Luận văn building business strategy for one member limited liability company 17 in period 2017 2020 and vision to 2025

ABSTRACT Thesis Title : Building business strategy for one-member limited liability company 17 in period 2017-2020 and vision to 2025 University Lunghwa University of Scien and Techno

Lunghwa LUnivcrsity of Scicncc and Tcchnology Approval Certificate of Mastcr's Degree Examination Board

This is lo certify thal the Masler’s Degree Examinations Buard has approved the thesis “Building business strategy for one-member limited liability company 17 in period 2017-2020 and vision to 2025”published by

Mr Khuong ‘lat Thang in the Master Program of Graduate School of Department of Business Administration

Master’s Degree Examination Board

Doan thy ‘Irang —— _

Advisors : Le Thai Phong

Date: 24/11/2018

ABSTRACT

Thesis Title : Building business strategy for one-member limited liability company 17

in period 2017-2020 and vision to 2025

University Lunghwa University of Scien

and Technology Graduate School : Department of Business Administration

Dato : January, 2018 Degree : Master

Researcher : Khuong Tat Thang Advisor : Le Thai Phong

Keywords: Business stralegy

Based on actual requirements, theoretical basis, documents, preceding studies on the issuz abont the business stalegy in general and [he business strategy one-meruber limited Habilily company in partienlar, T Wave chosen topic for my thesis: “Building business strategy for one-member limited liability company 17 in period 2017-2020 and vision to 2025” In this thesis, [ use secondary data sources from the reports of Company 17 to analyze

Tn thesi

the author simultmncously use primary daly sourcss collected from of

Company 17 lo study At the same time, the aulhor use the data of Truong Son

Construction Corporation to compare

Research inethods: In the thesis, I use both quelitative quantitative rescarch methods

Documentation Methodology ‘The studied information and materials include publications, survey results, research, maps, statistics, surmmary reports on construction industry and issues related to research topics

Qualitative research methodology: Interview and consultation with some leaders, managers at all levels of the One Member Limited Company 17 ‘The content of the discussion focused on fundamental issues of business strategy of the company in the construction market

Comparative analysis methodology: PSI' analysi

live forces model M.Porter,

SWOT analysis, IE matrix for analysis of strategic basis tor Company 17 This is the main method of researeh in this topic Through comparative studies, the thesis will clarify the inflaznce of business envirotmnent Goturs on the process of developing and implementing the business stralegy of Company 17 Based on the summary of results, the thesis prope sitable business stralogy for One Membsr Limited Company 17 in

the period 2017-2020

ACKNOWLEDGEMENT

I sincarely thank the advior Prof Le Thai Phong, and the senior leader of of Truong Son Construction Corporation as well as the staffs in company 17 devoted to guide and help me complete this thesis,

Thank you!

Author

Khuong Tat Thang

ACKNOWLEDGEMI

1 INTRODUCTIO

1.1 Urgency of the topic

1.2 Overview of rescarch projects in the fields of the theme

1.3 Objectives of the research

1.4 Subjects and scope of research

1.4 Research methodology

1.6 The expected results of the dissertation

1.7 The meaning and contributions of the thesis

2 THEORETICAL FRAMEWORK OF STRATEGY FORMULATION APPLIE:

FOR ENTERPRISES

2.1 General view of enterprise's strategy

2.1.1, Some basic terms of enterprise’s strategy

2.1.2, Roles of strategy in bussiness activities of entoprises

1.1.3, Levels of strategy

2.2 Process of strategy formulation of company

2.2.1, Ldentification of mission, vision and objectives

2.2.2 Analysis of external inspacts

2.3.3 Competitive Profile Matrix (CPM)

2.3.4, Determination of feasibie strategy with SWOT analyss

2.3.5, Selection of optimal strategy with QSPM

2.4 Basic competitive (business) strategies

2.4.1 Basix of business strategy

2.4.2, Basic compelilive sirateples

2.4.3 Scletion of suitable stratery

2.5 “Characteristics” affecting to determination of business strategy of military

23.1, Characteristics of organization structure

3.1 Introductian af One-member Ltd Company 17

3.1.1 Sketch of establishment and development processes of One-Member Ltd Company 47

3.1.1 Structure of organization, management and operation

3.1.3 Result of business activity period 20142016

3.2 Analysis of macrocnvironmental impacts on strategy building of One-

member Ltd Company 17

3.3.1 Analysis of economic factors

2.2.2 Anulysis of policy-stipulation factors

3.2.2 Analysis of culvure-socicty factor:

3.2.3, Analysis of technology, infrastructure factors

3.2.4 Analysis of internatianal ecanemic integra

3.2.5 Matrix of External Facter Evaluation - EFE of one-member Ltd

3.3 Analysis of task environment per model of competitive pressure yeai

3.3.1 Analysis of pressure from customers

3.3.2 Analysis of pressure from suppliers

3.3.3 Analysis of risk fram substantial products

3.3.4 Analysis of competitive intensily between present oppanents,

3.3.5 Analysis of risk of new opponents

3.4 Analysis of internal environment of One-Member Limited Company 17 56

3.4.5 Organization and management

3.4.6 Matrix of Internal ¥actors Evaluation of Company 17

3.4.7 Building af Competitive Profile Matrix CPM

3.5 General cvaluation on SWOT of Ouc-member Ltd Company 17

3.5.1, General evaluation on opportunities and threats

3.5.2 Evaluation on strengths, weaknesses of Company 17

4 PROPOSAL AND SELECTION OF BUSENESS STRATEGY FOR ONE

MEMBER LTD COMPANY 17 PERIOD 2017-2020 AND BUSINESS VISION

4.2 Proposal and selection of business strategy

4.2.1, Summary of SWOT analysi

4.2.2 Strategies unter consideration

4.2.3, Select strategy based on QSPM matrix

4.3.1, Solutions on organization and management

4.3.2 Solutions on production and technology

4.3.3, Solutions on manpower management

4.3.4, Solutions an finance

4.3.5, Solutions on Marketing and PR

4.4 Requirements and conditions of strategy implementation

5 CONCLUSION

REFERENCES

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1.TNTRODUCTION

1.1 Urgency of the topic

Nowadays, Vietnamese enterprises operate in a constantly changing environment, which requires companies to set up new approaches in managing economic activities in order to keep up with changes The instability of the economic

situation, the tightening of competition, the iner:

ising demand of consumers for the

product, the reduction in the fife

¢ of the goods significantly complicate the managerial process, and the prospacts for dovelopmnent arc bocorning less prodictabite Tn these conditions, ths advancement in the practice of new ideas and technologies in strategic management play an undeniably important role

The iain goal of strategy development is lo achieve long-lorm comgzlilve advantages thal will cnsurc the stavival, sustainable functioning and development of enterprises However, as the practice of the majority of market participants shows, not all domestic enterprises are ready to form long-term development guidelines Even with

a stable financial position and competitive advantages in the market, many of local businesses arz not able to formulate an effective strategic plan due to the lack of methodology and methodological tools of strategic management that are relevant to specific Victnamese conditions Consequently, principles, methods and tools of strategic

development arc of grcat interest to Vietnamese enterprises

Vietnam construction industry is one of the key economic sectors, attracting

investment The share of construction sector in GDP of Vietnam is approximated to 5

percent to over 6 parcent of GDP However, the construction industry are still facing some difficulties and challenges Therefore, in order to survive and develop sustainably, construction firms must fornmlate a strategic plan that is not only scientitie but also

practical

‘As one member of the Corps 12 (Truong Son Construction Corporation), One- member limited liability company 17 is also under implementation of comprehensive renovation, reorganization of the security apparatus In operation, the company always persevered wilh the oricntation "Taking basic construction as ø core business, in which

infiastuclure consiruetion, transportation is the center, combined with diversified

trading activities’ quickly adapting to market conditions, actively investing in modermzing equipment and acquiring, applying advanced science and technology, creating high quality produets and always " keep promse" with customers With the right managing direction and the efiforts of officers, soldiers and defense workers, company 17 has step by step strived for self-recognition However, with the increasing demand for construction, company 17 is facing strong competition in the market The

company still has competitive advantages but is not dominant compared to other competitors Therefore, it is necessary to set up company 17 as well as Truong Son Corporation in fiont of many challenges in the construction market, especially for

competitors from the Ministry of Transportation, the Ministry of Construction

In that context, as a member of the board of directors of the company, I decided

to select the topic "Building business strategy for One-member limited liability company 17, period 2017-2020 and vision to 2025 » as my master's thesis

1.2 Overview of research projects in the fields of the theme

The subject of business strategy is increasingly popular for reseachers to choose

as a topic of master thesis, Here are some researches on the topic of business strategy

Ngo Dinh Khoi, 2015: “Umldmg Business Strategy to 2020 by NATSTEELVINA Ltd, Company” (National Economics University - HNU) The thesis aims to build a suitable business strategy for NATSTEELVINA (under the Vietnam Steel Corporation) in order to contribute to raising the competitiveness of steel producers in the peried 2015-2020 For the common goal of sustainable brand development, growth and profitability for Vietnam Sicel Corporation, the thesis has implemented a number of specific objectives: 4) Choosing a theoretical framework, b) Analyzing the external business environment to define opportunities and challenges; c) Analyzing the internal environment of NAT'STEELVINA Company to explore the strengths, weaknesses and impacts on steel production; d) developing and selecting strategic options; and e) proposing solutions, However, this thesis only makes sense for heavy industry company

Nguyen Thi Cam Tu, 2014, "Building Business Stralegiss for Vilna Prosperity Joint Stock Commercial Bank in Ha Tinh" (National University) The thesis aims at two main objectives Firstly, in the context of globalization and market economy, the development of strategies is an urgent issue for any enterprise The thesis

is meant as an overview of the situation and a suggestion of future business strategias Secondly, the thesis proposes the business stategy for the period 2015-2020 on the basis of internal analysis and external environment to forecast the business development trend for banking system Thy defining the scope of the disserlalion research that only mentions and delves info the operation of a particular tranch, the applicab

relatively limited On the other hand, the thesis only provides a comprehensive business strategy, not detailed plans for each specific action of the branch

Hoang Thi Hien, 2016, "Complete solution to build business strategy al Dang

Thai Son Ttd Company" The thesis (FPT University) achieves the following major

objectives: Building the rationale for strategy development for the company in the period 2016-2020; Analyzing the macro environment, micro environment and internal environment of Dong Thai Son Ltd Company to identify opportunities, threats, strengths and weak

Nguyen Dai Loi, 2010, “Business Strategy in Construction Company 3 - 2"

(Hong Bang University) Thesis has achieved certain results Firstly, the analysis and assessinent of the impact of extemal environmental factors as well as internal factors on the operation of Company 3-2 Sccondly, this work also proposcs appropriate business

strategies and some solutions ta mprave the competitive position and promote business efliciency for the Construction company 3-2 in the period 2010-2020

In the field of business as well as the scale of operation, the Construction Company 3-2 can be considered one of direct competitors of the One-member Limited Company 17 However, with the type of organization as a private joim slock company,

the characteris

s of the operation also have many differences

1.3 Objectives ef ihe research

Overall objectives

Research and propose business strategy for One-member limited company 17 by

2020 with a vision to 2025

Detailed objectives

* Studying the theoretical framework for building a business slralcgy

» Analyzing and assessing the impact of business environment factors (extemal environment, industry environment and intemal potentials and potentiat of the company17) to identify the strengths, weaknesses, opportunities and challenges in order

to determine the company’s business strategy in the coming years

» Proposing and selecting suitable business strategies for Company 17 in the period of 2017-2020, with orientation to 2025

» Proposing solutions for the implomentation of the sclectad strategy.

1.4 Subjects and scope of research

Research subjects

The subjects of the thesis arc the practical and theorclical arguments, the steps lo build the buainess strategy

Research scope

* Content: Building business strategies for construction activities

+ Regarding space: At One-member Limited Company 17

» Time frame: Iiistorical data from 2013-2015, survey data for 2016-2017

1.5 Research methodology

Documentation Methodology ‘The studied information and materials include publications, survey results, research, maps, statistics, summary reports on construction industry and issues related to research topics

Qualitative research methodology: Interview and consultation with some leaders, managers at all levels of the One Member Limited Company 17 ‘I'he content of the discussion focused on fundamental issues of business strategy of the company in the construction market

Comparative analysis methodology: PEST analysis, Five forces model M Porter,

SWOT analysis, IE matrix for analysis of strategic basis for Company 17 This is the

main method of research in this topic Through comparative studies, the thesis will clarify the influence of business environment factors on the process of developing and implementing the business strategy of Company 17, Based on the summary of results, the thesis proposes suitatle business strategy for One Member Limited Company 17 in the period 2017-2020

1.6 The expected results of the dissertation

+ Awaronass of tho role and importamcs of business slralegy formulation for

Company 17

+ Systematizing the theory of business strategies in a market economy

» Analyzing the basis of business strategy formulation for Company 17 with the main contents

* Proposing and selecting business strategies for Company 17 until 2020 as well

as the necessary solutions for the implementation of the selected business strategy

1.7 The meaning and contributions of the thesis

‘There are many researches on business strategies for enterprises in Vietnam

However, there are no work done directly and specifically for One-member Limited Company 17 (under the Truong Son Construction Corporation) in the context of restructuring and developing markets outside the Ministry of Defesuse Research results will bring itnportant contributions as followings:

+ Firstly: Researching and selecting the rationale for building a business strategy

of a construction enterprise under the Ministry of Defense in the context of new mission

+ Secondly Developing business stralegy and propose stratzgic solutions for Company 17, one of the leading enterprises of Truong Son Construction Corporation

+ Thirdly: contributing as research materials, refar to businesses under the Ministry of Defonse in the context of rostrachaing and sustainable markel dovclopment

* Contributing a journal article on the subject matter of the research

2 THEORETICAL FRAMEWORK OF STRATEGY FORMULATIONAPPLIED FOR ENTERPRISES

2.1 General view of enterprise’s strategy

2.1.1 Same basic terms of enterprise's strategy

The concept « Strategy» was first created by the Greeks with a military comnotation, which meant a general in command of troops or the art of the general or plan to destroy enemies through effective use of resources However, according to Mintzberg and Quinn, the torm « Stategy » only entered into the business world after the World War 2 and sinec then, it has been uscd widely in the ficld of management

George Steinar, one of the founders of ‘The California Management Review, notes that strategy entered the management literature as a description to what someone did to counter a competitor’s actual or predicted moves He also points out some definitions on the word « Strategy » as follows

- Strategy is what top management does which is greatly important to the organization

- Strategy refers to basic directional decisions, that is, to purposes and missions

- Strategy consists of the important actions necessary to realize these directions + Slralogy answers the question : Whal should the organization be doing?

- Strategy answers the question : What are the ends we seek and how should we achieve them?

In Top Management Strategy, Benjamin Trego and John Zimmerman, of

thai

stratogy as « the framework which guides those choie:

Kepner-Tregoe, Ine, defin:

determine the nature and direction of an organization » 'Tregoe and Zimmerman urge executives to base these decisions on a single "driving force" of the business Although there are nine possible driving forces, only one can serve as the basis for strategy for a given business The nine possibilities are listed below :Produets offered ; Production capability ; Natural resources; Market needs, Method of sale; Size/growth; Technology , Method of distribution and Retumn’protit

Michel Robert takes a similar view of strategy in Strategy Pure & Simple, where

he argues that the real issues are "strategic management" For Robert, this boils down to decisions pertaining to four factors:

1 Produets and services

Based on these above definitions of « Strategy», we can summurize that

strategy of an economic organization is a set of its main goals and the main ways to achieve them, In other words, to establish an enterprise strategy means to form a general direction of its activity, oriented to the future development, The strategy should be based on the scarch for teal opportunities for the actions of the enterprise Thercfore,

stralogy is, first of all, the organization

subjective elements of the external and internal environment,

sponse to Iho influcnes of objective and

Strategic planning is a tool that helps in making managerial decisions Its task is

to cnsure innovations and changes in the organization to a sufficient cxtent, Three main types of management activities can be identified within the strategic planning proccess resource allocation, adaptation to the external environment and internal coordination

» Resource allecalion: This process involves the distribution of limiled organizational resources: fiinds, scarce managerial talents and managerial experience For instance, splitting a large company into several smaller ones, in order to reduce the number of managers and company personnel ‘I'he money saved is reinvested in the branch data

« Adaptation to the extemal environment : covers all strategic actions that

improve the company’s relations with its environment Companies need to adapt to extemal opportunities as well as hazards, identify appropriate options and ensue effective adaptation of the stratzgy to environmental conditions That is the creation of now favorable conditions through the distranlling of belter production systems or inlcraction with the govormmmont and society as a whale, ole

© Internal coordination : Coordiralion of strategic activities is to reflect the strengths and weaknesses of the fin in order to achieve effective infegralion af internal operations Ensuzing effective intemal operations in organizations is an integral part of management activities

2.1.2, Roles of strategy in bussiness activitics of cnfcprises

Helen (2007) made the following statcment about the role of strategic planning

to businesses

» Orientation; Defining the purpose of the organization and selting realistic goals in line with the mission, which can be clearly communicated to the component parts Providing a basis fo measure the company's development process and establishing boundaries for effective decision-making,

© Make wise business decisions : How to distinguish between good ideas and great ideas ? Without a clear vision of what the company wants and the task or purpose

of business, it is very difficult to choose the ideas and determine which projects to invest, Strategies will help clarify what the company wants, how fo achieve it, and how

to effectively allocate Timited financial and human resources

* Increase the longevity of the business ; The world's markets and industries are changing faster than ever, and those relying on luck or oppotlunily without a solid

foundation are unlikely to survive in [he future Marker dala reflects that one out of top

need to bs motivated to work and fect

Emplo

8s ø Icsm member Employees are the greatest source of creativity Delermining the

purpose and meaning of the work in the company's strategic planning will bring the focus to the work and create a souree of daily creative motivation for employees

2.1.3 Levels of strategy

Most companies develop more Ihan one stralegic plan, and several arc united by

a common goal of stratcgics for different levels of management, thus forming a hicrarchy of slrategics, Al levels arc closely relaled lo cach other and forme a pyramid of strategies within the organization, where each level is like a fiams for the next level

(Figure 1.1)

€orporate ery)

departments within functional areas )

Figure 1.1Levels of strategies in an corporate

In a diversified company, which simultaneously focuses on several types of business activities, there are usually four levels of strategy : corporate, business, functional or operational Specialized firms are limited to three levels In this case, the corporate and business strategies coincide, as the strategy is developed for one business

area,

A corporate strategy is a general management plan for a diversified company The corporate strategy covers all areas of the company's activities The general strategic plan is developed for a period of time, usually up to five years and reflects the position that the company wants to occupy in the coming years In fact, the definition of a

corporate strategy is the decision to choose the general direction of the organization's

by strategic correspondences between different activities or not

- Corporate tasks : The initial basis for setting objectives is basically the results

of marketing and innovation It is efficiency in these areas that determines the demand for the products or services of the firm The tasks of the company should be focused not

on profit, but on methods of obtaining it

- Determination of strategic business units (SBU): in the development of corporate strategy, most large diversified companies comprise of many business units, which have a pronounced specialization, a certain range of suppliers, consumers and

compclitors Rach SBU should be a real administrative and cconurnic unit and act as an

independent firm

- Resource allocation : Diversified firms in their composition have a set of SBU,

or business economic "portfolio." ‘he members of the SBU structure may differ in their development potential and current financial performance, Some SBUs are engaged in bringing new products to the market or developing new markets ; they obviously need additional financial investments Others with a stable share in the mature market are a source of cash To comply with corporate goals, company management must ensure the retlistribntion of monetary resources belwean SBUs

- Synerpy Each type of activity involves a source of synergism Coordination of efforts in such activities as procurement, introduction of new technologies, R & D, production, marketing, human resouress mrmmagerterl, allows to rednce cosls and improve stafl development, For cxample, combining scveral lypas of procurcmont

2.2, Process of strategy formulation of company

“The process of strategy management will be best performed, in case,

everybody in the Enterprise understand thoroughly that, Five stages of this process are setting up objectives, analysis, fornmlating strategy, implemeting strategy and

monitoring strategy

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Figure 1.2 Process of planning business strategy

2.2.1 Identification of mission, vision and objectives

The mission clarifies the main purpose of the enterprise The vision also

determines the purpose of the organization, but focuses on tasks and aspirations The vision is unlimited: even if the organization rebuilds its strategy, the vision must remain unchanged

A mission is a business concept that reflects the purpose of the business, its

main goal, Unlike the vision, the mission characterizes only the "real" organization : the

type, scale of activity, differences from competitors, prospects for business

development, The mission details the status of the enterprise and provides guidance for

the development of goals and strategies at various organizational levels

‘The mission is what the company exists for, and the vision is the future image of

the company Without defining the direction of business development, it is impossible

to explain the essence of the activity The mission explains the essence of the business,

the specifics of the business and the development path of the company - all that

distinguishes this company from the rest in this industry

The formulation of the mission contributes to the solution of the following management problems :

Firstly, the mission forces managers to systematically engage in a comprehensive analysis of the strengths and weaknesses of the organization and its competitors, opportunities and threats, which increases the validity of strategic decisions,

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Secondly, in the case of large companies, the mission contributes to thơ integration of tocal organizational units into one, the motivation of stati’ and more effective interaction of managers and subordinates at different levels

Thirdly, a good mission contributes to the projecting of a rational and positive image of the company on business partners, sharcholders, investors, on which the destiny of the enterprise depends in various forms and extent

The mission statement contains three clenents:

- Customer needs, i.¢ that which nmst be satisfied

- Groups of buyers, ic who will be the object of product and service

Forming a vision is one of the tasks of top managamnent The horizon of vision,

ie the period of remoteness in time of the formed image of the enterprise oan be different, Gora several mumths to several years

The vision refers only to the future : it loses its relevance when the desired state

of the organization is achieved and must be formulated again

The fornmiation of the vision should be a laconic, dynamic design, sasy to understand (often a slogan), and meet the following requirements : to inspire, to be simple, as a memory or image, to deserve trust and provide guidance that can serve as the basis for strategy development

The formation of a strategic vision begins with the creation of ils three main

components:

= Tho company's mission, which dctsrmincs the position and business af the

company al the moment

- A long-term course based on the mission and determining the company's strategic path

= Clear formulation of the stralogic vision for obtaining broad support for all

employzes of the company

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Goals are the desired resuit that any organization seeks to achieve Goals should

be realistic and answer the questions : what do we want to achieve ? Who will do this ? When will we get the result ? Why do we need this ?

Goal setting transtates the theoretical part - the development of the strategic vision and direction of the company’s development - into the plane of practical application

The targets in the company’s activily arc only gosls that are defined in

Objectives of the organization should have a number of characteristics, which are sometimes called the criteria for the quality of the goals set

Main characteristics (criteria) of the goal

- Concreteness and measurability, Expressing goals in clear measurable forms, management excatcs a basis for decision-making and assessment of the progress of work,

- Planning horizon Highlight long-term (planning horizon more than 5 years), medium-term (planning period from 1 year fo 5 years) and short-term (usually within a

‘year) goal, The natrower the planning horizon, the more specific the goal nmst be expressed,

- Possibility of success, Goals are set so that they do not exceed the capacity of the enterprise The establishment of unattainable goals blocks the desire of employees fo succeed and reduces the motivation for work

= Consistency The actions and decisions necessary to achieve one goal should not interfere with the achievement of athers

Insufticient attention to the process of setting goals or, conversely, the pursuit of unachievable goals causes damage to the organization,

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2.2.2 Analysis of external impacts

2.2.2.1 Analysis of macro-environment factors,

Macroeconomic factors have an impact on any enterprise ‘hese include demographic, socio-economic, natural, technological, political and cultural factors,

Demugraphic factorsinclude

- Population ;

+ Age structure 5

- The level of education ,

- The structure of the household ;

- Geographical displacements of the population, ete

EcomonicaLsoclal factors:One of the most important objects of

macroeconomic study is the socio-economic environment, since the events that occur in

it depend on supply and demand in the market The general state of the economy deteramnes the financial possibilities of buyers, Economic factors are not less important than demographic factors It's not enough to identity how many potential customers a firm would have It is also important to determine how much and what scrvices they want to purchase, The solvent process of the population is influenced by many factors, including the level of the country’s cconomic development, wagcs, inflation, and unemployment, For instance, it is necessary to take into account the high dependence of the demand for tourist services on the level of income

Natural factors: can afféct the activities of the enterprise, especially as the issues of rational use of natwal resourees and environmental protection are becoming global

Political and legal factors: the study of the political and legal factars of the macro-environment should be carried out first in order to have a clear idea of the intentions of the state authorities and administration regarding the development of socivly and the means by which the state intends lo implemen its poticy The analysis,

of laws and other normative acts thal establish legal norms and the framework of

relations, gives the enterprise the opporlunity to determine for ilself the permissible

limits of actions and acceptable methads of defending their interests

The cultural environment : the strongest are the established norms adopted in

society, the system of social rules, spiritual values, the relationship of people to nature, work, to cach other and to themsclyes Knowledge of socio-cultural factors is very

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important, becanse they affect both other elements of the macro environment and the

internal environment of the enterprise (for example, the attitude of employees to work)

Scientific and technological environment:lhe teclmological factor has an

increasing influence on most enterprises It is, for example, already impossible to

imagine hooking tickets in hotels, on transport without using a fax PCs, the Internet are

an integral component of the development of the society ‘he changes of scientific and technology not only improve products, service according to customers’ need but also

can create new products replacing for current products

2.2.2.2, Analysis of task environment impacts

The analysis of the working environment of the enterprise 4s cartied out al two levels:

- industry analysis,

+ specific analysis

Industry analysis is primarily an analysis of proposal In the course of the

sof the industry: market sive, market growth tale, lotal production capacity, level of use,

industry analysis, it is expadion! Lo cstablish the dowinant commie characteris

markel saluration level, number of customers

M.Poter pointed out some forces that have the ability to change the situation in the industry

+ entrance or exit of large enterprises 5

- a change in costs and efficiency ;

- distribution of technical and technological achievements ;

- changes in public policy

Competitive analysis of the external environment is casted out through the study of the five main forces of competition, which determine the level of profit in the industry (according to M.Poler)

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Porter's five forces model

Threat of new entrants

Bargaining power of

Figure 1.3 Model of 5 forces

(1) Competition rivalry: Most is manifested in industries with a large mumber of

operators with homogeneous products

It is analyzed for such directions :

- the position of competitors in the market (sales volumes, product range, market

shares);

- characteristics of competitors’ products (technical and operational parameters, price, quality, novelty, trademarks, image of the company and products);

- marketing and promotion of goods on the market,

- scientific and technical potential of firms - competitors (R & D_ base,

availability of patents, licenses),

- production potential of competitors (capacities, loading, dynamics of receipts

of orders);

- financial condition (solvency, profitability, ability to mobilize financial

resources to protect market interests)

(2) New entrants : Analysis - the forecast of the emergence of new competitors in

the industry is determined by the barrier of entry, which is an obstacle to the

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organization of business and successful competition ‘The higher the barrier, the fewer new competitors, Barriers

- brand image,

- economies of scale (maintaining low production costs);

- the offset of exqericnee (especially in industries with high specific gravity of manual labor);

- the need for capital (efiéctive competition requires significant initial costs),

- reorientation costs associated with the change of suppliers, consumers, training

of personnel,

- the necd to ercate sales channels or access to them

(3) The threat of substitutes: tea - coffee, butter - margarine, skin - leatherette, camera - mobile phone

The effet of substitute goods is carried oul in lwo aspeols

- through the price ;

- through the level of imovation (the inaufaclurer of the substitute product sa increases ils quality that producers stop buying new producls)

{4} Bargain power of customer, which determine the principles of segmentation and grouping of customers (age composition, income level, purchasing power), the range of services and goods offered

(5) Bargain power of suptiers, which dictate the prices of raw materials, materials that complete, the condition of supply (shortage of raw materials), the quality of goods and services

2.2.3, Analysis of impacts of enterprise's internal environment

3.2.3.1

ty of manufacture anil Research & Development(R&D)

Production capacity is the calculated indicator of the maximum or optiznal

‘volume of production for a certain period (decade, month, quarter, year)

The optimal volume of production is calculated to determine the point at which the fact of providing the products with market needs will be achieved, as well as the necessary stock of finished products in case of'a change in the market situation

Calculation of the maximem volume of production is uecessary for the analysis

of the teserve of production, when the enterprise is working ai the timil of its

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capabilities, in practice, the anmal production plan (production program) is used to visualize the production capacity The production capacity of the enterprise is evaluated

in order to analyze the level of technical equipment of production, to identify intra- production reserves for inercasing the cfficicney of the usc of production capacities

If the production capacity of the enterprise is not fully used, this leads to an increase in the share of fixed costs, growth in produetion costs, and lower profitability,

‘Therefore, in the process of analysis it is necessary to establish what changes have occurred in the production capacity of the enterprise, how fully it is used and how it affects the cost, profit, break-even and other indicators,

2 & Dis a systematic activity carried out by a company that combines basic and applied research in an attempt to find solutions to problems or create or update products and services The act of a company conducting its own research and development offen leads to the ownership of intellectual property in the form of patents ot copyrights

Enterprises conduct research and development for many reasons, primarily, research and development of new products Before any new product is released to the market, it will go through @ significant stage of research and development phase Research is conducted on market opportunities, cost and production terms, After adequate research, a new product enters the development phase, where it is actually created ftom the concept outlined at the rescarch stage

An important component of the company’s R & LD is its expenditurs on 8 é D

‘These costs can be relatively small, or they can easily work in billions of dollars for large corporations R & D expenditwes are usually the highest for industrial, technological, medical and pharmaceutical fins Some companies reinvest much of their profits back into R & D, as is the case with technology companies, as they see it as

an investment in their further growth,

3.2.3.2, Manpower quality

‘The quality of the workforce is a combination of human characteristies that are manifested in the labor process and includs the qualifications and special qualities of the employee ; health status, intellectual and adaptive abilities, imovation, professionalism, morality

Llements of quality of labor :

- Professional knowledge Defined by the level of development of a person, which is bascd on his mental abilitics, cxpericnec, cducation, necessary to perform a

specific production task

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- Skills Defined by its physical data, necessary for the performance of the production task

- Competence is the level of general and professional training that allows to adequately react to the requirements of a particular workplace or work that is constantly

changing

- Responsibility It is datermined by the conscientiousness, reliability, which are

ry for the performance of vari

produation asks without, harm lo people and

s well as 4 worldview sufficient to prevent the occurence of

irrogularities in the production process,

2.2.3.3 Financial capactty

Finaneial potential « potential financial indicators of production (profitability, liquidity, solvency), potential investment opportunities

The purpose of analyzing and diagnosing the financial potential of an enterprise

is to determine the unused reserves of the efficiency in the conditions of a particular

enterprise

The assessment of the financial potential is carried out both according to the data

of extorraf ñnanciaÌ statements and internal documents

The composition of the financial statements includes ;

- Balance sheet ;

- Profit and Loss Statement ;

- Statement of changes in equity ;

- Statcmment of cash flows ;

- Supplement to the balance sheet ;

- Report on the targeted use of the funds received ;

- Explanatory note

- The final part of the audit report

2.2.3.4, Marketing and Sales

‘The effectiveness of the marketing activities of an enterprise depends on the quality of the marketing decisions and on the implementation of these And one and the other, in tum, depends on the organization of marketing department in the enterprise

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Organizational shortoomings lead to a low quality of ruarkcting aotivitiss.†'hersftre, ïLis necessary to assess the state of this factor in the enterprise

The methodology for assessing the stale of marketing al an erlerprise is based

on a survey of the company’s management with the use of certain indicators and a system of scores, The evaluation of marketing department can be done in three directions :

= Comploloness of marketing fimetions at Gre enterprise ;

- Marketingtunding ;

~The influence of the marketing, scrviee in the enterprise

‘The analysis of sales helps to identify whether sales will grow or decrease in addition, it is necessary to determine the range that is promising, and also to find out what products should be promoted more actively, Specific and targeted decisions on the sale of goods are made by managers on the basis of the results of’ sales analysis

The objectives of the study of sales are

- Evaluation of the current activities of the enterprise, as well as the activities of individual units ;

- Obtaining information for strategic and tactical management decisions in the field of product, marketing and marketing communications ;

- Segmentation of consumers +

- Identify strengths and weaknesses of the organization ;

-Tdentification of threats and opporlunitics of the extemal onvironment of the

enterprise +

- Definition of perspective directions of activity of the enterprise ,

- Managing the product portfolio of the organization ;

- Sales volume management

“managernicnt" is

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‘The purpose of the enterprise management analysis is to obtain reliable information about the state of management at the enterprise in order to increase the effectiveness of management decisions

To achieve this goal, it is necessary to solve a number of problems :

- Assess the state and effectiveness of the current management system and its elements ;

- Establish the correspondence of the system to the specifics of the tasks and the features of the control object ;

- Investigate problem zones and causes of non-conformities in the management system;

- Find out the reasons which cause discrepancy ;

- Carry out a diagnosis of the prospects for the development of the management system and its individual elements, as well as the possibilities for adapting to the projected changes in the extemal environment ,

- Develop ineasures aimed at improving the efficiency of the management

system

Methodology for management analysis should encompass all of its elements functions and methods The results of the analysis will be the basis for assessing the significance of managerial influence on the performance of the managed facility

2.3 Analysis techniques and Scicction of strategy

2.3.1 General introduction

In the theory and practice of strategic planning, there is no clear classification of methods of strategic analysis, In order to choose the right path of development and achieve the best result, itis necessary to conduct an analysis of the internal and external environment of the organization We will consider in detail the widely used methods of strategic analysis used in practice

2.3.2 External Factors Evaluation (E¥E) and Internal Factors Evaluation (LIFE)

External factor evaluation matrix — KFEM

This matrix allows, at development of altemative strategies of the firm, to simultanzously link the information obtained fiom the analysis on the eompany’s key extemal factors to the internal strengths and weaknesses of the tim.The process of

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formulating an alternative strategy using this matrix is to select for each key external

factor such an alternative strategy that would allow the most effective use of the firm's

capabilities, its strengths and make its weaknesses less influential

In the EFEM matrix, for each particular external factor under consideration, the

weight is determined that corresponds to the nature of its influence on the overall

influence of all factors on the activity of similar firms and the rating characterizing the

position of the particular firm with respect to each particular factor For the sake of

simplicity of calculations, the sum of all factors weights is assumed equal to | Factors

are the possibilities and threats of the external environment Often, such assessments of

factors are used: 1-strong opportunity, 2-small opportunity, 3-small threat, 4-strong

threat The total evaluation of the firm's position in relation to each factor is determined

by the multiplication of weight and the evaluation of factors The overall assessment of

the firm's position on external factors is calculated as the sum of the total estimates of

‘External factors ‘Weight | Rating | Translation

index | score score

a 2 3 42%

Opportunities

1 Growlh speed ofhotel industry in Philippine 03 2 06

2 Proliferation of digital platforms and new forms of | 0.1 1 01

communication to reach a wider audience

Challenges

4 Increasing of competition from hotels of different levels 01 2 02

5 Increasing of traffic congestion 61 3 0.3

6 National security issues 61 3 0.3

Internal factor evaluation matrix — IFEM

The difference of the matrix of internal factors in comparison with the EFE

matrix is that when building the IFE matrix, internal factors rather than external factors

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are taken into account The key intemal factors can be the strengths and weaknesses of

2 Benefits of refund policy 01 4 04

3 Strong developing company 02 3 06

2.3.3 Competitive Profile Matrix (CPM)

Competitive profile matrix compares the firm's position with the competitive

positions in the market such as the company’s main competitors, their strength and

weakness with respect to the strategic position of the firm The system for determining

weights, ratings and weighted estimates is used similarly, as in the case of the

construction of IFEM matrices.But the critical success factors used here are broader and

do not include specific indicators There is no grouping of factors into groups of

strength and weakness The factors of competitors are evaluated and compared with the

firm's performance, which provides important internal strategic information The

meaning of the weights of factors and their ratings is similar to their meaning in the two

previously described matrices, but used for a wider understanding of the factor

The total weighted estimates of the factors of competing firms make it possible

to arrange competing firms in terms of their competitive advantage as a whole and

individual components of competition

Table1.3 Competitive profile matrix example

Competiteve Profile Matrix (CPM) Example

Your Company | Competitor 1 Competitor 2

(Critical Success) Weight | Score | Weighted | Score Weighted | Score | Weighted

Factor Score Score Score ng

2.3.4 Determination of feasible strategy with SWOT analysis

The SWOT matrix (strength, weakness, opportunity, threat) is used to determine

alternative strategies for the company’s strengths and weaknesses and opportunities and threats in the external environment This is an important tool that enables management

to determine the ability to develop four types of strategy: SO, WO, ST, WT

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SWOT analysis example (Figure 1.4)

Figure 1.4 SWOT Matrix

SO strategy uses the company’s internal advantages to gain the benefit of extemal opportunities Any manager will be positive about this kind of strategy

WO strategies have the goal of reducing the company's internal weaknesses, using the possible benefits fiom external opportunities Sometimes key external opportunities exist, but the firm has weaknesses that prevent it fiom using those opportunities

ST strategy takes advantage of the company to avoid or reduce external threats

An example of an ST strategy is the use by the firm of its excellent legal department

(advantage) in order to obtain penalties from companies using an illegally owned patent (threat),

WT strategy is a defensive tactic, aimed at reducing internal weakness and

avoiding external threats

Eight Steps to Compile the SWOT Matrix :

- Compilation of key external capabilities of the firm ;

- Compilation of key external threats of the company ;

- Compilation of key internal advantages of the firm ;

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- Compilation of key internal weaknesses of the firm ;

- Selection of possible inter-relationships of internal advantages with external

capabilities and recording of SO strategies in the corresponding column of the table ;

- Selection of possible interrelationships of internal advantages with external

threats and the recording of ST strategies in the corresponding column of the table ;

- Selection of possible interrelationships of intemal weaknesses with external

capabilities and recording of WO strategies in the corresponding column of the table ,

- Selection of possible interrelations of internal weaknesses with external threats

and recording of WO strategies in the corresponding column of the table

2.3.5 Selection of optimal strategy with QSPM

Quantitative Strategic Planning Matrix (QSPM) Used to objectively select a

strategy from the list of pnority strategies.It uses the previous matrixes : EFE, IFE,

CPM of the first stage and SWOT, SPACE, BCG, IE, MacKensey, GSM of the second

stage

‘The left column of the matrix consists of key external and internal factors

opportunities, threats, strength and weakness,

‘The upper row consists of alternative strategies obtained in the second stage We

can compare only related strategies (for example, diversification, etc) When we

include them, we need an intuitive, serious analysis of specialists of different

specialties

The matrix determines the relative attractiveness of the various possible

strategies of the firm

Each factor has a rating for the firm For each factor, its attractiveness for each

strategy is rated fiom | to 4 in comparison with other factors: The cumulative estimates

of the factors for each strategy and the overall score for each strategy as a whole are

calculated

Strategic alternatives example (Table 1.4)

Trained and motivated manpower 0.18 4| 072 3| 0354

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Widespread branch and ATM networks 61 2 0.2 2 0.2

External factors

High discount rates and credit restrictions 0.2 4 08 4 0.8

Less savings of the people 0.08 3 0.24 2 0.16

Table 1.4 QSPM Model

With the help of this matrix, different strategies and different firms can be

evaluated, but good intuition and good managers are required to make the right

decisions and assessments

2.4 Basic competitive (business) strategies

2.4.1 Basis of business strategy

2.4.1.1, Customers’ demands and product differentiation

The strategy of differentiation is a strategy of gaining a competitive advantage

suggesting the orientation of the company’s activities to provide greater benefit to

consumers (except for a low price) by offering high-quality goods with a high level of

related services at justifiably high prices

Product differentiation is the way that manufacturers try to isolate their product

from the total mass of similar products in order to draw the attention of other customers

to it; offer products with characteristics that are better than competitors Differentiation

requires a certain increase in costs Companies following this strategy should invest

more in research and development than leaders do in minimizing costs Companies

pursuing a differentiation strategy should have products of the best design They need to

provide higher quality and often use more expensive raw materials, They need to make

big investments in customer service and be ready to give up some market share

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2.4.1.2 Customer groups aud market segmentation

The scgmentation strategy - working on several scgments, considzring cach

segment in accordance with ils needs - allows company lo focus on the needs of customers Segmentation helps stimulate the development of new prodnets, as well as the development of an effective marketing mix Understanding the needs of the segment helps to develop advertising strategies

In the functional market segmentation strategy, there are three distinguished

The basis of prodnel segmentation is Ihe allocation of market segments based

on consumer, product and competitive features

The basis of competitive segmentation is to find a niche market that is not occupied by competitors, in order to gain advantages when using innovations

2.4.1 Decisions on unique capacity of enterprise

‘The attack strategy (offensive) offers an active position of the company in the market and pursues the goal of winning and expanding the market share Liowever, if the firm's share falls below the optimal level, it faces a dilemma: either take measures to expand it, ot withdraw from the market

‘The use ofan allack strategy is advisable in saverat cases:

- if the market share is below the required minimum, or as a result of competitors’ actions it has sharply decreased and does not provide a sufticient level,

+ introduction of a new product on the market;

- fixms-competitors lose the positions, and there is a real opportunity at a relatively small cost to increase the market share

Defensive, or restraining, strategy assumes preservation by the firm of an

available market share and deduction of the positions in the market

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It can be used:

- with a satisfactory position of the travel agency

~ in case of lack of finds for carrying out an attack strategy;

~ inva situation where the firm is aftaid ta imploment, an attack strategy because

of possible strong retaliatory measures on the parl of competitors

Defensive strategy is often used by large travel agencies At the same time, this type of stratepy is flaught with danger, [t requires the closest attention on the actions of competing firms

2.4.2 Basic competitive strategies

2.4.2.1, Cost leadership strategy

The siralcgy of cost Icadorship is aimed at achieving competitive advantages duc

to low cosls for some important clsmenls of a produel or service and, conseypicnlly, ø lower cost price compared to competitors This is an cffective way ta compets in markets where most buyers are price sensitive

The goal of the cost Icadcrship strategy is to maintain advantages over competitors in terms of costs and get more profit, At the sane time, products can be sold cither at lower prices to “beat off" buyers from competitors, or at cuzrent market prices, but in this case the firm has the ability to channel more funds to marketing and sales

Price leadership is achieved if the organization exercises control over a significant market share or uses such advantages as access to sourees of raw matenals, unique cquipmen|, availabilily ofan experimental curve in the industry, cle

The necessary market conditions for cost leadership are as follows:

~ Demand for produots is highly clastic at a price and fairly homogencous,

- Price competition prevails;

= Differences in trademarks are not significant for customers,

- there are large buyers who can dictate the terms of the transaction, knocking down the price:

- liđuslry products arc standardized, the buyer can purchase ìL from diffaront vendors;

~The organization has access to sources of cheap raw materials, labor or other sources of reducing the cost of production

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2.4.2.2, Diffcrentiation stratery

The strategy of diffcrentiation is aimed at the production of spccial products, which are # modification of the standard producl Such products are intended for consumers who are dissatisfied with standard products and who are willing to pay for its uniqueness

Characteristics of the strategy

* strategic goal - oriented to the whole market;

* The main competitive advantages - the ability to offer the buyer something cxocllenf;

* assortment set - many varieties, wide choice;

* production - finding ways lo create valucs for customers;

* marketing - the creation of such qualities of the goods for which the buyer will pay, the establishinent of an increased price that covers the additional costs of ditferentiation,

* support of competitive strategy - concentration on several exceptional features (differences)

Differentiation involves the ercation of purchasing valuc diffrent fiom competitors (the attractiveness of packaging, the persistence of scllors, the price, the intensity of the advertising company)

Types of differentiation strategies

1) products : this offers products with charactcristies and (on) design is better

than that of competitors As part of the product differentiation, the organization can

offer a narrow range of products and in this case they talk about focusing on differentiation, ot a wide range of products

2) services : this is the offer of a diversc and higher level of services (compared

to competitors) associaled with the goods sold (urgency and reliabitity of supplies, installation of equipment, after-s les service, training and consulting clients)

3) differentiation of staff’: this is the recruitment and training of personnel who perform their fianctions of working with clients more efficiently than the staff of competitors Well-traincd stalfis distinguished by compatonee, fricmdti 28s, rnal

4) image differentiation (image, which distinguishes companies fiom competitors for the better)

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2.4.3 Sclcfion of suitablc stratery

How to choose a strategy? There arc various methods of choosing as following

1 Choice according to goals

This method focuses on the abjectives of the organivation, dependiny, on which

allernalive stralogics are evaluated Thus, it is possible to obtain different variants of the

strategy, quantified with respect to their strengths and weaknesses in this case, the most suitable of the options can be allocated for implementation For example, if one of the most important goals of the organization is to protect the environment, then this will be used to evaluate policy options (for example, the establishment of a network of shops tor goods for animal care)

2 Addr

to the higher level of management This is also a fairly common method of choosing a specific strategy ftom a series of altematives Typieally, a series of viable strategy options, together with individual assessments, is passed on to higher management, which should decide on a

on the basis

particular cose of action This management unit subsequently will deci

that the concrete strategy corresponds to the general purpose of the organization,

3 Hiring of consulting agencies that are not members of the organization

The recruilment of consniting agencies outside the organization is a common method in choosing a stratsgy Although they are often hired because of any contlicts within the organization, the breadth and depth of the agsney staff experienced in various management issues is valuable in itself Consultants often have extensive experience working with various organizations, which can be applied to a specitic situation When making a decision in such cases, objectivity is also necessary

2.5 “Characteristics” affecting to determination of business stratcgy

of military construction enterprise

2.5.1 Characteristics of organization structure

‘The organizational structure of military construction enterprise is usually a multi-level hierarchical management system, Multilevel linear control structure has only vertical links between the elements and is built on the principle of hierarchy This structure is characterized by a clear one-man management Every employee or leader is directly subordinate to only one superior person and through him is associated with

2

higher levels of management ‘Thus, a hierarchical ladder is oreated in the administrative apparatus by subordination and responsibility

The rain advantages of 2 linear taragement structure is the relatively simple selection of managers and the implementation of management functions This management organization ensures the promptness of the adoption and implementation

of managerial decisions, the unity and clarity of the management and eliminates duplication of powers and contradictory orders.All duties and authorities are clearly distributed, which provides all the necessary conditions for maintaining, the necessary discipline in the team.A linear organizational structure ensures minimum production

costs and a mininyum cost of operating activitics,

‘The disadvantages of this type of structure include the disconnection of horizontal links, the possibility of exeessive rigidity With the operation of modezn facilities, with a large mumber of diverse equipment and the use of extraordinary materials from the manager, a high level of universal training is required, which in tum limits the scope of the headed uni, and the manager's ability fo effectively manage iL Tn addition, a large overload of information, a mulliplicily of contacts with subordinates, higher-lovel and related organivations leads lo the fact that the main lime of the manager

is spent on solving operational problems, and the prospective issues are not given

sufficient attention

2.5.2, Characteristics of duties

Military constrnotion units - the construction of inilitary inffastructure, long- tent defensive structures and communivations, as well as the arrangement, and cantanment of troops in both military and peacetime

Depending on the tasks performed and different states, military construction organizations can be united into an independent army or be part of other branches of the armed forocs (forces), scrviecs or types of armed forees, as well as can consist of the

regular strength of the armed forces, being departmental military or paramilitary

formations of individnal executive bodies

2.5.3.General evaluation

Any army needs its own inffastructure And the more and more teclnologies applied by the army, the more diversity of the weapons - the larger and more complex the facilities for the deployment of personnel and equipment, the warchouses and

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