Luận văn thạc sĩ quản trị kinh doanh quốc tế MBA (2)

LIST OF ABBREVIATIONSEVNTelecom: EVN Telecom Company 3G: the third generation ARPU: Average Revenue Per User BCC: Bilateral Corporation Contract BTA: Bilateral Trade Agreement BTS: Base

CAPSTONE PROJECT

TELECOMMUNICATION SERVICE PROVISION OF EVN TELECOM COMPANY - ELECTRICITY OF VIETNAM FOR THE PERIOD FROM

2010 – 2015

LIST OF ABBREVIATIONS

EVNTelecom: EVN Telecom Company

3G: the third generation

ARPU: Average Revenue Per User

BCC: Bilateral Corporation Contract

BTA: Bilateral Trade Agreement

BTS: Base Transceiver Station

CDMA: Code Division Multiple Access

GSM: Global System for Mobile Communication

GTEL: Global Telecommunication Corporation

FDI: Foreign Direct Investment

ID: Identify

HANOI TELECOM: Hanoi Telecom Corporation

HCM: Hochiminh City

MBA: Master of Business Management

MPT: Ministry of Posts and Telecommunication

MIC: Ministry of Information and Communication

MVNO: Mobile Virtual Network Operator

NGN: Next Generation Network

PR: Public relation

R&D: research and deploy

SMP: Signified Market Power

SMS: Short Message Service

SOE: State-Owned Enterprise

SPT: Saigon PostTel

TECH: technology

TV: Television

VIETTEL Mobile: VIETTEL Mobile Corporation

VMS: Vietnam Telecom Mobile Service Company

VNP: Telecommunication Service Company

VNPT: Vietnam Post and Telecom Corporation

WAP: Wireless Application Protocol

WTO: World Trade Organization

LIST OF TABLES

Table 2.1.3: Results from the consulting, construction and

implementation activities – For the period 2006-2008

137

Table 2.1.4: Most recent 3 years’ financial and operating results 138

Table 2.4.1: A comprehensive evaluation of critical success factors

for a telecommunication company

98

LIST OF FIGURES:

Figure 1.1-1: The strategy formulation process 18

Figure 1.3-1: Competitive environment factors 22

Figure 1.3-2: PEST Model 23

Figure 1.3-3: Porter’s 5 Forces’ model 26

Figure 1.4-1: Michael Porter’s Value Chain Model 29

Figure 1.4-2: IE Matrix 33

Figure 1.6-1: Basic business strategies 35

Figure 2.1-1: EVNTelecom Organizational Chart 41

Figure 2.1-2: Analysis Chart of the sales proportion in telecommunications services of EVNTelecom in 2008 44

Figure 2.2-1: Population 54

Figure 2.4-1: Vietnam mobile market share in 2008 (Subscribers) 100

Figure 2.4-2: Telecommunication 2008 revenues (in billion VND) 100

Figure 2.2-1: Competitive positioning for the Vietnamese Telecom market 116

Figure 2.4-1: Results of synchronyzing telecommnitcations payment with that of Electricity Bills 127

LIST OF TABLES 4

PREFACE 9

1 PREFACE 9

2 THE NECESSITY OF RESEARCH TOPIC 10

3 OBJECTIVES, CONTRIBUTIONS AND EXPECTED RESULTS 13

4 SCOPE AND RESEARCH METHODOLOGY 13

5 MAIN CONTENTS OF THE MAJOR ASSIGNMENT 14

CHAPTER 1: THEORETICAL BACKGROUND ON BUSINESS STRATEGY 15

1.1 CONCEPTS, REQUIREMENTS AND CONTENTS OF STAGES INVOLVED IN A BUSINESS STRATEGY FORMULATION PROCESS 15

1.2 MISSION AND STRATEGIC OBJECTIVES OF THE BUSINESS 21

1.3 EXTERNAL ENVIRONMENT ANALYSIS 22

1.3.1 Macro environment analysis (Pest) 23

1.3.2 Vietnamese Telecommunication Industry Analysis using Michael Porter's 5 forces model 26

1.4 INTERNAL ENVIRONMENT ANALYSIS 29

1.5 SWOT ANALYSIS 33

1.6. BASIC BUSINESS STRATEGIES 35

1.7 QUANTITATIVE STRATEGIC PLANNING MATRIX - QSPM 37

CHAPTER 2: BUSINESS COMPETITIVE ANALYSIS ON THE TELECOMMUNICATION SERVICES AT EVN TELECOM COMPANY - EVN CORPORATION (EVNTelecom) 39

2.1 EVNTELECOM – AN OVERVIEW INTRODUCTION 39

2.1.1 Organizational structure 40

2.1.2 Areas of business 42

2.1.3 Available services 42

2.1.4 Evaluation of EVNTelecom’s operating results in recent years 43

2.2 EXTERNAL ENVIRONMENT ANALYSIS 45

2.2.1 Macro environment analysis for EVNTelecom (Pest) 45

2.2.1.1 Political and Regulatory Environment 45

2.2.1.2 Economic Environment 51

2.2.1.3 Business Environment 52

2.2.1.4 Culture-social Environment 54

2.2.1.5 Technological Environment 55

2.2.1.6 Global business environment 56

2.2.2 Telecommunication Industry Analysis (Porter's 5 forces model) 59

2.2.2.1 Threats from new entrants 59

2.2.2.2 Threats from substitute products 60

2.2.2.3 Supplier’s bargaining power 61

2.2.2.4 Buyer’s bargaining power 61

2.2.2.5 Existing rivalry within the industry 62

2.2.2.6 Overall industry analysis conclusion: 62

2.2.3 Competition Analysis 63

2.2.3.1 Vietnam Posts &Telecommunications (VNPT) 63

2.2.3.2 Viettel 70

2.2.3.3 Vinaphone 74

2.2.3.4 Mobiphone 76

2.2.3.5 S-Fone (S-Telecom) 80

2.2.3.6 VietnamMobile 83

2.2.3.7 FPT Telecom 85

2.3 EVNTelecom INTERNAL ENVIRONMENT ANALYSIS 87

2.3.1 Resources 87

2.3.1.1 Tangible resources 87

2.3.1.2 Intangible resources 90

2.3.2 Network capability – core capability 90

2.3.3 Joint-venture 93

2.3.4 Core competency building 93

2.3.5 The Value chain 94

2.4 INTEGRATED ANALYSIS AND POSITIONING OF COMPETITORS IN THE VIETNAMESE TELECOMMUNICATIONS MARKET 97

2.4.1 A comprehensive overview of the critical success factors of the participants in the Vietnamese telecommunication market 97

2.4.2 Market share 100

2.4.3 Revenue 100

2.4.4 Evaluation EVNTelecom position on the current telecommunications market 101 2.5 EVNTelecom SWOT ANALYSIS 101

2.5.1 Strengths 101

2.5.2 Weaknesses 102

2.5.3 Opportunities 103

2.5.4 Threats 104

2.6 EVALUATION OF THE CURRENT BUSINESS STRATEGY 105

2.6.1 Achievements: 105

2.6.2 Outstanding challenges: 105

2.6.3 Rationale: 106

CHAPTER 3: TELECOMMUNICATION BUSINESS STRATEGY FORMULATION

FOR THE 2010-2015 PERIOD 108

3.1 VISION, MISSION AND STRATEGIC OBJECTIVES OF EVNTelecom 108

3.1.1 Vision 108

3.1.2 Mission 109

3.1.3 Strategic objectives 109

3.1.4 EVNTelecom Brand value 110

3.2 BUSINESS STRATEGY CHOICE ANALSYS 110

3.2.1 External environmental factors influencing EVNTelecom (EFE Matrix) 111

3.2.2 Internal environment factors influencing EVNTelecom (IFE matrix) 113

3.2.3 Competitive positioning for the Vietnamese Telecom market – IE Matrix 116

3.2.4 Strategy analyzing, strategy formulation and select the optimal strategy 116

3.2.4.1 Strategic analysis 117

3.2.4.2 Strategy formulation 120

3.2.4.3 Quantitative Strategic Planning Matrix (QSPM) and select the optimal strategy 120 3.3 TARGET MARKET SELECTION ANALYSIS AND STRATEGIC PRODUCTS 125 3.3.1 Market segmentation and telecommunication needs for each segment 125

3.3.2 Target market and core product selection 126

3.4 SOME STRATEGY IMPLEMENTATION SOLUTIONS 127

3.4.1 Converting CDMA Technology into GSM through 3G Technology adoption 127 3.4.2 Synchronizing telecommunications payment with that of Electricity bills 127

3.4.3 Segregation of Telecommunication sale forces relatively independent from electricity sale forces 128

3.4.4 Implementation of brand stratification plan 128

3.5 IMPLEMENTATION AND EXECUTION OF STRATEGY 128

3.6 OTHER RECOMMENDATIONS 130

3.6.1 Regarding to macro policies 131

3.6.2 Regarding the business operations of EVNTelecom 131

3.7 CONCLUSION 133

REFERENCES 135

APPENDIXES 136

1 PREFACE

For fulfilling the requirements under

Master Of Business Administration

program, we submit this final

capstone project to Griggs University

In the first words of the Capstone

Project, we would like to express our

thankfulness to the great many people

We would like to thank all professors

of Griggs University, who gave us

very useful lectures during past two

years

For all the support in researching

period, we want to express our

heartily thanks to our friends in

EVNTelecom, our classmates and

program co-ordinators who gave us

good condition and useful information

that made me be easier in researching

and capstone project completing

approach that combines both quantitative and qualitative analysis, with an emphasis

With regards to our evidence collection, the preliminary information is collectedthrough the usage of questionnaires and interviews The other secondaryinformation such as MBA curriculum, newspapers, research journals, internet,statistical data… are collected from well-established studies nationwide, thetelecommunication industry, prior researches and other publications byEVNTelecom The collected materials are chosen, evaluated and classified base onthe distinct purposes reflected in the sub headings of this thesis

2 THE NECESSITY OF RESEARCH TOPIC

In the trend of global economic convergence, Vietnam is gaining importance on aninternational scale The economy enjoys consistently strong growth rates over theyears, and the changes are being recognized by foreign business partners One ofthe key contributing forces of such success is the Vietnamese Telecommunicationssector The industry has undergone considerable changes, leading people to a new

become the key to Vietnam’s economic development

During the past 10 years, simply by quoting impressive figures such as 7 networkprovider, about 113.5 million mobile phone subscribers1, 3 millions ADSL users2,the remarkable expansion of telecommunication of a 80 million-citizens countrycould be inferred EVN Telecom has contributed a great deal to that movement withits competitive edge – a modern cable network that offers nationwide coverage.EVN Telecom has spread out its services to the utmost remote parts of the country

Being a new comer of the Vietnamese Telecommunication market, EVN Telecom’sfirst priority is to gain market share, increase subscribers’ population, build a strongbrand and improve customer services Besides, EVN Telecom also has a strongfuture orientation to best serve its client’s needs, and introduce the most advancedtechnology to satisfy the strictest market demands

Currently, most developed and many developing nations have transformedthemselves into 3G and subsequent mobile generations, and to catch such social andeconomical trends in Vietnam, EVN Telecom – together with 3 other networkproviders being Vinaphone, Mobiphone, Viettel – have been granted the license on3G operations

Stemming from the undeniable needs of society as well as EVN Telecom’ inherentstrengths, we decided to build our thesis on formulating the business strategy of thiscompany in the period from 2010 to 2015

1 Quoted: http://www.vfej.vn/en/detail/18806/nearly_50_million_mobile_subscriptions_are dead _

2 Quoted: chuyen-cu.htm

http://xahoithongtin.com.vn/20090519123232191p278c285/chat-luong-adsl-khong-bao-gio-la-cau-telecommunication services EVN Telecom, having 8.473 billion3 worth in totalassets, is also one of the three largest telecommunication service providers with thebest network infrastructure, and one of the two companies with the biggest oceanfiber optic cable systems in Vietnam (The IA EVN Telecom Project has 50Ginternational capacity) With a diversified range of available services, EVN is theonly company that deploys both limited citywide mobility service (E-Phone), andfull mobility service (E-Mobile), creating new alternative options for customers

In addition, the company is the first to provide fixed television (E-Com) and is alsothe market leader in the fixed TV segment of Vietnam EVNTelecom is also the first

to offer citywide and nationwide mobile Internet services, through the utilization ofend portals from limited mobility services (E-Phone) and full mobility services (E-Mobile) as a portable modem Clients could also use the PCMCIA high-speedInternet access card to get connected to the net using CDMA-EVDO technology

Furthermore, EVNTelecom is also the first-to-market company that providesinternet service over cable TV, and is the number one in this market EVN is one ofthe three approved suppliers that have set up the best quality domestic and foreignprivate channel leasing, together with an extensive cable infrastructure across thecountry as well as outstanding broadband SDH transmission services

Along with the exploitation of various offerings such as 3G, BPL Wi-Fi, andWimax; EVN Telecom will continue to diversify its telecommunication and internet

services To meet both the trusted mission from EVN Corporations and consumer’s expectations, EVN Telecom needs not only immense supports in terms of assets, capital, and human resources but also an appropriate business

3 Quoted: EVNTelecom’s Financial Statement Report in 2008.

determining order of priority, allocating human, financial, tangible and intangibleresources to achieve the market expansion and customer satisfaction objectives Onthe other side, in order to better accomplish the current and future strategic goals,EVN Telecom has to be able to response to fast environmental changes throughswift strategic decision making and modifications This has become more and morecrucial in this rapid changing telecommunication market of Vietnam

3 OBJECTIVES, CONTRIBUTIONS AND EXPECTED RESULTS

Our objective is first to provide the surrounding backgrounds to originating a viablebusiness strategy for a telecommunication company After that, we will proposesome solutions to establish the future business plan of EVNTelecom

The main contributions from our research would be to reach suitable propositionsthat will enhance the operating results, reducing costs and bringing back greaterbenefits to the company

To gain market share, EVNTelecom has to formulate its strategic plan, creating theoverall operational skeleton, determining the priority order and resources allocation

4.2 Research Methodology

instructions from the Expert Panels with appropriate modification andimprovements that suits our group’s scope of study.

Furthermore, we will spend the majority of time to familiarize ourselves with thereal life business environment of EVNTelecom and in the mean time, we will try tocollect information as well as conduct essential interviews to support thepropositions derived

Finally, through the classification, grouping and analysis of the collected resources,

we will form our opinions and evaluations on the research topics to complete ourMajor exercise

5 MAIN CONTENTS OF THE MAJOR ASSIGNMENT

This topic contains 3 parts: Preface, Contents and Conclusion The main content oftopic has 3 chapters:

CHAPTER 1: THEORETICAL BACKGROUND ON BUSINESS STRATEGY

SERVICE ANALYSIS AND ASSESSMENT OF EXISITING BUSINESSSTRATEGIES OF EVN TELECOM COMPANY – ELECTRICITY OF VIETNAM(EVNTELECOM)

CHAPTER 3: TELECOMMUNICATION SERVICE BUSINESS STRATEGY FORMULATION FOR EVNTELECOM IN THE 2010-2015 PERIOD

1.1.3 The steps involved in formulating a business strategy:

The concept of strategic management had been introduced for a long time, but thesurrounding theoretical backgrounds that were rooted in scientific analysis onlyappeared in the late 19th and early 20th centuries

Strategic management is a process of analyzing the business environment to set upstrategic targets, policies and solutions It will help organization to bring outstrategies, policies and decisions on corrections, inspections, and evaluations in theexecution phase of a business strategy

* Principles of making business strategic choices

The strategies of a company is built and selected based on the following principles:

- Optimal exploitation of the company’s financial, human, technological resources,etc.…

- Product diversification

- Product life cycle

- Competitor’s strategies emergence

- Market demands

Besides, the appropriateness of a business strategy also depends on management’swill and preferences such as vision, hobbies, determination, personal and businessvalues

* Stages in strategy formulation

Figure CONCEPTS, REQUIREMENTS AND CONTENTS OF STAGES INVOLVED IN A BUSINESS STRATEGY FORMULATION PROCESS-1:

The strategy formulation process

* Phases in a business strategy development process

1.1.3.1 Strategy formulation phase

Forming strategy is a process of setting up the business task, surveying the internaland external factors, proposing the long-term targets and choosing appropriatestrategies It has 3 basic activities:

- Research: collect and handle information about the market This is called “Totake a glance at the business environment” Basically, it specifies the strengths andweaknesses in the company’s business operations Other surveys could be executedsuch as those on employee spirits, productivity, advertisement and customer loyalty

- Combine observation and analysis: A few companies can reach success withintuitively genius managers However, most other companies benefit from a well-balanced strategy that incorporates intuition, observation and careful analysis indecision-making

THE STRATEGY FORMULATION PROCESS

Company’s strategic functions & missions (1)

Internal analysis

(S,W) (3)

External analysis (O,T) (4) Strategic factor choice (4)

Corporate strategy (5) SBUs and functional strategies Strategy implementation (6) Strategy implementation & audit (7)

Feedback

- Decision-making: no single organization has infinite resources Therefore,strategists must decide on an effective replacement strategy The decisions in thisphase relate to product, market, resource and technology.

1.1.3.2 Strategy Implementation phase

This is a phase of action, which means that the company will have to fully utilize allmanagement and employee levels to execute the planned strategies The basicactivities comprise of:

- Setting up annual targets: they are the milestones that companies have to obtain toreach the long-term target

- Formulating policies: they are means to achieve the target They include theinstructions, regulations and procedures to support the achievement of the citedtargets

- Allocating resources: it is a management activity that focuses on the strategicexecution itself Strategic management allows companies to properly allocate scareresources that are required to satisfy annual targets There are 4 types of resourcesthat could be used:

1.1.3.3 Strategy evaluation phase

It is very necessary for each company to have this phase present A timelyevaluation will alarm the problems so that management team can interfere beforethey become more severe

The four criteria that are normally cited in strategy evaluation comprise of:consistency, suitability, adaptability and feasibility

I.2 MISSION AND STRATEGIC OBJECTIVES OF THE BUSINESS

1.2.1 Corporate Mission

Each company has its own mission, and a mission statement will draw out the roles,core values and operations of a company It also shapes the long term objectives ofthe entity, and distinguishes one company from another It sets up the reasons forexistence of a business, its goals and principles… allowing the company to orient itsdevelopment and forming future business objectives

1.2.2 Strategic objectives of the business

The strategic objectives are the fundamental, long-term goals that orient thesustainable development of a company It should originate from the business’sfunctions, but should be more specific and covers a wider range of issues thanmerely functional operations

The strategic objectives should be cornered around key areas such as profitability,products and services provided, technology advancements, target market, corebusiness values reflected in the competitive advantage, employment provision,employee benefits and social responsibility

The strategic objectives should act as effective means of advancing the company’sgrowth, and should satisfy the following requirements:

- Goals must be specific, industry-customized, and properly framed in anappropriate time horizon

- Goals must be flexible, easily adjusted to response to future environmentalchanges that could not be foreseen at the formulation stage; however the changesshould be limited to a reasonable range, otherwise it will sacrifice its scientific andoptimum basis

- Goals must be measureable, whether it is qualitative or quantitative; besides, itshould also be both realistic and challenging

- Goals must be consistent, forming a holistic range

I.3 EXTERNAL ENVIRONMENT ANALYSIS

A superior business strategy is dependent on a company’s knowledge of the externalenvironment in which it operates These environmental factors have profoundinfluences on the strategic management phases of an entity External environment isone of the 3 components illustrated in the following figure:

Figure EXTERNAL ENVIRONMENT ANALYSIS-2: Competitive

I.3.1 Macro environment analysis (Pest)

To analyze and evaluate external forces on a business’ operation, we use the PESTmodel that contains evaluations on the following group of factors: Political (P),Economic (E), Social (S) and Technological (T) to identify the opportunities andthreats for a given company in a particular industry

Figure EXTERNAL ENVIRONMENT ANALYSIS-3: PEST Model

Source: Nguyen Thi Lien Diep and Pham Van Nam, 1998 “Strategies and business operation policies”, Statistics Publisher.

1.3.1 1 Economic environment

Political

Political stability Labor Law Tax regimes Legal systems Legal environment

Lifestyle Knowledge, Culture Customs, Habits

The economic factors have considerable impacts on a business They comprises of:economic growth rates, foreign exchanges, inflation rate, interest policy, monetaryand fiscal policies, etc The company has to select the specific impact of each factorsince it could present opportunity or threat.

1.3.1.2 Technological environment

Most companies depend on its backbone technology There will be more advancedtechnologies coming out into society They will create both opportunities andthreats to every corporation, and impose a direct influence on the two basic factorsthat forms the competitive advantage of a company, being product quality and price

1.3.1.3 Legal-political environment

This is the foundation of all other factors in the external environment, which meansthat the business environment are shaped based on the legal-political framework.They comprise of: political regimes and the legal system Lenin has pointed out thatevery single political issue relates to some economic benefits and every economicissue serves some particular political purposes Therefore, if the political regime isstable, and the political viewpoints are crystal clear and open, there will be wideopportunities for business growth and vice versa

1.3.1.4 Socio-cultural environment

This has a slow but noteworthy effect on the business environment, and involvesfactors such as changes in lifestyles, spending habits, etc This will create differentmarket segmentations and targets, enabling the business to pursue new developmentopportunities and improve its competitive position

External Factor Evaluation Matrix (EFE Matrix) - Tool for assessment of external environmental factors to the firm.

External Factor Evaluation Matrix (EFE) helps us to summarize and measure the effects of external environment to the firm.

Step 1 – List factors: The first step is to gather a list of decisive external factors thatlead to external opportunities and threats affecting on the success of the firm in its businesssector Generally, number of factors is from 10 to 20; however, the more factors areevaluated, the better the result is This is because it doesn’t affect to the total weightedscore of the importance level (always to be 1) and reduces the errors caused by subjectiveevaluation in classification of the factors

Step 2 - Assign weights : Assign a weight to each factor, the value of each factor

should be between 0.0 (not important) to 1 (most important) in order to determinethe importance level of the factors (in case number of input factors is more than 10,the scale of 0-100 should be used alternatively)

Step 3 – Rate factors : Assign a rating to each factor; rating should be between 1

and 4 for each representing factor (actually, the range may be larger) Ratingindicates how effective the firm’s current strategies respond to the factor 1 = theresponse is poor 2 = the response is below average 3 = above average 4 = superior.Weights are industry-specific Ratings are company-specific

Step 4- Multiply weights by ratings: Multiply each factor weight with its rating.

This will calculate the weighted score for each factor

Step 5 -Total all weighted scores: Add all weighted scores for each factor This

will calculate the total weighted score as calculated on Step 4 for the company That

is total weighted score for the company in accordance with EFE Matrix

In the result, we will get one EFE Matrix with total weighted score of the factors If the total weighted score of the input factors into EFF Matrix is 4, the firm has good response to opportunities and threats from external environment If the score is above 2.50, the firm has above average response In contrast, if the total weighted score of the Matrix is below 2.50, the company has below-average response

1.3.2 Vietnamese Telecommunication Industry Analysis using Michael Porter's 5 forces model

Industry environment is also one of the 3 types of environments that are relevant to

a business’ strategy The below Michael Porter’s 5 forces model is considered thetheoretical foundation of all industry analysis Each of the forces is furtherinfluenced by many other factors that secures in-depth investigation before aholistic industry competitive picture could be derived

Figure EXTERNAL ENVIRONMENT ANALYSIS-4: Porter’s 5 Forces’ model

Source: Nguyen The Lien Deep and Pham Van Nam, 1998 “Strategies and business operation policies”, Statistics Publisher, pa 56.

1.3.2.1 Customer analysis

Customers play a crucial role to the existence and development of a company.According to many consumer researches: 96% of unsatisfied customers neverdirectly complain to the service providers, 90% of those will never come back and 1unsatisfied customer will tell this to 9 other customers

(Source: http://www.ictpc1.com.vn/forum/archive/index.php?t-218.html)

This means that the majority of customers will not automatically explains to thecompany their disappointments on the service quality They simply leave thecompany and never return Hence if the company fails to seek client’s opinions ontheir current service scope, it might act on falsified assumptions and allows itself toreduce the service quality on the basis of no complaints received This is a viciouscycle since this will push the clients further away from the entity and generate allother unforeseeable difficulties.

1.3.2.2 Supplier analysis

During the course of operations, businesses need production inputs such as: rawmaterial, labor, finance sources, etc… The suppliers of those will have directimpacts on a company’s bottom line through the price and quality of those inputs

A supplier that has the ability to increase price or reduce the quality of theirproducts is said to be a “powerful” supplier

1.3.2.3 Competitors analysis

Direct rivalry within the same industry determines the nature, level as well as themodes of competitions in that industry An industry with high level of competitionwill have high propensity to reduce prices, leading to profit reduction The factorsdetermining an industry’s competitiveness include the industry growth rates,number of businesses and their relative scales, barriers to exit, productdifferentiations amongst the players and consumer switching costs

Scrutinizing the competitors, the businesses need to have information on theiravailable objectives, action plans and responses Some questions that need to beanswered are:

- Are they satisfied with the current position?

- What are their capabilities?

- What are their weaknesses?

- What enables them to responses in the best possible way?

The above issues could be common to many companies, however, the critical point

is the depth of knowledge obtained relating to their competitors

Telecommunications industry is perceived to be a highly dynamic market, thereforecompetitive analysis is an obstacle facing each company every day and every hour

in the race to increase market share

1.3.2.4 Potential entrant analysis

Potential entrants are those with competitive capabilities once they choose to enterthe industry They impose threats to the existing players in the industry in terms ofmarket shares reduction, fierce competition, fragmented profit and relativepositioning alterations

This threat is determined based on the “entry barrier” If there are strong barrier toentry, the potential entrant threat is reduced The entry barrier encompasses:economy of scale, product differentiation, customer loyalty, distribution channel andthe absolute competitive advantage

1.3.2.5 Substitute product analysis

In the context of fast changing technology as at current, a product’s life cycle hasbecome shorter and shorter, and there are very high threats of new substitutionsbeing introduced into the market

According to Michael Porter, substitute products are products of competitors from

other industries that have similar functions and satisfy similar needs of customers.

For example, the coffee producers indirectly compete against the tea-processors andbeverage companies If the substitutions are produced using more advanced

technology with lower price and better quality, this would construct a huge threat tothe business.

However, if the clients are not very active in substitution seeking and are reluctant

to switch suppliers, the threats from these products will shrink

As a result, if the threat of substitution is low, the company has better chance tomake larger profits and vice versa

I.4 INTERNAL ENVIRONMENT ANALYSIS

Internal environment comprises of all factors and systems currently existing within

a business

Constantly analyzing these factors is critical to overcoming the company’sweaknesses and enhancing its strengths

To facilitate the internal analysis, Porter’s Value Chain Model is used:

Figure INTERNAL ENVIRONMENT ANALYSIS-5: Michael Porter’s Value

Chain Model

Primary activities

* Production

This is the direct function that creates products and services for the company This

is the primary activity that directly influences the success possibility of the business

as whole as well as other specific operations For example: if the company is able toproduce good quality products and services at low costs and low prices, themarketing force will be likely to succeed in selling the products, fasteningcollection from customers, enhancing the working capital turnover, and improvingother financial indicators

* Marketing

Marketing analysis is usually the first step in the internal analysis of the company.This study usually focuses on the following areas: product categories and qualities,market share, product prices, customer perception on product, quality anddistribution costs, as well as marketing effectiveness and sales activities

* Customer services

A company’s customer services contain after-sales supports or services Thisfunction could create the perception on customer’s mind on the differential valuethrough the ability to solve their problems and provide value-added services suchas: information provision, effective product usage guidance, etc

Upon information system evaluation, we will have to consider related aspects such

as the completeness, reliability, timeliness and modernity of the system

* Human resources management

Human resource plays a central role in the success of a company People make upthe inputs for the objective establishment relating to environmental analysis Eventhough the overall outputs of the business plan is correct, they are of no use if there

is a lack of capable, skillful people

* Research and development

The quality of R&D activities also determines the relative position of a companyamongst its competition base in terms of product development, quality, price controland production technology Through superior product design, the entity couldincrease its client attractiveness For the above reasons, R&D is a value-addingactivity

* Procurements

Procurements and inbound logistics refer to the management of inputs frompurchasing to production and distribution The results from this process couldsignificantly reduce the costs hence create greater values to the company

In summary, conducting internal analysis would help the company to identify itscompetitive advantages, as well as the obstacles to maintaining such competitivepositions In other words, this process assists management in pointing out thestrengths and weaknesses of the company and base on that, leveraging the strengthsand minimizing the weaknesses to increase the competition capacity of thecompany

Internal Factor Evaluation (IFE) matrix – Tool for assessment of the internal environment of the Firm

This matrix summarizes and evaluates the most important strengths and weaknesses

of different business functions as well as the entity as a whole The IFE matrix isdeveloped through 5 steps, similar to that of EFE matrix (presented at section 1.3.1– Business macro environment analysis), The only major difference is the type offactors that are included in the model: they are the key influencers over a business’competitive competency in a given industry

Calculating the total scores after all 5 steps, we will have the aggregate value of acompany using the IFE matrix If the total score of an entity is 4, the company hasabsolutely high competitive capacity Any total point that equals 2.5 or above wouldindicate a moderate competitive capacity, and if the result is lower than 2.5, theabsolute competitive capacity of the company is rated at below average

Integrated evaluation tool – IE Matrix

The IE matrix (Internal – External Matrix) organizes the different SBU-level

strategies (SBU= Strategic Business Unit) into a table with 9 separate cells The matrix is built on two major aspects:

- The total weighting score for IFE matrix on the X- axis

- The total weighting score for EFE matrix on the Y- axis

- Each SBU would form its own IFE and EFE matrices and base on these, the IE matrix would be formed for the whole company

- Interpretations of the X-axis scores (IFE matrix):

+ If total score ranges from 1.0 – 1.99: weak

+ If total score ranges from – 2.99: moderate

+ If total score ranges from – 4.0: strong

- Interpretations of the Y-axis scores (EFE matrix):

+ If total score ranges from 1.0 – 1.99: Low

+ If total score ranges from 2.0 – 2.99: Moderate

+ If total score ranges from 3.0 – 4: Strong

Total scores in the IE matrix

Strong 3.0 -4.0

Moderate 2.0 – 2.99

Weak 1.0 – 1.99 EFE Matrix

Figure INTERNAL ENVIRONMENT ANALYSIS-6: IE Matrix

+ For SBU occupying the regions I, II, IV: pursue the growth and build strategy+ For SBU occupying the regions III, V, VII: pursue the hold and maintain strategy

+ For SBU occupying the regions VI, VIII, IX: pursue the harvest or exist

strategy

I.5 SWOT ANALYSIS

The SWOT analysis/ model is a tool that allows a company to contemplate itscompetitive positioning This method uses the same name SWOT matrix to evaluateboth internal and external factors that influence a business operation The SWOTframework is a tool for auditing an organization and its environment

SWOT is the first stage of strategic planning that helps decision makers to focus onkey issues It is also a critical tool for company top management to formulatestrategic plans Each letter in the SWOT acronyms represents one meaningful word:

S = strengths, W = weaknesses, O = opportunities, T = threats.

To build a SWOT Matrix, the first step is listing down the strengths, weaknesses,opportunities and threats of the entity, then comparing them in a systematic waybased on the relative importance of each of the factors to arrive at possible strategycombinations, as illustrated in the below table:

S-O: Leverage strengths

to catch the opportunities,and to orient the business

S-T: Using thestrengths to combatthreats

-Weaknesses

weaknesses to exploitopportunities

W-T: Overcomeinternal weaknesses;carefully prepare tofight against externalthreats

The possible strategic combinations are as below:

- S-O strategy: Chasing the opportunities that are most suitable to company’s

strengths and business orientation

- W-O strategy: Overcome the weaknesses to catch the opportunities.

- S-T strategy: Determine the way in which the company could leverage its

strengths to reduce the external threats

- W-T strategy: Establish a defensive plan to protect company’s weaknesses

against external threats

I.6 BASIC BUSINESS STRATEGIES

Despite the variety of business strategies, there are three broad basic approaches to

competitive advantage creation, which are: Cost leadership strategy, Differentiation strategy and Focus strategy.

Figure BASIC BUSINESS STRATEGIES-7: Basic business strategies

Cost leadership Product Differentiation Focus

Product

differentiat

ion

Low(Mainly throughprice)

High(Mainly throughdifferentiation)

Low to High(Price ordifferentiations)Market

segmentati

on

Low (Mass market)

High(Many marketsegmentations)

Low (One or some marketsegments)Core

competenc

ies

Production andmaterialmanagement

Research &

Development,Sales- Marketing

Any differential corecompetencies

Cost leadership strategy

The purpose of a cost leadership company is to operate more efficiently than itscompetitors by producing the products and services at a lower cost

A company which pursues cost leadership strategy will not be severely impacted inthe event of rising pressure from suppliers to increase and from customers to deduceprices Additionally, the cost leader usually enjoy large market share and bulkbuying which increase its bargaining power towards suppliers The company will berelatively safe as long as the cost differential is maintained

- Advantages:

This strategy will form a “barrier” that not only can prevent the competitivenessfrom the rivals within the industry but also prevent other potential rivals those have

intention of joining in the market; because such rivals can not immediately havecompetitive advantages

- Disadvantages:

This strategy may be in the ability of existing competitors, the competitors may beable to imitate the method of the leading rivals in term of costs to reduced prices oftheir products and services Finally, if the company is just interested and thinkingabout cost reduction but forgets about market factors and other fluctuations of themarket, their market share may be affected

Differentiation strategy

The purpose of a Differentiation strategy is to gain a competitive advantage based

on the ability to create products and services that are unique in customer’sperception Once the product and service could satisfy customers’ need in a superiorway that no other competitor can provide, the company could charge higher-than-average prices on its product distinctiveness This would enable the company tobenefit from better profit margins than its peers

* Advantages and disadvantages

- Advantages:

Companies that pursuing the differentiation strategy will create a competitiveadvantage over its rivals, hence reduce the competition pressures from othercompanies and suppliers It also creates customer’s brand loyalty which is the mostinvaluable assets of the business

- Disadvantages:

Product differentiation demands extensive investments Within a short period oftime, competitors could imitate the product features and use that exact weapon tocombat against the company

Focus strategy

This strategy differs from the other two in that it is oriented towards serving theneeds of a restricted number of customers/ market segments Companies pursuingthe focus strategy will try to win a certain market target to avoid competitionpressure from existing players within the industry Those are usually neglectedsegments for which other companies have yet paid attention to or do not want toleverage on due to their limited resources or their perception of unattractivesegment growth rates

The Quantitative Strategic Planning Matrix or a QSPM approach is the method that

uses inputs from initial stages of analyses, and allows the company executivesdecisively to select the best strategy to the firm QSPM approach includes thefollowing 6 steps:

Step 1: Provide a list of internal factors strengths and weaknesses Then generate

a list of the firm's key external factors opportunities and threats

Step 2: Having the factors ready, each factor of success (internal and external) will

be classified, such classification is the same as in EFF Matrix and EFE Matrix

Step 3: Determining the alternative strategies which will be considered by the firm

for implementation

Step 4: Determining Attractiveness Score (AS) for each alternative strategies.

Attractive Score indicates the relative importance or attractiveness of onealternative strategy compared to other strategies The range for Attractiveness Score

is between 1 to 4: 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and 4 = highly attractive

Step 5: Calculate the Total Attractiveness Scores (TAS) in the QSPM Total

Attractiveness Scores are defined as the product of multiplying the classifiedweights (step 2) by the Attractiveness Scores (step 4) in each row; the higher TotalAttractive Score, the more attractive the strategy

Step 6: Calculate the Sum Total Attractiveness Score by adding all Total

Attractiveness Scores in each strategy column of the QSPM The QSPM Sum TotalAttractiveness Scores reveal which strategy is most attractive Higher scores point

at a more attractive strategy, considering all the relevant external and internalcritical factors that could affect the strategic decision

CHAPTER 2: BUSINESS COMPETITIVE ANALYSIS ON THE

TELECOMMUNICATION SERVICES AT EVN TELECOM COMPANY

-EVN CORPORATION (-EVNTelecom)

CHAPTER 2 SUMMARY

In this Chapter, our group will manipulate the basis of approach in Chapter I, wewill conduct further analysis of factors affecting business environment ofEVNTelecom, including internal and external factors, macro and micro factors; andthen analyze and assess the business results and current business strategy of theCompany, from that identifying the strengths, weaknesses; opportunities andchallenges as a premise for decision making and implementation of strategies inChapter 3 The following Issues will be presented in this chapter:

- Overview introduction of EVNTelecom;

- Based on Pest’s Model, the group will analyze the macro-environmentalfactors of the telecommunications industry, which may affect the businessoperations of EVNTelecom;

- Based on Poster’s Model of five competitive forces to analyze thetelecommunications industry of Vietnam;

- Based on Poster’s Model of competitors analysis to conduct further analysis

of strengths, weaknesses and strategies of the competitors;

- Internal Environmental Analysis of EVNTelecom;

- Based on the SWOT analysis Model to analyze the strengths, weaknesses,opportunities and challenges for EVNTelecom;

- Evaluation of current business strategies, identifying their strong points andweak points as well the relative reasons;

2.1 EVNTELECOM – AN OVERVIEW INTRODUCTION

As a 100% state-owned and self-finance subsidiary of EVN Group, EVN Telecomobtains full licenses to provide all kind of telecommunication services in Vietnam

Based on a robust infrastructure, state-of-the-art technology, wide channel ofdistribution, well-trained and dynamic staffs, EVN Telecom incessantly endeavors

to provide valuable services with stable quality and competitive price in order tosatisfy customers’ changing requirements

By the motto “Customer Proximity”, EVN Telecom plans to reach 20% marketshare in telecommunications sector of Vietnam in 2010

The Headquarter is located at: 30A Pham Hong Thai, Ba Dinh, Hanoi, Vietnam.Tel: + (84 4) 2100 526

Fax: + (84 4) 228 68 68

International transaction name: EVN Telecom

Services rendered include:

 Domestic and international private leased lines (E-Line)

 VoIP 179 service

 Traditional fixed telephony service (E-Tel)

 Cordless fixed telephony service (E-Com)

 Limited mobility service citywide (E-Phone)

 Full mobility service (E-Mobile)

 Internet (E-NET)

2.1.1 Organizational structure

 EVNTelecom and the wholly owned units:

o EVN Mobile Center

o EVN Transmission Center

o EVN Internet Center

o EVN Design and Consultant Center

o EVN Northern Telecommunications Center

o EVN Central Telecommunications Center

o EVN Central Highland Telecommunications Center

o EVN Southern Telecommunications Center

o EVN Information Technology Center

o EVN Telecommunications Project Management Units

Figure EVNTELECOM – AN OVERVIEW INTRODUCTION-8:

EVNTelecom Organizational Chart

 Telecommunication service providing participants:

o There is widespread participation of all Power Companies across 63provinces/cities nationwide, such as:

Hanoi Power Company, Ho Chi Minh Power Company, Dong NaiPower Company

o One-member companies like Ninh Binh Power Ltd., Hai Phong PowerLtd., Hai Duong Power Ltd., Da Nang Power Ltd

o Telecommunications & Information Technology Centers directlyunder each Power Company in 63 provinces/cities

n Techn ology

Mobil

e Cente r

Proje

ct mana geme

nt Units

South ern Telec

om

Centr

al Highl and Telec om

Centr

al Telec

om Cente r

North ern Telec

om Cente r

Desig

n &

Cons ultant Cente r

 Operating and exploiting information and telecommunication systems forproduction, transmission, distribution and sales of electricity.

 Installing electricity constructions

 Directly exporting and importing equipments, tools, commodities, goods andservices

 Other activities as stipulated and allowed by the letter of the laws

2.1.3 Available services

A Transmission

- Leased line and MPLS, IPVPN services

- LAN, WAN interactive networks establishment

- Data transmission (connecting to Centralized Servers)

- Virtual private network (VPN) services

B CDMA network services

- Wireless telephony service (E-Com);

- Limited mobility service (E-Phone);

- Full mobility service (E-Mobile 096);

- Toll Free services and enterprise networks

C Internet services:

- Internet exchange Provider (IXP) service;

- Internet direct access service;

- IP leased line;

- ADSL broadband internet service;

- Internet over cable TV

- Internet access via WLL/CDMA networks;

- Video conference;

- Wireless high-speed broadband access;

- Server location leasing, web design and hosting

- DNS services