DEVELOPMENT STRATEGY OF THE VICD COMPANY

Thesis
DEVELOPMENT STRATEGY OF THE
VICD COMPANY


INTRODUCTION
1.

Rational:
Development strategy making is a requirement which has the orientation role

ensuring the development, stability and effectiveness of a company. In the market
oriented economy, defining the development strategy for specific stages is the basis
for the company to exploit the best the company potentiality and resources. Makng
a sound development strategy is the foundation for international integration and
sustainable development in the market mechanism.
In VICD, development strategy definition for each stage received special
attention from company managers. Knowing the importance of development
strategy, the group has worked with the company managers to make development
strategy for the company up to 2015. This is a practical study and during the
research, the group has been supported by the company management board and
director board. The group also got the enthusiastic assistance of the Professional
Council, professors, and instructors of the university, national professors and
instructors.
2.

The significance of the paper.
Studying and making development strategy of a company help students to have

chance to connect the obtained knowledge with the actual situation of the company.
Applying knowledge in the company management actual practices is the best

experiences for the students to complement and improve their knowledge of
business administration in their personal development.
From the actual business situation, applying appropriately the knowledge and
experiences of international business administration in the specific business
conditions of the company will help the company to orient their development
appropriately, ensuring using effectively the company resources and capacity. The
field study also helps the company to find its shortcomings and weak points to


adjust the long term development strategy goals, define the specific strategic
objectives, provide concrete action plans to achieve goals.
In terms of society, the company development strategy reflects the indispensable
trends in the market economy wile show the consistent viewpoint of Vietnam
government toward economic development during the international integration.
3.

Research objectives:
1 : To provide scientific justification for making development strategy of a

company;
2 : To provide the most accurate and genuine information on the business
environment, defining the strength, weakness, opportunities and threats of
companies at present.
3 : To make and evaluate strategies and to choose the feasible business
strategy for the company.
4 : To propose solutions to achieve strategic goals which are suitable to the
actual conditions of the company for the 2010-2015 period.
4.

Research methodology:

To fulfill the requirements and objectives of the research, the group has used

a combination of methods:
-

Survey on the actual situation of the company.

-

Analyze the overall strategy with planning tools (BCG, SWOT) and
competitive strategy theory of Michael E.Porter.

5.

Compare to provide the highly feasible solution
Major research outcomes:

-

Applied company development strategy theory

-

Analyzed

business

environment,

defined

strength,

weakness,

opportunities and threats etc. to understand the current situation of the VICD
company


-

Developed and evaluated strategic options and selected the feasible
business strategy for VICD.

6.

Paper structure:
Chapter1: Company development strategy theory
Chapter 2: VICD actual situation analysis
Chapter 3: Developing development strategy for VICD.
Chapter 4: Strategy implementation options, conclusion and

recommendations.
The group would like to deliver sincere thanks to the Management Board,
Director Board, functional departments of VICD for the whole-hearted supports
and cooperation. The group would like to thank Associate Professor, Professional
Council, professors, instructors of NEU


CHAPTER I

COMPANY DEVELOPMENT STRATEGY THEORITICAL BASIC
1.1. BASIC STRATEGIC ISSUES.
1.1.1. Definitions of strategy:
There are many different definitions of strategy and they vary depending on the
viewpoint of each author.
In 1962 Chandler defined strategy as “identifying the basic and long term goals,
objectives of companies, implementing action sequence as well as allocating
necessary resources to achieve objectives.” (1).
In 1980 Quinn presented a more general definition of strategy: “ Strategy is the
pattern or plan that integrates major goals, policies and action sequences into a
cohesive whole” (2).
After that Johnson and Scholes redefined strategy in an environment with many
changes: “ Strategy is the direction and scope of an organization over the longterm: which achieves advantage for the organization through its configuration of
resources within a challenging environment, to meet the needs of markets and to
fulfill stakeholder expectations” (3)
According to Mintzberg, strategy definition is generalized with 5 P:
Plan: a consciously intended course of action.
Pattern: consistent in behavior, whether or not intended.
Position: locating a firm in its environment.
Perspective: ingrained way of perceiving the world.
Ploy: specific "maneuver" intended to outwit an opponent or competitor.

(1). Chandler, A (1962) Strategy and Structure.Cambrige Massacchusettes.MIT Press.
(2) Quinn, J,B (1980)Strategies for change; Logical Incrementalism. Homewood.
(3) Johnson, G, Scholes, K (19990 Exploring Corporate Strategy, 5th Ed.Prentice Hall.


In nature, the definitions of strategy are made depending on the viewpoint.
However, the levels of strategy include: Corporate strategy, Business unit strategy,
and Functional strategy.

According to Charles W.L.Hill and Gareth R.Jones: “Business strategy is a
process of identifying the basic and long term objectives of the company, selecting
action methods or option and relocating necessary resources to implement those
objectives”.
Fred David: “Business strategy is the tools to reach the long term
objectives”.
William J. Glueck: “Business strategy is a comprehensive, consistent and
integrated plan which is designed to ensure the company basic objectives will be
completed”.
Business strategy of a company is the comprehensive action plan aiming at
implementing the ultimate objectives of the company. However, the, strategy
doesn’t draw specifically how to achieve those objectives but a frame for thinking
and acting only.
The important thing is that all the business strategy is made and taken care of
because it is used to distinguish the “competitive advantage” from other business
plans. In fact, all competitors make their own strategy because strategy is the
ultimate objective and ensures that the company can find and gain the stable
position against its competitors.
In exposing to the above definitions, strategy can be generalized despite of
how differently it is expressed as:
“A complex action sequence aiming at mobilising the resources of an organisation
to achieve a certain objective.”
1.1.2. Strategic management:
Garry D. Smith said, “Strategic management is a process of studying current
and future environment, identifying organization objectives: make, implement and


check the implementation of decisions to achieve those objectives in the current and
future environment.”
According to Fred R. David, “Strategic management can be defined as an art

and science which set up, implement and evaluate multi function related decisions
which allow an organization achieve the set objectives. Strategic management
focuses on combining the management, financial accounting, marketing,
production, research and development and information system of all business
aspects to make the organization successful.”
There are many different definitions of strategic management. However,
according to the "Strategy & business policy" by MA. Nguyễn Thị Liên Diệp, three
approaches are available:
• Environment approach: "Strategic management is a decision process to
connect the internal power of an organization to the external opportunities and
threats”. The feature of this approach is the make the company responds to the
environment, get opportunities and encounter threats.
• Objective and measure approach: "Strategic management is part of the
decision making and management activities fixing the long term achievement of a
company ". This approach enable managers to identify more accurately the
company objectives, which are the foundation of the management while allow the
managers to use the organization resources more effectively.
• Action approach: "Strategic management is reviewing the current and future
context, creating organization objectives, making decisions and supervising
decisions, focusing ion implementing objectives in the current and future context. "
Strategic management is the studying current and future environment, setting
organization objectives; setting, implementing and supervising decisions to achieve
objective in the current and future environment in order to improve the
competitiveness and position of the company.


1.1.3. The benefits of strategic management to the company development.
Strategic management helps the company to know its objectives and orientation.
Being aware of the desired outcomes and objectives in the future helps the
managers and staff to know well what to be done to be successful.

The environment conditions that the organization faces always change quickly
and create surprises. Strategic management helps managers to see clearly the
environment in the future. Therefore, they can know and take advantages of
opportunities better while avoiding or limiting risks.
Strategic management helps managers to use effectively existing resources of
the company and allocate them appropriately. It helps company to attach decisions
to the related environment conditions. Moreover, strategic management harmonizes
the organization demand, through which attract senior managers and create synergy
to reach the common objectives of the company.
The fact of the study shows that the companies having strategic management
often get better results than they did before and the companies not having strategic
management.
1.2.

STRATEGY FORMULATION STEPS

1.2.1. Environment Analysis:
In making business strategy, studying environment is very important. It helps
company the identify opportunities to take and see the risks and challenges to act
with caution.
Environment is the existing factors, forces and institution impacting and
influencing the company activities and operation outcomes. The company
environment consists of macro environment and micro environment (the industry)
and the internal conditions.
Here below is the strategic environment analysis diagram of a company


Diagram 1: The strategic environment analysis diagram of a company
Macro environment
1. Economic factors

2. Legal, governmental and politic factors
3. Social factors.
4. Natural factors.
5. Technological factors
6. Global
Micro environment (industry environment)
1. Competitors
2. Suppliers
3. Customers
4. Substitute products
5. Potential competitors.

Internal conditions
1. Human resources.
2. Research and development.
3. Management
4. Production
5. Finance
6. Marketing.
7. Information system

Strength
Strengths

Weakness

The combination of strength, weakness, opportunities and threats will create
a SWOT matrix and the strategic options for selecting.
Studying the operation environment of a company is focusing on identifying
and evaluating trends and incidents go beyond the control of the company.

Evaluating external factors show the opportunities and challenges that a company
faces so the managers can make strategy to take opportunities and limit risks. We


will analyze the operation environment of a company with the macro and micro
(industry) environment.
1.2.1.1.

Macro environment

1.2.1.1.1. Economic factors

They are factors outside the company. They don’t not only orient and affect
directly the management but also affect the micro environment of the company.
These factors are also the causes of opportunities and threats to each company in
different industries. Studying the macro economic factors plays an important role to
the management of a company and it includes the following factors: economic
development speed, inflation rate, exchange rate, interest rate, salary and income.
1.2.1.1.2. Legal, governmental and politic factors

They include the system of viewpoints and policies of the government, the
system of current law, trends of diplomatic politics with other countries, and
domestic, regional and international politic incidents.
The legal and politics factors can create opportunities or threats to company.
To take advantages of opportunities and limit the threats, companies must grasp the
viewpoints, regulations and preferential programmes of the government. They
should establish a good relationship and even lobby when necessary to create a
favorable environment for the company operation.
1.2.1.1.3. Social factors

Social influences mainly include: entertainment and pleasure habits, moral
standards, aesthetics, lifestyles, professions, traditions, customs, interests and
focuses of society, awareness and general education level of the society. The social
factors change slowly and are difficult to recognize.
1.2.1.1.4. Natural factors

Natural factors include geographical locations, climates, natural landscapes,
land, seas, rivers, underground minerals and resources, marine and forest resources,
air and water environment etc. Natural factors are important input for many


industries. In many cases, it’s the natural condition to become a significant factor to
create the competitive advantage of products and services.
1.2.1.1.5. Technological factors

They are very dynamic factors which include many opportunities and threats
to companies. The pressures and threats caused from technological environment
are:
The appearance of new technology create and improve the competitive
advantages of substitute products, threaten traditional product, put pressure on
companies to change their technology to increase competitiveness.
Besides the above threats, technological environment also creates some
opportunities for companies, which is:
The new technology creates conditions to make better quality and cheaper
products, makes the product more competitive. Normally, the new companies have
more advantages in taking this chance than existing companies in the sector.
1.2.1.1.6. Global:

In the globalization context nowadays, the admission into international
economic organization and association like WTO, AFTA … is the factor

influencing companies greatly. The problem is that it is necessary to define in the
company development strategy the world economic integration trend. The company
will lag behind and can’t develop if the company development is not placed in the
globalization and integration context.


Digram 2- Micro environment model (4)
L

Economy

Natural
factor

Industry
Environment

Socio
cultural

Threats of new entrants
Power of suppliers
Power of buyers
Threats of product
substitutes
Intensity of rivalry

Political /
Legal

Competitor
environment

Global

Technology

1.2.1.2. Micro environment :
Micro environment include the industry and external factors of the company.
They decide the characteristics and levels of competitiveness in that
business/production sector. There are 5 major factors: competitors, suppliers,


customers, substitute products, potential competitors. Moreover, the suppliers and
debt owners are also factor affecting the business environment of the company.
To make a successful strategy, the company must analyze each of these major
factors thoroughly.
(4) – Strategic management textbook - Griggs University

Knowing these factors will help company recognize the strength, weakness relating
to the opportunities and threats that business sector is facing.
1.2.1.2.1. Competitors:
Understanding competitors is very important to a company for different reasons.
Companies competing with each other decide the characteristics and level of
competition or the ploy to gain the advantage in the sector.
1.2.1.2.2. Customers (buyers):
Customers are an indispensable part of a company. The loyal customer is a big
advantage of the company. The loyalty of the customer is built by satisfying the
customers’ demand and wishing to do better.
1.2.1.2.3. Supplier:

Companies always have to connect with suppliers to be provided with different
and necessary resources for their business and production operation like input,
equipments, workers, capital etc. Studying suppliers who provide resources to
companies can not be omitted during the environment study.
1.2.1.2.4. Potential competitors:
Potential competitors taking part in the sector is also a factor decreasing the
company’s benefits because they use new production capacity with a wish to gain
market share and necessary resources. Therefore, in making strategy and protect the
competitiveness, the company should take into consideration maintaining the legal
barriers against outsider invasion.
1.2.1.2.5. Substitute products:


Substitute products are the results of technological and scientific
breakthrough. The pressure of the substitute products limits the high price of
companies in the sector. Without taking notice of potential substitute products, the
company can lag behind with smaller environment. Therefore in order to be
successful, companies should pay attention and put resources in the development or
application of new technology in their strategy.
Diagram 3- Micro environment (Industry environment)(5)

Potential
competitors

Competitors

Substitute
products

Suppliers

Customers

1.2.2. Company internal conditions
Each company has the strength and weakness in their business. No company
is strong or weak in all aspects. The internal strength and weakness, the external
opportunities and threats and specific tasks are major points of interest in setting


objectives and making strategy for the company. Companies should try to analyze
thoroughly those internal factors to clearly define their advantages and
disadvantages. Based on this, they can provide measures to limit disadvantages and
exploit advantages to achieve the ultimate advantages. Basically, the internal factors
include the functional areas like:
o

Human resources.

o

Research and development.

o

Management

o

Line production

o

Finance - Accounting

o

Marketing.

o

Information system

1.2.2.1.

Human resources

Human resources play a very important part for the success or failure of a
company. No matter how appropriate the strategy is, without the good, enthusiastic
and dynamic workers, the strategy will not be effective. Therefore, the company
should prepare human resources to implement the set strategy. It includes:
recruitment, training and suitable compensation and benefits etc.
1.2.2.2.

Research and development (R&D)

Research and development activities aim at creating new products ahead of
competitors, improving product quality, controlling or upgrading production
process to decrease cost. Research and development activities can help the company
to maintain leading position or make it lag behind the competitors in the sector.
1.2.2.3.

Management:
Management activities include:

* Planning: is all activities relating to the preparation for the future:
forecasting, objective setting, strategy making, policy development, plan making.


* Organizing: are the activities creating the structure for relation between
authorities and responsibilities. The specific tasks are: organization design, job
specialization, job description, job specification, control expansion, order
consistency, coordination, arrangement, job design and analysis.
(5) – Strategic management textbook - Griggs University

* Leadership: includes the efforts aiming at orienting the activities of
people, namely: directing, team communication, activity changes, authorization, job
quality

improvement,

job

satisfaction,

demand

satisfaction,

organization

development.
* Controlling: Are the management activities to ensure that the actual
outcomes correspond to the planned outcomes. Major activities are: quality control,
financial control, sales control, inventory control, cost control, change analysis,
compensation etc.
1.2.2.4.

Line production

Line production includes all activities aiming at turning inputs into services
or merchandised products. Line production management should take into
consideration 5 areas as follow: Firstly, process: the physical production system
design. Secondly, productivity: deciding the best productivity. Thirdly, inventory:
managing raw inputs, under processing works and finished products. Fourthly,
human resources: managing admin staff, skilled and unskilled staff. Fifthly, quality:
making high quality products.
1.2.2.5.

Finance - Accounting

It is the factor that the managers pay special attention to. The shortcomings
in this activity often cause difficulties to implementing the company objectives. The
areas need consideration are: the existing capital capacity against the requirement
for implementing company plans; possibilities of mobilizing external capital; the


resources allocation and using; controlling cost, receipts and expenses, financial
relations inside the company and with other agencies.
1.2.2.6.

Marketing

Marketing is described as the process of identifying, forecasting, establishing
and satisfying the demand and wishes of consumers toward products and services.
According to Philips Kotler, marketing includes 4 major works: Firstly, market
analysis; secondly, target market selection; thirdly, mix marketing programme draft
(product, price, place and promotion); fourthly, marketing activity implementation.
1.2.2.7.

Information system

The good information system will facilitate to collect the raw data of the
external environment and the internal environment of the company. It helps us to
keep track of the environment changes, realize the threats as well as support us in
implementing, evaluating and controlling strategy. Besides that, an effective
information system will create other competitive advantages for the company.
1.2.2.8.

Company culture:

The company culture plays an important role in the strategic management in the
company. Company culture creates the difference in values, standards, practices and
specific effective opportunities for the company development and worker behavior
guidance.
Diagram 4 – Internal conditions of company


Human
resources
Organizatio

nal culture

Information
system

Research and
Development
(R&D)

INTERNAL
CONDITIONS
OF COMPANY

Management

Production –
line production

Marketing
Finance


1.2.3. Resource analysis to identify the core competencies.
Each company has its own strength, weakness and specific operating
environment. Therefore a strategy can help this company to be successfully but it
may not be effective for another company or cases. The development makes
company to choose business sector and market. Company can focus on one business
only, develop vertically or diversify with new business sectors.
The objectives of business structure analysis are to combine and select
suitable products (services) by reviewing the potentiality of single business. To

identify each business structure, managers must finding strategy options from which
they can select the strategy from the strategy collection with different approach.
If the company is multi-business, it can select a collection of suitable
businesses by using one business structure analysis tool or more. Companies can
use business structure analysis tools or position the company based on two types of
low or high tangible or intangible assets. Moreover, they can assess the company
with two or three different parameters…
1.2.4. Setting long term objectives
Each objective often requires certain amount of time and attaches to certain
index like the growth of revenue, capital or market share. Therefore the time frame
for objective and strategy should correspond to each other.
It’s necessary to notice that in the globalization context, it’s not advised to
set objectives for a period which is too long while identifying objectives. Normally,
2-5 year period is the best.
1.2.5. Strategy selection:
1.2.5.1.

Viewpoint and criteria for strategy selection:

Strategy selection is done based on:
•

Firstly, the advantage of company by analyzing the following
aspects:


•

-

Strength or relative position of company against rivals.

-

High ROI of the business in the future

-

Value chain analysis of customers, company and rivals.
Secondly, objective: How the selected strategy helps to

achieve the objective?
•

Thirdly, resources, financial conditions.

•

Fourthly, competence and ability of company: select strategy
depending on the quality and levels of difference competencies and
ability of company.

•

Fifthly, legal consideration and related party reactions:
suppliers, partners, customers.

•
1.2.5.2.

Sixthly, identifying the time for investment.
Selecting strategy:

Strategy is a long term operating method. Therefore, the basic features of the
business economic and technological nature need special attention. This is different
from factors which are short term and affect short term competitiveness and benefits
of company. Selecting strategy also depends on the culture; politics and the role of
strategy management are the most decisive factor in selecting strategy.
By environment analysis, strategy makers can have subjective viewpoint
based on the objective information on politics, culture, moral and social
responsibility. They offer strategy collection, analyze the feasibilities and select
specific action sequence. The strategy can be divided into three levels based on the
organization structure and scale of company:
* Corporate Strategy: focus on the issues of:
o

How to allocate resources.

o

Which area to develop

o

Which area to maintain

o

Which area to enter

Which area to omit

o

* Business level strategy: focus on identifying the executive method for each
business of a multi-business company or a SBU (strategic business unit) or an
enterprise in the sector. This strategy focus on the issues: how to overcome
competition? Defending or attacking? Low cost or product unique? This is also the
core of competitive strategies.
According to Michael E. Porter [6]: “The purpose of competitive strategy of a
business unit in the industry is to find a position in the industry where the company
can fight against rivals the best or can influence it in a way that benefit itself”
* Functional strategy: identifying the operation methods of each functional
department: Marketing, product research and development, production, human
resources, finance, information … to support and ensure the implementation of
company strategy and unit competitive strategy. It supports the strategy
implementation of SBU, corporate strategy and includes:
o

Marketing strategy

o

Management strategy

o

R&D strategy (technology strategy)

o

Production strategy (service) / operation

o

Finance strategy

o

Human resources strategy

Most of small and medium enterprises, even some large enterprises, don’t
have strategic business unit or department so the single business strategy tasks
should be taken into consideration as well.
1.2.6. Strategy formulation steps
Strategy formulation process is done through the following steps:
1.2.6.1.

Stage 1: Entering data stage

In this stage, basic information which has been entered will be briefed for
making strategy. This stage consists of analyzing external and internal environment.


Strategic management techniques like EFE matrix, IFE matrix, and competitive
image matrix are often chosen in this stage.
1.2.6.2.

Stage 2: Matching stage

This stage focuses on offering feasible strategies which can be selected by
arranging and matching important internal and external factors. The techniques used
in this stage include: SWOT, strategic positioning matrix, SPACE), BCG, IE
matrix, major strategy matrix…
Within this research and with the company characteristics, it’s advised to use
SWOT only because it is suitable for the actual situation and the provided data. On
the other hand, this is a popular method which is easy to use, comprehensive and
time saving.
1.2.6.3.

Stage 3: Decision making stage

This is the last stage to select the strategy that company pursuits. The selected
strategies should be ranked with which strategy will be given priority in
implementation. To select strategy, managers can select quantitative strategic
planning matrix. The strategy selection will be within the authority of top manager
in each company.
In this research, suitable preliminary strategies which to be recommended for
the company to pursuit were selected based on the analysis, business environment
evaluation of the company like finance, human resources, marketing, rivals and
legal consideration etc.
The criteria for strategy selection are:
•

Ensuring achieving company objectives.

•

Effectiveness of strategy implementation.

•

Feasibility (finance, human resources, technology,
government regulations,).

All techniques in the strategy formulation require a combination of visual
abilities and analysis. Using techniques allows analysis and synthesis of different


influences, evaluates them objectively and expresses them successfully in a
systematic thinking method.

1.2.7. Tools for strategy selection
1.2.7.1.

Information gathering tools for strategy formulation

1.2.7.1.1. External Factor Evaluation (EFE)
EFE matrix lists and assigns weight to environment influencing factors
toward the company.
According to Fred R.David, EFE is made with 5 steps:
Step 1: Make a list of 5 to 10 external factors which are decisive ones to
company success, including opportunities and threats to company and company
business
Step 2: Assign weights from 0. 0 (not important) to 1.0 (very important) to
each factor. This assigning visualizes the corresponding importance of that factor
to the success of company business. Weights can be decided by comparing
successful company with unsuccessful company in the industry. The total value of
all weight should equal 1,0.

Step 3: Assign rate from 1 to 4 to each factor to see the how company
responds to each factor. This rate is based on the strategy effectiveness of company.
In which: 4 = superior, 3 = above average, 2= average, 1 = poor.
Step 4: Multiply rate by weight for each factor to get the weight score.
Step 5: Add all weighted scores for each factor to find the total weighted
score for the company.
No matter how many opportunities and threats that the EFE matrix has, the
maximum total weighted score of a company is only 4.0, the average one is 2.5 and
the lowest one is 1.0.
If the total score is 4, it shows that the company is responding well to the
current opportunities and threats in its industry. If the total score is 1, it shows that


the current company strategy doesn’t take advantage of opportunities and avoid
external threats.
1.2.7.1.2. Competitive profile matrix (CPM)
Among incidents influencing company strategies, the influence of
competition is the most important. CPM identifies company’s major competitors as
well as their strengths and weaknesses. This matrix is the expanded version of EFE
matrix in regards to weights, rate and total score.
CPM is made similarly to EFE matrix.
The rate showing how company’s strategy respond to each factor are: 4 =
superior, 3 = above average, 2 = average and 1 = poor.
1.2.7.1.3. Internal factor evaluation matrix (IFE)
IFE brief and evaluate the strengths, weaknesses of functional business areas
and it provides a basis for identifying and evaluating relationships among those
areas. IFE matrix is created with 5 steps:
Step 1: List from 10 to 20 core internal factors, including strengths and
weaknesses
Step 2: Assign a weight from 0.0 (not important) to 1.0(very important) to

each factor (in the industry). This assigning shows the corresponding importance of
that factor to the company success in the industry, the total weight should equal 1.0.
Step 3: Assign rate from 1 to 4 to each factor (based on the company) in
which: 1 is the major weakness; 2 is the minor weakness; 3 is the minor strength; 4
is the major strength.
Step 4: Multiply rate by weight for each factor to have to total weighted
score of each factor.
Step 5: Add all the weighted score of each factor to find the weighted score
of the company.
No matter how many opportunities and threats that the EFE matrix has, the
maximum total weighted score of a company is only 4.0, the average one is 2.5 and


the lowest one is 1.0. If the total score is higher than 2.5, it means the company is
strong internally and if it is smaller than 2.5, it’s weak internally.
1.2.7.2.

Strategy formulation tools for selection

1.2.7.2.1. Strengths – Weaknesses – Opportunities - Threats Analysis matrix
(SWOT)
The purpose SWOT analysis matrix is to provide feasible strategies to select,
not to select which strategy is the best. Therefore, among the strategies offered my
SWOT matrix, only some best strategies are selected for implementation. SWOT
matrix is an important conjunction tool helping managers to develop the four
following strategies:
-

Strength – Opportunity Strategy (SO): These strategies use internal
strengths of company to take advantage of external opportunities.

-

Weakness – Opportunity strategy (WO): These strategies improve
internal weaknesses of company to take advantage of external opportunities

-

Strength – Threat strategy (ST): These strategies use the internal
strengths of company to avoid or mitigate the influences of external threats
Weakness- Threat strategy (WO): These strategies aim at improving internal
weaknesses or reduce external threats
Combining the important internal and external factors is a very difficult task in

creating a SWOT matrix. It requires a good analysis, an appropriate and ultimate
combination of internal and external factors. If not, strategy development will not
be as effective as expected. SWOT matrix is created using 8 steps:
Step 1: List important external opportunities of the company.
Step 2: List important external threats of the company.
Step 3: List important internal strengths of the company.
Step 4: List important internal weaknesses of the company.
Step 5: Combine strengths with opportunities to formulate SO strategy.
Step 6: Combine weaknesses with opportunities to formulate WO strategy.
Step 7: Combine strengths with opportunities to formulate ST strategy.