CAPSTONE PROJECT REPORT BUSINESS STRATEGY OF NTC IN THE PERIOD 2010 - 2015 BÁO CÁO DỰ ÁN CAPSTONE CHIẾN LƯỢC KINH DOANH CỦA NTC GIAI ĐOẠN 2010 - 2015

CAPSTONE PROJECT REPORT BUSINESS STRATEGY OF NTC IN THE PERIOD 2010 - 2015 BÁO CÁO DỰ ÁN CAPSTONE CHIẾN LƯỢC KINH DOANH CỦA NTC GIAI ĐOẠN 2010 - 2015

SA GRIGGS

CAPSTONE PROJECT REPORT

Class : GEMBA 01.E01

HA NOI 2009

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- Members of the management board of NTC and our friendly colleagues at NTC for giving us all the needed data in great details to enable us complete our project on time

- Professors, lectures and friends at Griggs University (USA), faculty of higher education for their crucial involvement in providing us this enjoyable

educational program

Members of Group 4 —- GEMBA.E01

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TABLE OF CONTENTS

Page AcknowledgemenS che |

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CHAPTER I: STRATEGIC MANAGEMENT THEORY 9

1.1 Concept criteria and steps in the strategic planning process 10

li VISION, Mission and SIStECIO BORIS: ccmnconneremmememmrnnccrens 13

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I.4 Michael Porter’s five forces model for industrial analysis 19

1.5 Internal anaÏVSIS - c2 Tnhh kh He 27

1.6 SWOT analySIS 2S 1n nàn vv nh HH HH de 29

|.7 Strategies for competitive advantage - cceeee- 32

CHAPTER II: CURRENT STATUS OPERATION AND EXISTING BUSINESS STRATEGY

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2.3.5 Analysis of marco environmenI -ccccsceeeeries 50

2.3.6.Five forces model for industrtal analyS1s 52

2.3.7 The company internal analysis — Value chain 57

2.4 Current business strategy of NÏTFC - ĩ2 cẶ cà eie 62

CHAPTER III SOME SOLUTIONS ON IMPROVING BUSINESS STRATEGY OF NTC IN THE PERIOD 2010-2015 - - - S11 Site 67

3.1 Development direction of the Company in the future 67

3.1.1 Iudgment of Vietnam”s economy in 2010-2015 67

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3.1.2 Targeted objective of the Company from 2010 to 2015 70

3:2 SWOT analysis Tor the [HE :¿:.accoi¿ioiiago¿daasaiiaaadyana 73

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3.3 NTC’s business strategy development in the period 2010 — 2015 75

3.3.1 Proposed solutions for the implementation of business strategy of NTC in the period 2010-

BRA wrcenonceae case Se RES HIER EN ENE REE A RIE ERTEO 75

3.3.2 Business strategy selection in the period 2010 to 2015 77

3.3.3 Business strategyimmplementaifOn eo 85

CONCLUSION 2077 T000 T7 TC CC CC .ggạỢ 91

REFERENCES (TAI LIEU THAM KHAO) c.ccccccccssssssssscssesssscsssesescsscsessseess 92

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PREFACE

1 Reseason of selecting this theme:

In the period that global economy ts facing lots of changes, modern business environment has created such a great challenge that enterprises have never faced before Hundred of bankrupts of big corporations such as CIT Group, Sun — Time Media Group, Lear Copr, etc have caused global economic crisis, damaged asset of society and created challenge to young enterprises

Each change of business environment put more pressure to enterprises and make enterprises change their views; be created with new technology, new products, new professional services in order to best meet customers’ demands Fierce competition will require enterprises to develop outstanding business strategy to create competition advantage and gain the market for their maintenance and development Changes of business environment is a difficult problem to enterprises In 2007, global economy had very fast development but the economic crisis in 2008 created fierce storm to enterprises and up to now world economy is stepping out of crisis However, in the same economic environment, same business sector, some enterprises gain, some lose To be successful, which strategies have been applied by these enterprises and how strategies have been implemented? This fact requires that enterprises should develop their owned strategies, look for cheaper finance resource and do marketing for new products or find new technology, etc., to create sustainable competition advantage

Business strategy plays very important role in the enterprises’ success In order

to have a good business strategy, it is needed to combine comprehensively product strategy, capital strategy, marketing strategy, human resource strategy, etc Thus, business strategy can be considered as comprehensive strategy of enterprises However, not all enterprises are successful in planning and developing their strategies Great business strategy for great business is carefully developed but will

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not be successful if it does not fit with economic situation One question to enterprises’ managers: “How to have an effective strategy which gets along well with economic development”

The Niem Tin Ltd (NTC) is a Vietnamese company which was established in 1997

in Information Technology — Automation Niem Tin is the confidence of its

capability, is a desire to make contribution to the country’s development Therefore, the Company’s symbol is V letter which represents a Vietnamese company and effort for victory

In Vietnam market, NTC is a prestigious in providing technology solutions to communication enterprises, urban areas, high buildings and industrial zones In the situation that Vietnam is enhancing world economy’s integration, especially since Vietnam became the 150"" member of WTO, competition also became more fierce NTC is facing competition of enterprises which provide products with similar

functions such as Alcaltel, Erisson, Schneider, etc In order to maintain in economic

crisis and make use of chances brought by economic recovery, therefore, the Company should have an appropriate business strategy to meet demands of customers and catch up with economic development

From the above recognition, our group selected the theme: “Developing business strategy of Niem Tin Ltd in the period 2010-2015” with the hope to make contribution to the Company’s development and help the Company to gain more

trust from customers

2 Objective of the research:

- Do research and systemize theories on strategy development in order to make the Company understand more about importance and crucial role of business strategy to its survive and development Develop a process and optimal strategy options to help the Company select most appropriate business strategy

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- Use theories and models for analyzing, assessing internal and external environment of the Company and then develop a business strategy for the Company

- From knowledge learnt, gained from some subjects such as Strategy & Marketing Management and Human resource management, give out some proposals and recommendations on the Development Strategy of the Company to make sure that:

e The Company carries out vision stated

e The Company provides optimal solutions to customers

e Success of customers is success of the Company

3 Research methods: Methods used in this research includes:

- Qualitative: Consultant method and individual interview is used

- Data collection, processing and analysis: Data from plans and reports of the Company are used

- Studying documents on strategy management, marketing, etc and newspapers, magazines to have accurate analysis in theory in strategy development

- Study real situation with reference of other companies’ success, combine with theory to have good arguments, deliver effective proposals for strategy development

Following people have been consulted on Strategy Management theory and real operation in the fact:

1/ Associate Professor, Dr — Faculty of — National Economics University

2/ Mr Nguyén Viét Son - Director General - NTC

3/ Mr U6ng Minh Nam —BSC’s Director— NTC

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4 Research of this structure:

Regardless to the preface, conclusion, reference, this research/report consists of

3 chapters namely:

Chapter I: STRATEGIC MANAGEMENT THEORY

Chapter II: CURRENT STATUS OPERATION AND EXISTING BUSINESS STRATEGY OF NTC

Chapter ITI SOME SOLUTIONS ON IMPROVING BUSINESS STRATEGY

OF NTC IN THE PERIOD 2010-2015

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CHAPTER 1 - SUMMARY

This chapter first discusses fundamental theories on firms’ competitiveness It then presents modern strategic management approaches to achieve long-term objectives for an organization Finally, it focuses on the study of strategic management planning process This process consists of internal and external environments analyses; formulating long-term objectives and grand strategies; and then evaluating and choosing the best fit strategies Presented strategic management models are: PEST model (external macro-environment analysis), Michael Porter’s five forces model for industrial analysis (competitive environment analysis), chain value model (internal analysis) and SWOT model (sum up strategic analyses to select the most appropriate strategies)

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CHAPTER I

STRATEGIC MANAGEMENT THEORY

1.1 Concept, criteria and steps in the strategic planning process

1.1.1 Concept

Strategy has always had military roots and Webster’s New World Dictionary defines strategy as ‘the science of planning and directing military operations’ Strategic maneuvers use the principles of military strategy Thus, strategy would be seen as the set of policies used for the conduct of conflict and the securing of an advantage over the competition

The application of the principles of the military strategy to business competition, known as Strategic management (or as strategy in short), is a more recent phenomenon, developed since the 1960s Kenneth Andrews presents a definition of strategy in his book, The Concept of Corporate Strategy [1]:

"Corporate strategy is the pattern of decisions in a company that determines and reveals its objectives, purposes, or goals, produces the principal policies and plans for achieving those goals, and defines the range of business the company is to pursue, the kind of economic and human organization it is or intends to be, and the nature of the economic and non-economic contribution it intends to make to its shareholders, employees, customers, and communities (pp.18-19)."

Andrews draws a distinction between "corporate strategy," which determines the businesses in which a company will compete, and "business strategy," which defines the basis of competition for a given business Thus, he also anticipated

"position" as a form of strategy Strategy as the basis for competition brings us to another Harvard Business School professor, Michael Porter, the undisputed guru of competitive strategy

In a 1996 Harvard Business Review article [2] and in an earlier book [3], Porter

argues that competitive strategy is "about being different." He adds, "It means

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The principal concern is to avoid doing the same thing, on the same battleground, as the competition The aim is to attain a competitive situation in which a company can gain a relative advantage through measures that its competitors will find hard to follow; and extend that advantage further

1.1.3 Strategic planning process

In today's highly competitive business environment, budget-oriented planning or forecast-based planning methods are insufficient for a firm to survive and prosper The firm must engage in strategic planning that clearly defines objectives and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the progress, and make adjustments as necessary to stay on track

A simplified view of the strategic planning process is shown in figure 1.1

Basic Strategic Planning Model

_ g Defining the Mission and Setting Top-Level Goals

External Analysis of Opportunities and Threats

Internal Analysis of Strengths and Weaknesses

Selection of Appropriate Strategies

1x |MPlementation of Chosen Strategies

Figure 1.1 Basic strategic planning model

Mission and goals

The mission statement describes the company's business vision, including the unchanging values and purpose of the firm and forward-looking visionary goals that guide the pursuit of future opportunities

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deliberately choosing a different set of activities to deliver a unique mix of value."

In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors In his earlier book, Porter defines competitive strategy as "a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there." Strategic management is the conduct of drafting, implementing and evaluating cross-functional decisions that will enable an organization to achieve its long-term objectives It is the process of specifying the organization's mission, vision and objectives, developing policies and plans, often in terms of projects and programs, which are designed to achieve these objectives, and then allocating resources to implement the policies and plans, projects and programs A balanced scorecard 1s often used to evaluate the overall performance of the business and its progress towards objectives

1.1.2 Criteria for effective strategies

A good strategy is one by which a company can gain significant ground on its competitors at an acceptable cost to itself There are basically four ways:

- Identify the key success factors in an industry and concentrate resources in a particular area where the company sees an opportunity to gain the most significant strategic advantage over its competitors

- Exploit any area where a company enjoys relative superiority This could include using technology or the sales network developed elsewhere in the organization for other products or services

- Aggressively attempt to change the key success factors by challenging the

accepted assumptions concerning the ways in which business is conducted in

the industry or market

- Innovate: open up new markets or develop new products

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Guided by the business vision, the firm's leaders can define measurable financial and strategic objectives Financial objectives involve measures such as sales targets and earnings growth Strategic objectives are related to the firm's business position, and may include measures such as market share and reputation

Internal and external analyses

The internal and external analyses include the following components:

e Internal analysis of the firm

e Analysis of the firm's industry (task environment)

e External macro environment (PEST analysis)

The internal analysis can identify the firm's strengths and weaknesses and the external analysis reveals opportunities and threats A profile of the strengths, weaknesses, opportunities, and threats is generated by means of a SWOT analysis

An industry analysis can be performed using a framework developed by Michael Porter known as Porter's five forces This framework evaluates entry barriers, suppliers, customers, substitute products, and industry rivalry

Selection of appropriate strategies

Given the information from the environmental scan, the firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses

and external threats

To attain superior profitability, the firm seeks to develop a competitive advantage over its rivals A competitive advantage can be based on cost or differentiation Michael Porter identified three industry-independent generic strategies from which

the firm can choose

Strategy implementation

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The selected strategy is implemented by means of programs, budgets, and procedures Implementation involves organization of the firm's resources and motivation of the staff to achieve objectives

The way in which the strategy is implemented can have a significant impact on whether it will be successful In a large company, those who implement the strategy likely will be different people from those who formulated it For this reason, care must be taken to communicate the strategy and the reasoning behind it Otherwise,

the implementation might not succeed if the strategy is misunderstood or if lower-

level managers resist its implementation because they do not understand why the particular strategy was selected

Evaluation and control

The implementation of the strategy must be monitored and adjustments made as needed

Evaluation and control consists of the following steps:

1 Define parameters to be measured

Define target values for those parameters

Make necessary changes

The following sessions will discuss the strategic planning model’s components in

more details

1.2 Vision, mission and strategic goals

1.2.1 Vision

Vision is a short, succinct, and inspiring statement of what the organization intends

to become and to achieve at some point in the future, often stated in competitive

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terms Vision refers to the category of intentions that are broad, all-intrusive and forward-thinking It is the image that a business must have of its goals before it sets out to reach them It describes aspirations for the future, without specifying the

means that will be used to achieve those desired ends

1.2.2 Mission

A mission statement is an organization's vision translated into written form It makes concrete the leader's view of the direction and purpose of the organization For many corporate leaders it is a vital element in any attempt to motivate employees and to give them a sense of priorities The mission of a company is the unique purpose that sets it apart from other companies of its type and identifies the scope of its operations In short, the mission describes the company’s product, market, and technological areas of emphasis in a way that reflects the values and priorities of the strategic decision makers The mission is a statement of purpose committing the organization to ambitious overarching goals The mission, along

with the vision, provides a sense of direction and purpose that drives strategic

decision making and resource allocations and forces the seeking of significant performance improvements to attain goals

1.2.3 Slogan

Slogans are words for phases used to sum up and express the spirit or aim of a company Unlike a logo or a trademark which can be changed easily to reflect new marketing strategies, slogan is one of the company’s most important intangible

assets

1.2.4 Strategic goals

The major outcome of strategic road-mapping and strategic planning, after gathering all necessary information, is the setting of goals for the organization based on its vision and mission statement A goal is a long-range aim for a specific period It must be specific and realistic Long-range goals set through strategic

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planning are translated into activities that will ensure reaching the goal through operational planning To achieve long-term prosperity, strategic planners commonly establish long-term objectives in seven areas:

understandable, and achievable

Acceptable: Objectives should be consistent with a firm’s preferences Unfair or inappropriate objectives should be ignored or even obstructed

Flexible: Objectives should be adaptable to unforeseen or extraordinary changes in the firm’s competitive or environment forecasts

Measurable: Objectives must clearly and concretely state what will be achieved and when it will be achieved Thus, objectives should be measurable over time

Motivating: People are most productive when objectives are set at a motivating level — one high enough to challenge but not so high as to frustrate or so low as to

be easily attained

Suitable: Objectives must be suited to the broad aims of the firm, which are expressed in its mission statement Each objective should be step toward the attainment of overall goals

Understandable: Strategic managers at all levels must understand what is to be achieved They also must understand the major criteria by which their performance

will be evaluated Thus, objectives must be so stated that they are understandable to the recipient as they are to the giver

Achievable: Finally, objectives must be possible to achieve This is easier said than

done

1.3 External macro-environment analysis

The PEST analysis is a useful tool for understanding market growth or decline, and

as such the position, potential and direction for a business

Figure 1.2 PEST model

A PEST analysis is an analysis of the external macro-environment that affects all firms P.E.S.T is an acronym for the Political, Economic, Social, and Technological factors of the external macro-environment Such external factors usually are beyond the firm's control and sometimes present themselves as opportunities, threats, and/or constraints An illustration of PEST model is depicted in figure 1.2

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1.3.1, Political factors

The direction and stability of political factors are a major consideration for managers on formulating company strategy Political factors include government regulations and legal issues and define both formal and informal rules under which the firm must operate Political constraints are placed on firms through:

1.3.3 Social factors

Social factors include the demographic and cultural aspects of the external macro environment These factors affect customer needs and the size of potential markets Some social factors include:

The fourth set of factors in the macro-environment involves technological change

To avoid obsolescence and promote innovation, a firm must be aware of technological changes that might influence its industry Creative technological adaptations can suggest possibilities for new products, for improvements in existing products, or in manufacturing and marketing techniques Technological factors can lower barriers to entry, reduce minimum efficient production levels, and influence outsourcing decisions Some technological factors include:

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by human activities in an industrial society are commonly referred to as pollution Specific concerns include global warming, loss of habitat and biodiversity, as well

as air, water, and land pollution Environment legislation impacts corporate strategies worldwide Many companies fear the consequences of highly restrictive and costly environment regulations However, some manufacturers view these new controls as an opportunity, capturing markets with products that help customers satisfy their own regulatory standards

1.4 Michael Porter’s five forces model for industrial analysis

Michael Porter's famous Five Forces of Competitive Position model provides a simple perspective for assessing and analyzing the competitive strength and position

of a corporation or business organization The five forces that Porter suggests drive competition are:

1 Existing competitive rivalry between suppliers

2 Threat of new market entrants

3 Bargaining power of buyers

4 Power of suppliers

5 Threat of substitute products (including technology change)

Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment They consist of those forces close to a company that affect its ability to serve its customers and make a profit A change in any of the forces normally requires a company to re-assess the marketplace The overall industry attractiveness does not imply that every firm in the industry will return the same profitability Firms are able to apply their core competences, business model

or network to achieve a profit above the industry average Porter’s five forces model

is depicted in figure 1.3

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Risk of entry

by potential competitors

purchase a significant proportion of output — distribution of purchases or if the

product is standardized; buyers possess a credible backward integration threat — can threaten to buy producing firm or rival Buyers are weak if producers threaten forward integration — producer can take over own distribution/retailing; significant buyers switching costs — product not standardized and buyers cannot easily switch

to another product; buyers are fragmented (many, different) — no buyer has any

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particular influence on product or price; producers supply critical portions of buyers’ input — distribution of purchases

1.4.2 Supplier power

A producing industry requires raw materials - labor, components, and other supplies This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products Suppliers, if powerful, can exert an influence on the producing industry, such as selling raw materials at a high price to capture some of the industry's profits Suppliers are powerful if credible forward integration threat by suppliers; suppliers concentrated; significant cost to switch suppliers; customers powerful Suppliers are weak if there are many competitive suppliers - product is standardized; purchase commodity products; credible backward integration threat by purchasers; purchasers are concentrated; customers are weak

1.4.3 Rivalry

In the traditional economic model, competition among rival firms drives profits to zero But competition is not perfect and firms are not unsophisticated passive price

takers Rather, firms strive for a competitive advantage over their rivals The

intensity of rivalry among firms varies across industries, and strategic analysts are

interested in these differences

The rivalry is measured by indicators of industry concentration The Concentration Ratio (CR) is one such measure The CR indicates the percent of market share held

by the four largest firms (CR's for the largest 8, 25, and 50 firms in an industry also are available) A high concentration ratio indicates that a high concentration of market share is held by the largest firms - the industry is concentrated With only a few firms holding a large market share, the competitive landscape is less competitive (closer to a monopoly) A low concentration ratio indicates that the

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industry is characterized by many rivals, none of which has a significant market share These fragmented markets are said to be competitive The concentration ratio

is not the only available measure; the trend is to define industries in terms that convey more information than distribution of market share

If rivalry among firms in an industry is low, the industry is considered to be disciplined This discipline may result from the industry's history of competition, the role of a leading firm, or informal compliance with a generally understood code

of conduct Explicit collusion generally is illegal and not an option; in low-rivalry industries competitive moves must be constrained informally However, a maverick firm seeking a competitive advantage can displace the otherwise disciplined market When a rival acts in a way that elicits a counter-response by other firms, rivalry intensifies The intensity of rivalry commonly is referred to as being cutthroat, intense, moderate, or weak, based on the firms’ aggressiveness in attempting to gain

an advantage

In pursuing an advantage over its rivals, a firm can choose from several competitive

moves:

- Changing prices - raising or lowering prices to gain a temporary advantage

- Improving product differentiation - improving features, implementing innovations in the manufacturing process and in the product itself

- Creatively using channels of distribution - using vertical integration or using

a distribution channel that is novel to the industry

- Exploiting relationships with suppliers

The intensity of rivalry is influenced by the following industry characteristics:

- A larger number of firms increase rivalry because more firms must compete for the same customers and resources The rivalry intensifies if the firms have similar market share, leading to a struggle for market leadership

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- Slow market growth causes firms to fight for market share In a growing market, firms are able to improve revenues simply because of the expanding market

- High fixed costs result in an economy of scale effect that increases rivalry When total costs are mostly fixed costs, the firm must produce near capacity

to attain the lowest unit costs Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results

in increased rivalry

- High storage costs or highly perishable products cause a producer to sell goods as soon as possible If other producers are attempting to unload at the same time, competition for customers intensifies

- Low switching costs increases rivalry When a customer can freely switch from one product to another there is a greater struggle to capture customers

- Low levels of product differentiation are associated with higher levels of

rivalry Brand identification, on the other hand, tends to constrain rivalry

- Strategic stakes are high when a firm is losing market position or has

potential for great gains This intensifies rivalry

- High exit barriers place a high cost on abandoning the product The firm must compete High exit barriers cause a firm to remain in an industry, even

when the venture is not profitable A common exit barrier is asset specificity

When the plant and equipment required for manufacturing a product is highly specialized, these assets cannot easily be sold to other buyers in another industry

- A diversity of rivals with different cultures, histories, and philosophies make

an industry unstable There is greater possibility for mavericks and for misjudging rival's moves Rivalry is volatile and can be intense

- Industry Shakeout A growing market and the potential for high profits induce new firms to enter a market and incumbent firms to increase production A point is reached where the industry becomes crowded with

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competitors, and demand cannot support the new entrants and the resulting increased supply The industry may become crowded if its growth rate slows and the market becomes saturated, creating a situation of excess capacity with too many goods chasing too few buyers A shakeout ensues, with intense competition, price wars, and company failures

1.4.4 Barriers to entry/threat of entry

It is not only incumbent rivals that pose a threat to firms in an industry; the possibility that new firms may enter the industry also affects competition In theory, any firm should be able to enter and exit a market, and if free entry and exit exists, then profits always should be nominal In reality, however, industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market These are barriers to entry

Barriers to entry are more than the normal equilibrium adjustments that markets typically make For example, when industry profits increase, we would expect additional firms to enter the market to take advantage of the high profit levels, over time driving down profits for all firms in the industry When profits decrease, we would expect some firms to exit the market thus restoring market equilibrium Falling prices, or the expectation that future prices will fall, deters rivals from entering a market Firms also may be reluctant to enter markets that are extremely uncertain, especially if entering involves expensive start-up costs These are normal accommodations to market conditions But if firms individually (collective action would be illegal collusion) keep prices artificially low as a strategy to prevent potential entrants from entering the market, such entry-deterring pricing establishes

a barrier

Barriers to entry are unique industry characteristics that define the industry Barriers reduce the rate of entry of new firms, thus maintaining a level of profits for those already in the industry From a strategic perspective, barriers can be created or

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exploited to enhance a firm's competitive advantage Barriers to entry arise from

several sources:

Government creates barriers Although the principal role of the government

in a market is to preserve competition through anti-trust actions, government also restricts competition through the granting of monopolies and through regulation

Patents and proprietary knowledge serve to restrict entry into an industry Ideas and knowledge that provide competitive advantages are treated as private property when patented, preventing others from using the knowledge and thus creating a barrier to entry

Asset specificity inhibits entry into an industry Asset specificity is the extent

to which the firm's assets can be utilized to produce a different product When an industry requires highly specialized technology or plants and equipment, potential entrants are reluctant to commit to acquiring specialized assets that cannot be sold or converted into other uses if the venture fails Asset specificity provides a barrier to entry for two reasons: First, when firms already hold specialized assets they fiercely resist efforts by others from taking their market share New entrants can anticipate aggressive rivalry

Organizational (Internal) Economies of Scale The most cost efficient level

of production is termed Minimum Efficient Scale (MES) This is the point at which unit costs for production are at minimum - 1.e., the most cost efficient

level of production If MES for firms in an industry is known, then we can determine the amount of market share necessary for low cost entry or cost parity with rivals The existence of such an economy of scale creates a barrier to entry The greater the difference between industry MES and entry unit costs, the greater the barrier to entry So industries with high MES deter

entry of small, start-up businesses To operate at less than MES there must be

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a consideration that permits the firm to sell at a premium price - such as product differentiation or local monopoly

Barriers to exit work similarly to barriers to entry Exit barriers limit the ability of a firm to leave the market and can exacerbate rivalry - unable to leave the industry, a firm must compete

1.4.5 Threat of substitutes

A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives A close substitute product constrains the ability of firms in an industry

to raise prices

The competition engendered by a Threat of Substitute comes from products outside the industry The price of aluminum beverage cans is constrained by the price of glass bottles, steel cans, and plastic containers These containers are substitutes, yet

they are not rivals in the aluminum can industry To the manufacturer of automobile

tires, tire retreads are a substitute Today, new tires are not so expensive that car Owners give much consideration to retreading old tires But in the trucking industry

new tires are expensive and tires must be replaced often In the truck tire market,

retreading remains a viable substitute industry In the disposable diaper industry, cloth diapers are a substitute and their prices constrain the price of disposables While the threat of substitutes typically impacts an industry through price competition, there can be other concerns in assessing the threat of substitutes Consider the substitutability of different types of TV transmission: local station transmission to home TV antennas via the airways versus transmission via cable, satellite, and telephone lines The new technologies available and the changing structure of the entertainment media are contributing to competition among these substitute means of connecting the home to entertainment Except in remote areas it

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is unlikely that cable TV could compete with free TV from an aerial without the

greater diversity of entertainment that it affords the customer

1.5 Internal analysis

To better understand the activities through which a firm develops a competitive adwantage and creates shareholder value, it is useful to separate the business system into a series of value-generating activities referred to as the value chain The value chain is a systematic approach to examining the development of competitive advantage They culminate in the total value delivered by an organization The

‘margin’ depicted in figure 1.4 is the same as added value The organization is split into ‘primary activities’ and ‘support activities.’

logistics Operations logistics and sales hà

Once the discrete activities are defined, linkages between activities should be

identified A linkage exists if the performance or cost of one activity affects that of another Competitive advantage may be obtained by optimizing and coordinating

linked activities

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The value chain also is useful in outsourcing decisions Understanding the linkages between activities can lead to more optimal make-or-buy decisions that can result in either a cost advantage or a differentiation advantage

- Operations are activities relating to the transformation of inputs into finished products and services Operations include machining, assembly and packaging

- Outbound logistics are activities relating to the distribution of finished goods and services to customers

- Marketing and sales includes such activities as advertising and promotion, pricing and sales force activity

- Service relates to the provision of any necessary service with a product, such

as installation, repair, extended warranty or training in how to use the product

Each of these might be crucial for competitive advantage The nature of the industry will determine which factors are the most significant

1.5.2 Support activities

These primary activities are supported by:

- Procurement refers to the function or process of purchasing any inputs used

in the value chain, as distinct from issues of their application Procurement may take place within defined policies or procedures, and it might be

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evidenced within a number of functional areas Production managers and engineers, for example, are very important in many purchasing decisions to ensure that the specification and quality are appropriate

- Technology development: technology is defined here in its broadest sense to

include know-how, research and development, product design and process

improvement and information technology

- Human resource management involves all activities relating to recruiting, training, developing and rewarding people throughout the organization

- The firm’s infrastructure includes the structure of the organization, planning, financial controls and quality management designed to support the whole of

the value chain

The firm's margin or profit depends on its effectiveness in performing these activities efficiently, so that the amount that the customer is willing to pay for the products exceeds the cost of the activities in the value chain It is in these activities that a firm has the opportunity to generate superior value A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better

differentiation

1.6 SWOT analysis

A scan of the internal and external environment is an important part of the strategic planning process Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T) Such an analysis of the strategic environment is referred to as a SWOT analysis

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates As such, it is instrumental in strategy formulation and selection

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1.6.1 Strengths

A firm's strengths are its resources and capabilities that can be used as a basis for developing a competitive advantage Examples of such strengths include:

e patents

e strong brand names

e good reputation among customers

« cost advantages from proprietary know-how

e exclusive access to high grade natural resources

e favorable access to distribution networks

1.6.2 Weaknesses

The absence of certain strengths may be viewed as a weakness For example, each

of the following may be considered weaknesses:

¢ lack of patent protection

e aweak brand name

s poor reputation among customers

e high cost structure

e lack of access to the best natural resources

e lack of access to key distribution channels

In some cases, a weakness may be the flip side of a strength Take the case in which

a firm has a large amount of manufacturing capacity While this capacity may be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment

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e anunfulfilled customer need

e arrival of new technologies

shifts in consumer tastes away from the firm's products

e emergence of substitute products

new regulations

increased trade barriers

1.6.4 The SWOT matrix

A firm should not necessarily pursue the more lucrative opportunities Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed The SWOT matrix (also known as a TOWS Matrix) is shown in figure 1.5 below

« §-O strategies pursue opportunities that are a good fit to the company's strengths

e« W-O strategies overcome weaknesses to pursue opportunities

« S-T strategies identify ways that the firm can use its strengths to reduce its vulnerability to external threats

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¢ W-T strategies establish a defensive plan to prevent the firm's weaknesses from making it highly susceptible to external threats

Figure 1.5 The SWOT matrix

1.7 Strategies for competitive advantage

A competitive advantage is an advantage over competitors gained by offering consumers greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices

Following on from his work analysing the competitive forces in an industry, Michael Porter suggested four "generic" business strategies that could be adopted in order to gain competitive advantage The four strategies relate to the extent to which the scope of a businesses' activities are narrow versus broad and the extent to which

a business seeks to differentiate its products The four strategies are summarised in figure 1.6 below

The differentiation and cost leadership strategies seek competitive advantage in a broad range of market or industry segments By contrast, the differentiation focus and cost focus strategies are adopted in a narrow market or industry

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Offers products to only

One group of customers

Focused Cost- Leadership Strategy

Focused Differentiation

Strategy

Offers products to many kinds of customers

Cost-Leadership Strategy

the product over other, less differentiated products

1.7.2 Strategy — Cost leadership

With this strategy, the objective is to become the lowest-cost producer in the industry Many (perhaps all) market segments in the industry are supplied with the emphasis placed minimising costs If the achieved selling price can at least equal (or

near) the average for the market, then the lowest-cost producer will (in theory)

enjoy the best profits This strategy is usually associated with large-scale businesses offering "standard" products with relatively little differentiation that are perfectly acceptable to the majority of customers Occasionally, a low-cost leader will also discount its product to maximise sales, particularly if it has a significant cost

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advantage over the competition and, in doing so, it can further increase its market

share

1.7.3 Strategy — Differentiation focus

In the differentiation focus strategy, a business aims to differentiate within just one

or a small number of target market segments The special customer needs of the segment mean that there are opportunities to provide products that are clearly different from competitors who may be targeting a broader group of customers The important issue for any business adopting this strategy is to ensure that customers really do have different needs and wants - in other words that there is a valid basis for differentiation - and that existing competitor products are not meeting those

needs and wants

1.7.4 Strategy — Cost focus

Here a business seeks a lower-cost advantage in just on or a small number of market segments The product will be basic - perhaps a similar product to the higher-priced and featured market leader, but acceptable to sufficient consumers Such products

are often called "me-too's"

This chapter has presented the fundamental theories on strategic management The next chapters will apply these modern strategic approaches on the study of the chosen firm and propose appropriate strategies that match the firm’s internal resources and capabilities with the specific external environment in Vietnam

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CHAPTER 2 - SUMMARY

In this chapter, we introducce the mission, orgnisation structure, functionallity of NTC Using the theory in the Ist chapter to analise the current situation of the company and to evaluate of the current business strategy The result of this research will be used to develop the future strategic business in chapter III

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CHAPTER II CURRENT STATUS OPERATION AND EXISTING

Transaction Name Niem Tin Co., Ltd (NTC)

Registration paid-up capital VND10,000,000,000 (ten billion dongs)

Ho Chi Minh City Branch Office

Address Floor FC1, 268 To Hien Thanh, District 10 -

HCMC

Tel +84(8) 3868 1818

Fax +84(8) 3868 1520

Hai Phong City Branch Office

Address Room 501, 275 Lach Tray, Hai Phong City

Fax +84(31) 3733979

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2.1.1.2 Mision

“Trust in tomorrow”

NTC are a Vietnamese company involved in information-communication area with

a simple name of Niem Tin Niem Tin in Vietnamese means trust It is our trust in our own capabilities and the ambition to contribute to the development and the bright future of our country That is why there is the V sign in our corporate identity

to always remind we are Vietnamese and we have to strive for Victory

By maintaining a professional and inspiring working environment while promoting the employee’s creativity, NTC always do our best effort to provide our enterprise customers with efficient information - communication tools to help them set up seamless communication channels down to the smallest units in their organisation, whereby they can make decision in the shortest time and the most cost-effective way We therefore always start from understanding the business model and the

present as well as future requirements of the customers With the motto “the

customer’s success is ours”, we have won the trust of our customers

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Building Solution Center

(BSC)

ST = ——ŸẰẰ Ạ

Communication Solution Center (CSC)

(PSC)

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Software Solution Center Professional Service Center al

(SSC) |

Sea

Industrial Automation Center (IAC)

a are

NTC Haiphong Center

(NHC)

Finance & Account Division

(AFD)

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2.1.2 Products and service

2.1.2.1 Building Solutions

As a result of the development of the economy, high-rise buildings, hotels, hospitals, factories are being constructed in greater number with more advanced technologies Investors are now interested in advanced use of the building to enhance the users’ satisfaction as well as facilitate the most effective building management and operation This is the good opportunity for NTC to provide the full range of building automation management, including:

2.1.2.1.1 Energy management

- Heating-Ventilating-Air-conditioning (HVAC) management

- Power and water distribution monitoring & management

- Lighting management (Litrol)

2.1.2.1.2 Integrated Security System

- Access Control

- CCTV

- Fire and intrusion alarm system

2.1.2.1.3 Building Management Solutions