Business strategies of Bourbon An Hoa joint-stock company in the period 2013-2018

54 BUILDING THE BUSINESS STRATEGIES OF BOURBON AN HOA JOINT STOCK COMPANY IN THE PERIOD OF 2013-2018 ..... Considering the urgency and necessity of this issue, we decide to choose our th

CAPSTONE PROJECT REPORT

BUSINESS STRATEGIES OF

BOURBON AN HOA JOINT-STOCK

COMPANY IN THE PERIOD

2013-2018

Group No : 5 Members : Nguyen Duc Uy

To Thi My Ton That Phuong Boi

i

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT BUSINESS STRATEGIES OF BOURBON AN HOA JOINT-STOCK COMPANY IN THE PERIOD

2013-2018

Group No : 5

Nguyen Thanh Tan Nguyen Tran Nhu Thuy Pham Thi Huyen Nhung

To Thi My Ton That Phuong Boi

Ho Chi Minh City, December 2012

ACKNOWLEDGEMENT

We would like to express our heartfelt thanks to the valued professors of Griggs University for their support in providing the information of management strategy, useful guidance and feedback so that we can complete this dissertation

I would like to express my heartfelt thanks to the Board of Directors of Bourbon

An Hoa Joint Stock Company who has created favorable conditions for us to easily access and do research on the internal information as well as has shared about both

of the advantages and difficulties of the company

TABLE OF CONTENTS

ACKNOWLEDGEMENT iii

TABLE OF CONTENTS ii

LIST OF TABLES vii

LIST OF FIGURES, GRAPS vii

INTRODUCTION 1

1 Background of the study 1

2 Objectives and tasks of the topic 1

3 Research method 2

4 The significance of the topic 3

CHAPTER 1: 4

THEORETICAL FRAMEWORK OF BUSINESS STRATEGY 4

1 Concept of business strategy 4

1.1.1 Definition 4

1.1.2 Role: 5

1.1.3 Categories 5

1.1.3.1 Corporate level strategy 6

1.1.3.2 Business unit level strategy 7

1.1.3.3 Functional level strategy 8

1.2 Strategic planning process 8

1.2.1 Environmental scan 8

1.2.1.1 external environmental scan 9

a) Macro-environment (PEST) 9

b) Microenvironment 9

c))External factor evaluation 10

d) Competitive matrix 11

1.2.1.2 Internal factor evaluation 11

a) Resource analysis 11

b) Analysis of mission’s adaptability and environment objective 12

c) Analysis of specialized divisions’ operation in the organization 13

d) Internal factor evaluation (IFE) 13

1.3 Strategy analysis 14

1.3.1 Strength- weakness, opportunity- threat matrix (SWOT) 14

1.3.2 Strategic Position & Action Evaluation matrix (SPACE) 16

1.3.3 Internal-external matrix (IE) 17

1.3.4 Grand strategy matrix 18

1.4 Strategy choice 19

CHAPTER 2: 22

ANALYSIS OF BUSINESS ENVIRONMENT AND CURRENT SITUATION OF BOURBON AN HOA CORPORATION 22

2.1 Introduction 22

2.1.1 General information 22

2.1.2 History of establishment and development 22

2.1.3 Development orientation 23

2.1.4 Structure of organization 24

2.2 External environment analysis 24

2.2.1 Macroenvironment analysis 24

2.2.1.1 Economy 25

a) World economy situation 25

b) National economy situation 25

2.2.1.2 Politics 28

2.2.1.3 Society 30

2.2.1.4 Technology 31

2.2.2 Microenvironment analysis 31

2.2.2.1 Micheal Porter model 31

a) Competitor 31

b) Customer: 32

d) New entrants 32

e) Substitue 33

2.2.2.2 Analysis of Southeast economic region 33

a) Brief information of Southeast economic region 33

b) Ealuation of competitive advantages of Southeast region 36

c) Evaluation of competitive competency of Southeast region 37

d) Analysis of the competition among Industrial Zones In South East region 40

2.2.2.3 Tay Ninh province’s analysis 41

a) Tay Ninh in General 41

b) Analysis of the attraction of foreign direct investment 41

2.2.3 External factor evaluation matrix (EFE) 44

2.3.4 Competitive matrix 46

2.3 Analysis of internal environment 47

2.3.1 Analysis of business operation in the period of 2009-2012 47

2.3.1.1 Human resource 47

2.3.1.2 Investment in the industrial zone’s infrastructure 47

2.3.1.3 Result of business operation 48

2.3.1.4 Marketing operation 49

2.3.2 Analysis of company’s strategies in the period of 2009-2012 50

2.3.2.1 Core competitive advantages 50

2.3.2.2 Business strategies 51

2.3.3 Internal factor evaluation matrix (IFE) 52

CHAPTER 3: 54

BUILDING THE BUSINESS STRATEGIES OF BOURBON AN HOA JOINT STOCK COMPANY IN THE PERIOD OF 2013-2018 54

3.1 Analysis of strategy models 54

3.1.1 SWOT matrix 54

3.1.2 Strategic Position & Action Evaluation matrix (SPACE) 56

3.1.3 Internal – External matrix (IE) 57

3.1.4 Grand strategy matrix 58

3.2 Building the business strategies of Bourbon An Hoa joint stock company in the period of 2013-2018 59

3.2.1 Vision, mission and core value 59

3.2.2 Business objectives 60

3.2.2.1 Short-term objectives (2013-2015) 60

3.2.2.2 Long-term objectives (2013-2018) 60

3.2.3 Business strategies 60

3.2.4 Solutions of business strategy implementation 8379

3.2.5 Control and evaluation of strategies 9692

CONCLUSION 9995

REFERENCE 10197

APPENDIX 10298

LIST OF TABLES

Table 1.1 - Matrix EFE 11

Table 1.2 - Competitive matrix 11

Table 1.3 - Matrix IFE 14

Table 1.4 - SWOT matrix 15

Table 1.8 - QSPM matrix 20

Table 2.7 – Table of PCI of Southeast provinces 38

Table 2.8 – Criteria of CPI of Southeast provinces 39

Table 2.10 – FDI inflow to Southeast region in 2010, 2011, 2012 42

Table 2.11 – Top nations investing in Vietnam in 2010, 2011, 2012) 42

Table 2.12 – Industries attracting foreign direct investment in Vietnam in 2010 and 2011 43

LIST OF FIGURES, GRAPS Figure 1.5 - SPACE matrix 16

Figure 1.6 - Matrix IE 17

Figure 1.7 - Grand strategy matrix 18

Figure 2.1 - Structure of organization of Bourbon An Hoa Joint Stock Company 24

Figure 2.2 – FDI attraction in the period 2000-2012 27

Figure 2.3 – Japanese FDI inflow into Vietnam 28

Picture 2.4 - Statistics of economic regions’ areas 35

Figure 2.5 - Statistics of economic regions’ population 35

Figure 2.6 - Statistics of FDI in 2011 36

Figure 2.9 - Graph of industrial parks and export processing zones allocation 40

Figure 3.1 - SPACE Matrix of Bourbon An Hoa 5756

Figure 3.2 - IE Matrix 57

Figure 3.3 - Grand strategy matrix 58

INTRODUCTION

1 Background of the study

Vietnam is at the stage of opening and integration into the global economy This is not only an opportunity but also a challenge for Vietnamese enterprises, which are considered as small scale, weak management and poor foreign market expertise Fierce competition in the real market requires these enterprises to adjust in order to improve their competencies, to maintain their domestic market share as well as to expand to global market

There are a variety of measures in order to competitive competency of enterprises Nevertheless, in my opinion, the most essential point is that enterprises must change their business styles from experience-based and subjective-thought one to strategic one

Clear strategies will help enterprises run and manage their businesses easier and more efficiently The whole Board of Management and employees understand their tasks and objectives thoroughly that makes them more confident, proactive and responsible in their work Strategic management will help the company’s leaders make right business decisions based on the analysis and the generalization of internal and external information; or based on the inside and outside changes, Board

of Management will plan business strategies as well as give on time adjustments to adapt to business environment’s metamorphosis

Considering the urgency and necessity of this issue, we decide to choose our thesis topic as "Building the business strategy for Bourbon An Hoa Joint Stock Company

in the period of 2013-2018 " Through this topic, we would like to apply theories and modern analytical models to strategic planning and management of Bourbon

An Hoa Joint Stock Company

2 Objectives and tasks of the topic

- To analyse the external business environment factors influencing company’s business sector, then to find out company business field’s opportunities and threats

in order to build the matrix evaluating external factors

-To analyse internal factors of the company, then to find out strengths and weaknesses in order to build the matrix evaluating the internal factors

- To apply modern analytical models in business in oder to build selectively feasible strategies Based on these model analysis results, the company will make decisions

of suitable strategies for execution

 Tasks

-To support Bour bon An Hoa company to build business strategy in the period of 2013-2018 based on quantiative analysis of internal and external information through models

- To make the company realize the benefits and efficiencies of applying analysis models to plan strategies in comparison with traditional method which is experience and personal feeling based

3 Research method

 Subject and Scope of Research: The research is based on the business

information of company’s field, competitors and internal environment of Bourbon AnHoa company

 Research period: from 1st

November 2012 to 30th December 2012

 Data collection method

-Internal information: making reference to the company’s history of establishment and development as well as its business operation report, in-depth interviews with the Board of Management

-External information: collecting reports as well as specialized articles from electronic sources of governmental bodies or independent organizations

 Research method of the topic

- Mmethod of dialectical materialism

- Mmethod of description

- M method of statistics and forecast

- Mmethod of comparison and collation

- Mmethod of analysis and generalization

- Method of in-depth interview with experts

4 The significance of the topic

This thesis with the topic "Building the business strategy for Bourbon An Hoa Joint Stock Company in the period of 2013-2018" is going to become an important reference source for the Board of Management planning future business strategies

We hope that our study will provide much useful information contributing to the company’s success

CHAPTER 1:

THEORETICAL FRAMEWORK OF BUSINESS STRATEGY

In order to build business strategy for Bourbon An Hoa company, we have studied the theoretical basis of "Strategy & Business Policy" compiled by Associate

& Dr Diep Nguyen Thi Lien and MA Pham Van Nam and published in 2006 Some

of the content about strategy building has been studied and summarized as follows:

1 Concept of business strategy

1.1.1 Definition

Nowadays, there are a lot of different concepts of strategic management However,

it could be generalized into three most popular approaches as follows:

 Ii n term of environment

“Strategic management is a process for integrating internal abilities of the organization with external opportunities and threats”

 Ii n term of objective and method

“Strategic management is a set of managing decisions and actions which decide company’s long term achievements”

 Ii n term of actions

“Strategic management is to examine present and future environments, to create organization’s missions, to make and execute decisions as well as to control these executions in order to achieve present and future goals”

Based on the above approaches, we suppose the definition of strategic management as follows:

“Strategic management is the process of studying present and future environments, planning organization’s objectives; making and executing decisions as well as controlling these executions in order to achieving present and future objectives for enhancing company’s power”

1.1.2 Role:

Because there are a variety of complex variables affecting, it’s almost impossible

to find out the direct relationship between strategic management and company’s profit Therefore, isolating and examining one variable’s impact on company’s profit is unworkable Nevertheless, indirect contribution to company’s profit through taking advantages of opportunities and gaining the upper hand in competition of strategic management is undeniable

 Bb enefits of strategic management

- Clarifying objectives and directions of organizations Hence, the managers need

to consider and define which way they should follow and when they achieve a certain position

- Strategic management requires the managers to analyse and forecast environment conditions in short term and long term; thus to be able of grasping opportunities better and taking full advantage of these opportunities as well as reducing negative risks

- Making company decisions closely based on relevant environment conditions

- Reducing severe risks and increasing company’s competency in exploiting available opportunities

 Disadvantages of strategic management

- It takes much time and effort

- It could be considered as stiffly built in form of written documents

- There may be big mistakes in long term forecast

- Some companies still attaches much importance into planning without paying enough attention to execution that causes doubts of strategic management’s usefulness for some managers

1.1.3 Categories

Strategic management is going to be applied at different levels in an organization

1.1.3.1 Corporate level strategy

It’s a typical pattern for company’s decisions that defines objectives and goals

as well as business operation activities in order to establish foundation policies

and plans for the company

Popular corporate level strategies

 Concentrated growth strategy

 Strategy of market penetration: Increasing current market share by more

audacious marketing efforts

 Strategy of market development: gaining business growth by entering new

market with current products

 Strategy of new product development: gaining business growth by

developing current market share with new products

 Integration strategy

 Backward integration strategy: gaining business growth by acquiring the

control or possession of its supplies

 Forward integration strategy : gaining business growth by acquiring the

possession or control of the direct distribution of its products or eliminating the

middle man to approach closer to the final customer

 Diversification strategy

 Concentric diversification: gaining business growth by acquiring or

developing new products or services (closely related to its current products)

to enter one or more new markets

 Horizontal diversification: gaining business growth by acquiring or

developing new products or services that are different from its core business or

technology, but which may appeal to its current market

 Heterogeneous (conglomerate) diversification: moving to new products or

services that have no technological or commercial relation with current

products, but which may appeal to new groups of customers or new market

 Turnaround: a short term or temporary strategy eradicating organization’ s

inefficiency by cutting operation costs, improving productivity, cutting labour cost, eliminating secondary products or facilities

 Divestment strategy: used by businesses when they downsize the scope of

their business activities by selling or eliminating a portion of business in order

to acquire a long term change in their business operation scope

 Harvest strategy: Maximizing the cashflow in a short time regardless of long

term consequence

 Liquidation strategy: closing down the entire firm and selling its assets in

accordance with court’s decrees It is considered the most extreme and the last resort

 Reasonable strategies: the company can combine many strategies in order to

achieve its business objectives such as penetrating the market, developing the products, backward integrating, horizontal diversification or divestment

 In addition, the company can use other strategies by external concentration

such as consolidation, acquisition and joint venture

1.1.3.2 Business unit level strategy

Determining the selection of specific product or market for each business activity within the company, and how the company will compete with other competitors in the same industry Business unit level strategies of the business determine how each business unit makes efforts to achieve its objective in contribution to the corporate objective If the company is in a single industry, the business unit level strategy can

be considered as corporate level strategy or the corporate level strategy can also be applied for business unit level strategy

Popular business unit level strategies

 Competition strategy in Michael E.Porter’s perspective

 Cost leadership strategy: building competitive advantage by setting lower

price than competitors’ one in the same industry in order to attract

price- Differentiation strategy: creating distinguished products and marketing

programmes from competitors’ ones in order to win the leading position

 Integrated strategy of cost leadership differentiation of outputs: providing

customers with superior value by satisfying customer’s desire such as quality, service, outstanding features, performance results use with the most reasonable price

 Strategies based on market dominance

 Strategies for leaders: Expand the total market; Protect the existing market

share; expand the existing market share or defensive strategy

 Strategies for challengers: frontal attack; flank attack; encirclement attack;

bypass attack and guerrilla warfare

 Strategies for followers: complete imitation, imitation of some core

competencies of competitor’s integrated marketing together with some differentiation, imitation with improvement to adapt to the market

 Strategies for nicher: focusing on a specific market segment, focusing on a

specific stage in the manufacturing and distribution process, focusing on a selling region etc

1.1.3.3 Functional level strategy

Focusing on improving the effectiveness of a business at an operational level

In order to create products with superior values, functional level strategies in marketing, finance, purchasing, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently

1.2 Strategic planning process

1.2.1.1 external environmental scan

-Political factor: the legal system and government policies also affect the operation of the business (hiring, lending, security, pricing, advertising, environmental protection, etc.)

-Social factor: usually affects business gradually and unrecognizably and needs to be forecasted in order for business to plan suitable strategies However, there are also fast impacts such as consuming trend or entertaining trend

- Technological factors: together with the strong development of science and technology, nowadays most businesses can take advantage of technology transfer but also bear the risk of technological competition with ones possessing more advanced technology The key point is that business should pay attention to the life cycle of technology and its effect once applied into business’s operation

b) Microenvironment

The micro environment includes the whole factors within the industry that are the external factors of business, deciding the characteristic and level of competition There are five basic factors that are competitor, consumer, supplier, new entrant and substitute product

- Competitor: analysis based on criteria such as future objectives, current strategies, potential and so forth

- Consumer: is a company’s stakeholder and loyal customer is a big

customer data source in order to find out the consuming trend Customers have the bargaining power that requires companies to segment their current and future customers for better demand satisfaction

- Supplier: Suppliers of raw materials, components, labor, and services (such as expertise) to the firm can be a source of power over the firm

- New entrant: can have bad impact on company’s profit They are also potential competitors when they buy out or acquire other companies in the industry in order to gain the market share

- Substitute product: is to the detriment with the industry’s profit

c))External factor evaluation

External factor evaluation help the strategic planners summarize and evaluate the above information There are five steps to build the matrix: -Listing the external factors playing the important role with opportunities and challenges inclusively

-Assign a weight from 0,0 (not important) to 1,0 (very important) to each factor The total value of all weights together should equal 1

-Assign a rating to each factor from 1 to 4 Rating indicates how effective the firm’s current strategies respond to the factor 1 = the response is poor

2 = the response is below average 3 = above average 4 = superior Weights are industry-specific Ratings are company-specific

- Multiply each factor weight with its rating This will calculate the weighted score for each factor

- Add all weighted scores for each factor This will calculate the total

weighted score for the company

Table 1.1 - Matrix EFE

Table 1.2 - Competitive matrix

Success factor Weight

rank Weighted score

rank Weighted score

rank Weighted score

 Human resource: the first factor needs to be analysed

- High-level managers: there are skills such as mentality, human, specialized and team work ones necessary to be considered carefully in different level Their contribution to the organization and professional etiquette are also put in consideration

-Executives: analysis based on professional competency, professional etiquette and achievement in each period or in each specific task

 Material resource: including capital, production, facilities, equipments, machines, materials etc

-Classifying the current material resource ( cash, equipment and machine, facilities, land, inventories, materials etc)

-Identifying the volume, the structure, the quality and characteristics of each resource

-Evaluating the ability of satisfying real demand

- Evaluating the strength and weakness of each resource in comparison with competitors’ resources

 Intangible resource: the common labour result of the whole members in the organization or of one individual affecting the operational processes These resources are mainly the guiding concepts of business theories, strategies, business policies, organizational structure, prestige of the leaders etc Intangible resource analysis is performed through several steps such as identification, classification, evaluation, comparison with competitors and decision of what resource should be focused for development

b) Analysis of mission’s adaptability and environment objective

- Analysis of the mission of the organization, business units and specialized divisions: administrators make a number of questions and answer for themselves in order to evaluate the level of adaptation of mission to the environment

 Can Organizations or businesses define their mission?

 What is the current mission of the organization and the professional divisions? How about the mission in the future?

 What is the foundation to determine the mission? Are the members of the organization able of completing the mission ?

 Can tasks adapt to environmental changes? Is it necessary to reduce the current task or add new task?

- Analysis and evaluation of objectives: Based on the scale of business’s objectives, administrators can analyse and evaluate the company’s objective system in a suitable way with its real situation To be able to analyze and evaluate the target system, the manager must perform the following basic tasks:

 Identify the current objectives of the business to see whether they can fully adapt to the changing environment?

 Review the basis for determining objectives and the relationship among the objectives and tasks of the current strategy

 Analyze the relationship between the targets of different levels in the enterprise

 Assess the current target system in order to determine the suitability

of target requirement with the changes of the environment over the time

c) Analysis of specialized divisions’ operation in the organization

Proper analysis of the specialized divisions’ operation help managers monitor the internal happenings in relation to the external environment in order to have prompt supplementation and adjustment as well to identify the strength and weakness in each field compared to competitors Consequently, the company can find out the suitable competitive strategy and operational policies suitable with the business environment Specialized divisions can be listed as marketing, HR, finance and accounting, research and development, purchasing, production and operations, quality management and operation of information systems

d) Internal factor evaluation (IFE)

The last step of internal analysis is building the matrix IFE with five steps

-List all the factors identified in internal factor analysis including strength and weakness

- Aassign a weight that ranges from 0.00 to 1.00 to each factor The weight assigned to a given factor indicates the relative importance of the factor Zero means not important One indicates very important The sum of all weights equals 1.00

Assign rating on the scale from 1 to 4 The factor represents a major weakness (rating = 1), a minor weakness (rating = 2), a minor strength (rating = 3), or a major strength (rating = 4)

Multiply each factor's weight by its rating This will make a weighted score for each factor

- The last step in constructing the IFE matrix is to sum the weighted scores for each factor This will give the total weighted score for the business 1 is the lowest and 4 is the highest whereas the average one is 2.5

Table 1.3 - Matrix IFE

1.3.1 Strength- weakness, opportunity- threat matrix (SWOT)

SWOT analysis, method, or model is an important tool facilitating the administrators to develop four following strategies: strategy of strength and opportunity (SO), strategy of weakness and opportunity (WO), strategy of strength and threat (ST) and the strategy of weakness and threat (WT) The integration of internal and external factors requires a competent judgement and there is no best integration way

- Strategy SO: using the company’s strengths to take advantage of opportunities -Strategy WO: improving company’s weaknesses to take advantage of opportunities

- Strategy ST: using company’s strengths to prevent from or to decrease the effects

of threats

- Strategy WT: improving company’s strengths and preventing the threats simultaneously

Below are steps to build SWOT matrix

- List all company’s strengths and weaknesses as well as opportunities and threats into four squares

- Integrate strengths and opportunities for suitable SO strategies

- Integrate weaknesses and opportunities for WO strategies

- Integrate strengths and threats for ST strategies

- Integrate weaknesses and threats for WT strategies

Table 1.4 - SWOT matrix

(O) opportunities

1.3.2 Strategic Position & Action Evaluation matrix (SPACE)

SPACE matrix shows which nature of strategy the company should choose: Aggressive, Conservative, Defensive, Competitive

Below are the steps to build SPACE matrix

- Choose a set of variables to be used to gauge the competitive advantage (CA), industry strength (IS), environmental stability (ES), and financial strength (FS)

- Rate individual factors using rating system specific to each dimension Rate competitive advantage (CA) and environmental stability (ES) using rating scale from -6 (worst) to -1 (best) Rate industry strength (IS) and financial strength (FS) using rating scale from +1 (worst) to +6 (best)

FS

Tấn công Thận trọng

g

-3 -2 -1

trọng

-1 -2

- Find the average score for financial strength (FS) by summing all the rates of

each factors, then dividing this ammount by the number of factors Average scores

of IS, ES and CA are calculated similarly

- Plot average score of FS, IS, ES and CA on the appropriate axis

- Sum the average scores on axis X and mark this point sum similarly for axis Y Find the intersection of X and Y points

- Draw a line from the center of the SPACE matrix to the intesection point This

line reveals the type of strategy the company should pursue

1.3.3 Internal-external matrix (IE)

Place specialized divisons of the company in the nine-squared table below:

Figure 1.6 - Matrix IE

strong 3,0 - 4,0

average 2,0 - 2,99

weak 1,0 - 1,99

Matrix IE is based on two major dimensions

Total weighted score of IFE matrix plotted on axis X

 If the total weighted score is from 1,0 to 1,99, the result is internal weakness

 If the total weighted score is from 2,0 to 2,99, the result is average

 If the total weighted score is from 3,0 to 4,0, the result is strong

Total weighted score

of EFE matrix

strong 3,0 - 4,0 average 2,0 - 2,99 weak 1,0 - 1,99

I Total weighted score of IFE matrix

Total weighted score of EFE matrix plotted on axis y

 If the total weighted score is from 1,0 to 1,99, the result is weak

 If the total weighted score is from 2,0 to 2,99, the result is average

 If the total weighted score is from 3,0 to 4,0, the result is strong

Matrix IE is used for identifying the compny’s strategies as follow

- Cells I, II, and III suggest the grow and build strategy

- Cells IV, V, and VI suggest the hold and maintain strategy

- Cells VII, VIII, and IX are characterized with the harvest or exit strategy

1.3.4 Grand strategy matrix

Beside the SWOT matrix, SPACE matrix and IE matrix, grand strategy matrix is also a key strategic tool to form a strategy with the ability to choose All businesses can be located in one of four squares of the matrix This matrix is based on two main dimensions of competitive position and market growth

Figure 1.7 - Grand strategy matrix

Horizontal diversification

1.4 Strategy choice

At this step, Quantitative Strategic Planning Matrix (QSPM) is applied for evaluating the relative attractiveness of possible strategies subjectively Quantitative Strategic Planning Matrix is built for each strategy group with the ability to replace

as:

- List all opportunities/ threats/ strengths/ weaknesses on the left column This

information should be taken from the EFE and IFE matrices

Weak

competitiv

e position

Strong competitiv

e position

Slow growth of market

- Each key external and internal factor should have some weight in the overall scheme You can take these weights can be taken from the IFE and EFE matrices again and put on the right column

-Note all the strategies from the period of strategy building on the top

Define Attractiveness Scores (AS) in the QSPM that indicates how each factor is important or attractive to each alternative strategy The range for Attractiveness

Scores is 1 = not attractive, 2 = somewhat attractive, 3 = reasonably attractive, and

4 = highly attractive

Total Attractiveness Scores are defined as the product of multiplying the weights

by the Attractiveness Scores in each row

- Calculate the Sum Total Attractiveness Score by adding all Total Attractiveness Scores in each strategy column of the QSPM The QSPM Sum Total Attractiveness Scores reveal which strategy is most attractive The higher score is, the more attractive the strategy is

Table 1.8 - QSPM matrix

Attractive score weight Strategy 1 Strategy 2

AS: attractiveness score TAS: total attractiveness score

Requirements of strategy planning and implementing

- Objectives of business strategies are enhancing company’s power and gaining competitive advantage Thus, it’s mandatory to exploit completely the company’s

relative advantage, to focus on strengths and not to spend too much on improving weaknesses

- Business strategy needs to ensure the safety of the enterprises It is necessary to have a safety zone where risks are still possible to occur but at the lowest possibility

- Need to define the business scope, objectives and basic conditions to achieve the objectives It can be seen that effective strategies are simple and natural in common

- Need to forecast the future business environment The more accurate the forecast

is, the more suitable the strategy is

- Must have a backup strategy to deal with future risks rapidly

-Need to consider both of ripeness and chance Don’t miss the chance just because

of paying too much attention to details of planning It can make the strategy become outdated in the context of fast-changing market

CHAPTER 2:

ANALYSIS OF BUSINESS ENVIRONMENT AND CURRENT SITUATION

OF BOURBON AN HOA CORPORATION

2.1 Introduction

2.1.1 General information

-Vietnamese name: Công Ty Cổ Phần Bourbon An Hòa

- English name: Bourbon An Hoa Corporation

- Representative: Mr Đo Huy Hiep

-Main office: An Hoi Commune, An Hoa Ward, Trang Bang District, Tay Ninh province

Website: www.bourbonanhoa.com.vn

Email: sales@bourbonanhoa.com.vn

- Representative office: In Thanh Nien Building, 62 Tran Huy Lieu, Ward 12,

Phu Nhuan District, HCMC Phone: (08) 39975000 Fax: (08) 39973926 -Business activity: industrial zone investment and leasing

-Charter capital: 500 billion VND

2.1.2 History of establishment and development

- Bourbon An Hoa Joint stock company was established on 10th September 2008 with 4 major shareholders They are Bourbon Tay Ninh Joint Stock Company, Long Hau Joint Stock Company, Viet Au Joint Stock Company and Thanh Thanh Cong Corporation The main business activities of the company are investing and leasing industrial zones The company is the investor of the project “Bourbon An Hoa Industrial Zone” located at An Hoi Commune, An Hoa ward, Trang Bang district, Tay Ninh province with the mission of “providing the investors with facilities for efficient investment and contributing to the sustainable development of the

community”

- After receiving the certificate of business from Department of Planning & Investment of Tay Ninh province, the company has put forth completing necessary investing procedures such as assessing project, evaluating environmental effects

On 22th October 2008, Tay Ninh People’s Committee approved the overall plan of compensation and support for resettlement in order to implement the project of the industrial zone and related service areas with the scheme of 1020 hectares in accordance with Decision no 2443/QĐ-UBND

- On 26th December 2008, the company received the certificate of investment no

45222000125 issued by Board of Management of Industrial Zones of Tay Ninh in order to develop Bourbon An Hoa Industrial zone

- On 27th April 2009, Tay Ninh People’s Committee approve Decision no UBND in order to compensate for the households in the delineated area of the project

758/QĐ On 25th January 2010, the company received the certificate of investment no

45121000165 issued by Tay Ninh People’s Committee in order to build the dock warehouse area for ship receiving and doing business of warehouse service

- The industrial zone has started to build the infrastructure and to call for investment since 2009 The project has been controlled and implemented effectively to form an industrial zone from just an originally agricultural rice-field

- In June 2012, Thanh Thanh Cong Corporation and Bourbon Tay Ninh Joint Stock Company bought the shares from Viet Au company and Long Hau company that led to the change in company’s equity structure

2.1.3 Development orientation

 Vision: developing Bourbon An Hoa industrial zone into “ecoindustrial park Interconnection point of Asia economies’ resources"

- Mission:

- Provide investors with effective facilities

- Contribute positively to the sustainable development of the community;

- Create the highest added value for shareholders, and each member of the

company

 Cultural value: Cultural background of Bourbon An Hoa is always nurtured and

developed on the basis of preserving the following values:

 Towards customers

- Consider customer as the center of attention;

- Take the efficiency for customer as the orientation of all activities;

- Serve customer with the professionalism

 Towards staff:

Create transparency in thought and action;

Create strength from the solidarity of the team

 Towards the community:

- Respect and protect the environment

2.1.4 Structure of organization

Figure 2.1 - Structure of organization of Bourbon An Hoa Joint Stock Company

2.2 External environment analysis

2.2.1 Macroenvironment analysis

General meeting

of shareholders Control Board

Board Board of directors Secretary

2.2.1.1 Economy

a) World economy situation

World economic situation in 2012 is still very complicated due to the impact of the long lasting global economic crisis lasts without signs of stopping

- US economy, the largest one is also heavily influenced by global economic crisis The number of bankrupt businesses and the unemployment rate are increasing whereas the economic growth is still low

- The European countries are influenced heavily by the public debt and the euro crisis Eurozone countries have to implement the strict economic policies by cutting public spending and subsidies to reduce the public debt As a result, the situation gets worse because it can not encourage the production and consumption whereas the unemployment rate continues to raise

- Asian overcomes the economic crisis better with higher economic growth than the U.S and Europe do However, the political situation is complicated as the South China Sea dispute between China and Southeast Asian countries The dispute of Senkaku (Diaoyu) between China and Japan and of Dokdo (Takeshima) between Japan and South Korea as well as the political tension between South Korea and North Korea also affect the general economy of the countries in the region

Due to the global economic crisis, foreign direct investment in Vietnam has decreased, and according to the forecast of World Bank, the global economic crisis will reach its peak in 2013

b) National economy situation

The situation of the Vietnamese economy in 2012 is in the predicament According to the General Statistics Office, there were 26,324 businesses dissolving

in only 6 beginning months going to dissolution whereas the number of newly registered enterprises decreased by 12.5% and the number of dissolving enterprises increased by 35.4%, which reflects the arduous situation of enterprises currently

Production cost increases due to the rise of fuel, electricity, coal, material and labour cost Moreover, the bank loans are difficult to get thanks to the high interest

of 18-25% In the mean time, the businesses face difficulties in selling their products because of low demand of the market that leads to high inventories As a result, the situation gets worse and more and more businesses fall into dissolution Vietnam real estate market in 2012 is very dismal with numerous sellers but no buyers in spite of various kinds of discounts or promotions The rate of bad debt accounting for a big percentage makes negative impact on the operation of the bank system Therefore, the real estate sector is currently underestimated and not lent by banks

However, the implementation of the Strategy of 10 - year socio-economic development from 2001 to 2010 has made great achievements The economy has grown continuously over the years with the average growth rate of 7% / year In the context of the difficult world economy in 2012, Vietnam's economic growth still achieves quite satisfactory results The measures to control inflation and to stabilize the macro economy have continued to promote efficiency The increasing rate of consumer price index (CPI) for the whole year 2012 is expected at about 8% Expected GDP growth in 2012 is 5.5% Export revenue increases about 10% expectedly In 2013, Vietnam continued to set top goals which are macroeconomic stability and inflation control It is dispensable to promote the implementation of restructuring the economy, changing growth model, ensuring social security, social and political stability in order to create more solid development platform for the next years

Vietnam has still maintained the relatively high growth rate in recent years 6%) The macro-economy has faced challenges sometimes with the inflation and bank interest of 2011 soaring to over 17% and 20% respectively As a result, enterprises have been in predicament However, with the efforts to stabilize the macro economy and to control the inflation through tight monetary policy and cutting public spending, by 2012, the macroeconomic situation has become stable

(5-with the inflation below 10%, the interest rate below 15% and stable exchange rate for a long time Businesses and residents’ anxieties about macroeconomic downturn have been relieved that leads to the recovery of foreign and domestic investment

After more than 20 years of attracting foreign direct investment, Vietnam has had 14,263 projects with registered capital of U.S $ 208.6 billion so far The foreign capital sector has contributed greatly to the development of Vietnam's economy, accounting for 22.7% of total investment in the period 2001-2011 Its percentage in GDP increases from 2% in 1992 to 12.7% in 2000 and 18.9% in 2011 Moreover, this sector also creates jobs for 2.5 million direct workers and 3-4 million indirect workers

Figure 2.2 – FDI attraction in the period 2000-2012

(Source: Department of Planning & Investment)

However, due to the world economic crisis, the trend of foreign investment in Vietnam has been downward with decreasing registered capital and number of projects since 2009 In the last months of 2012, this trend seems to increase, especially Japanese and Korean are inclined to Vietnam market after political tensions around the issue of disputes in the East sea of China It can be supposed

2413.5 2450.5 2591.0 2650.0 2852.5 3308.8 4100.1 8030.0

11500.0 10000.0 11000.0 11000.0 2,838.9 3,142.8 2,998.8 3,191.2 4,547.6

6,839.8 12,004.0

21,347.8 23,107.3

19,886.1 15,598.1

7,256.8 391

that in 2013 FDI inflow into Vietnam will increase again and this is a good opportunity for the industrial real estate market in Vietnam

Figure 2.3 – Japanese FDI inflow into Vietnam

(Source: Department of Planning & Investment)

2.2.1.2 Politics

- Over the past years, Vietnam has been considered as a political environment of security and stability for foreign investors to do business here compared to the unstably political situation in the Southeast region and all over the world

- After 25 years implementing the policy of opening and attracting foreign investment together with the promulgation of the Foreign Investment Law in 1987 and amendments in 1990, 1992, 1996 and 2000 as well as sub-law documents, Vietnam has established a uniform, and transparent framework of law consistent with international practice and has created a favorable business environment for foreign investment The promulgation of the Enterprise Law 2005 makes domestic and foreign investment regulated by the same legal framework and demonstrates the strict implementation of WTO commitments without discrimination This will create the peace of mind for investors Enterprise Law 2005 also extend the legal conditions that foreign investors can invest in joint stock company and that 100%

Total registerd capital （Mill.USD）

Number of projects

FDI companies can perform equitization so as to make the capital mobilization easier In addition, the changing business and legal environment also helps foreign investors feel easier Investment procedures become more simple, from investment licensing application to investment registration certificate The procedures of financial proof and authorized capital are not obligatory any more Instead, the investors are just required to be committed to explaining about finance The tax of transferring profits to overseas of 3-5% is cancelled So is the regulation of not using foreign labour in excess of 5% Foreign investors are permitted to buy apartments during the time they work in Vietnam and are granted temporary residence card State management of industrial parks under the Decree 29/2008/ND-CP according to the model of "one-stop-on site" at the Industrial Park Management Committee has met the expectations of investors about streamlining the administrative procedures Besides, foreign investors are entitled to preferential policies on enterprise income tax, import- export tax of raw materials, import tax of machinery and equipment for fixed assets as local businesses

– Improving the legal framework related to enterprises and investment to create a clear, fair, uniform and transparent corridor of law is for the purpose of attracting investment and better economic growth Land Law is being amended whereas Decree 108/2006/ND-CP guiding the implementation of the Investment Law and Decree 29/2008/ND-CP on industrial zones are being proposed for amendment The general trend is simplification of all business procedures that enterprises are responsible for enhancing the investment quality and reinforcing the control in order to gradually obey the international laws and practices

- Vietnam has joined some organizations such as ASEAN (1995), ASEM (1996), APEC (1998), WTO (2007) which confirmed that Vietnam has been involved in the global economy and has constructed the transparent and fair environment of investment in accordance with international law

2.2.1.3 Society

- According to Vietnam General Statistics Office, until 2011, Vietnam has a population of about 87 million people (ranked 13 in the world) Vietnam has a young population which is mostly in the working age Among of this, the number of people younger than 15 years old is about 36 million while the number of people from 15 to 49 years old is about 40 million There are about 11 million people older than 50 years old

- The life standard has been continuously improved The per capita income has increased over the years such as 289 U.S dollars (1995), 402 (2000), 639 USD (2005), $ 1.168 (2010) and $ 1.300 (2011); however this is still very low compared

to other countries in the region such as Thailand, Indonesia, Singapore and so on Materialistic and emotional life of Vietnamese is very various thanks to the history

of thousand years inheriting and developing the traditions that attracts lots of foreign tourists

- While implementing the objective of sustainable development and economic growth associated with solving social problems and protecting the environment, the center and local authorities will be more cautious of attracting investment The projects which waste natural and human resources, consume much energy or emit detrimental waste to the environment will be limited In the production process, the conformity to the law of enterprises will be inspected and supervised strictly with more and more severe punishment in order to increase compliance For example, in term of environmental problems, businesses fail to comply with environmental commitments will be fined seriously with the offense of up to a few hundred million and the environmental police are working very effectively In term of labour, the issues of sanitary and safety of labour, working time and working environment have been paid more attention, especially even the customers or partners also require businesses to regularly improve working environment and better care for employees The government also intensified the control of law conformity in order

to guide or to correct promptly for the purpose of sufficient human resource for development

- Growth rate in the industrial zone sector is so low Thus, competitive pressure is very high The industry zones offer many preferential policies to attract investors

- Barriers to exit are high: it is difficult to withdraw from the market due to the government’s law, high transfer costs and long procedures for withdrawal

c) Supplier

Suppliers of Bourbon An Hoa Joint Stock Companies include: plan leveling company, road construction, tree providing and plant building At the present, there are many suppliers that makes power of suppliers is low

Bourobon An Hoa has more advantages in negotiating the price with suppliers So, the company can take advantage of this to lower the lease price or to increase the profit due to low cost

d) New entrants

In addition to 04 industrial / export processing zones, there will be 4 more industrial parks with a total area of 950ha going to operation in the future in Tay Ninh This will result in more severe competition among industy zones

Moreover, the 2 active industrial parks, Linh Trung Trang Bang, which have leased over 90% of their land are planning to extend their area So, they are also potential competitors for Bourbon An Hoa