G1_00145 ORIENTATION TO COMPLETE THE BUSINESS STRATEGY OF HA BAC NITROGENOUS FERTILIZER AND CHEMICAL ONE-MEMBER LIMITED COMPANY OVER A PERIOD OF 2010 - 2015 (TOWARDS TO THE YEAR 2020)

G1_00145 ORIENTATION TO COMPLETE THE BUSINESS STRATEGY OF HA BAC NITROGENOUS FERTILIZER AND CHEMICAL ONE-MEMBER LIMITED COMPANY OVER A PERIOD OF 2010 - 2015 (TOWARDS TO THE YEAR 2020) ĐỊNH HƯỚNG HOÀN THIỆN CHIẾN LƯỢC KINH DOANH CỦA CÔNG TY TNHH MỘT THÀNH VIÊN PHÂN BÓN VÀ HÓA CHẤT HÀ BẮC GIAI ĐOẠN 2010 - 2015 (ĐẾN NĂM 2020)

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GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

ORIENTATION TO COMPLETE THE BUSINESS STRATEGY OF HA BAC NITROGENOUS FERTILIZER AND CHEMICAL ONE-MEMBER LIMITED

COMPANY OVER A PERIOD OF 2010 - 2015

(TOWARDS TO THE YEAR 2020)

Group: No I1 Studenfs' name:

Đong Van Quyet

Do Doan Hung Nguyen Thị Phuong Lan Nguyen Thi Thanh Minh

HANOI, 2010

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ACKNOWLEDGEMENT

April 12, 2010 Firstly, all members of the group No 11 — GaMBAO1.M06 would like to express our sincere thanks to:

- All the teachers who have taught and guided the subjects of the Global Advanced MBA program (GaMBA) held by Center for Educational Technology and Employment System — Hanoi National University in association with Griggs Universitv Those are the esteemed teachers who have always encouraged and supported us during the time of learning as well as of study for our capstone

- The Director Board of Ha Bac Chemicals and Nitrogenous Fertilizer Limited Company, who has given the best facilities and supported us in provision of the company’s business data as well as the development strategy over a period of 2010 —

2015 With their whole-hearted and considerate assistances, our capstone has been fully completed as expected

- The team of leaders of the Educational Center, the class’s Management Department and the whole members of class GaMBA01.06, who have supported and co-operated with us to fulfill our group's work well

We guarantee that this study is conducted by our group (group 11 — class M06), including: — 1 Dong Van Quyet (team leader)

2 Do Doan Hung

3 Nguyen Thi Phuong Lan

4 Nguyen Thi Thanh Minh AlI the data and results showed in this capstone have never been published in any other Similar study

THE GROUP OF AUTHORS

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2 The objectives of the capstone

3 The study method

4 The capstone structure

B ANALYSIS

CHAPTER I: THEORY OF ENTERPRISE BUSINESS STRATEGY

1.1 The concept of strategy and the role of business strategy

1.1.1 The concept of strategy and strategic administration

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1.1.2 The role of business strategy

1.2 Tools for analyzing and evaluating the strategy

1.2.1 Analyzing the business environment

1.2.2 Analyzing the internal environment of enterprise

1.3 Tools for determining position and orienting strategy

1.3.1 LE matrix

1.3.2 SWOT matrix

1.4 Types of competitive business strategy

1.4.1 Cost leadership strategy

1.4.2 Differentiation strategy

1.4.3 Focused business strategy

1.4.4 Integrated cost leadership/ differentiation strategy

1.4.5 Evaluating and selecting the strategy based on GREAT model

CHAPTER I: ANALYZING THE CURRENT STRATEGY OF

HA BAC CHEMICAL AND NITROGENOUS FERTILIZER ONE-SINGLE MEMBER LIMITED COMPANY (HANICHEMCO) 2.1 HANICHEMCO overview

2.1.1 General introduction of HANICHEMCO

2.1.2 HANICHEMCO production and business situation over a

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period of 2005 — 2009

2.2 Analyzing and evaluating HANICHEMCO’s real situation

2.2.1, Analyzing the business environment

2.2.2 Analyzing HANICHEMCO’s internal situation

2.2.3 Analyzing and evaluating the real situation of HANICHEMCO

by IE matrix

CHAPTER III: EVALUATING, SUPPLEMENTING, ADJUSTING

AND COMPLETING STRATEGIES AND SUPPOSING SOLUTIONS TO THE IMPLEMENTATION OF

HANICHEMCO’S DEVELOPMENT STRATEGIES OVER A PERIOD OF 2010 — 2015

(TOWARDS THE YEAR 2020) 3.1 HANICHEMCO’s development strategy over a period of

2010 — 2015 (towards the year 2020)

3.1.1 HANICHEMCO vision and mission over a period of

2010 - 2020 3.1.2 Development strategy for HANICHEMCO over a period

of 2010 — 2015 (towards the year 2020) 3.2 Analyzing and evaluating HANICHEMCO strategy

3.2.1 Analyzing and evaluating the business strategy by SWOT matrix

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LIST OF FIGURES, MODELS AND CHARTS

Pages Figure 1.1: The process of strategic administration 12

Figure 2.1 Diagram of HANICHEMCO organization structure 31 Chart 2.2: Business norms over a period of 2005-2009 33 Chart 2.3: Output of key products over a period of 2005-2009 33 Figure 2.4: Urea distribution system of the company 44

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LIST OF TABLES

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Table 1.1: The factors of macro environment

Table 1.2: Visible resources

Table 1.3: Invisible resources

Table 1.4: Weighting score

Table 1.5 Model GREAT

Table 2.1; Production and business norms over a period of 2005 — 2009

Table 2.2: Urea’s product capacity of the world

Table 2.3: Area and production of cereals

Table 2.4: Demand forecast for Urea in Vietnam to 2015

Table 2.5: Capacity of fertilizer manufacturing plant in Vietnam

Table 2.6: Urea consuming quantity of the company

Table 2.7: The amount of purchased coal from 2005 to 2009

Table 2.8: The purchasing coal price of HANICHEMCO

Table 2.9: Evaluate the strengths and weaknesses compared with other

competitors

Table 2.10: DAP fertilizer imported quantity into Vietnam from 2003 + 2008 Table 2.11: The human resource structure of the company

Table 2.12: The external factors

Table 2.13: The internal factors

Table 3.1: Synthesis SWOT matrix

Table 3.2: Quantitative matrix by GREAT criteria

Table 3.3: Comparison of two strategies

Table 3.4: Quality standard of Urea

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of country resources in order to create a momentum for development Besides, the management has made several mistakes, which caused by self-opinion, imposition, lack of socio-economic knowledge Therefore, the production and business efficiency was very low and was on the tendency of ever decrease, leading to long lasting stagnant economy Consequently, the socio-economic crisis happened at the end of 1980s

Viet Nam has introduced the reform policy since 1986 with its objective of building the market economy according to the orientation of socialism After 20-year of reform, Viet Nam has gradually operated its economy in line with market laws It created a momentum for the country development thanks to the maximization use of the available resources In addition, Viet Nam has overcome the socio-economic crisis and reached growth

The socialism-oriented market economy is the generally economic model, which was selected by Viet Nam in the renovation period It is a multi-sector economy in which the State sector plays a key role The State enterprises take the lead position

in the economy

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DEVELOPMENT STRATEGY

lla Bac Nitrogenous Fertilizer and Chemical one-member limited company (HANICHEMCO) is a State enterprise located in Bae Giang province with objective of production of fertilizers and chemicals Over the last 50-year of construction and development HANICHEMCO has contributed to the production

of agnculture and has ensured food security Besides its other products were supplied to meet the consumption demand of the socio-economy

llowever, in the face of current opportunities and challenges in the international integretion, the existing weaknesses of HANICHEMCO need to be overcome are small scale, unreasonably organizational structure, low competitiveness, low investment into the replace of technological process, backward techniques and weak management, etc Thus, it demands to set up a reasonable strategy for business and production development so as the company is able to become a strong unit cf Viet Nam Chemical Corporation To do so, the company has to continiously increase its production and business efficiency

As we know, the business strategy has played an important role and brought about great benefit to enterprise The strategy helps enterprise realize its objectives and the wey in its process of business and production; also helps enterprise grasp and make use of business opportunities; simultaneously gives solutions to surmount đange:s and threats in the competitive market; contributes to enhance the efficiency for use of resources and to increase the competitive position with a view to ensuring the sustainable development for the enterprise The strategy creates the firm bases for bulding policies and decisions on production and business suitable for market fluctuation

In the past, HANICHEMCO “business strategy’ was simply a plan of production and business with the annual objective counted on a basis of result gained in the previaus year plus the growth percentage (normally 5% + 10%) Since the Decision

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No 217/ HDBT was issued on Nov 14 1987 by the Ministerial Council regarding

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the reform policies on “socialism planning and self-financing applied to state enterprises’, HANICHEMCO has made great efforts and has been active in building an independent business and production plan Hence it has obtained quite

a lot of renovations and developments: has brought into play its resources effectively to push investment and maintained the high growth rate: has stabilized beth production and consumption; has exceeded the planned target and has greatly contributed to the state budget and the society As a result, it is ranked in the chemical industry in Viet Nam

The company’s strategy is normally set for a period of 5-year Its production and

business strategy for a period of 2010 — 2015 (till 2020 included) was based on the

result achieved over a period of 2005 — 2009 and the development orientation of Viet Nam Chemical Corporation However, it 1s necessary for this strategy to be revised, analyzed, evaluated, adjusted and supplemented to meet new requirements,

which derives from market fluctuation, impact of economic recession and the

company’s real situation as well as the opportunities and challenges in the years to

come

Three out of 4 members in our group are currently working at HANICHEMCO By

our real experience and knowledge and with the support of teachers in the grade of

International Business Administration Master — Griggs University, we unanimously study, anayze and evaluate HANICHEMCO production and business development strategy cver a period of 2010 — 2015 (till 2020); given this, we suggest, supplemert and adjust for the purpose of completing this production and business development strategy; advise HANICHEMCO Steering Board for an effective implememation

2 THE OBJECTIVES OF THE CAPSTONE

*) The study group collected and learned about the theoretic system, tools and methods for evaluation and basic analysis of strategic management science as a

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foundation for the analysis and evaluation of development strategy for HANICHEMCO over a period of 2010 — 2015 (towards the year 2020)

*) To analyze the strong points weak points, opportunities as well as challenges of HANICHEMCO and of its competitors

*) To analyze and evaluate the development strategy for HANICHEMCO over

a period of 2010 — 2015 (towards the year 2020) on a basis of the analysis mentioned

*) ‘To propose adjustment and to supplement strategy of HANICHEMCO over

a period of 2010 — 2015 (towards the year 2020)

*) To propose solutions with a view to implementing the strategy of

HANICHEMCO over a period of 2010 — 2015 (towards the year 2020)

3 THE STUDY METHODS

The methods used for strategic analysis and evaluation comprise of:

The study group used the recent documents and data of production and business of

Ha Bac Nitrogenous Fertilizer and Chemical One-member Limited Company as a base for analysis and evaluation of production and business strategy in their

capstone

4 THE CAPSTONE STRUCTURE

The capstone includes 3 major parts excluding table of contents, list of tables, charts, diagrams, figures and references with the following structure:

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1.2 Tools for analysis and evaluation of business strategy

1.2.1.1, PEST Analysis — Political, Economic, Social and Technological factor

(analyzing the macro environment)

1.2.1.2 Method of 5-competitive pressure (analyzing the industrial

environment)

1.2.2 Analyzing the internal situation of enterprise

1.2.2.1 Based on resources

1.2.2.2 Based on fields administered

1.2.2.3 Based on chain of value

1.3 Tools for determining the strategic position and building strategy

1.3.1 TE matrix

1.3.2 SWOT matrix

1.4 Types of competitive business strategy

1.4.1 Cost leadership strategy

1.4.4 Business strategy set up on a basis of the integration of different business strategies

1.4.5 To evaluate and select the strategy according to GREAT model

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CHAPTER II: ANALYZING THE CURRENT BUSINESS STRATEGY OF

HABAC NITROGENOUS FERTILIZER AND CHEMICAL ONE-MEMBER

LIMITED COMPANY (HANICHEMCO) 2.1 Overview

2.1.1 Introduction of HANICHEMCO

2.1.2 HANICHEMCO production and business result over a period of 2005 —

2009

2.2 Analyzing and evaluating HANICHEMCO’s real situation

2.2.1 Analyzing business environment

2.2.2 Analyzing HANICHEMCO’s real situation

2.2.3 Analyzing and evaluating HANICHEMCO’s the real situation by IE

matrix

CHAPTER III: ANALYZING, SUPPLEMENTING, ADJUSTING AND COMPLETING THE STRATEGY AND SUPPOSING SOLUTIONS TO THE IMPLEMENTATION OF HANICHEMCO DEVELOPMENT STRATEGY OVER A PERIOD OF 2010 — 2015 (TOWARDS THE YEAR 2020)

3.1 HANICHEMCO’s the development strategy over a period of 2010 — 2015 (towards the year 2020)

3.2 Analyzing and evaluating HANICHEMCO strategy

3.2.1 Evaluating the business strategy by SWOT matrix

3.2.2 Assess strategies by GREAT method

3.3 Assessing strategy of HANICHEMCO, the additional issues need to be modified to improve are

3.3.1 The currently existing unreasonable business strategy of HANICHEMCO

3.3.2 Cause for the existing and unreasonable issues

3.3.3 Some supplements to improve HANICHEMCO’s business strategic

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management during period 2010 - 2015 (towards to the year 2020)

3.4 Solutions to HANICHEMCO strategy over a period of 2011-2015

3.4.1 Expanding the production scale and implementing the strategy at low cost

3.4.2 Making the differences

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B ANALYSIS

CHAPTER I: THEORY OF ENTERPRISE BUSINESS STRATEGY

1.1 THE CONCEPT OF STRATEGY AND THE ROLE OF BUSINESS STRATEGY

1.1.1 The concept of strategy and strategic administration

ld Strategy

In currently competitive business environment, we can find some successful enterprises and some unsuccessful ones Enterprises all have to find their own ways for their survival Hence, every enterprise has to create its own competitive advantage, which is considered as its strategy The strategy could be considered as ideas, plans and supports for enterprise's success in the competition with its rivals There are several concepts of strategies depending on authors They are:

According to Oxford dictionary: “the strategy is the series of complex activities with a view to mobilizing resources of an organization so as to obtain a certain aim” The strategy is used to mention “the method” of an activity but not “the concept’ of that activity

In business, Chandler - is one of pioneers initiating the theory of strategic

administration — defined the strategy as “the determination of long-term objectives

and aims of the enterprise and the application of chain of activities as well as the allocation of necessary resources to implement this objective”

In the environment of quick fluctuation, Johnson and Scholes defined: “The strategy is a long-term orientation and scale of an organization for the purpose of gaining its competitive advantage via the allocation of its resources in order to meet the market demand and to satisfy the desire of relating parties”

According to opinions of Hitt A.M., Ireland D.R and Hoskisson E.R as mentioned in the book entitled “Strategy administration, competitive competence and globalization: Concept and Situation” that the strategy is defined as “series of

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complex activities with a view to mobilizing resources so as to obtain the aim

of resources, process, human resources and necessary skills

*) The prominent characters of the business strategy are

+ The strategy clearly determines the primary objectives and business orientation of the enterprise;

+ The strategy’s orientation has to ensure the firm and continuous development in the fluctuant business environment;

+ The strategy ensures the maximum mobilization and optimal combination of the exploitation and use of enterprise resources in the present and in the future; brings into play the strengths and grasps opportunities to gain competitive advantage; + The business strategy of enterprise is reflected in the consecutive process;

+ The business strategy must comprise of attack spirit and win in the market;

+ The business strategy is usually built for a long period (normally 3, 5 or 10 years)

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control (both internal and external); building, implementing and evaluating strategy Therefore, the strategic study emphasizes on internal strengths and weaknesses

*) The content of strategic administration includes

+ fo determine the key mission and objectives of the organization:

+ To analyze the internal and external environment of the organization:

- To select the strategy that can match strengths and weaknesses with opportunities and threats:

+ To accept the organizational structure and the control systems to carry out the strategies selected

According to the opinions of Hitt A.M, Ireland D.R, Hoskisson E.R and based on definition of strategy, it could be summarized that the process of strategic management includes “a full set of commitments, decisions and necessary activities for companies so as they can obtain the competence of strategic competition, maintain the competitive advantage and the profit above the average level”

The whole process could be illustrated in the following diagram:

Source: Slide 5, lecture 1, Strategy management Figure 1.1: The process of strategic administration

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Looking at the diagram we can find that the objective of a process of strategic

administration is to achieve the competence of strategic competition and the profit above the average level To realize the above-mentioned objectives, the most important step for an effective process of strategic administration is to analyze the internal and external environment The analysis will be the premises for building strategic tasks and aims and implementing the strategy after that If all the above steps are successful the enterprise will obtain the competence of strategic competition

However that is not the end of the process The consecutive feedback of information

is very important also for the purpose of increasing the inlet quality, which helps

improve the task and that process will be reiterated at higher level This consecultiveness creates the sustainable advantage of competition and the profit

above the average level

1.1.2 The role of business strategy

From the concept of strategy and strategic administration, we can find the very important role of strategy to enterprise

The business strategy is the most important part in the whole strategies of

enterprise The other parts of the general strategy must be based on the business strategy in order to build and adjust The business strategy has great significance to the existence and operation of enterprise It helps set the major objectives and the enterprise will prepare the reasonable mobilization of short-term and long-term resources given such objectives The strategy will ensure the plans not to deviate A good business strategy will help enterprise gain more profit, take the firm and safe stand in the business environment and adapt to that environment Therefore, the enterprises have to build business strategies suitable for concrete condition and circumstance It could be said that it is a vital condition to any enterprise

In the aspect of plan the business strategy is considered as overall plan of the enterprise It puts forwards long-term development tendencies and major objectives

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of the enterprise; points out basic resources of the enterprise: proposes solutions to possible fluctuations in the competitive environment Hence, the strategy is a primary plan whose tasks of determining resources focusing resources on objectives, making use of enterprise's power to implement those objectives

In summary, the role of strategy is expressed in the 3 following basic contents: + The strategy helps enterprise have long vision:

+ A good strategy will set practical objectives and find the way to reach those objectives:

+ The strategy helps enterprise improve its knowledge of frequent fluctuation in business environment and helps give flexible and appropriate solutions

1.2 TOOLS FOR ANALYZING AND EVALUATING THE STRATEGY 1.2.1 Analyazing the business environment

1.2.1.1 PEST Analysis — Political, Economic, Social and Technological factor (analyzing the macro environment)

The external environment includes not only the society and the economy but also the industrial environment in which the enterprise are operating

Overall, enterprises and organizations all are doing business in the world of daily change; are affected by and depend on factors of nature, culture and society, technology, economy, politics and justice The enterprise cannot exist without the consecutive interaction with the external environment It is necessary to consider all the above factors before building the strategy so as the enterprise could get success

by bringing into play its strengths

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Source: hitp:/vww.shell-livewire.org/business-library/business-planning/why-u-need-a-business-

plan/P EST-analysis/

Figure 1.2: External environment

In 2007, the external environment was defined by Hitt A.M; Ireland D.R and Hoskisson E.R that “7he elements of the society affect the industry and enterprises doing business in the industry” In concrete, these factors are listed in the following

table:

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Table 1.1: The factors of macro environment

Gross Domestic Product

‘Political and

judicial factor

Anti-monopoly law Tax law

Environment

Job change and occupational

factor techniques is introduced Attitude to work fondness

Population, age structure The concepts re products and

services are changed Technological Product is improved Private sector focuses on study factor Knowledge of science and | and development in

combination with government

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strategies, which enterprises use to build strategically competitive advantage and

profit above the average level”

Analyzing the industry will help enterprises determine the industry's attraction

Accordingly an attractive industry is an industry that owns high barrier of

penetration, low role of suppliers and customers, few substitutes and moderate

competition On the contrary, an unattractive industry with low profitability owns

low barrier of penetration strong power of suppliers and customers, quite a few

substitutes and fierce competition

The Michel Porter 5-force model is a useful tool, which is used to analyze the

industry Porter has built a frame in which 5 competitive forces in the same

industry are determined, including:

Rivalry among a © Bargaining power o

Existing firms © Š &P f

= Buyers

Threat of substitute products

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1- Potential competitors: If a new company easily penetrates the market, the competitiveness is fierce The factor that limits challenges from new companies Is barrier of penetration

2- Power from suppliers: \t can be understood as the pressure of suppliers to enterprises A supplier has a strong governing power if they can cause great impacts on Output and profit of enterprise

3- Power from buyers/customers: his 1S pressure from customer to enterprise The customer has a strong governing power if he/ she can cause great impacts on output and profit of enterprise

4- The availability of substitutes: What will happen if customer uses the products and services of competitors? If the expense for this change is low, the enterprise has to face a serious threat

5- Competitors: Lastly, the appearance of competitors expresses the competitive intensity between enterprises in the industry The industry of high competitiveness usually creates less profit due to high expense for competition

The curriculum “Hit A.M; Ireland D.R and Hokisson E.R” has confirmed that

“analyzing competitors” is the way to “collect and interpret information on all competitors of enterprise” Comprehending the competitors’ environment of enterprise will supplement the knowledge in the general study and the industrial environment The aim of analyzing competitors” environment is to focus on the forecast of competitors” moves, intentions and reactions

1.2.2 Analyzing the internal environment of enterprise

1.2.2.1 Based on resources

Unlike the result of macroscopic analysis that showing the opportunities and challenges, the enterprises can determine what they are able to do via the study of microscopic environment In other words, the enterprises expect to determine their major competence to create a sustainable competitive advantage

The resources are defined as “the asset of enterprise including human resources

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and value of brand name The key resources comprise of the inlet value for the

production process of enterprise such as equipments, machines, inlet capital, employees’ skill, trademark, financial sources and management competence”

There are two kinds of resources including visible and invisible resources

Visible resources are financial sources and physical assets of value in the financial

report of company In addition, the visible resources of a company also comprise of its scientific and technological resources and the organizational quality All of these parts are listed in the following table:

Table 1.2: Visible resources

Financial resources | - Ability to borrow

- Ability to clear debts by itself

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Table 1.3: Invisible resources

- Knowledge Human resources _ = Confidence

Core competence is defined as prominent activities conducted by the company in comparison with its competitors, or as activities from which the company has

created its own value for products and services for a long time There are four

criteria to determine the major competence of enterprise including value, scarcity, high expense for copy and level of irreplaceability

1.2.2.2 Based on fields administered

Analyzing the relationship administration stresses on the awareness of interaction style and the administration of externally competitive and co-operative forces The

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analysis of common value may not expose the whole importance of the relationship

as Well as the competitive advantages which are gained by enterprise by its administrative competence The relationships are built on basis of existing relations with purchasers: supplying sources of land labor capital and materials: current and potential competitors: substitutes and other partners, etc

The industrial analysis evaluates the external factors also but at the industrial level For example 5-competitive force model of Porter determines the competitive level

in the industry Analyzing the relationship administration is acknowledged in the aspect of enterprise It also reviews the external forces but stresses on value This analysis focuses on enterprise's competence in reducing negative forces or enhancing active forces

1.2.2.3 Based on value chain

The value chain reflects activities relating to commodity stream inner the enterprise and supporting activities for this commodity stream; associates with other business activities inner as well as outside enterprise Using this tool helps concretely recognize where the value is created and the nature of competitive advantage of enterprise At least, each business unit must be considered by a chain of value The creation of lots of value chain for every single business unit will be useful if products and services are quite different

Four steps are used to analyze the value chain:

1- Recognizing the relating elements of value chain by using a diagram of internal commodity chain

2- Describing what enterprise do for every single activity

3- Recognizing the way to increase value of every single activity in theory and classifying the effect on expense or the difference

4- Standardizing the best way to do this activity

In general, analyzing the internal or external environment or SWOT will help us clearly understand the strength as well as weakness of the company, the best

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opportunities as challenges Analyzing SWOT will help the company select the best way to utilize of resources given the internal and external situation of company Once the analysis of SWOT is successful the company can select the most suitable strategy to make use the strengths and opportunities as well as to overcome its weaknesses In Maximum

1.3 TOOLS FOR DETERMINING POSITION AND ORIENTING STRATEGY

In the strategic management, there are quite a lot of matrix models for evaluating and selecting the strategy for the enterprise, including:

~ SPACE matrix used for determining the strategic position of the enterprise

- BCG matrix used for determining the strategic position of product, of enterprise; for analyzing portfolio structure in order to point out the investment orientation and to allocate resources as a base for making business decision

- MC Kinsey matrix used for determining the position of enterprise in the business environment

- SWOT matrix used for evaluating, analyzing strengths and weaknesses, opportunities and challenges to enterprise

- IE matrix uses the internal and external factors of enterprise to determine the strategic position of enterprise

In this capstone, we concretely introduce matrices used for analyzing, evaluating and determining the strategic position of enterprise as follows:

1.3.1 TE matrix

This matrix uses internal and external factors in order to determine the strategic position of enterprise and to help enterprise evaluate and select the strategy accurately thence

To make the below table based on the internal and external factors:

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Table 1.4: Weighting score

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No The impact of business | Weighting | Rating | Weighted

|

(or internal factor of enterprise)

The environmental factors (around Using the | Score

10 factors affected should be put score card | of | -4

|

The internal factors of enterprise (the | percent

factors play the decisive role in

competitive capacity of enterprise)

The determination of score of the internal factor is similar and the synthesized point

represents the enterprise's position on vertical axis

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INTERNAL FACTORS (IFE)

Source: David, Fred R (1999) Strategic Management: Concepts (7th ed.)

Unner Saddle River N.J: Prentice-Hall Inc n 191

Model 1.4 \E matrix Having determined the enterprise’s position in the IE matrix, if the position is located the area of 3 cells at the left-top corner, it means the encouragement of growth; if the position is located in the area of 3 diagonal cells from the bottom to the top, the enterprise should keep stable and is located in the area of remaining cells, the enterprise should better withdraw from the market

1.3.2 SWOT matrix

Analyzing SWOT is a method used to evaluate strengths weaknesses, opportunities and challenges of enterprise SWOT is used as an inlet for building the potential strategy The following is model of SWOT matrix:

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SŠTRENGTHS - S WEAKNESSES - W

List of strengths List of weaknesses

OPPORTUNITIES - O SO WO

List of opportunities How do 1 use these How do I overcome the

strengths 10 take weaknesses that prevent advantage of these me taking advantage of opportunities these opportunities

List of threats How do 1 use these How do I address the

strengths to reduce the weaknesses that will make likelihood and impact of — these threats a reality these threats

Source: http://;www.markintell.com/swot-analysis-tools-templates

Model 1.5 SWOT matrix

It is necessary to give at least 10 concrete and primary criteria for an accurate analysis and evaluation of strengths, weaknesses, opportunities and challenges The enterprise’s strategy is built given such analysis Through the matrix model, we have four below basic strategies:

+ The strategy for combining strengths with opportunities (SO) This strategy recommends the use of enterprise’s strengths in order to make use of opportunities + The strategy for combining strengths with threats (ST) This strategy uses strengths in order to avoid threats

+ The strategy for combining weaknesses with opportunities (WO) This strategy

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+ The strategy for combining weaknesses with threats (WT) This strategy encourages the minimization of weaknesses and the avoidance of threats

Besides, it is possible to combine the integration of strengths weaknesses as well as opportunities and threats for building the different-integrated strategies This depends on the specific condition of each enterprise

1.4 TYPES OF COMPETITIVE BUSINESS STRATEGIES

The business strategy is defined as “a united and combined chain of commitments and activities, which are used by company to gain the competitive advantage by exploiting the major competence in the specific product markets” The objective of business strategy is to create a difference between the relative position of company and of other competitors To reach that position, the company has to decide whether they should conduct business activities in a different way or conduct another activities compared to its competitors

Hitt A.M; Ireland D.R and Hoskisson E.R recommend types of business strategy in the following diagram

Natow § Focused Cost nh Target § Leader sHIP -

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1.4.1 Cost Leadership Strategy

The cost leadership strategy is “the entire of activities with a view to providing products or services with particularities which are accepted by customers at lowest cost in comparison with competitors” Vhis strategy is applied to standardized products which are accepted by majority of customers at lowest price if possible

It is compulsory for the company in chase of this strategy to carry out several activities of saving cost Firstly the company must have good facilities This helps save resources and creates higher productivity Secondly, the company must minimize total production expense In addition, the production process must be simplified and expenses for external suppliers must be tightly controlled

Differentiation strategy is defined as “the group of integrated activities was made

fo create original products in important particularities, which are difficult to imitate by competitors and this original will bring about the added value to

enterprise’’ This strategy is suitable for company specializing in non-standardized

products and targeting the market segmentation in which customers prefer the

difference in features to low price

lo reach a quite different advantage, the company has to enhance the efficiency of product and service; to create the sustainability via customers’ knowledge of product and service original Therefore, a company should increase customers’ faith

to its products so as they do not want to use another products and services

The focused business strategy is defined as “the group of activities to produce commodities or services served for a specifically competitive segmentation” The competitive segmentation may be a group of specific purchasers, different segmentation of a product line or differently geographic market

There are two kinds of the focused business strategies including the focused strategy using the different approach and the focused strategy using the low cost

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approach To conduct a focused strategy the companies must have competence in

“completing basic activities and different supports in order to develop and maintain competitive advantages and to gain the profit above the average level”

1.4.4 Integrated cost leadership/ differentiation strategy

This integrated strategy is expected to bring about better position for companies in the condition of quick adaptation to the environmental change in the receiving

period of new skills and technologies Such a kind of company can enhance tts major competence in the competition with its competitors

According to Hitt AM, Ireland DR and Hoskisson ER, a company is in chase of integrated cost leadership/ differentiation strategy should be flexible in the strategy including the development of the flexible manufacture system (FMS), the

appropriate information system and the general quality management system (TMQ) The flexible manufacture system is specialized by the controlled process via the system to produce series of product at moderate and flexible quantity This helps enterprise produce lots of product kind at moderately low cost

The electronic information network connects the company with its suppliers, distributors and customers By effective connections with related parties, the company can meet customers demand on product quality and good delivery speed beyond their expectation Besides, the network can improve the work amount between staff in the company and its partners (suppliers and distributors) Customer Relation Management (CRM) will be effectively implemented also

The system of comprehensive quality management helps enterprise improve product quality, increase customer satisfaction, reduce expense and shorten time to launch new products

1.4.5 Evaluating and selecting the strategy based on GREAT model

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Table 1.5 Model GREAT

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CHAPTER Il: ANALYZING THE CURRENT STRATEGY OF

HA BAC CHEMICAL AND NITROGENOUS FERTILIZER ONE-SINGLE

MEMBER LIMITED COMPANY (HANICHEMCO)

2.1 HANICHEMCO OVERVIEW

2.1.1 General introduction of HANICHEMCO

Ha Bac Chemical and Nitrogenous One-Single Limited Company is a subsidiary of the parent company — Viet Nam Chemical Corporation The company has its legal status, Its Own stamp, and its bank accounts domestically and abroad The company operates in pursuant to Law of Enterprise and company regulations

Date of establishment: 01 May 1960

Full name: HA BAC CHEMICAL AND NITROGENOUS FERTILIZER ONE- SINGLE MEMBER LIMITED COMPANY

Vietnamese abridged name: HABAC CHEMICAL AND NITROGENOUS FERTILIZER COMPANY

International transaction name: HABAC CHEMICAL AND NITROGENOUS FERTILIZER LIMITED COMPANY

English abbreviation name: HANICHEMCO

Head office: Tho Xuong ward — Bac Giang city — Bac Giang province

Charter capital: 352.000.000.000 VND (three hundred fifty two billion Vietnamese dong only.)

Key products:

Producing and selling urea fertilizer, mixed fertilizer NPK;

Producing and selling basic chemicals;

Producing and selling electricity:

Producing and selling liquid NH;3 liquid-solid CO», CN gas products

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equipment and technology for chemical works:

- Investing in financial business:

- Doing business in other fields in accordance with stipulations of law

Organizational structure of the company:

Viember Council

General é Director

Deputy General Director

Technical Production Administrative

(

Figure 2.1; Diagram of HANICHEMCO organization structure

2.1.2 HANICHEMCO production and business situation over a period of

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leading company of Viet Nam

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Does Preliminary assessment of the company’s operation result

Norms of the company’s production and business in the last 5 years all have been 200d:

+ Norms have mostly grown, of which the highest growth rates are the

efficiency of production and business (89%) budget contribution (38.6%) and CO;

growth rate (63.7%) Total turnover and laborers” income are moderately high

(above 10%) This reflects the effective production and business situation of the

company, the improved laborers’ life, resulting in high socio-economic efficiency for the province and the whole industry

+ Several norms have grown but not at high level This reflects the maximum exploitation of production competence of technological line Thus, the investment

in production expansion in the future is necessary (next period)

In the long run, the company has gained a remarkably growth over a period of

2005 — 2009 The investment and renovation have showed clearly efficiency A

good result of production and business not only brings about high efficiency in

financial aspect for the company but also the socio-economic efficiency (via annual norm and budget contribution of the company) This result will create a momentum for making the development strategy for the company in the years to come

SITUATION

2.2.1.1 Analyzing the macroscopic environment

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materials The demand for 3 these energies is expected to quickly increase in the

future The urea production technology from black-coal is mainly applied in China

- Where urea fertilizer is produced from black-coal powder, accounting for 65.9% meanwhile the urea produced from other materials such natural gas oil sludge, etc just accounts for 34.1% The production of urea from black-coal is_ firstly

introduced in 1950 and till now it has been developing into the 3rd generation with

modern technology including gasification of coal powder made by Shell (Holland)

or Texaco (the US): the synthesis technoloy of ure made by Snamprogetti (Italy) or

Stamicacbon (Holland) in which the major features are to reduce raw materials and

energy consumption by 50% in comparison with the previous technology The owner of the above technologies came to Viet Nam already to seek co-operation and investment opportunities and to express their goodwill in handing-over of these technologies to Viet Nam for investment and production

+ For the allocation of major urea production and consumption areas in the world Currently, 80% of total urea output in the world produced from natural gas Urea production factories mainly are located at the natural gas-abundance regions including Russia, Middle East, Indonesia, etc From 2000 — 2005, the world urea

output increased by 19%, mainly in Asia, Middle East and CCCP Meanwhile quite

a new projects were built or expanded, the output of several other factories were cut In the US and Japan, lots of factories had temporarily stopped production for a long time due to the increased price of oil in the world

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Tiêu đề	Orientation to Complete the Business Strategy of Ha Bac Nitrogenous Fertilizer and Chemical One-Member Limited Company Over a Period of 2010 - 2015 (Towards to the Year 2020)
Tác giả	Đong Van Quyet, Do Doan Hung, Nguyen Thi Phuong Lan, Nguyen Thi Thanh Minh
Chuyên ngành	Business Administration
Thể loại	Capstone project program report
Năm xuất bản	2010
Thành phố	Hanoi

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Số trang	93
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