vietnam national university, HANOI school of business Do Thi Mai IMPROVING COMPETITIVENESS of PETROLIMEX JOINT- STOCK INSURANCE COMPANY Major: Business Administration Code: 60 34 05 Master of business administration thesis Supervisor: Dr Tran Phuong Lan Hanoi - 2011 TABLE OF CONTENT ACKNOWLEDGMENTS i ABSTRACT ii TÓM TẮT iv TABLE OF CONTENT vi LIST OF TABLES vii LIST OF FIGURES ix LIST OF ABRREVIATION .x INTRODUCTION .1 The problem .1 Objectives Research Questions Scope of work Methodology and data sources Significance and expected results Limitations .3 Thesis Structure CHAPTER 1: THEORETICAL FOUNDATIONS 1.1 Definition of competitiveness 1.2 Sources of competitiveness .5 1.3 Models to assess and analyze industrial competitive environment 1.4 Models to analyze firm competitiveness 14 CHAPTER 2: RESEARCH AND ANALYSIS APPLICATION OF MODELS TO ANALYZE PJICO’s COMPETITIVENESS 16 2.1 Overview of non-life insurance industry in general and in Vietnam 16 2.1.1 Non-life insurance industry in recent years .16 2.1.2 Non-life insurance industry in Vietnam 20 2.1.3 Key success factors in non-life insurance industry 25 2.1.4 Factors affecting non-life insurance enterprise’s competitiveness 27 2.2 Overview of PJICO 29 vi 2.2.1 Introduction of PJICO 29 2.2.2 PJICO’s business activities 33 Unit: VND billion .35 2.3 Application of models to analyze PJICO’s competitiveness 39 2.3.1 Application of PEST & Five Forces models to analyze factors affecting PJICO’s competitiveness 39 2.3.2 Application of Value Chain model to analyze and evaluate PJICO’s competitiveness 51 2.3.3 PJICO’s competitive position in comparison with its main competitors 76 CHAPTER 3: CONCLUSIONS AND RECOMMENDATIONS 80 3.1 Conclusion of PJICO’s Competitiveness .80 3.1.1 Summary from internal analysis and competitiveness comparison 80 3.1.2 Assess to the real PJICO’s strengths & weaknesses – the core compentencies 85 3.2 Solutions for PJICO to strengthen its competitiveness & to achieve its objectives .89 3.2.1 PJICO’s strategic vision and objectives 89 3.2.2 Solutions for improving PJICO’s competitiveness until 2017 90 3.3 Recommendations 106 3.3.1 Recommendations to Government 106 3.3.2 Recommendations to Association of Vietnamese Insurers 107 3.3.3 Recommendations to PJICO 108 REFERENCES 109 APPENDICES .111 LIST OF TABLES Table 1.1: Selected connotations of firm level competitiveness: Table 1.2: The five forces that shape industry competition of Michael Porter vii Table 2.1: Real growth rate of Industrialized and Emerging markets (1980 – 2009) 17 Table2.2: Real growth rate of insurance market of developing countries (1980 2010) 18 Table 2.3: Asia Pacific Non-life markets at a glance, 2008 - 2010 19 Table2.4: Vietnam’s top 10 non-life insurance market share 2005-2010 21 Table2.5: Non-life insurance premium income and premium growth 2004-2010 21 Table2.6: Premium and Loss by class in 2010 23 Table 2.7: Gross Premium Income by Type of Insurance 2007-2010 38 Table 2.8: Vietnam’s non-life insurance market shares 2005- 2010 47 Table 2.9: Conclusion of Environment analysis – Chances and Challenges 51 Table 2.10: Labor Force of PJICO 2006-2010 69 Table 2.11: Statistics of Training Courses 2007-2010 70 Table 2.12: Some financial criteria of PJICO 2007-2010 73 Table 2.13: Competitiveness Comparison 77 Table 3.1: Identification of Sustainable Competitive Advantages - Strengths 85 Table 3.2: Identification of Sustainable Competitive Advantages – Weaknesses 86 Table 3.3: The real PJICO’s strengths and weaknesses – Core competencies 88 Table 3.4: Possible solutions and actions 91 viii LIST OF FIGURES Figure 1.1: Value chain 14 Figure 2.1: Market premium and loss 2006-2010 22 Figure 2.2: Non-life insurance premiums by business lines 23 Figure 2.3: Market share of Non-life Insruance Companies 2010 31 Figure 2.4: Insurance Premium Income 2005-2010 35 Figure 2.5: PJICO’s Product Portfolio in 2010 36 Figure 2.6: Vietnam’s GDP 42 Figure 2.7: Vietnam’s savings and current account balance (in % of GDP) 43 Figure 2.8: Vietnam’s inflation and exchange rate 43 Figure 2.9: Some Vietnam’s economic figures 44 Figure 2.10: Value chain of PJICO ……………………………………………… 52 Figure 2.11: Process of new product design 53 Figure 2.12: Underwriting process 59 Figure 2.13: PJICO’s process of reinsurance 62 Figure 2.14: Survey process for non-life insurance products of PJICO 64 Figure 2.15: Claims handling process for non-life insurance products of PJICO 65 ix LIST OF ABRREVIATION PJICO Petrolimex joint-stock insurance company SWOT Strengths, Weaknesses, Opportunities, Threat PEST Political, Economic, Social, Technological R&D Research & Development SCIC State Capital Investment Corporation CEO Chief Executive Officer GDP Gross Domestic Price IT Informatics Technology x INTRODUCTION The problem Vietnamese non-life insurance market has been experiencing a challenging, struggling as well as fast-developing stage Going along with this context, each and every participant in this market needs to focus more on their real competitiveness to achieve further growth and sustainability; and PJICO is one of these players Moreover, until now, there has not been a complete and thorough analysis on PJICO’s competitiveness and the ways to improve the real competitiveness Therefore, the thesis is born to conduct analyses on PJICO’s competitiveness and suggest possible solutions to strengthen its competitiveness in order to stand and develop in Vietnamese non-life insurance market in the future Objectives The objectives of this study can be listed as follows:  Give the overview on concept of competitiveness  Provide some analyses on macro and industry environment of insurance market  Conduct a thorough study on PJICO’s competitiveness  Recommend the possible ways to improve the current competitiveness so as to help PJICO be stable and progressive in the insurance market Research Questions Based on the problem and objectives listed above, some research questions are given and discussed: a What is competitiveness? b Method and process to analyze competitiveness of a firm? c The way to conduct macro and industry environment analysis of insurance market? d The way to conduct internal environment analysis of an insurance company? e What are suggestive solutions to improve the competitiveness of PJICO to the year 2017? Answering these above questions shall help the author fulfill and reach the objectives which the thesis are required to achieve Scope of work In terms of theory, the thesis focuses on the concept of competitiveness, macro and industry environment analysis, and internal environment analysis of an enterprise In terms of practice, the thesis focuses on reviewing the current insurance market in Vietnam, analyzing the external and internal environment of insurance market in order to assess the competitiveness of PJICO, and giving recommendations on possible solutions to improve its competitiveness to the year 2017 Methodology and data sources This study uses the descriptive method for analysis through a specific case study of PJICO in the context of present Vietnam insurance market The data are sourced through two ways: a Secondary data are collected from research of books, websites, teaching notes, reports, magazines and newspaper, and other available documents b The primary data are collected chiefly through deep interviews with PJICO’s as well as partners’, other players’ managers, key staffs, and their customers The details of primary data are shown in analyses in Chapter and Chapter 3; the list of interviewees and the list of questionnaires are shown in the Appendix and Significance and expected results By scanning the specific theory on competitiveness and analyzing the impacts of business environment of non-life insurance market, the study helps PJICO in giving suggestive solutions to improve its competitiveness to the year 2017 Therefore, this methodology, information and analysis can be applied for other companies or other insurance companies or for the PJICO itself in other stages of development Limitations This thesis is conducted in narrowed scope of insurance market and the applications to PJICO in certain period to the near future until 2017 Thus, it may not wholly express and reflect the business environment as the whole and in other periods Thesis Structure The study includes four parts as below: a Introduction b Chapter 1: Literature review and overview of non-life insurance market c Chapter 2: Research and applications of models to analyze PJICO’s competitiveness d Chapter 3: Conclusions and recommendations CHAPTER 1: THEORETICAL FOUNDATIONS Day by day, firms have been facing increasing numbers of challenges, changes and competitors Indeed, being successful is requiring new perspective and practice on competitiveness 1.1 Definition of competitiveness In spite of its significance, the concept and definition of competitiveness is widely controversial Up till now, there has been no generally accepted definition of competitiveness as well as no mutually accepted definition to explain it In the simplest terms, competitiveness is the ability to compete It has become the name of the game where economic strength of a country or an industry or a firm is described with respect to its rivals in the global market economy, in which goods and resources can move freely throughout territorial borders In other terms, competitiveness is a broad concept According to Beckley, “A firm is competitive if it can produce and services of superior quality and lower costs than its domestic and international competitors Competitive is synonymous with a firm’s long run profit performance and its ability to compensate its employees and provide superior returns to its owners” The Organization of Economic Cooperation and Development (OECD) defines competitiveness as “the ability of companies, industries, regions, nations and supranational regions to generate, while being and remaining exposed to international competition, relatively high factor income and factor employment levels on a sustainable basis.” Whereas, under Fischer and Schornberg’s analysis, profitability is obviously a significant variable for assessing sector competitiveness and value added as a percentage of turnovers is a kind of profit margin that entity usually relies “Market shares are often defined as the proportion of the total available market segment or sales that is produced or sold by a company They also rationed that market share is a necessary competitive indicator at the firm level even when analyzing aggregates, market share may be of trouble” (InternationalJournal.org) Simply speaking, it can be said that ... insurance products of PJICO 64 Figure 2.15: Claims handling process for non-life insurance products of PJICO 65 ix LIST OF ABRREVIATION PJICO Petrolimex joint-stock insurance company SWOT Strengths,... analyze competitiveness of a firm? c The way to conduct macro and industry environment analysis of insurance market? d The way to conduct internal environment analysis of an insurance company? ... analysis, profitability is obviously a significant variable for assessing sector competitiveness and value added as a percentage of turnovers is a kind of profit margin that entity usually relies