vietnam national university, HANOI school of business Nguyen Huyen Trang Business strategies: The case of baoviet’s fronting and broking corporate insurance master of business administration thesis Hanoi - 2011 vietnam national university, HANOI school of business Nguyen Huyen Trang BUSINESS STRATEGIES: THE CASE OF BAOVIET’S FRONTING AND BROKING CORPORATE INSURANCE Major: Business Administration Code: 60 34 05 Master of business administration thesis Supervisor: PhD. Nguyen Viet Anh Hanoi - 2011 vi TABLE OF CONTENTS ACKNOWLEDGMENTS i ABSTRACT ii TÓM T T iv TABLE OF CONTENTS vi LIST OF TABLES viii LIST OF FIGURES ix LIST OF ABBREVIATION x INTRODUCTION 1 1. The problem 1 2. Scope of work 1 3. Objectives and aim 1 4. Research questions 2 5. Research methods and data sources 2 6. Significance 3 7. Limitations 3 8. Expected results 3 9. Thesis structure 4 CHAPTER 1: THEORETICAL FOUNDATION 5 1.1 Business strategy 5 1.1.1. Strategy 5 1.1.2 Concepts of business strategy 6 1.2 Strategic management 8 1.2.1. Vision and Mission statement 9 1.2.2 Strategy formulation 9 1.2.3 Strategy implementat ion 22 CHAPTER 2: FORMULATION OF BUSINESS STRATEGIES 24 2.1. The concept of service area 24 2.1.1 Insurance in general 24 This watermark does not appear in the registered version - http://www.clicktoconvert.com vii 2.1.2 Characteristics of fronting and broking corporate insurance 28 2.2 Introduction to Bao Viet Insurance 30 2.2.1 Introduction to Bao Viet Holdings 30 2.2.2 Bao Viet Insurance Corporation (Bao V iet Insurance) 34 2.3 Vision and Mission statement 36 2.4 Strategy formulation 37 2.4.1 Externa l analysis . 37 2.4.2 Industry analysis . 48 2.4.3 Internal environment analysis 58 2.4.4 Choice of strategies 69 CHAPTER 3: IMPLEMENTATION OF CHOSEN STRATEGIES 72 3.1. Choosing strategic solutions 72 3.1.1. SWOT m atrix for strategic solutions 72 3.1.2 The GREAT 75 3.2. Performing compon ents of strategy implementation 75 3.2.1 Communication 75 3.2.2 Su pport 76 3.2.3 Tactics 76 3.3 Actions plan 76 3.3.1 Activities t o strategic solution 01 - Improving clients discovery and services 76 3.3.2 Activities to strategic solution 02 - developing professional underwriting 78 3.3.3 Actions plans (for strategy of 5 years from 2011 to 2015) 80 3.4 Recommendations to Bao Viet Insurance 82 3.5 Recommendations to the Government 83 CONCLUSION 85 REFERENCES 87 APPENDICES 89 This watermark does not appear in the registered version - http://www.clicktoconvert.com viii LIST OF TABLES Table 1.1: Sample SCA identification process 20 Table 1 .2: A complete SWOT analysis 20 Table 1.3: SWOT matrix 21 Table 2.1: 5 - year base - line forecasting 37 Table 2.2: Vietnam Economic Activity 38 Table 2.3: Real GDP growth 39 Table 2.4: Foreign di rect investment projects licensed in period 2000 - 2009 39 Table 2.5: Numbers of enterprises (2008 – 2009) 44 Table 2.6: Some fi gures of non - life insurers 50 Table 2.7: Competencies comparison 52 Table 2.8: Identification of sustainable competitive advanta ge 68 Table 2.9: Assessment of Weaknesses 68 Table 2.10: SWOT profile 69 Table 2.11: SWOT matrix for generic strategy 69 Table 2.12: GREAT model for generic strategy - 1 70 Table 2.13: GREAT m odel for generic strategy - 2 71 Table 3.1: SWOT matrix for strategic solutions 72 Table 3.2: GREAT model for strategic solution s 75 Table 3.3: Actions plan for 5 - year strategies 80 This watermark does not appear in the registered version - http://www.clicktoconvert.com ix LIST OF FIGURES Figure 1.1: Generic stra tegies matrix 7 Figure 1.2: Strategic management process 9 Figure 1.3: Business environment 11 Figure 1.4: Five forces model 12 Figure 1.5: Value chain model 18 Figure 2.1: Structure chart – B ao Viet Holdings 32 Figure 2.2: Structure chart - Bao Viet Insurance Corporation 36 Figure 2.3: Baseline forecasting for 5 years 38 Figure 2.4: Exchange rate VND/USD 41 Figure 2.5: Interbank USD/VND 42 Figure 2.6: Typhoons and storms 47 Figure 2.7: Non - life insurers divided by owners 49 Figure 2.8: Market share - 2009 51 Figure 2.9: Financial figures of 4 giants – 2009 61 This watermark does not appear in the registered version - http://www.clicktoconvert.com x LIST OF ABBREVIATION 1. SWOT Strengths, Weaknesses, Opportunities, Threat 2. GREAT Gain, Ri sk, Expense, Achievability, Time bound 3. PEST Political, Economic, Social, Technological 4. SCA Sustainable Competitive Advantage 5. SCIC State Capital Investment Corporation 6. CEO Chief Executive Officer 7. GDP Gross Domestic Price 8. IT Informati cs Technology 9. R & D Research & Development This watermark does not appear in the registered version - http://www.clicktoconvert.com 1 INTRODUCTION 1. The problem “Tomorrow always arrives. It is always different, and then even the mightiest company is in trouble if it has not worked on the future” - Peter Drucker, the legendary man agement theorist, writer and consultant. Business strategies help organizations figure out the right ways to increase their competitiveness and compete successfully , especially in the under - systematic and changing market . As the saying above, companies who applying appropriate strategies will create sustainable development. On the contrary, companies with unsuitable strategies or without strategies will come to an end. Bao Viet Insurance is a big insurer in Vietnam at the moment. However, nothing is ever b uilt to last without its own vision and efforts , especially in doing business with foreigners . In fast - changing environment, right strategies are of much more importance. The study will help formulate and implement appropriate strategies for Bao Viet’s fro nting and broking corporate insurance with the hope that this service will get and maintain its sustainable development. 2. Scope of work This research f ocus es on the strategic analysis, business strategy formulation and implementation ; and applying the a nalysis and suggestions to fronting and broking corporate insurance of Bao Viet in order to suggest suitable business strategies for the co mpany in terms of fronting and broking corporate insurance until 201 5 . 3. O bjectives and aim In terms of objectives, the research helps r eview the theor y of business strateg ies and helps give a clear view on industry and service area . And then it will ap ply the theory of business strategies formulation , selection and implementation into the case of Bao Viet in order to f igure out appropriate business strategies for Bao Viet’s fronting and broking corporate insurance . This watermark does not appear in the registered version - http://www.clicktoconvert.com 2 In terms of a im , t he suggested appropriate business strategy can help Baoviet remain the sustainable leading insurance company in increasingly complicated an d challenging Vietnam insurance market . 4. Research questions For getting suggested business strategies for Bao Viet’s fronting and broking corporate in surance, it is vital to answer and make clear of the following research questions: - What are business str ategies? - What is the way/process to formulate, select and implement the business strategies ? - What is the nature of industry and service area? - How should Bao Viet do to formulate suitable business strategies for fronting and broking corporate insurance? - How should Bao Viet do to implement the selected strategies into business and operation reality? - What are recommendations to the company as well as Government in terms of strategic performance? 5. Research methods and data sources The qualitative (descriptive ) methodology is applied to this thesis through specific case study. A review of theoretical foundation is carried out to understand the process to formulate , and choose the right strategies; and then know how to apply them into reality. Both secondary an d primary data collection are used for this research. The theoretical foundation part deals with studying books, articles, online documents and other sources. The secondary data are also collected from Bao Viet Insurance and its d ifferent departments ; from State’s administration offices, from other insurance companies’ , brokers’ and partners’ reports and websites (both local and foreign ones ). The primary data are collected though interviews of managers, staffs, clients and partners from Bao Viet Insurance as well as from other insurance This watermark does not appear in the registered version - http://www.clicktoconvert.com 3 companies, insurance brokers and partners. Some in - dept interviews have been conducted with experts and managers from several companies regarding non - life insurance in order to complete the assessment, ranking, comparison an d so on (the detailed results show in tables of chapter 2 and chapter 3 and the detailed list of interviewees shown in Appendix C ). 6. Significance In terms of theory , the thesis will help understand more about business strategies formulation and implemen tation (vision and mission statement; external and internal environment analysis; recognition of opportunities, threats, strengths and weaknesses ; and selection and implementation of the right business strategies in order to achieve company’s goals). In te rms of practice , the thesis should help suggest business strategic analysis and business strategies selection and implementation for Bao Viet, especially for fronting and broking corporate insurance. This is also the reference for other firms and products/ services, especially for insurance companies and insurance products/ services, which need suitable business strategies for their development. 7. Limitations The thesis is directly applied to the case of Bao Viet Insurance, especially fronting and broking c orporate insurance . In so as to be applied to the cases of other products/services and other firms, it is necessarily required further researches. In addition, the thesis is also applied to the case of Bao Viet’s fronting and broking corporate insurance in the period of 5 years from 2011 to 2015. For different period’s appropriate business strategies formulation and implementation , further researches are also required. 8. Expected results The study reviews the process to formulate , select and implement suit able business strategies for the company. And then the study successfully formulates and selects right business strategies for Bao Viet in terms of fronting and broking This watermark does not appear in the registered version - http://www.clicktoconvert.com [...]... terms of symbol, external environment is like the surroundings or the atmospheres of the firms It contains things in different circles around and the firms have no or little influence on it In terms of theory, external environment includes macro environment and micro environment Macro environment is the larger circle, in which all kinds of firms survive and develop Micro environment, accordingly, is... Implementation 1.2.1 Vision and Mission statement Vision is an overall strategic view on what the future business will become and where the organization is headed It also means the provision of long term and overall direction/achievement with a sense of purposeful actions It does not specifically mention how to gain the long-term achievement Mission statement is a more visible kind of vision More detailed,... (email, e- (Accounting, primary activities in terms of smoothing the operations Other R&D… supporting activities can be: Accountings, Research & Development… Primary activities: Inbound : mentioning material handling and warehousing, with invisible logistics service it involves all the preparations and processes/procedures for establishing and maintaining this kind of service Operation : transforming the... fronting activity is apparent The insurer issuing the policy effectively is on the risk in name only, with all parties of full awareness that the reinsurer is the real party in interest In Vietnam, the reinsured rate (or ceded rate) can go from 50% up to 99% of insured value Vietnam legal framework does not allow 100% reinsured rate Some popular global reinsurers having fronting service with Baoviet are:... through strategy 1.2.2.2 Internal environment analysis: Besides understanding the external environment, it is vital for firms to understand themselves as a whole through internal environment analysis Therefore, internal analysis helps companies evaluate factors of all belonging relevant areas in order to extract the firms’ strengths and weaknesses In order to get internal environment analysis, it is commonly... http://www.clicktoconvert.com A SWOT matrix (or the combinations of two: one from external environment and one from internal environment - out of four boxes above) shows that organizational strategies must be originated from a proper fit between firm’s internal and external environments It is like an intersection among macro environment, micro environment, and internal performance Table 1.3: SWOT matrix Opportunities... the internal processes and/or activities a company performs in order to create, market, distribute and support for its products/services There are two major categories of value chain: primary activities and supporting activities Therefore, value chain analysis needs to be seriously considered in way of determining the organization’s strengths and weaknesses Primary activities directly impact on creating... All organizations’ mana- activities are seriously influenced by their own human, especially in 18 This watermark does not appear in the registered version - http://www.clicktoconvert.com gement service sector Technology : dealing with activities concerning know-how, information deve- processing, lopment signature…) that supporting firm’s performance Others : dealing with activities concerning direct or... (adaptive); is partly visible and partly hidden to outside view According to Michael Porter, the essence of strategy is choosing to perform activities more differently than the rivals do Another term that Michael Porter mentioned is “strategic positioning” In the Article named “What is strategy”, he said that Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive... micro environment, it is known to apply Five Competitive Forces model of Michael Porter Five Forces divide industry into five different factors: Rivalry, among existing firms, Potential entrants, Suppliers, Buyers, and Substitutes Sometimes Government is also mentioned as an additional factor · PEST analysis The circle below shows the four major forces of external environment For being the overall environment, . theory, external environment includes macro environment and micro environment . Macro environment is the larger circle, in which all kinds of firms survive and develop. Micro environment, accordingly,. Supervisor: PhD. Nguyen Viet Anh Hanoi - 2011 vi TABLE OF CONTENTS ACKNOWLEDGMENTS i ABSTRACT ii TÓM T T iv TABLE OF CONTENTS vi LIST OF TABLES viii . 1.2.1. Vision and Mission statement Vision is an overall strategic view on what the future business will become and where the organ ization is headed. It also means the provision of