Building business strategy in the shrimp farming industry the case of IC Company

Strategy form ulatio n..... Figure 1.2 A simplitìed vievv of the strategic managemenl process1.3.1... > Intensity of Rivalry 11... H ig h barriers to ỉeave an industry inc re ase rivalry

V1ETN AM N A T IO N A L U N IV E R SIT Y , HANOI

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

A B S T R A C T ii

T Ó M T Ắ T iv

T A B L E O F C O N T E N T S vi

L I S T O F F IG U R E S A N D T A B L E S v iii 1 N T R O D U C T IO N 1

1 The thesis t it le 1

2 The thesis n e ce ssity 1

3 O b je c tiv e s 1

4 M eth o d 1

5 Data so u rce s 2

6 Signiíìcance 2

7 L im ita tio n s 2

8 Expected re s u lts 2

9 The thesis stru ctu re 2

10 Suggestion for future rese arch 3

C H A P T E R 1: L I T E R A T U R E R E V I E W 4

1.1 S trate g y 4

1.2 Business stra teg y 5

1.2.1 D e íìn itio n 5

1.2.2 Competitive strateg y 6

1.3 Strategic m anagem ent 7

1.3.1 V isio n and M is s io n 8

1.3.2 Strategy form ulatio n 8

1.3.3 Strategy im plem entation 24

1.3.4 Strategy e valu atio n 25

C H A P T E R 2: S H R IM P F A R M IN G IN D Ư S T R Y IN V I E T N A M 27

2.1 An overview o f shrimp tầ n n in g 27

TABLE OF CONTENTS

2.2 The development o f shrimp íầrm ing industry in V ie tn a m 30

2.3 Pactors effecting shrimp ía rm in g 33

C H A P T E R 3: B U 1 L D IN G B U S IN E S S S T R A T E G Y 36

3.1 Company p r o íìle 36

3.2 Sírategy ío rm u la tio n 38

3.2.1 External environment a n a ly s is 38

3.2.2 Industry environment a n a ly s is 47

3.2.3 Internal environment a n a ly s is 51

3.2.4 S W O T analysis 55

3.2.5 Strategy selectio n 57

3.2.5.1 Production expanding 57

3 2.5.2 Black tiger shrimp ía rm in g 57

3.2.5.3 Post larvae and íeed pro d ucing 57

3 2.5.4 Food Processing 58

3 2.5.5 lnírastructure im p ro vin g 58

3.3 Implementing the growth strateg y 59

3.3.1 O b je c tiv e s 59

3.3.2 S o lu tio n s 59

3.3.3 A ction p la n 61

3.3.4 Recommendations to 1C C o m p a n y 62

3.3.5 Recommendations to the G o vern m en t 63

C O N C L U S IO N 65

R E F E R E N C E S 66

A P P E N D I C E S 69

Appendix A : Shrim p production by the major producer n a tio n s 69

Appendix B : Vietnam production o f tầrmed aquatic prod ucts 70

Appendix C : 1C Com pany’ s tìnancial p eríorm ance 71

Appendix D : IC shrim p farm in Quang N in h 73

Appendix E : IC Com pany’ s intensive shrimp íarming m etho d 76

LIST OF FIGURES AND TABLES

h ia u r e 1.1 P o r te r “s g e n e ric s t r a t e g i e s 6

ỉ ia u re 1.2 A sim p litìe d v ie w o l 't h e stra teg ic m a n a g e m e n t p ro c e s s 8

F ig u re 1.3 F iv e P orces M o d e l 10

F ia u re 1.4 Strategic a n a ly sis p r o c e s s 18

Pig u re 1.5 S W O T M a t r ix 19

F ig u re 1.6 G E - M c K in s e y M a t r ix 21

F ig u re 1.7 R ecom m ended strategies for G E - M c K in s e v M a t r i x 22

F ig u re 2 1 W o rld p ro d u c tio n o f s h r i m p 29

F ig u re 2 2 S h rim p vo lu m e for consum e and e x p o r t 31

F ig u re 2.3 V ie tn a m e x p o rt v a lu e by s h rim p a n d c o m m o d i ty g ro u p 32

P ig u re 2 4 V ie tn a m iìsh ery a n d s h r im p e x p o rt v a l u e 32

F ig u re 3.1 V ie tn a m G D P p e r c a p ịta g r o w t h 41

F ig u re 3 2 V N D / Ư S D e x c h a n g e r a t e 42

F ig u re 3.3 V ie tn a m p o p u la tio n p y r a m i d 42

F ie u re 3 4 Im p acts o f sea level r i s e 46

F ig u re 3 5 IC C o m p a n y ’ s revenue and net p r o ĩ i t 52

F i s u r e 3 6 IC C o m p a n y ’s o rg a n iz a tio n a l s t r u c t u r c 53

P ig u r e 3 7 IC C o m p a n y 's S W O T M a t r i x 56

F i e u r e 3.8 IC C o m p a n y ’s p o sitio n in G E - M c K in s e y M a t r i x 57

P i g u r e 3 9 IC C o m p a n y ’s s tra te g ie s im p le m e n ta tio n p r o c e s s 63

9 13 14 18 24

31

40 46 50 54 54 55 55

58

61

E x a m p le o f possible íầ c to rs in a P E S T a n a ly s is

In d u s try 's entry and e x it b a r r ie r s

B a rg a in in ạ pcnver o f su p p lie rs and b u y e r s

T h e c o m p le te d S W O T p r o í ì l e

A p p r o p r ia te s tra te g ie s s e le c tio n ( G R E A T M o d e l) V ie tn a m s h rim p tầ r m in g a r e a s

V ie tn a m q u a rte rlv G D P g r o w t h

E x te m a l enviro nm ent a n a ly s is c o n c lu s io n

In d u s try a n a ly s is c o n c l u s i o n

Intern al e n v ir o n m e n t a n a ly s is c o n c l u s i o n

C o m p e titiv e streníỊth a s s e s s m e n t

Su sta in a h lc co m p e titive a d v a n ta g e

IC C o m p a n y 's S W O T p r o i ì l e

IC C o m p a n y ’s a p p ro p r ia te s tr a te g ie s s e le c tio n ( G R E A T M o d e l)

IC C o m p a n y 's a ctio n p l a n

d e v e lo p m e n t o p p o r tu n itie s a n d c h a lle n g e s to in v e s to rs T h e r e s e a r c h f o u n d out th a t

IC C o m p a n y ’s c u r r e n t p ro d u c t io n is o n ly o n e th ird o f its c a p a b ility , r e s u lte d in an irrelativ e m a r k e t share T h e h ig h e r m a r k e t p o s itio n r e q u i r e s th e c o m p a n y

1

T he ĩirst step is to revievv theories o f strategy and strategic m a n a g e m e n t T he study

ío c u ses on the literature view o f e x istin g a p p ro a c h e s to b u s in ess strategy

ío rm u la tio n , a n d in d e n tifíe s a c o m m o n p ro cess to b u ild b u s in e s s strategies

T he s e c o n d step is b a s e d on the research o f s h rim p ía r m in g in d u s try in V ie tn a m and íìn d s o ut s p e c iĩic ía c to rs that in ílu en t the busin ess success

A fter that, the c a s e stu d y o f IC C o m p a n y is a n a ly z e d , w h ic h in c lu d es som e intervievvs w ith c o m p a n y ’s m a n a g e rs re sp o n sib le for its strategic planning This analy sis allovvs b u ild in g b u s in ess strategies a n d p ro v id in g s o m e re c o m m e n d a tio n s

c o n c e m e d w ith th e strategy im plem entation

5 Data sources

T h e theo re tic al revievv a n d collection o f s e c o n d a ry d ata has b een p e río rm e d by

re s earch o f b o o k s , rep o rts, n ew s p a p e rs and in tern et sources T h e p rim ary d ata w as

c o lle c te d th ro u g h intervievvs w ith IC C o m p a n y ’s m a n a g e rs a n d k ey em ployees A n

im p o rta n t part o f th e re s e a rc h is m y p e rso n a l e x p e rie n c e in th e co m p a n y , allovved a careful u n đ e r s ta n d i n g o f p a rtic u la r issues in the industry

6 Signiíicance

B y r e v ie w in g th e th e o ry o f strategy and strategic m a n a g e m e n t a n d u n d erstan d in g the im p a c ts o f b u s in e s s en v iro n m e n t, the th e sis b e n e íĩts IC C o m p a n y in building

a p p ro p ria te b u s in e s s strategies T his th e oretical ap p ro a c h can be a p p lie d in cases o f

o th e r c o m p a n ie s in s h rim p ĩa n n i n g industry

T h e stu d y is lim ite d in the sense that j u s t a sm alỉ n u m b e r o f c o m p e tito rs in the local

m a rk e t is c o n s id e re d , m o re o v e r, those c o m p e tito rs co u ld n o t be a n a ly z e d w ith detail

in íb rm a tio n a n d d ata, w h ic h m a y n ot entirely re íle c t the in đ u s tr y ’s com petitive

e n v iro n m e n t

2

8 Expected results

The result o f this thesis is to bu ild appro p ria te b u s in e s s strategies for further

d e v e lo p m e n t o f IC C o m p a n y T h e m e th o d o lo g y is e x p e c te d to be effectively applied in the c a s e s tu d y o f oth e r c o m p an ies in s h rim p f a rm in g industry

9 The thesis structure

T he thesis is s tarted w ith the intro d u ctio n part, fo llo w in g by th ree c h ap ters and the

co n clu sio n part

C h a p te r 1 p r o v id e s a fu n d a m e n ta l rev ie w o f strategy a n d strateg ic m a n a g e m e n t theory It fo c u s e s e s p e c ia lly on the busin ess strategy ío rm u la tio n process

C h a p te r 2 d is c u s s e s the s h rim p fa rm in g in V ie tn a m , h ig h lig h tin g its latest

d e v e lo p m e n t a n d k e y su ccessful íactors

C h ap ter 3 p r e s e n ts IC C o m p a n y and an alyzes its e n v iro n m e n t to ide n tiíy extem al

o p p o rtu n itie s a n d th re a ts as well as interaal strengths a n d w e a k n e s s e s that are based

to build c o m p a n y ’s b u s in e s s strategy T h e c h a p te r a lso s u g g e s ts r e c o m m e n d a tio n s

on the strategy im p le m e n ta tio n

10 Suggestion for future research

T h e rap id c h a n g e o f e n v iro n m e n t íactors, like te c h n o lo g ic a l a d v a n c e s , clim ate, and

c u s to m e r ’s lifestyle, cre a te s b oth o p p o rtu n itie s an d c h a lle n g e s to the in d ustry and

IC C o m p a n y T h e re fo re , it could b e interestin g i f fu rth e r re s e a rc h w ith larger sam ple size c o u ld b e u n d e rta k e n to co n ĩirm fu lly the fin d in g o f this study

3

CHAPTER 1 LITERATƯRE REVIEWThe im p o rta n c e o f s trateg y and s trateg ic m a n a g e m e n t fo r o r g a n iz a tio n a l success is now re c o g n iz e d in b o th the literature a n d p ra c tic e S tra te g y a n d strategic

m a n a g e m e n t are n e c e s s a ry fo r an o r g a n iz a tio n to a c h i e v e its o b je c tiv e s , e n h a n c e

c o m p e titiv e a d v a n ta g e s a n d im p ro v e its value

T o d a y ’s h ig h ly c o m p e titiv e b u s in e s s vvorld p re s s u re s o n m a n a g e r s a n d e m p lo y e e s across ĩu n c tio n a l area s a t all o rg a n iz a tio n a l le v els to b e ta k e n o n strategic responsibilities It is im p o rta n t th a t th e y u n d e r s ta n d b o th th e s tra te g ic m a n a g e m e n t

c o n ce p t a n d process

This c h a p te r p ro v id e s th e b asic u n d e r s ta n d i n g o f s tra te g y , b u s in e s s s trateg y and strategic m a n a g e m e n t T h e c h a p t e r íb c u s e s on s tra te g y í o r m u l a t i o n as a p art o f the strategic m a n a g e m e n t

1.1 Strategy

S trategy is a plan d e s ig n e d to a c h ie v e a p a rtic u la r lo n g -te r m g o a l 1 T h e w o r d derives from the a n c ie n t G re e k w o r d s ư a tẽ g o s , w h ic h is c o m b i n e d f r o m t w o w o rd s: stratos (for a rm y ) an d ago (for le a d in g ) 2 T h e c o n c e p t o f stra te g y h a s b e e n b o ư o w e d ữ o iĩì the m ilitary a n d ad a p te d f o r u s e in busin ess

T h ere is v e ry little a g r e e m e n t a b o u t th e m e a n in g o f s tra te g y in th e w o rld o f business A lth o u g h stra te g is ts a n d p ra c titio n e rs u n d e r s ta n d s tr a te g y in d ifferent

\vays and in v ario u s c o n te x ts , th e re are s o m e m o s t c o m m o n c o n c e p t s : 3

s S tra te g y is p e rs p e c tiv e , w h ic h is Vision a n d d ire c tio n

s S tra te g y is p o s itio n , it re íle c ts d e c is io n s to o f f e r p a r ti c u la r p ro d u c ts and

s S trateg y is a plan, a “h o w ” , a m e an s o f g ettin g from here to there

s Strategy is a pattem in actions over time

S tr ơ te g y is the a r t o f th e g e n e r a l.ự S trategy refers to h o w an o b je ctiv e will be ach iev ed , th e re b y , it is broad, long te rm a n d far reaching S trateg y is m ore

c o n c e rn e d w ith d e p l o y in g th e reso u rces vvhereas tactic s is c o n c e m e d with

e m p lo y in g them In b u s in e s s , as in m ilitary, strategy b rid g e s the g a p b e tw e e n policy

a n d tactics T o g e th e r, s ư a te g y and tactics b ridge the g a p b e tw e e n en d s and means

S ir ơ te g y is e v e ty w h e r e S trategy can be fo u n d in all size a n d types o f organizations,

in c lu d in g sm all o r large corporations, political o rg a n iz a tio n s and social

o rg a n iz a tio n s S tr a te g ie s a p p e a r in differe n t levels in an o rg an iz atio n C o rporate strategy, e s ta b lis h e d at th e h ig h e st level o f m a n a g e m e n t, c o n c e m s w ith the selection

o f b u s in e s s e s in vvhich the c o m p a n y sh o u ld c o m p e te a n d h o w res o u rc e s will be

a llo c a te đ a m o n g th o se B usiness strategy fo c u s e s o n h o w to c o m p e te in a given

b u sin ess F u n c tio n a l s trateg y is related to the activities o f fu n c tio n a l areas

1.2 Business strategy

1.2.1 Deíìnition

M o s t b u s in e s s e s h a v e strategies w h ic h m ay n ot b e íb rm a lly w ritten but still exist

Business strategy is a plan fo r how a firm w ill compele, whal its goals shouỉd

T h e b u s in e s s s tr a te g y is a co m b in a tio n o f the in v e s tm e n t d e c isio n and the

d e v e l o p m e n t o f a s u s ta in a b le c o m p e titiv e ad vantage T h e in v e s tm e n t decision o f a

b u s in e s s stra te g y c o v e r s the p r o d u c t a n d m a rk e t, its in v e s tm e n t in ten sity and the

r e s o u r c e a llo catio n T h e d e v e lo p m e n t o f a su sta in a b le c o m p e titiv e ad v an tag e is

b a s e d on a d v a n ta g e s o f a b u s in e s s such as assets, te c h n o lo g y , h u m a n resource,

m a n a g e m e n t

4 F re d N ic k o ls (20(X)) "Strategv: D efinilions a n d M e a n in g " w w w n ick o ls.u s

5 O x fo rd E n g lish Dictioiiar>

5

Since p u b licatio n , M ic h a e l E P o rte r’s “C o m p e titiv e S tr ơ te g y ” has in ừ o d u c e d the

theory and p ra c tic e o f b u s in ess strategy th ro u g h o u t the vvorld

H e <íefines c o m p e titiv e strategy as:

C o m p e titiv e s tr a te g y is ihe se a rc h f o r a jà v o r a b le c o m p e titiv e p o s itio n in a n

in d u stry, the j\'undam ental a r e n a in w h ic h c o m p e titio n occurs C o m p etitiv e

s lr a te g y a im s to e s ta b lis h a p r o fita b ỉe a n d s u sta in a b le p o s itio n a g a im i the

Ịo r c e s th a t d e te r m in e in d u stry c o m p e titio n 6

C o m p e tiíiv e s ír a te g y is a co m b in a tio n o f the en d s (g o a ls) f o r w h ich the firm

is s lr iv in g a n d the m ea n s (policies) b y w h ich ií is s e e k in g to g e í there 7

After a n a ly z in g the c o m p le x ity o f industry c o m p e titio n , M ic h a e l P o rter presents the

th re í g e n e ric strategies: c o st le a d e rsh ip , d iffe r e n tia tio n a n d fo c u s , vvhich can be

im p e m e n te d at th e b u s in e s s unit level to c re a te a c o m p e titiv e a d v a n ta g e and defend against th e effects o f th e fíve factors T h e four b asic a lte m a tiv e com petitive

straiegies are: c o st L ea tỉersh ip , D iffe re n íia tio n , C o st F o c u s a n d D ifferen {ia lio n

Diffèrentiation

Focus

S o u rc e : M ic h a e ỉ P orter, ỉ 980

6 M ichael Portcr (1 9 8 5 ) ‘C om petitive A d \’antage: C reating a n d Susta in in g S u p erio r P er/orm ance "

7 M ich acl Porter (1 9 9 8 ) “C om petitive strategy”

6

1.2.2.1 C o s t Leadership: P ro d u cin g the s a m e p r o d u c t o r Service at a lo w er cost than c o m p e tito rs C re a tin g a m o re efficient p ro d u c tio n or S e r v i c e d elivery process than th a t o f c o m p e tito r s allow s the c o m p a n y to sell at a lovver price and be

p roíítable

1.2.2.2 Differentiation: P ro d u c in g the sam e p ro d u c t or S e r v i c e a t a h ig h e r quality than c o m p e tito r s do

1.2.2.3 F o c u s : F o c u s in g ex c lu siv e ly on a n a iro w s e g m e n t o f the m arket

A fo c u s (or n ic h e ) s trateg y is m o s t suitable fo r sm all fĩrm s b u t ca n be u s e d by any

c o m p a n y , e s p e c ia lly those can afford n eith er a w id e s c o p e co s t le ad ersh ip nor a

w ide s c o p e d iffe re n tia tio n strategy C o m p a n ie s c o u lđ use a cost íb c u s or a

d iffe re n tia tio n fo cu s W ith a cost focus a íìrm a im s at b e in g the low est cost

p r o d u c e r in that segm ent W ith a d ifferentiation fo c u s a fìrm crea tes com petitive

a d v a n ta g e th ro u g h d iííe re n tia tio n w ithin the segm ent

T he a p p ro p ria te g e n e ric strategy w ill help the firm to le v erag e its s ừ e n g th s and

d e íe n d a g ain st th e five fo rc e s ’ effects O th e n v is e , M ic h a e l P o rter speciĩically

e m p h a s iz e d that o n ly one o f the g eneric strategy a lte m a tiv e s s h o u ld be pursu ed fo r

a given p r o d u c t, r a th e r th a n im p le m e n tin g a c o m b in a tio n o f th e se strategies So,

o r g a n iz a tio n s s h o u ld take the ir c o m p e te n c ie s and s tren g th s into consid era tio n to

c h o o s e the m o s t s u ita b le generic strategy

1.3 Strategic management

S ừ a te g ic m a n a g e m e n í is the p ro cess by w h ic h to p - m a n a g e m e n t d e term in e s the

lo n g -te rm d ire c tio n and p e río rm a n c e o f the o rg an iz atio n b y e n s u rin g that careful

fo rm u la tio n , e í í e c t i v e im p le m e n ta tio n and c o n tin u o u s e v a lu a tio n o f the strategy take p la c e 8 T h e strategic m a n a g e m e n t, h en ce , is an o b je ctiv e , logical and

s y ste m a tic a p p r o a c h for decisio n m a k in g in an o rganization

8 Llo yd L B y a rs L e s lic w R ue, Sh akcr A Zahra (1 996), "Strategic m a n a g e m e n t"

7

Figure 1.2 A simplitìed vievv of the strategic managemenl process

1.3.1 Vision and Mission

V ision d e s c rib e s a s p ira tio n s for the íuture \vithout s p e c iíy in g th e m e a n s to achieve

d e s ire d e n d s 9 T h e m o s t ctTective Vision m ust be in sp ira tio n al, w h ic h requires for

the best, the m o s t o r the greatest A V is io n b e c o m e s m o re v isib le \vhen ít is

e x p re s s e d in the íb rm o f a m issio n statem ent

A c o m p a n v ‘s m is s io n is its reason tor b eina T h e m iss io n s ta te m e n t describ e s the

e o m p a n y 's b u s in e s s Vision, in c lu d in g the u n c h a n g in g v alu es a n d p u rp o s e o f the íìrm and íb rvvard-looking v is io n a ry s o a ls that g u id e the p u rsuit o f future

o p p o rtu n itie s

1.3.2 Strategy formulation

S trateg y ío r m u la tio n includes id e n tiíy in g an o r g a n iz a tio n ’s e x te m a l o p p o rtunities and th reats, a n a ly z in g internal s tre n e th s and w e a k n e s s , g e n e ra tin g alte m a tiv e s strateg ies, and c h o o s in g the m ost a p p ro p ria te strateg ies to pursu e

1.3.2.1 External environment analysis

T h e e x te m a l e n v iro n m e n t has tvvo aspects: th e m a c r o - e n v ir o n m e n t that affects all íìrm s a n d the m ic r o - e n v ir o n m e n t that a ííe c ts o nly tlrm s in a p a rtic u la r industrv A

P E S T a n a ly s is is a te c h n iq u e for ư n đ e rstan d in g the m a c r o -e n v iro n in e n t in w hich a

í i n n o p erates P E S T a n aly sis inclu d es P olitical, E c o n o m ic , Social and

T e c h n o lo g ic a l íầctors

T h e in d u stry in vvhich the firm operates (o r is considerinR o p e ra tin g ) is an im p ortant

a s p e c t o f the m ic r o - e n v iro n m e n ta l analysis In the b o o k “ C o m p e titiv e Strategy:

T e c h n iq u e s for A n a ly z i n g Industries and C o m p e tito r s ” (1 9 8 0 ) M ichael Porter

5 A le x M ille r G rcuo rx G Dess (1 9 9 6 ) " S im ie g ic n uin a g em en t"

8

presents the m o d e l o f th e F ive C o m p e titiv c Porces T h e m o d e l has b e c o m e a useful tool for industry analy sis T h e tìve to rc e s include B a rrie rs to entry, C u sto m e rs,

S uppliers S u b s titu te p ro d u c ts, and Rivalry

a P E S T A n a ly s is

M an y m a c ro -e n v iro n m e n ta l tầctors are c o u n try -s p e c iíìc and a P E S T analy sis needs

to be p e rlb rm e d tor all related co untries T h e n u m b e r ot' m a cro -e n v iro n m e n ta l íactors is u nlim ited

Table 1.1 Example of possible factors in a PEST anaỉysis

P o ỉitic a l A n a ly s is

~ — - - 1

E c o n o n i ic A n a ỉy s is

Political stability G o v e r n m e n t in te rv e n tio n in th e m arket

E n v iro n m e n ta l re g u la tio n and pro tec tio n E c o n o m ic grovvth

C o n s u m e r p ro te c tio n C o m p a ra tiv e a d v a n ta g e s o f the cơuntryLegal fr a m e w o rk ỉn íìa s tr u c tu r e q u ality

ỉn tellectual pro p erty p ro tection Skill level o í 'w o r k f o r c e

T ra d e re g u la tio n s a n d ta riíĩs L a b o r costs

Speed o f technology transfer

b Industry analysis: Poríer ’s Five Forces model

P o r te r 's five tb rc c s tramcvvork e v alu ate s e n trv b a rrie rs, s u p p lie r s , c u s to m e rs ,

s u b stitu te P roducts, a n d rivalrv in the industry

Substitutes

I

S o u r c e : M ic h a e l P o rte r, ỉ 98 0

T h o s e íìv e c o m p e titiv e íb rc e s a p p e a r in every in d u s try a n d e v e ry m a rk e t T h e y

d e te r m in e the in ten sity o f co m p e titio n and th e r e íb r e th e p ro tlta b ility and

a ttra c tiv e n e s s o f a n industry B ased on the in íb rm a tio n d e r iv e d fro m th e F iv e F o rces

an a ly sis m a n a e e r s can d ecid e h o w to in í lu e n c e o r to e x p lo it p a rtic u la r

c h a ra c te ris tic s o f th e ir industry to im p ro v e the i ì r m ‘s p o s itio n

10

T his Ibrce d e s c rib e s the intensity o f c o m p e titio n betvveen e x is tin g p layers in an industry in \vhich firm s strive fo r a c o m p e titiv e a d v a n ta g e o v e r th e ir rivals.

E c o n o m is ts m e a s u re rivalry by in d icators o f i n d u s t r y c o n c e n tra tio n A high

c o n c e n tra tio n ratio in d ic a te s that a h ic h c o n c e n tra tio n o f m a rk e t s h a re is held by the lareest tìrm s the in d ustry is c o n c e n tra te d or less co m p e titiv e A lo\v co ncentration ratio in d icate s that the inđustry is c h a ra c te riz e d by m a n y rivals, n o n e o f \vhich has a sig n itìc a n t m a rk e t share T h e m a rk e t is com p etitiv e

T h e inlensity o f rivalrv is c o m m o n ly based on the tìr m s ' a g g re s s iv e n e s s in o rder to gain an a d v a n ta g e It is in íìu e n c e d by the in d u stry ch a ra c te ristic s s u c h as:

I f total c o s ts are m o stly tìx e d costs, the firm m ust p ro d u c e n e a r ca p a c ity to attain

th e lovvest unit costs T h e firm m u st sell a la re e q u a n tity o f p ro d u c t, that lead to a iìg h t for m a rk e t s h are and an in c rease in rivalry

s L e ve ì o fp r o d u c t d iJ feren tia tio n

Lcnv level o f p ro d u c t d ifle re n tia tio n is asso ciated w ith h ig h e r level o f rivalry

In d u s trie s w h e re p ro d u c ts are c o m m o d itie s h av e g re a te r riv alry , Industries w here

c o m p e tit o r s can diíTerentiate th eir p ro d u cts h av e less rivalry

> Intensity of Rivalry

11

R ivalry is r e d u c e d ii therc is a sign ifícan l cost as s o c ia te d w ith the d e c isio n to buy a

p ro d u c t fro m an a lte rn a tiv e supplier

> Threat of New Entrants

It is not o n lỵ e x i s t in g rivals that m a k e a threat to íìrm s in an in d ustry, the possibility that ne\v íìrm s m a y e n ter the industry also a í ĩe c t s c o m p e titio n N e w entrants to an industry c an ra is e th e lcvel o f c o m p e titio n , th e re b y r e d u c in g its attractiveness Hovvcver, th e re are b a rrie rs to entry

B arriers to e n trv are u n iq u c industry characteristics B a rrie rs m a in ta in the level o f

p ro íits for th o s e a lre a d y in the in d ustry b e c a u se they r e d u c e the rate o f n e w entrants

B arriers to e n try a ris e from several sou rces such as:

s G o v e r n m e n t r e g u la tio n s

T h e p rin cip al ro le o f th e g o v e rm n e n t in a inarket is to p re s e rv e c o m p e titio n through anti-trust a c tio n s B e s iđ e s , g o v e rn m e n t restricts c o m p e titio n th ro u g h reguỉations Industries s u c h as p u b lic U tilities are c o n s id e re d natural m o n o p o lie s as it has been

m o re e ỉ ĩic i e n t to h a v e o n e c o m p a n y ra th e r than to p e rm it m a n y c o m p a n ie s to

c o m p e te in a local m a rk e t

s P a te n ts a n d p r o p r ie ta r y k n o w le d g e

Ideas and knoxvledge that p ro v id e c o m p e titiv e a d v a n ta g e s are c o n s id e r e d private

p ro p erty , so th a t, p r e v e n tin g othe rs from usin g the knovvledge and th u s creating a

b a rrie r to e n try

v' A s s e t s p e c ự ìc ity

A sset s p e c itìc ity is th e e x ten t to \vhich the íìn rT s a s sets can be utilized to p ro d u c e a diíTerent p ro d u c t P o ten tial entra n ts are reluctant to invest in hig h ly specialized assets that c a n n o t be sold or c o n v e rte d into o th e r uses

s Switching cosỉs

12

T h e e x iste n c e o f an e c o n o m v oi' scale (m in in iu m size re q u ire m e n ts for profitable

o p e ra tio n s ) c re a te s a b a rrie r to entry

s E x it bcirriers

B arriers to e x it a re s im ila r to barrie rs to entry Exit barrie rs limit the ability o f a firm

to leave the m a rk e t H ig h barriers to ỉeave an industry inc re ase rivalry H ig h exit barriers c a u s e a firm to rem ain in an industry, e v en w h e n the b u s in e s s is not

p ro íĩta b le A c o m m o n exit barrie r is asset s p e c iíic ity ỉ f th e pla n t and eq u ip m e n trequ ire d ío r m a n u f a c tu r i n g a p ro d u c t is h ig h ly sp e c ia liz e d , th e y c a n n o t easily be

P ate nted or p ro p rie ta ry k n o w -h o w

D iữ ic u lty in b ran d svvitching

R estricted d is trib u tio n c h an n e ls

> Bargaining Power of Buyers

B u y e r s are th e p e o p le o r o rg a n iz a tio n s w h o create d e m a n d in an industry T he

p o w e r o f b u y e rs is Ihe im pact thai c u s to m e rs h av e on a p r o đ u c in g industry

13

I f b u y e r povver is strong, the rela tio n sh ip to the p r o d u c in g in d u stry is n ear to a

m o n o p s o n v a m a rk e t in vvhich there are m a n v su p p lie rs and o n e huycr U n d e r such

m arket co n d itio n s, the b u y e r sets the price

> Bargaining Power of Suppliers

S u p pliers can h av e a s ig n iíìc a n t im pact on a c o m p a n y 's p ro tltab ility I f suppliers

h av e high b a r g a in in e p o w e r o v e r a co m p a n v then the c o m p a n y 's industry is less attractive

A p r o d u c in g in d ustry re q u ire s r a w m aterials labor, c o m p o n e n t s T h is requireinent leads to b u y e r-s u p p lie r re la tio n sh ip s betvveen the industrv and the íìrm s that p rovide the m a te ria ls used to cre a te P r o d u c t s S u p p lie rs, i f p o w e rfu l, c a n in ílu en t the

p ro d u c in g industry, su ch as selling at a high price to ca p tu re s o m e o í 't h e in d u s try 's proíìts

T h e in d ustry o ften tầ c e s a high p ressu re íro in th e ir s u p p lie rs or buyers This

re la tio n s h ip c an p o te n tially aíTect its profítability

Table 1.3 Bargaining power of suppliers and buyers

A few b u y e rs vvith s ig n ific a n t m a rk e t M a n y diíTerent b u y ers, n o b u y e r has

s h a re and m a n y sellers any p a rtic u la r in ílu e n c e on p ro d u c t or

T h e industry is not a kev supplvine, price

u r o u p P ro d u c e r c a n ta k e o v e r o w n

Low switching costs: Products are distribution or retailing

s ta n d a r d iz e d S ig n ifíc a n t svvitching costs

B u y e r s th re a te n backxvard integration P ro d u c e rs th re a te n forw ard integration

M a n y b u y e rs and few d o m in a n t M a n y c o m p e titiv e su p p lie rs

14

s u p p h e rs J^0W s^vitching costs: p ro d u c ts are

N o s u b stitu te s fo r the p a rtic u la r input sta n d a rd iz e d

High s w itc h in g c o s ts from o n e s u p p lie r P u rc h a s e c o m m o d it y p ro d u c t

T he th rea t o f s u b stitu te s is d e te rm in e d by tầ cto rs like:

1.3.2.2 Internal environment analysis

All area s o f th e o r e a n iz a tio n can sig n itìc a n tly in ílu e n t its lo n g -te rm success Internal a n a lv sis ev a lu a te s relevant tầ c to rs from those are a s to d eterm ine

o r g a n iz a ti o n 's s tre n g th s a n d vveaknesses T h e s p e c itlc areas to be a n a ly z e d vary from o rg a n iz a tio n to o rg an iz atio n Factors that are c o m m o n ly e v a lu a te d across the

o r g a n iz a ti o n 's a re a s in c lu d e the t'ollowing:

15

T h is analy sis, w h ic h is to u n d e rs ta n d c a u s e - a n d -e ffe c t re la tio n s h ip s in the

o rg a n iz a tio n helps m a n a g e r s to identiíV c o m p a n y and industry c h a n g e s a n d trends vvhich m a y e x p la in c o m p a n y ‘s p e rfo rm a n c e , a llo w c o m p a r is o n s w ith com p ctito rs

an d g iv e in íò r m a tio n to its tliture^s p e río m ia n c e

b P r o d u c t

N o b u s in e s s can be su c c e s s tu l in t o d a y 's c o m p e titiv e e n v iro n m e n t vvithout the

a w a re n e s s o f its p r o d u c t in the m a rk e tp la c e T h e p ro d u c t can s u rv iv e and grcnv o n ly

w h e n it is p r o v id in g liigh quality relative to its price P e e d b a c k from c u sto m ers and

c u s to m e r a c c e p ta n c e a re potential data s o u rc e s re íle c tin g the p ro d u c t quality In

ađ d itio n th e c o m p a n y n eeds to assess p ro d u c t p o s itio n by e v a lu a tin g the m arket

s h a r e o f its m a jo r P ro d u c ts and the trends in th e m a rk e t s h a re as well

O r g a n iz a tio n s , w h e t h e r they h av e research and d e v e lo p m e n t ( R & D ) đ e p a rtm e n t or

n o t m u st c o n e e rn a b o u t their abilitv to d e v elo p n e w P roducts N o w a d a y s , R & D

b e c o m e s o n e o f th e k ey successiìil tầctors o f any o rg a n iz a tio n s

16

e O r g a n ỉ i a t i o n a ỉ s t r u c t u r e

All o r g a n iz a tio n s o p e ra te th ro u g h an o rg an iz atio n al structure D irectly im pactin g on

an o r g a n iz a ti o r f s p e ríb rm a n c e the stru ctu re m ust be e v a lu a te d to assess its intcrnal stren g th s a n d vveaknesses

f H u m a n r e s o u r c e

T he h u m a n re s o u rc e s h a v e a sig n iíìc a n t in ílu e n c e on e v ery o r g a n iz a ti o n 's activities

T h e r e to re o r g a n iz a tio n s n eed to m a k e an ev a lu a tio n on th e ir h u m a n resources to acc u rately a s s e s s s tre n g th s and w e a k n e s s e s E íĩe c tiv e h u m a n re s o u rc e s give an

o rg a n iz a tio n a c o m p e tit iv e a d v a n ta g e in attracting or re ta in in g h igh quality people

I n đ u d i n g o p e r a t iv e e m p lo y e e s and ali levels o f m a n a g e rs , th e e v alu atio n will

d e te rm in e n o t o n ly th e q u a n tity a n d q u ality o f c u rre n t e m p lo y e e s but also that o f

e x p e c te d e m p lo y e e s in the future

g T e c h n o l o g y a n d i n f r a s t r u c t u r e

T h e c o n đ itio n o í 'o r g a n i z a t i o n ’s íầcilities and e q u ip m e n t c an e n h a n c e or hindcr its

c o m p e titiv e n e s s O r g a n i / a t i o n s sh o u ld e v alu ate th e ir p r o d u c tio n process, for

e x a m p le , w h e th e r it is m o d e rn and up to date or not

1.3.2.3 SWOT Analysis

T h e e x te rn a l a n a ly s is id e n titìes o p p o rtu n itie s and threats vvhereas the internal

an a ly sis d e í ìn e s th e i ì r n r s s tren g th s and w e a k n e s s e s B y u n d e r s ta n d in g that

in lb rm a tio n a íìrni can b etter leveratìe its stren g th s, c o rre c t its vveaknesses,

c a p i ta l i/e on o p p o rtu n itie s and d e te r po te n tially threats

S W O T a n a ly s is is a u s e tu l te c h n iq u e for s u m m a riz in g the e x t e m a ỉ e n v iro n m en ta l

tầ ctors S W O T s ta n d s for S trengths, W e a k n e s se s O p p o r tu n itie s an d T hreats T he lra in e w o r k w a s d e s c rib e d in 1969 by E d m u n đ p L ea rn e d , c R o la n d C hristiansen,

K c n n e th A n d r e w s , an d W illiam D G u th in “B u sin e ss P olicy, T ext a n d C a s e s ”.

S W O T is a s im p l e tramevvork for g e n e ra tin e s tratceic a ltern ativ es from a situation analy sis T h e internal and ex ternal e n v iro n m e n t analy sis can p r o v id e a large am ount

OAI HỌC Q U O C G IA UM

o t i n í ò n n a t i o n m u c h oi' vvhich m a y n ot be h ig h l y r e le v a n t T h e re b y , S W O T

c c n c e n tra te s o n ly o n the issues that p o tcntiallv h a v e th e m o s t im p act

Figure 1.4 Strategic analysis process

CEEEEEP

" t i r M ỉ ỉ i : T r r t i : ;

c iỂĩ )

W hen th e a n a ly s is has b e e n c o m p le te d , a S W O T p r o t ĩ l e c an b e g e n e ra te d and u s e d

as the basis o f g o al s e ttin g , strategy tb rm u la tio n , a n d im p le m e n ta t io n

ln a d d itio n to i d e n t i í y i n e m ạ ịo r strengths vveaknesses o p p o r tu n i tie s a n d threats, the

S W O T m a trix in c o rp o ra te s potential strateg ies for im p r o v i n e th e c o m p a n y ’s

co m p e titiv e p o s itio n F or e x am p le, the stre n g th s c a n be le v e ra g e d to p u rsu e

o p p o rtu n itie s a n d to av o id threats, and m a n a g e rs c an be a le rte d to w e a k n e s s e s that iniííht n e e d to bc o v e r c o m e in o rd e r to s u c c e s s fu lly p u r s u e o p p o rtu n itie s

18

1.3.2.4 S t r a t e g y s e le c tio n

C h o o s in g an a p p ro p ria te strategy, basically, in v o lv e s c a re íu l co n sid e ra tio n s to

e n s u re that the op tio n s e lec ted \vill w o rk in practice S trateg ic o p tio n s that may be

re le v an t in dilTerent s itu a tio n s n eed to be vveiehed up a g a in st e a c h other T h e three

m ost im p o rta n t c riteria a re suitability, a c c ep tab ility and íeasibility

> Suitabiỉity

H a v in g a v ie w o f re la tio n s h ip s b e tw ee n the internal a n d ex tern al e n v iro n m e n t, an

o rg a n iz a tio n then n e e d s to c o n s id e r w h e th e r a s trateg y is su itable or not F or

e x a m p le d o e s it build on o r e a n i z a ti o n 's s tre n e th s and e n v iro n m e n ta l o p p o rtu n itie s?

R eturn deals \vith the b e n e íìis ex p e c te d by th e s ta k e h o ld e r s F o r e x a m p le

s h a re h o ld e rs vvould e x p ec t the increase o f th e ir vvealth, e m p l o y e e s w o u ld e x p ec t

im p ro v e m e n t in th e ir care ers and c u s to m e rs w o u ld e x p e c t b e tte r v a l u e for m o n e y

S ta k e h o ld e rs ' reactions deal w ith an tic ip a tin g r e a c tio n s o f sta k e h o ld e rs

S h a re h o ld e rs could o p p o s e the issuing o f new s h a re s , e m p l o y e e s a n d u n io n s co u ld

o p p o s e o u ts o u r c in g for 1'ear o f lo sing the ir jo b s , c u s to m e r s c o u ld h a v e c o n c e r n s o v e r

a m e rg e r w ith re g a rd s to q u ality and support

> Feasibiliíy

l easibility is c o n c e m e d vvith \v h ether s tra te sic p la n s c an g o in p r a c tic e a n d \v h e th er the o rg a n iz a tio n has suíTicient reso u rces to carry o u t th o s e p la n s R e s o u r c e s include funds p cople, tim c and in ío rm atio n

T h e m o s t p o p u la r a p p ro a c h e s to select strategies in c lu d e th e G E - M c K i n s e y M atrix and G R E A T M odel

a GE-McKinsey Matrix

T h e G E - M c K i n s e y M a trix is a n ine-cell (3 by 3) m a trix used to p e r f o n n b u s in e s s

p o rtío lio a n aly sis as a s tep in the strategic p la n n in g p r o c e s s

T h e G E - M c K i n s e y M a trix (also k n o w n as the G E B u s in e s s S c r e e n o r G E S trateg ic

P la n n in g G rid ) w a s d ev e lo p e d in 1971 by th e m a n a g e m e n t Consulting f in n

M c K in s e y & C o m p a n y M c K in s e y a ỉu m n u s K e v in C o y n e d e s c r ib e s the G E -

M c K in s e v m a trix as a f ra m e w o rk to screen G E ' s la re e p o r t ỉ o l i o o f 43 strategic

b u s in e s s units B asically this m a trix im p ro v es on thc B C G a p p r o a c h by u s in g m o re

c o m p re h e n s iv e axes and a llo w in g for g re a te r p re c isio n

T h e industry a ttra c tiv e n e s s c o n sists o f su ch factors like m a r k e t s iz e , m a rk e t g ro w th ,

in d ustry p ro íĩt m a rg in a m o u n t o f c o m p e titio n th e đ e e r e e o f s e a s o n a l a n d cyclical llu c tu a tio n s in dcmancỉ, and industry cost structure B u s in e s s s tr e n e t h e v a lu a te s the ability to c o m p e te in the m a rk e t and is a function o f the size a n d g r o w th rate o f the

20

firm , m a rk e t s h a re by s e g m e n t, c u s to m e r loyalty, m a rg in s, d is trib u tio n ch an n e ls,

te c h n o lo g y skills, p a te n t p o sitio n s, a n d m a rk e tin g and o rg a n iz a tio n a l skilỉs

Figure 1.6 GE-McKinsey m atrix

in attractìve industry

Me di um s trong business unỉỉ Average business 1

in average industry unit in average 1

B o th a x e s are d iv id e d into th re e s e g m e n ts , y ie ld in g n in e cells vvhich a re g ro u p e d

in to three zones T h e G re e n is the m o s t a ttractiv e in w h ic h to o p e ra te a n d req u ire a

p o lic y o f in v e s tm e n t for grovvth T h e Y e ll o w has a m e d iu m a ttractiv en ess,

th e re fo re , the m a n a g e m e n t o f b u s in e s s e s vvithin this ca te g o ry s h o u ỉd be m ore

c a u tio u s a n d vvith a g re a te r e m p h a s is b e in g p la c e d on sele c tiv e in v e s tm e n t and

e a m i n g retention T h e R ed is the least attractiv e, so m a n a g e m e n t s h o u ld follow a

p o lic y o f h a rv e s tin g o r d iv e s tin g u n le ss th e re la tiv e stren g th s c an be im p ro v e d

T h e m a trix b e lo w d e s c rib e s s tra te g ie s that w o u ld be p u rs u e d fo r eac h b u s in e s s unit

21

Pigure 1.7 R eco m m en d ed strategies for GE-lM cK insey matrix

Grow

Protect position

Invest for growứi

Search for globat

Search for new segments

Reduce cost to maximixe

Search for new segments Try harder and challenge the ỉeader

Selective investment

Invest selectivelyMaintain market positionConcentrate on selected segment

specialize in niches

Segment and selective investment

Invest for eam ing

M aintain m arket positionConcentrate on selected segment

Speciaiize in niches Invest selectively

Harvest for cash

generation

Invest for eam ing

Maintain m arket position

Concentrate on selected

segment

Specialize in niches

Invest selectively

•/ G ro w : this b u s in e s s is a ta rg e t fo r in v e stm e n t, vvhich s h o u ld r e c e iv e íin a n c ia l

and m a n a g e r ia l s u p p o r t to m a in ta in the s tro n g p o s itio n a n d c o n tin u e

c o n tr i b u ti n g to lo n g -te rm p ro fitab ility

22

^ ỉn v e s t fo r g r m v th : that unit sho u ld be in v e ste d in to im p r o v e th e c o m p e titiv e

position

v' S e le c tiv e 'm vestm eni: investm ent m u s t a i m at im p r o v i n g the b u s in e s s

strerm ths O n lv b u sin esses that can im p r o v e th e ir s tr e n ẹ t h s sh o u ld be reta in ed

s S e le c tiv e H arvest o r ìn v estm e n t: s e lec tiv e h a r v e s ti n g is a n o p tio n to ex tra ct

c a s h tlo w but th is sho u ld be d o n e \vith c a u tio n

* S e g m e n t a n d s e le c tiv e in vestm en t: b u s in e s s e s c a n im p r o v e th e ir p o sitio n s by

Creative s e g m e n ta tio n and s e lec tiv e in v e s tm e n t to s u p p o r t th e s e g m e n ta tio n strategy

^ C o n tr o lle d e x it o r h a rvest: try to gain m a rk e t s h a re by in c re a s in g b u s in ess

strerm ths c o u ld p ro v e to be very e x p e n s iv e a n d m u s t bc d o n e w ith c a u tio n

s H a rv e s t fo r c a s h g e n e r a tio n : th o s e s tro n g u n its s h o u ld be net ca s h g e n e ra lo rs

T h o s e pote n tial s tra te g ie s should be ev a lu a te d and c o m p a r e d to c h o o s e the m o s t

p ro p e r stra te e y b a s e d on the G R E A T M o d el vvhich s ta n d s fo r G a in , R isk, E x p e n s e

A c h ie v a b le and T im e C riteria are w e ig h te đ a c c o r d in g to th e ir im p o r ta n c e to the

c o m p a n v S tra te e ie s a re m a rk e d form 1 to 5 for e a c h c r ite rio n , o f w h ic h 1 is the

w orst 3 is m e d iu m a n d 5 is the best B asically b u s in e s s e s a re s u g g e s te d to p u rsu e

23

Table 1.5 A ppropriate strategies selection (GREAT niodel)

A rte r a n a ly z e d a n d s e lec ted a strategy is then tra n s la te d into o r g a n i/ a ti o n a l action

H o w e v e r, th e im p le m e n ta tio n is not easy It re q u ire s an o re a n iz a tio n to estabỉish annual o b ịe ctiv e s, set policies, m o tiv ate e m p lo y e e s a n d a llo c a te resources to

e x e c u te íb rm u la te d strategies T h e im p le m e n ta tỉo n c o n s is ts o f d e v e lo p in g a

s u p p o rtiv e cu ltu re c re a tin g an e í ĩe c t iv e o rg a n iz a tio n a l stru ctu re , p rc p a rin g budgets, utiliz ing in fo rm a tio n s y stem s, and also in c lu d es d e te r m in in g w h ic h strategies sho u ld be im p le m e n te d íìrst

In g en era l all m a n a g e r s íìnd im p le m e n la tio n th e m o st diffícu lt asp e c t o f the strategic m a n a g e m e n t, m o re d iftìc u lt than e ith e r s trateg ic a n a ly sis or strategy

tb rm u latio n M o st c o m p a n ie s h a v e strategies, but few er a c h ie v e the m A Fortune

M a g a z in e stu d y s u g g e s te d that 7 0 % o f 10 C E O s vvho fail d o so not b e c a u se o f bad strategy b u t b c c a u s e o f bad e x e c u tio n 10 In a n o th e r stu d y o f 20 0 c o m p a n ie s in the

T im e s 1000, 8 0 % o f directors said they had the right stra te g ie s but o nly 14%

th o u e h t they vvere i m p l e m e n t i n g th e m w e l l '1

T h e seie c te d s trateg y is impltMTiented by p ro g ra m s , b u d g e ts and p ro ced u res T he

im p le m e n ta tio n in v o lv e s th e (ìrm ’s res o u rc e s and its s ta f f s ‘ m o tiv a tio n to achieve

10 R Charan, G C o lv in ( 1999) “ W h y C E O s F a il” , F ortune M a g a iim , 21 Jun 1999

11 I Cobbold & G Lavvrie (2 0 0 1 ), “ W hy do only one third o f U K com panies achieve strateiỉic success?” ,

2 G C L td M ay 2001

24

obịectives T h e w a v in \vhich the strategv is i m p lc m e n te d c a n h a v e a sig n illca n t

im paet on vvhether it \vill bc successíu l

O rg a n iz a tio n s h a v e to p ay atten tio n to the ir h u m a n r e s o u r c e s to m a k e strategies apply C o n s id e ra tio n o f h u m a n re s o u rc e s re q u ire s that p e o p le , w h o are in charge vvith d e v e l o p in g the c o rr e s p o n d in a action steps í Lilly u n d e r s ta n d th e stra te g y they vvill im p le m e n t T h e iin p le m e n ta tio n m ig h t n o t s u c c e e d i f th e strategy is

m is u n d e rsto o đ or the o rg an iz atio n fails to truly m o t iv a t e p e o p l e to w o rk w ith

en th u siastn to w a rd s its obịe ctiv e s P u rth e rm o re , m a n a g e r s m u s t be avvare o f the

e íĩe c ts e a c h nevv strategv \vill h av e on the h u m a n re s o u rc e F o r in s ta n c e , h o w m uch

ch an g e d o e s the strategy call íor, h o w quickly m u s t th e y p r o v id e for that c h a n g e The ansvvers help d e cid e w h e th e r to allovv tim e for e m p lo y e e s to g a in e x p e rie n c e , to introduce tra in in g o r to hire nevv em p lo y e e s

A lso, o rg a n iz a tio n s n eed to translate th e ir b ro ad s tra te g y s ta t e m e n t in to a n u m b e r o f

sp eciíìc vvork a s s ig n m e n ts T h ey d e v e lo p d e ta ile d a c tio n p la n s listin g a ctio n steps and a s s ig n in g resp o n s ib ility to a s p ecitlc in dividual ío r a c c o m p l i s h i n g e a c h o f those steps T h e y a lso set a d u c date and e stim ate the re s o u rc e s re q u ire d to ac c o m p lish each step

1.3.4 Strategy evaluation

S trateg y e v a lu a tio n in v o lv es e x a m in in g e ith e r hovv the s tr a te g y has been

im p le m e n te d or its o u tc o m e s T h e e v a lu a tio n in v o lv e s m o n i to r in g results,

c o m p a rin g to best practices, e v a lu a tin g the e f f e c tiv e n e s s a n d e í ĩ i c i e n c y o f the pro cess a n d c o n tro llin g for v aria n c e s as w elỉ O r g a n iz a tio n s h a v e to m ake

a d ịu stm e n ts to the p ro c e s s if n ecessary s u c h as c h a n g i n g th e s c h e d u le , c h a n g in g the action step s, c h a n e i n s th e strategy or lìnally c h a n g i n g the o b je c tiv e

I f it is im p o s s ib le to a c h ie v e the m e trics and tim e ta b le s , th e e x p e c ta tio n s are unrealistic and the stra te g y vvill d eíìn itely fail II' the e v a ỉu a tio n d e te rm in e s that

p ro c e s s e s a re not w o rk in g , or results are not as e x p e c te d , th e n th e s tra te g y sho u ld be

m o d itìe d o r re íb rm u la te d

25

Both m a n a g e m e n t a n d e m p lo y e e s arc involved in strateg v ev a lu a tio n , as they vievv the im p lc m e n te d stra te g y írom d iffercnt persp ectiv es F o r e x a m p le , a vvorker can

re c o g n iz e a p ro b le m in a s p eciíìc im p le m e n ta tio n step that m a n a g e m e n t vvould not

be ab le to identiiv

C lia p te r s u m m a r v

A s o rg a n iz a tio n s fo llo w a strategic m a n a g e m e n t p ro cess, it is n ece ssary for

m a n a g e r s to u n d e rs ta n d either strateg y c o n c e p t o r strateg ic m a n a g e m e n t process

W hile s tra te e y d e s c rib e s the vvay o rg a n iz a tio n s vvill p u rsu e th e ir goals, strategic

m a n a g e m e n t is the p ro c e s s by \vhich m a n a g e rs e n s u re that c a re lu l íbrm ulation, eíTective im p le m e n ta tio n and c o n tin u o u s e v a lu a tio n o f th e strateg y takes place

M o re o v e r, c h a n g e s in the b u s in ess w o rld result in Ihe m o d iíìc a tio n o f existing

s trateg ies and the d e v e lo p m e n t oí' nc\\ strateg ies w h ic h is a part o f the

o r g a n iz a ti o n 's c o n t in u o u s ly im p ro v in g process in o rd c r to a c h ie v e its obịectives

26

SHRIMP FARMING INDUSTRY IN VIETNAM

CHAPTER 2

The grovvth in the d e m a n d tor s h rim p has c x c e e d c d m o s t c x p c c ta t io n s a n d this gro\vth is e x p c c ic d to c o n tin u e until at least 2 0 2 5 1 “

T h an k s to g e o g ra p h ic a lK idcal co n d itio n s s h rim p t ầ m i i n g in V ie tn a m e x p e rie n c e d

a rapid grovvth o v e r th e past d cca d e and b e c o m c s a m a ị o r c o n trib u to r to

V ie tn a m e s e c c o n o m y , e a m i n g V ie tn a m thc rank o f th ird la rg c s t p r o d u c c r o f shrim p globaíly T h e u o v e m m e n t ‘s e n c o u ra a e m c n t g o e s \vith th e in c re a s in g d om e stic

d c m a n d and a s tro n g cx p o rl m arkel, are the d r iv in g lb rc e s h e h i n d the grovvth of’

s h rim p lầ rm in g

A basic knovvledge o f thc s h rim p liirminiì is n c c e s s a ry to s h r im p p ro d u c e rs and

e v c ry o n e vvho involveii in this globa lly m a ss iv c in d u strv l his c h a p t e r d e s c rib e s thc

d e v e lo p m e n t and c u rren t status ol' shrim p ía r m in e in V ie tn a m T h e c h a p te r also

ch a ra c lc riz c s the e c o n o m ic s oi' s h rim p tầ rm in g a n d h ig h lig h ts th e in d u s tr y 's kcy

s u c c c s s tu l faclors

2.1 An overview o f shrimp íầrming

S hrim p, re a a rd c d as a luxury food has b e c o m e m o r c a H b r d a b le a n d available ụloballv A s c a p tu re o f vvild s h rim p is no lo n g e r e n o u s h to fulfill th e dem an d ,

s h rim p s a re ra is c d on an industrial scale in tro p ical c o u n t ri e s to s a tisíy the

12 PingSun Leu ng , C aro le Eng le (2 0 0 6 ), "Shrim p C ulture: E conom ics, M arket, a n d T ra d e "

13 h ttp://en.w ikipedia.org/w iki/Aquaculture

27

posl k m a e tVoin h a tc h c ric s and then Iran ster iheni to íirovv-out ponds in w hich

s h rim p s arc raised lo m a rk c ta b le si/.c u h i c h ta k es a b o u t ihrce m o n th s

T h e m a jo r form o f sh rim p lầ rm in g initiallv is e x ten siv e, a form o f o c c u p y in g and

p o sse ssin g vvatcr s u rtầ c e s and natural tìsheries re s o u rc e s w ith in v e stm en t in labor and m a n a g e m e n t lloNvevcr lầced \vith d e c lin in a p ro d u ctiv ity a n d e n co u ra g ed by

g o v e rn m e n t p o l i c y to i n c r e a s e a q u a c u l t u r c p r o d u c t i o n , s h r i m p t ầ r m e r s h a v e

increasingly svvitched 10 m o re in tensive m o đ e ỉs S e m i-in te n s iv e a n d intensive farms

a p p ea red w h e re th e s h rim p \vere raised by artificial feeds and p o n d s \vere actively

m a n a e e d T e c h n o lo g ic a l a d v a n c e s m a d e m o re in ten siv e tầ rm in g p ra ctices possible that could a c h ie v e h ig h e r o utput vvhile u s in e less land

'r F our s p c c ie s d o m i n a tc sh rim p produ clio n are:

v' M a c h r o h r a n c h iu m r o s e n b e r g iì: a Ireshvvaterspecies.

'S M e ta p e n a e u s ensis: the G re a s y b a c k S h rin ip a b ra c k ish vvatcr species,

e x p lo ited from thc vvild rathc r than bein g iầ rm ed

P e n a e u s m erạiiicn.ú.s: initialK p opular this sp ccic s is easy lo b reed hut

diH ìcult to grovv out a íte r re a c h in g 20tt

s P e n a e u s m o n o d o n : thc B la ck T ig c r S h r im p has b etter grovvth rates a n d copes

h etter vvith salin ity c h a n e e s

✓ P e n a e u s v a n n a m e i: th e S o u th - A m e ric a w h ite -le g s h rim p w h ic h is not as taste

and b ig a s th e black tig er sh rim p H o w e v e r its easy b re e d in g stable supply

as vvcll as lovv p ro d u ctio n cost m a k e the vvhile s h rim p thc c h o ice tbr most

s h rim p la rm s T h e S o u th - A m e ric a vvhite-leg s h rim p \vas introduced to

V ietn am in 20 0 0 , and n o w rep la ce b la c k tig e r s h rim p to d o m in a te the

m a rke t

W e have seen an in c rc a s in g c x p a n s io n o f iropical s h rim p a q u a c u llu r c o v er the last tvvo d ec a d e s , p a rlic u la rly in A sia S h rim p farm in g has c h a n g c d Irom traditional,

28

s m a ll-s c a le tầ rm s in S o u th - A s ia into a g lo b a l industry T e c h n o lo g ic a l ad v a n c e s

h e l p s to g ro w s h rim p at h ig h e r d en sities, a n d b ro o d stock is sh ip p e d w o rld w id e

D u r in g this tim e, total p ro d u c tio n o f ía rm e d s h rim p has g ro w n fa s te r th a n a n y other

a q u a c u ltu r e c o m m o d ity w o rld w id e T h e tra d e o f s h rim p a c c o u n te d for o v e r 2 0 % o f

th e total aquatic p ro d u c ts and b e c a m e th e largest trade c o m m o d it y o f aquatic

p ro d u c ts Total w o rld a q u a c u ltu re p ro d u c tio n o f s h r im p w a s a ro u n d 2 5 ,0 0 0 tons

b e t o r e 1970s and m o r e than f o u r m illio n tons in 2 0 08 A lth o u g h s h rim p p ro d u ctio n

c o n tin u e s to d o m in a te a q u a c u ltu re , th e ir ra p id incre ases h av e m o d e ra te d in recent

y e a r s T h e vvorld g ro w th rate w a s 2 4 % p e r y e a r d u rin g the 19 7 0 s , an d 2 7 % in the 1980s S ince th e 1990s, s h rim p p ro d u c tio n th e n slovved to a g r o w th rate o f 6 % 14

S o u rc e : F A O a n d G S O , 2 0 0 9

A s i a raises ab o u t 8 6 % o f c u ltu re d s h rim p a n d the rest c o m e p rim a r ily fro m Latin

A m e ric a V ie tn a m is n o w o n e o f th e w o r ld ’s to p four s h rim p e x p o rte rs, w ith C hina,

T h a i la n d a n d I n d o n e s ia 15 T h e p ro d u c tio n í í o m the top fíve c o u n trie s to o k a share o f

7 3 5 % o f the w o r ld c u ltu re d s h r im p p ro d u c tio n in 2 0 08

14 FA O (2004)

15 V ie tn a m Asso ciatio n o f Seafood Exp o rters and Processors (2 0 0 9 )

29

V ie t n a m enlries into thc alobal sh rim p m a rk e í latcr than m anv oth e r A sian

c o u n trie s Hovvcver ía v o ra b le a g ro -c lim a tic co n d itio n s thc o p e n i n g o f the e c o n o m y

tbllovvina the econom ic renovation process o f " d o i m o i " and the expansion o f the

g lo b a l sh rim p m a rk e t all lead to th e c o u n t r y ‘s sp c c ta c u la r m a rk e t entry

W i th a c o a stlin e ol o v c r 3.260 km and m ore than 3 ,0 0 0 islands a n d islets scattered oKíshore plus up to 2,8 6 0 rivers and cstuaries V ie tn a m has g e o g ra p h ic a lly ideaỉ

c o n d itio n s for íìsh e rie s and sh rim p ía n n s V ie t n a n r s Coastal and m a rin e e c o sy stem s

a r e o f s i n n i l i c a n i e c o l o n i a ì l s o c i a l a n d e c o n o m i c i m p o r í a n c e vvith a p p r o x i m a t e l y

! 1,000 sp e c ie s r e c o rd c d in the m a rinc and Coastal vvaters, and 40 ty p e s o f vvetland

h a b ita t

S h r im p tầ rm in g b e g a n in V ietn am a p p ro x im a te ly 100 y ears ago T h e M c k o n g R iver

D e lta in the Sou th an d the Red R iver Delta in the n orth h a v c been used 1’o r vvild

c a t c h Í1S vvell as e x te n s iv e íầ rm in g for decades A r e a o f s h rim p tầ rm in g re ac h ed

7 0 , 0 0 0 h ec ta re s in th e M e k o n e R iv e r D elta (1974), a n d a b o u t 15,000 h ectares in the

N o r th ( 1 9 7 5 ) 16 V ie tn a m s h rim p lầ rm in u actuallv d e v e lo p e d s in c e 1987 and

s tr o n g ly e x p a n d e d in 1990s A fter 20 0 0 V ietn am b e c a m e o n e o f the iìve countries

h a v i n g th e h ig h e st s h r im p p ro d u ctio n in the vvorld

V ie t n a m is p r o b a b ly One o f the c o u n trie s w h ic h h av e the largest area for shrim p

f a t m i n g in the vvorld T h e area ỉb r shrim p c u ltu re in c re a s e d fro m 3 4 0 ,5 0 0 hectares

in 2 0 0 0 to 5 8 0 ,4 0 0 h e c ta re s in 2003 By the end o f 2 0 0 7 , th e re had b een 630,300

h e c t a r e s o f land u s e d for s h rim p farm ing, a c c o u n te d for m o re th a n 6 2 % o f land used

t o r aq u a c u itu re M o s t o f s h rim p íầ rm s are in M e k o n g delta s c a tíe r a lo n g estuaries,

c a n a ls in Central C o a s ta l reg io n s and in the Red R iv e r a n d T h a i B in h rivers delta in

t h e N o rth

2.2 The development o f shrimp farming industry in Vietnam

16 UNDP

30

T able 2.1 Vietnam shrim p farm ing areas

Area 340.5 476.7 516.2 580.4 604.4 533.2 616.7 630.3

S o u rc e : G SO , 2 0 0 8

V i e t n a m ’s s h rim p ía r m in g e x p e r ie n c e d rapid grovvth, at an a v e ra g e rate o f 7 % from

1991 to 2 0 00, and a b o u t 18% from 2001 to 2 0 0 7 O n e h a l f o f s h rim p p ro d u c tio n is

c o n s u m e d in the c o u n try a n d the o th e r is e x p o rte d T otal s h rim p p r o d u c tio n reached

3 9 2 ,0 0 0 tons in 2 0 0 8 (in c r e a s e d by 1.4%), o f vvhich a p p ro x im a te ly 5 1 % w as

Figure 2.3 Vietnam export value by sh rim p and commodiỉy group (2008)

a c c o u n tin g for o v e r 4 3 % a n d 3 5 % o f total íĩsh e ry ex p o rt e a m in g s , re s p e c tiv e ly in

20 0 6 a n d 20 0 8 ỉn th e íirst five m o n th s o f 2 0 0 9 , the tu rn o v e r from s e a f o o d exports had re a c h e d us $1 3 7 b illion U S D , o f w h ic h us $441 m illion vvas s h rim p s

Figure 2.4 Vietnam íìshery and shrimp export value (U S Smillion)

J a p a n a n d th e U S A a re the big g e st m a rk e ts fo r V ie tn a m e s e s h rim p J a p a n e s e m a rk e t

a c c o u n ts fo r 3 5 % o f the total v a lu e o f all V ie tn a m e s e s h r im p e x p o rts in 2008

V ie tn a m is the s e c o n d big g e st ex p o rte r o f frozen sh rim p to U S A , fo llo w in g

T h ailan d S h rim p ex p o rts to the U n ite d S ta te s h a d a Sharp in c re ase from 2 7 ,2 0 0 tons (vvorth us $317 m illio n ) in 2 0 01 to 4 6 ,2 8 9 to n s (w o rth us $ 4 6 7 m illio n ) in 2008

5000

■ Fishery export value

■ Shrimp export value

months 2009

Source: GSO, 2009

32

N o t o n lv e a r n i n e io rcig n c u r r e n c y ío r the c o u n try s h r iin p a q u a c u ltu r e is a ls o

p r o v id i n g v a lu a b lc aq u atic p ro d u c t a n d re d u c in g o v e r - c a p t u r in g as vvel 1 It also ofí'ers a g r e a t n u m b e r o f e m p lo y m e n t o p p o r tu n itie s a n d ra is e s liv in g Standard for

m a n y p e o p l e , e s p e c ia lly th o se in Coastal areas, w h ic h h e lp to r e d u c e th e ir m o v e m e n t

to b ig cities M o re o v c r s h rim p in d u stry h a s b een c o n t ri b u ti n g to th e u p g ra đ in g o f

t r a n s p o r ta tio n electricitv in rural areas

2.3 Factors effecting shrimp farming

2.3.1 Geographical condition

V i e t n a m h a s g e o g r a p h ic a lly e s s e n tia l c o n d itio n s fo r tìs h e r ie s a n d a q u a c u ltu r e as vvell T h e c o u n t r y h a s a co a s tlin c o f o v e r 3 2 6 0 k m a n d m o r e th a n 3 ,0 0 0 isla n d s a n d islets s c a t t e r e d oíTshore In ad d itio n th e re are a b o u t 2 8 6 0 riv e rs a n d esluaries, p lu s

4 ,2 0 0 s q u a r e k m o f lakes and o th e r n a tu ra l b o d ie s o f w a te r

B e s id e s , V i e t n a m is located in th e tro p ic vvhere suíTicient light a n d te m p e ra tu re are

a v a i la b l e f o r e f f ic ie n t p ro d u c tio n o f a g ric u ltu ra l c ro p s T h e r a in tầ ll p a tte rn is a lso

lầ v o ra b le A t 2 0 to 35 ppt the s a lin ity o f v v a tc r is d e s ira b le ỉ ỉ e a v y ra in lầ ll and h igh

te n ip e r a t u r e s , g e n e ra lly , b e n e íìt s h r im p ía rm in g U n d e r n a tu ra l c o n d i tio n s th e w a te r

te n i p e r a t u r e o f a q u a c u ltu re p o n d s is h ig h e n o u g h to s u p p o r t ra p id g ro w th

2.3.2 Post larvac and feed

T h e m o s t i m p o r ta n t d e t e n n in a n t o f h a rv e s t s u c c e s s is th e q u a l ity o f p o s t-la rv a e a n d leed T h e q u a lity o f post la rv a e (w ith high m o rta lity ra te s a n d in c re ased

s u s c e p ti b ili ty to d is c a s e ) h elps to in c re a s e the s h r im p groxvth, its d e te c tio n o f

d is e a s e s a n d t ầ r m i n e p ro d u ctiv itv

A s í ầ n n s t r a n s í e r tro m e x le n s iv e to in te n s iv e m e th o d , th e q u a lity o f feed b e c o m e s

m o r e im p o r t a n t b e c a u s e the s h r im p g et m o s t o f th e ir n u tritio n fro m feeds H ig h -

q u a l íty te e d s o í ĩ e r sev eral a d v a n ta g e s suclì as b e t te r feed c o n v e r s io n , fa s te r g ro w th , lovver m o r t a li tie s a n d im p ro v ed vvater quality

33

T h e a p p lic a tio n ol' Science and te c h n o lo g y h a s re m a rk a b ly im p ro v ed the

s u sta in a b ility o f s h rim p lầ rm in g industry T h e c o m b in a tio n o f e x p e rie n c e s and

c a re íu l te c h n ic a l in s tru c tio n s is n ece ssary to a s u c c e s s íu l Harvest T h e su ccessíul

íầ c to rs in c lu d e a p p r o p ria te te ed in g , m ore in ten siv e tầ rm in g , m o d e rn m a c h in e ry and

eq u ip m e n t

Ideally, s h r im p in s e m i- in te n s iv e and intensive farm s sh o u ld be fed sm all quantities

ío u r or tlv e tim e s a day \vith at least th re e h o u rs betvveen te ed in g s N o t only excess íeedinsi w a s te s m o n e y but a ls o in c rease n u trien t p o llu tio n o f the p o n d s and w aters

A p p ro p ria te ie e đ in g has a d v a n ta g e s such as: less po llu tio n , íầ ste r g ro w th , early

d e te c tio n o f d is e a s e b etter h a rv e s t e s ti m a t e s

In te n s iv e la r m in g m e th o d s p c c itìc r e q u ire m e n ts include:

s W a t e r area: 7 0 -7 5 %

✓ S h rim p s e e d : a r tit lc ia l h a t c h e r y post larvae

✓ P o n d tr e a tm e n t vvith C a C 0 2 and fertilizers

S C h e m ic a l a n d e n z y m e s usage

2.3.4 Finnncial resource requirement

A lth o u g h s m a ll tầ rm e r s ca n o p erate on sm all e x te n s iv e fa rm s w ith little m oney,

in v e stin g in in d u s tria l sc a le tầ rm in g req u ire s m u c h m o n e y , e s p e c ia lly to r electric insta lla tio n , m o d e rn e q u ip m e n t, intensive p o n d d e s ig n a n d a d v a n c e d technology.othe rvvise th e t ầ n n i n g b u s in e s s e s re q u ire a high c u rren t ratio, w h ic h m e a n s that a

la ra e a m o u n t o f c a s h and cash eq u iv a le n ts is n e c e s s a r y fo r m a te ria ls p a y m e n t

d u rin g the h a rv e s t ll is the reason w h v m a n y sm all in v e sto rs w ith p o o r access to credit, do n o t h a v e s u lìì c ie n t Capital to re c o v e r a fte r o ne íầilure

2.3.3 Technology

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D iseases rc p re s e n t th e b ig s e s t chalỉerm e to the s h r im p farm ing F a rm s and

h a tc h e rie s h a v e fe w d e íe n s e s a g a in st fungi and bacteria, but that viral d iseases m ake

se rio u s dilTiculties to íầ rm e rs A lso , lovv q u ality oí' post larvae and inappropriate

fe e d in g o íte n c a u s e d iseases

Chapíer suntmary

T h e g o v c r n m e n t, in te m a tio n a l o r u a n i/ a ti o n s and n ational c o rp o ra tio n s have

p ro m o lc đ ihc e x p a n s io n ol' industrial sh rim p la rm in g lor ils co n trib u tio n lo the

\v o rld 's Ibotl s u p p ly siíinilicani íoreimi e x c h a n g e earn in g s, and en h a n c c m e n t

e m p lo y m c n t o p p o r tu n i tie s a n d in c o m es in p o o r Coastal c o m m u n itie s F or

b u sin c ssc s s h r im p la n n i i m c o n tin u e s to bc an a itractiv e in v c stm e n t b e c a u se o f its high prolìt a n d hisih n ia rk e t ilemuiul

I ỉo w ev er, th c s h r im p la rm in g , g lo b a lly , has hccn a s s o c ia te d w ith serio u s ncgative

e n v iro n m e n ta l a n d social im pacís E n v iro n m c n ta l p ro b ie m s in c lu d e tlie d estruction

o r m a n u r D v e s a n d o th c r vvctland habitats d a in a ạ e lo Coastal and m a rin e eco sy stem s,

p o llu tio n S o c ia l im p a c ts a s s o c ia tc d \vith this industry in c lu d e p rom otion o f

po v erty la n d le s s n e s s and food insecurity, eỉe v a tio n o f risk s from ttoods and

iv p h o o n s , a n d itn p a c ts on h calth a n d cciucation

I h e re lb re the indusirv sh o u ld m o v c lovvards s u stain a b ilitv K ey s o lu tio n s may include te c h n o lo g ic a l a p p ro a c h c s d e v e lo p in g cu ltu re s o i’ local species, and

d e v e lo p in g a r e a s for in ten siv e iầ rm in g A d d itio n a lly g o v e m m e n t ’s p o licies for

s h r im p c u ltu r e m u s t bc a d ịu s tc d and c o m p le m e n tc d to a c h ie v e the su stain a b le

d c v e lo p m c n t

2.3.5 Discase

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