CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGY OF OCEAN DEVELOPMENT JOINT STOCK COMPANY TOWARDS 2015

CAPSTONE PROJECT REPORT FORMULATING BUSINESS STRATEGY OF OCEAN DEVELOPMENT JOINT STOCK COMPANY TOWARDS 2015

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ACKNOWLEDGEMENTS PDF Compressor Free Version

This research is conducted by Group No.12 - M04 Class - Global Advanced Master of Business Administration Program - Griggs University We commit that

this is our study, and that study results are accurate and unavailable in any other studies

During the study, we have received valuable support from many individuals organizations, agencies aiid enterprises

We wish to thank leaders managers and employees of Ocean Development Joint Stock Company for releasing the burden of data provision, cooperation, exchange and discussion

We extend our special thanks and appreciation to many individuals and experts who have shared with me an opinion and response to questionnaires of the Group

We would like to express our deepest thanks to lecturers, Board of Management and managerial staffs under Global Advanced Master of Business Administration Program - Griggs University in Hanoi for communicating knowledge, creating favorable conditions in all fields for us to accomplish this project

Last but not least, we would like to express our deepest thanks to all students of M04 class- Global Advanced Master of Business Administration Program -Grigygs University for sharing information, material support and invaluable support to accomplish this project

The authors:

1 Tran Thi Kim Oanh

+> Luyen Xuan Trang

1.2 Defining strategic targets and tasks

1.3 External business environment

2.1 Introduction to Ocean Development Joint Stock Company

2.2 External environment of Ocean Development Joint Stock Company

2.3 Internal environment of Ocean Development Joint Stock Company

CHAPTER 3 FORMULATING BUSINESS STRATEGY OF OCEAN

DEVELOPMENT JOINT STOCK COMPANY TOWARDS 2015

3.1 Strategic Task to 2015

3.2 Formulating business strategy to 2015 for OCEAN JSC

3.3 Determination and implementation of OCEAN JSC’s strategy to 2015

3.4 Implementation solutions of business strategy

Conclusions and recommendations for further research

LIST OF TABLES AND FIGURES CGADK&ampressor Free Version

Missions of business strategy management

Basic model of business strategy planning

Strategy planning process

Michael Porter's five competitive force model

Examples of External Factor Evaluation Matrix (EFE)

Examples of Internal Factor Evaluation Matrix (IFE)

SWOT matrix model

Example of Quantitative Strategic Planning Matrix (QSPM)

Key macroeconomic data of Vietnam in 2004-2008

Some indicators on Vietnam Real Estate Market

Monthly average income per capita in 2006

Development trends of Vietnam Real Estate Market

External Factor Evaluation (EFE) Matrix

Human resources of OCEAN JSC

Some indicators of asset and financial scale of OCEAN JSC

Some financial indicators of OCEAN JSC

Competence self- assessment of OCEAN JSC

: Internal Factor Evaluation (IFE) Matrix

SWOT Matrix of OCEAN JSC

Primary selection of master strategy

Quantitative Strategic Planning Matrix — QSPM (1)

Quantitative Strategic Planning Matrix — QSPM (2)

Chart 3.1 Strategy implementation schedule

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1 General context, necessity and significance of the study:

Enterprises are making a significant contribution to economic growth and

market economy reform in Vietnam, However, it is shown that most of Vietnamese enterprises especially private sector are characterized by low

competitiveness, a series of constraints and inadequateness in management including business strategy management

Being a private enterprise, incorporated in 2006, Ocean Development Joint

Stock Company operates in a dynamic, demanding and risky market Le

Vietnam real estate market Although some achievements and growth in revenue and profit, the Company’s business operations are recently unstable

modest and unclearly-oriented due to various reasons in which the confusion

when positioning market, limited competence and failure to develop a comprehensive business strategy to act as a background for specific business administration activities Therefore, investigation and application of the

modern business administration concepts for Business Strategy Formulation

are urgent and practical significance to Ocean Development Joint Stock

Company

In such context, Group No 12- M04 Class - Global Advanced Master of Business Administration Program of Griggs University in Hanoi selects the topic “Formulating the Business Strategy for Ocean Development Joint

Stock Company towards 2015” to fulfill the assignment of Strategy

management module

2 Aims and objectives of the research:

This assignment aims at applying knowledge accumulated from Global Advanced Master of Business Administration Program (Griggs University)

to formulate business strategy of Ocean Development Joint Stock Company

to 2015.

o To consult directly internal and external knowledgeable experts

4 Outline of the Study

Introduction

Chapter 1: Literature review on business strategy formulation

Chapter 2: Business environment of Ocean Development Joint Stock Company Chapter 3: Formulating Business Strategy of Ocean Development Joint Stock

Company towards 2015

Conclusions and suggestions for further studies

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and special works Products classified as per market operation form include property for sales, purchase, transfer; property for mortgage, insurance, deposit: real estate transaction service; joint- name real estate, equitization, equity, etc Products classified as per region include urban property, rural property, and

primary property (for instance coarse building directly sold by the Project Owner) and secondary property (turn key complete building), etc [23]

Major business lines of Ocean Development JSC are: To invest in commercial real estate development (Commercial Center, head market retailers), This is a combination of activities including: 1) Input: project design land receipt, ete.: 2) Manufacturing and transfer: works construction: and 3) Output: Post- investment management and business Therefore it is possible to study theoretical model on Business Strategy Formulation for manufacturers to apply for Ocean Development Joint Stock Company

1.1 OVERVIEW ON BUSINESS STRATEGY

1.1.1 Some concepts and characteristics of business strategy

In different phases, contexts and approaches, theoretical research models present various concepts on business strategy Generally there are 3 approaches covered

with “business strategy” concept [16]:

PDF Compressor ki PÊoh€ Phụ business strategy as a Management norm In which, the business strategy is only a form of business plan by nature

G.Arlleret revealed that strategy is the determination of how and what designed

to achieve the particular goals via policies Sharing this perspective, D.Bizrell specified strategy as a master plan to direct or orient enterprises to the desired goals; acting as a background for planning policies and operation techniques Gluec! defined that business strategy is a consistent comprehensive and synthetic plan designed to achieve corporate goals

and develop enterprise Alain Threlart said that strategy is an art enterprise applies to protect against competition and win M Porter also defined that: Strategy is an art of constructing reliable competitive advantages for preventative purposes

business strategy as an art of consolidating and controlling operations to obtain long- term goals of enterprise Right in 1962, Alfred Chandler specified that: Business strategy includes determination of corporate long- term goals and objectives and application of a series of necessary resource allocation, to achieve these goals Later, Mintzberg introduced a yeneral model and completely reflected various concepts on business strategy with S’s P definitions of strategy namely Plan, Pattern, Position, Perspective, and Ploy [I0]

Regardless of how to access to, nature of the strategy is generally characterized by following straits [16]:

companies in each period

in an often-fluctuating market

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corporate resources in the present and in future: uphold advantages and take opportunities to gain competitive advantages

and so forth)

Within the scope of this study, business strategy is interpreted as the art to design and organize facilities to achieve long- term goals of companies associated with fluctuation of business environment

1.1.2 Business strategy in the corporate strategy system

Various strategy levels are available in the enterprises, including:

expectations of the owner This significant level orients process of making strategic decisions in the entire enterprise Corporate strategy is explicitly presented in “mission statement”

particular market It involves in strategic decisions on product selection, meeting the Buyer demand and gaining the competitive advantage against others rival to exploit and generate new opportunities

organized to perform the strategic orientation at company level and every division in the company (for example marketing strategy: financial strategy human resources development strategy, etc )[5]

management

term performance of a company Strategic management includes the continuous

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ion; Strategy RS cee and strategy control assessment Therefore the strategy study emphasizes external opportunity and thread supervision and evaluation in the context of internal strength and weakness [10]

vision and mission: setting up goals: development strategies to achieve goals:

strategy performance; performance evaluation supervision and adjustment |10]

(refer to Figure 1-1) Therefore, Business Strategy Formulation ts one of tasks of business strategic management in the company

Figure 1-1: Tasks of business strategic management

1 Develop 2 Setting 3 Developing 4 Perform S Performance

Strategic —> up goals — SIALCLZICS LO jam} selected >> assessment

prospects achieve goals divciinay supervision &

where where modify modify 1.2.3.4 where necessary necessary where where NeCeSSary

necessary necessary

Source: Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai (2009)

1.1.4 Business Strategy Formulation

In spite of various concepts on business strategy the basic method to plan the business strategy was to have consistence and less change in nearly 60 years ago: including selection of key missions and vision of the company; internal

environment analysis to identify strength and weakness of the company; selection of

strategies by seeking for resources, capacity and core competence and developing it

to mitigate risks, make use of opportunities from external environment: and strategy

performance

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>! Mission and objectives

| resources, capacity threats)

| and core competence)

structure structure and control

'

Strategy modification

Source: Le The Gioi, Nguyen Thanh Liem, Tran Huu Hai (2009)

Basic model of business strategy planning as illustrated in Fig 1.2 can be simplified

PDF Co Compressor presso Fr Ede rsign 8 Strategy planning process

Partial business strategy

Strategic functions, tasks and objectives of | gE

v

(6)

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and assessment (7)

Within the scope of the study, Business Strategy Formulation covers internal and

Source: Ngo Kim

external environment analysis and strategy selection with impact of corporate vision and mission

1.2 DEFINING STRATEGIC TARGETS AND TASKS

1.2.1 Identification of the relevant parties

The enterprise should adopt a strategic plan, demonstrated by the clear targets The parties, whose interests are affixed to the business (called the relevant parties), shall influence these targets They are individuals or groups of individuals, affecting to

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Therefore, when determining the vision and the mission of the enterprise it 1s important that the most relevant parties be identified and set the priority for the

strategies that can satisfy their demands Normally there are the relevant parties in the enterprise (the owners, the managers the staff the leaders ete directly affecting

and participating in the strategy formation process, at the same time, being impacted

by the strategy under the implementation in the future) and the relevant parties

cutside the business (for example, the client, the supplier, the Government, the trade union, the jocal community, the public etc) These subjects may not participate in the strategy formation but have a major impact on the content of the business

strategy, especially, the Buyer [16]

1.2.2 Determination of vision and mission

enterprise; expressing the aspiration about what the enterprise wishes to reach

The vision needs to be impressive enough so that all persons in the business try their best to attain their ideology The structure of the vision shall comprise two

inseparable aspects, which 1) are the core ideology (determination of the

permanent characteristics of the business; supply of the adhesive substances of the entire business; including the core value means the system of principles and the guiding principle; the core purpose or the most fundamental reasons leading the existence of the business, 2) envisioned future including the challenging targets and the attractive, convincing description on what the challenging targets

wish to be achieved [16]

requirements of the relevant parties and forms a basis for cater for the vision However, the mission must be somewhat that can be obtained within a period of time The statement of mission shall form the basis for the whole strategy

planning: first of all, it must express the strategy intention which means the general ambitious targets to challenge the business [16]

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Defining the strategic tasks is to answer the question that is what are the business

activities of the business? To answer this question, there area various ways

however, the model used by many enterprises belongs to Derek F Abell hereby

we should determine the business activities On three aspects First who shall be satisfied (for which group of Buyer?); secondly, what they shall be satisfied (what

do the Buyers need?), thirdly, the way for which the Buyers shall be satisfied (by the skills or any other extraordinary capabilities?) [16]

1.2.4 Business target

The business targets shall have the following characteristics: accurate, and can be

measured, must target at the key, challenging issues but can be achieved (actual), determined to with a length of time and can supply the tools to measure the performance of the manager In the theories about management of the strategy, people also can differentiate the long-term and short-term targets

1.3 EXTERNAL BUSINESS ENVIRONMENT

The environment of the enterprises can be divided into two degrees namely the macro environment (or called the general environment) and the microenvironment (or called the industry environment) Another point of view in the business environment (with the meaning that taking the business as the subject of research), the business environment can be viewed under two angles including the external

environment (consisting of the macro, microenvironment) and the internal

environment of the enterprise However, the business environment is the general motion, which interacts with each other among the elements and internal and external forces of the system but shall be directly or indirectly affect to the business and production result of the business The purpose of the business environmental analysis is to help the enterprises answer the question: which are the elements and

the degree of influence on the business results? Therefore, two views on the

business environment mentioned do not contradict with each other and can

replenish with each other

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acro environmen

opportunities and threaten to exert the influence on the operations of the business in

the future; that can comprise [10]:

The economic environment: The environment refers to the development of the

economy, the supply of capital, the growth of Gross Domestic Products; the rate

of inflation, the rate of interest, the financial policies, the developments of types

of market, the econemic institution and so forth These are the elements affecting dramaticaily to the operation and business strategy of the business

technological scientific environment for business identification and exploitation

of the appropriate technologies to create the competitive advantages for the business on the market

The political- law environment refers to any business wishes to exist and

environmental condition of the local country The enterprises that can operate is accepted by the society, to the extent that the society find that any of condition is

hardly accepted, it shall withdraw these allowed conditions by requiring the

Government to intervene through the policies and the system of law The political and law elements of the local country can create the opportunities or risks for the business

The cultural, social environment: It is the change of the lifetime point of view, the standard of living, the spending habit, the population growth rate the cultural standard, the social perception, the psychology, the living perception etc These changes can have a profound influence on the business production

activities of the business

The natural environment such as forest, air, water resources, natural resources, weather, the climate, land, geology and so forth are the natural elements very

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can cause the influences on both Buyers and business ete

1.3.2 The industry environment

The industry environment is the external relationship of enterprise but has the direct impact on the production and business activities as well as the existence and the

development of the enterprises There are many theoretic models supporting the industry environmental analysis, however at present the model “five competitive

models” of Michael Porter has many predominant advantages in helping the

Strategic managers to realize the strengths and weaknesses so that they can Issue the

appropriate policies to take advantage of the opportunities and avoid the risk caused

by the industry environment

Figure 1-4: Michael Porter Five Forces Model

Potential Entrants

Threat of Substitute Products or Service

Substitutes

Source: Ngo Kim Thanh (2009)

According to Michael Porter, the industry environment of the business shall consist

of five basic elements [10, 11]:

1) Buyers buying the products and services of the enterprise: 2) the suppliers supplying the input for the business and production of the enterprise; 3) the rivalry

in the existing firms: 4) the potential competitors: and 5) substitute products They

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enterprise gains the success when they control the correlation of forces among the enterprise and those forces

(1) Buyers: Buyers are those, who buy the corporate products, therefore, they have considerable role for the survival of the company; bringing the market, the revenue

the orientation of the corporate business, even can consider as a part of the business However, Buyers also create the pressure causing the difficulty and reduce the

corporate profit

sellers creating the monopoly This is the disadvantageous situation of the business because the power entirely belongs to the Buyer

a big number of orders, they can cause the pressure in negotiating the price for the business

so, Buyers can easily select another supplier, at the same time, will spend

less cost on this conversion, thereby, it shall boost the position of the Buyers

thus, they shall not be ready to pay higher cost, although the products can be considered as having higher quality Therefore, it is necessary to give the advertising measures, seminars, discussions, presentation on the products in the course of providing the training courses on the updated information on the domestic and international quality for Buyers

(2) Suppliers area the individuals or enterprises that can satisfy the inputs for the enterprises such as raw material, equipment, manpower, capital, services, land, the

site for production and business etc It is similar to the Buyer analysis The only

difference is that the position of the enterprise is Buyer Enterprise should exploit

radically the advantages of Buyers as analyzed as above The suppliers can cause

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exclusive suppliers

(3) Competitive competitors: competitive competitors are often the major threats

to the corporate development, especially in the saturated market period and now

when the market has impediments hindering the withdrawing from the market of the

enterprises in the sector Therefore, it is very important for enterprises to give

competitive competitors, the competitive strength as well as the growth rate of business sector, the density of fixed capital of the competitive competitors, the targets and business strategies as well as the strategic policies used by them and how they change their strategy, the financial results and market position as well as their financial potential It is supposed to choose some of the most important competitors, then compare with their competitiveness in accordance with the product samples, the supply capacity, the arts and technique for serving the Buyers, the warranty, the density of contribution, the product prices advertising assistance the professional standard of the salesman, the quality of products, the developing potentiality, the flexibility, the revenue the market share, etc When making assessment, it is noted that the poorer aspects still create the various business strategies and shall not be included into the weaknesses of the enterprises

(4) Potential competitors are the new entrants taking part in business in any sector

or intending to penetrate the market, however they may not indirectly threaten to the business interests of the companies but can become a competitor that compromise the interests of business in the future To cope with the potential competitors, the present enterprises often put the barriers against their being penetrated from the outside forces such as forming the advantage of economy of scale, increasing the goods purchasing conversion expenses of Buyers by specializing their products, consolidating their advantageous supply source etc In the necessary case, the existing companies can enter into a close liaison to prevent the new risk of penetration from the outside forces

FOR GRMRRS Soo an LES 10101 products are those of other market but can meet the market demand like the main products The existence of substitute products shall limit the potentiality of increasing the business profit If the price of main products increases, it shall engender a hike in the demand of substitute products

Substitute products are usually the results of the technological explosion To avoid being lagged far behind in the market, apart from the analysis of the relationships in

price of substitute products, in the business strategy the enterprises should pay attention to the due investment of their existing resources for the research and application of new technology aimed at forming the products, which have the high competitiveness in the market

1.3.3 External Factor Evaluation (EFE)

The influence of the external factor to the enterprises shall be determined through the qualitative analysis However, the modern business management science demands that these be quantified in order to make the enterprises and strategic planners have a more accurate, objective view on the influence of the chances and challenges from the outside forces One of the tools to realize these goals is to build

the external factor evaluation matrix (EFE) There are various forms and methods to

construct EFE matrix

Figure 1.5 Example of the External Factor Evaluation Matrix (EFE)

Source: Nguyen Thi Lien Diep (2006)

Figure 1.5 describes the way of building EFE, therefore:

e The most fundamental factors identified from the external environmental

analysis.

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must define the importance of each factor in the external influence general Total classification marks for all elements shall be 1.0 or 100 %o Af

calculating equal to %

must indicate that degree of reaction, for example: | = little reaction; 2 = the average reaction; 3 = the above average reaction; 4 = the good reaction

identify the marks in the importance Add the total marks in the importance for each variable to identify the total mark of the business For example, with such way of classification as the example, the mark that the business can receive is the highest is 4.0, the average is 2.5, and the lowest is 1.0 These marks bear the significance of assessing the relevance of the current strategy being applied for risks and environmental risk [5]

1.4 THE INTERNAL ANALYSIS

The internal analysis is to trace the points and internal weaknesses of the business in order to exploit the strength and improve the weaknesses, aiming at the strategic goals of the enterprises The internal analysis of the business can help analyze the

basic function of the business that is production finance and marketing [8]

1.4.1 The internal issues that need to be analyzed

- Analysis of the production process:

The production process shall be the principal activities of the enterprise affixed to the formation of the products and services It decides upon the success of the enterprises and other fields, the high quality products and services and reasonable cost shall facilitate for the marketing and financial activities The production process also exerts the great reciprocal influence and shall form the premise for the business management development research and the information system When

analyzing the business production process, it is important to first evaluate whether the equipment and the manufacturing technology that can create the output meeting

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large-scale production stable input supply with reasonable price the suitable arrangement of production facilities, the warehouse, and the yards shall generate the

high efficiency for the production process Besides, it is also important to take into account of the labor use the satellite units, and the inspection of the enterprises [8]

- Financial analysis:

The financial resources (Such as cash, the credit loan ability, owned capital, etc) are the most basic sources because they are the premise for other resources and form the final results of the activity sequence (or a process) of production and business of the business

The financial analysis shall be base on the economic financial standards such as the

profitability per capital, the mobile capital, the capital recovery ability the cash flow, the debt coefficient, the short-term and long-term capital mobilization ability the company capital sources, the capital expenses as compared to the entire sector and the competitors, the tax issues, the relationship with the owner etc Assessing the financial potentiality of the business shall be the best mean to take into account

of the competitive position of the business and shall be the condition to attract the external capital This is the basic condition to make the competitive strategy more feasible, through analyzing the financial indicators, the strengths and weaknesses of the business in the investment, finance, and dividend [9]

- Analysis of the organization, management and administration activities:

the management activities related to the preparation for the strategy formation Whether the business organizes the monitoring and forecasting of the

tendencies related to the macro and the industry environment? Whether the

business has established the clear goals? How is the business strategy? How is the formation process and content of operations? Whether the distribution of the

resources base on the set out goals? How are the strategies and supporting policies? Whether the enterprises give any plan to cope with the contingencies’?

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organizing diagram shows the agreed principles? How is the command’? Whether the manager organizes the authorization effectively or not? How are the works groups organized? [8]

participation of employees in the management the working attitude the satisfaction in the work, the encouragement of the creativity in the works, the

two-way communications and exchange in the company, the number of structures and role of the unofficial Buyer group, the capability of the

employees [17]

such as how the enterprises have the financial control system the sales the production, the targets, and the inventories Whether it has the efficient control system? How is the quality control? How is the information system? Is it likely

to work out the business control system as soon possible? [8]

- Marketing operation:

First of all, it is important to give analysis on the Buyer structure, the consumption channels with the scope of quantities and control degree, the flexibility in the evaluation, product samples, advertising and assisting tools for consumption policy, then, to compare the development of each consumption channel, to set out the necessary instructions for the marketing strategy formation

It is also important to pay attention to the potentiality for product consumption the revenue structure, the profit rate from the revenue, the quality diversification level

and the popularity of the products and services, the business market share, the trust

of Buyers, the efficiency of the promotion and advertising campaigns, the post sale

services and Buyer caring services

Then it is assumed to analyze whether the input supply is stable and favorable combine the consideration of the survival cycle of products to check the research

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and development of new products as well as analyze the business opportunities that can be promoted |1 1]

- Development and research activities:

In this aspect, it is important to consider the corporate interests and investment for

the technology, product development research activities, the conditions of the development and research activities, the quality, the research and development results, the research and development research capability (finance human being, organization, etc); the studying and developing results ete [11]

- The information collecting and processing:

The information system is a component linking all functional activities, at the same time; it shall provide the basis for the business management decision Therefore, the efficient information system shall pay contribution to improving the operations of

the business and enhance the quality for the management decisions [11]

1.4.2 Internal factor evaluation matrix

The internal analysis results of the business shall is also demonstrated by “the Internal Factor Evaluation Matrix” (IEF) The forms and ways of building the internal factor evaluation matrixes in the same way as EFE are as follows:

Figure 1.6: Example of the internal factor evaluation matrix (IFE)

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1.5 1 Formation of the business strategy options

Technically, the theory on the strategy management has set out many tools for

analysis, evaluation and selection of the strategy, of which, the tool used in this stage shall be SWOT matrix (strengths, weaknesses, opportunities, threats)

SWOT matrix shall be the results of the combination of the analysis of the

strength, the weaknesses, the opportunities and the challenges of the company (also called as the SWOT analysis) [14]

The enterprises should define the opportunities and threats through the external

analysis The opportunities may include the market development potentialities

the market space, near the raw material sources or cheap, suitable manpower sources and workmanship The threats may be the possible market narrowing the cut- throat competition, possible changes in policies, the political stability in the major markets or the new technological development that makes the means and production line of the business face the risk of being backward

Strengths and weaknesses that can be withdrawn from the internal analysis The

strengths can be the skills, the resources and the advantages that the business has

over other competitors (the key capability of the business) such as having many talented managers, the excellent technology, the famous trademark, cash, the business leaving a good impression in the public or accounting for a big market share in the major market The corporate weaknesses are the shortcomings or imperfections and skills, resources or factors limiting the competitive ability of

the business They can be the poor distributing network the bad labor

relationship, lack of the managers of international experience or backward products over other competitors etc

The results of the SWOT analysis process shall maintain the specific the accuracy, reality and feasibility that the business shall use to implement the next steps such as forming the strategy the tactics goals and the specific strategy control mechanisms The effective strategy shall be those that can take

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the external risks, limit or surpass the weakness of the business itself

strengths and weaknesses, take advantage of the opportunities and nullify the

risks to which subject to each specific circumstance and condition the business

can select one of four combined strategic groups as in the figure 1-7

Figure 1.7: SWOT Matrix

(List the threats)

|

|

Source: Ngo Kim Thanh, 2009

1.5.2 Comparing and selecting the business strategy

What the SWOT analysis get is the result of four strategic groups Lach group has various strategies So, it is important that the suitable strategy be compared and selected

comparison and selection However, for the time being, there are many points of

View on assessment of the strategy selection method by using “quantitative

strategic planning matrix”- QSPM

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score attractive score attractive score

| (AS) score (AS) score

Source: Pham Van Minh (2001)

the development of the QSPM matrix shall consist of 6 steps (refer to the figure

1.8):

1 Filling the basic factors of the EFE and IFE matrix in the column |

2 Filling in “Rating” of EFE and IFE in the column 2

3 Filling in strategies that can be withdrawn from SWOT matrix The strategies can be classified into the separate groups (if any)

4 Defining the attractive score (AS): unattractive = 1, less attractive = 2 relatively attractive = 3, very attractive = 4 These values demonstrate the relative attractiveness of each strategy over others in the same strateg

group that can be variable These values bear the subjective will of the strategy maker Therefore, there is usually the consultation of the knowledgeable experts or the undertaking of survey in order to augment

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Objectiveness At the same time there is available the basis of the attractive mark at the end of the column

‘n" Calculating the total attractive score (TAS) of each factor

6 Accruing all attractive scores to produce the total attractive scores of

each strategy (taking into consideration of the suitable internal and

external elements that can affect to the strategic decisions) The higher

tctal these marks are, the more suitable and werth they are to be selected for implementatien [12]

1.5.3 Types of business strategies

1.5.2.1 The concentrated growth strategies

The focused growth shall aim at improving the common products, the markets to which none of factors is changed The business must exploit the existing opportunities, the intentional staying back in the basic business line [here are three

basic strategies [5]

existing market with products, services supplied to the market by the business

There are two ways:

© Increasing the market share by increasing the product purchasing power; luring the Buyers of the competitors: buying back the

competitors

so far used the business products at the current target market begin to reuse these products

consumption of products, services for which the business is manufacturing and consuming this means that it shall find the new consumers in the current market

that still has not been yet penetrated There are three ways to implement this

strategy: Searching for market in the new locality; Finding the target markets; finding the new used value of the products

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evelopment strategy: This strategy shall consist of new kinds of products for consumption on the market for the time being or sale to the present Buyers This strategy may target at the separate products or the entire items of

the business With the development of a separate product the business can

improve the performance of the products the quality of the products, models

This strategy needs to pay attention to the development of goods lines, the

product development process and product survival precess

1.5.2.2 Integration development strategies

The Backward Integration Strategies: they are the ownership strategy or control increasing strategy on the side of the business supplier They use this strateg\ when the present suppliers are unable to meet the demand, the small or big number of supplier, the number of companies developing fast in the sector; the suppliers have the high marginal profit

The Forward Integration Strategies: they are ownership strategy or control

increasing strategy on the side of business distributor; used when the distributors

fail to meet the business demand, and when there are not many distributors in the sector forecasted to be high and have the considerable distributing profit etc The Vertical Integration Strategies: it is the ownership strategy or control increasing strategy on the side of the competitors in the growing sector; securing the large-scale economic interest; when the competitors are weakened; etc

1.5.2.3 The diversification strategies

They are strategy changing the field of operation, the business characteristics and searching the mutual competence [5] They include:

Concentrated diversification: adding the new products, services from the internal forces

Horizontal diversification: adding the new products, services for Buyers of enterprises

Vertical diversification: adding the products, new trading services not related to the existing products and services

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The leading enterprise of the market: they always manage to expand the scale find out the new tools of products and often use the strategies: the marketing

Strategy, the new strategy, the consolidation strategy, the connecting strategy

the disturbing strategy, the at war strategy,

The challenging enterprise in the market: they often take advantage of the weakness of the leading companies and gulp the market share of the weaker competitors

The following enterprise: They are smali enterprises, not challenging the leading enterprises, protect the market share, strive to keep the Buyers and find new Buyers, and exploit the separate points to increase the gain without causing the big marketing strategy

The enterprises are trying their best to find the firm position in the market

(corner market): It is assumed to search and dominate the small market share in

the market ignored or not paid attention by the big enterprises To realize this target, business must focus on the activities or other specialized products [5] 1.5.2.5 Other business strategies

Besides, there are many various business strategies: the alliance, cooperation strategy, and the cutting strategy (reduction time), the consolidation strategy etc The strategies like marketing strategy, production strategy, financial strategy

human resource management strategy, and so forth are referred to as the functional

or component strategy These strategies can be independent However, in most of the cases, it forms the business strategies

Conclusion of the Chapter 1: The above are the theoretical bases forming premise

for the strategy formation in Ocean Development Joint Stock Company The next content shall apply this theoretical base to formulate the business strategy of Ocean

Development Joint Stock Company

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BUSINESS ENVIRONMENT OF OCEAN DEVELOPMENT JOINT STOCK

COMPANY

This Chapter aims to investigate and canalize factors of internal and external business environment and its impacts on operations of OCEAN DEVELOPMEN|I JOINT STOCK COMPANY (hereinafter referred to as OCEAN JSC), acting as database for developing and selecting the business strategy of OCEAN JISC

2.1 INTRODUCTION TO OCEAN JSC

2.1.1 General

accordance with Law on Enterprise of Vietnam

OCEAN JSC includes:

© Real Estate Investment — Trade: To invest to develop real estate

projects (residential area, urban area industrial park): To deal with

real estate (real estate brokerage; real estate management service: consultancy and pricing; real estate exchange services)

© Construction and design consultancy: To design and construct the engineering infrastructure of civil works, markets, commercial centers, urban areas, residential area; To provide design consultancy service for industrial, traffic and irrigation works

o Traffic works management, operation and exploitation services: To trade the road toll plaza management services

© Finance investment: To invest and make the partnership capital

contribution

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OCEAN JSC still has no strategy but only a vision and mission to 2020, Le corporate strategy is embodied

OCEAN JSC wishes to develop as a modern organization, operating in real

estate and finance investment, focusing on professionalism based on creative

contributing to the development of Vietnam by products and services rendered

to Buyers, etc.”

Motto: Creative, standard and practices

Key to success: Always listen; ceaselessly learn to apply science and technology

into Development and Management Harmonizing benefits of Buy ers- Company

~ Society Providing high quality products with reasonable price with the deeply understanding of Buyer demand

Human development philosophy: Embracing the principle considered human is

the biggest asset of the company; human resource development is put on the top

of priority This human resource is always trained in terms of expertise professional skills, focusing on the internal training development, together constructing corporate culture to be a powerful collective to be able to fulfill the

company’s missions

Business philosophy: Considering moral as a background for business philosophy and guideline for all operations Ocean JSC puts the credit on the top for Buyers and partners Prestige is a key to success of the Company Values built in practices by Ocean JSC are confidential contributed by all members in the Company wishing to create new values and outstanding marks of Ocean trademark in projects and works They are the products of creativeness and effort to bring about general development for the Company in particular and society in general Ocean JSC always wishes to share success with Buyers

partners and society,

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investment company

Commitment: Buyers are always offered with the most perfect products and services

Strategic tasks: Company will become one of the leading enterprises of the

North and Vietnam in terms of development and establishment of market- based

commerciais real estate projecis in year 2020 It 1s expected to manage, operate and exploit 7 — 10 toll plaza, generating the stable and well- paid jobs for approximately 1600 — 2000 people

Tools to perform the strategic tasks are series of closely interrelated factors: Competence of implementing great projects; product quality as development objectives; closely working with stakeholders in many localities; modern

telecommunication; professional project management

Core competence: Extensively experienced, modern management and powerful financial capacity

2.2 EXTERNAL ENVIRONMENT OF OCEAN JSC

2.2.1 Macro- environment of OCEAN JSC

2.2.1.1 Political factors

management and performance are strengthened: democracy in the society is

improved; political and social security is guaranteed sovereignty and territorial integrity are secured Political activities are continuously expanded toward

increasingly high position in the international cooperation organizations being a

standing member of the UN Security Council National defense, security and

foreign relations contribute to the political and social stability creating a

peaceful, stable and favorable environment for the nation’s socio- economic

irresponsibility of many civil servants and competent authorities who are in

charge of serving people and enterprises Local competent authorities in many

places are disqualified Achievements in security protection are not stable [26]

These disadvantages could increase transaction costs for OCEAN JISC especially in relation to state agencies

2.2.1.2 Economic elements

Market economic system is initially formed in Vietnam Ownership and economic sector structure are basically renovated by many mixed economic sectors Different types of market are born and developed, associated with the regional and international market Enterprise and businessmen are empowered to make their own business with healthy competition for development State management on economic is strengthened from direct administrative command

in production and trade activities to the management covered by laws, policies, Strategies, plans, socio- economic development plan and other macro regulating tools However, construction process of market economy system in Vietnam is still slow The legal, policy and regulation systems are not adequate

characterized by various troubles The State management on enterprises is stll

differentiated as per ownership form Market elements and market types are formed and developed in a rather slow, asynchronous and inconsistent manner The unhealthy competition situation trade fraud and tax evasion area available

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wit out tImel y recovery TẾ national resource allocation is inappropriate,

failing to comply with principles of market economy system That is why many

countries do not acknowledge Vietnam to have a complete market economy in

spite of admission to WTO since the end of 2006 Business environment of

Vietnam is increasingly improved but it is still later than that of the world

According to evaluation of World Bank (WB), the business environment of Vietnam in 2008 was ranked 9! out of 187 surveved economies, and then in

2009, it ranks the 93rd in spite of fields with relatively active changes such as credit loan (Vietnam ranks the 43rd), asset registration (Vietnam ranks the 47"),

etc [26] In that environment, OCEAN JSC and other enterprises are hard to

apply the standards of business by market mechanism

the past nine years from 2000- 2008, GDP increased twice, 7.6%/ year on average, Per Capita Income in 2008 exceeded the threshold of US $1000 to become a nation with the lowest average income However the growth mainly depends on investment; ICOR continuously increases since 2000; high imbalance was available between savings and investment; deficit of state budget was always high (about 5% GDP); deficit of current balance was high Economic sector structure was converted slowly The imbalance was available

in many fields, mainly depending on natural resource exploitation Effect of economic industries was modest and tended to reduce, illustrated in average increase rate of all industries/ total productivity decreased 41% in 2007 trom over 45% in 1999 Inflation rate in 2007 and 2008 of Vietnam was relatively high, but it was controlled Financial and monetary policies of the Government

opportunities and challenges for OCEAN Large investment of State increases

the opportunity for the business of real estate Inflation will increase costs and

selling price

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development [24] In addition to domestic investment with involvement of all economic sectors, foreign investment in Vietnam will be recovered and

continued to develop, resulting in demand and improvement of construction and

real estate trading market in both rural and urban areas

According to the official statistics, unemployment rate was about 5% (Table

2.1); however many assessments revealed that in fact this rate was much higher

especially in the economic depression period However, high unemployment rate and abundant free time in rural areas were favorable for creating hurnan resources to develop and expand the construction and infrastructure investment

(Source: Summary from annual figures released by the General Statistics Office of

Vietnam)

engineering- technology, especially in Information Technology facilitates Vietnam

to be more integrated with the international community [22]

2.2.1.4 Technological and engineering elements

Science and technology level of Vietnam is lower than the average level in the world Technological contents in products seem to be not changed added value of the industry is many based on raw material resources, high technology export products only accounts for 20% export quota [24]

2.2.2 The industrial environment of OCEAN JSC

2.2.2.1 Overview of Vietnam real estate market

accepted in the world, real estate market experiences 4 development steps:

Beginning, centralization, monetization and financialization (for example in

USA and developed countries where market financialization level is reached) In Vietnam, real estate trading was available under various forms long time ago However, the real estate market was official introduced in Vietnam when the

National Assembly promulgated Law on Land in 1993 Then, real estate market

experienced the various development phases and to 2007 it witnessed the sudden augmentation of total bank credit outstanding for real estate loan (increase in 1.4 times against 2006) This augmentation showed that the Vietnam real estate market has stepped into “monetarization” phase, in which commercial banks participated into the market, systematically, providing credit loans and professional housing purchase services (for example Sacombank An Binh

ANZ, etc.) and directly trading in real estate (through establishment of real

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estate COmpanies under the banks such as ACBReal Sacomreal VPREIT BIVDLand and so forth.[23]

Vietnam real estate market lays a remarkable impacts on economy formation of industrial parks and infrastructure for companies: urban areas for the comimunity

life and daily life of people According to statistics released by Ministry of Planning and Investment, in the period of !993 - 2008, 194 big industrial parks were available nationwide occupying an area cf 46588 hectares and generating

jobs for over 4 million laborers; constructing 1.036 billion m° tenement building

for residents from new real estate projects (barrack, new urban area ete.)

Investment capital in real estate market segment was intensive According to the Statistics released by Foreign Investment Agency- Ministry of Planning and

Investment, in 2008, about 60% Foreign Direct Investment (FDI) registered to invest in Vietnam was poured in real estate field If FDI alone is calculated into real estate market with items such as: Hospitality — tourism, construction of new urban area, office- apartment, infrastructure of industrial parks and export

processing zones, to the end of June, 2008 there were 462 projects (accounting

for about 5% total FDI projects in Vietnam) with total registered capital of approximately 40 billion USD (making for 23.8% of total FDI registered in Vietnam), in which total charter capital was 11.5 billion USD (making for 25.6% of total charter capital), total implementation capital was 4.98 billion USD (accountings for 17.11% of total FDI for implementation) [23] Although FDI poured in the real estate was high, actual capital rate for implementation was low against the general rate of the whole nation Signal from this market indicated that quantity and number of FDI projects in items such as hospitality-

tourism and office- apartment construction were the majority in the past time This context was still available on months at the end of 2008 and early of 2009 Especially, investment projects with foreign elements in new urban areas and high- rise building had a high investment value For instance, only the Hano

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Nang had the estimated investment of over 200 million USD Regarding the domestic fund credit balance of the banking system for the real estate market at the end of 2008 was approximately 135 thousand of billion VND and quantity of

property for mortgage to the banking system for credit loan was 400 - 500

thousand of billion VND, which was not a modest investment Some particular

cases included temporary payment of the secondary investors in 3 projects

namely Sky Garden 3; Hoang Anh Gia Lai and the Vista on November, 2007 were 500 billion VND.[23]

Table 2.2: Some indicators of Vietnam Real Estate Market

Development investor (supplier): According to the statistics released by Ministry of Planning and Investment, to 2008 there was more than 2000 enterprises officially registered “real estate business” In fact many enterprises operated in this field without registration of real estate, especially construction

supervision reports on the State capital business investment prepared by the National Assembly in 2009, most of 70 corporations and State groups involved

in real estate business, in which “giants” dominating the market were available

Development Investment Corporation (IDICO), Development Investment Construction Corporation (DIC), Housing and Urban Development Corporation

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Development and Construction Corporation, VIGLACERA Corporation, Coma Corporation, Hanoi Construction Corporation, LILAMA Corporation, Song Hong Corporation, etc, excluding leading real estate companies namely

Stock Corporation (VINACONEX) was a State joint stock companies governed

by the Staie Private companies and companies with FDI play an increasingly important role in the real estate business industry In recent years investors of the great real estate projects are not State- owned enterprises but domestic private enterprises and FDI enterprises such as: HAGL Joint Stock Company, Keangnam Group, Kinh Do Real Estate Joint Stock Company, Nam Cuong Group, ACB Real Estate Company, Conic Group, Phuc Fung Investment Construction And Import - Export Joint Stock Company, Cuong Hung Thinh Group, Detech Land, Gia Hoa (Ho Chi Minh City), Dat Lanh (Ho Chi Minh City) Entities who are Vietnamese people residing overseas also involve in

such as Minh Trung (Da Lat, Lam Dong), Overseas Vietnamese Village Area

(An Khanh, Hanoi) etc Foreign investors participated in this market can also

acknowledge the diversification For example, Riverside- 100% foreign capital

project of Indochina Capital (Da Nang) Partnership of foreign investors with the domestic investors includes Phu My Hung (Ho Chi Minh City), Ciputra

(Hanoi) and so forth [23]

Buyer (Demander): Entities involving in the secondary market are also crowded

and diversified However, these are mainly the small investors Enutecs with foreign elements only participate in this form under the re- lease to serve for the

transaction office Currently, this subject is available in Phu My Hung Urban

Area, Trung Hoa- Nhan Chinh New Urban Area, Trung Yen New Urban Area etc Entity groups who are corporations or foreign- related joint venture

companies rarely participate as the secondary buyer In fact there are many

domestic enterprises participating in this form both under office leasing and

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individuals This group acts as a large plot Buyer and then reseller to retailers: acquisition and re-sales: acting as a market brokerage [23]

Other entities participating in the real estate market: include the State management agencies on land and real estate from the central to the local level: real estaie vocational training institutions: rea! estate professional organizations: brokerage agents: supporting services of the market such as brokerage pricing

consultancy, management, finance and real estate investment According to the

incomplete statistics, to December, 2008, there were over 60 institutions providing real estate vocational training courses (excluding professional universities such as University of Civil Engineering, Hanoi Architectural

University, etc), 18000 experts in brokerage, pricing and exchange management

for real estate market [23]

Operation framework of the market: Since Law on Land 1993 was promulgated, framework of the real estate market and its segments have been established and increasingly perfected including laws and written instructions: Law on land, Law on Construction, Law on Housing, Law on Enterprise Law on Real Estate Business, Law on Taxation, Law on Banking, Law on Credit Instituuions ete, However, many weaknesses are available in the Vietnam real estate market: o- The legal document system governing the real estate market segments

is insufficient and asynchronous Vietnam fails to promulgate legal documents on planning and master plan for the socio- economic development: real estate registration: standards and criteria on new

urban area management and operation, high- rise tenement building, urban infrastructure works, etc

transparent: forecast is existed with many limitations According to

Law on Land 2003, land for project performance must be bided In