Developing business strategy for the 5-year period (2010 - 2015) of Vinaconex - Alphanam Infrastructre Development and Investment JSC

financial resources Table 1.3: Summary of choices suitable for each strategy among the three mentioned strategies Chart 1.3: Stakeholders Diagram 2.1: Organizational structure of Vinac

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

Student's name: Kieu Xuan Nghi

Nguyen Quang Huy Nguyen Van Thanh Nguyen Xuan Luyen

HANOI, 2009

LIST OF CHARTS, DIAGRAMS AND TABLES

Chart 1.1: Strategic management model

Table 1.1.: Macroeconomic environment factors

Figure 1.2: Strategic group map

Table 1.2: Organizational technical human, physical financial resources

Table 1.3: Summary of choices suitable for each strategy among the three mentioned

strategies

Chart 1.3: Stakeholders

Diagram 2.1: Organizational structure of Vinaconex - Alphanam Corporation

Table 2.1: Balance sheet of VINA — ALPHA year 2008

Table 2.2: Completed projects of VINA — ALPHA Company

Table 2.3: Business operation result of VINA — AIPHA Company in the 2006-2008 period

Diagram 2.2: Revenue and profit growth diagram of VINA — ALPHA Company

Table 2.4: The internal factor assessment matrix

Table 2.5: Revenue and profit of construction enterprises

Diagram 2.3: Comparison of revenue of 4 companies in 2006- 2008

Table 2.6: Comparison of profit per revenue of enterprises

Diagram 2.4: Comparison of profit per revenue of 4 companies in 2006-2008

Table 2.7: Competitive analysis of 4 construction enterprises

Chart 2.5: The role of the Board of Execution in project

Chart 2.6: Two level Board of Management

GaN{BA O1\O1-Group 4 Master of Business Adminitration Programe

GRATITUDE

Period of time researching and reality studying at Vinaconex — Alphanam JSC is helping us to understand a part of company’s business activity, especially business planning It also help us to have chance to apply school’s knowledge to

reality We hope that our solutions might help increasing the effective of company’s business planning in the near future

Our team would like to express our gratitude to the Board of Directors, staff of Sales Dept, Administration, Finance and Accounting, and other departments at Vinaconex — Alphanam JSC., who were helping us to complete

our thesis

We also thank teachers, who were providing us valuable knowledge, skills and experiences with their whole-hearted Thank to Center for Educational Technology and Career Development (ETC Center) who give us a chance to

working together, sharing our job experience

However, due to shortage of studying time and reality knowledge, mistake

and shortcoming is unavoidable We are looking for our teacher and classmate’s advise and suggestions to improve our performance

Thank you very much.

—_— Chapter Ï: Theoretical hackground on strategic managemenr | 10

Lo The definition of strategic management _ cóc 10 |

242 _L The middle stage: Focus on the organization of the industry 12

3.2.2 Industry a and competition analysis 18

3.2.2.2 | & Strategic g groups in an industry - 22

i H | Vision, mission, and \ values of strategic management s CƠ

IH Implementation, monitoring and evaluation 30

- Chapter II: The situation of bisuniess strategy management of 33 -Vinaconex — Alphanam Infrastructure Development and |

L 43 | "Assessment on n business activities SỐ —_ 38

te | Sector environment assessment and analysis — 40

2.2 National | economic market (Macro- -economic market) 43

2.2.2 | Legal factors and state economic management 44

R 3 - _Analysis ( on inner industry environment (5 competitive forces) 50

3.5 T Intensity of the rivalry ‘in the industry 7 oO _ _ 54

mi |The business strategy of Vinaconex — Alphanam Company on | 56

the stagr 2010-2015

| 12 | Ability to control and coordinate input resources for the | 57 ˆ

| S | enterprise's main business and production process ˆ DĐ |

| 2 Building business strategy for VINA-AL PHA: | 59

22 Short-term strateg tegy period 2010-2015: 62

| capacity

cL Development orientation of the ‘company |} 727 |

A, Completation of Company’s commitment a and strategy [77 |

Vina — Alpha company’s strategic solutions - 78 Ị

“Complete administration system give prominence to the role of | 78 functional departments, train and improve the quality of human |

resource Management, - ee

Training and improving the quality of human resources 80

Investing in equipment, improving production and construction | 8l

Content of the solution 82

the quality monitoring and control system 82

-Further inv esting In research and applyi ing science c and technology | 83

into practical construction \ W vorks ¬ _

Actively integrating into the process of international business, | 84 |

Investing in equipment Improving management skills 85

GaMBA O1MOl-Group 4 Master of Business Adminitration Programe

GaMIBA O1\MO1-Group 4 Master of Business Adminitration Programe

business environment, business strategy helps enterprises to grasp and fully utilize

business opportunities, actively seek measures to overcome potential risks and threats

In addition, a specific, clear and practical set of strategies is considered the basis for

enterprises to improve effectiveness in resource usage, strengthen its competitiveness

to ensure sustainable and continuous development Building and implementing

strategies are also solid background for enterprises to make proper and effective

decisions during business operation

The construction field in recent years has witnessed rapid growth in order to meet the increasing demand of infrastructure for the national socio-economic

development Therefore, competition in this sector is relatively harsh In this context,

strategic planning and management activities play a very important role in the

development of enterprises and are considered decisive factor to improve the competitiveness of an enterprise The most important task of civil construction and

transportation construction enterprises is to define a long-term development orientation through a strategy that is proper and suitable with the external environment as well as the capacity and position of enterprises in its specific business environment This is the reason why | choose the topic “Developing business strategy for the 5-year period (2010-2015) of Vinaconex — Alphanam Infrastructure Development and Investment ia”

GaNIB.t OLMOl-Group 4 Master of Business Adminitration Programe

** Research purpose:

The research has the following research puposes:

Asses and analyze strengths and weaknesses of the enterprise Analyze the impacts of business environment on the business operation

of the enterprise analyzing opportunities and threats for the enterprise

Analyse the current situation of developing and managing strategies at

the enterprise

2 Propose solutions and recommendations to enhance the effectiveness

of developing and managing strategies at the enterprise

** Objects and scope of study:

Data from Vina — Alpha Company

Sectoral data and data from enterprises of the same sector

Data from newspapers and the internet

Y Analysing data:

Applying data compilation and comparison method for mid-term data

planned data and actual implementation data to draw conclusions

Inductive method: Compiling and drawing conclusions from issues and

phenomena arisen

SWOT analysis

“* Structure of the study:

The thesis includes three chapters as follows:

C11 0LAU1-Croup 4 Master of Business Adminitration Programe

Chapter |: Theoretical background on strategic management

Chapter 2: The situation of business strategic management at Vinaconex — Alphanam Infrastructure Development and Investment JSC

Chapter 3: Measures to improve business strategies of Vina — Alpha Infrastructure

Development and Investment JSC

9

Cớ\/B.{ 0T\/1-Croup 4 Master of Business Adminitvation Programe

CHAPTER I THEORETICAL BACKGROUND ON STRATEGIC MANAGEMENT

I The definition of strategic management

1 Definition

In the competitive business world each enterprise has its own way to survive

and develop All enterprises do not necessarily compete with other businesses in the

same manner or act in the same way to react to changes

Therefore, each company needs to develop its own strategy The development of

a competitive advantage is required in order for a successful competition Strategies can be seen as relevant ideas, plans and supports for an enterprise to successfully compete against its competitors

Competitive advantage, in a broader sense, allows a business to outstrip its competitors It is the “capacity to differentiate” which includes the capacities, skills, technologies and special resources for businesses to make a difference among the competitors and create competitive advantages

Strategic management is an integrated combination of management decisions and

actions, which determines the long-term efficiency of a company by the continuous revision

of environmental issues, strategy formulation, implementation, assessment and

management

Research on strategic management is focused on the monitoring and assessment

of the opportunities and external threats in the context of internal strengths and

weaknesses

2 Approaches to strategic management

The development of strategic management ts divided into three stages:

- The first stage: Research on the internal development of strategic management

- The middle state: Focus on the organization of the industry

- The current stage: Focus on the enterprises” resources

2.1 The first stage: Internal development

The concept of strategic management started in the 1960s with the such publications as “Strategy and structure” by Chandler in 1962: “Strategy” by Ansoff in

1965 and curriculum “The business policy: lessons and situations" by Harvard Business School im 1985 Those works had an influence on the development of

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strategic management concept Primary concepts emphasized the integration of

business activities within the functions of the business The publications in this period gave birth to various basic concepts, terminologies and structures which paved the way for the development of future concepts

Two schools of thought of the mentioned strategy development were structures and planning

Chandler and Ansoff's studies mainly discussed the way in which large companies develop new administrative structures to deal with the growth as a result of

changes in strategy If the structure does not fit the strategy, the outcome will be

inefficient Chandler thinks of strategy as the identification of long-term goals of a

business, the acceptance of a series of actions and the allocation of resources needed to

achieve these goals

Ansoff also focus on planning, transforming the strategy from basic principles

applied in a business to highly formalized theory His main approach is deviation analysis Firstly, he set up a set of objectives, then measured or estimated the deviation between the current position and desired goals and recommended a series of potential

actions (strategies) Finally, he verified the features to reduce the deviation then selected the most effective strategy

During this period, there was also research by Andrews and his associates at the

Harvard Business School published in the curriculum on business policy Business

policy is the study of functions and responsibilities of management along with general

issues influencing the characteristics and success of an enterprise In their opinion, business policy has two separate but related aspects They include formulation and implementation Strategy formulation identifies and regulates four components: market opportunities: enterprise’s competence and resources: manager’s aspirations and values; responsibilities for other social groups beside shareholders

However, the approach using case study methods lacks the generalization which

is the foundation for the development of strategic management Next We are going to consider two important schools: informal design and planning

a School of informal design

Schools of design by Andrews and his peers started from the important premise

on the “ability to create differences” and the needs to associate “internal situation” with

“external expectations” as well as the relationship between strategy and structure [This

Ga\IBA OLMO1-Group 4 Master of Business Adminitration Programe

model begins with a scanning about internal and external In the external assessment, the thoroughly studied of the opportunities an threats pointed out the significant

factors In the internal evaluation, the strengths and weaknesses of the organization

were considered Then, the ability to create differences and the strategies to be formed

were discovered on the basis of this platform The strategy was then evaluated and the best one was selected Finally, the strategy was implemented

As a template tor many ideas, SWOT model (S: Strengths; W: Weaknesses; O: Opportunities: T: Threats) was primarily used with various techniques and questionnaires Schools of informal design considerably impacted many other schools

of thought and became very important in the field of strategy

- Goals set up stage:

- External assessment stage:

- Internal assessment stage:

- Strategy assessment stage ;

- Strategy concretization stage:

- Planning for the entire process

The first phase in the model focused more on the quantitative targets In the internal and external assessment, SWOT model was used The strategy assessment

stage was very formal and techniques such as return on investment, risk analysis and

other financial analysis methods were utilized to choose the strategy that created the

gles were

=

maximum value In the strategy coneretization stage objectives and strate

divided into subsections Finally, all the actions were closely programmed The whole

planning process would be closely monitored through the — monitoring and

implementation tool including: SWOT matrix: market share growth matrix: attractive sectors matrix

2.2 The middle stage: Focus on the organization of the industry

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In the 1970s there was a popular shift in the focus of the nature of strategic

management theory [Theoretically and methodologically, the shift towards economics occurred What caused a change in the vision from internal to external and in the whole industry? Schools of thought initiated by Porter was prominent during this stage

Schools of positioning believed that only a few main strategies could be used in

the industry The use of this strategy in an attempt to position an enterprise in the market allowed the enterprise to easily compete and gain higher profit

Tools in the middle stage were fairly common, including: the model of 5

competitive forces, the general strategy and value chain An important tool was the general strategy Businesses could form its range to gain competitive advantages and have strategies such as cost leadership strategy, differentiation strategy, focus strategy

During this stage, there were many other environmental factors which led to a series of technical and technological breakthrough Porter provided the 5 competitive forces for analysis, which was a very useful tool With a more demanding market, value chain is an important tool to improve the competitiveness of each enterprise Globalization and free economy brought about instability that strategic planning did not take effective in this period

3 Strategy formulation

Strategy formulation can be divided into five steps:

Selecting a mission and main objectives of the business

Analyzing external environment to identify opportunities and threats

Analyzing internal environment to identify the strengths and weaknesses of the business Selecting the strategies based on the search for resources, capacities and core

competencies and develop them to avoid the risks take advantage of opportunities

from external environment

- Implementing the strategy

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External analysis Strategy selection Internal analysis

(opportunities & and formulation (resources,

competencies)

Function strategy

Business strategy

3.1 Mission and main objectives

This is the first step in the process of strategic management Mission and main objectives of the organization are provided in a context for building strategies

Gal\IBA OLMOl-Group 4 Master of Business Adminitration Programe

Mission provides the reasons for the existence of business and what a business

should do The main objectives determine what business must realize in the medium

and long term such as profit achievement in remarkable capacity ete

3.2 External environment analysis

External environment analysis of the enterprise is aimed at figuring out the opportunities and external risks, particularly in the sector environment, the national environment and macro environment External environment analysis studies:

- Macro environment analysis: economic environment, technology environment, socio

- cultural environment, demographic environment law and political environment, and

globalization environment

- Industry and industry competition analysis

- Competition changes in the cycle of industry analysis, movement of competitors etc

- Study the key factors for success

The sector environment analysis needs competitive structure assessment in the

industry, including the competitive position of the centers and main competitors, as

well as the development stages of the industry The real estate construction and investment sector has a distinctive feature that their market depends on a large extent

on government policies and the situation of the financial market Currently, a number

of market sectors have turned into the global markets As a result, sector environment

analysis also means evaluating the impact of globalization on the industry competition National environment analysis studies the context of a country which creates conditions for enterprises to operate The enterprise should consider moving part of its

activities to a nation which has more preferential conditions to achieve competitive

advantage The macro-environment analysis includes the study of macroeconomic

factors society government legal and technology which may or may not affect the operation of the business

The techniques for external environment analysis of the business including

seanning monitoring forecasting and assessing

Œu\/D.1 OLMOl-Group 4 Master of Business Adminitration Programe

- Scanning environment plays an essential role in competition In addition

scanning environment needs appropriately to be oriented as a system designed

for an environment changes will undoubtedly not suit the business activities in a stable environment Scanning environment required general study of all external

elements through which companies recognize latent changes in the environment The biggest challenge for scanning is the ambiguous, discrete, incomplete data and information collected

- Monitoring means observing the changes of the environment to identify

important trends arising from the scanning process Enterprises should be aware

of the relations among the stakeholders because they can alter the life cycle of

the business The key to the success of monitoring is the ability to interpret the meaning of events and trends of different changes through which business can

be better prepared for timely launching a new product or service, then gain competitive advantage from the possible opportunities

- Forecasting means developing prediction about latent events, and its frequencies

as a result of detected changes and trends from scanning and monitoring

- The objective of assessment is to identify the time and the importance of impacts, which may cause changes in environmental trends on the strategic

management Through scanning, monitoring and forecasting, analysts can have

an understanding about environment and continue to assess and_ identify

working ideas for their organization

At present, Vietnamese real estate and construction markets are bustling,

opportunities as Well as threats are abound for enterprises participating in the market The number of enterprises in this market significantly improves as a result of increased attraction of this market Reviewing and assessing the market carefully, monitoring changes in the market to make forecasts on changes in the market, the participation or

movement of other enterprises will enable enterprises to adopt proper policies: to define short-term and long-term objectives

3.2.1 Macro environment analysis

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In fact changes in the macro environment can directly affect any forces in an

industry so it transfers the relative strength from one force to another and finally change the attractiveness of an industry The status of a macroeconomic environment

determines an economy’s healthiness and prosperity which in turn has an effect on the business and industry Economic environment indicates the nature and orientation of

the economy The impacts which an economy can exercise on an enterprise may alter its ability to create values and income include four important factors such as the

growth rate of the economy, interest rate, exchange rate and inflation rate In addition, change in the technology factor influences the entry barrier and reform the industry structure The change in technology includes creation and destruction, both opportunities and threats Political factors and law also affect the level of opportunities

and threats from the environment, mainly in the way business can respond to the

government and vice versa

Table 1.1: Macroeconomic environment factors

| Demography | Population | Ethnics

Age structure | Income allocation

| | Geographical distribution |

_ Economy _ Inflation rate | Savings rate

| Interest _ Enterprise savings rate

| Budget balance

+

-Polities-law — Antitrustlaws - kabor law

Tax laws Educational policy and philosophy Regulatory philosophy

Socio - culture | Female labor force Environment protection

Labor diversity Work shift and passion

Working quality attitudes Change in attitude about product) and

Gab OLMOL-Group 4 Viaster of Business Adminitration Programe

service concept

Technology Innovation The enterprises investment — and |

Application government support for research and

development

Basic global market Variations in cultures and institutions |

3.2.2 Industry and competition analysis

Each industry varies in its economic features, competitive situations and prospects for future profitability Features of each economic sector change depending

on factors such as size and market growth, the pace of technology change, number of buyers and sellers etc Competitiveness differs in sectors which show various focus of

competition such as price, quality or features and efficiency

Current competitive conditions as well as predictions of the industry form an

important basis for forecasting future profit Differences in industry conditions and

competition status may perplex some business activities in specific difficulties Industry and competition analysis clarifies key issues as follows:

The prominent economic features of the industry

Competitive forces in the industry, the nature and strength of each force

The driving forces causing the change in the industry and their impact

The strongest and weakest business positioned in the industry

Which makes the next move in the industry

The key factors for the success or failure in competition

The industry attractiveness in term of potential above average profits

3.2.21 The model of 5 competitive forces

To figure out competitive orientation in an industry, Michael E: Porter — a

Harvard professor — created the model of 5 competitive forces According to him there are 5 forces orienting competition in an industry including:

- Threats of potential new entrants

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GaM(BA OLMOL-Group 4 Master of Business Adminitration Programe

: Rivalry among existing competitors

- Buyer's bargaining power : Supplier's bargaining power

- Threats of Substitutes

a Potential new entrants

This force includes companies who now, are not competitors in the industry but are able to participate in the industry in the future if they want Companies always appreciate identifying new competitors who are able to enter the market, for they are

threats to market share of existing companies Competitors entering the market always

equip themselves with new productive capacities to achieve large market share Therefore, existing companies have certain pressures in their operation to compete and

maintain their market share in the industry market

Existing companies always try to hinder potential competitors from entering the market by creating entry barriers Market entry of potential competitors is threats to profitability of existing companies If threats from market entry is small, existing companies will take advantage of this opportunity to add value, enlarge their scale and therefore, enjoy higher income

Entry barriers are factors that cause difficulties and increase costs for

competitors when they want to enter the market Higher cost for market entry will keep potential competitors out even when the income of the industry is high The main entry barriers include: brand loyalty; absolute cost advantage: and economies of scale Besides there are such factors as: switch cost, governmental regulations and retaliation

- Brand loyalty: Uniqueness competitive prices, good after-sale services etc are

elements creating products’ attractiveness to customers

- Absolute cost advantage: is gained from prominent productive capacity created

by experiences in the past ability to control inputs for production and management: access to cheaper financial resources ete

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- kconomies of scale: is marginal efficiency improvement thanks to enterprises’ gaining after the expansion of their scales Factors relevant to the advantages and disadvantages of entering a large or small scale include flexibility in pricing and market share: costs relevant to entry and producing economies of scale: competitors” responding

actions

- Switch cost: is cost incurred once customers want to switch their purchasing to another supplier including: cost for purchasing accessories, cost for training staff, intangible cost of a relationship etc

- Governmental regulations: By issuing permits, gradually removing special regulations or requirements, the government can control the entry to an industry

- Retaliation: Reactions of existing competitors depend on the present position in the industry of the company (the available business choices)

The construction sector is distinctive in that it requires large capital, the period for capital recovery is slow compared to other sectors but the number of enterprises in the sector is considerably large thanks to the attractiveness of the sector For small- scale enterprises participating in this sector, stretgic management is a very important task Therefore, such enterprises should investigate procedures, thoroughly assessing their potentials and capacity to fully utilize opportunities

b Rivalry among existing competitors

Enterprises in an industry are interdependent Therefore, actions of one

companies are often followed by responding actions of other companies Rarely is

there a consistency among enterprises in an industry since they have different

resources, different capacities and they try to differentiate themselves from their rivals

If the competition in an industry is weak companies will have opportunity to push up prices as Well as earn more profit If the competition is strong, price competition can take place intensely, which will lead to price wars reducing profitability

Main factors of competition in an industry include: Structure of competition in an industry: demand conditions: high exit barriers

- Structure of competition in an industry represents quantity and scale allocation

of companies tn that industry Structure of an industry varies from dispersal structure to

Ca\/.1 OLMOL-Group 4 \Viaster of Business Adminitration Programe

focus structure and is relevant to competition Dispersal structure creates a threat rather than an opportunity because it only includes some small or medium companies Focus industry is dominated by several large companies or by only one company in extreme circumstance (In this case, the industry is considered oligopoly or monopoly)

- Demand conditions: The increase in customers’ demand tends to ease competition, as all companies can sell more goods without scrambling for other companies’ market while their profit is maintained When demand decreases, competition 1s pushed up to earn market share

- Exit barriers: are emotional, strategic and economic factors which can prevent a company from exiting an industry even when income is low High exit barriers will lead to the situation in which companies are held in an unprofitable industry This can

lead to a redundancy in productive capacity and make price competition more intense

Through reviewing the activities and analyzing the capacity of enterprise, enterprises can realize their potentials and define proper strategies In the construction

field, a large number of small-scale enterprises participate in the market

c Buyer’s bargaining power

Buyer of a company can be either consumer or another company who plays the

role of a distributor of that product to the final consumer Buyers can be regarded as a threat to competition when they are at an advantageous position to require lower prices

or better services In addition, when buyers are at a disadvantageous position, companies can raise prices and gain more profit Whether buyers can make a request to companies or not depends on the comparative power they have towards companies:

power gained when there are many suppliers of the same products; when buyers

purchase product in great quantity; when switch cost is low ete

d Supplier’s bargaining power

Suppliers can be considered a threat when they push up the price or reduce quality of the input they provide to companies so companies” profitability decreases

In contrast, if the suppliers” power is weak companies have opportunity to squeeze price and require better quality Similar to buyer's bargaining power supplier's bargaining power depends on comparative power between them and companies in such

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situations as: the suppliers” products are difficult to be substituted: products of suppliers are so differentiated that it will be costly if companies switch from a supplier

to another one ete

e Substitutes

Substitutes are products of industries which serve customers” demands similar

to which of studied industry The existence of these close substitutes represents a threat

to competition reduces high-pricing capacity limitation as well as_ profitability Hlowever, if a company’s products has few substitutes and other factors are normal, this company will have a chance to raise prices and earn more profit As a result, its strategy will be designed to gain competitive advantage

Studying 5 competitive forces helps enterprises understand thoroughly an

industry to identify its attractiveness The stronger the competitive forces are, the lower

the potential profitability of the industry's enterprises is In an industry lacking attractiveness, entry barriers are low, suppliers as well as buyer have stronger bargaining power, threats from substitutes is bigger, and high competitive intensity in the industry will cause great difficulty to enterprises’ creating values and earning over- medium income

3.2.2.2 Strategic groups in an industry

Strategic group includes competitors having same conditions and access to competition in the market One industry has one strategic group only when companies pursue strategies alike in general and have similar position

Companies in one strategic group all pursue similar strategies, customers tend to regard products of such companies as direct substitutes So the main threat to a

company’s profitability can come from other companies in its group Different

strategic groups can have different positions, which depend on each force among competitive forces Buyer's bargaining power supplier's bargaining power and competitive force of substitutes etc can change the intensity of strategic groups in an industry

Mapping strategic groups ts a technique used to represent competitive positions belonging to competitors in an industry This technique is considered a linkage

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Ca \ƒB-{ 0T\/1-Croup +4 Master of Business Adminitration Programe

between an industry as a whole and individually judging the position of each enterprise Steps of building strategic group map include:

- Identifying characteristics distinguishing an industry's enterprises bases on pivotal variables including: price/quality geographical boundary within which an

enterprise is operating vertical integration level ete

- Positioning enterprises on coordinate axes with each pair of differentiation characteristics

- Circling strategic groups provided that each circle goes with revenue proportion

of every group

Cost

Figure 1.2: Strategicgroup map

3.3 Enterprises’ internal analysis

External environment analysis to identify the attractiveness of an industry

through the structure of that industry has clearly pointed out the reasons making an

industry more profitable than another However, structure of an industry is not the only force affecting a company’s profit Therefore, a problem to be confronted with 1s why

in a specific industry a company operates better than another

Internal environment analysis is used to figure out strengths weaknesses

identify potential as well as existing resources creating sustainable competitive advantage for every enterprise It also points out the way to gain competitive advantage

of an enterprise and the role of different forces resources and ability to build and

maintain sustainable competitive advantage for that enterprise

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3.3.1 Analyzing company’s current strategy

Appraising how a company ts carrying out its strategy must begin with the strategy the company is pursuing It is required to know which specific strategy the company is pursuing: cost leadership differentiation or focus on best serving a segmentation etc Evaluating efficiency of strategy operation or strategy management

is implemented through such signals as:

- Whether a company’s market share is higher, constant or lower

- Whether a company’s marginal profit increases or decreases and its comparative

size compared with its competitors

- Tendencies of net profit, return on equity, increased economic values etc and correlation with competitors

- Whether company’s current financial strength and credit assessment improve or reduce

- Whether company’s revenue growth is faster or slower than that of the market

- Whether company is considered the leader in technology, product improvement, product quality or satisfying customers’ demand or not

After taking the current strategy of company into account, managers will

consider, assess strengths, weaknesses of their company to propose a specific project and strategy to achieve the target company is pursuing

- Identifying company’s strong points existing in the forms of: skills, experiences in

production, management, and customer serving: valuable physical assets, human resource:

valuable organizational assets: valuable intangible and tangible assets: competitive

capacity; achievements or cooperation and association with other partners etc

- Identifying company’s weaknesses existing in the forms of: the lack of important skills and competitive experiences: competitive capacity in critical fields:

shortages in resources ete

3.3.2 Potential resources and capacities

A core competence (differentiating competence) is a unique strength allowing a company to enjoy preponderance in efficiency quality, improvement and customers’ serving so that company can create preponderant value and competitive advantage as well as more value than its competitors and gain a higher profit proportion

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a Core competencies of an enterprise is created through two sources including: its potential resources and capacities

Table 1.2: Organizational, technical, human, physical, financial resources

patent, business secret

- Technical provision such as copyright, commercial brand,

eves of suppliers ete - Reputation for effectiveness, efficiency, support in the

In creating core competences intangible resources in comparison with tangible resources, are more efficient and dominant since value of tangible resources is limited due to its poor applicability while intangible resources are little noticeable and difficult for competitors to discover, acquire and duplicate ete

b Potential capacity

to mn

Ca\{BA OLMOL-Group 4 Viaster of Business Adminitration Programe

As sources of producing capacity intangible and tangible resources are

tindamental parts creating the development of competitive advantage Potential capacity is capacity that allows companies to use purportedly integral resources to

reach a desirable target situation

Company's potential capacities are produced from organization structure and

controlling system How are they defined and what is their position in the crganization? Being the bottom line creating competitive advantage, capacities often

tase on information as well as knowledge development, transmission and exchange tirough human resource Knowledge of human resource is the most crucial capacities

cf a company as well as the root of all competitive advantages Value of a company is nade not from physical materials but knowledge, expertise, intellectual property,

competence — which all stay inside human

Distinguishing between resource and potential capacity is to figure out what ceates differentiating competence A company can have unique and valuable resources bit if it does not have potential capacities to operate these resources efficiently, it still

cinnot produce and maintain differentiating competence

In summary, to possess differentiating competence, a company has to own at

Icast a unique and valuable resource and necessary potential capacities to utilize this

resource

34 Selecting business strategy

After taking external environment into consideration as well as analyzing srengths and weaknesses of a company, it is necessary to identify a strategic solution

in accordance with a company’s strengths weaknesses, opportunity and_ threats

(SWOT) The purpose of SWOT analysis is to identify strategies oriented by this

alalysIs to create a harmony or correspondence between resources as well as the

eompany’s capacities and demands of the environment in which it is operating

34.1 Cost leadership strategy

Cost leadership strategy is series of actions to provide products or services

ovning characteristics accepted by customers with minimum cost in comparison with

al of its competitors

CaN (BA OLMOL-Group 4 Vlaster of Business Adminitration Programe

[he goal of cost leadership strategy is to surpass competitors by producing and providing all products and services with lower cost than competitors

Success in pursuing this strategy will bring companies two following competitive advantages:

- First cost leader can require lower price compared with competitors while profit

is maintained

- Second, cost leader can stay firmer than competitors when there is an increase in

number of competitors in the industry and cause others fall into a price war since it has lower cost

Choosing cost leadership strategy also means choosing a low level of product differentiation, paying little attention to different segmentation, positioning product to attract normal customers since development of a product line meeting all demands of

different segmentation is very costly

3.4.2 Differentiation strategy

Differentiation strategy aims at obtaining company’s competitive advantages in

an attempt to raise a company’s product values by developing products having unique features that the company’s rivals cannot produce

Product differentiation can be created by quality, innovation and customer satisfaction

When differentiating by customer satisfaction, company provides such services as after-sale service and comprehensive maintenance service, making them distinguished by

various available methods The more these services are not similar to its rival’s ones, the

more competitiveness the company can preserve and the more market attraction it can get

Differentiation and brand loyalty also create barrier to new entrants The threat

of substitute products depends on the abilities of competitors” products to meet the

demands of customers and to break customers” brand loyalty

[he disadvantage of differentiation strategy is that company’s rivals can gain a

similar competitive advantage if they have no difficulty m imitating products.

GaN(BA OLMMO1-Group 4 Master of Business Adminitration Programe

Ilowever it is not easy to duplicate a company’s intangible factors therefore differentiators still can gain long-term benefits from their products

3.4.3 Focus strategy

Focus strategy is the third competitive strategy It concentrates on meeting the needs of specific customer groups or a niche Selecting a focus strategy means to pay one’ attention to the gap of particular market which can be identified by geographically, customer types or product segments

Once selected a market segment, the company pursuing focus strategy may use

either differentiation approach or low-cost approach Moreover, focus on a narrow

range of product sometimes allows a focuser to have improvement faster than a wider market differentiator does A focuser can seize any differentiation opportunity because

it is able to figure out cost advantage and outstanding efficiency in low-cost

manufacture of the industry Building brand loyalty 1 has been taken into consideration

by most companies in order to lessen the threat of substitute products

Advantages of a focus company emits from sources of differentiation:

efficiency, quality, improvement and customer satisfaction While the company can

protect itself against its rivals to be able to continue supplying products, its rivals

cannot

However, a focus company is at a disadvantage compared to powerful suppliers because when trading volume is small, power belongs to the suppliers Even so, there

sull have loyal customers who are ready to pay at the company’s price

Table 1.3: Summary of choices suitable for each strategy among the three

above mentioned strategies

| Cost leadership |

- Differentiation - Focus

differentiation — price) uniqueness ) price to uniqueness )

Market segment Low (mass) High (a number of Low (one or a_ few

market) market segments) market segments) S

Ca \ 0.1 0T\101-Crroup 4 Master of Business Adminitration Programe

Differentiating § Manufacture and Research and Any ability to create

manage inputs development Sales | differences

II Vision, mission, and values of strategic management

Once operating in environments full of fluctuation, each enterprise should have

an ability to adapt, and a preserved unshakably nuclear preservation to survive

[-nterprIses are interested not only in making the benefits for themselves but also in their stakeholders in the process of cooperation That is the very important beginning for the existence of a business

Vision statement of an enterprise is like the first key indicator on how enterprise recognized its obligations to its stakeholders The purpose of mission statement is to set guidelines for making strategic decisions

Stakeholders of an enterprise is understood as individuals or groups affect and are affected by the results of strategy They have the right to require a business to

succeed Specifically, they have the right to keep an eye on a company’s achievement, the existence, competitiveness and sharing induced profitability

Stakeholders of an enterprise are divided into internal stakeholders and external

stakeholders

29

Cra IBA 0)T\10T-Croup 3 Vaster of Business Adminitration Programe

Stakeholders is binding in the relationship with the company but not equally

dependent on relevant parties

III Implementation, monitoring and evaluation

Implementing strategies refer to the methods used by enterprises to create organizational arrangements in order to pursue their strategies in the most effective way Enterprises should choose suitable organization structure and control system so that they can pursue their strategies and create sustainable competitiveness For each strategy adopted, enterprises need to develop cooperation among different units and divisions: as well as defining the reporting relationship between staff tasks and functions at different levels of the enterprise in order to ensure the effective implementation of strategy Only in this way can enterprises implement their strategies effectively

Cra /BA OLMOL-Group 4 Master of Business Adminitration Programe

The organization structure and the control system for strategic implementation must ensure 2 factors:

- First cooperation among different staffs enables staffs to perform their tasks most effectively in implementing strategies

- Second enterprises should provide motivation and motives for staffs to excel

in quality of work, improvement and customer satisfaction

The organization structure designed needs to be suitable with other factors in

order to improve the effectiveness of strategy implementation Organization structure is

a decisive factor in strategy implementation as it creates stability necessary for enterprises to successfully achieve its objectives sustain current competitiveness, and ensure flexibility in developing the competitiveness of future strategies

In strategy implementation process, enterprises also need to develop measures to

control, monitor and evaluation to make sure that strategies are implemented

effectively and efficiently, that interventions and adjustments are in place whenever

needed

To control strategy implementation, enterprises need to:

- Formulate standards and objectives based on which strategy implementation is

evaluated

- Formulate monitoring and measurement system to report whether standards and objects can be achieved

- Comparing actual implementation with the defined objectives

- Make reasonable adjustments whenever standards and objectives are not achieved

- Develop different levels of strategic control: Managers at company level managers at unit level, managers at functional level

By using the strategic control system at different levels, enterprises can ansure that standards and objectives used at one level will not create difficulty at another level Controlling strategies include: Controlling the financial resource for — strategy implementation controlling output (objectives of each unit functional objectives and

Ga MBA OLMOL-Group 4 Master of Business Adminitration Programe

individual objectives): objective-based management (defining concrete objectives):

controlling behaviours (budget standardization rules and procedures) and corporate

culture

Each enterprise in its implementation of strategy develops a strict control

system to ensure effectiveness of strategy implementation Therefore the evaluation of

strategy implementation of different enterprises are different, subject to the objectives

that they pursue Besides defining rewarding policies is also an important factor,

enabling enterprises to motivate staffs to implement strategies most effectively

CGaNIBA OLMOl-Group 4 \Vaster of Business Adminitration Programe

CHAPTER II PHE SEPUATION OF BUSINESS STRATEGY MANAGEMENT OF

VINACONEX — ALPHANAM INFRASTRUCTURE DEVELOPMENT

AND INVESTMENT JOINT STOCK COMPANY

I General Information

- Company name: VINACONEX — ALPHANAM Infrastructure

Development and Investment Joint Stock Company

- Abbreviated name: VINACONEX-ALPHANAM JSC

- Head office: No 2 Dai Co Viet, Le Dai Hanh ward, Hai Ba Trung district, Hanoi

- Telephone: 04 35578547 Fax: 04 34478548

1 Major businesses

- Consulting, designing, providing and installing electronic and automatic

equipment for industrial buildings, infrastructure, transportation and civil engineering;

- Consulting, designing, providing and installing and maintaining bridge crane, elevators, air conditioners, water-processing equipment, environmental hygiene

equipment, lighting equipment for fire prevention and extinguishing, camera and

monitoring and protection equipment;

- Providing, manufacturing and installing training equipment and scientific and

technical materials:

- Manufacturing, buying and selling building materials and consumer goods:

- Leasing transportation, bridge crane and specialized machines:

- Building technical urban infrastructure, industrial zones construction works

and plumbing and drainage construction works:

- Designing general layout, interior architecture for civil engineering and

industrial buildings:

- Real estate business:

Cứ \/D.1 OLNMOL-Group 4

- Real estate brokerage: ©

- Real estate exchange management services

Master of Business Adminitration Programe

2 Organizational structure of Vinaconex - Aiphanam Company Company

Market Finance- Sales Economics Project Designing and

Investment [] Accounting [|] Department [~]| and Planning [| Management Consulting

Note: — + _ Directive relation

—— : Coordinating relation

Diagram 2.1: Organizational structure of Vinaconex - Alphanam Corporation

(Source: Human resource and Administration Unit

Vina-Alpha Company) VINACONEX ALPHANAM Intrastructure Development and Investment Joint Stock Company adopts an vertical functional management model Lower level

Ca \fB.T O1MOL-Group 4 Master of Business Adminitration Programe

departments receive upper level’s directions and cooperate with other departments to fulfill their tasks

With the above model the Shareholder General Assembly has supreme

authority in making decisions on the company’s activities The Board of Director has the duty to concretize the decisions made by shareholders and lead the execution

process It is supervised by the Board of Control which is set up by the Shareholder National Assembly The General Director possesses the largest share in the company

He has the duty to operate the company and implement decisions made by the

Shareholder National Assembly and the Board of Management General Director is

assisted by two Deputy Directors in charge of business aspect and technical aspect of

the company These Deputy Directors are responsible for managing related departments and reporting to the General Director and the Board of Management

The company has 7 departments as follow:

- Human Resources and Admin Department;

- Finance — Accounting Department;

- Sales Department;

- Economics and Planning Department:

- Designing and Consulting Department;

- Project Management Department:

- Investment and Marketing Department

Each department has the duty to implement decisions made by the Board of

Management and to support other departments during the operation process

3 Characteristics of the company

GaNlBA OLMOL-Group 4 \Vlastcr of Business Adminitration Programe

Construction works have a common feature It requires large capital is used for

a long time and serves the benefits of many people However, managing building projects and ensuring construction quality are difficult tasks This requires the

company to adopt strategies to consolidate the management structure improve

workforce management capacity, prevent material loss and apply scientific and

technological applications The development viewpoints of the Board of Management

are: Prestige and effectiveness for investors, customer satisfaction, professional

management system and ensuring the quality and timeline

3.2 Market

In recent years, the basic infrastructure in Hanoi in particular and in Vietnam has strongly developed Investment projects involving construction for many sectors have been implemented in timely manner to make use of available opportunities and

resources At the same time, opportunities and challenges in the construction

investment, consulting and designing sector have been opened The country is aiming

to achieve the target of becoming an advanced industrial country by 2020, which is concretized into specific roadmaps The potential opportunity for foreign investors in Vietnam is abound Therefore, building and building investment consulting sector have

been pushed to a new height: higher quality, more thorough research, combination of

such factors as appearance, culture-oriented, flexible in space, application of

technology and reasonable cost The consulting and designing services are required to meet not only the requirement of appearance and long use but also the symbols of

success, educational level and new thinking These products will increase the benefits for investors, improve relationship with the public and enhance urban view

It can be said that the building market will proper in the following years

However, competition is intense This open market attracts the entry of large

companies with high technology and professional working style from advanced

countries such as Japan Korea and Malaysia [his creates competitive challenges for Vietnamese companies in general and Vina-Alpha Corporation in particular Since its foundation Vina-Alpha Corporation has step by step developed its business network to actively develop its prestige in the market through large number of ongoing and

completed projects

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3.3 Quality of Human resources

Vlaster of Business Adminitration Programe

With any company or organization, human resource quality is always a big competitive advantage With Vina-Alpha Corporation human resource quality always plays an important role and is considered a valuable asset and strength of Vina-Alpha

Corporation Human resource quality of a company reflects its development potentials,

scientific and technological application capacity, management and operational capacity This is an important factor for development of Vina-Alpha Corporation

4 Business operation results

4.1 Balance sheet

Table 2.1: Balance sheet of VINA — ALPHA year 2008

cash equiv alents

2 | Short- term financial — fp ;

c4 Other long-term receivables | 8,367.903.648 - 31.722.140.000 41.710.200,000

(MBA OLMOL-Group 4 Master of Business Adminitration Programe

(Source: Finance -Accounting Department - VINA — ALPHA Company)

In the balance sheet of Vina-Alpha Corporation during 2006 — 2008 period

tke value of assets has increased Short-term loan payment capacity in the following

year has improved compared to that of last year

42 Completed and ongoing projects

Table 2.2: Completed projects of VINA — ALPHA Company

1 Premises of Da Nang | 2006 11.000.000.000 | Da Nang industrial zone Alphanam Joint Stock |

2 Sakura Tower 2007 69,000,000,000 | No 47 Vu Trong Phung Str,

3 Sakura Hotel 2008 328.000.000.000 LNo 73 To Hien Thanh Str,

4 Sakura Office 2009 112.000.000.000 | No 2 Dai Co Viet St, Hai

Ba Trung Dist, HN

§ Sakura Palace 2009 mà 000 000 000 No 108 Nguyen Trai Road

| _ Thanh Xuan Dist Ha Noi

(Source: VINA - ALPHA C ompany Pr ofile)

4.3 Assessment on business activities

Vira — Alpha Company is a young company which is on its way of development and

grovth

Table 2.3: Business operation result of VINA — AIPHA Company in the 2006-2008

period

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Diagram 2.2: Revenue and profit growth diagram of VINA — ALPHA Company

By analyzing the internal environment we can summarize and assess the

irternal factors of the company as follow: