Building business - level strategies in automobile industry the case of Huyndai Vietnam

Chapter 1: Literature Review1.1 Strategy and Business-Level Strategies... Employment lavv Taxation Education change in internet Governmentattitude Exchange rate Health consciousness chan

A C K N O W L E D G E M E N T i

A B S T R A C T ii

T Ó M T Ẩ T iii

T A B L E O F C O N T E N T S V L IS T O F F IG U R E S A N D T A B L E S vii

In tro d u c tio n 1

1 R a tio n a le 1

2 R esearch O b je c tiv e 1

3 R esearch s c o p e 2

4 R esearch m e th o d 2

5 D ata s o u rc e s 2

6 L im ita tio n 2

7 E x p ected íin d in g 2

8 T h e th esis s tru c tu re 3

C h ap ter 1: L iteratu re R e v ie w 4

1.1 S trategy and B u siness-L ev el S tra te g ie s 4

1.1.1 S trategy d e íìn itio n 4

1.1.2 B u sin ess-lev el s tra te g ie s 4

1.1.3 T h e im p o rtan ce o f B u sin ess-lev el s tr a te g ie s 5

1.2 B u sin ess-L ev el S trateg ies F o rm u la tio n 6

1.2.1 V isio n and M is s io n 6

1.2.2 E x tem al a n a ly s is 6

1.2.2.1 M acro A n a ly sis : 7

1.2.2.2 M icro A n aly sis: F ive F o rces M o d e l 12

1.2.3 Intem al a n a ly s is : 19

1.2.3.1 V alu e Chain m o d e l 19

1.2.3.2 C o m p etitiv e a d v a n ta g e s 21

1.3 F o rm u la tio n and C h o ic e 23

1.3.1 S W O T A n a ly s is .23

1.3.2 G R E A T m o d e l 25

1.3.3 S trategy Im p le m e n ta tio n 25

1.3.4 M a tc h in g S tra te g y 26

C h a p te r 2: C ase study o f H yundai V ie tn a m 27

2.1 O v e rv ie w o f C ars m a rk e t 27

2.1.1 O v erall m ark et grovvth 27

2 2 In tro d u c tio n o f H yu nd ai V ie tn a m 30

2.2.1 D ev elo p m en tal h is to ry 30

2 2 2 C o m p an y V is io n 31

2.2 3 P r o d u c ts 31

2 2 4 C o m p etitiv e p o s itio n 31

2.3 S trateg ic a n a ly s is 31

2.3.1 E x tem a l a n a ly s is 31

2.3.1.1 P E S T 31

2.3.1.2 5 Forces 39

2 3 2 In tem al a n a ly s is 44

2.3.2.1 V alue c h a in 44

TABLE OF CONTENTS

2 3 2 2 C o m p etitiv e a d v a n ta g e s 49

2.3.3 Formuỉation and choice 50

2.3 3.1 SWOT cmaỉysis . 50

2 3 3 2 G R E A T m o d e l 54

C h a p te r 3: R e c o m m e n d a tio n 54

3.1 O b je c tiv e s 55

3.3 R e co m m e n d atio n s to H yu nd ai V ie tn a m 61

C O N C L U S IO N .62

R E F E R E N C E S 63

vi

1 R a tio n a le

V ie tn a m is n o w lo o k in g fo rw a rd to ủ ir th e r d e v e lo p m e n t a n d g lo b a liz a tio n b y

jo in i n g W T O in 2 0 0 7 a n d a d ịu s tin g o p e n p o lic ie s to m u lti-n a tio n a l c o m p a n ie s vvho

h a v e s tro n g p o s itio n in th e g lo b a l m a rk e t V ie tn a m c o m p a n ie s h a v e to suíT er h ig h

c o m p e titio n a n d p re s s u r e fro m th o s e ío re ig n c o m p a n ie s In a n o th e r h a n d , c o n s u m e r

in te r e s ts c o n s ta n tly c h a n g in g a n d in d u s tr y c o m p e titio n in c re a s in g , m a s s p ro d u c tio n

s y s te m s o fte n d o n o t a lig n a n o rg a n iz a tio n vvith its c u s to m e rs A d o p tin g m a s s

c u s to m iz a tio n is in c re a s in g a s a m e th o d fo r c o p in g w ith th e s e c h a n g e s H o v v ev er, in

r e a s o n s A n d th e p rim a r y d a ta fro m H y u n d a i V ie tn a m , s o m e in íb r m a tio n is

c o n fid e n tia l a n d n o t a llo w e d to p u b lic

7 E x p e c te d íĩn d in g

T o fín d o u t th e r ig h t b u s in e s s - le v e l s tr a te g ie s f o r H y u n d a i V ie tn a m d u r in g

th e re c e s s io n tim e a n d it w ill g e t g o o d r e s u lt in a p p ly in g th is s tr a te g y in to H y u n d a i

V ie tn a m

Chapter 1: Literature Review

1.1 Strategy and Business-Level Strategies

P r o c e s s o f b u s in e s s d e íĩn itio n e n ta ils d e c is io n s a b o u t (1 ) c u s to m e r s ' n e e d o r

w h a t is to b e s a tis íìe d ; (2 ) c u s to m e r g ro u p , o r w h o is to b e s a tis íìe d ; a n d (3 )

d is tin c tiv e c o m p e te n c ie s , o r hovv c u s to m e r n e e d s a re to b e s a tis íie d T h e s e th r e e

d e c is io n s a re th e b a s is o f th e c h o ic e o f a b u s in e s s -le v e l s tra te g y b e c a u s e th e y

d e te r m in e h o w a c o m p a n y w ill c o m p e te in a b u s in e s s o r in d u s try

C ustom ers’ needs and p ro d u ct diíĩerentiation:

C u s t o m e r s ' n e e d s a re d e s ir e s , w a n ts , o r c ra v in g s th a t c a n b e s a tis íĩe d b y

m eans o f the ch aracteristics o f a product or Service.

P ro d u c t d if f e r e n tia tio n is th e p ro c e s s o f c re a tin g a c o m p e titiv e a d v a n ta g e b y

Distinctive Com petencies:

T h e th ir d is s u e in b u s in e s s - le v e l s tra te g y is to d e c id e w h ic h d is tin c tiv e

c o m p e te n c ie s to p u r s u e to s a tis íy c u s to m e r s ’ n e e d s a n d c u s to m e r g ro u p s

1.1.3 T h e im p o rta n c e o f B usin ess-lev el stra te g ie s

B u s in e s s -Ie v e l s tr a te g ie s e x a m in e h o w a c o m p a n y c a n c o m p e te e íĩe c tiv e ly in a

1.2 Business-Level Strategies Form uIation

F ig u re 1.1 B u sin ess level stra te g ie s

B u siness L evel S trategy

1 P ro d u ct d iíĩe re n tia tio n

2 M arket seg m en t

3 D istin ctiv e co m p eten cies

S trateg y Im p lem en tatio n

(source: S tr a te g ic m a n a g e m e n t a n in te g r a te d a p p ro a c h b y C h a r le s W L H ill a n d G arethr Jo n e s)

1.2.1 V ision a n d M ỉssion

T h e m is s io n s e ts o u t w h y th e o rg a n iz a tio n e x is ts a n d w h a t it s h o u ld b e d o in g

V is io n : d e íìn e s a n d d e s c r ib e s th e íìitu re s itu a tio n th a t a c o m p a n y w is h e s to

h a v e , th e in te n tio n o f th e V isio n is to g u id e , to c o n tro l a n d to e n c o u r a g e th e

o r g a n iz a tio n a s a w h o le to r e a c h th e d e s ir a b le S tate o f th e o rg a n iz a tio n

1.2.2 E x te rn a l a n a ly sis: to id e n tiíy s tr a te g ic o p p o r tu n itie s a n d th r e a ts in

th e o r g a n i z a t i o n 's o p e ra tin g e n v ir o n m e n t T h r e e in te r r e la te d e n v ir o n m e n ts s h o u ld

b e e x a m in e d a t th is s ta g e : th e im m e d ia te , o r in d u s try , e n v ir o n m e n t in vvhich th e

o rg a n iz a tio n o p e r a te s ; th e n a tio n a l e n v iro n m e n t; a n d th e w id e r m a c ro -e n v iro n m e n t.

A n a ly z in g th e in d u s try e n v ir o n m e n t r e q u ire s a n a s s e s s m e n t o f th e

c o m p e titiv e s tr u c tu r e o f th e o r e a n iz a tio n ’s in d u s try , in c lu d in e th e c o m p e titiv e

p o s itio n o f th e fo c a l o rg a n iz a tio n a n d its m a jo r riv a ls , a s w e ll a s th e s ta g e o f

in d u s try d e v e lo p m e n t S in c e m a n y m a rk e ts a re n o w g lo b a l m a rk e ts , a n a ly z in g th e

in d u s try e n v ir o n m e n t a ls o m e a n s a s s e s s in g th e im p a c t o f g lo b a liz a tio n u p o n

c o m p e titio n vvith in a n in d u s try A n a ly z in g th e n a tio n a l e n v ir o n m e n t r e q u ire s an

fo r u n d e rs ta n d in g m a rk e t g ro v v th o r d e c lin e , b u s in e s s p o s itio n p o te n tia l and

A l l b u s in e s s e s are a ffe c te d b y n a tio n a l a n d g lo b a l e c o n o m ic ía c to rs N a tio n a l and

g lo b a l in te re s t ra te a n d í ĩs c a l p o lic y w i l l be set a ro u n d e c o n o m ic c o n d itio n s T h e

c lim a te o f th e e c o n o m y d ic ta te s h o w c o n s u m e rs , s u p p lie rs a nd o th e r o rg a n iz a tio n a l

A s u c c e s s íu l o rg a n iz a tio n w i l l re s p o n d to e c o n o m ic c o n d itio n s a nd

f o r g re a te r in v e s tm e n t in ío o d p r o d u c tio n D u e to fo o d s h o rta g e s A í r ic a n c o u n trie s

such as U g a n d a a re n o w re c o n s id e rin g t h e ir re je c tio n o f g e n e tic a lly m o d ifie d fo o d s

H o v v e v e r an a b i lit y to re a c t q u ic k ly a ls o cre a te s e x tra p re s s u re as b usine sse s are

e x p e c te d to d e liv e r o n t h e ir p ro m is e s v v ith in e v e r d e c re a s in g tim e s c a le s

F o r e x a m p le th e In te r n e t is h a v in g a p r o fo u n d im p a c t o n th e m a r k e tin g m ix

s tra te g y o f o r g a n iz a tio n s C o n s u m e rs ca n n o w s h o p 2 4 h o u rs a d a y fr o m t h e ir

p e n s io n e rs k n o w n as “ s ilv e r s u rfe r s ” has e m e rg e d T e c h n o lo g y w i l l c o n tin u e to

e v o lv e a n d im p a c t o n c o n s u m e r h a b its a n d e x p e c ta tio n s , o rg a n iz a tio n s th a t ig n o re

th is fa c t fa c e e x tin c t io n

In th e ta b le b e lo w y o u fin d e x a m p le o f e a c h o f th e s e íầ c to rs

Political Factors Economic Factors

Socio-cultural Factors

Technological Factors Environmental

te c h n o lo g y

ỉ ỉ

Employment lavv Taxation Education change in internet Government

attitude

Exchange rate Health consciousness

change in mobile technology Competition

regulation

lnflation living condition

political stability

Consumer confidence safety regulation

1.2.2.2 M icro A nalysis: Five Forces M odel

F iv e fo rc e s a n a ly s is lo o k s at f iv e k e y areas n a m e ly th e th re a t o f e n try th e p o w e r o f

b u y e rs th e p o w e r o f s u p p lie rs , th e th re a t o f s u b s titu te s , a n d c o m p e titiv e r iv a lr y

R ivalry vvithin the industry

T h is is m o s t lik e ly to b e h ig h w h e re e n try is lik e ly ; th e re is th e th re a t o f

s u b s titu te P ro d u c ts , a n d s u p p lie rs and b u y e rs in th e m a rk e t a tte m p t to c o n tro l

I f r iv a lr y a m o n g fir m s in an in d u s tr y is w e a k , c o m p a n ie s h a v e an o p p o r tu n ity

t o ra is e p ric e s a n d e a m g re a te r p r o fits P ric e c o m p e titio n lim it s p r o ĩit a b il it y b y

r e d u c in g th e m a rg in s th a t can b e e a m e d o n sales T h u s , in te n s e r iv a lr y a m o n g

e s ta b lis h e d c o m p a n ie s c o n s titu te s a s tro n g th re a t to p r o í ĩ t a b ilit y T h e e x te n t o f

r iv a lr y a m o n g e s ta b lis h e d c o m p a n ie s v v ith in an in d u s try is la r g e ly íu n c tio n o f th re e

fa c to rs : ( 1 ) T h e n u m b e r o f c o m p e tito rs ( 2 ) th e in d u s t r y ’ s c o m p e titiv e c a p a c ity , and

( 3 ) th e h e ig h t o f e x it b a r r ie r in th e in d u s tr y

1 T h e n u m b e r o f c o m p e tito rs : N u m b e r o f c o m p e tito rs re la te s to b a r r ie r to

e n tr y o r e x it I t w i l l be m o re c o m p e titiv e i f b a r r ie r to e n try is lo w a n d h a rd to e x it

A n d its a d v a n ta g e f o r e x is tin g c o m p a n ie s i f b a ư ie r to e n try gets h a rd e r a n d lo w

c lu b s , to re a l e sta te b ro k e rs a n d su n ta n n in g p a r lo r s M a n y íra g m e n te d in d u s trie s are

c h a ra c te riz e d b y lo w b a r rie rs to e n try a n d c o m m o d ity ty p e p ro d u c ts th a t are h a rd to

d iíĩe r e n tia te T h e c o m b in a tio n o f these tr a its te n d s to re s u lt in b o o m a n d b u s t c y c le s

as in d u s tr y p r o íits ris e a n d f a ll L o w b a rrie rs to e n try im p ly th a t w h e n e v e r d e m a n d

is s tro n g a n d p r o í ĩt s are h ig h , th e re w i l l b e a í lo o d o f n e w e n tra n ts h o p in g to ca sh in

o n th e b o o m A íra g m e n te d in d u s try s tru c tu re c o n s titu te s a th re a t ra th e r th a n an

o p p o r tu n ity M o s t b o o m s w i l l be r e la tiv e s h o rt liv e d b eca u se o f th e ease o f n e w

e n tr y a n d w i l l be f o llo w e d b y p ric e w a rs a n d b a n k ru p tc ie s S in c e i t is o fte n d i f f i c u l t

13

to d iffe r e n tia te p ro d u c ts in the se in d u s trie s th e best s tra te g y fo r a c o m p a n y to

p u rs u e m a y be c o s t m in im iz a tio n T h is s tra te g y a llo w s a c o m p a n y to ra c k u p h ig h

re tu m s in a b o o m to s u rv iv e a n y s u b s e q u e n t b u s t

3 E x it b a rrie rs : are e c o n o m ic , s tra te g ic , and e m o tio n a l fa c to rs th a t k e e p

c o m p a n ie s in an in d u s tr y e v e n w h e n re tu m s are lo w I f e x it b a rrie rs are h ig h ,

com panies can becom e unprofítable in w hich o v e r a ll dem and is static or declining

E x c e s s p r o d u c tiv e c a p a c ity c a n re s u lt In t u m , excess p ric e s in an a tte m p t to o b ta in

• E m o tio n a l a tta c h m e n ts to an in đ u s tr y , as w h e n a c o m p a n y is u n w illin g to

e x it fr o m its o r ig in a l in d u s tr y f o r s e n tim e n ta l re a son s

d e m a n d a ffe c te d b y th e p ric e c h a n g e o f a s u b s titu te s T h e c o m p e titio n e n g e n d e re d

b y th re a t o f s u b s titu te c o m e s f r o m Products o u ts id e th e in d u s try A n d th re a t o f

s u b s titu te s is d e te rm in e d b y f o llo w in g fa c to rs

• B ra n d lo y a lt y o f c u s to m e rs ,

• C lo s e c u s to m e r re la tio n s h ip s

• T h e re are n o s u b s titu te s f o r th e p a r tic u la r in p u t,

• T h e s u p p lie rs c u s to m e rs are íra g m e n te d , so t h e ir b a r g a in in g p o w e r is lo w ,

In s u c h s itu a tio n s , th e b u y in g in d u s tr y o fte n face s a h ig h p re s s u re o n m a rg in s

fr o m t h e ir s u p p lie rs T h e r e la tio n s h ip to p o \v e r fu l s u p p lie rs can p o te n tia lly re d u c e

s tra te g ic o p tio n s f o r th e o rg a n iz a tio n

C ustom ers Pow er

• T h e p ro d u c t is u n d iíĩe r e n tia te d a n d ca n b e re p la c e s b y s u b s titu te s ,

• S w itc h in g t o a n a lte m a tiv e p ro d u c t is r e la t iv e ly s im p le a n d is n o t re la te d to

i f th e r is k o f n e w e n try is lo w , in c u m b e n t c o m p a n ie s c a n ta k e a d v a n ta g e o f th is

o p p o r tu n ity to ra is e p ric e s a n d e a m g re a te r re tu m s

T h e s tre n g th o f th e c o m p e titiv e fo r c e o f p o te n tia l r iv a ls is la rg e ly a íu n c tio n

o f th e h e ig h t o f b a rrie rs to e n try B a r rie r s to e n trv a re ía c to rs th a t m a k e i t c o s tly f o r

c o m p a n ie s to e n te r a n in d u s try T h e g re a te r th e c o s ts th a t p o te n tia l c o m p e tito rs m u s t

b e a r to e n te r an in d u s try , th e g re a te r are th e b a rrie rs to e n try H ig h b a rrie rs to e n try

k e e p p o te n tia l c o m p e tito r s o u t o f in d u s tr y , e v e n w h e n in d u s tr y re tu m s are h ig h T h e

c la s s ic w o r k o n b a rrie rs to e n try w a s d o n e b y e c o n o m is t Joe B a in , w h o id e n tifíe d

th re e m a in so u rc e s o f b a rrie rs to n e w e n tr y ; b ra n d lo y a lty , a b s o lu te c o s t a d v a n ta g e s ,

a n d e c o n o m ie s o f sca le T o B a in ’ s lis t w e can a d d a íb u r th e n try b a r rie r o f

c o n s id e ra b le s ig n ifíc a n c e in m a n y c o u n trie s ; g o v e m m e n ta l re g u la tio n

c o m p a n ie s A c c o m p a n y c a n cre a te b ra n d lo y a lt y th r o u g h c o n tin u o u s a d v e r tis in g o f

b ra n d a n d c o m p a n y n am es, p a te n t p r o te c tio n o f P ro d u c ts , p ro d u c t in n o v a tio n

a c h ie v e d th r o u g h its re s e a rc h a n d d e v e lo p m e n t p ro g r a m , an e m p h a s is o n h ig h

p ro d u c t q u a lit y , a n d g o o d a fte r sales Service S ig n ií ĩc a n t b ra n d lo y a lt y m a k e s it

d i f f i c u l t f o r n e w e n tra n ts to ta k e m a rk e t sh are a w a y fr o m e s ta b lis h e d c o m p a n ie s

T h u s b ra n d lo y a lt y re d u c e s th e th re a t o f e n try b y p o te n tia l c o m p e tito rs s in c e th e y

m a y see th e ta s k o f b r e a k in g d o w n w e ll e s ta b lis h e d c o n s u m e r p re fe re n c e s as to o

c o s tly

c o s t a d v a n ta g e r e la tiv e to p o te n tia l e n tra n ts A b s o lu te c o s t a d v a n ta g e s ca n a ris e

fr o m th re e m a in s o u rc e s : ( 1 ) s u p e rio r p r o d u c tio n o p e ra tio n s , d ue to p ast e x p e rie n c e ,

p a te n t, o r se cre t p ro c e s s e s ; ( 2 ) c o n tr o l o f p a r tic u la r n p u ts re q u ire d f o r p ro d u c tio n ,

su ch as la b o r m a te ria ls e q u ip m e n t o r m a n a g e m e n t s k ills ; a n d ( 3 ) access to c h e a p e r

fu n d s b e ca u se e x is tin g c o m p a n ie s re p re s e n t lo w e r r is k s th a n c o m p a n ie s th a t are n o t

ĐAI H Ọ C qŨ Õ Õg i a h a n o i

TRUNG TAtv' THÕNG tin thư v iệ n

p r o d u c tio n v o lu m e , a n d e c o n o m ie s o f scaỉe in a d v e rtis in g i f th e se c o s t a d v a n ta g e s

are s ig n iíĩc a n t, a n e w e n tra n t face s th e d ile m m a o f e ith e r e n te rin g o n a s m a ll sca le

a n d s u ffe r in g a s ig n ií ĩc a n t c o s t d is a d v a n ta g e s o r e n te rin g o f la rg e sca le a n d b e a rin g

a large risk o f sig n iíĩcan t Capital costs A further risk o f large scale entry is that the

in c re a s e d s u p p ly o f P ro d u c ts v v ill d e p re s s p ric e s and re s u lt in v ig o r o u s re ta lia tio n b y

e s ta b lis h e d c o m p a n ie s T h u s w h e n e s ta b lis h e d c o m p a n ie s h a v e e c o n o m ie s o f sca le

th e th re a t o f e n try is re d u c e d

in d u s trie s F o r e x a m p le , u n t il r e c e n tly in th e u s g o v e m m e n t r e g u la tio n p r o h ib ite d

th e r is k o f e n try b y p o te n tia l c o m p e tito r s is g r e a tly d im in is h e d W h e n th is r is k is

ỉo w e s ta b lis h e d c o m p a n ie s c a n c h a rg e h ig h e r p ric e s a n d e a m g re a te r p r o íìts th a n

F igure 1.4 V alue Chain m odel

(so u rce: s tr a te g ic m a n a g e m e n t b y C h a r le s W L H ilỉ a n d G a reth r J o n e s)

Primary Activities

P r im a r y a c tiv it ie s h a v e to d o w i t h th e d e s ig n , c re a tio n , a n d d e liv e r y o f th e

p ro d u c t as w e ll as its m a r k e tin g a n d its s u p p o rt a n d a fte r-s a le s Service.

Inbound iogistics:

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In b o u n d lo g is tic s is c o n c e m e d v v ith re c e iv in g , s to r in g , in v e n to r y c o n tro l

d is c o v e r in g c o n s u m e r needs a n d c o m m u n ic a tin g th e m b a c k to th e R & D í ì in c t io n o f

the com pany, w hich can then design Products that better m a tc h those needs

Service

T h e ro le o f th e Service í ì in c t io n o f an e n te rp ris e is to p r o v id e a fte r-s a le s

Service and support T h is âin ctio n can create a perception o f superior value in the

m in d s o f c o n s u m e rs b v s o lv in g c u s to m e r 's p r o b le m a n d s u p p o rtin g c u s to m e rs a fte r

th e y h a v e p u rc h a s e d th e p ro d u c t

Support Activities

T h e s u p p o rt a c tiv itie s o f th e v a lu e C hain p r o v id e in p u ts th a t a llo v v th e

p r im a r y a c tiv itie s t o ta k e p la c e T h e p ro c u re m e n t fu n c tio n is to p ro c u re ra w

m a te ria ls , spare p a rt, a nd b u ild in g m a c h in e s T h e e íY ĩc ie n c y w it h w h ic h th is is

c a rrie d o u t can s ig n ií ĩc a n t ly lo w e r c o s t, th e re b y c re a tin g m o re v a lu e S im ila r it y ,

th e re a re a n u m b e r o f w a y s in w h ic h th e h u m a n re s o u rc e í iin c t io n ca n h e lp an

e n te rp ris e c re a te m o re v a lu e T h e h u m a n re s o u rc e íu n c tio n ensu re s th a t th e

c o m p a n y has th e r ig h t m ix o f s k ille d p e o p le to p e r ío r m its v a lu e c re a tio n a c tiv itie s

e í ĩe c t iv e ly I t is a ls o th e j o b o f th e h u m a n re s o u rc e íu n c tio n to e n s u re th a t p e o p le

are a d e q u a te ly tra in e d , m o tiv a te d a n d c o m p e n s a te d to p e r ĩo r m t h e ir v a lu e c re a tio n

ta sks T h e í ĩn a l s u p p o rt a c t iv it y is th e c o m p a n y in ír a s tr u c tu r e has a som evvhat

d if fe r e n t c h a ra c te r fr o m th e o th e r s u p p o rt a c tiv itie s In ír a s tru c tu r e has to d o w it h th e

c o m p a n y w id e c o n te x t w it h in w h ic h a ll th e o th e r v a lu e c re a tio n a c tiv itie s ta k e p la c e

T h e in ĩr a s tr u c tu r e in c lu d e s th e o rg a n iz a tio n a l s tru c tu re , c o n tr o l s y s te m s , a nd c u ltu re

21

Figure 1.5 C om petitive ad v an tag e

C O M P E T IT IV E A D V A N T A G E

L o w e r C o s t D iíT e re n tia tio n

B ro a d 1 C o s t L e a d e rs h ip 2 D itT e re n tia tio n

le a d e rs h ip re q u ir e s a g g re s s iv e c o n s tr u c tio n o f e ff ĩc ie n t sca le f a c ilitie s , v ig o ro u s

p u r s u it o f c o s t re d u c tio n s fr o m e x p e rie n c e , t ig h t c o s t a n d o v e rh e a d c o n tro l,

a v o id a n c e o f m a r g in a l c u s to m e r a c c o u n ts , a n d c o s t m in im iz a tio n in areas lik e R & D ,

Service, sales force, advertising, and so on T o achieve lovv cost position often

re q u ire s a h ig h r e la tiv e m a rk e t sh a re o r o th e r a d v a n ta g e s , su ch as fa v o ra b le access

to ra w m a te ria ls I t m a y w e ll re q u ire d e s ig n in g P ro d u c ts f o r ease in m a n u ĩa c tu r in g ,

m a in ta in in g a w id e lin e o f re la te d p ro d u c ts to sp re a d co sts, and s e rv in g a ll m ạ ịo r

c u s to m e r g ro u p s in o r đ e r to b u ild v o lu m e T h u s a lo w c o s t p o s itio n p ro te c ts th e f ir m

a g a in s t a ll f iv e c o m p e titiv e fo rc e s b eca u se b a r g a in in g can o n ly c o n tin u e to e ro d e

p r o íits u n t il th o s e o f th e n e x t m o s t e ff ì c ie n t c o m p e tito r are e lim in a te d , a n d beca u se

th e less e f f í c ie n t c o m p e tito rs w i l l s u ffe r í lr s t in th e fa c e o f c o m p e titiv e p re s s u re s

T h e s e c o n d g e n e ric s tra te g y “ D if f e r e n t ia t io n ” is o n e o f d if fe r e n t ia t in g th e

p ro d u c t o r Service o ff e r in g o f th e f ir m , c re a tin g s o m e th in g th a t is p e rc e iv e d

in d u s tr y - w id e as b e in g u n iq u e A p p ro a c h e s to d if fe r e n t ia t in g ca n ta k e m a n y íb r m s :

d e s ig n o r b ra n d im a g e (P ie ld c re s t in to p o f th e lin e to w e ls a nd lin e n s ; M e rc e d e s in

autom obiles) technology custom er Service, dealer n e tw o r k E tc differentiation

p ro v id e s in s u la tio n a g a in s t c o m p e titiv e r iv a lr y b eca u se o f b ra n d lo y a lty b y

c u s to m e rs a n d r e s u ltin g lo w e r s e n s itiv it y to p ric e I t a ls o in c re a s e s m a rg in s w h ic h

a v o id s th e n e e d f o r a lo w c o s t p o s itio n T h e re s u ltin g c u s to m e r lo y a lt y a n d th e n eed

fo r a c o m p e tito r t o o v e rc o m e u n iq u e n e s s p r o v id e e n try b a rrie rs D iíT e re n tia tio n

y ie ld s h ig h e r m a rg in s w it h w h ic h to d ea l v v ith s u p p lie r p o w e r, a nd it c le a rly

m itig a te s b u v e r p o w e r s in c e b u y e r la c k c o m p a ra b le a lte m a tiv e s and is th e re b y

fe w e r p ric e s s e n s itiv e

F o c u s is ío c u s in g o n a p a r tic u la r b u y e r g ro u p , s e g m e n t o f th e p ro d u c t lin e , o r

g e o g ra p h ic m a rk e t; as w it h d if fe r e n t ia t io n , íb c u s m a y ta k e m a n y fo rm s A lth o u g h

th e lovv c o s t a n d d if fe r e n t ia t io n s tra te g ie s a re a im e d at a c h ie v in g th e ir o b je c tiv e s

in d u s tr y - w id e , th e e n tire fo c u s s tra te g y is b u i l t a ro u n d s e r v in g a p a r tic u la r ta rg e t

v e ry w e ll, a n d each fu n c tio n a l p o lic y is d e v e lo p e d v v ith th is in m in d T h e s tra te g y

re sts o n th e p re m is e th a t th e f ĩr m is th u s a b le to se rv e its n a r r o w s tra te g ic ta rg e t

m o re e f f e c t iv e ly o r e f f ic i e n t ly th a n c o m p e tito r s w h o are c o m p e tin g m o re b ro a d ly

1.3 FormuIatỉon and Choice

1.3.1 SW O T A nalysis

T h e e x te m a l a n a ly s is id e n tiíĩe s o p p o r tu n itie s a nd th re a ts vvhereas th e in te m a l

a n a ly s is d e fm e s th e f i r m ’ s s tre n g th s a n d w e a k n e s s e s B y u n đ e rs ta n đ in g th a t

in f o r m a tio n , a f ir m ca n b e tte r le v e ra g e its s tre n g th s , c o rre c t its w e a kn e sse s,

c a p ita liz e o n o p p o rtu n itie s , a n d d e te r p o t e n t ia lly th re a ts

S W O T is a s im p le fr a m e w o r k f o r g e n e ra tin g s tra te g ic a lte m a tiv e s fro m a

s itu a tio n a n a ly s is T h e in te m a l a n d e x te m a l e n v iro n m e n t a n a ly s is can p ro v id e a

c o m p a n y ’ s c o m p e titiv e p o s itio n F o r e x a m p le , th e s tre n g th s ca n be le v e ra g e d to

p u rs u e o p p o r tu n itie s and to a v o id th re a ts a n d m a n a g e rs ca n be a le rte d to

vveaknesses th a t m ig h t n eed to be o v e rc o m e in o rd e r to s u c c e s s íu lly p u rs u e

o p p o rtu n itie s

W -0 Strategies overcome vveaknesses to pursue opportunities

External

Threats

S-T Strategies identiíy ways that the firm can use its strengths to reduce its vulnerability to external

threats

W-T Strategies establish a deíensive plan to prevent the firm 's weaknesses from making

it highly susceptible to external

threats

1.3.2 G R E A T model

G R E A T M o d e l is a m o d e l used in a n a ly z in g s tra te g ic m a n a g e m e n t o r

c o m p e titiv e s tra te g y w h ic h sta n d s f o r G a in , R is k , E x p e n s e , A c h ie v a b le a nd T im e

C r ite r ia are v v e ig h te d a c c o r d in g to t h e ir im p o rta n c e to th e c o m p a n y S tra te g ie s are

m a rk c d f o r m 1 to 5 f o r e ach c r ite r io n , o f w h ic h n u m b e r 1 is th e vvorst, n u m b e r 3 is

1.3.3 Strategy Im plem entation

Im p le m e n tin g a s tra te g y re q u ire s th e a llo c a tio n o f ro le s a n d re s p o n s ib ilitie s

f o r d if f e r e n t aspe cts o f th a t s tra te g y to d if fe r e n t m a n a g e rs w it h in th e c o m p a n y A

25

c o m p a n y ’ s o rg a n iz a tio n a l s tru c tu re m a p s o u t ro le s a nd re s p o n s ib ilitie s , a lo n g w it h

r e p o r tin g re la tio n s h ip s In th is sense s tra te g y is im p le m e n te d th r o u g h s tru c tu re I f

th e e x is tin g s tru c tu re o f an o rg a n iz a tio n is n o t a p p ro p ria te g iv e n th e c o m p a n y 's

s tra te g y it m a y h a v e to d e s ig n a n e w s tru c tu re B e s id e s c h o o s in g a s tru c tu re , an

o rg a n iz a tio n m u s t a ls o e s ta b lis h a p p ro p ria te o rg a n iz a tio n a l c o n tr o l s y s te m s I t m u s t

d e c id e h o w b e s í to assess th e p e r ío rm a n c e a n d c o n tr o l th e a c tio n s o f s u b u n its T h e

options range from market a n d output Controls to bureaucratic Controls a n d control

th r o u g h o rg a n iz a tio n a l c u ltu r e

1.3.4 M atching Strategy

I f it vvants to s u cce e d , a c o m p a n y m u s t a c h ie v e a f i t a m o n g its s tra te g y ,

s tru c tu re , and Controls E v e n w hen you íĩnd the right strategy but it d o esn ’t fìt to its

c a p a b ility it m a y ta k e n o re s u lts o n a c tio n S o th is step a ls o is o n e o f th e im p o r ta n t

phases in a p p ly in g th e o ry in to o r g a n iz a tio n ’ s a c tio n

Chapter 2: Case study of Hyundai Vietnam

2.1 Overview of Cars m arket

2.1.1 O verall m ark et grow th

in d u s tr y th r o u g h p r o te c tio n m e a s u re s lik e a n im p o r t lic e n s in g s c h e m e a n d h ig h

c u s to m s d u tie s In a d d itio n , v a r io u s ta x e s a n d fe e s a p p lic a b le w h e n b u y in g n e w

c a rs , lik e th e s p e c ia l c o n s u m p tio n ta x o f 5 0 % in c re a s e c o s t s u b s ta n tia lly

b e in g th e p re íe rr e d m e th o d o f fm a n c in g In a m a rk e t vvith v e ry h ig h p ric e s , ca r

íìn a n c in g has a h ig h p o te n tia l A lt h o u g h th e m a rk e t is g ro v v in g s tro n g ỉy , it is s t ill

5.9 nil 4.3 mi

Soiưce: JETRO Hauoi

2 1 2 C o n s u m p t io n

O v e r th e past 7 y e a rs V ie tn a m e c o n o m y has shovvn a g re a t a n d im p re s s iv e

g ro v v th ra te A lo n g w it h th e b o o m in g o f th e m a rk e t, a u to m o b ile in d u s try has a

s ig n ií ĩc a n t a c h ie v e m e n t S ta rtin g fr o m a v e r y lo w le v e l o f a d e v e lo p in g c o u n try , c a r

d e m a n d in V ie tn a m is c lim b in g u p o v e r y e a rs A c c o r d in g to th e s ta tis tic s o f

2.2 Introductỉon of Hyundai Vietnam

2.2.1 D evelopm ental history