Developing business strategies for Thang Long Construction Corporation in the period of 2012-2016

LIST OF FIGURES Figure 1.1: Micro environment Figure 1.2: M.Porter’s Five Forces Model Figure 1.3: Fundamental elements to create competitive advantages Figure 1.4: IE Matrix Figure 1.5:

GLOBAL ADVANCED MASTER OF INTERNATIONAL BUSINESS ADMINISTRATION

Ha Noi, Dec 2011

The Socialist Republic of Vietnam Independence - Freedom — Happiness

Hanoi, December 16 , 201 |

To: THANG LONG CONSTRUCTION CORPORATION

We are Bui Van Rang, The Duy Khuong, Trinh Van Hanh, Nguyen Van Trung (Students of the group 7, classes X0710)

At present, we are learning MBA (Master of Business Administration)(GaMBA) by a

program co-organized by Griggs University (United States) and Vietnam National University, Hanoi

Pursuant to the provisions of GaMBA Program, Pursuant to the provisions of the program content, we make great graduation assignment for presentation before the Council’s evaluation It is known that Thang Long Construction Corporation is an enterprise under the Ministry of Transport, specializing in construction of road and bridge projects With over 35 years experience, the Corporation has become one of the prestigious and leading contractors in construction market in Vietnam

Thank for precious and favorable conditions of Thang Long Construction Corporation and on the basis of learning theory, we have examined, study great graduation assignment with specialized topic: "Building Strategic Development for Thang Long construction Corporation period 2012-2016 »(To be attached)

We look forward Thang Long Construction Corporation would be interested in our proposals At the same time, the You are respectfully request confirmation of the contents, data and information used in attached topics to our eligible graduates report Thank you very much for your attention and valuable assistance!

Sincerely yours

For group 7% classes X0710

Khuefig The Duy

CONFIRM OF CONSTRUCTION THANG LONG CORPORATION: We agreed to

Group 7 using the Corporation’s data and information in the graduation Assignment The group 7 is requested to use the data and information for study purposes only

Hanoi, 19/12/2011

gia —

TABLE OF CONTENTS

1 The necessity and meaning of the research fODIC << << «<< << <<e 9

2 Subject and scope of the PeS€Ar Ch .ccccsnsscecaarnensexsmnsavensecinanssconmmnnianesens 10

5 NeREiiTCh THEMOU OIE wscuncccncssmncmncmmssscrescasnaromammnneniiiencemmmennen 10

G, EXXpeCied TESS ercesscasssnsnnssavscensmavicinieiecemenemenmmmnasmenmmannnnnnasecenaness 10

5 Structure Of the FESCATCH COPIC mecersscceernencncsssnencansonseusnncasemeanesesensasnssasaes 10 CHAPTER 1: LITERATURE REVIEW OF STRATEGY AND STRATEGIC IMÍ ¡VÀ 0E ME: VI sau nngtigitiivioisootgiriaiEgtioibatsts3565600863855G169)230ceexss4'e00ISXEEODSIESDGEGE 12

I The concepfs of developmenf SÍF{€ØY - 5c 5 Ăn nên 12 2s TNE POLE OF DUSINESS STPRIEZY teunỳyeii-ỷnaaatnaisrotobiadaikeossccsgdissostild0606949665446Esseee 12

Je DECATERY CLASS CREO vos sccsesuesensnassaxenmnawacnrvnuavteauwasnonvsisisicennvnmeenenmmnonennnusadnse 13

4 The strategy development Process wisi cssisssccesieenerseenscesmncnsnssvarassavessnsasnsnseivs 14

1 « DOTO ig MISSION GNC TAIT OD OCLIVES mvenrsmnscnrcsmavansmmnapnminnaiiven 14

32 EM ðEiffil Eifviföftiii6if BE uaeraeeenniadrodiinlBbiressersgoryoserpiilPkttfrg8S0 15 42,4 « PACTS G1 BAO GHVTOHITGHE no nmersearcrmenrsconnnmrmnmmnamranmuninien 16

Gok [DI ONOINIIG GHIHDNENGNE ssuvedrrsdvoinesiintsiieiaRottiibitikaipBi0À438443340044 16

biddeds TECHROLOBICEl CAVITORIREN cxsscccnsassnssecessenessenssanisimemneniiaienteeinns 17

4 Ladd BOC) GNA GHITimMHÍ ĐNVINDNNIDI ceccscnemsenrenerinencncemprncuxciuccanennecss 19

© sed Ae, FOOTE CVIPORICIT cocxseszcaxcsnnt aviansies eeRL eNOS 19 4.2.) de F OUNCE GHA LEO) CVT ORIG ccoses cxssnicceccrrmnanupaitiitiinntoemnnnnseves 20 Soi, JANI S1 OL KH HSÍTV EHVHDIRHEHseeesseessroosesteesosordrgtieoigfro60000/0010036 ie

#2 0.3 EXISTING COMPCHIONS 10 ME TIDNSTOV srr rencncsnneecervimmceunmmneunves

4.5 Analysis Of INterial GAVITGHITIGNE MMUENCES nce cncnnncemnnommmnamamavnnn 26 3.3.1„ Hi f£80u76 nữ ðfEST28HưTiRI 1aCbOS cece cccassayseseresvecnntacemers if

BD ctee SRROBATON ác LptaloprriefL TRO gaeeseeesasmssosvermsiddxeerostnrvgeppggkeVoS8I0600 2d 4.3.5 FIC! * LEGGUHIENE THẾ ƠEE cccccanru cuss commen 28 4.354 PrOMUICHOn aid TeChnOlO Ral FACIOT Ses sessecsosssemnvenrnanemrcansdiienmmnsmmnennen 28 1.3; XIBT CETTP mril SIÌE6 THƠI HE scene crapckerinrneremereemenmnnanermecommnnctnereane 29 4.3.6 Identifying sustainable competitive advantàe - - -«.- 29

Sv SERIE HIC an ÍySS UUỀN seeeenneerdrrnnrrebriiorraiossbgisgstisasxy32G000383488108005616694042668 30

tuần bi TV HÍY Etnanerrrdssteeesnoosrreaetesenorropesnepnongi TSN OE RS ETRE 30 5.2.1 EFE Matrix: Evaluation of the company’s external factors 30 5.2.2 IFE Matrix: Evaluation of the company’s internal factors 31 tuc cx.Ee 0 TT nu naaqindabatabkesssnsesragenrroornsoioo0i)VESGHENGISSGSNGISGIGIUESEGGS018 độ

G Basic btieiiess SÍTHÍGBTDÉueeeeeeesisnreboeennnldtaornastarkaS0p461600G0005/008800438.880083 a2 Gols SERIE 1 n0 TGŨ cengeessnnsetrdddtrrnrdiitintsoebiBkotidgetsg10800110301010860/61nesysevsse 32

bu CÍEHETTE CORIPOUTI VS GHAI EE race sssisascsxertioontiormermernnrmermerememmmnemenenss 34 Gated » CONE JGR EPSIID SAIC EY eccencsxnereemmenersonomenenmennentemmenonammnesaNiee 34 2 PEBGUEL GiTafgtiilatioii SETBTĐDY ceeaeeonnserddeioiidaesgitiosiskllb4G48611668ssseee 35 uc Ð 00116 BTR BE euaanagrgrrrdstoitiiSNg0t02n90036436iidiiSuEimseeosocersorrsrgstrgruTpvgeki 35 Ơ,5.1 EJOIIbinigdffonni tí PBTGEIE RHTHEBE TỔ ceesessesneteseretenootoofonsogopilit8li400080/08200 36

7 QSPM model to select the optimall straf€ØÏeS .s- 5 55s «s55 a7

8 Implementation and adjustment of selected strategies «<5 38 E.!, 1)1Pð†Iiziiiontal BÌYHETHWE naaeennseenseesssvrnnotxrrotgtroptivviBieinPGbiipt9SNHEAESG0000030/6 38

us, DREMEL TifflGEIGIDT BÍ mrsenssnsursostrortauiatiioissgtkcsssti4si6G923600146060sxlssheaeesrre 38 8.3 Designing a system of control and evaÌuation ‹+ <<<<<s++<s2 40

CHAPTER II: ANALYZING THE SITUATION BUSINESS STRATEGIES OF

THANG LONG CONSTRUCTION CORPORATIOÌN - << «=<<«s=<s 42

1 Overview of Thang Long Construction CorporafiOn: << «<< 42

Lb ESS TS sannagaavbdbesnssesrasssongstgg0940 9000008001000 000150043896018msssmomsed 42 ods „ CGITIREHRV TW sessnueveastkansesresogtesbsttgisg800%600616g0 nVa580540000000010E9I-THMGi 42

1 „La THSIGTY GÌ (0EEIOPITHEHÍEsaaaaaaeeaaxeessserrrornnnrvoieDkI0ENS0NSGSES0608/704E39 0222 42

1, NETifinit: B HH deeasaaadkeernrennrrnenssnEgiogiinhoiSiPIGGBNGSS01S0003830194kememensesmmse 44

Pe ee TH cueseeronanndgagiursbioiBEBGici96000S0skorsisnr SE NNHRSESGESSGIEGEEOEI 45 1.4, Frodittllon - b0s1ii6šš Dếr GITHBHTE ceeeeserssnrodvinini3AIG0039110409505608006663 45

Ld (MIO ~ Ievetr = PHIHHHHEEE sseweseseeosodgrsuotagdll340814G60814406000/0uyseorsed 46 Lt.¿ EyaluaHơn ơn sơrie GtlhieF é6onioiriio THd|OAOTS sousseessaersedsae 47

2 ANALYSIS OF OPPORTUNITIES AND CHALLENGES FOR THANG LONG CONSTRUCTION CORPORATION .sccsssssssssssssessessssssesessees 47 ian SNS OL ưưtr0ET(vVIT0T0ETlGGesenusdridadddeirottirtrooidtdgestietssesosgxgssem 47 ideal E@ONOIIC ðNVIFOHWNIEHE srenaaenddisdtioial206k6esesesekasvsgroletotggieuerioppoai 47 2,1; T€01111510E1C81 6ũñYlTGDWNGHsseaeaeeseeeensevvrinepddsrpsrngrgroioll49406890806 54 48 xin « D°Y!ã|-<GHibirdl gi GD eeereseedeerntaesiroiaoidbpdliboirásltessssergsnrrsee 48

ZA A Lege political GHIVHGTEIGDÍ-aseendaonddntookiasdldGiia8l2neocerrenepehorgipi9t30gg070136 48 Datu PUBLYSIO OF MICUSIy GIVTGTNIEI cunggaseesnrienirdsdepevetoohrsstsaossaShoposi 49 s.0- 0x 2| ÿB]Š GÌ: CGGIHEHEoaaaeaeesnrredrenanstersrtoktsil400608)40030030821030 le 50 c„sn DINK ĐÌ HgW GOEDTIEIT [TS essensrenrsetedinuedibsirtobklosessssresorcgrtggftg gio no Putts LOE CETL ƠI Ti ngerrdersdtrsaeibdeenrvsshstghpntSi4©E280/2001880/88018020u0ugi 56

oi LAE DI DI TẾ nganndsnaeieadateeorenreentonorntig0IAG0S010/801/00/99/00000009000383i0Exmseos 56 inox UIRSEETREITVE DI xeeseennerrnvroraatorgtGGIGGEUEIGEDHiOnhdyssontotS0ST0EEHSGHn6 af 2.3: ASSESS Of OPPOrinities aNd ChallenPES eeeeeseiednddaaboeesorasrarsreai sử

3 ANALYSIS & ASSESSMENT THE STRENGTHS AND WEAKNESSES

OF THE THANG LONG CONSTRUCTION CORPORATION 006 58

3.i+tIiẰnani Xes0rfC0 VIANA EON ance asncnussntsiimnneremnneaeenmemenrenciennmntian sume 58

Txi»r1„ SH hÈire 0í Si nàsaaeeesesenssennseteooornotiogtterstttVIGSGIGINEIGDOSIOIG.565/08lemren 58 3.1.2 The OfgnanizaHom, Nữinăf †6sGUrEE rfani8PEmEHE eseesree 59 3.13 TS 19906 OF TSG essen cxasscremsssienescnmne nmr reeennmmemnaacoe 60 3.0 Analysis of Tnaneial CAPACI ccco-neyerecccnewuns sarsexsiseysarneaviesenietetenenverns 60 3.3 Analysis of technological capability and equipment 60 3.4 Marketing and PR work ee Error! Bookmark not defined 3.5 Analysis of management qualification Error! Bookmark not defined 3.6 Assessing the strengths and weaknesses of Thang Long costruction

ID TH veeesdnngnogdrgantlaiboGhGn0seiesssa380Á Error! Bookmark not defined 3.7 Determine the competitive advantage of the Corporation 60

4 Reviewing the results of environmental analysis and setting the matrix S§29140/0.295536908851i3904445331G0ÄnA.0000900880090000000G00000/00040008/0806 Error! Bookmark not defined 4.1 Assessing the external environment, internal use EFE matrix and IFE

5 SS SP RSPR RIERA ERATE Error! Bookmark not defined 4.1.1 EFE Matrix (Evaluation of external factors) Error! Bookmark not defined

4.1.2 IFE Matrix: (Evaluation of internal factors) Error! Bookmark not

defined

4.1.3 Matrix IE: (Evaluation factors internal - external) - - - - 70

CHAPTER 3: PROPOSAL OF BUSINESS STRATEGIES AND

IMPLEMENTATION SOLUTIONS FOR THANG LONG CONSTRUCTION /ê///28//.2.7/,// , 0 ượya g7 70

1 Vision, mission and general obj€CfÏV€S co SH Y4 73

Ef ho TƯ Losesreennetotssto0i99e4EGIGGMEGIGS-GTMNNEbliieitueniiioi2090/0019109)00NG00000807R N3

1 SE OU] GOT WSS ene rcrecemnmncseranene en IRs raennaomennmmmnnena 74

Ly 6oIHộPTILIDD PT THÌNG toan vgoehrititiiddennromnresediroeksgrsthesri0GEVBGSPERSIPNGUGGGS-ISEEIDSD 74

2 Proposed strategies and appropriate strategic choiC€S -.« 74 soaks PROPOSE BITRE 8 sc ceneerc omen ane senmnaneeeontanenn annie Siskamcrmmconmeninememecenseenne RNAS 74 2.2 SCICCUON OL PTIOTITY GWRLERY’ set icennecxnenrennronncevennmess ee 75

Š.SIrnfepic SGÌH ĨD Hỗ sua ceeeeserseaddrddrbasenoraaaesegstsbsoosillagx064860099066606644646ee 78

3.1: DECMOIORICAL SOLUINONS escscsne em acemnnewess ee 78 1ue« SƠIUITOHB TDf TINH TGGGITEDEexseeseeeedntvetrrtrinhntbt940PI050005939401/00003/0001988 a 8x CNT OT OT SEAT hirer eeenene narnia 80

SA Solutions on Marketing Sid) Mate! cscsssssacecenscrmininenewcnemennnsemeungenenen 81

4 Implementation plan for the strategic solutions and Requirements 81

5 Improving the organizational structure and assessment control 83

6 RECOMMERTATIONG i cers cacnecensvessrennanmasnenssesussnucsunssancnanantsnsiaspaneeviisnmcenmeeenens 83

6

LIST OF FIGURES Figure 1.1: Micro environment

Figure 1.2: M.Porter’s Five Forces Model

Figure 1.3: Fundamental elements to create competitive advantages

Figure 1.4: IE Matrix

Figure 1.5: Strategy implementation activities

Figure 2.1: Organization chart of Thang Long Construction Corporation

LIST OF TABLES Table 1.2: Macro-environmental factors

Table 1.3: The process of identifying sustained competitive advantages

Table 1.4: Michael Porter’s Generic Strategies

Table 1.5: QSPM Model

Table 2.1: Production - business performance

Table 2.2 Estimating total demand for construction of traffic work up to 2017 Table 2.3 Financial statement of the Corporations in 2011

Table 2.4 Financial Structure of the Corporations in 2011

Table 2.5 Proportion of qualifications of indirect employees

Table 2.6: Proportion of equipment, plant and technology

Table 2.7: Opportunities and challenges

Table 2.8: The situation of the labor structure of the Corporation

Table 2.9 : The structure of equipments & machineries of Thang Long construction corporation

Table 2.10:Competitive profile matrix

Table 2.11 : Matrix evaluation of external factors

Table 2.12 : Matrix evaluation of internal factors

Table 2.13 : IE matrix

Table 2.14: SWOT matrix

Table 3.1: The quantitative strategic planning matrix for optimal strategy seletion Table 3.2: Implementation plan for the seleted strategies

ACKNOWLEDGEMENT First of all, the Group No.7 - GaMBA.X0710 would like to express our sincere thanks for the Master of Business Administration Program, the Affiliate Programs between Griggs University, USA and Center for Education Technology and Career

Development, Vietnam University Hanoi for organize MBA course in Vietnam and facilitating our Capstone Project Report

Secondly, we would like to express our sincere thanks to the Leaders and staffs of Thang Long Construction Corporation, who have fully supported our team in providing valuable input information for this Capstone Project Report

Last but not least, let our thanks go to our families whose encouragement has helped us complete the course without having any difficulties

We have tried to complete the assignment in the best way using our best knowledge and ability However, the shortcomings are inevitable We wish to receive valuable comments from teachers and colleagues

INTRODUCTION

1 The necessity and meaning of the research topic

To harmonize with the country’s industrialization and modernization process, the transport industry must develop more to meet growing good and passenger transport demand, enhance the socio-cultural exchanges and economic integration among economic regions Moreover, the transport industry must also ensure its role as the bridge tor international integration It not only plays an important part of social infrastructure which paves the way to develop other industries, but also create big changes in the process of economic restructuring and make great progresses in the social development process in general

To accomplish the above tasks, it is required that traffic construction companies should enhance technical and technological innovation as well as train a_ highly

qualified scientific and technological contingent, administrative staff, businesses, skilled

workers, especially expand the relation activities to compete in the domestic and international market

Therefore, enterprises must develop the strategies which go in line with the national development, globalization and regionalization trends in the world Setting up the business strategies which identify development priorities, specialization, main products for the sustainable development is essential

In the plan of the strategy, it should consider many external and internal factors, analyze information as a basis for planning business activities in the short and long term, focus efforts and resources on the key objectives to achieve the best results, quickly respond to the uncertain situation and adapt to changes

Like other units in the transport industry, Thang Long Construction Corporation also faces many challenges Especially after joining WTO, the economic globalization and regional economic integration has become an overwhelming and irreversible development trend, the competitive advantage of some key industries (bridge, tunnel) of the Corporation becomes more fragile than ever, when other business units in the same industry also generate and accumulate competitive advantages as that of the Corporation

9

In such context, it is really necessary to build a stable solution or a development strategy for Thang Long Construction Corporation

With these requirements above, our group- group No 07, class x0710 carried out the research topic: “DEVELOPING BUSINESS STRATEGIES FOR THANG LONG CONSTRUCTION CORPORATION IN THE PERIOD OF 2012 - 2016”

with a view to using the knowledge gained at school into practices as well as contributing to the sustainable development of the Corporation in the current situation

2 Subject and scope of the research

- Subject:

- Analysis on the business environment of Thang Long Construction Corporation helps us build the business strategies for the Corporation during 2012-2016

- Scope of the research:

- Subjects: the business strategy of the Corporation

- Scope: in curriculum frameworks and in Vietnam market

3 Research methodology

The primary source of data is from the annual report of the Corporation, other corporations in the same industry From there, we use the research methods such as data analysis and synthesis, logical thinking, deductive methods

4 Expected results

- Improve the knowledge about strategic management in the current environment,

- Analyze and judge the impact of external and internal factors on Thang Long Construction Corporation

- Recommend the appropriate business strategy to improve the competitive advantage as well as to promote the efficiency in business for the Corporation during the period 2012-2016

5 Structure of the research topic

Chapter 1: Theorecal background on business strategy development

Chapter 2: Strategic analysis of Thang long Construction Corporation

10

Chapter 3: Proposal of business strategies and implementation solution for Thang Long Construction Corporation

CHAPTER 1:

LITERATURE REVIEW OF STRATEGY AND STRATEGIC MANAGEMENT

1 The concepts of development strategy

- Strategy: Currently, there are different definitions of strategy; the underlying reason of this difference is that there are different systems of concepts of organizations in general and different approaches to organization’s strategy in particular In terms of ontology, depending on the perspective of the positivism or following the constructivism trend, the nature of strategy is determined by natural laws or significantly influenced by the subject In fact, strategy is usually defined according to the practice in order to facilitate the implementation in the organization

The definition of William F Gluek 2 argues that: "Strategy is a unified, coordinate and comprehensive plan designed to ensure that the company’s basic objectives are successfully accomplished However, the viewpoint is not really complete In practice, official plans that are formulated specifically, sometimes, fail Therefore, there should be responsive plans in the business process

Besides, business strategy or competitive strategy is defined according to the following six factors: product market, investment level, functional strategy, strategic assets and strategic capabilities, resource allocation, synergistic effect between enterprises

In summary, formulated strategies should help businesses achieve the set goals However, in the process of strategy formulation and determination, goal orientation is not enough Strategy development should include implementation roadmap, specific timeframe and locations with certain resources

2 The role of business strategy

In the highly competitive market economy, to be successful, every business should have a strategy That means business managers must understand the changing trends the market, find out key success factors, exploit the advantages of the business, recognize the weaknesses of the business, understand competitors and the customers’ wants, know how

to approach the market Thereby, the company can make creative decisions to deploy more Or cut back operations activities at certain time and areas

[2

The above efforts are to determine an optimal strategy which has specific influences on basic business functions as follows:

- Provides an enterprise a specific and effective business direction which is the guideline for every functional activity of the enterprise This helps enterprises promote their competitive advantages and strengths, as well as increase their market share

- Helps enterprises limit uncertainties and risks to the minimum level, enabling the enterprise’s long-term operations stability and continuous development

3 Strategy classification

- Strategy classification according to strategy levels:

In the past, people often divide the strategic system of a corporate into three levels:

- Corporate - level strategy

- Strategic business unit - level strategy

- Functional strategy

Currently, with the globalization trend, many companies expand their activities beyond national borders and it refers to the fourth strategy level:

- Global Strategy

-Classification according to strategic contents:

Based on strategic contents, managers can divide strategies into:

+/ Marketing strategy, commercial strategy

+/ Financial strategy

+/ Human strategy

+/ Technological strategy

- Classification according to the development process:

According to this classification, business strategy includes:

+/ Orientation strategy: refers to the orientation of the business’s major goals It is built based on the results of external and internal environment analysis

+/ Operations strategy: refers to the operations plans of the business in each specific situation and expected strategy adjustments

là

4 The strategy development process

Previously, business strategy decisions used to be made once for a long time and this was the job of top executives Currently, the strategy development process is made more frequently and requires the participation of all members of the business, including the following contents:

< >| Internal analysis of the Business environment |_ „

enterprise (S,W) (3) analysis (O,T) (2)

/

aii Corporate level strategy (5) eee TẤN

Business units and functional divisions |

perenne ae Strategy implementation (6) eee

/ once Evaluation of implementation results (7) See

Figure 1.1: Business strategy development process

4.1 Defining mission and main objectives

- Defining the organization’s mission:

The first step of the strategic management process is to define the mission and main objectives of the organization The organization’s mission and main objectives provide the context within which strategies are formulated

A mission statement spells out the reason the existence of an organization and what the organization will do For example, the mission of a national airline is to meet the high-speed travelling demands of customers with reasonable prices Similarly, the mission of Yahoo! would be "to connect people to anyone and anything."

- Defining strategic objectives:

Main objectives determine what the organization hopes to meet in medium term and long term Most organizations pursue profits Priority is given to the objective of achieving superior capabilities The second objective is the one that the company considers as necessary if they want to achieve superior capabilities

These objectives are essential to the organization’s success, because they indicate the direction, help evaluate, create energy, identify the priorities, allow co-operation and provide a basis for effective planning and for activity organization, encouragement and control Objectives should be challenging, measurable, appropriate, reasonable and clear

In a company that has many departments; objectives should be set for the entire company and for each department

4.2 External environment analysis:

External environment refers to outside elements, forces and institutions that are beyond the control of business enterprise and it may affect the efficiency of business operations

External environment includes:

- Macro environment (general environment)

- Micro environment (the industry environment / competitive environment)

External environment includes many factors The purpose of the study on external environment is to identify opportunities as well as risks that may affect the company Therefore, the scope of the study is limited in the study of some factors directly affecting the company These factors may vary in each sector and individual businesses depending

on their characteristics, objectives and strategies

Frequent changes in external environment also cause changes in the company Therefore, to ensure the successful strategic management process, the company must

conduct studies on external environment regularly And it shouldn’t use results of the previous studies to build the strategy for the new period

4.2.1 Impacts of macro environment:

Macro environment is the environment which covers activities of all businesses, affecting directly or indirectly to these activities It includes macroeconomic factors such

as government and legal factors, geo-physical factors, political factors, socio-cultural factors, demo-graphical factors, technical — technological factors

When doing research on macro environment, some following issues should be considered:

- Macro-environment influences can have long-term effect on the company

- Changes in macro environmental lead to changes in the micro environment/ industry environment and internal environment Therefore, changes in the macro environment will influence the development of the company

- The elements of macro environment affect all economic sectors and businesses However, the degree and nature of these impacts are not the same

- Businesses can take advantage of opportunities and minimize risks, but they can’t avoid the impacts of macro environment

- Each element of macro environment can independently affect businesses However, in conjunction with other factors, they can also affect businesses

4.2.1.1 Economic environment:

Economic environment represents the nature and extent of the growth rate, orientations for the development of the economy Economic environment analysis is very important because it includes those factors affecting the purchasing power and consumption structure All businesses’ strategy is related to output and market And market needs both purchasing power and people Therefore, economic factors directly affect the business strategy of businesses Some particularly important factors are economic growth rate, interest rate, exchange rate and inflation rate

Macroeconomic environment determine the prosperity of the economy and it always has great influences on businesses and sectors

16

- kconomic environment identifies the nature and orientations of the economy in which businesses operate

The economic impacts on businesses may influence the ability to create value and generate future income

Four important factors in microeconomic environment:

+ The economic growth rate

Bargaining | Rivalry among „Ì Bargaining power of existing Ny power of buyers

Some issues should be considered when doing research on_ technological environment:

The introduction of new technologies

The speed of invention and application of new technology

The Government’s incentives for the research and development activity

Law on intellectual property, copyright protection

Law on technology transfer

Pressures and expenditures for the development and transfer of new technology These factors contain many opportunities and risks for businesses With the rapid deveopment of the technology revolution, technological environment has great influ:nces on the business strategy of enterprises Changes in technology allow busiresses to produce a range of new products with unsurpassed features and quality only

in ore night However, technology itself makes the existing products out-dated only after one ught Hence, technology innovation brings both invention and destruction, both oppotunities and risks

It can be seen that technological changes open many opportunities for businesses, some Signals are as follows:

- New technology helps businesses improve the quality of products, reduce cost, enhaice competitiveness

- The introduction of new technology and technology transfer in different sectors, indusries or geographical areas can open opportunities to raise productivity and complete the products in sectors/industries/geographical areas receiving new technology

- The introduction of new technology can create new markets for products and services of businesses

In addition to the opportunities listed above technological changes can also pose challenges on businesses as follows:

- The introduction of new technology leads to the appearance of new substitutes whic} threat to the existing products

- The explosion of new technology rapidly makes the existing technology out- dated Therefore, it puts pressure on businesses for technological innovation to improve the competitive advantage

- The introduction of new technology increases the number of new entrants, competitiveness will therefore be greater As usual, new enterprises often have a more advantage in application of new technology than the current enterprises Hence, these enterprises will have higher competitive advantage

- The explosion of new technology shortens the technology cycle; therefore it requires businesses to shorten the time of depreciation as well as the research and development process

4.2.1.3 Social and cultural environment:

Social and cultural environment includes the norms and values that are accepted and respected in the society or a specific culture

The research results show that social-cultural changes are consequences from the long term impacts of other macro factors Therefore, they often occur later than other factors The impacts of socio-cultural factors are often long-term and more subtle than other factors; even sometimes it is difficult to recognize On the other hand, the scope of these impacts is often very broad: "they determine how people live, work, produce and market products - services" Therefore, the knowledge about culture and society is an important foundation for managers in the strategic management process These aspects on creating the cultural and social environment have strong influences on the business operations such as:

The concepts about ethics, aesthetics, lifestyle, jobs

The traditional customs and practices

Concerns and priorities of society

4.2.1.4 Natural environment:

Natural environment consists of geographical location, climate, landscape, land, river, sea, mineral resources, forest resources, air, water that ensure the necessary inputs and operating environment for businesses and organizations

19

Some factors should be considered:

- Geographical location, natural conditions and climate

- Resources, mineral resources and reserves

- Sources of energy

- The exploitation and utilization of natural resources

- Environmental issues and environmental pollution The attention of the government and community to environment

The current situation: increasing environmental pollution, depletion and scarcity of natural resources and energy, ecological imbalance The price that people have to pay for the degradation of the natural environment is enormous and uncountable Today, the public as well as the international organizations on environmental protection requires that regulations should be stricter to maintain and improve the natural environmental conditions

4.2.1.5 Political and legal environment

The political environment includes the State, legal system and operating activities

of the State Specifically, the political environment includes the perspective system, the government policy, the current legal system, the Government's trends in diplomacy and political developments in the regional and in the world

Impacts of political environment on enterprises can be illustrated as:

- Legal: The legal system should provide regulations and constraints that require enterprises to comply The question is that enterprises should understand the spirit of the law and strictly comply with the rules of law

- The Government supervises, maintain and implement the law and protect the national interests The Government plays a major role in regulating the macro-economies through economic policy, fiscal and monetary policy, and spending programs For enterprises, the government’s role is not only to control, encourage, finance, regulate, prohibit, restrict, but also to supply services to enterprises such as: providing macro information and other public services, etc

20

These complicated changes in the political-legal environment will create opportunities and risks for businesses, for example: a country often has conflicts; internal wars occur constantly, the government policy is inconsistent All of these problems would be a major obstacle for businesses The trend toward peace, cooperation, and respect for the right to self- determination of peoples are the mainstream today The policies for the stable political environment and "Vietnam wants to befriend all countries" are favorable conditions for the operation of enterprises

- Antitrust laws < Labor code

Political-legal | - Law on tax | - Educational philosophy and

- Adjusted philosophy policy

Table 1.2: Macro-environmental factors

Analysis on the external environment (macro environment) will help managers realize opportunities and challenges to their businesses Since then, they have the basis for building and choosing an appropriate strategy for the company

4.2.2 Analysis of industry environment

Micro environmental research is a very important and indispensable content of the strategic management process Micro-environment, also known as competitive environment / industry environment is directly related to each business; the majority of the business's activities and competition occur directly in this environment

Michael E Porter, a well-known professor of business strategy at Harvard Business School, introduces the five forces model of competition; helping strategic managers analyze the micro-environment, identify opportunities and the risks from this environment According to Porter, five forces of competition are:

- Threat of new entrants (potential competitors)

- Bargaining power of suppliers

- Bargaining power of buyers

- Threat of substitutes

- The intensity of competition among existing firms in the industry

The power of these competitive forces in the industry will determine the level of investment, competitive intensity and the industry’s profitability According to M Porter, the stronger the competitive forces are; the less likely that existing firms are to increase prices and gain higher profits; whereas weak competitive forces will create opportunities for the existing firms in the industry to gain higher profits Therefore, companies need to research these five competitive forces Based on the their internal conditions, companies should select an appropriate position in the industry in order to best cope with these competitive forces or affect them in the way that can benefit them

23

Potential Entrants

Threat of dh entrants

Bargaining Power

of Suppliers INDUSTRY

COMPETITORS Rivalry among

The contents should be considered when analyzing customers:

Analysis of customer groups: includes collecting information on groups of customers: their needs, interests, loyalty, and concerns about products, prices, distribution and marketing This analysis helps companies determine whether the product positioning

is reasonable or not, which potential market segment is available for the company to participate in

Evaluation of the bargaining power of customers The stronger the bargaining power of customers is, the more likely the business is to spend more money to maintain the relationship with this customer by reducing prices, increasing discounts, and commissions, increasing quality, increasing after sales service, increasing sales promotion

The bargaining power of customers is strong if they have the following conditions: + The volume of customer’s purchasing accounts for a high proportion of the company’s total sales

to `)

+ Low switching costs

+ The number of customers is small

+ The customer is likely to have backwards integration with other suppliers

+ The level of the business” impact on the customer's product quality is low Pressure from buyers mainly exists in two forms: request for discount or negotiation for better product quality This makes existing competitors compete with each other which decreases the industry’s profitability

4.2.2.2 Bargaining power of suppliers:

Suppliers can create opportunities for businesses when they reduce prices, increase product quality, increase the quality of supplementary services; vice versa they can also pose a threat to businesses when they increase prices, reduce the quality of products and services, do not meet the requirement of the supplying quantity and time

The advantages of suppliers:

- There are few suppliers

- Product differentiation

- High switching costs

- Limited ability of vertical backwards integration of customers

- Supplier is capable of high autonomy

Substitutes are often the result of innovation or new technology boom Businesses whiich want to gain a competitive advantage need to spend resources to develop or apply new technology to its business development strategy or focus on their product research andi development strategy

4.2.2.4 Potential competitors

Potential competitors are companies that can enter the industry market in the future When new competitors appear, they will exploit new production capacity, gain market share, increase competitive pressure and reduce the profits of existing companies The appearance of new competitors will affect the company’s business strategy; so, companies should analyze these potential competitors in order to assess the threats that they can cause to the company

Competitors can appear through many ways:

Export

Joint ventures

Direct investment in the form of 100% foreign capital

Acquisition of other companies in the industry

The threat of new entrants in an industry depends much on the barriers to entry represented by the responses of existing competitors that new entrants can predict If the barriers are high or new entrants can predict the fierce retaliation from existing companies in the industry, new competitors will be unlikely to enter and vice versa

4.2.2.5 Existing competitors in the industry

Competitors are companies offering the same products and services with those of the company Competitors will share the market with existing businesses and may grow if they have higher competitive position The nature of competition in an industry will increase or decrease depending on the market size, the industry’s growth and the investment level of competitors

The types of competitors:

- Competitors on desire

- Competitors on a type of products

-Competitors on the formstypes and specifications of products

- Competitors on brand

Competitor analysis consists of the following tasks:

- Identify, classify, evaluate list competitors according to the market area

- Collect and evaluate information about competitors (research on competitors’

key objectives, current strategies and policies, potentials, strengths and weaknesses)

- Predict the responses of competitors

- Select appropriate strategies and tactics (attack, avoid, or collaborate) to deal with Competitors

4.3 Analysis of internal environment influences

Internal environment of a business includes all its internal elements and system

In order to survive and develop, every business must conduct the following activities: administration, finance, accounting, production, business, research and development, marketing They also must have an information system, a management system, and functional departments In every fields of activity, businesses have their own strengths and weaknesses

Accurate identification of the strengths, weaknesses, special abilities (strengths of

a business that competitors cannot easily imitate) will help businesses select appropriate strategies

Four elements needed to create a competitive advantage: efficiency, quality, innovation and superior customer satisfaction

The ability to make distinctions of an organization is created from its resources and capabilities In particular, the resources include: financial assets, facilities, human resources, technologies, organizational models

4.3.1 Human resource and organizational factors

Human resource activities focus on the management of people or human resources, including payroll, bonus and benefit management, recruitment, training and retraining, personnel allocation, laying-offs, management of labor relations, encouragement and creating of fair working conditions, professionalism development, human studies, public relations, policies and regulations on labor discipline, strikes,

Human activities play a crucial role in the process of strategy implementation In this modern world of business, HR managers play more and more important roles, sometimes decisive ones in the strategic management process

Management of human resources include recruitment, training (and retraining), payroll for all categories of workers It affects all activities in the value chain

4.3.2 Research & Development factors

The fifth main factors in business environment study are research and development (R&D) The popular methodology to assess the strengths and weaknesses of this factor is cost-based There are four methods commonly used to determine the cost of R&D:

1 Investment for as many projects as possible

2 Based on percentage of sales

3 Comparison to that of competitors

4 Evaluation of new product success and reversely calculate to determine the cost

of R&D

In enterprises, research & development activities can take many forms:

1 In-house: enterprises conduct their own research and developments

2 Contract-based: enterprises outsource R&D activities on individual products to independent researchers or institutions

4.3.3 Financial - Accounting factors

Planning effective strategies needs identification of the financial strengths and weaknesses Business’ solvency, the balance of debt, working capital, profits, the use of capital and cash flow actively influence the planning and implementation strategies According to James Van Home, functions of finance and accounting department include three decisions: investment, financial and dividend decisions

Production/operations

Production function, operation of business activities includes al] activities involved in the production of inputs into goods and services Production management is the work of management of input, processing and output Roger Schrocder argues that the production management includes five types of decisions or five functions: processes, capacity, inventory, workforce and quality

4.3.4 Production and technological factors

Production activities have close relations with the creation of products It affects the success of an enterprise and covers issues related to production technology, production technology, productivity, production costs control, inventory, raw materials supply The factors of production and technical capabilities that meet the needs of quality and quantity of market demand, the control of production costs are really important, and they relate to pricing policy of goods and products

Information links all business functions together and provides the basis for all management decisions Information system is the backbone, the fundamental, the field where main advantages and disadvantages of a business are clearly seen Therefore, assessing strengths and weaknesses of the information system is an important part of the internal environment research

The information system receives raw data from the environments, both external ancl internal An effective information system works as a modern library in collecting, sorting, processing and storing data to aid the decision process of business managers

4.3.5 Marketing and sales factors

Marketing can be described as a process of identifying, forecasting, setting and meet the needs of consumers for a particular product or service Joel Evans and Barry Bernian argue that marketing includes nine basic functions:

9 Analysis of social responsibility

4.3.6 Identifying sustainable competitive advantage

The process of identifying sustained competitive advantage is briefly described by the following table:

Superior When core competencies are superior compared to compeencies competitors, they become Superior competencies

Core Core Competencies are resources and capabilities that can compeencies serve as a source of competitive advantage

; Resources Resources that are used and exploited

- Intangible resources: brand, commercial advantages, favorable locations, R&D capacity

Table 1.2: The process of identifying sustained competitive advantages

29

Meeting 4 of the 5 following criteria, superior competencies will become a sustiinable competitive advantage: (1) Valuable, (2) Rare, (3) Difficult to imitate, (4) Sutff cient distance, (5) are the same with critical success factors

Summary: Internal analysis is to identify potential and existing sources creating the company’s competitive advantage; at the same time identify obstacles in maintaining competitive advantage

5 Strategic analysis tools

5.1 SWOT Matrix

SWCT Matrix is an important matching tool that helps managers form 4 groups of strategies: strengths - opportunities (SO) strategies, weaknesses - opportunities (WO) strategies, strengths - threats (ST) strategies, weaknesses - threats (WT) strategies

- SO strategies: promote internal strengths to welcome external opportunities

- WO strategies: overcome internal weaknesses in order to take external oppcrtunities

- ST strategies: make use of the company’s strengths to avoid or minimize the damizge caused by the influences of external threats

- WT strategies: are defensive strategies to overcome internal weaknesses in order

to avoid the threats from external environment

5.2 IE Matrix

5.2.1 EFE Matrix: Evaluation of the company’s external factors

External Factor Evaluation (EEF) Matrix helps us summarize and quantify the effecs of environmental factors to the business EFE Matrix is also developed through five steps similar to the development of IFE matrix The only difference is that the factors

to be evaluated reflect main opportunities and threats, influencing the success of the comyany in its business sector

The result obtained from the EFE matrix is also the total weighted score of all facto’s If the total weighted score of all factors is 4, the company responds effectively to the o»portunities and threats from its external environment If the total weighted score is

2.50 And above, the company’s responses are above average In contrast, the total weighted score of EFE matrix less than 2.50 indicates that the company’s responses are lower than the average level

5.2.2 IFE Matrix: Evaluation of the company’s internal factors

This matrix summarizes and evaluates the main strengths and weaknesses of business units as well as the entire company IFE Matrix is developed through five steps:

Step 1: Make a list of factors which can determine the enterprise’s competitiveness

in an industry Usually, the number of factors is in the range from 10 to 20 However, the more factors are included in the matrix the better it is Because this does not affect the sum Of weights (always = 1) but also reduce subjective evaluation errors of the classification of factors

Step 2: Assign a weight for each factor from 0.0 (not important) to 1.0 (most important) to determine the level of importance (in the case that the factors included are more than 10, we can use the measurement system from 0 to 100) This shows the comparative importance of the factor to the enterprise’s success in the business sector Thus, for firms within an industry, the weights for all factors listed in step 1 are the same

Step 3: Assign a rating for each factor from | to 4 (in practice, we can use a wider

range): 4-major strength, 3-minor strength, 2-minor weaknesses, |-major weaknesses So,

this rating reflects the competitiveness of each factor of the business compared to that of the competitors in the industry based on the company’s conditions In contrast, assigning the weights in the above steps is based on the general practice of the industry

Step 4: Calculate the weighted score for each factor by multiplying the weight of this factor with the corresponding rating

Step 5: Calculate the total weighted score for all factors in the matrix by adding the weighted score for each factor which has been calculated in the step 4 The total weighted score shows the absolute competitiveness of the enterprise

Using the results from the above analysis of the strengths and weaknesses, we can conduct the IFE matrix According to these results, if the total weighted score of the entire list of factors included in the IFE matrix is 4, the enterprise has high absolute

3l

competitiveness If the total weighted score is 2.50 and above, the enterprise has above averige absolute competitiveness In contrast, if the total weighted score in the IFE matrx is smaller than 2.50, the enterprise’s absolute competitiveness is lower than averige

5.2.3 IE Matrix

Combining the External Factor Evaluation (EFE) Matrix and the Internal Factor

Evaliation (IFE) Matrix, we have the IE Matrix

Growth and Development: I, II or IV

Maintenance and reinforcement: III, V or VII

Harvest or withdrawal: VI, VIII, [X

6 Basic business strategies

6.1 Strategy foundation

Purposes:

- Explain the basic factors of business unit - level strategy

2 to

- Analyze and select general competitive strategies and functional strategies for the company

* Customer demands and product differentiation

Customer demands are the wants, needs or desire that can be fulfilled by the fectures of products or services

Product differentiation is the process of creating a competitive advantage by designing products or services with unique features to meet individual customer needs

All companies have to create differentiation for their products so that they can appeal to customers and at least meet customers’ needs

* The customer groups and market segmentation

Market segmentation is the way in which companies classify customers based on important differences in their needs and interests in order to find a competitive advantage

Companies may use three strategic alternatives towards different market ‘segments:

- Firstly, select normal consumers to serve Thus, it is not necessarily to realize the difference between the needs of different groups (assuming that all customers have common needs at the average level)

- Secondly, select diversified market segments It means that the company divides the market into different segments and develops products suitable to the needs of each segment

- Thirdly, select a focused segment The company realizes that the market is segmented, but it only focuses on a particular segment or a niche market

Instead of having only one type of products for the entire market, if the company has various products to for different customer groups, customer demands will be satisfied better Therefore, customer demand for the company's products increases and these products produce more income compared to the case that the company only offers a type

of products for the entire market However, sometimes the nature of the products or the nature of the industry will not allow much differentiation, for example: steel and cement products

* Decision of the unique capabilities (Distinctive capabilities)

Distinctive capabilities can be considered as the way companies use to satisfy customer needs in order to achieve a competitive advantage Some companies focus on building scale and experience curve effects to produce with low costs; other companies focus on R&D and technology to meet customer demands for unique products with outstanding design and quality Some other companies focus on sales, after sales service

The foundation of competitive strategies is formed by combining the decisions about products, markets and the company’s distinctive capabilities in order to achieve a competitive advantage over competitors

6.2 Generic competitive strategies

Sources of competitive advantage

Low cost Differentiation

The goal of the company pursuing this strategy is to create products and services with the lowest costs to surpass competitors in order to survive and grow

Companies using cost leadership strategy have the following competitive advantages:

- Thanks to lower costs, companies can sell more products with competitive prices compared to their competitors while maintaining the level of expected profits In the case

competitors offer the same price, companies have the lowest costs will gain higher profits,

When the industry enters the maturity stage if a price war occurs, companies with the lower costs will win due to their better competitiveness

The company can easily withstand the pressure caused by suppliers when they increase the prices of materials

The disadvantages company may have when pursuing cost leadership strategy:

- Competitors can lower costs; it is easy to be imitated by competitors;

6.2.2 Product differentiation strategy

The nature of differentiation strategy is to create products which are recognized as

"unique" Differentiation may express in many forms: design, product quality, brand,

labels, technology, and customer service

The goal of product differentiation strategy is to achieve competitive advantages through creating products (goods or services) that customers regard as distinctive and unique, meeting customer needs in the way that competitors cannot perform This ability allows companies to charge “superior” prices for their products in order to increase revenue and achieve above average profit rate

Companies choosing product differentiation strategy has high level of product differentiation, high-end market segments Their strengths are concentrated in specific activities such as: R & D, marketing and sales;

6.2.3 Focus strategy ;

The nature of focus strategy is to serve the needs of a group of customers or a particular market segment that is identified by geographic factors, type of customers or product characteristics

Companies using focus strategy can focus on low costs or differentiation in the selected market segment in order to achieve a competitive advantage

Companies using focus strategy have low level of product differentiation if the focus is put on lowest costs If the focus is put on differentiation, the level of product differentiation will be higher; there will be only one or a few market segments Depending on which aspect the company wants to focus, their distinctive strengths will

6.3.4 Combination of generic strategies

These generic strategies are not always compatible with each other If a company tries to achieve superiority in all areas, it will not achieve any advantage For example, a company possessing an outstanding position compared to other competitors by launching the highest quality products will have to take risks of reducing the quality of their products, if that company tries to pursue cost leadership strategy Even in case that the product quality is not reduced, the company has inadvertently created an inconsistent image in the eyes of their customers Therefore, Michael Porter argues that, to succeed in the long term, every business needs to choose only one of three generic strategies listed above If a greedy company pursues all of the three objectives, the company will be confused and fail to gain any competitive advantage

According to Porter, companies successfully applying multiple strategies, often set

up separate business units, in which each unit pursues a single strategy By separating strategies for units that are different in policy or even culture, a business can reduce the risk of falling into stagnation

However, there is also an idea that pursuing a single strategy is not the right choice; because for the same product, customers often look for the satisfaction in many watys - a combination of quality, style, convenience and price In fact, there are some mainufacturers pursuing a single strategy and suffering from heavy losses; whereas, another company entering the market with lower product quality can better satisfy cusitomer needs in other aspects

7 QSPM model to select the optimal strategies

I-nterprises have to select the optimal strategies because it cannot simultaneously

implement all strategies or implement each strategy in a random order, because it will

take a lot of time, material resources, financial resources and human resources Therefore,

companies have to choice to implement a set of strategies which are considered as the

most optimal considering all advantages and disadvantages, benefits and losses that

companies have from these strategies

To select the optimal strategies, companies need to compare all the strategic

alternatives Nowadays, many companies refer to the opinions of experts in and outside

the industry Depending on the rating scale, we can evaluate the criteria as strong or

weak The strategy which has the highest total weighted score for all criteria will be

8 Implementation and adjustment of selected strategies

8.1 Organizational structure

Depending on the business characteristics and requirements of business strategy, leaders need to choose the most appropriate model for the company as well as different units:

- Organizational structure by functions: each unit or department will be responsible for the different functional areas such as finance, marketing, manufacturing

- Organizational structure by product: classify staffs and all activities under the category or product groups

- Organizational structure by area of operations: based on the basis of its subsidiaries in a particular region, areas of different activities to form a distribution system on a large scale

- Organizational structure by customer or group of customers: it is rarely used as a single model or form of organization but often used for a general organization

- Organizational structure by strategic business unit: This is a variation of organization by product or by customer but it is more complete and essential for large firms with diversified activities

- Mixed organizational structure: A model of organization that combines two or more of the above models to take the advantages of them while reducing the disadvantages

8.2 Strategy implementation

To ensure the success of strategy implementation, enterprises need to thoroughly follow the following key principles:

- The strategies must be widely conveyed to all employees whom it affects

- The strategies must be presented in a full, detailed and explicit manner to the targeted audiences

- Organization must ensure the participation and enthusiastic support of all departments and individuals involved

- Board of managements must ensure adequate resources for the implementation

of strategies including finance, human resources, technical and time

- knterprises must concretize strategy implementation activities into the specific targets for and monitor of the implementation process in each departments and individuals

In implementing the selected strategies, companies should pay special attention to common difficulties and issues such as:

- A lot more time needed than initially planned

- The variation of environmental factors beyond forecast

- Inefficient management

- Incapable and unqualified human resources who participate in the implementation process

- Many emerging conflicts

- Insufficient monitoring and supervising system

Therefore, when implementing the selected strategies, the management board needs to focus on the following basic points:

- Break down the long-term strategic objectives into a specific system of short- term objectives (annual objectives)

- Propose policies and plans (marketing, finance - accounting, research - dewelopment and internal information system )

- Evaluate and allocate basic resources

- Determine the appropriate organizational structure

- Manage conflicts and anti-change tendency

- Apply compensation and reward policies based on achievements of strategies

- Create a cultural environment that supports the strategies

- Adjust the production/operations process to adapt the selected strategies

The necessary components of the strategy implementation process are shown in the following figure:

a9