G1_00165 FORMULATING DEVELOPMENT STRATEGY FOR FSC INFORMATICS ELECTRONICS JOINT STOCK COMPANY (FSC) 2011-2015 XÂY DỰNG CHIẾN LƯỢC PHÁT TRIỂN CHO CÔNG TY CỔ PHẦN ĐIỆN TỬ TIN HỌC FSC (FSC) 2011-2015

G1_00165 FORMULATING DEVELOPMENT STRATEGY FOR FSC INFORMATICS ELECTRONICS JOINT STOCK COMPANY (FSC) 2011-2015 XÂY DỰNG CHIẾN LƯỢC PHÁT TRIỂN CHO CÔNG TY CỔ PHẦN ĐIỆN TỬ TIN HỌC FSC (FSC) 2011-2015

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GRIGGS UNIVERSITY GOLBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION

PROGRAM

CAPSTONE PROJECT REPORT

FORMULATING DEVELOPMENT STRATEGY FOR FSC INFORMATICS ELECTRONICS JOINT STOCK COMPANY

(FSC)

2011 - 2015

Group No 13 Students’ names:

1 Doan Quang Huy — Group leader

2 Luu Manh Tuong

3 Vy Tien Dung

4 Trinh Thi Yen

~ HANOI, 2010

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ACKNOWLEDGEMENTS

We Doan Quang Huy Luu Manh Tuong Vy Tien Dung and [Trinh Thi Yen would like to extend our gratitude to all Griggs professors and ETC-VNU staff for their guidance and support during our process of preparing this report

Let our thanks also go to FSC INFORMATICS ELECTRONICS JOINT

STOCK COMPANY (FSC) for their assistance in our collection of data and

relevant support for the timely completion of this work

[.ast but not least, we also owe our achievements to the tireless support and

encouragement of our family and friends without which we will not have such courage to fulfill our MBA

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CHAPTER 1s: THEORETICAL BACKGROUND , :csnsseconseenernersennenersssnvonsersensonorenss 13 1.1 Definitions of strategy and strategic management DFOC€SS - ««<<<s<<s<<<2 13 1.2 SWOT analysis — the tool to formulate the strategy .:cscessessessenseceresetenenees 1s 1.2.1 External Environment Analysis .0 0 0cccccccccecssesceseeeseeseeeeeeeeenseeeenseeeeaees 16 1.2.1.1 Macro environment AmalySis ccccccccccccccscecscseseessceeseeeesseseeeesuecesseenesseaneees 17 1.2.1.2 Industrial analysis and Michael Porter`s competitive fIve forces 18

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CHAPTER 2 CHAPTER II: AN ANALYSIS ON THE CURRENT SITUATION OF

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CHAPTER 3: FORMULATION OF DEVELOPMENT STRATEGY FOR FSC FOR PERIDD 2011:2015 äadoauddaddgdgdagdadGoaodtioitsslislidesisitusi6oiqiasx6s0ssgisei 86 Š,]; ESCs viiohs/nmissions 2011-20 lỗ acga nen dáodio0050214466153146504466s40148686214144414ÿ0SE 86 3.2 Selecting development strategy for FSC 2011-201Š So Ă HH, 86 3.3 Solutions for the implementation of the straf€gieS So 92 31.1; Miar?Rbt SEN DU tuuccggocGátg Giá tin c1 28608xgu14300160008440a936650gg1130 S33G28580439b206003.10 038 92 3.3.2; Cost Management Strategy .-:: csssecejcessscsdascecssinessesenttscecesanssensentninesagesess 93 3.3.3 Human resource development (HRM) Strategy - -2- {2c se 95 80t R00 TEEN Euaeasauesarorrnrroonortrrianoutnirosottttrptivat00001008000001018002%00041000800000680 97 3.4 Roadmap and Gantt chart for the implementation of the stratepy 99

CE” CONCLUSION caadalaostiebeokateoatssgakadwdiedadcslbsdtegtuasdediseadaasatboeae 101

REEFERENGCES HH Họ HT Họ HT 00 1 0001600004000 04 103

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PDF Compressor Free) Gf! ABBREVIATIONS

Customer Relationship Management

external Factor |.valuation

Foreign Direct Investment

SC informatics electronics joint stock company

Gross Domestic Products

Gains, Risks, Expenses, Achievability, Time

High Tech Zone

Information and Communication Technology

Supply Control and Management

Strengths, Weaknesses, Opportunities and Threats

World Trade Organization

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6

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taBbl6-1.i, SÀNG] MAI [6 ngsoatianiioabigaiciiiili0i401045303302i006180125a008055601/00318954045135303/630013806 16 Table 1.2 The general Environment: Segments and Elements .:c.:ccscsseeseseseeeseeeseeees |8 IFì) 0 NHI F0 l0 THDIE-liát: ;MHŒHETDIE FESBGMTUELeesennsesdddvesaslfndasenanrioiruiôsgesz400096)ãs20131000/36000045%1/0N212038/0 4686063 24 TRDI€:1.ã: Valbe CNaÌNGHA VÀ § scauuagiitiiaroniisoidiniStiiltEiNii43518160359588ã56cu05cLã06s60024653560802580030/56210Ô TRUS TG KARE COS vices "ốm ẽốốố hố hố Sia eT Ge tapra aaa aOR 32 Table 2.1 FSC’s Financial reports Over years .cccccecccececeseeeseeseceseensecnaeeeeeeeesaeeeseaseeeeenes 36 Table? 2 FSS 's key inant tal (CCAR co sessansasaiccmncncmurnaonmnenaccasanemnnennccormnunenennsae 37 Ta162.3, EOIEEWSI TOY VI stiaktiebiridiiiioláctiiogindi030064§2000012013060455Ẹ0348/430646189/0414/g04013GGồ 39 Table 2.4 The application of IT and e-commerce In ÍirmS 5 55s 43 Table 2.5 FSC’s hardwares provision as against that of 11s competIfOFS 56 Table 2.6 FSC’s hardwares provision as against that of 11S comp€tIfOFS «.- 58 Table 2:7, Extéttial Factor Evaluation tĐ€ TẾ cụ cceocnidvbiciicdsvotia01033 86110030046 66440ã1606ã4: 63 Table 2:8 TTiiiiiclfl RES0U S5 các cesecceesdesioi869058 00200 0Agiã018x64x\8008//403408x2isug 64 Table 2.9 General Balance Sheet cv 2n v11 TK ng KT KH Hư kh 67 1TùBle 2 lnternal Esebur Evaluation(TEE) NHI eeeeeeeeeoniernnidddaninaaindenaiogesasssvn 83 Fable 2:11 FSC's titenmial-Ectettial MU (utuviadtuanadadiatiadiabiaaidlsdiataskotadadiabuali 85 Table 3.1.:Quantitative matrix with GREAT Chiteria es «sssdessiscssivnssnascrecuaassccanents 90 Table 3.2 Total investment Of FSC wo ccc ccc ceseesscesecseesseeeeeseeseeeseeeeeeeeaeeneeeeaeensesaeenaees 98 1l 1„3 ERPvcfeid Bìf6iCGNI YESDUIGES saasososenerirtintiuikeratittsibioitavtkoNIAA0925044/009908049048009/89008369068 09

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igure 1.1 The strategic management Process .cccccccccesseseseceseseeceseesereeceseeensaeeneeensees I4 [igure l.2 Layers of the busineSS €RVITONIT 2 2221112 122 th nh nà Hy he 17 Figure 1,3 5 [ore modelot ME Porte ts ciscsccsssccrcamuaconsensmmecnmeannernneonnensanesanuseaxeonwarnsens 20 Figure 1.4 Competitor analysis GO(TĐDHIBfĂBcsscosseocaogrsetiidgi001640244001s664 424321534 30140Á083606604686 22 Figure 1.5 Porter's Generic Strate gieSins reazsirenceenrtminsetenstditennseepstvinertibacineenatitnnnn dhauibs 27 Figure 1.6 Types of business-leVel SITA[CĐICS cu cv ng HH ng Hà rớt 30 Figure 2.) Growth chart of Lumover (Mil VND) sssssssususssasnccemcassaanncwnnnerecuimasnoreeennnn 36 Figure 2.2 Vietnam GDP changes over from 1980 to 2009 000 ceceeseeseeteeseeeseseceneeeee 38 Figure 2.3 Structure of IT investment and e-commerce of enterprises in 2008 and 2009.42 Figure 2.4 FSC’s customers’ groups cccccccssseseeesenseseesecseeteesecaeesecsecsecaeessnaeeaeeseeaeeeeneeees 52 Figure 2 5 COtftiBoslHGB tIỆ ES 9 GURIHHiĐNccosucseooobetiaiiitidiibinlL0506161428315408/0300040600004008 53 Elptte 2:6, NGIWDFK GỂ DIGVIEESecooetivgttalG05466556356862.0864020(44508404866330102440002446003k 84 54 [igure 2.7 FSC”s HRMS product as against that of its competIfOTS «‹-.+ s5 s55 55 Figure 2.8 FSC”s hardwares provision as apainst that of 11s competItOFS a Figure 2.9 FSC’s e-gov solution software provision as against that of its competitors 58 Figure 2.10 FSC Informatics Electronics J.S.C shareholoders Plenum 66 Figure 2.1 ls FSC SGTY GUTHEAUTE 220x620 16t công s06 02alninia,xilo vui 68 Figure 2.12 FSC Staffˆs range Of 0€ .L L0 L1 HT TT HH HH ren 69 Pirpure: 2.13 2 SC's Value Cha? GINBÌVSÌS soaneoaedvbiioeiia2iLiidsolioASiES33/00454ã04100N4%6E4300890865910610 70 Figure 2.14 A comparison of infrastructure between FSC and its competitors 7] FiEufe2.15.G5fowth of Human resource Chan se: các1204204848SoiE6201088 08.086 73 Figure 2.16 A comparison of Human Resrouces between FSC and its competitors 73 Figure 2.17 A comparison of Technology development between FSC and its competitors Đuối E0 EEErseerbenesoelliyneeosnensfxmtessÖsntpxe2:nnsssanengonssrnere drasrrslovnoseg4gnnsrÖoinsn9esteeseseresdnseensasslssssesrecessối 74 Figure 2.18 A comparison of Technology development between FSC and its competitors

Gg LESS SG AAT RAI GANA AA on abe Seen sph abbey Bde dd AMIR MARE NES 75 Figure 2.19 A comparison of Inbound logistics between FSC and its competItors 76 Figure 2.20 A comparison of Operations between FSC and its competItors a Figure 2.21 A comparison of Outbound logistics between FSC and its competitors 78 Figure 2.22 A comparison of Marketing and sales between FSC and its competitors 79 Figure 2.23 A comparison of Services between FSC and 11s competiOrs 8] Figure 2.24 SWOT atialysis FESHÌHES saaesotuernoietdanasdaiidabiadEiiooi38000L051G04884015164316/8/0030146.3015ui30808i0 84

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Nigel OF | Cpttnrss SOc FPGA METAR ture SE T0 i oscrnceenemsarnensedimenaniengpaaies 94 Higure 3.2 Roadmap for the mmplementation öf the SIrAt€BY che 99 Migure 3.3 Gantt chart for the implementation öÍ the sIFaf€ĐY à cà co 100

LIST OF MATRIX

Matrix |: Combination of exploiting strengths and taking advantage of opportunities plan -

NƯ KÝ tua nibic tá ents Scie are rca iPad 50 /403331006003/006904ã8500480004160g000983ài1ÄNi4gkL3Âxuegaistdk 87

Matrix 2: Combination of exploiting strengths and overcoming threats plan - S/T 88

Matrix 3: A combination to minimize weaknesses and overcome threats — W/T 88

Matrix 4: A combination to minimize weaknesses and take advantage of opportunities —

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1 Rationale

Despite the three remarkable crises, namely the 1994 Mexico's currency crisis the 1997-1998 Asian crisis and the not-yet-over 2008 financial global crisis Vietnam still remains one of the fastest-growing economies in the world, averaging around 8% annual gross domestic product (GDP) growth from 1990 to 1997 and 6.5% from 1998-2003 From 2004 to 2007 GDP grew over 8% annually Foreign trade and foreign direct investment have improved significantly From 1990 to 2005 agricultural production nearly doubled, transforming Vietnam from a net food importer to the world's second-largest exporter of rice The average Vietnamese savings rate is about 30% Inflation in 2007 was 7.3% but was in the double digits and approaching 30% year-on-year by August 2008' Generally in 2009, GDP

increased by 5.1% against that of 2008.”

I lowever, according to the Ministry of Planning and Investment’s reports’, the economy is showing signs of slower growth while its quality is relatively lower due

to the low efficiency and productivity resulting in high production cost At present, investment is contributing to 60% of the annual GDP growth and the rest come from labor values However, due to low productivity and obsolete technology, the high-tech products account for only a limited amount in total export volume This fact, in turns, results in an imbalance in the macro economy To find the way out, the Vietnamese government has decided to strongly conduct a structural shift in the economy In this shift, the private sector is encouraged to become drivers of the economy Especially, the technology sector is to be spearheaded and seen as agents leading the whole economy movement toward a more advanced high tech economy

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Having nay UWARSf30RR is tren Ƒgt9 predicts great opportunities will be opened for private enterprises in general and in the IT field in particular It also sees the needs for revising its current strategy and forming a new strategy to actively grasp the potential new developments in the industry

2 Objectives

The project is aims at following objectives:

e Form theoretical background for the analysis of the external and internal environment Major theories on SWOT and industry competitive forces, strategies and strategic management will be studied as the group try to form a strategy for FSC in the 2011-2015 period

- Analyzing FSC’s strengths, weaknesses, opportunities, threats while taking into consideration FSC’s market status against its competitors

- Formulating the development strategy for FSC in the 2011-2015 period on the basis of the SWOT analysis

- Proposing an implementation plan for the new strategy with specific roadmap and plan for the co-ordination of different resources

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lhe Tesea Mains parts vith following compositions:

A INTRODUCTION

B DEVELOPMENT

CHAPTER I: THEORETICAL BACKGROUND

CHAPTER Il: AN ANALYSIS ON THE CURRENT SITUATION OF FSC

3.2 Selecting development strategy for FSC 2011-2015

3.3 Solutions for the implementation of the strategies

3.4 Roadmap for the implementation of the strategy

3.5 Recommendations

C CONCLUSION

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Chapter 1 : THEORETICAL BACKGROUND 1.1 Definitions of strategy and strategic management process

Originally the word “strategy"’ comes from word for “general” in Greek and has a military connotation As a general who Is more involved with telling other how to

do than to do it himself a strategy tends to deal with the “how” part rather than the “what" The tree Wikipedia defines generally “A strategy is a plan of action designed to achieve a particular goal’ In its authentic sense, “a strategy” can be understood as a set of action plan that one party undertake to gain a particular purpose in relation to its competitors In the military context, the competitors may

be the enemy while that of the game theory may be another player.”

In a business context, Thomson A.A., Jr Strickland II] A.J and Gamble J.E defined “a company’s strategy consists of the competitive moves and business that managers employ to attract and please customers, compete successfully, grow the business, conduct operations and achieve targeted objectives” (p3, 2003, Crafting and Executing Strategy-The Quest for Competitive Advantage Concepts and Cases) Despite the details that the definition touch upon in specifying what a business should do to compete successfully, we think that it lays too much the workload on the role of the “managers” in developing and implementing the strategy while ignoring the other factors, i.e., the role of the followers in the process Instead, this research adopts the Hitt, A M: Ireland D.R and Hoskisson E.R`s definition of business strategy put forward in the first chapter of the book

“Strategic Management, Competitiveness and Globalization: Concepts and Cases” Accordingly, strategy is defined as “a coordinated series of actions which involve the deployment of resources to which one has access for the achievement of a given purpose (slidel, chapter 1) Elaborating from this definition, the strategic

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management process inch ude the involvement of “the full set of commitments, decisions and actions which are required for firms to achieve strategic competitiveness, sustained competitive advantage and above-average returns’ In comparing the two definitions, one can easily see that they both target enhanced competitiveness but the latter tend to be more sustainable since it aims to bring about the “sustained competitive advantage and above-average returns’ On the base of the definition, Hitt, A, M; Ireland D.R and Hoskisson E.R also suggest a model of the whole strategic management process as follows:

External Environment |

Stratepic Intent

» Phas

intemal

Emironnent |

Competitne Corporak level im ie Là ¡à010 01 0Ú Bae tas Stratezy ; & Controi

Acqukifions & Inte matioml Cooperative | Strakgic es ae rier a

Restruc tung, 5trakery Strategies Leadership & Innovation A

Competitive ness

Above Averagr Returnms

Figure 1.1 The strategic management process

(Source: slide 5, chapter 1, “Strategic Management, Competitiveness and Globalization:

Concepts and Cases", Hitt, A, At; Ireland D.R and Hoskisson 1:.R’s, 2007)

In an attempt to realize the objectives, a company should be able to know exactly what 1s happening in the external environment while tapping the internal strengths

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to HN €fPrfff?E(bX£S1MV€TfIDBv chance that the whole process starts with the external and internal environment analysis which is seen as the inputs for the strategic mission and intent On the base of the inputs, a strategy will be formulated and afterward implemented in order to result in the strategic competitiveness which may generate the above-average returns However, it is noticeable that the process

is a non-stop circle where continuous feedback is extremely important to further enhance the inputs quality which in turns betters the mission and the proccss repeated itself at a higher level It is this continuity that brings about the sustainable competitive advantages and above-average returns Obviously, the external and internal analysis plays crucial roles in developing an effective strategy A tool that has been used for long to generate inputs for the formulation of strategy is SWOT analysis

1.2 SWOT analysis — the tool to formulate the strategy

Environmental factors internal to the firm usually can be classified as strengths (S)

or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T) Such an analysis of the strategic environment ts referred to as a SWOT analysis

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates As such, it is instrumental in strategy formulation and selection The following diagram shows how a SWOT analysis can be used in environmental scan:

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Table 1.1 SWOT Matrix®

The first use of SWOT analysis is to get to identify strengths and weaknesses, external opportunities and threats In which, the internal strengths are seen as core competencies, corporate capabilities and resources that provide the basis for a company’s strategy Second, the internal Weaknesses are the critical parts of a business a company must strengthen or hide from its competitors The external opportunities are the benefits that are likely to accrue from pursuing a company’s vision and external opportunities while the external threats are the pitfalls and the dangers, the variations and exceptions possible

Another use of SWOT is to march and convert Matching is used to find competitive advantages by matching the strengths to opportunities Converting is to apply conversion strategies to convert threats or weaknesses into strengths or opportunities

1.2.1 External Environment Analysis

° http://www 1000ventures.com/business guide/crosscuttings/swot_ analysis html

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The broader external economy and society but also the industry environment that the business operates in is the two factors composing the external environment

1.2.1.1 Macro environment Analysis

No business can exist in a vacuum Each is set in a particular country and region to which it is inextricably linked This setting provides multiple contexts that influence how the organization operates and how and what it produces Thus, the concept of

"external environment" is an important consideration for a business in its attempts

to understand the environment it is operating in An analysis of the external environment is an attempt to understand the forces outside organizational boundaries that are helping to shape the business The layers of business environment are clearly illustrated below

<ne macro-environme,,,

\adustry (or Sôcto p

The

Figure 1.2 Layers of the business environment’

To effectively formulate a strategy, a firm should not only look at the current situations but also the trends in those factors in order to be more actively in

” Source: www.busmegt ulster.ac.uk/modules/bmg547m1/Strategy%202 ppt

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influencing the future since most strategy are usually set in a longer term The general environment factors can be summarized in the following table:

* Inflation rates

- Interest rates + Trade deficits or surpluses

* Budget deficits or surpluses

- Applications of knowledge

* Important political events

* Critical global markets

care The General Environment: Segments and Elements

- Ethnic mix

+ Income distributuon

+ Personal savings rate

- Business savings rates

* Gross domestic product

- Labor training laws

- Educational philosophies and policies

* Concerns about the environment

+ Shifts in work and career preferences

* Shifts in preferences regarding

product and service characteristics

* Focus of private and government-

supported R&D expenditures

* New communication technologies

> Newly industnalized countnes

* Different cultural and institutional

attributes

Table 1.2 The general Environment: Segments and Elements®

In analyzing the external environment, a company should not only figure out a list

of influences but it should also need to understand key drivers of change More importantly, the focus should be laid on future impact of environment factors with considerations to the combined effect of some other factors likely to be most important

1.2.1.2 Industrial analysis and Michael Porter's competitive five forces

As seen in the figure 1.1, external environment factors include both the macroeconomic environment and the industrial one The industry is defined as “a group of firms producing products that are close substitutes or the firms that influence one another.”’ Moreover, an industry also “includes a rich mix of

* Hitt, A, M; Ireland D.R and Hoskisson E.R, Slide 9, chapter 2,

: Hitt, A, M, Ireland D.R and Hoskisson E.R, Slide 9, chapter 2,

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compelltive ¥ rale gles (hat COMpPAHleS Use IH pur suing SIrale gic competitiveness and

ahove-average returns ©

A very useful tool that has been long used for industrial analysis is Michael Porter's five force model published in the book Competitive Strategy (1980), Free Press, New York 1980 Michael Porter developed a framework, which identified 5 forces that act to either increase or reduce the competitive forces within an industry as

follows

Threat of New Entrants: The easier it is for new companies to enter the industry, the more severe competition there will be Factors that can limit the threat of new entrants are known as barriers to entry which may include economies of scale, product differentiation, capital requirements, switching costs, access to distribution channels, and cost disadvantages independent of size and government policy

Power of Suppliers: This is how much pressure suppliers can place on a business Suppliers may become powerful when:

e Supplier industry is dominated by a few companies but sells to many

e [ts product is unique and/or has high switching costs

e Substitutes are not readily available

e Suppliers are able to integrate forward and compete directly with present

customers

e Purchasing industry buys only a small portion of the supplier's goods

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Potential entrants

‡

Threat of entry

Figure 1.3 5 force model of M.E Porter’

Power of Buyers/ Customers: This is how much pressure customers can place on

a business Buyer is powerful when:

e Buyer purchases large proportion of seller’s products

e Buyer has the potential to integrate backward

e Alternative suppliers are plentiful

e Changing suppliers costs very little

e Purchased product represents a high percentage of a buyer’s costs

e Buyer earns low profits

e Purchased product is unimportant to the final quality or price of a buyer’s products

'© Source: Porter, M_E (1980) Competitive Strategy, Free Press, New York, 1980

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ALAA BING BE Substitutes! FAIRE products that appear to be different but can satisfy the same need as another product To the extent that switching costs are low substitutes can have a strong effect on an industry

Competitive Rivalry: The term refers to the intensity of competition between existing firms in an industry Consequently, intense rivalry closely related to:

e Number of competitors

e Rate of Industry Growth

e Produce or Service Characteristics

e Amount of Fixed Costs

1.2.1.3 Competitor analysis

Hitt, A, M; Ireland D.R and Hoskisson E.R defined “competitor analysis” as a way

of “gathering and interpreting information about all of the companies that the firm competes against.”'' The key objectives in competitor analysis are to develop a greater understanding of what competitors have in place in terms of resources and capabilities, what they plan to do in their businesses, and how the competitors may

Hitt, A, M: Ireland D.R and Hoskisson E.R, Slide 6, chapter 2

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react to various situations in reaction to what the firm does Michael Porter has defined a competitor analysis framework that focused on four key aspects (Porter,

1980 cited in netmba.com): competitor’s objectives, competitor’s assumptions, competitor’s strategy, and competitor’s resources and capabilities These four aspects of competitor analysis are the areas critical for a firm to understand and they should pursue this knowledge not only for current competitors but also for other potential competitors in the business This framework is broken into two parts The competitor's objectives and assumptions drive the competitor while the competitor’s strategy and resources and capabilities define what the competitor is doing or is capable of doing Together, these four aspects define a competitor response profile which gives the firm an understanding of what actions a competitor may take Taking this analysis across a firm’s key competitors will give the firm a viewpoint on where the sector is heading, and provides the firm with a basis for developing their strategy and actions

Competitor Analysis Components

What crives the cornpetitor What thecorrpeiiter m doing or in

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In conclusion, the external analyses’ outcomes are to find out opportunities and threats to a business from macro, industry and competitors’ exposure By studying the external environment, firms identify what they might choose to do After knowing the opportunities and threats, firms should also know how to maximize the former while at the same time mitigate the latter An internal environment analysis

is an effective tool in so-doing

1.2.2 Internal Analysis

The internal analysis is expected to provide a comprehensive evaluation of the internal environment's potential strengths and weaknesses In other words, a firm is expected to successfully identify its unique resources, including both tangible and intangible ones, capabilities and competencies required for sustainable competitive advantage Specifically, the tangible resource of a company is listed in this following table:

TABLE 3.7 Tangble Resources

Financlal Resources - The firm's borrowing capacity

- The firm's ability to generate internal

funds

Organizational Resources - The firm's formal reporting structure

and its formal planning controlling and

coordinating systems

Physical Resources - Sophistication and location of a firm's

plant and equipment

- Access toraw materials

Technological Resources - Stock of technology such as patents,

trademarks, copyrights and trade

secrets

Table 1.3 Tangible resources”

Intangible resources are largely invisible, but over time become more important to the firm than tangible assets because they can be a main source for a competitive advantage The typology of the intangible resources is specified in the following table:

'? Hitt, A, M; Ireland D.R and Hoskisson E R, Slide 8, chapter 2

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Typology of Intangible Resources

Reaticecee aiMerect atom

i Put tesed etources weer Lead “esc ces SIUIDULIGSEeS resources

“#s5cr€ POW DOA Atelty tu lead

†2{ret tre Ntac 2® competence Huma

Capita renwe Piavers Capaott, Cates Menai Cortra otelty to rase tures Orgarvragonal ‘eputatien

S@latorshic ain the communit, Rel stionshic wm ocal and cenrrai

goremment Marhetng ani selling

Business develooment and planning xganang Orgarncatonal

Culture

Table 1.4 Intangible resource’?

The analysis of a firm’s tangible and intangible resources may help it know its capabilities and core competencies better Capabilities'* represent the capacity to deploy resources that have been purposely integrated to achieve a desired end state Meanwhile, Core Competencies'* are defined as the activities that a firm performs especially well compared to competitors or the activities through which the firm adds unique value to its goods or services over a long period of time

Four criteria for determining strategic capabilities'° include Value, Rarity, Costly- to-imitate, and Non-substitutability

1.2.3 Value chain analysis

Additionally, a company is also expected to analyze its own value chain to allow the firm to understand the parts of its operations that create value and those that do not According to Michael E Porter in his book of “Competitive Advantage: Creating and Sustaining Superior Performance, pp 39-40, 1998, a value chain’s primary activities involved with a product’s physical creation, a product’s sale and distribution to buyers and the product’s service after the sale while its support activities may involve a company’s provision of the assistance necessary for the primary activities to take place Other elements are explained as follows:

'* http://students.aftrs.edu.au/nhijazi/MBT/Ass1/Assessing%20Core%20Intangible%20resources pdf ' Hitt, A, M; Ireland D.R and Hoskisson E.R, Slide 18, chapter 3

'* Hitt, A, M; Ireland D.R and Hoskisson E.R, Slide 22, chapter 3

'© Hitt, A, M; Ireland D.R and Hoskisson E.R, Slide 20, chapter 3

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Table 1.5 Value chain analysis’

Outbound Logistics

Activities involved with collecting, storing, and physically distributing the final product to customers Examples of these activities include finished goods warehousing, materials handling, and order processing

Marketing and Sales

'” Hitt, A, M: Ireland D.R and Hoskisson E.R, Slide 25, chapter 3

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ARF GORUATSANCE yee Neal oMeans through which customers can purchase products and to induce them to do so To effectively market and sell products firms develop advertising and promotional campaigns select appropriate distribution channels and select develop, and support their sales force

Services

Activities designed to enhance or maintain a product's value Firms engage in a range of service-related activities, including installation, repair training, and adjustment

Each activity should be examined relative to competitors’ abilities Accordingly, firms rate each activity as superior, equivalent, or inferior

In conclusion, a SWOT analysis is expected to help us understand better a company’s resource strengths resource weaknesses, best opportunities, external threats However, a SWOT analysis on its own won't help a business The next step

is where things start to get interesting and that is when the SWOT study is incorporated into a business strategy A firm may do this informally or informally but it is imperative that a company should be able to develop different alternative strategies and select the best for itself

1.3 Business-level Competition Strategies

A business-level strategy is defined as “an integrated and coordinated set of commitments and actions the firm uses to gain a competitive advantage by exploiting core competencies in specific product markets.’ 'S A firm positions itself

by leveraging its strengths Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus These strategies are applied at the

'* Hitt A, M: Ireland D.R and Hoskisson E.R, Slide 2, chapter 4

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business unit level They are called generic strategies because they are not firm or industry dependent The following table illustrates Porter's generic strategies:

(low cost) (differentiation)

Figure 1.5 Porter's Generic Strategies

Source: hitp: www.quickmba.com strategy generic.shtml 1.3.1 Cost Leadership Strategy

This generic strategy calls for being the low cost producer in an industry for a given level of quality The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices to gain market share In the event of a price war, the firm can maintain some profitability while the competition suffers losses Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for a longer period of time The cost leadership strategy usually targets a broad market

Some of the ways that firms acquire cost advantages are by improving process efficiencies, gaining unique access to a large source of lower cost materials, making optimal outsourcing and vertical integration decisions, or avoiding some costs

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altogether lmpeting rms are unable to lower their costs by a similar amount, the firm may be able to sustain a competitive advantage based on cost leadership

l'irms that succeed in cost leadership often have the following internal strengths:

e Access to the capital required making a significant investment in production assets: this Investment represents a barrier to entry that many firms may not overcome,

e Skill in designing products for efficient manufacturing for example having

a small component count to shorten the assembly process

e High level of expertise in manufacturing process engineering

e Efficient distribution channels

|:ach generic strategy has its risks, including the low-cost strategy For example, other firms may be able to lower their costs as well As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive advantage Additionally, several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their segments and as a group gain significant market share

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Iitms that succeed in a differentiation strategy often have the following internal strengths:

« Access to leading scientific research

e Highly skilled and creative product development team

¢ Strong sales team with the ability to successfully communicate the perceived strengths of the product

e Corporate reputation for quality and innovation

The risks associated with a differentiation strategy include imitation by competitors and changes in customer tastes Additionally various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments

1.3.3 Focus Strategy

The focus strategy concentrates on a narrow segment and within that segment attempts to achieve cither a cost advantage or differentiation The premise is that the needs of the group can be better serviced by focusing entirely on it A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from competing directly

Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their suppliers However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute products do not exist

Firms that succeed in a focus strategy are able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very well

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Some risks of focus strategies include imitation and changes in the target segments Furthermore, it may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly Finally, other focusers may be able to carve out sub-segments that they can serve even better

1.3.4 Integrated Cost Leadership/ Differentiation Strategy

Elaborated from Michael Porter’s strategy, Hitt, A, M; Ireland D.R and Hoskisson E.R also suggests following types of business-level strategies shown in the

Figure 1.6 Types of business-level strategies

(Source: Hitt, A, M; Ireland D.R and Hoskisson E.R, slide 33, chapter 2)

In the Figure 1.6 above, the integrated strategy is added and expected to bring about

a better position for the company in term of quick adaptation to environmental changes, early adoption of new skills and technologies A company of this kind could better leverage a company’s core competencies while competing against its

rivals

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Acc PDE COmMPRESSAr t% VFR and Hoskisson E.R'’ a firm that follows the integrated cost leadership/differentiation strategy is advised to commit to strategic flexibility which involves flexible manufacturing systems (FMS) adaptable information network and total quality management systems (TMQ)

Flexible Manufacturing Systems is characterized by computer-controlled processes

to produce a variety of products in moderate, flexible quantities with a minimum of manual intervention This may help a company eliminate the “/ow-cost-versus-wide product-variety” tradeoff and produce large variety of products at relatively low

costs

Information networks link companies electronically with their suppliers, distributors, and customers By having good connection with the stakeholders, a company may better facilitate efforts to satisfy customer expectations in terms of product quality and delivery speed Additionally, it may improve flow of work among employees in the firm and their counterparts at suppliers and distributors Customer relationship management (CRM) will also be implemented effectively

Total Quality Management Systems would help the firm to commit totally to the customer through continuous improvement using data-driven, problem-solving approaches and empower employee groups and teams to increase the customer satisfaction, lower costs and reduced time-to-market for innovation products

1.3.5 Selecting suitable strategies

Based on the above analysis, the authors will select a company specific strategy Possible basis for selection strategies will be rationalized by the use the GREAT model

Step 1: Select criteria that need to be analyzed (column 1)

Step 2: Use the impact coefficient showing the importance and the influence of factors on strategies

Step 3: In this step, we evaluate and score in each analysis factor for each strategy

Step 4: Add results together and select 3 strategies with the highest total of point

All in all, chapter | has laid the theoretical background for the whole study It starts with the initial definitions of strategy, strategic management by digging deeper into theories on external environment analysis and internal environment analysis to shed light on the next chapter of practical analysis To analyze the external environment, Michael Porter’s five forces of competitiveness have been put forward as a foundation for the discussion of the information technology in the second chapter

By the end of the first chapter, Michael Porter's business- level competitive strategies, namely cost leadership differentiation, and focus with A Hitt’s integrated strategy have also been described in details The best strategy to be selected for FSC in the period 2011-2015 shall be formulated on the basis of a profound analysis in chapter 2

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Chapter 2 CHAPTER II: AN ANALYSIS ON THE CURRENT SITUATION

OF FSC 2.1 Company Profile

Planning and Hanoi Department of

Joint Stock Company

0101220467 10.000.000.000 VND Military Bank of Vietnam — Thanh Xuan Branch Account Number: 003.110.009.2002

Import and export electronic, telecommunication, automatic, office and

IT products; Supplying and trading packaged software, solutions, computer, IT equipment system and office instrument; Consulting comprehensive solutions and informatics equipment system; repairing and maintaining communication and informatics system, Whole application Solution in the Television Conference System, IT training

and other IT services

2.1.2 Products and services

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2.1 1 Hard pace products and IT services

Import and export electronic, telecommunication, automatic, office instruments and IT products

Consult comprehensive solutions to apply in Communication and

informatics equipment system; repairing and maintaining

e oe ‹— Consult and install the Television Conference System,

communication solution for meeting rooms and conferences

ñ mm

“rửa as +

Install the control in and out system, electronic door, camera and

supervision, timekeeping equipments

Distribute all kind of Printers, scanners, large size AO Printer for

Industry, architecture, construction, geography

2.1.2.2 IT products and solutions

FORMELATING DEVELOPMENT STRATEGY FOR FSC INFORMATICS ELECTRONICS JOINT STOCK COMPANY (FSC) 2011 2018

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Finance and accounting management apply in enterprises,

administrative units and flexible application, easy to use in

project management Especially, let customers themselves

chose the data base

Supply E-portal solution and apply the Portal construction

to integrate management and demonstrator modules Systematize tools to manage easier and useful than before

Training and management solution for universities,

colleges, technical secondary schools Allow to extend the

training model: degree or credit

tD for Nhaoial situation is evaluated by tax office and

the shareholders as: healthy, completing the implementation of tax obligations for

the State At the end of each year, financial reports of FSC are evaluated and

verified by independent audit Offices or local tax agencies For partners and

suppliers, FSC always affirm to keep our integrity by the ability of full payment on

time

After 7 years, all the financial targets such as: Total Assets, Turnover, and Profit

after tax have been sustainably and continuously grown as in following Table 2.1:

5 | Profits after tax 74,985,551 | 1.145 616.365 I.461.500828 | 1.123.131,040 | 6,110,533,91¢

Table 2.1 FSC’s Financial reports over years

(Source: 'SC''s financial reports over years) P j

Figure 2.1.Growth chart of Turnover (Mil VND)

(Source: 'SC’s financial reports over years)

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In teak SeUTHAE HAM clat Ghd buch as EPS, ROA and ROE, FSC is compared with other competitors in the table 2.2 below:

(Source: FSC ’'s financial reports over years)

In general, the company has a significant EPS, ROA and ROE as against its competitors Especially, its ROE is almost double its strongest competitors in the market, which is the FPT Therefore, it is totally convincing to say that FSC has quite good development outlook as against other competitors

2.2 Current situation of macro and industrial environment

2.2.1 Macro economic conditions

2.2.1.1 Economic

Economic performance recorded in Vietnam over the past 20 some years has made the country known as a very successful story in the socio-economic reform among developing countries Vietnam has been ranked among the fastest growing and most dynamic economies in Asta (Ishii, 2007), and reported to be one of the world’s fastest growing economies in 2003 by the Asian Development Bank The figures show that the country’s GDP growth rate has started to improve in 1986, and

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acdelthated aReS 192! Eteihgr8l€Thid-L9805, the GDP growth rate increased by more than 5% on average per annum and achieved an impressive record of GDP growth in the mid-1990s, averaging 9% between 1992 and 1997 After a few years

of suffering the negative impact of the 1997 Asian financial crisis, which diminished the GDP growth by half, Vietnam’s economic growth has started to rise since 2000 From 2004 to 2007, GDP grew over 8% annually Foreign trade and foreign direct investment have improved significantly The average Vietnamese savings rate ts about 30% Inflation in 2007 was 7.3% but was in the double digits and approaching 30% year-on-year by August 2008 In 2009, Vietnam’s GDP per capita has crossed the line of more than 1000 USD

The economic growth of Vietnam illustrated via GDP growth has been generalized

by IMF in the following Figure 2.2:

Gross domestic product, constant pnces

Figure 2.2 Vietnam GDP changes over from 1980 to 2009

(Source: International Monetary Fund - 2009 World Economic Outlook)

As shown in Figure 2.2, the country’s 2009 GDP went down to around 5% in 2009 due to the effect of the financial global crisis This is seen as a very positive sign given the fact that most other countries are suffering from a recession The outlook

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PDF Compr r Free Version ‘ for the CORRE RSS or dee it DHon seems bright according to the Oxford [:;conomics’ country’s briefing as shown in the table 2.3 below:

Forecast for Vietnam

nports oÍ gqoođs (% year) 396 28 3 138 52 7 84 Current account ($ bn) -70 -107 52 -45 -48 52 Current account balance (% of GDP) 98 -118 56 -45 -43 41 Exchange rete per USD (year average) 16 105 16,302 17,737 18,075 18,373 18,706

External debt total ($bn) ˆ 242 316 33 8 354 373 40 O0

Governmem bslence (% of GDP) -26 “4:7 57 -48 -35 24 Populetion (millions) 86 1 87 1 B8 ! 890 900 99

Nominal GDP ($bn) 710 90 7 929 100 7 1126 125 1

GOP per capita ($ current prices) 825 1,041 1 055 1.132 1252 1,376

Table 2.3 Forecast for Vietnam

(Source: Oxford Economics, 2009, Country Briefings: Vietnam) Accordingly, the country’s GDP per capita is expected to be 1,376 USD by 2012 with the average annual growth rate of around 7.8% More importantly, according

to Oxford Economics, “Vietnam’s software industry will be the fastest growing in South East Asia next year, according to independent consultancy reports It has become the third largest exporter of software to Japan, after China and India, and possibly the fastest-growing according to the trade association, which believes its current 0.5% market share can grow to 5% by 2015 Official promotion of fixed and mobile internet links is paying off in terms of programming activity, though the industry’s exports are likely to remain constrained by lack of marketing and language proficiency, and the slowness of large IT players to emerge” (P5 Oxford Economics, 2009, Country Briefings: Vietnam)

All in all, the macro economic conditions have show favorable signs for the development of IT sector in general and for FSC in particular The first condition is that FSC is in a macro environment with upward economic trend Second, the forecast for the next 3 years is quite positive with the fact that GDP/capita of more

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thd DB đo90W J€†%HuFTPS AI are seen as the key plavers for the export of Vietnam in the time to come especially to the Japan market Those conditions are clearly favorable for FSC to develop Together with that the technological environment is also showing optimistic signs with clear trends

2.2.1.2 Technological

There are three major trends that are noticeable in the technological environment that may affect strongly FSC, namely, the trends of internet access, more enterprises conducting business with the help of a website and electronic commerce and increasing investment that enterprises are now making in their IT technology

The first noticeable trend is the trend of internet access As Internet infrastructure continues to be improved, bandwidth and speed are up and service is increasingly reliable By November 2009, Vietnam had estimated 18 million Internet users out of

a population of around 85 million people, or a 21 percent penetration rate In some urban areas where many enterprises and homes still lack computers Internet cafes are ubiquitous and Wi-Fi access is increasingly common (US Commercial services,

2009).””

Along with the robust growth of Internet access and the development of electronic payment systems, business-to-business (B2B) website of enterprises has been expanding with increasing speed According to the Ministry of Industry and Commerce’’, about 38 percent of Vietnamese businesses had websites and more than 83 percent of Vietnamese businesses had Internet access as of the end of 2009