Strategic Management Process
Figure 1.2 Micro-environment
Figure 1.4 Internal Environment
Figure 1.5 SWOT Matrix
Figure 2.6 Organizational Structure Chart of MIC
Figure 3.7 SWOT Matrix of MIC
Figure 3.8 QSPM Matrix of MIC








7
LIST OF ABBREVIATIONS

Order
Full name
Abbreviations
1
Military Insurance Corporation
MIC
1
Strengths
S
2
Weaknesses
W

3
Opportunities
O
4
Threats
T
5
Insurance
I
6
Non-life Insurance
NLI
7
Insurance firms
IF
8
Limited Company
Ltd.


8
INTRODUCTION

Necessity of the Research:
Vietnamese economy is now deeply integrating into the regional and the
world‟s economy. In face of continuously changing business environment with
increasingly fierce competition, every company should find their own proper way to
be able to catch up with new trends and continuously strengthen its position in the
market. Along with the country‟s economic development, Military Insurance
Corporation has achieved remarkable successes, contributing to the increasing

development of the Vietnamese insurance market. However, the newly entry of
Vietnam into the World Trade Organization has certainly induced number of
changes in business environment. The Military Insurance Corporation cannot well
develop if only based on its existing advantages and business experience
accumulated from the past without applying appropriate strategies for its
development. With our desire to apply our knowledge and analysis tools
accumulated in MBA program of Griggs in order to search for appropriate business
strategies to enable MIC to firmly maintain and develop its market position, after
significant research efforts, the Group 8 of Class N06 has selected the issue of
“Building business strategy for the Military Insurance Corporation for the period of
2011 -2015” as the theme for our capstone project.
Research Objectives and Applicability: The project derives from the
analysis of macro, micro environment and business reality of MIC in order to search
for an appropriate business strategy for MIC to be able to firmly maintain its status
and grow continuously to become one of the Top 5 Insurance Corporations in
Vietnamese insurance market in the future.
Research Methodologies:
We have applied the following research methods to conduct our capstone
project: Descriptive research, data collection and compilation, analysis tools and
selection models to demonstrate business reality and recommend strategy selection
for MIC.


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Structure of the Capstone Project Report:
Besides the Introduction, Conclusion and Appendix, the Capstone Project
Report is structured into three chapters:
Chapter 1 : Theoretical Background on Business Strategy and Business
Strategy Formulation
Chapter 2 : Business Reality of Military Insurance Corporation.

Chapter 3 : Formulation and selection of business strategies and
implementation solutions for Military Insurance Corporation in the period of 2011-
2015.
























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CHAPTER 1: THEORETICAL BACKGROUND ON BUSINESS
STRATEGY AND BUILDING BUSINESS STRATEGY

1.1. Concept of Business strategy
1.1.1. Definition of Business strategy
The concept of strategy emerged from the ancient Greek time. The term
“Strategy” derives from the military field, being developed into military science
and commanding art. However, since the 60s (20
th
Century), the concept of strategy
has been applied into business area and the term “Business strategy” was born.
There are various definitions of strategy with different points subject to different
views of their authors. We point out here the definition which is the most
appropriate for the research theme and scope of our capstone project: "Strategy is
the direction and scope of an organization in the long-term, which will bring
competitive advantages to the organizations through the optimum arrangement of
its resources in a changing environment to meet market demands and expectations
of stakeholders." (Johnson, G., Scholes, K. (1999). Exploring Corporate Strategy,
5
th
Edition Prentice Hall Europe).
In a traditional approach, strategy is the identification of the basic long-term
goals of an organization, and the implementation of action plans to allocate
resources to achieve these goals. Strategy can also be defined as "a series of
commitments and actions that a company uses to gain a competitive advantage
through exploiting its core competencies in a certain market". In other words,
business strategy is a method used by enterprises to orientate its future in order to
achieve and maintain its development.
The nature of the business strategy is to outline the future image of business in
the field of activity and the ability to exploit.
Business strategies are used by three basic meanings:
+ Identify long-term objectives of the business.
+ Set forth overall action programs.

+ Select action plans, implementing the allocation of resources to implement
those objectives.

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1.1.2. Roles of Business Strategy to enterprises
Planning Role
Business strategy enables company to clearly identify its business orientation
and objectives for the future, guiding and directing all activities of a company in the
long-term, serving as a solid basis for the implementation of operational activities,
allowing managers to be aware of, consider and set the right direction for the
organization in the right method at the right time.
Forecasting Role
In the trend of globalization, the business environment is always changing.
Therefore, the environment analysis and strategies building would help business
managers to be well aware of opportunities, and threats facing them as well as of
the strengths and weaknesses in their business, thereby analyzing, assessing and
predicting the environmental conditions in the future to make appropriate strategies
to take advantage of opportunities, strengths and reduce threats, weaknesses to lead
the business to overcome and win any challenges.
Directing Role
Business strategies enable managers to use and allocate resources
appropriately, to make appropriate decisions in each condition of the business
environment, increase the link and cohesiveness among employees, enhance the
ability to prevent and contain coming threats, thus avoiding financial risks,
enhancing business and operation performance of the enterprise toward its
sustainable development.
1.1. 3. Types of business strategies.
Integrated business strategy.
This strategy is outlined on the basis of external and internal environment
analysis to clearly identify the company‟s strengths, weaknesses, opportunities,

challenges, thereby incorporating the following strategies:
+ To take advantage of strengths to exploit coming opportunities in business
(SO).
+ To take advantage of the strengths to limit coming threats in business (ST).

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+ To take advantage of opportunities to overcome the weaknesses (OW).
+ To minimize the weaknesses to limit the coming threats (WT).
Overall business strategy:
This strategy refers to the most important issues of long-term and vital
significance to the business, including the four following groups:
+ The focused strategy which concentrates on solving a key problem, not
spreading resources, focusing on the activities of vital and decisive significance to
business and production.
+ The strategy which is based on the comparative analysis of the business
and its competitors to find out the key comparative advantage of the business that
can be exploited to further develop business and production.
+ The creative strategy which explores new products and services.
+ The strategy which explores the possibility of the environment to find out
critical factors.
Other business strategies.
+ Forward, backward, horizontal, vertical integration strategies.
+ The strategy to penetrate and develop products and markets.
+ Diversification strategies.
+ Hedging strategies.
1.2. Strategic Management Process
Includes all Commitments -> Decisions -> Actions that need be done by an
organization to achieve:
- Strategic Competitive Advantage.
- Sustainable Competitive Advantage

- Above-average Return.

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1.2.1. Strategic planning agreement, identification of mission and direction of the
organization.
Strategic planning agreement: is the cooperation, mutual-support between
strategy-makers with those who involve in strategy implementation in order to
achieve:
+ Clearer and better understanding of strategic implementers about selected
strategies, leading to easier and better strategy implementation by them.
+ Higher feasibility of selected strategies.
Mission Identification
A mission statement explains the reason of being, the significance of
establishment and existence of a company. Company‟s mission is its declaration to
society. A mission statement of a company usually contains the content of its
customers, products or services, market, technology, philosophy, interest in society,
staff…The company‟s mission statement shows the overall picture of the company.
It is an important basis for the proper selection of objectives and development
strategies for the company.
Objectives Identification: Objectives are the specification of the content of
a mission of the company, serving as instruments to successfully realize its mission
statement.
1.2.2. Analysis of factors affecting enterprises
1.2.2.1. External environment analysis
a. The macro environment – socio, economic and political environment.
The macro environment includes factors of economic environment, legal and
political environment, social and cultural environment, technological environment,
natural environment, global environment that have impact and influence on the
survival and development of the business.
* Economic environment (economic factors)

The main factors of economic environment that affect the operation of
enterprises are: The growth of the economy, interest rates, exchange rates and
inflation rates. Economic growth or recession has great effect on businesses.

14
Economies with high growth rates will create many opportunities for businesses to
invest in expanding the operation, whereas the recession in economy will lead to
reduction in consumption spending and increase of business risks. The levels of
interest rate will determine the demand for business products. Policies on exchange
rates, inflation rates also create opportunities or increase threats for enterprises.
* Legal and political environment (legal and political factors)
The legal and political environment may make significant impact on
businesses with the creation of significant opportunities or large threats for
enterprises.
This environment consists of political stability, the legal policy system and
framework (e.g. the investment law, labor law, laws on natural environment and
resources, tax and fee policies, regulations on advertisement )
* Socio-cultural environment (social, cultural factors)
This environment includes the following factors: lifestyle, ethics, traditions,
consumer attitudes, the role of women, population growth, population shifts, the
marriage rate, birth rate, educational level, the creation of associations to protect
consumers These factors create greater opportunities or increasing threats for
businesses.
* Technological environment
Technological changes alter production methods, leading to the changes in
product life cycles and the creation of better and cheaper products. Technology is a
factor of great and direct impact on the business strategy of enterprises. Hence, in
the process of formulating business strategies of enterprises, it is essential to make
concrete analysis and assessment on the technological factor as well as the trend of
technological development to be able to set up a proper business strategy.

* International environment (international factors)
At present, the trend of regionalization and globalization has been inevitable
trends. Therefore, the opportunities and threats from the international environment
that affect businesses have become larger and more complex due to differences in
cultures, societies, institutional structures, policies and economies. So each

15
enterprise should approach and analyze this environment under the perspective of
their industry. Especially, the factors of free trade agreements, tariff barriers,
international quality standards, antitrust, anti-dumping laws need to be analyzed
carefully to take advantage of opportunities, limit threats and develop business
strategies accordingly.
b. Micro environment (industry environment):
The factors of micro-environment include: pressure from customers (buyers),
pressure from suppliers, and the threat from potential competitors, the threat from
substitute products and services, and the rivalry among existing competitors. Michel
Porter - a theoretical and practical strategist of the Harvard School of Business
Administration has developed the model of five forces of competition to serve as
the basis for strategists to analyze this environment as follows:

Source: Text book of “Strategic Management”- Global Advanced Master of
Business Administration, Hanoi, 2010)

Potential Competitors

Suppliers

Enterprise and competitors




Competition in the industry

Customers


Substitute Products and
Services
Threat of Potential Entrants
Bargaining
Power of

Customers
Bargaining
Power of

Suppliers

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* Analysis of existing competitors:
This is the first force in the model of M. Porter. This force is competitors
already position in the market. If these competitors are weak, the businesses will
have the opportunity to increase prices and may earn more profit, whereas the
greater competitive pressure in the industry will lead to the increasingly fierce
competition in prices among enterprises in the same industry. The analysis of
existing competitors require enterprises to collect and understand detailed
information of their competitors to serve as the basis for analyzing their
technological potential, human resource potential, financial capability, marketing
system, management activities, capacity, product quality, qualifications of
leadership, thereby identifying the strengths and weaknesses of their competitors.
From these assessments, we can set up a Competitive Profile Matrix to formulate
overall assessment of competitors in comparison with the company.
Order
Factors
Degree of
Importance
Competitor A
Competitor B
The company
Rank
Score
Rank
Score
Rank
Score
1

(0 ÷ 1)
(1 ÷ 4)

(1 ÷ 4)

(1 ÷ 4)











(Source: Text book of “Strategic Management” – Associate Professor
Doctor Ngo Kim Thanh, Asso. Professor Doctor Le Van Tam – Publisher of
the National Economics University, Hanoi-2009, p.258)
* Potential competitors: These involve the enterprises not competing with
the business now but they are able to compete if they decide to enter the industry.
The number of potential competitors depends greatly on the entry barrier of that
industry. Therefore, where potential competitors are considered, it needs to analyze
all elements of entry barriers from the economies on scale, product differentiation,
capital requirements, switching costs, the accessibility to distribution channels, the
cost disadvantage regardless of scale, government policies and possible response
actions to fully assess the threats from potential competitors .

17
* Suppliers: This force includes suppliers providing raw materials, fuels,
equipment, labor, and transportation services It can be a pressure when they are
capable of increasing input prices or reducing the quality of products and services
they provide. Therefore, in the formulation of business strategies, it needs to
analyze and work out appropriate strategies to deal with this force.
* Customers: This is the force which creates the bargaining power of buyers.
A large number of buyers would create opportunities for the business, otherwise it
can be viewed as a threat if strong customers require the business to reduce prices or
provide products or services of better quality.
* Substitute products or services: Substitute products are the other products
that can satisfy the same need of consumers. To find out the threats from substitute
products and limit the risks to business, the process of formulating business
strategies would involve the analysis and forecast of policies, the development of
science, technology, price trend and consumers pattern in order to build proper
business strategies.
Besides the mentioned-above five groups of factors, the formulation of
business strategies should also involve the consideration of other factors such as the
systems of distributors, community and union to fully analyze the opportunities
and business threats facing the enterprise to be able to develop appropriate business
strategies.
The analysis of the external business environment is very important for all
enterprises as it helps them to identify opportunities and threats facing them in order
to set up proper business strategies accordingly. To assess the extent of the impact
of the external environment on business activities, an EFE matrix can be built as
follows:

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EFE Matrix






(Source: Text book of “Strategic Management”- Global Advanced Master of
Business Administration, Hanoi, 2010)
1.2.2.2. Internal Environment Analysis
The analysis of the enterprise‟s internal environment is to identify strengths,
weaknesses and competitive advantages of the enterprise for the formulation of
appropriate business strategies. It is essential for enterprises to analyze and assess
the factors of finance, materials base and infrastructure, technology, marketing,
human resources, manufacturing, research and development, management activities,
brand name, corporate culture in order to promote all their strengths, limit their
weaknesses, thus creating competitive advantages for their businesses.
* Human Resources:
This is a very important resource, being associated with the existence and
development of the business. Human resource management of an enterprise
involves the work of recruitment, training, arrangement, appointment, rotation, and
personnel policies. The analysis of human resources of an enterprise is to identify
the strengths and weaknesses in its human resource management to work out
appropriate strategies.
* Financial capacity:
- The analysis and assessment of these factors should be based on the
detailed consideration of material facility, plants, equipment and machinery, raw

materials, the level of modern technology that businesses are applying, and the
evaluation of their financial conditions, total assets, capital, capital structure,
profitability, ability to raise capital, ability to secure financing of the enterprises.


List of
external
factors


The level
of
importance
of factors
0,0 † 1



Shorting of
factors 1 †
4


Sum of
scores for
factors in
the list

Scoring the
factors

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- The analysis and assessment of financial work of the enterprise is to review
to check whether its finance and accounting activities can meet their task
requirements and maintain integrity, thereby identifying the company‟s strengths
and weaknesses in this area.
* Production and operation activities:
The analysis and assessment of production and operation activities of the
business are conducted on the basis of analysis and assessment of production plans,
plant capacity, appropriateness of scale, the efficiency of utilizing of technology
line in production activities, the quality of the work force, quality of goods
produced, the production cost or cost of a product unit in order to clearly identify
the strengths and weaknesses of the enterprise in this area.
* Marketing activities
The analysis and assessment of the marketing work is focused on analyzing
and evaluating the marketing systems, plans of products and services, the sales and
purchases activities, customer analysis, pricing policies as well as the effectiveness
of the marketing work in order to see clearly the real situation, the strengths and
weaknesses of the enterprise in this area to develop appropriate strategies.
* Management activities:
In order to be able to make accurate assessment on the enterprise‟s
management activities, it requires analyzing and assessing the reality of its
organizational model. The enterprise‟s organizational model should meet the
requirement for operations and development. The establishment of models with
overlapping functions is not encouraged.
On the other hand, analysis and assessment should be conducted on the
operation of functions from planning to implementation organization, incentive
policies, human resource arrangement and utilization, control work, the

development of the system for research and development activities and the
application of informatics technologies in business operations…in order to review
and assess the reality of management functions of the enterprise to identify its
strength and weakness in this area. On the other hand, thorough analysis and

20
assessment should be done on the competencies of the enterprise‟s leadership. Good
leadership would help the enterprise to develop while the lack of competencies of
the enterprise‟s leadership would drive the enterprise to the verge of bankruptcy or
failure.
1.2.3. Identification of long-term objectives and build development strategy for an
enterprise
Objectives identification is a critical opening step for any enterprises. It
requires enterprises to identify the mandates or objectives it will pursue in its
business operation. On the other hand, the business operation of enterprises should
demonstrate clearly their legal and ethical values to society.
The identification of mandates, objectives and business area of enterprises
should be followed by the analysis and evaluation of factors affecting them to form
the basis for building business strategies.
1.2.4. Determination of action plans and implementation of strategy solutions.
This is the process to set up mechanism, plans of resource allocation to
implement solutions of selected key strategies, thereby contributing to the effective
exploitation of available resources and competitive advantages of the enterprise,
creating the combined strength for the enterprise to win its objectives and achieve
success in business.
1.2.5. Strategy Evaluation:
The strategic management process may result in far-sighted strategic decisions
which bring about long-term significant outcomes, or it may also result in wrong
strategic decision which brings about serious disadvantages and huge difficulties.
Hence, most strategies agree that strategy evaluation is critical for enterprise‟s

prosperity; timely and proper evaluation can give warning to strategic management of
existing or potential difficulties before the occurrence of a serious situation. Strategy
Evaluation is made up of the three major activities as follows:
a. Review and control fundamental basis of strategy of the enterprise.
b. Compare actual outcomes with desirable outcomes.

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c. Recognize and install correct activities to ensure the work progress in line
with plans. Following is the illustration of strategy evaluation as a phrase of a strategic
management process:
Comprehensive Strategy Management Model
Feedback information

Feedback information




External
Control to
identify
opportunities
and threats
Set up
long-term
goals
Set up
annual
targets
Identify
mandates,
objectives
and
existing
strategies

Review
business
objectives
Internal Control
to identify
major strengths
and weaknesses

Select
strategies
to pursue
Combine
resources
Set forth
policies
Strategy
Formulation
Strategy
Implement
ation
Strategy
Evaluation
Measure
and
evaluate
performa
nce

22
Sufficient and timely feedback information is the foundation for effective

strategy evaluation. Strategy evaluation should be based on current information.
Strategy evaluation is a complicated and sharp task. Over-emphasized strategy
evaluation may become costly and results in reverse effect. No one likes to be
controlled too closely. Dalton and Lawrence assert that the more strategy managers try
to control other behaviors, the looser control they have. However, under-evaluation or
none evaluation may lead to worse situations. Strategy evaluation is essential to ensure
the achievement of set goals and desirable outcomes.
In many companies, strategy evaluation is simply to review any improvement
or change in their performance, asset and net worth, profit and sales as well as
production capacity.
It is unable to demonstrate clearly a typical strategy as the best one or to ensure
its absolute feasibility. However, it can be evaluated through serious mistakes. Richard
Rumelt proposes four criteria to be used for strategy evaluation, including:
consistency, appropriateness, convenience and feasibility.
Successful strategic evaluation allows the company to take the best advantage
of rising internal strengths, exploiting coming external opportunities, identifying and
limiting external threats and restructuring its internal weaknesses before they become
serious dangers.
1.3. Instruments to be used for strategy formulation and evaluation
1.3.1. External Factor Evaluation (EFE) Matrix
External Factor Evaluation Matrix is an instrument to evaluate the impact of
external environment to a company.
E
E
F
F
E
E

K

K
e
e
y
y


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d
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S
S
c
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r
r

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O
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p
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p
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s

1

1
.
.








23
2
2
.
.







T
T
h
h
r
r
e

e
a
a
t
t
s
s





1
1
.
.







2
2
.
.

T
T
o
o
t
t
a
a
l
l
1
1
.
.
0
0
0
0



Advantage: Outline the overall picture of external factors affecting the
company‟s competitiveness.
Disadvantage: The scoring and weighting significance of each factor is still
subjective.
1.3.2 Internal Factor Evaluation (IFE) Matrix:

Similar to steps and scoring methods of the EFE Matrix, IFE Matrix is an
instrument to evaluate strengths, weaknesses and the importance of functional areas
of a company.
I
I
F
F
E
E

Key Internal Factors

W
W
e
e
i
i
g
g
h
h
t
t
R
R
a
a
t
t

i
i
n
n
g
g
W
W
e
e
i
i
g
g
h
h
t
t
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d
d


S
S
c
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o
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r
r
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S
t
t
r
r
e
e
n
n
g
g
t
t
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s
s

1
1
.
.

2
2
.
.







W
W
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a
a
k
k
n
n
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s
s
s

s
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s
s




1
1
.
.







2
2
.
.

T
T
o
o
t
t
a
a
l
l
1
1
.
.
0
0
0
0




24
Advantage: Outline the overall picture of the company inside including it
major strengths and weaknesses affecting its competitiveness.
Disadvantage: The scoring and weighting significance of each factor is still
subjective.
1.3.3. Internal-External (IE) Matrix:
The IE Matrix is an important strategic tool which is used to plot the company‟s

strategic position in a nine-cell diagram; each cell has implications about the company‟s
situation and suggestion for its optimum strategies.
EFE Matrix
EFE Total Weighted Scores
IFE Total Weighted Scores


Strong – 3
Average – 2
Weak – 1
High – 3

1

2
6
Medium – 2

3

5
9
Low – 1

4

7
8
- If the company‟s strategic position is in cell 1, 2 or 3: it is in the fast
growth area.

-
If the company‟s strategic position is in cell 4, 5, 6: it is in the selected
growth area or should adopt stable strategy.

- If the company‟s strategic position is in cell 7, 8, 9: the best strategy is
retreat.

25
1.3.4. SWOT Matrix:
SWOT Matrix is the Matrix of Strengths – Weaknesses - Opportunities –
Threats. This matrix helps managers to form strategies based on a combination of
strengths, weaknesses, opportunities and threats.

SWOT
Matrix
Strengths – S
1………………….
2………………….
3………………….
……………………
Weaknesses – W
1………………….
2………………….
3………………….
……………………
Opportunities – O
1………………….
2………………….
3………………….
……………………

Strategies
1………………….
2………………….
3………………….
……………………
Strategies
1………………….
2………………….
3………………….
……………………
Threats – T
1………………….
2………………….
3………………….
……………………
Strategies
1………………….
2………………….
3………………….
……………………
Strategies
1………………….
2………………….
3………………….
……………………
Figure I.5: SWOT Matrix
(Source: Text book of “Strategic Management” – Associate Professor
Doctor Ngo Kim Thanh, Associate. Professor Doctor Le Van Tam – Publisher
of the National Economics University, Hanoi-2009, p.255)

+ S-O Strategy: To use strengths to take advantage of external opportunities.
+ W-O Strategy: To overcome weaknesses to take advantage of external
opportunities.
+ S-T Strategy: To use strengths to cope with threats.