LV Thạc sỹ_Formulate strategy for Techcombank

SOLVAY-BRUSSELS SCHOOL OF

NATIONAL ECONOMICS

ECONOMICS AND MANAGEMENT

UNIVERSITY

Vietnam – Belgium Master Programmes
MASTERS IN BUSINESS MANAGEMENT

THESIS
Formulate Strategy for Techcombank
Retail Banking

Supervised by: ….
Prepared by: ….

Hanoi, October 2010


Acknowledgements
I would like to express my deepest gratitude to my research supervisor, Ms. Ngo
Kim Thanh, for her intensive support, valuable suggestions, guidance and
encouragement during the course of my study.
I would like to express my sincere gratitude to all of my teachers at Solvay
Business School and National Economics University for their teaching and
guidance during my course.
I would like to extend my thanks to the board of managers and my colleagues at
Techcombank for their support and assistance during my research study.
I am very thankful to all individuals for providing me with the necessary

information and supporting me with advice during the period of my data collection
for this research study.
Last but not least, I would like to express my loving thanks to my parents, my wife,
my sister for their love and encouragement throughout my studying.

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Contents
Acknowledgements...................................................................................................1
Executive Summary..................................................................................................4
Chapter 1 – Introduction...........................................................................................8
I.1. Background........................................................................................................................................8
I.2. Problems Statement........................................................................................................................9
I.3. Research Objectives......................................................................................................................11
I.4. Research Questions......................................................................................................................11
I.5. The importance of the research...............................................................................................11
I.6. Scope of Limitation.......................................................................................................................12
I.7. Structure of Thesis........................................................................................................................12

Chapter 2 – Literature Review................................................................................13
II.1. Theoretical framework..............................................................................................................13

II.1.1. Corporate strategy & role of corporate strategy in organization............13
II.1.2. Corporate strategy formulation.............................................................14
Chapter 3 – Research Methodology........................................................................25
III.1. Research background...............................................................................................................25
III.2. Research objective.....................................................................................................................25
III.3. Research methods......................................................................................................................25
III.4. Data collection.............................................................................................................................25

III.4.1. Primary data.........................................................................................25
III.4.2. Secondary data.....................................................................................26
Chapter 4 – Research analysis................................................................................27
IV.1. Environment analysis................................................................................................................27

IV.1.1. The societal environment (PEST Analysis)..........................................27
IV.1.2. Banking industry analysis (Five Forces Analysis)................................33
IV.1.3 Opportunities and Threats.....................................................................38
IV.2. Techcombank internal environment analysis..................................................................39

IV.2.1 Brief Information..................................................................................39
IV.2.2 Business structure.................................................................................40
IV.2.3. Internal Resources................................................................................48
IV.3. SWOT analysis..............................................................................................................................56

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Chapter 5: Recommendations.................................................................................58
V.1. Strategy selection.........................................................................................................................58
V.2. Vision, Mission and Goals..........................................................................................................58
V.3. Recommendations in Detail.....................................................................................................59

Human Resource.............................................................................................59
Technical.........................................................................................................61
Risk Management............................................................................................61
Products...........................................................................................................62
Customer services............................................................................................64
V.4. Timeline...........................................................................................................................................68

Chapter 6: Conclusion, limitation and further researches.......................................70
VI.1. Conclusion.....................................................................................................................................70
VI.2. Contribution.................................................................................................................................71
VI.3. Further researches.....................................................................................................................71
VI.4. Limitations....................................................................................................................................71

Reference................................................................................................................ 72

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Table of figures

Figure 1: Breakdown of staff graduate....................................................................10
Figure 2: Vietnam Inflation.....................................................................................31
Figure 3: Vietnam GDP...........................................................................................32
Figure 4: Organizational Chart of Techcombank....................................................40
Figure 5: personal customer deposits (BLN VND).................................................43
Figure 6: Breakdown of personal customer deposits...............................................43
Figure 7: Retail outstanding loans (BLN VND)......................................................44
Figure 8: Number of issued card in 2009................................................................45
Figure 9: Payment turnover via POS (VND BLN)..................................................46
Figure 10: Structure of coporate customers............................................................47
Figure 11: Deposits by economic institution (BLN VND)......................................48
Figure 12: Customer service circle.........................................................................64

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List of tables

Table 1: Corporate strategy formulation process.....................................................15
Table 2: SWOT/ TOWS matrix...............................................................................22
Table 3: Opportunities and Threats of Techcombank..............................................38
Table 4: Number of branches..................................................................................40
Table 5: Charter Capital of Techcombank...............................................................40
Table 6: Finalcial Highlights...................................................................................49
Table 7: Strengths and Weakness............................................................................55
Table 8: SWOT/TOWS matrix of Techcombank....................................................56
Table 9: Timeline for Recommendations of Techcombank retail banking..............68

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Executive Summary
Today, integration into the world economic is the general trend of developing
countries to approach the developed countries economic. For Vietnam, global
integration is a right and important direction which is the premise for making
Vietnam economic grows fast and stable.
However, global integration also makes Vietnamese companies, especially Join
Stock Banks – which deal with monetary, finance, credit … business – facing with
many challenges. To overcome these challenges and take full advantage of chance,
Join Stock Banks must analyze their strength and weakness to bring out the suitable
strategies for each period, phase of their development progress.
According to State Bank statistical, there are only about 15 million bank accounts.
It’s a very small amount in about 85 million Vietnamese people. Therefore, foreign
banks like ANZ, HSBC, Standard Chattered… are focusing on developing retails
banking in Vietnam. International banks, only for retail banking, have thousands of
products/services. But, local banks have very limited products/services, only about

200. The provision of new bank services is an internal requirement for local bank
because, estimately, the cost for an ATM transaction is only 1/8 and an Internet
transaction is only 1/12 in compare with traditional transaction (face to face).
"The best retail bank in Vietnam" title is the dream of many banks. In order to
achieve this title, each bank has its own strategies. Taking advantage of the wide
network, especially transaction offices, state-owned commercial banks have
detailed plans to push sales in retail segment, in which focus on credit area. They
are strengthening organisation structure and retail customer-relation staff and
transforming the transaction offices to be official retail banking units.
In the near future, the retail service competition will have to delve into service
quality. This creates pressures on banks to raise financial capacity, invest more in
technology, and diversify services and finding more customers. Even though
foreign banks currently still focus on high-level customers, in the long term, they

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may push up service developments for lower income customers. The race in
Vietnam retail banking would then become severer
Techcombank, with its objective to be the best retail bank in Vietnam, has built its
own strategy to obtain the proposed goal. But, in the hard competition and unstable
economic environment, bank strategy must be evaluated and adjusted to make it
more effective and make the bank success on their target.
Firstly, this study aims to review company’s business, finance statement and
organization, to evaluate suitability of the current strategy in context of unstable
changing environment. Valuating & Adjusting Strategy for Techcombank.
Secondly, base on technical of Strategy Formulation process including SWOT and
BCG analysis this study shall give out the suggestions to formulate
Techcombank’s retail banking strategy in order to improve Weakness to
reduce

Threats

from

changing environment and to take full advantages of

Strengths to catch Opportunities.

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Chapter 1 – Introduction
I.1. Background
Since the economy changes from a command economy to a market-oriented
economy, there has been a competition among companies to win more customers
by providing better goods or services. Most of companies in Vietnam now become
aware of the importance of “better taking care of customers” as one of their strategy
to grow in the competitive market. Customer relation management activities
therefore has been emphasized as a necessity for the existence and thrive of a
company.
Under pressure of the competition on providing bank services and the rapid
growing of information technology, year 2010 is considered as a “explosion year”
of retail banking services, intensification on approaching the personal customers
and small enterprises.
Vietnam trade banks have been focused on modernization, applied new technology
in to their systems to develop the retail market. When moving to the retail market,
banks will have a larger market, development opportunities and disperse their
business risks.
Vietnamese population is estimated to increase to 88 million by this year with

higher income. The average density of using bank service in Vietnam is about 1516%, higher in some big cities, about 32%. Meanwhile, this density in Thailand or
Malaysia is 70-80%. In next 10 year, the estimate grow speed of Vietnam retail
banking is 30-40%. This show that retail banking in Vietnam is a potential market
for trade banks.
According to financial experts’ assessment, the competition among local trade
banks are more and more severe to get their market share and attract customers.
Beside, as Vietnam joined WTO, the government must follow the agreement to
open the bank industry to foreign banks. It will increase the number of foreign
banks with strong financial power, diversified of services, new technologies and
good management. Therefore, local banks will little by little lose their advantage on

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scale, customers and distribution channels, especially after 2010, when most
limitation for foreign banks are removed.
In that context, local banks cannot base on their traditional advantage as previously
and most of them identify to develop their retail banking services as an important
part in their strategy.
The research object of this study is Techcombank – a local bank which has been
founded in 1993. With its vision to become the best retail bank of Viet Nam,
Techcombank is now serving about 600.000 individual customers, 25,000 Small
and Medium Enterprises (SMEs), providing many products and services to meet the
particular needs of this customer group at various stages in their lives which
ultimately supports business activities locally and internationally. The structure of
business, together with changes in the world economy and the industry
environment, has created difficulties and imposed threats on the company. This will
be the main content of “Problem Statement”.
I.2. Problems Statement
Currently, Techcombank has 2 main Banking services : personal banking services

(retail banking service) and Corporate Banking services. Techcombank Board of
Management want to use retail banking services are key product of the bank. But
the size of the customers for this service is still very small, about 600.000, with the
contribution only about 20% to total revenue. Techcombank Board of Management
want to step up their retail banking services but they are on some difficulties.
Retail banking services are under many pressures from external environment
forces as well as inside bank
Macroeconomic issues such as political, economical, social and technology seems
not create favorable conditions for the development of Retail Banking. Being the
WTO member with many advantages but the fact shows that Retail Banking also
have to cope with many difficulties such as the backward technology, lack of legal
procedure, few services... Together with the serious lack of human resource,

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management capacity, world economic turmoil in 2008, it is obvious that Retail
Banking service in Vietnam in general also in Techcombank is facing many issues.
Micro economic forces inside the Retail Banking sector also impact to the bank
business.
The bank business structures still cumbersome and inflexible to adapt with the
unstable economy environment and operate effectively.
The human resource increase in quantity but not much in quality. The employees
working skill, knowledge, professional are not fully meet the new requirements.
From 2006 to 2009, the staff number increased from 1584 to 5028 while the
ratio of staff hold a bachelor’s degree of higher only increase from 78% to
82%. There is lack of policies to attract talented people to join and work for bank.
Human resource structure is not rational and backward in compare with foreign
bank’s standards.
Figure 1: Breakdown of staff graduate

Source: Annual reports
The risk management and internal audit activities still very weak and ineffective.
Financial report, accounting system and information management systems are not

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comply with International standards. Irrecoverable debt ratio still high despite of
many effort to recover.
Therefore, to improve its business, especially in retail banking sector, Techcombank
should consider reviewing its business, developing plan under strategy view.
Techcombank direction to be the best retail bank is only within 2 years from
2008 to 2009 and there has not been any clear strategy for the company for this
sector. With the change in the world’s economic (short-term effect) and
increasing in competition (long-term effect) which have very strong effects on
bank’s retail business, there is an essential need to develop a strategy for bank
on retail banking for the period of 2010 – 2015.
I.3. Research Objectives
Below are objectives of the study:
- Identify current missions, objectives, strategies of Techcombank retail banking
- Analyze external & internal environment of Techcombank influence on its Retail
Banking service
- Base on the result of above researches, the study will suggest a suitable strategy
for Techcombank retail banking service in the period 2010-2015.
I.4. Research Questions
Below are the research questions that the study aims at answering
1. What is the current mission, objectives, strategies of Techcombank?
2. What is the status of external & internal environment of Techcombank? Base on
the environment analysis, point out what is the strong, weakness, opportunities,

threats for the company?
3. What should be the suitable strategy for Techcombank retail banking?
I.5. The importance of the research
Bank is growing too fast, the Bank’s Board of Management seem to ignore
serious problems at the strategy level to flow target of growth as fast as
possible. Therefore, the outcomes of this study aim to warn them about the
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future risks as well as to support them to adjust the company’s strategy for
more safe & stable statement in a changing environment.
I.6. Scope of Limitation
Because of the limitation of time and ability to get updated company’s information,
this study just only focus on business activities of Techcombank in duration from
2004 to 2009.
Bank services are very various including personal banking (retail banking) and
Corporate banking services. In this study, the concept of banking service is
narrowed to the field that bank business concerned: Retail banking.
I.7. Structure of Thesis
This thesis consist of five chapters:
Chapter 1 describes the background, operational definitions, statement of
problems, the objectives and scope of the study, research questions, and research
framework.
Chapter 2 presents the theoretical model, overview of Bank industry in the world
and in Vietnam, the related literature to understand the value chain of banks in
Vietnam.
Chapter 3 presents research methodology with conceptual framework, sources of
data, sampling.
Chapter 4 presents data analysis in with main parts are response rate, demographic
of firms and value chain management analysis, experts’ opinions summary and

secondary data analysis.
Chapter 5 recommendations,

Chapter 6 conclusions, discussions

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Chapter 2 – Literature Review
The literature review was based on the concepts and theories of some wellknown authors (Miles; Porter; Mintzberg,…). These relevant literature works
were collected from lecture notes of professor of Solvay Business School and
some other online sources (State Bank of Vietnam website, Techcombank
website,…) and from friends and colleagues in MBM7 of researcher.
II.1. Theoretical framework
The concept of strategy is not a new one. It appeared from ancient history and
strongly adhered to wars, where strategy meant to win over the enemy, to keep the
land from invasion, or even to expand the country successfully. Later on, strategy
has not only become a war terminology but also been well connected to many other
fields including economy, politics and society. In economy, strategy has become
very important to business organizations.
II.1.1. Corporate strategy & role of corporate strategy in organization
Corporate strategy
Corporate strategy is mainly about broad decisions for the total organization's scope
and direction. When creating corporate strategy, managers should consider what
changes should be made in the company’s growth objectives and strategy for
achieving those objectives, the lines of business that company plan to involve, and
how these lines of business cooperate together. Corporate level strategy includes
three components: (1) growth or directional strategy (what should be the growth
objectives, ranging from retrenchment through stability to varying degrees of
growth and how the company accomplish this), (2) portfolio strategy (what should

the portfolio of lines of business with regard to how much concentration or
diversification we should have), and (3) parenting strategy (how the company
allocate its resources – where should the company put special emphasis, and how
much does the company integrate to different fields of business).

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Roles of corporate strategy in organization
Many people start their business with a small amount of money but become
successful thank to a correct strategy. However, there are a lot of big firms but due
to applying a wrong strategy, become bankrupt in a short period. It is obvious that
nowadays, strategy become more and more important in organization.
- Corporate strategy can be seen as the direction for organization in the long term
and the sound basis for all activities of organization. Firms operate without
corporate strategy or unclear corporate strategies will lose the direction easily. They
cannot link the current issues with the long-term view and see the business in one
side, not overall activities of enterprise.
- Corporate strategy helps the organization to see and utilize the opportunities as
well as prepare to deal with threats in business environment.
- Corporate strategy is the key for organization to best employ the resources,
enhance the position of enterprise and sustain development.
- Corporate strategy assists the board of managers to make decisions in accordance
with the move of market. It will be the basis for RD & D, human resource, product
development…
II.1.2. Corporate strategy formulation
It is useful to consider strategy formulation as part of a strategic management
process that comprises three phases: diagnosis, formulation, and implementation.
Strategic management is an ongoing process to develop and revise future-oriented
strategies that allow an organization to achieve its objectives, considering its

capabilities, constraints, and the environment in which it operates. Within the scope
of this thesis, the author will only concentrate on Diagnosis and Formulation phase
which are summarized in table 3.1 below:

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Table 1: Corporate strategy formulation process
COMPONENT

DIAGNOSIS

FORMULATION

Basic question

Where are we?

Where do we want to be?

Output

Understanding of the organization & Corporate
its environment, therefore, address the recommendations
critical issues

strategy
to

ensure success & address

the critical issues

Process

1. Identify current mission, objectives 1. Identifying directional
and (especially) strategies

strategy (grand strategy)

2. Analyze data about external & for the company
internal

environment

to

evaluate 2. Identifying portfolio

performance and identify SWOT

strategy for the company.

* External: competitive environment
(5-force model), societal environment 3. Define new mission,
(political/legal,
technological, goals for the company
economic, socio-cultural) -> identify
opportunities and threats
*

Internal:

financial,

production/operations,

marketing,
technology,

organizational -> identify strengths
and weakness
3. Address critical issues: SWOT
analysis

II.1.2.1. Diagnosis
Diagnosis phase include

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- Reviewing the current key objectives and strategies of the organization.
- Performing analysis of the internal environment of the organization including
financial resources, physical resources, human resources, technological resources…
to identify major strengths and weaknesses;
- Analyzing the organization's external environment, including macro factors
(political, economic, social technological factors) and micro factors (rivalry level,
threat of substitute, buyer powers, supplier powers, barrier to entry) in order to
identify major opportunities and threats.
- Identifying the major critical issues, which are a small set, typically two to five,
of major problems, threats, weaknesses, and/or opportunities that require

particularly high priority attention by managers.
Reviewing current missions, goal and strategy of bank
Before formulating a new strategy for the company, it is necessary to check whether
the firm has any strategy or not. In case company already have a business strategy,
should evaluate the current strategy: its strong points, weak points and the necessity
to formulate a new strategy.
External environment analysis
A scan of external environment in which the firm operates can be expressed in term
of societal environment analysis (political, economic, social technological factors)
and industry analysis (rivalry level, threat of substitute, buyer powers, supplier
powers, and barrier to entry)
* The Societal Environment Analysis
The societal environment composes of general forces that influence the long-run
decisions of the organization. They are economic, technological, political-legal
socio-cultural forces. Therefore for Online Banking sector, its societal environment
is the situation of economic, technological, social and political force in Vietnam
 Political factors include government regulations and other legal issues and
define both formal and informal rule in which the firm must operate. The

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political factors can be online trading procedure, labour law, environmental
regulations, trade restriction and tariffs, political stability. For Banking
sector, above factors have a very strong influence on company’s operation
and development.
 Economic factors affect the purchasing power of potential customers and
the firm cost of capital. Economic factors are economic growth, interest
rates, exchange rates, inflation rates… Managers must consider the state of
the economy when formulating strategies. In 2010, with the recovery of the

world economics, Vietnam Banking service can expect to increase the
turnover.
 Social factors include the demographic and cultural aspect of the external
macro environment. These factors affect customer need and size of potential
markets. Some factors include: health consciousness, population growth
rate, age distribution, career attitude, emphasis on safety… Each of these
influences how management accomplishes its job. Changes in social
environment can have major impact upon managerial decision making.
 Technological factors can lower barrier to entry, reduce minimum efficient
service levels and influence outsourcing decision. Some technological
factors include R & D activities, security, technology incentives… In
Internet Banking sector, management must decide the appropriate level of
technology for the company and how new level of technology should be
introduced.
* Business Analysis: Analyzing Task environment
Porter (1985) states that corporation concerned mostly on the intensity of
competition within its industry. The level of intensity is determined by major
competitive forces as threat of new entrant, rivalry, threat of substitutes, bargaining
power of supplier and bargaining power of buyer.
 Rivalry is the intensity of the competitive environment consists of those
whom an organization must "compete" in order to obtain resources. Hamel,

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(1993) stated that knowing your rivals is a key ingredient in building
effective strategies, and analyzing the competitive environment is a
underlying challenge to management, in the traditional economic model,
competition among rival firms drives profit to zero. The intensity of rivalry
is different in each industry. In Internet Banking business, the intensity of

rivalry is influenced by the following characteristics:
(1) A large number of firms increase rivalry because more firms must
compete for the same customers and resources. The rivalry intensifies if
the firms have similar market share, leading to struggle for market
leadership.
(2) Slow market growth causes firms to fight for market share. In a growing
market, firms are able to improve revenues simply because of the
expanding market.
(3) High fixed costs result in an economy of scale effect that increases
rivalry. When total costs are mostly fixed costs, the firm must produce
near capacity to attain the lowest unit costs. Since the firm must sell this
large quantity of product, high level of production lead to a fight for
market share and results in increased rivalry.
(4) Low switching cost increases rivalry. When a customer can freely switch
from one product to another, there is a greater struggle to capture
customers.
(5) Low level of product differentiation is associated with higher levels of
rivalry. Brand identification, on the other hand, tends to constrain rivalry.
(6) High exit barriers place a high cost on abandoning the product. High exit
barrier cause a firm to remain in an industry, even when the venture is
not profitable. A common exist barrier is asset specificity. When the plan
and equipment required for developing a product is highly specialized,
these assets cannot be sold to other buyers in another industry.

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 Threat of substitute: In Porter’s model, substitute products refer to products
in other industries. To the economist, a threat of substitutes exists when a
product’s demand is affected by the price change of a substitute product. A

product’s price elasticity is affected by substitute products – as more
substitutes become available, the demand becomes more elastic since
customers have more alternatives. A close substitute product constrains the
ability of firms in an industry to raise price. - The threat of substitute comes
from products outside the industry. The price of paper bag is constrained by
the price of poly bag. The poly bag is substitute, yet they are not rivals in
the poly bag industry.
 Buyer power: The power of buyers is the impact that customers have on a
banking industry. Buyer affect an industry through their ability to force
down the prices, bargain for higher quality or more service, and play
competitors against each other. Buyer are weak if buyers are fragmented (no
buyer has any particular influence on product or price) or producer threaten
forward integration (producer can take over own distribution/ retailing) or
producer supply critical portions of buyers’ input or products not
standardized and buyer cannot easily switch to another product.
 Supplier power: Definition for supplier in bank industry is diversified. They
can be shareholders provide bank’s capital or Information Technology
service provider, etc… Suppliers, if powerful, can exert an influence on the
producing industry, such as selling raw materials at a high price to capture
some of the industry profits. Suppliers are powerful if suppliers are
concentrated, credible forward integration threat by suppliers or significant
cost to switch suppliers. Suppliers are weak if there are many competitive
suppliers while product is standardized, credible backward integration
threats by purchasers or concentrated purchasers.
 Barrier to entry/ threat of entry: It is not only current rivals that pose threat
to a firm in an industry but also the possibility of new firm enter the
industry. In theory, any firm should be able to enter market and if free entry

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and exists then profit should always be nominal. In reality, however,
industries possess characteristics that protect the high profit levels of firms
in the market and inhibit additional rivals from entering the market. These
are barrier to entry. Barrier to entry are unique industry characteristic that
define the industry. Barriers reduce the rate of entry of new firms, thus
maintaining a level of profits for those already in the industry. From a
strategic perspective, barriers can be created or exploited to enhance a firm’s
competitive advantage. Barrier to entry arise from several sources:
government regulations, patents and proprietary knowledge, economies of
scale...
Internal environment analysis
The elements within the organization that are available to be used in the
accomplishment of its goals are organizational resources. They are physical,
human, technological and financial resources.
 Financial resources: All organizations require resources to provide for
ongoing operations and to fund growth. Retained earnings refer to the
portion of net income which is retained by the corporation rather than
distributed to its owners as dividends. This source of funds is often
inadequate to fund the desired level of growth so other source must be
utilized. In order to secure needed financial resources, management can look
outside the organization for sources of funds. There are 2 general sources
for business: debt and equity. Debt is the money that company borrows to
fund its businesses. Debt can include bank loan, lines of credit and
corporate bonds. Equity is the money company get from selling the stock.
When selling its stocks, the company is giving out its ownership. In general,
the major financial task confronting management are to acquire necessary
funds by some combination of retained earnings, debt and equity and
allocate the acquired financial resources for organizational use. The
accounting profession, through its record and procedures, provide

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management with a financial perspective on how funds are being used and
strategy indicate the needs for financial resources for operation in the future.
 Physical resources: The physical resources of company include plant and
manufacturing equipment, distributing facilities and raw material.
Management periodically evaluates the manner in which the physical
resources of company being acquired and utilized. These resources are the
tools for management to improve productivity and ensure profitability.
 Human resources: The people who work in the organization are its human
resources. In order to have effective business, company should recruit and
develop necessary skilful workforce. It is very important for any company
to manage well this resource. The first task of human resource management
is to acquire the necessary staffs through recruiting or training. The second
task is to place the correct employee in the right jobs. The third task is to
motivate effective performance which will lead to the high productivity. The
final task is evaluating correctly the employee performance.
 Technological resources: Technological resources refer to the level of
applied technology within the firm. Management must decide the
appropriate level of technology for the company in term of its goals and
workers’ skill. From internal analysis, internal factors to the firm can be
classified in to strength (S) and weakness (W). A firm’s strength is its
resources and capability that can be used as a basis to develop the
company’s competitive advantage. The strengths can be a strong brand
name, good reputation among customer, cost-advantage from propriety
know-how… The absence of certain strengths can be viewed as weaknesses.
For example, each of following can be considered as weakness: lack of
patent protection, a weak brand name, poor reputation among customer,

high cost structure

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SWOT analysis
A firm should not necessarily pursue more lucrative opportunities. Rather, it may
have a better chance at developing competitive advantage by identifying a fit
between the firm’s strength and upcoming opportunities. In some case, the firm can
overcome a weakness in order to preparing itself to pursue an opportunity
Table 2: SWOT/ TOWS matrix
External Opportunities

External Threats

(O)

(T)

SO

ST

"Maxi-Maxi" Strategy

"Maxi-Mini" Strategy

Strategies that use strengths

Strategies that use strengths

to maximize opportunities

to minimize threats

Internal Weaknesses

WO

WT

(W)

"Mini-Maxi" Strategy

"Mini-Mini" Strategy

Strategies that minimize

Strategies that minimize

weaknesses by taking

weaknesses and avoid threats

Internal Strengths

(S)

advantage of opportunities

II.1.2.2. Development
Development, the second phase in the strategic management process produces a
clear set of recommendations, with supporting justification, that revise if necessary
the mission and objectives of the organization, and supply the strategies for
accomplishing them.

In development, we are trying to modify the current

objectives and strategies in ways to make the organization more successful. This
includes trying to create "sustainable" competitive advantages -- although most
competitive advantages are eroded steadily by the efforts of competitors.
A good recommendation should be: effective in solving the stated problem(s),
practical (can be implemented in this situation, with the resources available),

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feasible within a reasonable time frame, cost-effective, not overly disruptive, and
acceptable to key "stakeholders" in the organization. It is important to consider
"fits" between resources plus competencies with opportunities, and also fits
between risks and expectations.
There are three primary steps in this phase:
Identifying the directional strategy (grand strategy) for the company
It should be either
(1) growth strategy: company can be promoted internally by investing in expansion
or externally by acquiring additional business divisions or
(2) stability strategy (pause strategy): the organization wants to remain the same
size or grow slowly and in a controlled fashion or
(3) retrenchment strategy: the organization goes through period of forced decline

by either shrinking current business units or selling off or liquidating entire
business.
Identifying the portfolio strategy for the company
After having the clear direction, it is the time to decide the portfolio strategy of the
company which pertains to the organization’s mix of SBUs and product lines that
fit together in such a way as to provide the corporation with synergy and
competitive advantage.
Define new mission, goals for the company
After analyse all aspect of the business and select which businesses the company
should develop, it is necessary that the new corporate strategy should have a new
mission and goals.
Mission Statement
The new mission statement is the organization's new vision translated into written
form. It makes concrete the leader's view of the direction and purpose of the
organization. This mission statement should be a short and concise statement of
goals and priorities.
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Setting Goals
The major outcome of strategic road-mapping and strategic planning, after
gathering all necessary information, is the setting of goals for the organization
based on its vision and mission statement. A goal is a long-range aim for a specific
period. It must be specific and realistic. Long-range goals set through strategic
planning are translated into activities that will ensure reaching the goal through
operational planning.

Chapter 3 – Research Methodology
This chapter will provide an overview of the methodology approaches and the
research design that implemented for the study of external and internal environment

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