Formulating business strategy for Song Da Trading and Transport Joint Stock company from 2010 to 2015

Base on SWOT model which match external — internal environment, diversification is suggested for corporate level strategy.. In addition, it can be used to support STRACO in getting thoro

GRIGGS UNIVERSITY GL.OBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

Global Advanced

CAPSTONE PROJECT REPORT

IFORMULATING BUSINESS STRATEGY

FOR SONG DA TRADING AND TRANSPORT JOINT STOCK COMPANY

TABLE OF CONTENTS

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CHAPTER 1: THEORICAL EFRAMEWORK SƠ.” 15

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1.4.5 Strategic ImplemenAafIOI: cv 33

CHAPTER 2: STRATEGIC ANALYSIS FOR SOTRACO 35 2.1 _ Introducing the SOTRACOs background -. ccesssesereesee 35 2.2 _ Actual performance of SOTRACO 2007-2009 Ă cài 36 2.3 Straf€BIC anaÌYSIS HT HH kh 38 2.3.1 PESÍI analÌySIS: Ă Ăn TH HH kh 38

2.3.2 Five FOrC€S anaÏySiS: S - t2 2v S2 tre 42

2.3.3 Internal anaÏySIS - HH TH TH HH kh 47 2.4 Current business SITAf€BI€S Ăn TH TH TH ngờ 52 2.4.1 Diversification at corporate ÏeV€Ì .- series 52 24.2 Low cost provider at business level sis iiss cscs sascsevensavscsa sen seassosmnacoenssaans 53

CHAPTER 3: SUGGESTED SOLUTIONS TO IMPLEMENT STRATEGIES FOR SOTRACQ™O 2010-200 scssrcscsscsscascsascsanessncoss cecsasasswanssssamsevesssveatocsanonanesvossanss 54 dai, LÄVEIŒDIU(ETHE GEIGIHHIOHEemaemeeerreetrrnmnuaagatesaeenoasptgtroRnUEnGPESnDSGEMGEMSYSESYRSSREE 54

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ACKNOWLEDGEMENT

This is a valuable chance for us to have an insight into method of forming strategy for one company This is also scare opportunity for us to apply knowledge and basic skills which we have learnt from MBA program to solve a practical problem

Finally, we would like to take this opportunity to thank our family, especially for their constant support and encouragement so that we can complete this course successfully

Strategic Business Unit Political, Economic, Society, Technology

Strength, Weakness, Opportunity, Threat Information System

Research & Development Song Da Trading and Transport Joint Stock Company Resource-Base View

Value Chain Analyze External factors evaluation

A company’s external €HVITOHIW€PIÍ vs nhe 23 The five ƒorces model OƒCOIHD€ẨÏÍÏOH St S2: ESsvEsrkeessees 26 TRE VALUE CHAIN (G0ÌÏUHHĐW, «cà Hà Suy cu đền cà I3 168 441011183 se ĐẾN xemaigk 30 The SWOTT t\đÍF ỦY - 0011125111125 1 1112211115111 1111111111111 k key 32 The Strategic Balanced Scorecard FraIeWOFK .- -555-ss5+ 34 VND/USD exchange rate hlÏSÍOF - cv ESeiksreesrvkrrrks 41

LÍ THQEFÌN Q.21 ST TT kh tk KH nen vn 51 Comparative position of transportation indlWSÍFy - -«- «+ 52 Business structure Of SOTRACO 2015 cccccccccccccscceseseeeseeesteeseseenseetents 56

Table 2.5 EFE matrix of SOTRACO.Q.0 c.cccccccccecceeseeceeeseeeeseeneeeseeneessenseetenseeneensens 47 110.058, 7.1) 019/0.4.(09nn AđẬẲÂẨẲÂẲẨẢ 50

Table 3.1: SWOT analysis oƒSOTÁCO - c5 55c SE ‡+‡EEkEserksrxsserreerks 34 Table 3.2.Road map ƒor sirategic iMpDÏ€In€HÍđIÌORN 5c 5c s‡+csvcssvxssxs 61

LIST OF APPENDIX

Appendix 1: The balance sheet of SOTRACO 2008

EXECUTIVE SUMMARY

Established in 2003 as one subsidiary of Song Da Corporation, one of the big and reputable companies operating in Vietnam, SOTRACO would take advantages of a good foundation from its mother to develop After over 6 years of operation, it has accomplished quite a lot achievement during its operation period, however, still bears some mistakes to be improved

Like any other companies, SOTRACO is impacted by various factors including both external and internal ones Briefly, SOTRACO should enjoy stable politics of Vietnam with almost no threat of war in accordance with looser policies of the Vietnamese Government in the efforts of attracting FDI and ODA from foreign investment In addition, a sustainment and increasing economy also creates favorable condition for SOTRACO to operate in This enables company to take part

in more projects and have chances to upgrade its technologies and enhance its management and production skills Nevertheless, an open economy of Vietnam also indicates fierce competition from not only domestic companies but also different

competitors and potential rivals from other countries In addition, a lot threats

come from external environment such as high inflation rate, increasing fast of material price, the substitution of product, etc To some extent, these rivals would outcompete SOTRACO in terms of both price and quality of products if it does not know how to promote and improve itself

Regard to internal factors, reputation of Song Da corporation brand name is considered valuable intangible asset SOTRACO was listed in the stock exchange of Vietnam, therefore, it can be easier for the company to raise capital but in fact, this capital source has been utilized In addition, although SOTRACO has good basis in some production areas such as transportation of goods, this is cooperated with the fact that SOTRACO has limited management and working skills due to the characteristics of a company originated-state-owned model Moreover, SOTRACO diversified its business in various areas, which makes SOTRACO _ encounter

difficulties in finding appropriate solutions to help the company exploit opportunities better and overcome challenges to continue the sustainable development

Base on SWOT model which match external — internal environment, diversification

is suggested for corporate level strategy It helps company improve competitive ability by the way to develop strengths, limit weaknesses, exploit well opportunities and overcome threats In business strategy level, differentiation strategy is recommended so that SOTRACO can focus its resources and capabilities in specific areas in order to increase its competitiveness over its rivals In the last part, the group has proposed some main solutions to implement strategies with the hope that these solutions can be applied to the reality and become useful

INTRODUCTION

1 Rationale:

In the past, the economy of Vietnam was still closed and there was almost no trade agreement between Vietnam and other countries However, since 1986, Vietnam opened its economy and this year became one special milestone for the economy of Vietnam Opening the economy, joining in various economic parties or organization brings Vietnamese enterprises more golden opportunities to develop but also indicates a large number of challenges and threats coming from outside our nation Note that in some recent years, like many other countries in the world, Vietnam’s economy has been seriously affected by globalization trend in almost every business

area

In such kind of volatile environment, crafting and executing strategy are top-priority managerial tasks for two very big reasons First, a clear and reasoned strategy is management’s prescription for doing business, its road map to competitive advantage, its game plan for pleasing customers and improving financial performance Second, a strategy-focused enterprise is more likely to be a strong bottom-line performer than a company whose management views strategy as secondary and puts its priority elsewhere In other words, there’s no escaping the fact that the quality of managerial strategy making and strategy execution has a highly positive impact on revenue growth, earnings and return on investment [2] Established as a subsidiary of reputable Song Da Corporation, Song Da Trading and Transport Joint Stock Company (SOTRACO) enjoyed a good basis to grow in some

“traditional” areas of Song Da Corporation, then promoting diversification in other industries SOTRACO is chosen as an example of an enterprise that has been influenced by various external factors of social, economic, political, technological, etc ones but is quite successful thanks to putting priority in crafting and executing a> good strategy This project is conducted under the title “Forming business strategy for Song Da Trading and Transport Joint Stock Company 2010-2015” aims at

analyzing how this company kept itself growing in such kinds of business environment and recommend some solutions to implement its strategies in next 5- year period

2 Research objectives

This research, including analysis of both external and internal factors affecting the business, is conducted as a tool for students to systemize and apply strategic management’s theory in reality In addition, it can be used to support STRACO in getting thorough understanding of its strengths and weaknesses together with Opportunities and threats, then, generating a long-term vision and formulating business strategies which are able to fit well with the business model and the real current conditions of the company in a volatile business environment from 2010 to

2015 To some extent, it also can be recommended as material for some other enterprises sharing the similar conditions and resources as STRACO

3 Scope of research

Established under the umbrella of Song Da Corporation, STRACO would take advantages of this strong basis to boost itself in many business areas such as building and construction, transportation, production of material and accessories for building and construction industry, directly involvement in construction of building and development of infrastructure and factories, etc

However, due to time and human resources as well as understanding limitations, the focus of this research is on the time frame of 5 years and some key operation areas

of the company inside Vietnam’ border

exchange of Vietnam, therefore, information (especially internal information such

as profile, finance situation, business plan, etc) was rather available and easy to be collected on mass communications

4.1.2 Primary data:

Apart from secondary data, primary data which is collected by the researchers is

exploited Some lists of questions were delivered to SOTRACO’s leaders,

managers, employees, customers to gather sufficient information and data needed for the report The questionnaire was firstly designed, delivered to some above types of participants, collected, processed and then analyzed as a very useful analyzing tool

5 Structure of capstone project report:

Apart from the acknowledgement, table content, executive summary, introduction, conclusion, references, and appendices, the main body of this capstone project report is divided into three chapters as following:

Chapter 1: Theoretical framework

This opening chapter is taken as summary of relevant theories which are used to analyze environment and formulate strategies for STRACO

Chapter 2: Strategic analysis for STRACO

This chapter illustrated applications of some theories summarized in the previous chapter to the real case of STRACO Therefore, it would give deeper understanding about STRACO’ strategic choices Especially in this part, we focus on application of some well-known strategic tools such as SWOT analysis or value chain analysis model into this company

Chapter 3: Suggested solutions to implement strategies for SOTRACO 2010-

2015

In this final chapter, strategies for corporate level and business level which meet to business environment in new period are suggested In addition, proposing some main solutions to implement strategies for STRACO in the period of 2010-2015

CHAPTER 1: THEORICAL FRAMEWORK 1.1 Definitions

1.1.1 Strategy definition:

Perhaps, there are various definitions of the word “strategy” developed by Strategists This paper would provide you one of them in simple words A company’s strategy is management’s action plan for running the business and conducting operations The crafting of a strategy represents a managerial commitment to pursue a particular set of actions in growing business, attracting and pleasing customers, competing successfully, conducting operations, and improving the company’s financial and market performance Thus a company’s strategy is all about how-how management intends to grow the business, how it will build a loyal clientele and outcompete rivals, how each functional piece of the business will be operated, how performance will be boosted [2] In their book “Crafting and executing strategy-the quest for competitive advantage, concepts and cases” (2007), Thompson, Strickland and Gamble suggests “An organization’s strategy deal with how to make management’s strategic vision for the company a reality — It represents the game plan for moving the company into an attractive business position and building a sustainable competitive advantage” [2, pp.256]

1.1.2 Vision statement:

Vision statement of an organization aims at answering the question “What do we want to become?” It is especially important for any managers to set up long term objectives and executives to achieve good performance A clear vision provides the foundation for set up strategy and all organization’s operations follow it

Developing a vision statement is first step in strategic planning Many vision statements are single sentences only It may also contain a slogan, diagram, or picture — whatever grabs attention [2] For instance, the vision of eBay is “Provide a global training platform where practically anyone can trade practically anything” [8,

pp 115]

1.1.3 Mission statement

The defining characteristic of a well-conceived strategic vision is what it says about the company’s future strategic course “The direction we are headed and what our future product/market/customer/technology focus will be”

In contrast, the mission statement that one finds in the company annual reports or posted on company Web sites typically provide a brief overview of the company’s present business purpose and raison d’étre, and sometimes its geographic coverage

or standing as a market leader They may or may not single out the company’s present products/services, the buyer needs it is seeking to satisfy, the customer groups it serves, or its technological and business and capabilities But rarely do company statements say anything about where the company is headed, the anticipated changes in its business, or its inspirations, hence, they lack the essential forward looking quality of a strategic vision in specifying a company’s direction and future product/market/customer/technology focus [2]

1.1.4 Strategic objectives

Strategic objectives are used to concretize the mission statement They show that how the organization can fulfill or move toward the mission and vision The organization’s objectives should be whether financial or non-financial, but it needs

to meet these basic following criteria

e Measurable: There must be at least one indicator that measure progress against fulfilling the objective

e Specific: This provides a clear massage as to what need to be accomplished

e Appropriate: It must be consistent with the vision and mission of organization

e Realistic: It must be achievable target given the organization’s capabilities and opportunities in the environment In essence, it must be challenging but doable

e Timely: There needs to be a time frame for finishing the objectives [7] 1.2 Strategic levels:

In order to give suitable strategies and especially is assign responsibility for manager levels, in diversified enterprises, strategies are initiated as four distinct organization levels There’s a strategy for the company and all of its business as a whole (corporate strategy) There’s a strategy for each separate business the company has diversified in to (business strategy) Then there is a strategy for each specific functional unit within a business (functional strategy) Each business usually has a production strategy, a marketing strategy, finance strategy, and son on And, finally, there are still narrower strategy for basic operating unit-plants, sale districts and regions, and departments with thin functional areas (operating strategy)

1.2.1 Corporate-level

“Corporate strategy concerns how a divefsified company intends to establish business position in different industries and the actions and approaches employed to improve performance of the group of businesses the company has diversified into” [2, pp 56] Normally, in this strategy level, company has three major strategies to choose that are firstly focus on a single business The company focuses all of its resource such as finance, human resource, brand, and so on to compete successfully

in a single business which the company has chosen Second, vertical integration represents an expansion or extension of the firm by integrating preceding or successive productive processes That is, the firm incorporates more processes toward the original source of material (backward integration) or toward the ultimate consumer (forward integration) Third, diversify business operation into other businesses which have related or unrelated with its current business Generally, all

of diversified strategies aim to increase value objectives by many ways such as using each other’s competitive advantages to decrease cost and improve benefit or improve competitive ability comparing with competitors There are many ways to implement diversified strategy such as merger and acquisition (M&A), joint venture/strategic alliances, internal development [2]

1.2.2 Business-level

Thompson and Strickland define: “Business strategy concerns the actions and the approaches crafted by management to produce successful performance in one specific line of business; the central business strategy issue is how to build a stronger long-term competitive position” [2, pp 245]

In other words, business strategy refers to the managerial game plan for a single business, showing the way to achieve successful performance in one specific line of business

All strategy levels are not independent with each other Formulating strategies is process from top to down Different management levels are in charge of managing different strategy levels Corporate strategy is responsibility of corporate-level managers, business strategy is responsibility of business level-general managers, functional strategy is responsibility of heads of major functional activities within a business unit or division and operating strategy is responsibility of plant managers, geographic unit managers, and managers of front line operating units

1.2.3 Functional - level

The functional strategy concerns the managerial game plan for running a major functional activity or process within a business-R&D, production, marketing, customer service, distribution, finance, human resource, and so on; a business needs

as many functional strategies as it has major activities [2]

1.2.4 Operation-level

The operation strategy illustrates how to manage front line organizational unit within a business (plant, sale, district, distribution center) and how to perform strategically significant operating task (material purchasing, inventory control, maintenance shipping, advertising campaigns) [2].Figure 1.1 below shows the strategy—making hierarchy for diversified company

in the case of a single bourssinvesssss company, these two levels of the strategy- making hierarchy

merge into one

level—business

The companywide game plan for managing 23

gyeneral managers B Strategy ˆ in orchestrated

of aach of the (one for each business the — by the

company's differont

lines of business

often with advice

and input from the

company has diversified into)

*@ How to strengthen market position and build competitive advantage

Actions to build competitive

° Add relevant detail to the hows of

overall business strategy

* Provide 4 game plan tor managing

@ Particular activity in ways that <

ipport the overall busines

Two-Way Influence Crafted by brand

——

ca

Operating

strategies within each business

© Add detail and completonass to business and functional strategy

*® Provide a game plan for managing specific lower-echelon activities with strategic Significance

Ni ces `

Figure 1.1: The strategy-Making hierarch [2,pp.39]

1.3 Business strategies:

One organization can take into account different external and internal factors to choose which generic competitive strategies to employ: low cost provider strategies, differentiation strategies, focus (market niche) Each strategic choice bears its own strengths and shortcomings

1.3.1 Cost leadership strategies:

Cost leadership focuses on providing products or services accepted by customers at the lowest cost comparing with competitors This strategy treats providing low cost

as one tool to gain competitive advantage and market share over user’s rivals The firm can chose this strategy when its ability to make differentiation of product is low; market segment which they follow is low with high quantity In addition, they have to ability to make differentiation about manufacture and management material [11]

1.3.2 Differentiation strategies:

Differentiation strategies aims at gaining firm’s competitive advantages by making products or services which customer think that it is special and different about some important features The firm make different to try to be satisfy customer demand which its competitors hasn’t made with the purpose is requirement about price increasing The firm can achieve differentiation by three ways: Quality, improvement, and meeting customer demand [11]

the following figure:

Three above strategic choices can be compared based on different criteria, shown in

Cost

Differentiation Focus leadership

Differentiation | Low (mainly High (mainly by | Low to high

of product by price) unique) (unique price)

Low (market High (many Low (one or

Figure 1.2: Comparison of strategic choices [2, pp.95]

1.4 Strategic formulation and management process

1.4.1 Formulating model:

In order to formulate a business strategy for a company, we are necessary to conduct some main steps that are (1) identifying problem which shows what problem the company is facing and necessary to solve; (2) environment analysis include internal and external environment which help us to understand what are happen and will happen which affect company’s operation in short and long term; (3) setting up vision, mission and long term objective for the firm; (4) business strategic choice which can choose the most suitable business strategies to apply for the company; (5) the last is strategic implementation, in this step will show how strategies chosen will be implemented The figure 1.3 presents model of this

process

Business B’s strategy

Business D’s strategy

1.4.2 External environment audit model

The purpose of an external audit is defining the list of opportunities and threats that the company would bear in the future The external audit includes two categories that are macro-environment and competitive environment audit

The macro-environment refers to all relevant forces outside of company’s boundaries including population demographics, societal value and lifestyle, govern-

mental legislation and regulation, technological factors which impact on the organization

The competitive environment is competitive forces of the industry which affect directly to firm Analyzing these environment helps to define clearly effective factors such as buyers, rivals, suppliers, substitutes and new entrants The following figure illustrates factors of external environment of a firm:

MACROENVIRONMEN7

Entrants

Figure 1.4: A company’s external environment [2, pp, 74]

There are some models to be used in this analysis

A PEST model:

This model concerns four main factors as following

e The political/legal segment:

Political analysis is scanning of the government polices, legal which effect to firm’s business Some of it includes tax policy, trade tariffs, environmental regulation, socioeconomic development policy, etc

e The economic segment:

The economy has an impact on all industries, from suppliers of raw material to manufacturers of finish good and services, as well as all organization in service, wholesaler, retailer, government, and nonprofit sectors Key economic indicators include interest rates, unemployment rate, the consumer price index (CPI), the gross domestic profit (GDP) and net disposable income [1]

e The socio-cultural segment:

Socio-culture forces influence the value, beliefs, and lifestyle of a society They have major impact on customer need, product, service and market

e The technological segment:

Developments in technology lead to new product and services and improve how they are produced and delivered to end users Innovation can create entirely new industries and alter the boundaries of exiting industries It presents the opportunities and threats that must be considered in the formulation strategies

This model can be associated with the EFE matrix (external factor evaluation matrix) The EFE matrix is the strategic tool used to evaluate firm existing strategies, EFE matrix takes into account opportunities and threats exposed to the company [8]

« Rating

Rating in EFE matrix represent the response of firm toward the opportunities and threats Highest the rating better the response of the firm to exploit opportunities and defend the threats Rating range from 1.0 to 4.0 and can be applied to any factor whether it comes under opportunities or threats

There is some important point related to rating in EFE matrix

e Rating is applied to each factor

e The response is poor represented by 1.0

e The response is average is represented by 2.0

e The response is above average represented by 3.0

e The response is superior represented by 4.0 [ 8]

= Weight

Weight attribute in EFE matrix indicates the relative importance of factor to being successful in the firm’s industry The weight range from 0.0 means not important and 1.0 means important, sum of all assigned weight to factors must be equal to 1.0 otherwise the calculation would not be consider correct (7)

= Weighted Score

Weighted score value is the result achieved after multiplying each factor rating with the weight [8]

=" Total Weighted Score

The sum of all weighted score is equal to the total weighted score; final value of total weighted score should be between ranges 1.0 (low) to 4.0(high) The average weighted score for EFE matrix is 2.5 any company total weighted score fall below 2.5 consider as weak The company total weighted score higher then 2.5 are considering as strong in position [8]

B Five forces model:

Five forces model, developed by Professor Michael Porter of the Harvard Business School in 1980, is one of the most useful tools for scanning the micro-environment The figure 1.5 is presented as an illustration for this model

FIRMIS IN OTHER D1010 310) OFFERING See eee a] 01m Gen

RIVALRY

ED ere) AMONG Competitive

AN as come from Competitive pressures Mrom seller:

OR seller's Jockeying for better collaboratio

OTHER | collaboratio posifion and n and

RESOURCE | n and completive bargaining

Competitive pressure comes from the threat of entry of new rivals

Figure 1.5: The five forces model of competition [3, pp.81]

e Rivalry among competing sellers:

This is the most noticeable force in this model, bearing most impacts on the company Intense competition among competitors results in pressure on price, margin, profit, etc for every players in the industry The strategies pursued by one firm can be successful only to the extent they provide the competitive advantages over the strategies pursued by rival firm Changes in strategies by one firm may be met with retaliatory countermoves, such as lowering prices, enhancing quality, add features, providing services, extending warranties, and increasing advertising [6]

e The threat of new entrants

Whenever new firms can easily enter a particular industry, the intensity of competitive among firm's increases Barriers to entry include the need to gain economies of scale quickly, the need to gain technology and specialized know-how, the lack of experience, strong customer loyalty and strong brand preferences to existing products, large capital requirement, lack of good distribution channel, government regulation policies, tariff, etc Despite numerous barriers to entry, new firms sometimes enter industries with higher quality product, lower price, and substantial marketing resource [6]

e Threats of substitute products

There are many industries in which firms are in close competition with producers of substitute products in other industries The presence of the substitute products puts a ceiling on the price that can be charged before consumer will switch to the substitute product Competitive pressures arising from substitute products increase

as the relative price of substitute products declines and as consumer switching cost decrease The competitive strengthen of substitute product is best measured by the inroad in to the market share those product obtain, as well as those firm plans for increased capacity and market penetration [6]

e The bargaining Power of Suppliers:

The bargaining power of suppliers affects the intensity of competition in an industry, especially when there are a large number of suppliers, where there are only

a few good substitute raw materials, or the cost switching raw material is especially costly It is often in the best interest of both suppliers and producers to assist each other with reasonable prices, improved quality, development of new services, just- in-time deliveries, and reduce inventory cost, thus enhancing long term profitability for all concerned [6]

e The Bargaining Power of Buyer:

When customers are concentrated or large, their bargaining power represents a major force affecting the intensity competition in an industry Rival firms may offer extended warranties or special services to gain customer loyalty whenever the bargaining power of customers is substantial Bargaining of buyer is also higher when products being purchased are standard or undifferentiated When this the case, customer often can negotiate selling price, warranty coverage, etc [6]

1.4.3 Internal environment audit model

After auditing firm’s external environment which finds out opportunities and threats, we scan firm’s internal environment to identify the organization’s strengths and weaknesses These strong and weak points can be found in a variety of areas and function activities such as marketing, operation, logistic, finance, management information system, and so on

There were many models was used to analyze internal environment of a, however,

in the scope of this research, we only focus on two main models namely Resource- Base View (RBV) and Value Chain Analyze (VCA)

A Resource-Base view model

The RBV of the firm combine two perspectives: (1) the internal analysis of phenomena within a company and (2) an external analysis of the industry and its competitive environment It is helpful in developing strategies for individual business and diversified firms by revealing in how core competencies embedded in

a firm can help it exploit new product and market opportunities [5]

We define firm resource to include all assets, capability, organizational processes, information, knowledge, and so forth, controlled by firm that enable it to develop and implement value creating strategies

e Tangible resources refer to physical and financial assets that an organization uses to create value for its customers [2]

e Intangible resources much more difficult for competitors (and for that matter, a firm’s own managers) to account for or imitate are tangible resources, which are typically embedded in unique routines and practice that have evolved and accumulated overtime These include human resource, innovation resource, and reputation resource A firm’s culture may also be a resource that provides competitive advantages [2]

e Organization capabilities are not specific tangible or intangible assets, but the competences or skills that a firm employs to transform input into output

In short, they refer an organization’s capacity to deploy tangible or intangible resource over time, generally in combination, and to leverage those capabilities to bring about a desired end Example of organization capabilities are outstanding customer service, excellent product development capabilities, superb innovation processes and flexibility in manufacturing processes [2]

B Value Chain model:

The value chain model was created by M.E Porter in 1980 A value chain refers to collections of activities undertaken in the course of designing, producing, marketing, delivering ad supporting its products and services All firms in a given industry have a similar value chain, in which it is divided two main activities that are primary activities and support activities as shown in following figure 1.7:

Inbound |Operation| Outbound|Marketing! Service

e Operation: Operation includes all activities associated with transforming inputs into final product form, such as machining, packaging, assembly, testing, printing, and facility operation [2]

¢ Outbound logistic: The activities of outbound logistic are associated with collecting, storing, and distributing the product and service to buyers They include finish good, ware-housing, delivery vehicle operation, order processing and scheduling [2]

e Marketing and Sale: Sales and marketing activities are associated with purchases of product and service by end user and the inducements used to get them to make purchases They include advertising, promotion, sale force, quoting, channel selection, channel relations, and pricing [2]

e Service: This primary activity includes all activities are associated with providing service to enhance or maintain the value of the product, such as installation, repair, training, parts supply, and product adjustment [2]

Supporting activities

e Procurement: This is support activity Procurement refers to the function of purchasing inputs used in the firm’s value chain, not to the purchased themselves Purchased inputs include raw materials, supplies, and other consumable items as well as assets such as machinery, laboratory equipment, office equipment, and buildings [2]

e Technology development: every value activity embodies technology The array of technologies employed in most firms is very broad, ranging from technologies used to prepare documents and transport goods to those embodied in processes and equipment or the product itself Technology product related to the product and its features supports the entire value chain, while other technology development is associated with particular primary or support activities [2]

e Technology development: ever Human resource management: It includes such as recruiting, hiring, training, development, and compensation of all type of personnel It supports both individual primary and support activities and entire value chain [2]

e General administration: General administration includes supports such as general management, planning, finance, accounting, legal, government affair, quality management, and information system Administration (unlike the other support activities) typically supports the entire value chain and not individual activities [2]

1.4.4 Strategic choices

A SWOT model:

SWOT, standing for Strength, Weakness, Opportunity, Threats, is widely employed model by a large number of companies The strengths and weakness portion of SWOT refers to the internal conditions of a firm where firm excels (strengths) and where it may be lacking relative to similar competitors (Weakness) and are already presented in practice Opportunities and threats are environmental condition external to the firm, imposed in the future Therefore, it is obvious that this model is the combination of assessment of both external and internal factors The SWOT matching stage can be presented in the following figure 1.8

(List weakness) W/O STRATEGIES OPPORTUNITIES — S/O STRATEGIES

(Use strength to take

by taking advantage of (List opportunities) opportunities)

opportunities)

(Use strength to avoid | (Maximize weakness

threat) and avoid threats)

Source: (8) Figure 1.7: The SWOT matrix [2, pp152]

B Strategic group map to assess the market position

After strengths and weaknesses of the enterprise are identified, these can be compared to other rivals’ The best technique for revealing the market positions of industry competitors is strategic group mapping (or positioning map) This analytical tool is useful for comparing the market positions of each firm separately

or for grouping them into like positions when an industry has so many competitors

that it is not practical to examine each one in depth The procedure for constructing

a Strategic group map is straightforward:

e Indentify the competitive characteristics that differentiate firms in the industry Typical variables are price/quality range (High, medium, low), geographic coverage (local, regional, national, global), degree of vertical integration (none, partial, full), a degree of service offered (no frills, limited, full), etc

e Plot the firms on a two-variable map using pairs of these differentiating characteristics

e Assign firms that fall in about the same strategy space to the same strategic group

e Draw circles around each strategic group, making the circles proportional to the size of the group’s share of total industry sales revenues [2]

1.4.5 Strategic implementation:

After choosing the most suitable strategies, we need to apply tools to implement Balanced scorecard model is one of those tools which author is going to apply to strategic implementation in this thesis

The balanced scorecard was developed by two men, Robert Kaplan, a professor at Harvard University, and David Norton, a consultant also from the Boston area It concerns four perspectives when implement a strategy The following figure 1.9 describes this implement process

/^ | The Vision & Strategy

To acneve and maintain a competitiv

Positon, how must the organization

And inprove?

Lg.) ?

Actions

Source: Collected by group

Figure 1.8: The Strategic Balanced Scorecard Framework