Building business strategy of Tien Dong joint stock company for the period 2013 - 2017

QSPM Matrix CHAPTER 2: ANALYSIS OF BUSINESS ENVIRONMENT OF TIEN DONG JOINT STOCK COMPANY 2.1 Overview of Tien Dong Joint Stock Company.. Matrix of External Factor Evaluation EFE 2.3

BUILDING BUSINESS STRATEGY OF TIEN DONG

JOINT STOCK COMPANY FOR THE PERIOD 2013 -2017

CAPSTONE PROJECT REPORT

Ho Chi Minh City

 Group 05:

 Nguyen Dinh Dai

 Nguyen Thi Kieu Nga

 Do Le Nhan

 Tran Thanh Phong

 Pham Truong Son

Class: GaMBA.M0311

TABLE OF CONTENTS CONTENT

TABLE OF CONTENTS

LIST OF TABLES

ABSTRACT

1 The urgency of the thesis

2 The research object and scope

3 Research Methodology

4 Structure of the subject

CHAPTER1THEORETICAL BASIS OF DEVELOPING BUSINESS

STRATEGY OF ENTERPRISES

1.1 Business strategy and its role in enterprises

1.1.1 Definition

1.1.2 Roles of business strategy

1.2.Procedures of strategy building

1.3 Strategic vision and mission

1.4 External environment analysis

1.4.1 Macroeconomic environment analysis

1.4.1.1 Political – Legal factor

1.4.1.2 Economic factor

1.4.1.3 Socio-cultural factor

1.4.1.4 Technological factors

1.4.2 Analysis of industry environment: Analysis of five competitive force

model of Michael Porter

1.5.3 Business administration

1.5.4 Core competencies

1.6 Selection of business plan and strategy

1.6.1 Tools of strategy building

1.6.1.1 Matrix of External Factor Evaluation EFE

1.6.1.2 Matrix of Internal Factor Evaluation (IFE)

1.6.1.3 Matrix of Competitive image

1.6.1.4 SWOT Matrix

1.6.2 Selection of business strategy

1.6.2.1 QSPM Matrix

CHAPTER 2: ANALYSIS OF BUSINESS ENVIRONMENT OF TIEN

DONG JOINT STOCK COMPANY

2.1 Overview of Tien Dong Joint Stock Company

2.1.1 Establishment and development history of Tien Dong JSC

2.1.2 Organizational structure and operational feature of company

2.1.3 Vision

2.1.4 Main business lines

2.2 External environmental analysis of Tien Dong Joint Stock

Company

2.2.1 Macro environmental analysis

2.2.1.1 Political factors and the law

2.2.1.2 Economics Factor

2.2.1.3 Sociocultrural Factor

2.2.1.4 Technological Factor

2.2.1.5 Analysis the impact of the integration factor

2.2.2 Analysis of the industry environment of five competitive force model

of Michael Porter

2.2.2.1 Competitiveness of competitors in the industry

2.2.2.2 Competitive pressure of potential competitiors

2.2.2.4 Pressure of suppliers

2.2.2.5 Pressure from substitute products

2.2.3 Evaluation of the impacts of the external environment to Tien Dong

Company

2.2.3.1 Evaluation summary of the opportunities and challenges

2.2.3.2 Matrix of External Factor Evaluation (EFE)

2.3 Analysis of internal factors of Tien Dong Joint Stock Company

2.3.1 Analyzing sources of Tien Dong Joint Stock company

2.3.1.1.Financial capacity

2.3.1.2 Human resources and management level

2.3.1.3 Analyzing sources bringing the brand of Tien Dong

2.3.1.4 Tien Dong investment items

2.3.2 Analyzing core competencies of Tien Dong Company

2.3.3 Internal factorEvaluation matrix of Tien Dong Company

2.3.3.1 Total strengths and weaknesses of Tien Dong Company

2.3.3.2 Internal factorEvaluation matrix (IFE matrix)

CHAPTER 3: BUSINESS STRATEGY SELECTION OF TIEN

DONG COMPANY IN THE PERIOD 2013 - 2017

3.1 Objectives of Tien Dong Company in the period 2013 - 2017

3.1.1 Objectives and mission of Tien Dong Company

3.1.2 Main economic indicators in five years from 2013 to 2017

3.1.3 Business structure

3.1.4 Major tasks

3.2 Strategic plan of Tien Dong Company in the period 2013 - 2017

3.2.1 SWOT analysis matrix of Tien Dong

3.2.2 Strategic choices

3.2.2.1 Quantified strategic planning matrix (QSPM)

3.2.2.2 Tine Dong strategic choices in the period 2013 - 2017

3.2.2.3 Content of the choosen strategy

3.2.2.4 Roadmap of strategy deployment:

3.3 Strategic Solutions

3.3.1 Marketing strategy selection (Marketing Mix – 4P)

3.3.2 Financial Solution

3.3.3 Solution of product quality management

3.3.4 Solution of building and developing human resources

LIST OF TABLES AND DIAGRAMS

Figure 1.1 Map of procedures for strategy building 10 Figure 1.2 Five competitive force model of M Porter 13 Figure 1.3 Tool model of strategy building 20 Table 1.1 Competition Profile Matrix 24

Figure 2.1 Organizational layout of Tien Dong Joint Stock Company 31

Table 2.1 Product lines of paint, wall putty of JAVITEX brands Of Tien

Table 2.6 Competitive matrix image 48 Table 2.7 Summary of the opportunities and threaten 51 Table2.8 Evaluate the intensity of the 5 pressures according to

Michael Porter model to Tien Dong Company

52

Table 2.10 Indicators of financial capacity of Tien Some Dong 55 Table2.11 Staff’s qualifications 57 Table2.12 Some basic information about

the three high quality paint brands and Javitex

61

Table2.13 Total strengths and weaknesses of Tien Dong Company 63

Table3.1 Financial targets for five years from 2013 to 2017 66 Table 3.2 Results of SWOT analysis matrix 68 Table3.3 QSPM matrix analysis 71 Table 3.4 Results of QSPM matrix analysis 75

ABSTRACT

1 The urgency of the thesis

It would be very dangerous if an athlete ran a marathon without estimating his marathon race and then his running ability is only for 5,000 meters while the race is 10,000 meters He uses up all his energy for the first 2,000 meters and then could not drag his feet In contrast, a miner can get precious minerals when there is only a few feet underground However, he cannot know how long he can reach to the point of minerals, and his physical exhaustion, and depression make him abandon the mining, then embrace failure without understanding the reason Now, these stories are also true to an

organization, they must answer the questions “How is the enterprise in the next five

years, ten years? Where is it going? What can it bring to the society?” How to make

sure to meet the expectations of members of the enterprise as well as the society, etc The operating way “after doing then thinking the next step” is one of the basic causes of enterprise failure in doing business

The fact proves that if it cannot be determined a proper development strategy, business managers are likely to work themselves into the pitfalls and cannot withdraw that leading to the business performance decline and even bankruptcy Enterprises can set goals and decide to invest in a new field in the hope of development, but due to not judging all the competitors, their potentials, etc which can lead them to losses Causes of failing for enterprises are increasing, either explicit or implicit For some cases, enterprises do not have a logical organizational structure, some have ineffective human resource management, or their management costs are too high The business product is not innovated, their market share is more and more declining They do not use strategies

on price and marketing, etc Doing business without a business strategy is like building a big construction works without a design Therefore, in order to survive and grow, enterprises need to build themselves a medium and long-term business strategy It might

be said that the business strategy is indispensable in business management of enterprises

2 The research object and scope

Tien Dong Joint Stock Company is an enterprise engaged in manufacture and trading of paints, mainly wall-paint, also known as paint for construction (ACRYNIC

paint line) branded JAVITEX The goal of the company is to build "JAVITEX" brand

to become a strong brand in the domestic market Implement all the obligations to the

State Stabilize and improve the quality of life for workers in the Enterprise Ensure dividends to shareholders

Therefore research will focus on the analysis of the business environment, forming alternatives and selecting business strategy of Tien Dong Joint Stock Company for the coming years

3 Research Methodology

On the basis of primary and secondary data collection, direct survey methods, statistical methods and economic analysis, the SWOT matrix group, EFE matrix; IFE; QSPM to analyze, evaluate and select business strategies for Tien Dong Joint Stock Company in order to achieve its objectives

4 Structure of the subject

In addition to Introduction and Summary, the content of the Subject has 3 chapters

Chapter 1 THEORETICAL BASIS OF DEVELOPING BUSINESS

- Establishing long-term goals of an enterprise;

- Setting out general action programs;

- Selecting action plans, allocating resources to carry out such goals

(Course book on Strategic Management of National Economics University)

1.1.2 Roles of business strategy

Business strategy plays an important role for the existence and development of each enterprise Right business strategy will lead to a good direction for the enterprise The business strategy can be considered as a compass for leading the enterprise to the right direction

In facts, thanks to proper business strategy, many businessmen achieve success, defeating their competitors and creating a firm foothold in the market The business strategy brings many benefits for the enterprise as follows:

The business strategy helps the enterprise to orient its future activities through the analysis and forecast of business environment Business is an activity that is always affected by both internal and external factors The business strategy makes the enterprise flexible and initiative to adapt to market changes, as well as ensures that the enterprise operates and develops in the right direction Thus, the enterprise will strive to achieve the

The business strategy helps the enterprise get opportunities and risks for the development of corporate resources It supports the enterprise to exploit and use the resources properly, promoting the strengths of the enterprise

9

Strategy creates an operating orbit of the enterprise for connecting individuals with different interests towards a common goal in order to develop the enterprise Strategy links the employees together or managers and employees, hereby, strengthening and improving the enterprise‟s internal resources

Business strategy is an effective competition tool of business Context of globalization and economic integration makes the influence and mutually dependence between business enterprises The process has created fierce competition among enterprises on the market In addition to competitive factors such as price, quality, advertising, marketing, the enterprise use business strategy as an effective competition tool

1.2 Procedures of strategy building

The strategy is the result of a planning process from the senior management of the enterprise Consideration of the planning process is as a starting point The strategic planning process can be divided into the following main steps:

- Selection of the mission and the main goals of the enterprise;

- Analysis of the external environment to identify opportunities and challenges of the business;

- Analysis of the internal environment of the enterprise to point out the strengths and weaknesses of the enterprise;

- Selection of the strategy based on the resources, capabilities and core competencies, develop to neutralize the risk, take advantage of opportunities from the external environment;

- Implementation of strategy: analysis of internal and external environment of the enterprise, then choice of the strategy is generally considered as building strategy Implementation of strategy will include designing organizational structures and appropriate control systems to put the strategy into practice

Figure 1.1 Map of procedures for strategy building

Strategic functions, duties and goals of the

enterprise (1)

Analysis of internal enterprise (S,W) (3)

Analysis of business environment (OT) (2)

1.3 Strategic vision and mission

The main objectives of the business are to determine what the enterprise hopes to meet in long term time

- Strategic vision refers to the future business direction of the enterprise "Where are

we going"

+ The need- to- be pursued market;

+ The focus in the future on the technology-product-customer;

+ Type of company leaders are trying to create

- Given the strategic mission refers reason for existence and mission of the enterprise The mission statement of most companies focus on current business activities

"Who we are and what we do"

+ The current products and services;

+ Served customers‟ demand;

+ Business and technology capacity

1.4 External environment analysis

1.4.1 Macroeconomic environment analysis

The objective of external analysis is the awareness of opportunities and threats from the external environment of the enterprise including consideration of the legal factors, macroeconomic, social culture and technology which can affect the enterprise Using

PEST model is to analyze the impact of the macro environment to Tien Dong Company according to factor groups

1.4.1.1 Political – Legal factor

The law, political factors have influence on all the business of a territory, the institutional factors, the law may endanger the viability and development of any industry When trading on an administrative region, the business will be required to comply with the institutional factor of the law in that area

1.4.1.2 Economic factor

Economic factors have a direct effect on the potential attraction of different strategies The influential economic factors are economic growth, inflation, business cycles, the increase or decrease in interest rates, the stock market, the increase in GDP, the tax system and the tax rate

1.4.1.3 Socio-cultural factor

Each country or territory has its cultural values and specific social factors Enterprises need to consider cultural factors to take advantage of the opportunities as well as affects on the business strategy Enterprises need to consider the social factors in market research, social factors such as lifestyle, income, demography, psychology, education The changes of factors will affect important decisions about products, services, markets and consumers

1.4.1.4 Technological factors

Today's advanced technology can be seen as an opportunity as well as threat to enterprises when building business strategy The development in the field of information technology, communication, transportation shortens the geographical distance, transmission media The factor includes transport infrastructure development, infrastructure, research, science and technology applications The impact of information technology, internet to business

In addition, the companies need to be aware of the impacts of natural factors on the business decisions of a company

1.4.2 Analysis of industry environment

Five competitive forces model of Michael Porter is considered as an useful and effective tool to study, analyze competition pressure on the companies

According to M Porter there are 5 forces orient the competition within the industry, which are:

(1) threat of new entrants

(2) Intensity of competitive rivalry

(3) the bargaining power of buyers

(4) bargaining power of the seller

(5) threat of substitute products

The task for the administrators is to be aware of the opportunities and threats created by the change of forces, thereby to develop adaptation strategies

Figure 1.2 Five competitive force model of M Porter

According to Michael Porter, the intensity of competition in any industry is affected

by the following five competitive forces:

1.4.2.1 Threats of potential competitors:

Potential competitors consist of the companies involved in the industry, who have unclear competitiveness at present but competitive potential and power in the future With the desire to gain market share the competitors are willing to invest into new

Potential competitors

Current competitors

The Company

Competition between existing firms in the industry

Threat of having competitors

CustomersSuppliers

Substitute product

Ability to pressure of customers

Ability to pressure of customers

Threat of substitute products

technologies to exploit Companies should consider the threat due to the entry possibility

of these potential competitors

This force includes the companies currently is not competitive in the industry, but they are able to do it if they want

The higher the cost for joining the industry of new companies is, the higher the barriers to entry are High barriers to entry will keep potential competitors outside even when the income in the industry is high

Economist Joe Bain, identifies three sources of barriers to entry including: brand

loyalty;absolute cost advantage and Economy of scale In addition to the Bain‟s factors,

we can add two important barriers worth considering in many cases They are: switching costs, government regulations and retaliation

- Brand loyalty: The buyer's favorite for the products of the existing companies

now is called brand loyalty Brand loyalty will cause difficulties for entrants to gain the market share of existing companies Therefore, it reduces the entry threat of potential competitors; the competitors find that task of dispelling customer‟s favorite established is extremely difficult and costly

- Absolute cost advantage: the existing companies can have the absolute advantage

in cost compared to those who enter the contest Such absolute advantages in costs come from:

+ Preponderant operation thanks to experiences

+ The control of special inputs for production such as labor, materials, equipment, and management skills

+ Access to cheaper capital because the existing company is at risk lower than the company that has not been established

If the company is in the absolute cost advantage, the threat from beginternals drops

- Economies of scale: Economies of scale is the marginal efficiency improvement

because the enterprise accumulated experience with increases in its size The sources of economies of scale includes cost lower through mass production or standardized large amounts of products, discount for big purchase of materials, advantages is obtained by the allocation of fixed costs for large volume production, and the economics of scale in advertising Once the cost advantage is significant in the industry, newcomers must be in

a situation, or to begin with the small-scale and leave the cost advantage, or to accept the risk to enter with the large-scale and large capital expense

- Conversion cost: Conversion cost is the once – paying cost when customers want

to convert their purchases to another suppliers The conversion cost may be related to the cost of procurement of equipment, staff training costs, even the consumption of spirits in case of ending a relationship

If conversion cost is high, customers are restrained in the current company's products even if the products of the newcomers are better

1.4.2.2 Risk of current competitors:

In the model of Michael Porter, existing competitors have already had a strong position in the market, which leads to the higher level of competition The important factors in forming the level of competition between firms operating in the same industry include: competitive structure, market demand and barriers The important part is to identify all of the competitors and identify strengths and weaknesses, threats, and their strategic goals

The commonly used tool in the race to create value for customers is price, quality, innovation and customer response If the competition is weak in the industry, the company will have the opportunity to raise prices and get higher profits But if the strong competition, price competition can occur strongly, this will lead to price wars

Competition limits the profitability by reducing the profit margin on sales Therefore, the intensity of competition between the companies in the industry creates a powerful threat

to profitability A general way, the level of competition between firms in the industry is a

function of three main factors: (1) the competitive structure of the industry; (2) demand

conditions; (3) high barriers out of the industry.

- Industry competitive structure: shows distribution of number and size of

enterprises in the industry Many scattered branches have low entry barriers and the primary products are of a kind with little difference These two characteristics combine to create tendency of profit increasing or decreasing in the cycle The low entry barriers will facilitate newcomers, whenever the high demand and high profits, in the hope of making money at the increasing price Generally, newcomers of scattered industries at the booming time of demand will create a potential demand for excess capacity Once capacity excess appears, the company will begin to cut prices in order to use redundant

staff Because the company encountered difficulties when trying to create difference in comparison with products of competitors, it should make this situation worse As a result, price war happens, leading to reduced profits in the industry, forcing some companies to leave the industry, and discourage those who want to enter the industry In general, how similar primary products is, the price war is likely to occur more intense

Thus, scattered industry structure brought threats more than opportunities Most of the booming have been relatively short, because of easy entry, and followed up by a price war with the bankruptcy It is difficult to make a difference of products in such industries; it is the best strategy for the company to pursue a minimum cost This strategy allows a company to pocket big profits in boom times and survive in any recession time

A concentrated industry is dominated by a small number of large companies (in this case it is seen as exclusive groups) or in the extreme case, only one firm (monopoly) Concentrated industries include aerospace, auto production, and pharmaceuticals The nature and degree of competition in the concentrated industries is difficult to anticipate because in the concentrated industries, companies are dependent Competitive actions of

a company will directly affect profitability and impact on the market share of competitors

in the industry

Another more general way, when the price war is a threat, companies tend to switch

to compete on the factors such as advertisement, promotion, brand positioning, design and product quality This type of competition is trying to make a difference for the company's products compared to products of competitors, creating brand loyalty and minimizing the possibility of a price war However, the effectiveness of this strategy depends on the ability to easy causing the difference in the product or not Some products (such as cars) is relatively easy to cause the difference, but some (such as air transportation) is very difficult

- Demand conditions: demand conditions of an industry are another determinant

of the level of competition in the current company The growth in demand from new customers or increasing existing customer purchases tends to soften the competition, because it opens up a larger space for development Demand growth tends to reduce the competition, because all companies can sell more, they do not need to win the market by other companies, and the result is usually still profitable

In contrast, the reduction in demand caused a stronger competition as companies have tried to struggle to maintain revenue and market share Demands reduce when the customers leave the market or they buy less.In that situation, a company can only grow

by acquiring other companies‟ market Therefore, need reduction creates a major threat because this increases the competition between companies in the industry Moreover, as

in the opening situation, the problems may also appear when the need growth slows down

- Barriers to exist: barriers to exist is the emotional factor, strategy, and economic

factor that can keep a company in the industry even if the income is low

Investment in workshop, machines, and equipments without any other plan of using and it is impossible to sell them If the company wants to leave the industry, it has to leave the book value of these assets

Fixed costs to leave the industry are too high such as money paid to redundant workers

Emotional attachment to the industry, in case a company does not want to leave its first industry because of emotional reasons

1.4.2.3 Pressure of customers:

The third force in Porter's five forces is the bargaining ability of buyers The buyers

of a company may be the final consumers of its products (final users), but they can also

be the companies distribute its products to final users, such as wholesalers and retailers

The buyers can be considered as a competitive threat when they are in a position of requiring lower prices or better service (which can lead to cost increase)

When supply industry is created by many small companies and buyers are few and with large amount, this case allows buyers dominate the supply companies

When buyers make large volume purchase, they can use the buying power as a lever

to negotiate a discount

Customers always demand to buy at cheap price but high-quality goods and perfect services This has put pressure on every company, easily leads to cost increase and price

competition risk Nevertheless, the customer is always a vital element of every company, business strategy of every company should be oriented to the customer

1.4.2.4 Pressure of supplier:

The forth force in Porter‟s five force model is bargaining ability of suppliers The suppliers can be considered as a threat when they can force to increase the price or to reduce the required input quality they provide for the company, thereby reducing the profitability of the company Conversely, if the supplier is weak, the company has chance

to compel to decrease the price and increase higher input quality

According to Porter, suppliers have the most power when the products provided by suppliers are difficult to replace and important to the company; corresponding products

of the suppliers are manufactured too differently for the Company to change supplier

1.4.2.5 Threat of substitute products:

The final force in Porter's model is the threat from substitute products The substitute products are the product of the industry that serves the needs of customers similar to the analyzed one To limit the pressure of this risk, the company needs to consider the development of the market trends, ability and forecasting of substitute products in the future

Besides, in analysis it is necessary to care about other factors such as: distributers, shareholders, etc to find more opportunities and challenges affect the Company‟s

operation

1.5 Analysis of internal environment of the company

The goal of the internal analysis is to find out the strengths and weaknesses of the company Analyzing the industry environment is to point out the competitive position of the company, main competitors as well as the development stage of the industry, and to assess the impact of globalization in the scope of the industry

The role of capabilities, resources and ability to build and maintain sustainably competitive advantage for the enterprise Creating and maintaining competitive advantage is a requirement for enterprises The strength of the enterprise leads to domination in this field, whereas weaknesses can lead to poorer performance

1.5.1 Resources:

Resources of the enterprise are understood to be the property that the enterprise owns and can be exploited for economic purposes (F David, 1998) If only understanding the macro-environment and industry environment is not enough to plan successful strategies Every enterprise needs to have some tangible resources such as money, manpower, plant and machinery and intangible resources such as relationships with suppliers, understanding the market, image and reputation with customers or the government Identification and development of these resources into capabilities is one of the basic strategic challenges that each enterprise is facing Existing resources of the enterprise is important basis to determine the goals and business development in accordance with the requirements in the short and long term strategies

Resources in an enterprise are usually distinguished into two categories: tangible resources and intangible resources

- Tangible resources are the assets of the business which can be seen and quantified, including: cash, buildings, equipment, human resources, office, etc

- Intangible resources are intangible assets, including: knowledge and skills of individuals in the enterprise, relationships with partners such as retailers, awareness of others for business and products/services of the enterprise (for example, customers believe that the enterprise provides high-value products than competitors)

- Enterprises have accumulated at the same time tangible and intangible resources to serve the strategic planning and implementation

1.5.2 Financial capability:

Financial capability is often considered the best evaluation method of competitive position and attractive conditions for investors Determine the strength of financial capacity is a condition to choose the right and effective strategy The financial functions consist of the ability to raise capital, profitability, solvency and risk management

1.5.3 Business administration:

In business administration, the important thing is to make decisions, because the operation of an organization from the simple daily tasks to large long-term strategies is also based on the appropriate decision The requirements for decisions in business administration must be based on science, subject to the regulations, common institutions, must be oriented and very specific in terms of time, timely satisfaction of requirements

The term “core competencies” is used to refer to professional expertise or skills in the key areas of business, which directly provides superior performance compared to other competitors Core competencies are formed over time through the process of learning, accumulating in a systematic and organized way of how to exploit different resources and capabilities Analysis of core competencies and separate different qualities

is to clarify further the competitiveness of enterprises The mission of the strategists is to look for appropriate resources and capabilities and combine them to create the largest value-added effect with sustainability In this section, we will study the four standards that enterprises can use to determine the potential resources and capabilities to become core competencies The four criteria are valuable, rare, difficult to imitate and irreplaceable

1.6 Selection of business plan and strategy

Each enterprise unit must choose a business strategy as its competition in a market - certain products Enterprises in an industry can pursue a variety of different business strategies that the difference between them related to many factors such as the choice of market segmentation, product quality, technology In business strategy, concentrative strategy is the cheapest because it needs fewer resources to serve only a segment other than to serve the overall market

1.6.1 Tools of strategy building

According to Fred R David, important techniques to form a strategy consists of three phases, the tools used for this process can be applied to all sizes and types of organizations, it help administrators identify, evaluate and select the strategy, it is expressed through the following phases:

Figure 1.3 Tool model of strategy building

PHASE 1: INPUT PHASE

Matrix of external factor

PHASE 2: COMBINING PHASE

Matrix of Matrix of Matrix of Internal – Main strategy

Consulting Group (BCG)

matrix (IE)

PHASE 3: DECIDING PHASE

Quantitative Strategic Planning Matrix (QSPM)

Phase 1: Input phase consists of the EFE matrix, the IFE matrix, the competitive

image matrix, this phase summarizes basic entered information necessary for the formation of strategic

Phase 2: Combination stage makes possible strategies by sorting, combining

internal or external important elements In this phase we choose one of the matrixes such

as SWOT, BCG, IE, SPACE ., in the topic, the group only uses the SWOT and IE matrix, an then combine factors to make appropriate strategies

Phase 3: Deciding phase only includes a technique of using Quantitative Strategic

Planning Matrix The matrix uses entered information in the first phase, to valuate possible strategies which can be selected in the second stage and from which to choose the appropriate strategy

1.6.1.1 Matrix of External Factor Evaluation EFE

Matrix of external factor evaluation allows strategists to summary and evaluates the information on economics, society, culture, demography, geography, politics, government, law, technology and competition There are five steps to develop a matrix of external factor evaluation

Step 1: Make a list of 10 to 20 key opportunities and threats which play a decisive

role for the success of the enterprise as identified in the inspection process from external factors

Step 2: Classify importance from 0.0 (not important) to 1.0 (very important) for

each factor This classification shows the respective importance of the factors for success

in the business of the enterprise, the total importance of all factors must be equal to 1.0

Step 3: Classification from 1 to 4 for each of the determinants of success shows

how the current strategy of the enterprise responds to these factors, of which 4 is a good response, 3 is above average response, 2 is the average response and 1 little response These levels are based on the effectiveness of business strategies Thus, the classification

in this step is based on enterprise size, while classification in the second step is based on the industry

Step 4: Multiplying the importance of each factor to its kind to determine the

importance of each factor

Step 5: Add the important points of all factors to determine the total number of

critical points of the matrix The total score of the matrix is in the range from 1 to 4 points, regardless of the number of factors in the matrix If the total score is less than 2.5, enterprises are of internal weakness, if the total score is above 2.5, enterprises are of internal strength

1.6.1.2 Matrix of Internal Factor Evaluation (IFE)

The final step in the construction of the internal situation analysis is to build the matrix of internal factor evaluation (IFE) Strategy formulation tool summarizes and evaluates important strengths and weaknesses of departments and it provides the basis for determining and evaluating the relationship of these departments There are five steps to develop a matrix of internal factor valuation

Step 1: Make a list of 10 to 20 factors including the strengths and weaknesses

which affect the development of the enterprise

Step 2: Set the importance 0.0 (not important) to 1.0 (very important) for each

factor Importance assigned to each of the specific factors shows the relative importance

of the factors for the success of the enterprise in the industry Excluding key factors as internal strengths or weaknesses, the factors considered most influential to the performance of the organization is regarded as the most important Total all levels must

be equal to 1.0

Step 3: Classification from 1 to 4 for each of the determinants of success shows

how the current strategy of the business responds to these factors, of which 4 is a good response, 3 is above average response, 2 is the average response and 1 little response These levels are based on the effectiveness of business strategies Thus, the classification

at this stage is based on the enterprise, while the classification in step 2 is based on the industry

Step 4: Multiplying the importance of each factor to its kind to determine the

importance of each factor

Step 5: Add the important score of all factors to determine the total number of

critical points of the matrix

The total score of the matrix is in the range from 1 to 4 points, regardless of the number of factors in the matrix If the total score is over 2.5, the enterprise is of internal strength

1.6.1.3 CompetitiveProfile Matrix

Competitive profile matrix comparing between the enterprise and competitors is primarily based on the factors affecting the competitiveness of enterprises in the industry, thereby helping administrators identify the strengths and weaknesses of the enterprise as well as the strengths and weaknesses of competitors, identify competitive advantages for businesses and weaknesses To build the competitive profile matrix, it is necessary to follow five steps:

- Column (1): Criteria affecting to operation of Painting industry

- Column (2): Total influence of criteria in column 1 is 100% and it evaluates influence level of each factor to the industry

- Columns (3), (5), (7): Respectively response of competitors to criteria

- Point 1: Little response, Point 2: average response, point 3: above average response, point 4: good response

Table 1.1.Competition Profile Matrix

Rating criteria Level of

1.6.1.4 SWOT Matrix

SWOT is a collection of abbreviation for the first letter of the words: Strengths, Weaknesses, Opportunities and Threats This is extremely useful tool to help us understand the problem or make decisions in the organization, management as well as in business In other way in image, SWOT is a theory framework upon which we can review the strategy, determine the position and direction of an organization, an enterprise, analyze of the business proposals or any idea related to the interests of the enterprise And in fact, the application of SWOT is implemented in business planning, strategies planning, competitor evaluation, market survey, product development and in research reports

SWOT analysis model is applied in the evaluation of a business unit, a proposal or

an idea It is a subjective assessment of the data organized in a logical sequence to help

us understand the problem, from which we can discuss and make reasonable and accurate decisions

SWOT analysis frame below will help professional thinking and make decisions positively, not only based on instinctive reactions or emotional habits SWOT analysis frame is presented in a grid, consists of four main parts representing 4 main contents of SWOT

Table 1.2 SWOT matrix

more accurate measures to improve the performance of the business, to avoid outdated and inappropriate situation The objectives and strategies should be considered, developed and combined to accomplish the mission of the business with the highest efficiency

SWOT matrix is used to list all the opportunities, threats, strengths and weaknesses within the enterprise, in order and appropriate location Based on the relationship between the elements, the analyst will conduct to select appropriate strategic solutions through the combination of:

- Strengths - Opportunities (S-O),

- Strengths - Threats (S-T),

- Weaknesses - Threats (W-T),

- Weaknesses - Opportunities (W-O)

Depending on the field of business the administrator will use one or more SWOT matrix to analyze and select the solutions SWOT model is usually given four basic strategic groups:

S-O: The strategies are based on the strength of the enterprise in order to exploit external opportunities

S-T: The strategies are based on the strengths of the enterprise in order to prevent ot limit external threats

W-O: The strategies are to reduce internal weaknesses in order to utilize external opportunities

W-T: The strategies are to reduce internal weaknesses in order to prevent ot limit external threats

Strategists never consider all feasible strategies beneficial to businesses because there are countless feasible solutions and an infinite number of ways to implement these measures Therefore only a group of most attractive strategic is selected for development

To set up a SWOT matrix, according to FERD R DAVID, it is necessary to go through the following eight steps:

Step 1: List external opportunities of the enterprise

Step 2: List external important threats of the enterprise

Step 3: List internal main strengths of the enterprise

Step 4: List internal weaknesses of the enterprise

Step 5: Combine internal strengths with external opportunities, record results of

S-O strategy on suitable box

Step 6: Combine internal weakness with external opportunities, record results of W-O

strategy on suitable box

Step 7: Combine internal strengths with external threats, record results of S-T strategy on

suitable box

Step 8: Combine internal weaknesses with external threats, record results of W-T strategy

on suitable box

1.6.2 Selection of business strategy

1.6.2.1 QSPM Matrix: QSPM Matrix is a tool used to quantify the analyzed

information in the first phase that allow administrators to select the optimal strategy, the QSPM matrix, according to FERD R David, consists of six basic steps:

Step 1: List the external major opportunities threats and the internal key strengths

weaknesses of he enterprise

Step 2: Classify each external and internal critical success factors, the classification

is the same as in the EFE matrix, the IFE matrix

Step 3: Determine the replaceable strategy that enterprise should consider to

implement

Step 4: Determine the number of interest points for each strategy Number of

interest points denotes the relative attractiveness of each strategy compared to other strategies, assessment scale from 1 to 4: 1 is not attractive, 2 is somewhat attractive, 3 is quite attractive, 4 is very attractive

Step 5: Calculate the total number of interest points, here is the result of

multiplying classification point (step 2) with interest point (step 4) in each row The higher the total number of interest points is, the more attractive strategy is

Step 6: Add the interest points It is the sum of the total number of interest points in

strategic column of QSPM matrix difference between the total number of interest points

in a strategic group, the higher score indicates more attractive strategy

Table 1.3 QSPM matrix

Important

factors (1)

Classification (2)

Replaceable strategies Basis of

interest points

Strategy 1 Strategy 2 Strategy 3

AS TAS AS TAS AS TAS Internal factors:

Based on the set out principles and standards, the enterprise carries out comparing the proposed strategic plan with the aim to find a suitable business strategy for implementation Chosen strategy is the optimal strategy or to best suit the conditions and circumstances of the enterprise When choosing a strategy, the enterprise should consider a number of factors that affect the choice of strategy These factors include the strength of the industry and the enterprise Strategic objectives of the enterprise, the attitude of the Board of Directors, financial resources The strength

of the industry and enterprise in comparison with competitors may impact on the process of strategy choice Typically, the enterprise with competitive position often chooses growth strategy different from choice of the enterprise with weak position Leading enterprises in the industry often try partnership and take advantage of their position, find opportunities in other sectors with growth potential For industries with high growth, enterprises with a strong position often choose focused growth strategy, growth by integrating or concentric diversification But the industry has developed with saturation tendency, the enterprises often choose to combine diversification strategy While enterprises with a weak position often have to choose any strategy to increase competitiveness, businesses are not effective, they must seek to recover investment capital and seek to redirect production

Chapter 2 ANALYSIS OF BUSINESS ENVIRONMENT OF TIEN DONG

JOINT STOCK COMPANY

2.1 OVERVIEW OF TIEN DONG JOINT STOCK COMPANY

Vietnamese name: Công ty Cổ phần Tiên Đồng

English name: Tien Dong Joint-Stock Company

Abbreviation name: Tien Dong Company

Address: Plot 15, Cai Lan Industrial Zone – Ha Long – Quang Ninh Province; Website: http://sọnjavitex.com.vn

Business Registration Certificate No 0103002731 dated 22 February 2005 and the first revision thereof dated 3 October 2007 of Quang Ninh Department of Planning and Investment;

Charter capital: VND 16,000,000,000 (Sixteen billion Vietnam dongs only)

2.1.1 Establishment and development history of Tien Dong JSC

Tien Dong JSC was established in February 2005, with the business field of industrial and construction paint product production and trading Wall paint has been determined to be the leading product in the business and development strategy of the company Due to the limited initial capital resource, the company focused on the paint product having cheap and medium price to aim at small-scale and medium-scale works and projects with the investment from the state budget However, market surveys show that when using paint products, most of customers often care about the quality and aesthetics of the products rather than the price This does not completely deny the importance of price, nevertheless, the actual competition between paint companies reveals that the product quality, especially the ”brand name” should

be the key point of success It is impossible if the company would like to obtain its strong impression in the market basing on competitive price only It shall be more effective if the company affirms its ability to provide the high-class products with reasonable price to satisfy all needs of customers and then focuses on the product having the strongest competition After careful consideration, Board of Directors decides that in order to build up the company‟s brand name, it is essential to have high-quality products to aim at high-class projects and high-income customers, and broaden consumption in country

Since realizing the need to have a large-scale production base to create company image and reputation as well as to build long-term brand name of the company, the executive board decided to invest to set up a factory in Cai Lan Industrial Zone that now

is the biggest industrial zones of Quang Ninh province and reputable in country and region The factory started operating in September 2006 after one year of constructions

The company's paint factory is located near a port service area, which shall facilitate export and import activities This creates good conditions for the brand name development of the company The land area is large enough to set up a modern production line with capacity of up to 80 tons of paint / day in spite of the fact that using area needed is much smaller compared to the production organization of other products.Legal and environmental matters are guaranteed because the Company's project has been approved by the Management Board of Industrial Zones and Foreign Investment of Quang Ninh Province

Although paint production uses chemical substances, it is not the production type that pollutes the environment because this is a liquid paint technology in which 100% chemical substances enter into the product, i.e there are no waste except from household waste that is in common treatment process of the industrial zone

In comparison with the targets planned when establishing current results have not met investors‟ expectation yet, especially profit is still limited However, after short period since the establishment, the company has had many achievements, especially, the development direction has been determined Product plan proposed to some extent are making good progress, the products are accepted in the market Growth rate always increase year by year at the average amount of from 20-25% For technology, after 6 months, technical staff can manage and organize the production of all product types without any errors and the company no longer needs to hire experts with high expense In general, the company has completely seized control of production technology

Wall paint and putty were tested at Tropical Technical Institute under Institute of Vietnam Science and met registration standards Several products have quality index that

is better than reputable ones, which is one of the most factors of a new company

For sale market, the company‟s products are present in nearly all Northern provinces Current consumption is only 30% of the factory‟s capacity

30

2.1.2 Organizational structure and operational feature of company

Figure 2.1.Organizational layout of Tien Dong Joint Stock Company

MANAGER

Accounting

Dept

Deputy Director of technique

Dept of planning and technique

CONTROL BOARD BOARD OF

DIRECTORS SHAREHOLDER’S MEETING

The company‟s wall paint product branded JAVITEX belongs group of construction material used for decoration of houses and offices, etc At present, wall paint is the sole product of the company, so strategy analysis and development for the company is business strategy analysis and development of JAVITEX

The company‟s products are distributed via wholesale/ retail agents but the wholesale system plays the main role The final step is color mixing Both paint companies have diversified color list to meet customers‟ needs when choosing color (some companies are ready to meet the customers‟ needs with thousands of colors) Therefore, at some agents, the Company arranges computers for the color mixing Due to specific characteristics, customers often choose the paint basing on the consultancy of contractors, painters, and those who used, the Company pay much attention to these customers

However, according to the agents of paint companies, domestic paint production companies just explore the field of interior and exterior decoration paints Domestic paint types are not diversified and professional The paint companies have not paid much attention to marketing activities Therefore, domestic paint products have not persuaded the customers Consequently, domestic paint market is still a thriving market of foreign paint companies such as Nippon 4 Oranges, ICI, Jotun…

Although, the need for using increasingly raises, many producers with many brand names including inside or outside Vietnam appear in the market Therefore, competition

is tougher and tougher and marketing is considered as the most important management of paint production companies in general and Tien Dong Joint Stock Company in particular

2.1.3 Vision

In order to becoming a strong brand name in the domestic market with JAVITEX, Tien Dong Company focuses on increase the product quality in order that the product is close to nature, friendly with environment and assures technical requirements, build and preserve Prestige in all circumstances All products of Tien Dong Company always meet customers‟ requirements At Trade Mark Spread Fair of Quang Ninh province in 2009, JAVITEX was ranked in Top 10 favorite trademark Therefore, the company always develops sustainably

At beginning, Tien Dong intended to focus on the pain types having moderate

However, after a period of consumption, the company finds that cheap product sale may affect the reputation, long –term development of the company and the target to build JAVITEX to become a strong brand name in domestic market is difficult to obtain Therefore, in 2008, Board of Director decided to produce and sell high-class paint products having preponderant quality compared to other paints

2.1.4 Main business lines

Tien Dong Joint Stock Company has registered many business fields, in which there are production and sales of paints However, ACRYNIC (called wall paint or liquid paint used to coat construction works‟ surface) has been the decisive product in the operation

of the company The company‟s factory with the capacity of 3000 tons per year is located

in Cai Lan Industrial Zone, Ha Long City that is near Cai Lan Port - an international port

in East Northern area of Vietnam

At the beginning, the company got many difficulties because the production technology is still new for the executive board After technology transfer, the company still hires experts of Vietnam Tropical Technical Institute to instruct the production Addition, due to the lack of the information on product market, distribution system development was not effective However, the investment gets many advantages; the Company basically completed workshop area and organized production activities

+ The product lines of Tien Dong Company

Tien Dong company makes production and trading of two kinds of main products which are wall paint and wall putty Used for inside and outside walls, with different characteristics in order to create the adaptation to environment, weather, climate, etc inside and outside the building

Wall paint consists of many product lines which are classified by the features and usages to create the appropriate use for each type of medium, high level work However, these product lines of the company are designed to meet the customers‟ tastes and needs in the rural areas, towns and townships in the Northern provinces of Vietnam This is the company's target market In this market, the company's target customers are those mostly having good incomes

Table 2.1 Product lines of paint, wall putty of JAVITEX brands Of Tien Dong company

INTERIOR PAINT PRODUCTS

- Good waterproof down

- Possible to be repeatedly cleaned

- Good waterproof down

- Possible to be repeatedly cleaned

- Good waterproof down

- Possible to be repeatedly cleaned

8 JAVITEX - Sealer interior

(Sealer interior paint) Sealer interior

- Being anti-bacterial anti-fungal

- Creating good adhesion for the coating layer

-Reducing the impact of exterior and interior thermal fluctuations

- High coverage

EXTERIOR PAINT PRODUCTS

1 JAVITEX - Glass

(Exterior shining paint) VB 400

- Shiny and beautiful painted surface

- Being anti-bacterial anti-fungal

- Good waterproof

- High coverage

- Being subject to harsh weather conditions

2 JAVITEX - Glass

(Exterior shining paint) VB 350

- Shiny and beautiful painted surface

- Being anti-bacterial anti-fungal

- Good thermal radiation

- Good waterproof

- High coverage

JAVITEX - Cover

(Exterior smooth paint) VM 300

- Smooth painted surface

- Good adhesion

- Good thermal radiation

- High coverage

4 JAVITEX - Cover

(Exterior smooth paint) VM 100

- Smooth painted surface

- Good adhesion

- High coverage

5 JAVITEX - Sealer exterior

(Sealer exterior paint) Sealer exterior

- Being anti-bacterial anti-fungal

- Creating good adhesion for coating layer

- Having capability of heat insulation

- Increasing the durability for paint

- High coverage

1 JAVITEX - Matit in

(Interior wall putty)

- Creating flat surface for the wall, increasing the hardness, gloss and adhesion to the coating layers

2 JAVITEX - Matit out

(Exterior wall putty) -

- Creating flat surface for the wall, increasing the hardness, gloss and adhesion to the coating layers

- Adapting to the sudden weather changes

Table 2.2 The proportion of each product line in total revenue

No Product name Product code Unit Net weight

(Kg)

Selling price(đồng)

The proportion

of total revenue

4 JAVITEX - Smooth

(Interior smooth paint) JM200

Tank 22.0 563,000 1.19% Can 4.7 183,000 0.17%

5 JAVITEX - Smooth

(Interior smooth paint) JM150

Tank 22.0 486,000 0.68% Can 4.7 175,000 0.04%

6 JAVITEX - Smooth

(Interior smooth paint) JM100

Tank 22.0 349,000 4.51% Can 4.7 129,000 0.28%

7 JAVITEX - Super White

(Interior superwhite paint) Superwhite

Tank 22.0 576,000 6.06% Can 4.7 192,000 0.52%

8 JAVITEX - Sealer interior

(Sealer interior paint) Sealer interior

Tank 21.0 697,000 15.11% Can 4.3 196,000 0.47%

11 JAVITEX - Cover

(Exterior smooth paint) VM300

Tank 22.0 808,000 3.14% Can 4.7 223,000 0.31%

KG 1.0 111,000 0.07%

12 JAVITEX - Cover

(Exterior smooth paint) VM100

Tank 22.0 666,000 2.93% Can 4.7 167,000 0.12%

13 JAVITEX - Sealer exterior (Sealer exterior paint) Sealer exterior Tank 21.0 973,000 10.73%

JAVITEX - Matit out

(Exterior wall putty)) Bag 38.0 210,000 1.03%

CommentFrom the above table showing that 2 paint lines of JB250 (Interior shining paint) and VB 400 (Exterior shining paint)

account for the highest proportion, and are mostly consumed in rural areas These are the up-market paint lines showing that in rural markets, up-market paint lines are interested by customers

2.2 EXTERNAL ENVIRONMENTAL ANALYSIS OF TIEN DONG CORPORATION

2.2.1 Macro environmental analysis

2.2.1.1 Political factors and the law

As one of the countries with stable political situation and security in the world, Vietnam is also an attractive investment environment in the region for investors inside as well as abroad the country

Vietnam is building an institutional market economy, the government shifted from direct intervention mechanism to the indirect mechanism of law by impacting on the business environment This makes a stable macro-economic environment and favorable

to businesses The State has issued many legal documents in order to create conditions for the production and business development as the Investment Law, Business Law, Intellectual Property Law, Commercial Law, Tax Law, Land Law

However, the current legal system of Vietnam is still insufficient and inadequate, administrative reforms have low results which partly affect the operation of the businesses The legal documents, especially the bylaws are not synchronized, there are many areas having overlapped documents which makes it difficult to apply The decree issued by the Government to guide the implementation of the Law; Circular issued by the Ministry to guide the implementation of the Decree and the guidelines of the authorities sometimes inconsistent, still in the condition of having the same legal document but is differently applied in each area It can cause effects to changes of supply and demand in the economy Paint manufacturing business is also influenced by policy and law, particularly the law on the State's investment and construction

Political factors and the current Vietnamese law shows that businesses in general and Tien Dong Co in particular have the following opportunities and challenges:

Opportunities:The political stability creates conditions for the sustainable and

long-term development strategy The law system is gradually improving according to the market-oriented tendency which has a positive impact on the economy It is a prerequisite for more healthy development of production and business activities

Currently, the Government is developing policies to support development of the real estate market, leading to the construction activities will be bustling again, so demands of

Threaten:The legal documents in investment and construction management are

overlapped, verbouse and don‟t link to the reality, which reduce the construction progress

of the investors in the short term

Policies to attract foreign investment to facilitate more foreign paint companies to invest in Vietnam, contributing to increased quantity of competitors for domestic enterprises, including Tien Dong Company

2.2.1.2 Economics Factor

In recent years, the Vietnamese consumer income raised substantially, so that the purchasing power has also increased Some parts of high-income consumers have a very high demand of consumptionwhich results in emerged stratification in income and buying Besides the difference in purchasing power between the resident strata, between urban and rural areas, plains and mountains

Table 2.3 The economy of Vietnam (Source: Data from the General Statistics Office)

Target In 2009 In 2010 In 2011 Estimated

2012

GDP growth rate / year 5,46% 6,78% 5,96% 5,03% The growth of construction industry 3,82% 7,03% 7,43% 5,18% Industrial – constructional structure in GDP 33,59% 34,07% 33,82% 34,57%

The average economic growth for the period from 2009-2012 is 5.8% (lower than in the period 2008 - 2011 is 6.77% / year) The growth rate of industry and construction increased 5.86% However the proportion of contribution to GDP of industry - construction structure is still modest (average of 34.26% of GDP) The growth rate of the construction industry covariances with the growth rate of GDP Vietnam is striving to become a modernized industrial country by 2020, development capacity of construction industry is low compared with its potentials; therefore, the problem which focuses all resources to the development of the industry is inevitable

Vietnam's macro economic grows dramatically and Vietnam is a developing country In construction industry, construction materials account for a high rate Among building materials, paint can also be regarded as the industry in the development stage

About inflation: due to increasing pressure from outside by the basic raw material prices and upward pressure from elements inside is very huge thanks to the raise in the price of coal, gas, electricity and basic salary In terms of purchasing power and income have not improved, businesses also have to adjust prices to offset rising costs

Regarding monetary policy, in 2012 the credit markets is tightened State Bank has made the movement to one side to curb inflationary pressures, on the one hand to relieve business loans with high interest rates With the efforts of the State Bank, hoping that credit markets in 2013 will be stable in the interest rate; actually lower than in 2012

To 2013, credit growth could be maintained between 15% - 17% as the Government's target due to inflationary pressures remain high This affects the business activities of enterprises in accessing bank loans

Risk on the trade deficit and balance of payments deficit will remain, but withweakened VND in recent years along with measures of dollar deposit interest rate cap to the economic organization also helps to stabilize the situation It can be seen that, the balance of macro economic policies has a key role in dealing with the problem of inflation, balance of payments deficits, exchange rates and creatation a foundation for sustainable and long-term growth If the Government priorities stable macroeconomic issues, GDP growth may be lower than the target set, it will help the economy to return

to potential growth status in a sustainable way

In 2012, VN-Index ranges from 300 points to 500 points Economy in 2013 is still

in orbit back to the recovery of the growth which will be the basis for potential stock market growth However, with the drag on the process of going up and macro economic issues such as inflation, exchange rates, trade deficit, it is difficult to expect the market to grow as before Monetary policy and credit market conditions will be the key factor leading market fluctuations Vibrant stock market will be the channel to raise capital quickly and greatest

Stock market downturn makes the channel to raise capital through the issuance of shares, corporate bonds facing many difficulties However, with the impact of the government to stabilize the gold market and support the quiet real estate market over the time has been seen as a chance for the stock market recovery leading investors turn to invest in this market which contributes to business development

According to a recent report by the Government announced "Vietnam per capita income