Luận văn business strategy for viet trading technology investment development joint stock company 2019 2025

LIST OF FIGURES Figure 2.1: Strategic plannin; Figure 2.2: Corporate strategic management framew 5 Figure 2.3: Forfcr°s eompctitive strategies Figure 2.4: Business strategy based on t

Lunghwa University of Science and Technology

Approval Certificate of Master's Degree Examination Board

This is to certify that the Master's Degree Examinations Board has approved the thesis Business strategy for Viet Trading Technology Investment

Development Joint — Stock company published by Mr.Mai Van Chinh in the Master Program of Graduate School of Department of Business

Administration

Master's Degree Examination Board

Board Members : Chia Chi Tsan

Nguyen Van Dinh

Nguyen Thi Hong Hanh

Advisors : Mai Anh & Yuan, Cheng — Kang, Dr

Date : 2018 / 11/25

ABSTRACT

Thesis Title : Business Strategy for Viet Trading Technology Investment Development

Joint-Stock Company 2019-2025

Pages : 30

University : Lunghwa Universitv of Science and Technology

Graduaie School > Department of Business Administration

Date : January, 2018 Degree : Master

Researcher : MAI VAN CIIINIT Advisor:MAI ANIT& YUAN, CIIENG-KANG Dr

Keywords; Business Strategy

YNTECI is 2 frm which is now doing business in installation and construction industry The purposes of this study are to study basis tor building strategies, process of building strategies and methods of analyzing and selecting the best strategies aiming to help VNTECH choosing the most suitat

theories to build the best business strategy tor VNTECH for the period 2019-2025, and to provide recommendations solutions in order to implement and successfully perform the

business strategy so that VNTECH becomes a powerful player both in the Victnamesc and

lo identify and ta apply business strategy

in the world market

‘To do that qualitative research method is employed and the researcher evaluates both extra and inlcrnal markel relevant to the business of VNTECH The strengths of VNTECH are the participation into 19 M&E projects, having strategic cooperation with big

partners like Omron, Siemens, LG Vietnam, strong commitment fom top management

team in delivering high project quality to the customers, and the employces arc young and

enthusiastic Ihe weaknesses of VN’ CH are short time of business because of Mé&ki

services since 2005 while leading firms like RET and SAREPICO have more than 30 years

of doing business, building information modeling (RIM) is not applicd, current human

resources is low and cannol handle more M&E projects, too low profitabilily, portfatio is not diversified, do not have specification in mission, vision, and business objectives, low financial capabilities, and do not establish professional human resource management policies

The opportunities to VNTECH are political score of Vietnam is increased after

downtum in 2014, strong economic dsvelopment continuous its trend during 2018 and

2019 with high GDP growth rate and strong FDI inflows, the demand of the installation of electricity and water for civil projects (seaport, railways, housing for low-income people) is expected increasing, low price segment in residential market is increasing, prime segment (villas and townhousc) arc not explored by cxisting players, and Victnamese people spend their spare cash into home renovation ‘The threats are identified as high corruption in

Vietnam’s political system, inflation rate is expected increasing, the market is fragmented

by geographic location wilh different demands, more than 15,000 contractors im Viclipmˆs M&E market which lead to fierce competition, The customers have many options due to large construction services providers, and Vietnam’s M&E market is being approached highly by forcign contractors ftom developed countrics New Isgal ftamework supports

foreign construction contractors

Based on that, there aré same business

‘alagies lo be developed They are strength focus strategy, low cost strategy, and marketing strategy Other recommendations to fiuther improve the effectiveness of business strategy umplementation are also proposed to help the company to achieve better implementation effectiveness

ACKNOWLEDGEMENT

T sincurdly thank tho lacher Mai Anh, and corporale officers af Viet Trading Technology Investment Development Joint-Stock Company devoted to guide and help me complete this thesis

Thank you!

Author

Mui Van Chỉnh

1.1 Reason of choosing the research ioic

1.2 Purpose at the study

1.3 Research topic and scape of the research

1,4 Structure of the study

2.1.2 The role of business strategy in business activities of a company

2.2 Introduction fo some business stralegics

2.2.1 Focus growLh strategy

3.2.2 Porler's comgetive sÍrfegies

2.2.3 Business strategy according to the firm's position

2.2.3.1 Market leader strategy

2.2.3.2 Marker challenger strategy

2.2.3.3 Market follawer strategy

2.2.3.4 Market michor strategy

2.3 Process of developing strategy

vi

2.3.4 Aualysis uf internal cuviroumcut

2.3.4.2 Analysis of functional department in a company lá

2.3.5 Analyze and kienfHy strafegy

2.3.6 Implement stratepy

2.3.7 Control and review Lhe implementation of strategies

2.4 Other tools to analyze and bulld business strategie:

4.1.3 Products and cansnming markefs

4.1.3.1 Business seclor and main ĐTOdWCHS cm eH nhe TỔ

4.2.1.3, Culture and society 32 4.2.1.4 Technolsgy 3ã 4.2.2 Aualysis of compelilion in the industry 4.2.2.1 Porter Matrix of $ Forces 34

4.2.2.2 Competitive analysis 35 4.2.2.3, Analysis of inlemnal environment .38

4.3.3 EFF matrix, IFK matrix, SWOT matrix oĩ VNTECH

4.3 Visions, mission and objectives

4.3.1 Mission

4.3.2 Strategic objectives

4.4 Identifying business strategy

4.4.1 Strength focusing strategy 4.42 Law cost strategy

4.4.3 Marketing strategy

4.E Solntlans fo tmplemeni.sirafeptes

4.5.1 Expanding customer base

4.5.2 Enhancing human resource capability

4.5.3 Improving marketing aetivitles

4.5.4 Diversifying penducts/services and pridng palictes

45 tnhanding finanrlal capaclfY co

4.5.6 Other solutions

4.6 Chapter summary

5 CONCLUSION nh nhhreirerirrearrirrirrrrirrrrroroe 2Ú) REFERENCES = 5

Appendix 1: Projects of VNTECH ¬

Appendix Ld: Core compeleneies oĩ VTKCH and main cormpelit0rs 6Ì

viii

LIST OF TABLES

Table 4.1: Key VNTECH's projects

Table 4.2: Financial Performance in Last 3 Years (VND billion) 24

Table 4.3: Victnam’s construction industry

Table 4.4: Office market in Hanoi and Ho Chi Minh City 3? Table 4.5: Retail market in Hanoi and Ho Chi Minh City 28 Table 4.6: Residential market in Hani and Ho Chi Minh City 28

Table 4.7: Victnam' FĐI OYerViCW on noheheeereernrsroeooeou 2l

Table 4.8: Financial performance of VNTECTI and main competitars 35

Table 4.9: Expcriences of VNTECH and main cømpefifors 3Ố

Tablc 4.12: IFE natrix p£ VNTECH

LIST OF FIGURES

Figure 2.1: Strategic plannin;

Figure 2.2: Corporate strategic management framew 5 Figure 2.3: Forfcr°s eompctitive strategies

Figure 2.4: Business strategy based on the firm's position 1 Figure 4.1: Organization structure af VNTECH 23 Figure 4.2: Vietnam’ s Political Stability Index 29 Figure 4.3: Vietuam’s GDP growth rate and inflation rate 30 Figure 4.4: FDT inward by country (%) 3 Figure 4.5: How đo Victiamesc consumers suend their spare casl7 33

1 INTRODUCTION

1.1 Reason of choosing the research topic

Nowadays the Vieam economy has been increasingly developing with high requirement of all sectors in the sovicty, Construction Industry is included in that Irend To exist and develop, it

is necessary that organizations should build clear business strategies and orientations Being a

business involved in Installation and Construction Industry, Viet trading technology investment

development joint-stock company (VNTECH) recognizes tough competition and need to change

with that trend in this market Io survive and develop, if is findamental for VNSECH to build a

suitable business strategy Kor these reasons, the researcher decides to choose the topic as the role of Chairoan and General Direelor: “Developing the business strategy for Viet Trading

Technology Investment Development Joint-Stock Company for the period 2019-2025” for the

thesis’s title and with the researcher’s practical experiences and knowledge getting from le-MBA

course, the rescarchcrexpectsproviding accurate adjustment and identifying night busincss

strategies for VNFECH Company

1.2 Purpose of the study

‘This study is condusted with some specific purposes as below:

—_ Review basis for business stratasies, process and methods of analyzing and selecting the best strategies aiming to help VNTECH choosing the most suitable strategy

Identifying and applying business strategy theories to formulate suitable business

sltalegy for VNTECH far the PERIOD 2019-2025

Propose some key solutions to implement and successfidly perform the business

strategy

1.3 Research topic and scope of the research

‘This study is developed with research topic as “Wusiness strategy for Viet ‘Trading

Technology Fnvestinent, Development Joinl-Slock Company 2019-2025”.

Scope of the research includes the subject, the content, the time, and the location and they are described as below

= The subject: Business stralogy of VNTECH Company

— The content: The study is developed with inormal and extemal analyses which arc developed in order to scan internal operation of VNTECH Company and the business environment in which the company is now doing business Then, busine

siralegies for the

company during 2019-2025 are proposed accordingly

- The time: Krom June 2018 onwards

- The location: Within VNTECH Company

1.4 Structure of the study

This study is developed wilh 5 chapters The firs! chapler is introduction of the sludy Lopic as

well as the proposal of research objectives and research scope Other chapters include

‘Theoretical Basic of Corporate Business Strategy, Analyzing VNYECH’s Current Operations and Businass Stralogy, and Rocormnendation of Business Stratsgiss for VNTECH during 2019- 2025.Theoretical background for business strategyreviewsfundamental understanding about the

research topic It covers the examination of theoretical basis about business strategy and how it is

formilated Some strategic analysis tools are proposed and examined during this chapler The third chapter is to analyzing VNTECH’s Current Operations and Business Strategy It examines some basic information about VNTECH Company such as its vision, mission, and objectives

Tilemal envirwmneni is seamed along with external cuvirommenl scanning Hercin, som strategic analysis tools are put into practices with the data is collected fiom both interviews with the managers of the company and secondary data, ‘The fourth chapter is developed in order to formulate a suitable business strategy for VNTECH during 2019-2025 It covers the proposal of new visions, missions, and objectives, Chosen business strategies are described clearly in this chapter and the solutions to implement chosen business strategies are discussed accordingly

2 THEORETICAL BACKGROUND FOR BUSINESS

STRATEGY

2.1 Concept and role of business strategy and strategic management

2.1.1 Concepts

2.1.1.1 Strategies and business strategies

Strategy is defined as on-going process which allows a company’s top managers to control ils operations and businesses in order Lo oblain business goals in long-term perspectives (Lamb, 1994), Mintzberg and Waters (1985) define strategy with structural approach in which a strategy

is either planned strategy or emergent strategy Planned strategy refers to a strategy which is proparcd and it is generated Rom pre-srtilysos of inlermal and oxtornal markol while smergent strategy is determined as the one which is raised when strategic managers pereeived that planned strategy must be revised and changed upon on certain feedbacks (Mintzberg and Waters, 1985) Another understanding about strategy is provided by Porter (1996) and it is defined as a set of actions that helps a company to differentiate itself with other competitors Porter (1996) provides the differentiation between strategy and non-strategy as non-strategy is standard actions which are conducted by a company and its compotilors ty deliver products and services to the customers or to nnaintain production flows

In summary, this study chooses a definition for strategy as @ unifying theme in order to provide cokicrence and direction for the actions and the decisions to gain business successes In addition, strategy is perceived as planning action in long-run perspectives and it helps the firms

lo eslablish and lo sustain specific capabilities, Lo allocate resources, and to clarify goals and policies to support the firms’ development and business objectives (Johnson and Scholes, 2002) Finally, strategy brings the directions of the firms and it aims to answer following questions: Where is the firm now? What the actions will help the firm to achieve business objectives and goals? What are the moverent of the compelitors and compelitive environment? What the Gm want to achieve in the long-run?

Strategic formmlation Strategic planning Mac ouuent

Figure 2.1: Strategic management

Source: Nickols (2016)

It is also denoted that a strategy is managed under strategic management According to

Nickols (2016), strategic management includes 3 components, including strategy formulation,

strategic planning, and strategy deployment Strategy formulation is the component in which strategies are formulated after consideration of internal and external environments (Nickols, 2016) Strategic planning is determined as a useful tool which helps strategic managers to deploy

chosen strategies throughout the firms (Nickols, 2016), Strategy deployment refers to the

implementation of chosen strategies along with closed monitoring (Nickols, 2016)

2.1.1.2 Strategic levels

There are 3 strategic levels, including corporate strategy, business strategy, and operational

strategy (Johnson and Scholes, 2002) These strategic levels are illustrated as below:

Corporate level strategy Business level strategy Operational strategy

Is concemed with the

overall purpose and scope Is concerned with the way Ie conceniea sania

of an organization and H* business seeks to different parts of the

how to add value to compete successfully is its Grganization deliver the

business unit particular market OF strategy in term ox

managing resources, processes and people

Figure 2.2: Corporate strategic management framework

Source: Johnson and Scholes (2002)

According to Grunig and Kuhn (2010), corporate strategy covers business strategy and operational strategy and it is developed under the objective of differentiating a company with

others in the market Business strategy, however, is developed with the target is business

activities of a company or which business area that a firm need to improve in order to win the market share (Grunig and Kuhn, 2010) Finally, operational strategy refers to the combination of

each operational part of the firms to be connected with each other in order to form a strategic

architecture (Johnson and Scholes, 2002)

2.1.1.3 Corporate strategic management

Corporate strategic management is a business term and its conceptualization is not very new

since it is introduced in 1970s (Wells, 2000) It is defined as a process in which the top

management of the firms envision about the future and they develop a set of actions that allow

the firms to achieve that future (Wells, 2000) Moreover, corporate strategic management is defined under a system approach whether it is perceived as a management system that allows the

firms to identify and to measure the corporate performance in order to achieve desired future

(Wells, 2000)

According to Wells (2002), a tiamework of corporate strategic management is illustrated with 5 components, including pre-planning, strategic planning, deployment, implementation, and measurament and ovaluition, Pro-planning is conducted with the abjactive of rscngniving which activitics should be canicd out and what organizational assessment is, Then, stralcgic planning is developed with the exploration of strategic foundation and it includes mission, vision, and guiding principles Tt is denoted thal the firms should conduct gap analysis afler stralegic foundation is determined in order to define strategic goals, relevant strategies and objectives

‘This component outputs measurement plan Deployment is the third component in corporate

slralogic management flamework and it consists of the completion of the plan as the first phas and the communication of the plan as the second phase, After that, the firms move to implementation stage in which action plans are developed and actions ate implemented with

appropriate tracking and commumication progress The last component refers to measurement

and evaluation and it requires the data collection and certain analyses in order to measure the

effectiveness implementation process

2.1.2 The role of business strategy in business uctivities of a company

‘There are 4 roles of a business strategy and if is proposed by Whittington (2000) The ñrst role refers to classical perspective and i refers 1o the assumplion of which top imanagers and strategic managers of a company need to develop business strategies in the way of leveraging internal strengths and extemal opportunities while overcoming internal weaknesses and reducing extertal threats The scoond role refers 1o the evohuionary perspective in which the perceplion of top managers and strategic managers are either wrong or sight While right decision in choosing business strategies allows a company to obtain business success, wrong decision leads to business failure The role refers to the yrocessual perspective of a business strategy wheller the assumption of which business performance is a result of interaction between individuals and environment and the result of this interaction, generally, is impredictable or unintended The last role of a business strategy refers to systematic perspective of a business strategy and il is highlighted as the role of cultural or religious effects and educational background on strategy of

a company.

2.2 Introduction to some husiness strategies

2.2.1 Focus growth strategy

Focus growth strategy refers to the context of the firms desire to achieve growth in their business scale, winning against other competitors, andprosperity (Leminen and Westerlund, 2012) In this context, focus growth strategy can be divided into high growth strategy and low growth strategy whether high growth slralogy is conducted when the firms aim to achieve rapid growth while slow growth rate reférs to safé and steady growth (Brown et al., 2001), It is denoted that not ail firms want to follow high growth strategy due to their top management aims

to avoid business risks (Leminen and Westerlund, 2012)

2.2.2 Porter's competitive strategies

Acvording lo Porter (1980), the firms can choose 3 different stratogics in order to gain competitive advantages against other players in the market, They are cost leadership strategy, product differentiation strategy, and focus strategy It is perceived that focus strategy is divided

into cost focus strategy and differentiation focus strategy

2.2.2.1 Cost leadership strategy

Cost leadership is conducted when the firms want to sell their products and services at lower

process (Parter, 1980)

2.2.2.2 Product differentiation strategy

Product differentiation strategy refers to the action of the firms in which they develop now products and services with the characteristics and the functions are different to others (Porter,

1980) On the other hand, it means that the firms implement produet differentiation strategy

throughout unique characteristics and fimctions integrated into their products and services and

this action helps distinguishing themselves to other competitors in the market (Hall, 1980)

2.2.2.3 Foous stratogy

Focus strategy is implemented under the context of the firms try to deliver and to sell their products and services on specific market segment or for specific customer segment (Porter, 1980) in this comext, the finms apply cither cost Icadership stratcgy or product differentiation strategy but they focus on new market segment or new customer segment and this segment is not exploited by other competitors (Horsky and Nelson, 1993)

2.2.3 Business strategy according to the firm’s position

According to the firm’s position in the market, business strategy is formulated and the firms can follow cithor market leader or markel challenger or market follower or markel niches!nicher,

A framework which is utilized to illustrate different business strategy upon on the firm’s position

is highlighted below:

2.2.3.1 Market leader strategy

Itis asserted that every market has a market leader which has highest market share, intensive nerkeling programs, wide distribution network, inlegrated advance technologies, high rate of new products and services, and pricing controls (Butler and Collins, 1996) On the other hand,

when the firms conduct market Jeader strategy, they aim to expand current market share and to explore new customers through new products and services while still maintaining the relationship with cwrsnt customers or protecting current market (Koller ct al., 2010) To expand current inarket share, a marker Ieader often invests heavily on advertising programs, improves the coverage of distribution networks, gives incentives to the distributors, develops new products and services, expands ils businesses lo new geographic localions, and conducls mergers and acquisitions with existing and smaller firms in the market (Gilligan and Wilson, 2003), To

protect current market share, a market leader continuonsly refines its competitive advantages

against olhor competitors in the market, invests heavil

into advertising, and crosles strong customer relationship as well as strong relationship with its suppliers (Gilligan and Wilson,

2003)

2.2.3.2 Marker challenger strategy

Market challenger is defined as the firms which have slightly smaller market share and they try to adopl aggressive Imsiness stralogy in order to attack the market share [rom other competitors, including market leader (Tse et al, 2004) According to Gilligan and Wilson (2003), a firm can conduct chooses either attacking market leader or attacking other firms with smaller size bat under Gnancial problems or allacking smaller fins in other regions, Porter (1985) indicates that a firm which follows market challenger strategy must be careful of attacking market leader due to it is dangerous competitive movement and it may destroy market challenger Moreover, a market challengsr can condnel, s

ios of actions to allack, inoluding

discounting product’s price, improving current products, introducing innovative products,

heavily investing on advertising efforts, developing the market, developing higher value added produc!

onducting inarket posilioning in mere rucaning ful ways (Gilligan and Wilson, 2003)

2.2.3.3 Market follower strategy

Market follower is considared as the firms which do not have largest market share and they attempt to conduct business strategies af less aggressive level than market challenger with the objective of maintaining current market position (looley and Greenley, 2005) Generally

current market share and il avoids di

speaking, a market follower isa firm which aeccpls il

competition with market leader like a maker challenger (Levitt, 1996; Kotler, 1997), According,

to Saunders (1987), a maiket follower has some common business characteristics, including such firm has smaller market shares and it competes in the market segment where it has competitive

arch and development (R&D) activilics, it has small

advanlage, it has Toss officioney im

business scale und il aimns slaying with small business scale in (he long-ran, and ils leaders involve into all aspects of operational activities When a firm conducts market follower strategy,

il can follow by 3 options, as hightighted by Gilligan and Wilson (2003).The first option is following closely with market mix programs and market segmentation are the same as a market leader The second option reférs to following at a distance and it is the combination between similar and different market mix programs and market scgmentation comparsd to a market leader, The third option is determined as following selectively or a market follower aims to follow market mix programs and market segmentation in selective manners and therefore the likelihood of direct competition is minimized accordingly

2.2.3.4 Market micher strategy

Markel nicher is porocived as the firms which align their businesses inlo smaller but specified markets; thus, by considering themselves as market niches, these firms avoid dirzct competition from larger competitors and they build up in-depth understandings about the customers’ preferences of specialized markel (Ho, 2014) According to Gilligan und Wilson (2003), a market nicher should conduct specialization actions, including specialized by geography, specialized by products and services, specialized by product and service quality, spovialized by customer's sive, and specialized by mniqne features of praduels and services

2.3 Process of developing strategy

To develop strategy, a following proccss is proposed with 7 steps, including determining

business objectives, analyzing external environment, analyzing the industry, analyzing internal

environment, analyzing and identifying strategy, implementing strategy, and controlling and roviowing Ihe itaplomentalion of stratogy This provoss is illustrated as below

Definition and evaluation of specific action

programs (6-18 months)

Figure 2.4: Business strategy based on the firm’s position

Prepared by the researcher (2018)

Then, each step in the process of developing strategy is put into discussion, It is denoted that each step requires different actions and approaches ‘I'he researcher also proposes this process to

develop business stratagy far VNTECH

2.3.1 Determining business objectives

Telermining business objectives is the Gist step in he process of developing business strategy of the firms It is denoted that business strategy is developed to support the business goals of the firms in long-run perspectives (Hax and Wid! II, 2003) According te Grunig and

2.3.2 Analyzing external environment

The sccand step in business strategic plamring is to conduet the analysis ou external markel and the fizms should adopt some strategic analysis tools To analyze external environment, strategic managers can utilize PESYLL analysis which is considered as ons of famous strategic analysis loolbox (Koller, 1998) It helps stralegic managers to understand how business of a company is influenced by economic environment, political and legal environment, cultural and social environment, and technology environment (Koumparoulis, 2013)

2.3.2.1 Economic environment

‘The business performance of a company is depended on the health of national economy or global cconomy such as interest rate of borrowing loans from conunercial banks, the [uctuation

of exchange rate and inflation ate, ete, (Koumparoulis, 2013), For example, when inflation rate

is increased, the cost of purchasing raw materials is increased and it impacts directly Lo profit of

a company (Thompson, 2002), Another example for the impact of economic environment is shown through the government’s action in which they tightens the spending and this action impacts directly on money supply and labor market which cause negative impacts on the

of a company (Thompson, 2002)

2.3.2.2 Political and lepal environment

Political and legal envionment impacts on business performance of a company (Kotler, 1998) The role of potitical diraotion amd legal is shown through an example of European arga whether a company which is cstablished within (his arca gains many benciils fom single currency while another company which is coming ftom non-European area faces up with the

Muchuation of exchange rate (Koumpsroutis, 2013) tn addition, if a company is doing busine

in an industry with incomplete legal framework, this company is facing up with higher threats

from other competitors (Kotler, 1998)

2.3.2.3 Cultural and social environment

Cultural and social environment decides the customer behavior and therefore it impacts on the business performance of a company (Thompson, 2002) It is identified that the customers may follow different cultures or they may have different perception about culture values, leading

to the requirement of studying customer behavior in detail to assure that the products and

services developed in fine with f

new technologies and trainings for the employees to operate new technologies (Kotler, 1998)

2.3.3 Industry analysis

To analyze the industry in which a company is now doing business, strategic managers can apply Porter's Five Forces as industry analysis toolbox, It is denoted that a company is doing business within specific industry and this company’s business performance is influenced by the performance of overall industry (Dalken, 2014) On the other hand, it means an industry's performance impacts on the busi

conduct industry scanning and analysis to understand the impacts Gohnsen et al., 2008)

of every company inside and (herefore a company needs to

iB

According to Porter (1979), an industry performance is depended on 5 factors, including competitive rivalry, potential rivalry, customers, suppliers, and substitute products Porter (2008)

rovises thoa factors and identifics thal the analyses of these factors help slratogic managers to

đetcet the opporlunitics and lhe threats frorn specific industry

2.3.3.1 Competilive rivalry

Competitive rivalry is defined as the competition among existing players within an industry

(Porter, 1979) It means that when a company is doing business within an industry, this company

needs la compete with athor players in term of the qualily producls and sorvices, marketing programs, etc, (Porter, 2008), Competitive rivalry impacts on business performance of a company through how many players in this industry, overall growth rate of this industry, the differentiation level of products and services which are provided by different players, ete

(Hubbard and Beamish, 2011)

2.3.3.2 Polontial rivalry

Potential rivakry is detined as the potentials of which new players can enter an industry or it

is determined as the barrier level to enter an industry (Porter, 1979) It is affirmed that new

players arc hard to cnler an industry when this indusiry is covered by many cxisting players (Johnson et al., 2008) When an andustry has many players, the profit sharing for each player is smaller and therefore it limits new players to enter this industry due to small rate of retums (Datken, 2004) Morcover, when ani industry consisis of intonsive competition among existing players, the banier level to an industry is very high to new players accordingly (Rothaenmel,

2008)

2.3.3.3 Customers

According to Porter (1979), customers play significant role in an industry and it is reflected through the barpaining power of customers When the bargaining power of customers is high, the fins nee to improve the quality of products and services continuously, to strengthen innovative products and services to win the market shares, to fiequently conduct promotion programs, and

to widely spread distribution nofworks (Porter, 2008) Rarguining power of customers is high

when an industry is covered by many players but the number of customers is low or when an industry has many substitute products and services (Slater and Olson, 2002)

2.3.3.4 Supplicrs

According to Porter (1979), the supplier impacts on overall performance of an industry due

lo a firrn requires raw materials which are purchased from the suppliers and it is so-called as

2.3.3.5 Substitnte products

stitute products is considered as the last factor in Portor’s Five Forecs model and it impacts to overall performance of an industry It is defined as other products and services of which the customers can find in the industry instead of purchasing products and services from a company (Porter, 1979), A product and scrvice is considered as allermative when il shares the same fictions with a company’s products and services (Dalken, 2004), The impact of substitute products on a company is depended on onstomer loyalty level with this company’s products and sorvices as well as switching cost lo the customers (Hubbard and Boamiish, 2011) For instaneo,

customers The resoure

al, 1987; Bristow and Mowen, 1998) In addition, the resources can be divided into physical

s of a company is divided into lamgible and intangible asscis (Dwycr ot

B5

capital resources such as plant and equipment used to produce products and serviees, human resources such as employees and their working skills and attitudes, and capital resources such as organization cullares, poticics, and contral mechanism (Rarncy, 1991)

2.3.4.2 Analysis of fimetional department in a company

To amilyre functional departinen! i

should be utilized and this model is developed and proposed by Porter (2001), It is asserted that value chain modet allows strategic managers to identify all activities within a company as well as the

2 company, il is recommended thal value chain model

2.3.5 Analyze and istentil

The analysis and the identification of business strategies is conducted with the objective of

strategy

choosing which business strategies are important to a company (Grunig and Kuhn, 2010)

Strategie managers need to analyze cach possible business strategy and then they should identily which business strategies are important to long-term development (Grunig and Kutm, 2010) After business stratsgies are analyzed and the most important business strategies are chosen, strategic managers need to develop action plans to implement chosen business strategies (Hax and Wilde IT, 2003)

2.3.6 Tmplement strategy

The next step in the process of developing new business strategies is implementation strategy in which strategic managers need to establish a team who take the responsibilities of rolling choson new business stralogies (Grunig and Kuhn, 2010) The implementation of now business stralcgics also require clear communication with all cimployecs in functional departments of a company and business strategies are documented in well mammer (Grunig and

Kuhn, 2030)

2.3.7 Controt and review the implementation of strategics

The last but not least step refers to the control and the rz

isw of the implomentation of now business strategies According to Grunig and Kuhn (2010), top managers of a company needs to participate into implementation process and they should involve in the meeting with the implementation team to assure thal timeline and mitestones are fulfilled as well as critical issues

are resolved accordingly

2.4 Other tools to analyze and build business strategies

2.4.1 Matrix to analyze internal and external environment

Matrix to analyze internal and extemal environment includes Internal Factor Evaluation Matrix (FE Matrix) and External Factor Evaluation Matrix (EFE Matrix), according to Zulkamain et al, (2048), Both IFE Matrix and EFA Matrix are prepared with 5 steps The first step is to determine key internal and external factors that influence significantly on a company’s

bust

es Thon, cach factor is given by a weight which is ranged from 0 to 1 as the second step

It is denoted 0 is not important and 1 is very important and the sum of weight of all factors must

be equal to 1.0 The next step is to provide the scare for each factor and the score is ranged from

1 to 4 with 1 is important weakness/threat, 2 is minor weakness/threat, 3 is minor strength/opportunity, and 4 is importanf strengtiưopportunity ‘fhe fourth step is to multiple each

hi The last step is to sum the score of cach factor Lo gain a talal score

planning of the firms According to Mumpuni (2013), the purpose of preparing IFE and EFE

Wy

matrix is to understand how internal and external factors influencing on the firms’ business conditions and performances and therefore they allow the strategic managers to identify which the most appropriale stralogiss for their firms In addition, David (2010) indicales that IPF and

EEE matrix are reliable tool lu strategie managers with casy to usz and casy to urederstand,

2.4.2 SWOT analysis

SWOT analysis is a matrix in which it is combined by 4 factors, namely intemal stengths, internal weaknesses, external opportunities, and external threats (I'errados et al., 2007) On the othor hand, SWOT anulysis helps slralogic managers ta recognize internal strengths and weaknesses and how te leverage the strengths while to reduce the weaknesses (Ommani, 2011)

In addition, SWOT analysis enables strategic managers to understand how extemal market impacts on business activities and business performances of a company and strategic managers should utilize external opportunities and they should consider action plans to reduce negative impacts from external threats (Singh, 2010)

2.5 Chapter summary

In this chapter, the researcher examines some theoretical basis about business strategy and ils roles to a company Moreover, the researcher obtain certain understandings about different strategic toolboxes, including PESTEL analysis, Porter’s Five Forces modsl, Internal and

External Matrix, SWOT analysis, etc and they provide in-depth understandings about internal

implementing chosen business stratogics, and controlling and reviewing the implementation of chosen business strategies The researcher also examines two types of data that are collected in this study, imchiding primary data and secondary data, ‘hen, the choice of direct interview is nmdc along with the catlection of secondary data.tn (he next chapters, the rescarcher ulitizes

what are obtained fiom literature examination in order to formulate right busmess strategues for VNTECLI Company

3 RESEARCH METHODOLOGY

3.1 Research method

This study is developed with qualitative research method, The researcher aims to collect primary data and secondary data for studying the research topic Primary data is extracted fom the inlzrviews with the managers of the company while secondary data is collccted from books and journals about business strategy as well as ftom the report about Vietnam’s construction

industry This study involv

several strategic analysis loots such as Porter’s Five Forces model,

PRSTEL analysis, SWOT Matrix, cle 1o formulate business strategies for VNTRCH Company

3.2 Data collection and analysis

Dircet interviow is the process in which the rescarchers play the role of interviewers while

the respondents who participate into interview process is interviewees (Saunders et al., 2009)

Direct interview is made up with face-to-face scheme and the researchers put questions to the interviewees and then the rescarcher caplure fhe information which is provided by the

interviewees accordingly (Saunders et al., 2009) The main benefit of direct interview is that the

researchers can evaluate the attitude of the interviewees and obtain in-depth findings about social

phenomenon (Saunders ct al., 2009) In this study, dircct interview is chosen to collect primary

data and it helps the researcher to acquire in-depth understanding about current situation of

imlernal and external market and whal the current and possible future business sbalegies of

VNTECH Company

Questionnaire is favorite data collection instrument and it helps the researchers to collect

primary data (Saunders st al, 2009) Questionnaire is developed in standard format and the

respondents choose their answers upon on given statcrucnt (Cargan, 2007) The bencfit of

questionnaire refers to the fact that it allows the researchers to collect primary data in large sample and the resprmdents who parlicipale inlo questionnaire proc

are ananymious and they can answer the questions without issues (Saunders et al., 2009) Since this study’s tome is about business strategy, questionnaire is not suitable since required primary data requires the rospondenls to have intensive knowledge about stralggic management as well as having broad

knowledge about intemal situation of VNTECH and extemal situation from Vietnam’s

construction market

Scundary data is defined as the information thal is propared, collcctsd, and prosonted by olher rescarchers (Saunders ct al, 2009), Collecting secondary data has the benefit of which secondary data does not require much time and eftiort to the researcher to obtain this information (Srivastava and Rego, 2011), Towever, secondary data has its weakness since ho researcher cannot evaluate how previous researchers process this data (Saunders et all, 2009), In this study, secondary data is collected ftom books and joumals about business strategy and it is also collected from internal documents of VNTECH Company

Data statisties, and interview data are analyzed and extracted in the paper in the form of words, numbers All data are meaningful to author for understanding the facts of the company and its industry context

4 ANALYZING VNTECH’S CURRENT OPERATIONS

AND BUSINESS STRATEGY

4.1 Company overview

4.1.1 Company overview

4.1.1.1 Establishment and development

Viet ‘Urade ‘Technology Investment Developing Joint Stock Company (VNYECID) is eslablished under the business license 0101619893 in 2005 with the head office is located in Hanoi, the capital of Vietnam The firm is doing business in main areas, including the installation

of electricity, water system, monitoting system, fire protection system, etc for buildings and industrial vonvs; the installation of clean water sysicrm and construction works, and providing electrical and information system for automate production process Total capital of the firm is? VND billion at the time of establishment and it is increased to 8.8 VND billion and it is under the management of 3 founders The capability of VNTECH is reficcted through its experiences of participating into 19 projects Some projects have high contractual values Kor example, the contract with Hoa Lac Hi-Tech Park and Dak Nong valued at 63.1 VND billion and 57 VND billion respectively Soruc key projcels which are implementcd by VSTECH are presented in the

table below:

traffic management and

‘operation center, maintenance and charge administration office; Construction of Da Nang

= Quang Neai expressway

Hanovid high-rise and low

condominiums

Infrastructure development in Hoa Lac Hi-Tech Park

Bidding package DN3B //A/i0

ACB Construction and

Supply and inslallation of elecinieal

systems, light electricity, water, and air conditioning,

Design and constuction of electricity within the apartment of the commercial

center, lie Lower ‘I’ and lbe conslruction of

the mechanical and electrical infiastructure and landscape

Design and construction, electrical engineering, lechnology of the pump, sewage pumping station number pumping stetion number 12

Construction of electrical engineering

technology, waler plan! equipment

§oure: VNTECH (2018)

Ry 8

Jnvestanestl sources Enterprise's fimds

GDA finds

" Faterprise’s funds

ODA fimds

ADB's

Bmds

Project's value 743VND billion

43 VND

‘billion

31.6VND dillion

63.1 VND billion

The firm is governed by Board of Directors (BOD) and there are 3 deputy directors to

support daily management The first deputy director takes the responsibility of financial

management, the second deputy director manages planning process while the last deputy director

takes into account project management Under each deputy director, there are functional

departments to be setup In more detail, the first deputy director manages financial planning

department and admin department, the second deputy director controls economic planning

department and the last deputy director monitors the operations and the efficiency of technical

department, project department, and service and assurance department

The firm is governed by Board of Directors (BOD) as highest decision hierarchy and there is

a Director under BOD’s management To support the Direct, there are 3 Deputy Directors who

take the responsibilities for financial management, planning management, and project

management.

In term of financial management, there are 2 functional departments, namely fancial planning department and admin department Kinancial planning department takes the responsibility of managing financial performance of the firms as well as conducting avcounting works, This department also courdimates with other departments in order to cnsure that the cost is managed well Admin department provides the consultancies to BOD and the Director in term of developing haan resources of the firm as well as adnrinistration tasks,

Inter of planning management, there is 1 functional department, This department is named

as economic planning and if takes the responsibility of coordinating with other departments to establish project plan and to provide the constrnotion and material atitizalion plan This department also analyzes new technologies and software that help optimizing worktlows

In term of project management, there are 3 functional departments, inclnding technical department, project department, and service and assurance department Technical department supervises technical requirements and technical fulfillment of each project, Project department

manages overall project plan and project implementation in order to ensure that the activities are

4.1.1.3 Some key business pertormance

Inthe last 3 years, business performance of the firm is as below

Table 4.2: Financial Performance in Last 3 Years (VND billion)

‘Source: VNTECH (2018)

Tn the last 4 years, financial performance of VNTRCT is fluctuated accordingly The revenues fiom sale activities in 2014, 2015, 2016, and 2017 arz 46.98 VND billion, 36.18 VND billion, 30.88 VND billion, and 74.38 VND billion respectively Profit after tax in 2014, 2015,

2z

2016, and 2017 are 0.345 VND billion, 0.034 VND billion, 0.080 VND billion, and 1.170 VND billion It is commented that sale revenues are dropped significantly during 2015 and 2016

before il is increased in 2017 Dur to sale reven

during 2015 and 2016

are dropped, profit aller tax is doorsased

4.1.2 Vision, missions and objectives

The vision of VNTECH is to provide comprehensive, realistic, and optimized solutions to

the customers ‘'o support this vision, VN'TECH proposes some missions, including:

— _ To updato, adopt, apply, and transfor new (cchnalogics continuously

To frequently update new legal and discretion to ensure of legally activities

— ‘To research and to identify optimized solutions for construction projects while maintaining the quatity

To research and to develop new products which are realistic to the customers, New products must have the characteristics of friendly to the customers, appropriately for people wilh different professional lovels, and applicabty in differont business

environments at appropriate cost

— ‘To establish widened business network

— Togel morc projects

— To develop human resources which are increasing in term of quality and quantity

‘The objectives of VNITECH are:

= To vonstrucl the projecis at high quality warmer, good desigmation, and they arc integrated with mnuitiple functionalities

— ‘To contribute to the progress of industrialization and modemization of Viemam and to participate into global market

4.1.3 Products and consuming markets

4.1.3.1 Business sector and smain products

VNTECH is now doing business in Vietnam’s construction industry This industry gains strong growth rate and is being ranked as fastest growing construction market among emerging countries in Asia, according to RMT Rescarch (2018) Aunual growth tale of Ihis industry is

more than 6% per anmum in 2017 and it is expected the same in 2018 (HVACR Vietnam, 2018}

Sy b

The value growth of Visinam construction industry in 2018, 2019, and 2020 is expected at 11.3

USS billion, 12.6 US$ billion, and 13.9 US$ billion (HVACK Vietnam, 2018) ‘Vhis industry coulnibuies lo 5.1% of Victnam’s GDP in 2018 and it is expected at $.1% and 5.0% in 2019 and

2020 (HVACR Victnam, 2018)

Table 4.3: Vietnam's construction Industry

Construction indusiry value growth, USS billion H3 12.6" 13.9"

Somes: HVACR Vietnam (2018) , ,

Construction industry has a lot of potentials for farther development This argument is proven through the plan of Viemamese Government to invest more into public construction

projects in order to improve living standards and infrastructure in rural areas during 2016-2020

(Rider Levett Bucknall, 2017) in addition, the firms in this industry may gain the benefit fram

construction projects for low-income people sinee the government launches Housing for Poor Rural Families Program and low rentmg houses in industnal zones for the labors (Rider Levett Bucknall, 2017) Moreover, the demand of the installation of electricity and water is expected increasing since the government aims to increase seaport capacity under a new master plan for scaport development until 2020 (Rider Levett Bucknall, 2017)

4.1.3.2 Consutning inarket

In term of consuming market, the market is characterized by property types, including office, retail, and residential Moreover, highest consumption is in Ilanoi and Ilo Chi Minh City

which are considered as the most dynatnic cilics in Vietnam The office market is characterized

by grade and there are 2 grades, namely Grade A and Grade B Total stock by square meter of office in Hanoi is higher than in Ho Chi Minh City in both of Grade A and Grade B office type (Jones Lang LaSalle, 2017) Towever, the occupancy rale in the office of Ho Chi Minh Cily is slightly higher than in Hanoi Jones Lang LaSalle (2017) reports that occupancy rate of office in 1ianoi is 93.6% while this sumber in {lo Chi Minh City is 94.9% Moreover, Llanoi market gains positive oullook duc 1a good cconomic performance and the rise of newly established firms in this city, In addition, total supply for office market in Hanoi and Ho Chi Minh City are both