Formulation of businessstrategy for embroidered products of minh trang limited company in the period 2011 – 2015

Study purpose of the Project - Synthesize concepts, theoretical models related to building a business strategy for enterprise - Apply learned concepts and theoretical models in Strategi

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

FORMULATION OF BUSINESS STRATEGY

FOR EMBROIDERED PRODUCTS

OF MINH TRANG LIMITED COMPANY

IN THE PERIOD 2011 – 2015

Ngo Ngoc Quang Tran Kha Toan Nguyen Tien Dung Pham Ngoc Anh

HA NOI 2011

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COMMITMENT

Group 04 - Class GaMBA01.X0409 pledges that the content of this Capstone Project has not been submitted to any master degree program as well as any training and diploma issuing program

In addition, our Group also commits that this Project was the group‟s own efforts The results, analysis and conclusions in this Project (except for the quoted parts) are the result of collective work of our group

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ACKNOWLEDGEMENT

Group 04 - Class GaMBA01.X0409 sincerely thanks Dr Tony Sanichara and Assoc.Prof.Dr Vu Thanh Hung who were very enthusiastic and dedicated to deliver knowledge on the last subject of Master of Business Administration Program - Strategic Management Course The knowledge has helped group members have a deeper understanding of this subject and through which the group can complete the Capstone Project according to regulation of the program

Our group also sincerely thanks teachers, faculty, board of directors of the Program, student affair staff and all staff Gamba program – ETC, Vietnam National University have provided a lot of other auxiliary knowledge and support our group to complete this Project The lectures and curriculum of the program have helped many our group not only in studying but also in current operating our enterprise

In addition, our group also sincerely thanks leaders and staffs of Minh Co., Ltd have created favorable conditions in providing valuable comments, data and practical knowledge for our group to carry out this Project

In particular, the group would like to express our gratitude to family, colleagues and friends who have created favorable condition for our group to have time for this course Sincerely thanks friends from class GaMBA01.X0409, over the past year have always encouraged and supported us in studying process

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TABLE OF CONTENT Trang

ACKNOWLEDGEMENT ii

TABLE OF CONTENT iii

LIST OF SYMBOLS AND ABBREVIATIONS vi

LIST OF DIAGRAMS, TABLES AND FIGURES vii

INTRODUCTION

1 Name of the project 1

2 Rationale for selecting the project 1 3 Study purpose of the Capstone Project 2

4 Scope of the study 2

5 Methodology of the study 2

6 Meaning of the study 3 7 Structure of the Capstone Project 3

CHAPTER 1: THEORETICAL BASE OF BUSINESS STRATEGY AND BUILDING BUSINESS STRATEGY 1.1 Business strategy concept 4

1.1.1 Strategy 4 1.1.2 Business strategy 4 1.1.3 Meaning of building business strategy 5

1.2 Process of building business strategy 6 1.2.1 Strategic vision, mission, and target of the enterprise 7

1.2.2 External environment analysis 10

1.2.2.1 Macro analysis (PEST model) 11

1.2.2.2 Micro analysis (Michael Porter‟ five forces model) 12

1.2.2.3 Analysis synthesis of external environment – EFE matrix 14

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1.2.3 Internal environment analysis 16

1.2.3.1 Enterprise‟s value chain analysis 16

1.2.3.2 Sustainable competitive advantage recognition process 17

1.2.4 SWOT matrix and selecting optimal strategy – SPQM matrix 17

1.2.4.1 SWOT Matrix 18

1.2.4.2 Optimal strategy selection 19

1.2.5 Competitive strategies 21

1.2.5.1 Cost leadership strategy 22

1.2.5.2 Differentiation strategy 23

1.2.5.3 Focus strategy 24

1.2.5.4 Common strategy integration 25

1.3 Summary of chapter I 26

CHAPTER 2: BUSINESS OPERATION SITUATION OF MINH TRANG CO., LTD 2.1 Overview of the company 27

2.2 Vision and mission of Minh Trang Co., Ltd 30

2.3 External environment analysis 31

2.3.1 Macro analysis 31

2.3.2 Sectorial environment analysis 34

2.3.2.1 Overview of embroidered handicrafts market 34

2.3.2.2 Sectorial environment analysis applying five forces model 35 2.4 Internal environment analysis 42

2.4.1 Summary of operation situation and result from 2008 to 2010 42

2.4.1.1 Organizational structure 42

2.4.1.2 Human resource 43

2.4.1.3 Operation situation and result 45

2.4.2 Basic activities 51

2.4.3 Supporting activities 52

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CHAPTER 3: PROPOSING STRATEGY AND SOLUTIONS FOR SELECTED STRATEGY

3.1 Target of Minh Trang Co., Ltd 54

3.1.1 General target 54

3.1.2 Some main targets 55

3.2 Proposing and selecting optimal strategy 56

3.2.1 SWOT matrix and strategy proposal 56

3.2.2 Selecting strategy 58

3.3 Strategy implementing solution 59

3.3.1 Solution on products 59

3.3.2 Solution on market 61

3.3.3 Solution on finance 62

3.3.4 Solution on human resources 62

3.3.5 Solution on management 63

3.4 Plan to implement solutions 64

3.5 Recommendation 66

CONCLUSION 67

REFERENCES 69

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LIST OF SYMBOLS AND ABBREVIATIONS

1 Ltd: Limited

2 TCMN: Handicrafts

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LIST OF DIAGRAMS, TABLES AND FIGURES

1 Diagram 1.1 Business strategy building and selecting process 7

4 Diagram 1.4 Michael E.Porter „s Five forces model, 1980s 13

5 Table 1.1 External factors evaluation matrix (EFE matrix) 15

8 Table 1.3 Strategic Planning Quantitative matrix with

9 Table 1.4 Summary of suitable selections for each strategy

14 Table 2.1 National export revenue in three years from 2008

15 Table 2.2 Percentage rate of national export revenue in

16 Table 2.3 Percentage rate of product groups export revenue

17 Table 2.4

Percentage rate of export major market share of companies with similar products group in three years from 2008 to 2010

40-41

20 Table 2.5 Human resource structure according to age and

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22 Table 2.7 Statistic of capital resource of the company in

24 Table 2.9 Business production result of the company from

25 Table 3.1 Some major quotas of Minh Trang Co., Ltd in the

27 Table 3.3 Matrix selecting optimal strategy for Minh Trang

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INTRODUCTION

1 Name of the project: Business strategy for embroidered products of Minh Trang

Co., Ltd in the period 2011 - 2015

2 Rationale for selecting the topic

Competition is one of market economy rules, is the way to live, exist and develop of the enterprise Through competition, products can be launched, more and more perfect This is also This is also selected environment for new entrepreneurs who have stuff, dynamic, dare to think, dare to do, and adapt quickly to new conditions To be able to compete in market mechanism, building business strategy for each enterprise is very important; it plays a crucial role in success of the enterprise, towards enterprise to sustainable development in the market mechanism Business strategy enables managers and employees in all enterprises realize the goals and direction of the business Through which all members of the business will know what to do and encourage them to get short-term achievements, while better improve long-term interests of the business

To be a limited company operating in producing and trading traditional handicrafts products, Minh Trang Co., Ltd is not out of that general trend In recent years, the company has been trying to find itself long term development strategy so that its products can always stand stably in the market It can be seen that planning a strategy for effective use of resources, exploitation of opportunities and limit risks is critical task of Minh Trang Co., Ltd in current period For this reason, Group 4 has

decided to select the topic "Formulation of Business strategy for embroidered products of Minh Trang Co., Ltd in the period 2011 - 2015" to

study and complete the Capstone Project

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3 Study purpose of the Project

- Synthesize concepts, theoretical models related to building a business strategy for enterprise

- Apply learned concepts and theoretical models in Strategic Management and other subjects in building business strategy for Minh Trang Co., Ltd in the period 2011 - 2015

- Select suitable business strategy to compete with other competitors in Ninh Binh market

4 Scope of the study:

- This project only focuses on studying to build and select business strategy for Minh Trang Co., Ltd in the period 2011 -2015

- This project only researches on business operation of Minh Trang Co., Ltd with specified product is embroidered product

Study period:

- Situation: From 2008 to 2010

- Business strategy in the period 2011 - 2015

5 Methodology of the project

Methodology applied in this project are:

- Qualitative methodology, case study of Minh Trang Co., Ltd

- Main data are statistic reports of the company, Ninh Binh handicrafts association, information from newspaper, Internet, etc

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6 Meaning of the Project

- Basing on real situation of the enterprise, this project helps the owners, managers have general view of current situation of the enterprise

- Some given contents in the project can be reference for the enterprise to orient long term business strategy and create foundation for the enterprise to

be active in developing embroidered handicrafts products business orientation

7 Structure of the Capstone Project

Besides the introduction and summary, the Capstone Project consists of 3 chapters, including:

Chapter 1: Theoretical foundation on business strategy and building business strategy

Chapter 2: Business operation situation of Minh Trang Co., Ltd

Chapter 3: Proposing strategy and strategy implementation solutions

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CHAPTER 1:

THEORETICA FOUNDATION ON BUSINESS STRATEGY AND

BUILDING BUSINESS STRATEGY

1.1 Business strategy concept

1.1.1 Strategy

According to Prof Alfred Chadler: Strategy is identification of basic and long term

targets of an enterprise, is description of necessary sources distribution and action process to carry out those targets

According to Prof Kenneth L Andrews: Strategy is model of targets, purposes and

plans to achieve those targets

According to Prof H Igor Ansoff: Strategy is guideline for all activities of an

organization

1.1.2 Business strategy

According to Michael Porter: “Business strategy to compete with competition is the combination of objectives need to achieve and means by which enterprises need to find out to achieve goals”

Bruce Henderson – Strategic man as well as founder of Boston Consulting Group said that two competitors can not coexist if their business practices are identical, it is necessary to create new differences then they can exist and competitive advantage is to put the company in a better position tan its rivals to create economic value for customers

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Therefore, the nature of business strategy is to outline future image of the Enterprise

in the operating region and ability to exploit In this sense, the term business strategy is used by three most important aspects:

- Establishing long-term goals of the business based on competitive resources

- Giving general action plan

- Selecting the action plan, deploying resources distribution to implement that goal

1.1.3 Meaning of building strategy

Building business strategy is one of the most important activities of the enterprise managers An organization does not have a strategy like a ship has no rudder Most business failures are due to lack of a proper strategy, or lack of implementing right strategy Building business strategy to bring real benefits for enterprises:

- Define clearly goals in each period of the enterprise, help the enterprise to see clearly business direction in the future to achieve the given goals

- Help board of managers to see clearly external opportunities and threats, real situation of strengths, weaknesses of the enterprise, predict changes in the future to find out active solutions to deal with and adapt to new business environment

- Help the enterprise to explore and take use of its resources, bring into play ultimately power of the enterprise to develop

- Help to distribute resources reasonably in each period, improve operating efficiency of the enterprise

- Help to increase cementation and commitment of staff and leaders in implementing general goals of the enterprise

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- Help the business to increase labor productivity, increase sales and increase effective management, avoid risks, increase prevention ability and prevent difficult problems to the enterprise

1.2 Business strategy building process

Business strategy has always been built on the basis of competitive advantage of the enterprise in comparison with other competitors in each certain period corresponding to specific business environment and internal conditions of the enterprise Business strategy of an enterprise is often built according to strategic management process, which are building strategy stage, implementing strategy stage and evaluating strategy stage In particular, the period of "building strategy"

is the first stage, plays an important part and necessary condition to ensure correctness and quality of remaining stages

Building strategy methodically, adequate and feasible requires the enterprise to identify its competitive advantages an weaknesses, in which competitive advantage

is defined as central priority for analyzing and building strategies Competitive advantage may be strategic vision of business leaders, business leadership, financial capacity, human resources, technological know-how, relationship with partners, client networks, input supply sources, the ability to adapt with changing environment, …

Business strategy building process is described according to the following diagram:

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Diagram 1.1: Business strategy selecting and building process

Source: Assoc.Prof.Dr Vu Thanh Hung – Lecture “Strategic management”

1.2.1 Strategic vision, mission, target of the enterprise

Mission of the enterprise

Defining vision, mission is first step in the process of business strategic planning, is

an essential first step, because it indicates destination in the future, what long-term goals that the enterprise direct to, it is also the foundation to build policy, business strategy for each period of the business

Vision / Mission of the enterprise

External environment

analysis

1 Macro environment

analysis: PEST model

2 Micro analysis: Five

forces model of

Michael Porter shows

competitive pressure

in the sector

Conclusion: we can see

opportunities and threats

for the enterprise

Building and selecting strategy

- SWOT model

- GREAT optimal selection

1 Low cost strategy

Verify and evaluate the results of strategy

Infernal environment analysis

Model

- Value chain

- Sustainable competitive advantage recognition process Conclusion: we can see strengths and weaknesses

in comparison with other competitors

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Mission of the enterprise: is the ability to feel deeply the whole major changes and

opportunities which can happen in the future for the enterprise Foreseeing over the current situation can help the enterprise to avoid threads, find out the most suitable and best way, as well as take advantage of business development opportunities for it own

So what are factors of an effective enterprise vision? To be successful what the enterprises need to do?

The enterprise needs to define 6 necessary factors of a vision, that are:

o Giving direction for the enterprise in the future

o Focusing on consumers benefit

o Practice

o Creating motivation

o It is essential to communicate fully

o Always following and assessing

And the barriers to the get vision and strategic plan? If the strategic plan and vision are very important, so what are barriers to create them? In other words, what can protect the enterprise to avoid mistakes in its vision and strategic plan namely:

o Awareness

o Enthusiasm

o Knowledge

o Ability to act

o Connection to business change or rebuild business process

Strategic targets for the enterprise

Strategic targets concept of the enterprise:

Strategic targets of the enterprise is ideal result that the enterprise has to achieve within a certain period, in objective and subjective conditions of the enterprise in

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accordance with given direction such as competitive position, business knowledge, growth rate, etc

Strategic targets of the enterprise need to be understood as qualitative norms The

quantification of strategic targets has two benefits: the first one is easy to refer to

annual target, targets of each department, each factory, each team, and each person

with clear responsibility, the second one is easy to check In the process of

implementation it can be based on quantitative norms to check whether the enterprise has got it or not, if it detects any problem it can overcome, basing on quantitative norms to encourage public efforts

Content of strategic target of the enterprise:

Content of strategic targets of the enterprise includes 10 items:

- Development of human resources

- Level of employee welfare

- Social responsibility of the enterprise

Strategic target system of the enterprise:

The general target of the enterprise is formed from targets of departments They base on their actual situation to build goal for each department The enterprise will

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synthesize to set common goal Also, the enterprise will base on the general

situation to set common goals and divides into intermediate goals and specific goals, discusses via organization from top down and vice versa to form a strategic

targets system of the enterprise

In summary: The mission statement describes how an enterprise can combine

requirements of stakeholders (customers, suppliers, and its staff…) in making its decisions and thereby reducing risks of losing the support from stakeholders;

And, the targets of the business can determine what to do if it wants to achieve the mission Well built targets must be accuracy, can measure, direct to key issues, must

be challenge but real, and must identify specific time to achieve

1.2.2 External environment analysis

Environment of the whole national economy and sectorial environment are also called external environment of the enterprise, which includes trends and events beyond control of the enterprise so that enterprise must find ways to adapt to changes

of the environment At certain level, the enterprise also can have opposite effect and may alter its external environment Analyzing and predicting trends of factors of the external environment helps environment helps the enterprise see opportunities and threats that it may face with The fundamental factors of external environment are shown in the diagram 1.2

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Diagram 1.2: External environment factors

Source: Assoc.Prof.Dr Nguyen, Lien Diep and MBA Pham, Van Nam 1998

“Business strategy and policy” Statistics publishing house 1.2.2.1 Macro analysis

To analyze macro environment, which is also known as the entire environment of national economy, people use PEST theory including evaluation of political factors (P), economic factors (E), social factors (S) and technological factors (T) to find out the opportunities and threats for the enterprise operating in that business environment

Environment of the whole economy

Economic

factors

Political, legal factors

Technological

factors

Social, cultural factors

Môi trường nội bộ ngành

Customers

Suppliers

Substitute products

Potential competitors

Existing competitors

Enterprises

Source: Assoc.Prof.Dr Vu Thanh Hung – Lecture “Strategic management”

Politics

Stable politics Labor law Tax policy Law system Legal environment

Living style People‟s knowledge, culture Customs and habits

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Diagram 1.4: Michael E.Porter’s Five forces model, 1980s

 Competitiveness among existing enterprises

When mentioning the competition among existing enterprises, we must mention the competition level of enterprises in the sector The factors determine competitive level of a sector, including growth rate of the sector, number of the enterprises and their relative scale, height of barrier to draw from industry, products differentiation

of the enterprises and customer transfer costs:

 Threats from newcomers

This threat is determined by "height of barriers to integrate" If the barriers to integrate are high, threats from potential competitors reduce, the opportunity will come to the enterprise Decisive factors of the barriers to integrate include economic scale, product differentiation and brand loyalty, distribution channels, channels, absolute cost advantages

Potential competitors

competitors

Competition among existing enterprises

Substitute products

Customers

Power of suppliers

Power of customers Threats from new rivals

Threats from substitute goods

Source: Assoc.Prof.Dr Vu Thanh Hung – Lecture “Strategic management”

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 Power of customers

In relationship between enterprises and customers, if customers are “weak”, the enternprises will have opportunity to increase prices to increase profits Conversely, the customers will be “stronger” than the enterprises Specifically, if costomers buy in bulk, if customers have more options to choose, when customers are regular customers, when customers can supply materials for themselves with lower-cost rather than purchasing outside … the customers will have the power

 Threat from substitute products

According to Michael Porter, substitute products are the products of competitors in different business sectors which have similar functionality to meet the same consumption demand of customer For example, in the coffee sector enterprises indirectly compete with tea processing enterprises and other refresh soft drink producers If substitute products are produced on new technology lines with lower price and better quality, this is a real threat to business However, if the customers have litter effort to substitute products and do not like to change the suppliers, this threat will be reduced instead

1.2.2.3 External environment analysis synthesis

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After analyzing the opportunities and threats arising from the external environment, strategists often use external factors evaluation matrix (EFE matrix) to summarize and evaluate the impacts of those factors on the enterprise Development process of

an EFE matrix consists of five steps:

1 Make a list of factors that play a decisive role for the success of the business

2 Determine the importance from 0.0 (not important) to 1.0 (very important) for each factor Total classification levels are 1.0

3 Classify from 1 to 4 for each factor to see how the current strategies of the enterprise response to those factors, in which 4 is the best response, 3 is above average response, 2 is average response and 1 is the least response

4 Multiply importance of each factor with its classification to determine the total of important points of each enterprise

5 Cumulative plus the important points of factors to determine the total number

of critical points of each business

Table 1.1: External factors evaluation matrix (EFE matrix)

Major external factors Importance Category Important point

Source: Fred R David 2006 “Concepts of Strategic Management

Statistics Publishing House – Page 180

Total highest important point that a business can achieve is 4.0 and the lowest one is 1.0 Total average important point is 2.5 Total of important points is 4 showing that the enterprise is responding very well to the existing opportunities and threats in the environment In other words, the strategies of enterprise effectively utilize the

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existing opportunities and minimize the threats of possible negative effects of external threats The total point is 1 indicating that the business strategy enterprise set out does not take advantage of opportunities or avoid external opportunities

1.2.3 Internal environment analysis

1.2.3.1 Enterprise value chain analysis

Analyze internal business environment to discover the strengths and weaknesses of the enterprise to build suitable targets system and appropriate strategies to maximize its strengths and can turn them into particular abilities, on the other hand, limit its weaknesses We analyze the internal business environment of the enterprise in term

of "value chain" analysis techniques of Michael Porter in diagram 1.5

Diagram 1.5: Value chain model of Michael Porter

Supporting

activities

Infrastructure

Information System Human Resource Material management

Research and Develop (R&D)

Main

activities

Marketing and sales Production

After sales service

Source: Assoc.Prof.Dr Vu Thanh Hung – Lecture “Strategic management”

The term value chain refers to the idea of considering a company as a sequence

of activities in transforming inputs into outputs which create value for customers The process of transforming inputs into outputs includes a number of main activities

and supportive activities Each activity will add values to the product

Value chain is divided into primary activities (functional activities) and other supportive activities The main activities of creating products, marketing and

Strategic target

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distributing to buyers The main activities are divided into two functional sections Products creation departments also called manufacturing departments Department performs marketing, distribution and after sales service is called marketing department

1.2.3.2 Sustainable competitive advantage recognition process

Sustainable competitive advantage recognition process:

Sustainable competitive advantage

When increase power more dominant than rivals

Long term becomes sustainable competition Dominant capacity

When core capacity excesses the rivals, it becomes Dominant capacity

Core capacity

Main and basic capacity makes success, it becomes

Core capacity (Successful factors of the sector) Capacity

Resources put into use, exploitation

- Intangible: brand, trading advantage, accommodation position, R&D Resources only become capacity when they are used and exploited -Tangible: Assets, capital

Resources

In long term, if the Enterprise can meet 4/5 criteria below, dominant capacity becomes sustainable competitive advantage: (1) Valuable; (2) Rare; (3) Costly to imitate; (4) Distance is big enough; (5) Coinciding with successful factors

Summary: The internal analysis is to identify potential sources as well as existing

resources to create competitive advantage for enterprises At the same time we also can recognize obstacles in maintaining competitive advantage Or in other words, internal analysis is to identify the strengths and weaknesses of the business On that basis, exploit the strengths and overcome weaknesses in order to increase the competitiveness of enterprises

1.2.4 SWOT matrix and optimal strategy selection

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1.2.4.1 SWOT matrix

The goal of building and selecting strategy is to set the long-term goals and create alternative strategies, select from them a few strategies to pursue Building and selecting strategy to define a series of actions that help the enterprises to achieve their goals and mission Current strategy of the enterprise, the goals and mission combined with analysis and evaluation of the external and internal environment to make evaluation and production of supportive strategies

Enterprises who want to do the analysis and select strategy for themselves, first of all, they need to grasp problems of long-term goal, its nature, then they need to understand deeply framework of a synthetic strategic planning process, methods and ways to apply in which specially the use of models to get strategies such as: SWOT, SQPM,

Table 1.2: SWOT matrix

O - Opportunity T - Threat

S - Strength

S-O: Improve strength to take

advantage of opportunity, orient business

S-T: Improve strength to limit

and avoid threats

W - Weakness

W-O: Overcome weakness to

take advantage of opportunity

W-T: Overcome internal difficulties and well prepare to overcome external threats

Source: Fred R.David.2006 “Concepts of Strategic Management”

Statistics Publishing House page 267

We have strategies as following:

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S-O strategy: Pursuing the most suitable opportunities to strengths of the enterprise,

orienting business direction in the market (Attack)

W-O strategy: Overcoming weaknesses to pursue opportunities (Compete)

S-T strategy: Defining clearly the way enterprises can use their advantages to

reduce lost from external threats (Careful)

W-T strategy: Making a defending plan to prevent weaknesses of the enterprise

from external environment threats (Defend)

1.2.4.2 Optimal strategy selection

Enterprise cannot select alternately each alternative strategy because it takes a lot of time and it is not effective Therefore, it is necessary to select a group of strategies which is considered as the most optimal strategies to develop and it must be calculated in details, considered the advantages, disadvantages, costs and benefits can be brought about by this strategy

On the basis of a group of strategies has been shown by combining strengths – opportunities, strengths – threats, weaknesses - opportunities and weaknesses –threats, using matrix SPQM according to GREAT criteria to outline basic characteristics for selecting focus business strategy that the enterprise can pursue

Table 1.3: Strategic Planning Quantitative matrix with GREAT criteria

Criteria

Weight

Strategies Strategy 1 Strategy 2 Strategy 3 Strategy n

Evalua ted point

Conv erted point

Eval uated point

Conver ted point

Evalua ted point

Conv erted point

Evalua ted point

Conv erted point

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Criteria

Weight

Strategies Strategy 1 Strategy 2 Strategy 3 Strategy n

Evalua ted point

Conv erted point

Eval uated point

Conver ted point

Evalua ted point

Conv erted point

Evalua ted point

Conv erted point

Source: Fred R.David.2006 “Concepts of Strategic Management”

Statistics Publishing House page 291

Step 1: First of all, it is necessary to recognize main contents need to be analyzed,

considered, selected and then give factors related to development plan of the enterprise to analyze in the first column, that is listing criteria need to be analyzed (Column 1)

Step 2: To assess the impact of these factors on overall strategies, we use impact

factor of importance and influence of these factors on strategies, this ratio is calculated by giving point from 0 to 1 and the total weight is always equal

to 1 (column 2) After having been given certain variables along with the importance of the strategy, continue to step 3

Step 3: In this step we can assess and give points in each analysis factor for each

strategy Assessed point is calculated by scoring from 10 to 50, the lowest is 10 the highest is 50 (corresponding to levels: low, average, pretty average – neutral, good, excellent) This analysis score shows that corresponding to each analysis factor, given strategy can achieve what level (column 3)

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Step 4: Conduct conversion of factors is result of composition of 2 numbers

(column 2 and column 3) of each strategy, next accumulate all those results to get the last result is sum of the above compositions Circle or highlight from 1 to 3 numbers with sum from highest to the next lower number to select strategy need to focus to building implementation

1.2.5 Competitive strategies

As mentioned above, if there is no competition, it is not necessary to build business strategies The competitive strategies must be based on sources of competitive advantages to succeed Every business can create itself a competitive advantage if it performs appropriate steps for winning top position in attracting customers more than its competitors Steps or road map that each enterprise carries out can be different, for example, creating the highest quality products, providing the best customer service, production at the lowest cost, focusing resources on the market segments Despite choosing any way, it is essential that customers have to feel superior value compared to what competitors offer

Although there are a lot of different business strategies, in general there are three

basic approaching ways to create competitive advantage, are: Cost leadership strategy, differentiation strategy, and focus strategy

People call the three above types of strategies are basic strategies because they cover all business activities whether manufacturing or services Each strategy in basic strategies is consistently selected result of the enterprise on products, markets, and the ability create differentiation This selection also affects each other

Table 1.4: Summary of suitable selections for each strategy in basic

competitive strategies

Criteria Cost leadership Differentiation Focus

High (Mainly by original)

Low to high (price or original)

Segment

market

Low (Large amount of markets)

Cao (a lot of market segments)

Low (one or some market segments)

Differentiation

creating

capacity

Manufacturing and material management

Source: Assoc.Prof.Dr Vu Thanh Hung – Lecture “Strategic management”

To confront with competitors, the enterprise can select three general strategies are: Cost leadership strategy, Differentiation strategy, and Focus strategy

1.2.5.1 Cost leadership strategy

The purpose of the enterprise in pursuing low cost is better performance than its competitors by doing anything possible to produce goods and services at lower cost than that of its competitors This strategy has two advantages:

First, because of lower costs, the enterprise can set lower prices than that of its

competitors but still getting equal benefits of its competitors If companies in that sector get the same value for their products, the enterprise still can gain higher profits because of its lower cost;

Second, if competition in the sector increases and companies begin to compete by

the prices, the enterprise will be able to stand stably because of its lower cost advantage

Enterprises comply with cost leadership strategy will be less affected when the suppliers increase cost and when customers demand for lower prices On the other hand, the enterprises with low cost often have large market shares, buy in great numbers then they have right to bargain prices with suppliers If alternative products

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come in the market, the enterprises can reduce prices to maintain the market The enterprises with low cost will create barriers to join the sector for their potential competitors

Enterprises implement cost leadership strategy will relatively safe until it can maintain its cost advantage, and the problem is that price must be key to attract customers

Diagram 1.6: Advantage of low cost enterprise

of the enterprise; customers are provided with information of products, services, procedures, etc in the most convenient and fastest way; it is necessary to create more options of products for customers Purpose of customer service differentiation strategy is to get competitive advantage by creating services that customer recognize as original, original in their evaluation, when meeting and satisfying the

Competitors

Low cost enterprise

Market Low cost advantages

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demand of using products, serving manner of customers in term of original and differentiation that the competitors can not have then the enterprise can give higher prices than the average ones of the sector Ability to increase revenues allows the enterprise operating better than its competitors and get higher benefit than the average level of other competitors On the other hand, creating services with different characteristics brings about new added values for consumers

Differentiation strategy is used when the enterprise recognizes the following signals:

- When the market is less sensitive to price

- Demand of consumers has differentiation

- Products are easy to create differentiation in comparison with other products

in the market

- When the enterprise avoids to face with price competition

With differentiation strategy, customers will no more care much about price of products, services Therefore, the enterprise can be able to increase high price for its products and services to create more advantages than its competitors and also increase benefit for itself In contrary, the enterprise will not need to increase price but it can have loyalty of customers for products that the enterprise is providing also long term and the most sustainable advantage

1.2.5.3 Focus strategy

This strategy differs from the other two strategies in that it orients to serve the needs

of a finite group of consumers or market segments Enterprises pursue this strategy will focus on serving a specific market segment, that segment may be determined according to geographical criteria, type of customer, or a branch of product line

When choosing a market segment, companies can implement focus strategy via or product differentiation or low cost For small enterprises it is difficult to

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simultaneously implement the strategy on both aspects, but also enterprises can simultaneously pursue strategy includes both factors If the business focuses on using low cost strategy that means this enterprise is competing against the cost leadership enterprise in the market segments in which there is no cost advantage Conversely, if business focuses on pursuing product differentiation strategy, all of product differentiation measures will always open for business

A focus enterprise has many ways to develop its competitive advantage and that explains why it appears so many small companies in comparison with large companies So a small company has many opportunities to develop its own activities and compete with low cost and differentiation enterprises which tend to grow up The focus strategy creates an opportunity for entrepreneurs to find necessary needs space of the customers that they have the ability to fill and also the favorable conditions for small enterprises to stably stand in the market full of harsh

1.2.5.4 Common strategies integration

Common strategies are not always compatible with each other If a business tries to take action to achieve superiority in all fields, the result is that it will not achieve any advantage Thus, Michael Porter argued that in order to succeed in long term, every business must select only one of three general strategies mentioned above If they are greedy to pursuit all three strategies, then the enterprises will fall into confused situation and can not gain competitive advantage

According to Porter, enterprises can be successful in adopting many strategies often establish separated business units in which each unit pursues a strategy By separating strategies for different units on policy or even culture, a business can reduce risk of falling into stagnation, not growing However, it is said that pursuing only a single strategy is not right choice; because with the same product, customers often find satisfaction in many aspects – a combination of qualify, style, convenience and reasonable prices

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1.3 Summary of chapter I

In summary, chapter I has provided with theoretical foundation to build business strategy for the enterprise through analysis models: PEST model to assess the impact of macro-economic environment on enterprise, M.Porter‟s five forces model

to assess impacts of sectorial in which business operates Through these two models

we can see the opportunities and threats for the business when the external environment fluctuate, so that enterprises can take advantage of the opportunities presented by the external environment at the same time also see the threats from the external environment Value chain model identify sustainable competitive advantage for internal business analysis, finding strengths and weaknesses Use the SWOT matrix and select optimal GREAT strategy for selecting business strategy for enterprises This chapter also presents three types of competitive strategies including: cost leadership strategy, differentiation strategy and focus strategy This

is the theoretical basis for analyzing, building and selecting business strategy for embroidered products of Minh Trang Co., Ltd in the period 2011 - 2015

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CHAPTER 2:

BUSINESS OPERATION SITUATION OF MINH TRANG CO., LTD

2.1 Overview of the Company

Minh Trang Co., Ltd was established and granted a business license No

0901000127 dated September 11th 2001 by the Department of Planning and Investment of Ninh Binh and the first registration change was made on 03rdDecember 2003

- Vietnamese name: Minh Trang Co., Ltd

- English name: Minh Trang Hand-made Bedding & Dinning Company

- Address: Van Lam - Ninh Hai craft village - Hoa Lu District, Ninh Binh province, Vietnam (Place of Tam Coc - Bich Dong)

- Tel: 0303.618.015 Fax: 0303.618.877

- Email: info@minhtrang.com.vn

- Website: http://minhtrang.com.vn/

- Initial investment capital is 1.5 billion dong

- Director: Nguyen Huu Vinh

Precursor of the enterprise is Hoa Binh embroidered complex which has been operating continuously since 1998 The company specializes in producing and trading in handicraft embroidered Initially, products offer for domestic consumption and for selling to tourists, and then through tourism way, its products are present in foreign countries and loved by many customers Currently over 80%

of the products are for export, its primary market is U.S., South Korea, Japan, France, etc From a small production facility without office, it relied mostly on

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households with embroidered skill in the village Up to now, the company has spacious facility at a convenient location with a surface area of 5,000 m2 in which 1,025m2 was used for factories, 400m2 for warehouses, 480m2 for product showroom, 200m2 for office

With continuous effort in recent years, the company has gradually built up its image and brand on the market For years the company was awarded "Typical business unit", "Excellent units in the emulation movement of doing business" of the locality

As the embroidered production company, materials are mainly fabric, yarn, cotton, and some other materials such as attached buttons, bag wire, ink, etc

The product lines the company is producing currently include:

- Embroidered blankets, sheets, pillows, cushions,

- Artistic embroidered painting

- Tablecloth, napkins, embroidered carpets, etc,

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- Hand embroidered shoes, bags, clothes, etc

The company's products are made manually by the artisans and craftsmen For each type of product, manufacture process is a little different:

- For a sheet, pillow, blanket, at first time, cloth and cotton materials are measured, cut and then fabric is printed to create pattern After creating samplers, they are taken to the embroidered team to comply with the embroidered patterns Completed embroidered is sent to the test team and the patterns meeting the requirement will be transferred to the sewing section At this section, cut cotton is transferred to integrate into products and products are finished (labeling and hygiene)

- For other products such as all kinds of embroidered art, scarves and bags, production process is similar to that of embroidered sheets, pillows and blankets, from the initial step to step of embroidering in compliance with samplers After checking satisfactory quality, they are washed, dried and finished (labeling, making frame, inserting a string bag, etc The poor-quality products will be removed or repaired depending on error level

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Diagram 2.1: Production process

(Source: Internal information of Minh Trang Co., Ltd in 2010)

2.2 Vision and mission of Minh Trang Co., Ltd

- Minh Trang Co., Ltd aims at rising the top 20 leading enterprises in Vietnam of embroidered products, developing types of closely-life products Satisfying customer with artistically unique, environmentally friendly, health caring embroidered products, etc especially manually embroidered products supplying the domestic and abroad market Performing administrative functions professionally, flexibly, creatively in order to enable Minh Trang to become a big brand

- Human is considered an invaluable source and is the overall strength of the company Strengthening human resource development, solidarity, working cooperation, discipline and industrial working style are core values and cultural traditions of the company in order to bring success to the enterprise

Test

Stitch