Business strategy of Thu Duc electro-mechanical joint stock company

Quantitative strategic planning matrix QSPM……… 18 Chapter 2: EMC’s INTERNAL AND EXTERNAL BUSINESS ENVIRONMENT ANALYSIS 2.1.. vi/129 LIST OF TABLES Table 1.5 Quantitative strategic plan

GRIGGS UNIVERSITY

GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

CAPSTONE PROJECT REPORT

BUSINESS STRATEGY OF THU DUC ELECTRO-MECHANICAL

JOINT STOCK COMPANY

STAGE 2010 – 2020, VISION 2025

GROUP 3:

Do Thi Minh

Le Thi Thang Bui Phuoc Quang Nguyen Duy Quoc Viet Nguyen Phan Quoc Phong

HA NOI 2009

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ACKNOWLEDGEMENT and ASSURING

First, our group would like to thank Dr Soren Kirchner for his imparting knowledge of strategies management and Dr Hoang Lam Tinh, who guided us on this capstone project implementation

Sincerely thanks the trainers in the professional team of Griggs University in Vietnam, who guided us on revising this capstone project

Sincerely thanks the lecturers communicating the knowledge, which was more or less integrated in this capstone project, throughout the curriculum

Sincerely thanks the leaders and colleagues at EMC, industrial experts, who gave

us many suggestions during the capstone project implementation

Sincerely thanks the support of class managers during this capstone project implementation as well as throughout the curriculum

Sincerely thanks Electric Power College of Ho Chi Minh City, who has provided the best facilities during school

We would like to assure that this capstone project is our own research The other similar works are only used as sources of reference and clearly stated in the part of references

Sincerely,

Group 3

TABLE OF CONTENTS

Template cover……… i

Acknowledgement and assuring ……… ii

Content……… iii

List of symbols, abbreviations……… vi

List of tables……… vii

List of figures……… viii

About capstone project ……… 1

Chapter 1: ARGUMENT BASIS OF STRATEGY AND DEVELOPING

BUSINESS STRATEGY 1.1 Overview of business strategy……… 4

1.1.1 Concept of business strategy……… 4

1.1.2 Business strategy sorting ……… 4

1.1.3 Strategy of business unit ……… 5

1.2 Process of strategy……… 6

1.2.1 Identifying objectives ……… 7

1.2.2 Analyzing external environment and internal situation ……… 8

1.2.3 Business strategies establishment ……… 13

1.2.4 Solutions for strategies performance……… 13

1.2.5 Business strategy efficiency assessment……… 14

1.3 Basic matrices for strategies establishment ……… 14

1.3.1 External factor evaluation matrix……… 14

1.3.2 Internal factor evaluation matrix……… 15

1.3.3 Competition image matrix……… 16

1.3.4 SWOT Matrix……… 17

1.3.5 Quantitative strategic planning matrix (QSPM)……… 18

Chapter 2: EMC’s INTERNAL AND EXTERNAL BUSINESS ENVIRONMENT ANALYSIS 2.1 General information about EMC……… 20

2.2 EMC’s manufacture and business situation analysis ……… 22

2.2.1 Research on customer’ evaluation to EMC……… 22

2.2.2 Analyzing EMC’s value chain……… 32

2.2.3 Internal factor evaluation matrix ……… 41

2.3 EMC’s external business environment analysis……… 42

2.3.1 Macroeconomics environment analysis ……… 42

2.3.2 Microeconomics environment analysis ……… 44

2.3.3 External factor evaluation matrix 49

2.3.4 Competitive image matrix ……… 51

2.4 SWOT matrix ……… 53

Chapter 3: DEVELOPING THE BUSINESS STRATEGY FOR EMC OVER

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THE PERIOD OF 2010 – 2020, VISION 2025

3.1 Missions and targets of EMC until 2020 55

3.1.1 Missions of EMC 55

3.1.2 Basics of Target Setting 56

3.1.3 EMC’s Business Targets until 2020……… 56

3.2 Developing strategies 57

3.2.1 Analysis of the SWOT Matrix to Develop Response Strategies ……… 57

3.2.2 Analysis of Company-LevelStrategies 64

3.2.3 Choosing the Company-Level Strategies ……… 70

3.2.4 Analysis of Main SBU-Level Strategies ……… 73

3.3 Solutions to the performance of strategies 76

3.3.1 Solutions to Investments 76

3.3.2 Solutions to Human Resources 77

3.3.3 Solutions to the Company’s Structure 78

3.3.4 Solutions to the Communications System 79

3.3.5 Solutions to Research & Development 80

3.3.6 Solutions to the Production Management 81

3.3.7 Solutions to Finance 83

3.3.8 Solutions to Marketing 84

3.4 Propositions 88

Conclusion 91

Reference material……… 93

List of appendices 95

LIST OF SYMBOLS AND ABBREVIATIONS Symbols,

Abbreviations

Writing full

THIBIDI THIBIDI Electrical Equipment Joint Stock Company

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LIST OF TABLES

Table 1.5 Quantitative strategic planning matrix form 19

Table 2.1 Sample’s structure according to use purposes 24

Table 2.2 Comparing the expectation level and the satisfaction level for

Table 2.3 Comparing expectation and satisfaction levels of criteria 29

Table 2.4 EMC’s yield statistics from 2000 to 2008 33

Table 2.5 EMC’s revenue statistics from 2002 to 2008 34

Table 2.6 EMC’s financial situation from 2002 to 2009F 39

Table 2.7 Internal factors evaluation matrix (IFE) 41

Table 2.8 External factors evaluation matrix (EFE) 50

Table 2.10 The revenue density according to use objectives 99

Table 3.1 QSPM.1 matrix – Choosing growth strategy 71

Table 3.2 QSPM.2 matrix – Choosing concentrated growth strategy 72

Table 3.3 Analysis of customer properties of SBU for distribution TFR 73

LIST OF FIGURES

Figure 1.1 Diagram of planning business strategies process 7

Figure 1.2 Diagram of the pressure model of Michael Porter 10

Figure 1.3 The business value chain diagram 12

Figure 2.4 Diagram of EMC’s products distribution channels 36

Figure 2.5 Financial situation chart 2002 – 2009F 40

Figure 3.1 The Matrix of Response Strategies 64

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BUSINESS STRATEGY

OF THU DUC ELECTRO-MECHANICAL

JOINT STOCK COMPANY STAGE 2010 – 2020, VISION 2025

ABOUT CAPSTONE PROJECT

Joining WTO, Vietnam enterprises are getting both opportunities and challenges to

improve the competitiveness of enterprises is very important With the WTO playing field, the games require more intelligence, more long-term vision

Domestic transformers (TFR) industry is getting opportunities of fast market demand growth However, with the global and regional economic integration, competitive pressure is also increasing Victory will belong to the enterprise, whoever can do the objectives planning, can take advantage of opportunities and strengths to handle weaknesses and overcome challenges In other words, to survive and develop in the market mechanism, we must have a reasonable strategy This is also the foible of most small and medium enterprises in Vietnam

THU DUC ELECTRO-MECHANICAL JOINT STOCK CO., (EMC) is a

member of the Electricity of Vietnam (EVN) specializing in the field of TFR manufacturing and repairing Operating under the market mechanism since 2008, EMC's leaders always have to make long-term decisions which are very important

in deciding the company’s destiny, but to build an overall long-term strategy according to a logical process was not mentioned With this context, we, group 3,

selected the topic "Business strategy of Thu Duc Electro-Mechanical Joint Stock Company - Period 2010-2020, vision 2025”

 The necessity of topic:

We chose the landmark moment in 2020 and vision 2025 to build the EMC development strategy because by 2020 we are expecting the first nuclear power

plant1 and a second plant will be completed during 2020 - 2025 This event will indirectly create a powerful push for TFR industry to develop TFR manufacturers should have a wait-in-front strategy to dominate the sudden increase of the market Moreover, the solution we suggest in this topic should be implemented through several phases of investment and 15 years is the necessary time for it to be fully effective

 Practical significance of the topic:

Although strategy is a relative field and has a strong private character of high-level administrators, with the theoretical basis drawn from various sources, and proved

by the practice, combined with reasoning, logical analysis, we believe that the capstone project can be applied in the process of EMC development planning with appropriate editing style of leadership

 Purpose of the topic

Purpose of the topic is planning the development strategy till 2020 to improve the competitive position of EMC and propose solutions to implement the strategy

 Operation Method

- Customers Survey, using SPSS tool to process data, identify key factors that make up the competitive advantage; EMC strength and weakness from the point of its customers

- Analysis of actual situation of EMC operation, using of expert method, combined with customer survey results to identify EMC strength and weakness

- Analysis of macro and micro environmental impacts, using expert method

to define opportunities and challenges for EMC operation

- Using the matrix method to set out the responsive strategies

- Offer solutions to implement the company strategy

 Structure of the capstone project

1 “ 2014 building the first nuclear power plant ” -

Address: Km 9, Hanoi Road, Truong Tho Ward, Thu Duc District,

Ho Chi Minh City

Chapter 1:

ARGUMENT BASIS OF STRATEGY AND DEVELOPING

BUSINESS STRATEGY 1.1 OVERVIEW OF BUSINESS STRATEGY

1.1.1 Concept of business strategy:

Strategy is a term appeared very early It was initially used in military and was understood as means to achieve long-term goals

Business strategy is attached in the field of economy and is understood in different ways These following understandings are relatively common:

- By Fred David, strategies are means to achieve long-term goals

- By Alfred Chadler, strategy is to define basic and long-term objectives of a business and to propose a course of action and distribution of necessary resources to implement that goal

So, we can say business strategy provides "a vision" of a desired development process and the consistency of the undertaken measures Strategies can be the basis for a short-term and medium term comprehensive development plan, or an unbounded general awareness of the prospects, challenges and desired response by the insiders during that period

In general, definitions of business strategy, though have differences, but basically consist of the following:

 Identifying short-term and long-term goals of the organization

 Setting and choosing solutions to achieve the goal

 Deploying and allocating resources to achieve the objectives

In current competitive environment, we can say business strategy is to identify business objectives, plan and allocate resources of the enterprise to create competitive advantages to achieve business goals in the best way

1.1.2 Business strategy sorting

1.1.2.1 Based on the strategic scope

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+ General Strategies: Refer to the key long-term issues, related to a

significant survival of the business

+ Divisional Strategies: such as a product strategy, pricing strategy, strategy

of marketing, strategy of sales service

These two strategies are closely linked and parallelly exist with each other to solve important objective of the business

1.1.2.2 Based on the strategic nature

+ Product Strategy

+ Marketing strategy

+ Investment Strategy

+ Competitive Strategy

1.1.2.3 Based on the strategic level

+ Strategy at company level: Refer to the overall objective and scope of the

business to meet the expectations of the capital contributors This is an important level because it is heavily influenced by investors of the business, and in the same time, it guides the process of strategic decision making across the enterprise Business Strategy is often clearly presented in a "mission statement"

+ Strategy at business unit level: more related to how a business can

compete successfully in a specific market It relates to strategic decisions about product selection, meeting customer needs, gaining competitive advantages over competitors, exploiting and creating new opportunities, etc

+ Strategy at functional level: Refer to how the individual departments in

enterprise will be held to achieve the strategic direction at company and each department level Therefore, industrial cooperation strategy focuses on issues of resources, process and people, etc

1.1.3 Strategy of business unit

1.1.3.1 Competitive strategy by Michael Porter:

+ Cost Leadership (low cost): compete by creating products or services with possible lowest cost Then business can sell more goods with average price and make large profits

+ Differentiation: compete by creating a difference that is incompatible to other businesses This difference can be product quality, delivery time, brand awareness, wide distribution network

+ Concentration: compete by focus all resources and strength on a product, a segment or a particular group of customers

Michael Porter has stressed that if enterprises do not choose one of the above strategies, they will not have competitive advantage

1.1.3.2 Competitive strategies by Philip Kotler:

+ Market-Leader Strategy: This is a strategy applied by the leading enterprise

in that industry It includes occupying the majority of market share, leading market

in product price change, launching new products, control distribution system

+ Market-Challenger Strategy: This is a strategy applied by the challengers

of leading position The most important objective is to subvert or at least to approach the position of market leaders

+ Market-Follower Strategy: This is a strategy of whom following in the tail

of market These enterprises do not have to do much invention or creation What these businesses do is imitating business policies, products, pricing, and distribution like leading enterprise

+ Market-Nicher Strategy: This is a strategy of enterprises who do not want

to compete in big markets, but want to become a leader in the small market - a market segment that they "create" out

1.2 PROCESS OF STRATEGY CONSTRUCTION

Process of planning business strategies includes such stages as:

- Formation of strategies stage

- Implementation of strategies stage

- Assessment of strategies stage

A strategic plan beginning with a business mission has been clearly defined Mintzberg defines the mission as follows: "A mission lets others know the basic functions of an organization in the society considered in the aspects of goods and services it produced to serve its customers"

1.2.1 Identifying objectives

Goal is the expected result of an organization after a certain time

Strategic objectives include such following characteristics as:

 Reasonability: Human is an important element It is both subject and object; therefore, the objectives have to ensure reasonability

 Flexibility: objectives must have ability to adapt to the environment fluctuation

 Specificity: It is the specialization of the objectives They have to attach to each unit and must be separated Each unit has its own goals to strive and to achieve

1.2.2 Analyzing external environment and internal situation

Scholar Michael Porter has confirmed that: "The major nature of the formation of competitive strategic plan is to attach the company to its environment Environments of companies always have customers (existing and potential customers), competitors (present and future), suppliers and policy makers

1.2.2.1 Analysis of external environmental factors

 Macro environment: affects all activities of the enterprise Macro

environment consists of the following factors:

o Economic factors

- Status of the macroeconomic environment determines the health, prosperity

of the economy It always causes impacts on businesses and industries

- Economic environment says about the nature and orientation of the economy in which businesses operate Effects of the economy on a company can change its ability to create value and income Four important factors in the macroeconomic environment: growth rate of the economy, interest rates, exchange rates, inflation rates

o Technological factors

- Changing of technology impacts on many parts of society Technology includes institutions and activities related to creating new knowledge which shifted

to the output of new products, processes and materials

- Changing of technology includes both creation and destruction, both opportunities and threats

Concerning social attitudes and cultural values

+ The value of cultural and social attitudes creates the foundation of society + Social change also creates opportunities and threats

o Demographic factors

The demographic segment in the macro environment related to population, age structure, geographic distribution, ethnic communities and income distribution

o Legal and Political factors

- Legal and political factors also significantly affect the extent of opportunities and threats from the environment

- The main point is the interaction way between business and government

- With continuous changing, this segment will significantly affect competition

- These factors need analysis: new philosophy and policies related to governmental management; Antitrust Law, Tax Law; the industries selected to adjust or to get priority; Labor Law; areas in which state management policies can impact on operations and profitability of the industry or business

- On a global scale, companies also have to face a range of concerned issues

of politics and law, trading policies, and multinational protection barriers

o Global Environment

- Including concerned global markets, current changing markets, important international political events, basic institutional and cultural features in the global markets

- Globalization of the markets creates both opportunities and threats

Micro-environment consists of external factors which directly affect the enterprises

It decides the nature and level of competition in that business industry According to the model of 5 competitive forces of Michael Porter, the intensity of competition in the market of an industry is affected by these five following competitive forces: (1) The power of suppliers, (2) The power of customers; (3) The risk from potential competitor, (4) Threat from substitute products; (5) Level of competition among the companies in the industry These relationships are expressed by the following diagram:

o Pressure from suppliers:

Number and size of suppliers, the ability to replace the product providers, information of suppliers Suppliers provide the enterprise input materials and equipments They can be a threat when they push up the price or want to reduce the input quality requirements They can be an opportunity when we can cut down the price and require for a higher input quality

Negotiation power

Alternate Products

Threat from future competitors

Negotiation power

Threat from the alternate products or services

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o Pressure from customers:

Customer is a competitive pressure that can directly affect the entire production and business activities of the industry Customers often cause pressure on price, product quality, accompany services They are the one, who driving the competition in the industry through their buying decisions

o Competitive pressure from potential competitors:

Potential competitors are enterprises who are not currently available in the industry but may affect the industry in the future The number and the pressure of these potential competitors depend on these following factors:

+ The attractiveness of the industry: this factor is expressed through such indicators as ratio of profit, number of customers, and number of enterprises in the industry

+ The barriers from joining the industry

o Competitive pressure from substitute products

Substitute products and services are the ones that can meet the equivalent demand

as the available products and services in the industry The emergence of substitute products is very diverse and complex, creating the risk of strong price competition with old products Advance of scientific techniques and technology is a factor giving rise of substitute products

o Competitive pressure within the industry

Enterprises doing business in the industry will compete directly with each other to create pressure, making the competitive intensity stronger and stronger In an industry, the following factors will increase competitive pressure on competitors:

+ Industrial status: demands, growth rate, the number of competitors + Structure of the industry: concentration or dispersion

+ Exit barrier: like the barriers prevent from joining the industry, exit barriers are factors making withdrawal of the enterprise from the industry difficult

1.2.2.2 Internal situation analysis

Each agency has specific advantages and disadvantages in its divisions It is not

possible to have an entrepreneur who is either totally strong or weak in all fields The internal environment evaluation means checking and assessing all aspects of an agency, relationship between divisions, and indicating strong and weak points encountered by an entrepreneur This evaluation is considered to be the premise for utilizing and promoting advantages as well as minimizing and overcoming existing disadvantages The internal environment includes all factors and systems inside an entrepreneur that enables to determine advantages and disadvantages of agency On the above basis, solutions are established to restrict disadvantages and to promote advantages that result in the utmost benefits Also, the internal factors mainly include functional fields such as: infrastructure, human resource, research and development, production, finance & accounting, marketing and general institutional foundation

The value chain is an aggregation of company related actions that increases values for customers

Figure 1.3: The business value chain diagram.

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1.2.3 Business strategies establishment

This process is related to the comprehensive knowledge of expectations nature of capital contributors (“basic rule”) to define strategic options, and then to evaluate

and select strategic options

+ Product strategy: this is the business method on the basis of satisfying market demands in a certain stage

Selecting products supplied to the target markets, and identifying type and quantity of provided products, price, size, model and other issues in regard to products are performed so as to better meet target markets’ needs and to obtain objectives proposed

by entrepreneurs In terms of product strategies, entrepreneurs have many ways to select, produce and provide many types of various products or fix several products of many types

+ Price strategy: The entrepreneur should carefully consider whether the price

is suitable to consumers and how to stimulate them to buy its goods The given price must make up for expenses and generate profit

+ Distribution strategy: The distribution channel system is arranged to bring products to target markets quickly

+ Promotion strategy: This is the supportive strategy in brand building, and entrepreneur image improvement for entrepreneurs in order to reach as many

customers as possible

1.2.4 Solutions for strategies performance

This is often the most difficult part Once a strategy has been analyzed and

selected, the subsequent task is to turn the strategy into the instructional actions

Thus, this is really a very important step deciding whether the strategy comes into practice The success or failure of strategy implementation depends not only

on the strategy quality but also on leaders’ competence The leader is required to give solutions in regard to human and financial resources, as well as business management and production manufacture organization, etc in order to execute the established business strategies

1.2.5 Business strategy efficiency assessment

In the strategies performance, should we regularly hold inspection and review works whether the strategies can be carried out in accordance with schedules or not? If the strategy is not satisfactory, we must consider reasons, due to outside or internal business Thus, before planning a business strategy, it is necessary to check and inspect the strategy feasibility to timely adjust or replace unreasonable matters as well

as to review the business strategy efficiency after the implementation period

1.3 BASIC MATRICES FOR STRATEGIES ESTABLISHMENT

1.3.1 External factor evaluation matrix

The external factor assessment enables strategists to summarize and assess information of economy, society, culture, population, geography, policy, Government, law, technology and competitiveness

There are five steps to develop an external factor evaluation matrix:

 Step 1 – Forming an external factors rating which play decisive roles in

the company success, including opportunities and threats influencing on company and its business fields

 Step 2 – Classifying the significance from 0.0 (not significant) to 1,0

(extremely significant) for each element This rating indicates the relevant importance

of the element to the company business field success

The opportunities rating is usually at higher level as compared to threats; however, threats can be rated at high level in case of serious or threatening traits

The whole rating specified for these factors must be equal to 1.0

 Step 3 – Rating from 1 to 4 for each factor determining success to

show how the company current strategies react to these aspects, among which response 4 is the best, and responses 3, 2 and 1 are above mean, mean and the worst respectively These levels are rated, depending on the company strategy performance Therefore, the rating is originally based on the company

 Step 4 – Multiplying the significance of each variable with its kind to

determine the significance mark

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 Step 5 – Adding the total mark of significance to each variable to define

the total significance mark for organization

Regardless of any major opportunities and threats included in the external factor evaluation matrix, the total maximum significance mark possibly achieved by an agency is 4.0 and the lowest mark is 1.0; the total significance mark is 2.5

Evaluation: the total significance mark of 4 points indicates that the agency’s

response is very positive to current opportunities and threats in their environment Meanwhile, the total mark of 1 point suggests that the company’s proposed strategies do not utilize opportunities or avoid external threats

Table 1.1: External factor matrix form

1.3.2 Internal factor evaluation matrix

The internal factor matrix is one used for assessing internal elements influencing on company activities, including strong and weak points of company

How to build this matrix:

- Forming the list of all internal elements influencing on company activities, then evaluating the effect or significance of each factor by marking weight and calculating whole weights equal to 1 or 100%

- Accessing the company response rates for elements by classifying aspects from

1 to 4, among which the rates 4 and 1 are the best and the worst responses of company respectively Next, marking the significance of each element by multiplying the weight with the corresponding rating mark, and then adding them together in order to find out the total significance mark for company Significance marks of the highest, lowest and mean are points of 4, 1 and 2.5 respectively

Evaluation: If the total significance mark is 4, it is meant that the company has

a lot of strengths and is capable of overcoming weaknesses Meanwhile, if the total

significance mark is 1, it is indicated that the company lacks strengths and unable to overcome its weaknesses

Table 1.2: Internal factor matrix form

1.3.3 Competitive image matrix

This matrix establishment is to provide evaluations of company as compared to competitors mainly in the same industry that is based on elements affecting the competitive capability of company in the industry Through these evaluations, administrators can acknowledge their company’s strengths and weaknesses in comparison with competitors, as well as define the competitive advantages for their company and weaknesses which need overcoming To construct a competition image matrix, it is required to conduct five steps as follows:

 Step 1: Forming a list of about 10 main elements remarkably affecting the company’s competitive capability in the industry

 Step 2: Rating the significance from 0.0 (Not significant) to 1.0 (Extremely significant) for each factor The significance of each factor depends on its influence level on the company’s competitive capability in the industry The total significance mark of all elements must be equal to 1.0

 Step 3: Determining the rating from 1 to 4 for each element, depending on the company’s capability to each factor Among which, points including 4, 3, 2, and

1 are rated as good, above mean, mean and poor respectively

 Step 4: Multiplying the significance of each element with the company’s rating to define marks for those elements

 Step 5: Adding the mark of all elements to define the total

Evaluation: Comparing the total mark of company with that of major

competitor in the industry to evaluate the competitive capability of company

Table 1.4: SWOT Matrix form

Upholding strengths to utilize opportunities

S – T COMBINATION:

Upholding strengths to avoid threats

Overcoming weaknesses to utilize opportunities

W - T COMBINATION:

Overcoming weaknesses to avoid threats

The matrix of weaknesses – strengths, opportunities – threats (SWOT) is an important integrated tool that can help administrators develop four types of strategies

as follows: strengths – opportunities (SO), weaknesses- opportunities (WO), strengths

External factors

Internal factors

- threats (ST), and weaknesses - threats (WT) The combination between important internal and external factors is the most troublesome task in developing a SWOT matrix because it requires good judgments and it is impossible to reach the best combination

To form a SWOT matrix, it is required to carry out the following eight steps:

Step 1- Listing key strengths inside the company

Step 2 – Listing key weaknesses inside the company

Step 3 – Listing great opportunities outside the company

Step 4 - Listing important threats outside the company

Step 5 – Associating internal strengths with external opportunities and noting

results of SO strategy in appropriate boxes

Step 6 – Associating internal weaknesses with external opportunities and

recording the WO strategy’s results

Step 7 – Associating internal strengths with external threats and recording ST

1.3.5 Quantitative Strategic Planning Matrix (QSPM):

The QSPM was established to evaluate the strategies’s attraction which was base for choosing the preferred strategy in group alternative

Method to establish the QSPM [8, tr289]:

- Step 1: Listing the external opportunities and threats, the internal strenghts and

weaknesses (column 1) Assembling information from IFE and EFE matrices

- Step 2: Rating each of the importance successful internal and external factors

Assembling information from IFE and EFE matrices

- Step 3: Determining group of strategies alternative which are compared (line 2,

column alternative strategies)

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- Step 4: Determining strategy’s attractive mark aganst each of factors (column 3,

column 5) Explaining base to evaluate attraction (column 7)

- Step 5: Caculating total attractive mark of the strategies according to each of

factors (column 4 = column 2 x column 3; column 6 = column 2 x column 5)

- Step 6: Summing attractive mark of each strategy in all factors

Evaluation: The strategy which have total attractive mark (final line) highest was evaluated most attractive and should referred to chose

Table 1.5: Quantitative Strategic Planning Matrix form (QSPM)

Chapter 2:

ENVIRONMENT ANALYSIS

2.1 GENERAL INFORMATION ABOUT EMC

EMC’s forerunner was Diesel Factory under Power Company 2 This factory is specialized in repairing Diesel generators for the South Electricity Network In

1984, the TFR repair section was merged into the factory In 1988, it took charge of the United Nation Development Program on the producing devices Since 1990, EMC has begun conducting researches on manufacturing TFR In 1991, the first generation of TFR was released –an important milestone marking the fundamental shift from repairing to manufacturing TFR In 1995, the factory’s name was changed into Electro-Mechanical Repairing Factory under the control of Power Company 2 In 1996, the first generation of 110kV TFR was released, building up the strategic business unit (SBU) In October, 1999, the factory was separated from the Power Company 2 and formed Thu Duc Electro-Mechanical Company, which is

a state-run unit and a member of Vietnam Electricity (EVN) In 2006, the company’s TFRs were transferred into the majoring list of products of HoChiMinh City Following the state’s privatization policy, since January 2nd, 2008, the Company is called Thu Duc Electro-Mechanical Joint Stock Company with the major function as producing the distributing TFRs, transmitting TFRs, repairing TFRs, repairing diesel generator, manufacturing hydro-mechanical parts, generating thermoelectricity, producing steel wire and transformer stations, among which the functions of producing distributing TFRs and transferring TFRs are the two main focuses

At present, EMC has a unique headquarter including both operating offices and producing factory at: milestone 9 – Hanoi Street – Truong Tho ward – Thu Duc district – Ho Chi Minh City The company operating system consists of approximately 10 functional departments and 10 manufacturing workshops

Product Quality Control Dept

Painting WS

Direction

Supervision

2.2 EMC’s MANUFACTURE AND BUSINESS SITUATION ANALYSIS 2.2.1 Research on customer’ evaluation to EMC

 Data analysis method

See details in Appendix 2.1: Research’s method

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Figure 2.2: Research processes

Theoretical base

+ Experts’ experience

Interview outline

Face-to-face discussion

n = 6

Draft Questionnaire Table

Test survey

n = 8

Interview Questionnaire Table

2.2.1.2 Research’s results

 Properties of survey sample

Among 200 collected questionnaire tables, 18 observations are removed because the data are either missing or invalid, and 182 valid observations are used as analysis data

The command: Analyze  Descriptive Statistics  Frequencies is used for

describing the variables frequency in the model according to customer groups

Table 2.1: Sample’s structure according to use purposes

structure

Revenue ratio structure

Install transformer station for

 Research’s result analysis

 Scale verification

The command: Analyze  Scale  Reliability Analysis is used to verify the scale

of importance measuring concepts This tool helps remove unsatisfactory variables The selection standard is Cronback’s alpha coefficient 0.7 and above Hoàng Trọng and Chu Nguyễn Mộng Ngọc say that:

Many researchers say that when coefficient of Cronback alpha 0.8 and above closely comes to 1, the measuring scale is good, and from 0.7 to

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nearly 8 is acceptable Another researchers suggest that Cronback alpha 0.6 and above is accessible in case the concept being researched is new or new

to the answerers in the research context.[16, p.257 – 258]

The verification results shows that one variable (v11d: Price correspond with quality) is excluded, meanwhile, the rest of variables matching conditions are taken

to the follow-up analysis The Cronback alpha factors of concepts scale get from 0,7430 to 0,8959

Appendix 2.2: Verification of initial concepts scale

 Factor analysis

The command: Analyze  Data Reduction  Factor is used to shorten criteria

into core factors, creating competitive advantages in the TFR market

The standards of factor analysis include: factor KMO2 ≥ 0.5; significance of the Bartlett verification ≤ 0.05; coefficient of Factor loading3 > 0.5; Eigenvalue4 >1 and Total variance explained ≥ 50%

The result of factors analysis shows that two variables do not meet the conditions of

the factor loading coefficient > 0.5, so both are removed They are variables: v12d: Promotion and v15d: Flexible payment method Twenty six remaining variables

have factor loading coefficients from 0,592 to 0,888 and are shortened to 5 factors The KMO coefficient = 0,916 and the Bartlett verification of the sig level = 0,000 show that the observation variables interrelate each other on the general scale [16, p.264]

2 Kaiser-Meyer-Olkin (KMO) measure of sampling adequacy: an index used for considering the

appropriateness of factors analysis The high value of KMO (from 0,5 to 1) means that the factors analysis is suitable Whereas, if this value is smaller than 0.5, the factors analysis is likely unsuitable with data [16, p.262]

3 According to Hair & ctg (1998, 111), Factor loading is a target used for ensuring practical significances of EFA The factor loading with coefficients > 0.3, > 0.4, and ≥ 0.5 is ruled as the minimal, significant, and practically significant respectively Hair & ctg (1998,111) also recommend readers as follows: in case of selecting a standard of Factor loading > 0.3, the sample size must be at least 350, and if sample sizes are approximately 100 and 50, standards of Factor loading must be > 0.55, > 0.75 respectively [5, p.44]

4 Factors with eigenvalue < 1 will not affect on summarizing information that is better than an original

variable, because each variable’s variance will be 1 after be standardized [16, p.265]

The explained variance obtains 70,546% This shows that 5 shortened factors explain the 70.546% date variance [16, p.262 – 263] proving the appropriateness of factors analysis

Appendix 2.3: Results of factors analysis

Appendix 2.4: The component criteria of 5 core factors

 Scale verification according to factors

After excluding two variables so-called v12d and v15d due to not meeting the factor

loading coefficient conditions, the five-factor scale shall be verified again The results show that the Cronback alpha coefficients of all-5-factor-scale reach from 0,8475 to 0,9120, so the factor scale is reliable

Appendix 2.5 : Verification of core factors scale

 Statistic analysis of variables description

The command: Analyze  Descriptive Statistics  Descriptives is used to

calculate mean values of variables measuring the significance and satisfaction levels

of EMC for each criterion

Appendix 2.6: The significance of each criterion (Customers’ expectations)

Comment: 24/26 criteria are evaluated to be higher than 3, equivalent to the

significance of above mean; 12/26 criteria are evaluated to be 3.8 and above, near to the significance (4 points) These criteria will be used as a basis of determining strengths and weaknesses of EMC thanks to the paired sample verification procedure

Appendix 2.7: The satisfaction level of EMC for each criterion

Comment: In terms of satisfaction levels assessed by customers, 24/26 criteria are

evaluated to be over mean; 13/26 criteria are evaluated to be 3.8 and above, near to the fairly good satisfaction level (4 points); two criteria are evaluated to be under

mean

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Perfectly Satisfactory

Q3 Well-known brand (4.07; 3.86) Q4 Transformer longevity (4.21; 3.95) Q5 Electrical energy loss (4.19; 4.01) Q7 Quality management process (3.51; 3.64) Q8 Color conformity (3.37; 3.63)

Q9 Neat dimension (3.58; 3.87) Q10 Pattern design (3.55; 3.78) Q13 Carefulness of sales department (3.13; 3.36) Q14 Transaction procedure convenient (3.27; 3.45) Q17 Delivery method convenient (3.66; 3.81) Q18 Design conformity to transport, unload (3.75; 3.91)

Q19 Design conformity to install (3.81; 3.97) Q20 Spare parts synchronous (3.79; 3.94) Q21 Introductions for assembly (3.41; 3.24) Q22 Uninterrupted operation (4.38; 4.01) Q23 Capability to withstand external breakdown (3.97; 3.13) Q24 Design conformity to view operation (3.43; 3.80) Q27 Period of warranty (3.87; 3.74)

Q28 Timeliness of breakdown repair (3.92; 4.60) Q29 Breakdown repair method flexible (3.81; 4.34) Q30 Sense of responsibility over against breakdown (3.84; 4.51) Q31 Maintain out of warranty (3.02; 3.41)

Q25 Introduction for operation

(2.47; 3.02) Q26 Spare parts in common

(2.48; 3.02)

Not important 3 Very important

Q6 Advanced manufacturing technology (3.86; 2.97) Q16 Delivery in time (3.84; 2.73)

Less satisfactory

Figure 2.3: Diagram “Expect – Satisfy”

 Strengths, weaknesses of company from customers’ viewpoints

 Comparing the customer expectations and satisfaction levels according

to core factors

The command: Transform  Compute is used to calculate the value of aggregate

variables according to each factor

See details in Appendix 2.8: Caculating the value of aggregate variables of 5 core factors

The command: Analyze  Compare Means  Paired-Samples T Test is

performed to verify the difference between expectation levels and satisfaction levels according to each factor pair

Table 2.2: Comparing the expectation level and the satisfaction level for core factors

Factors Core factors

Expectation levels - Mean

Satisfaction levels - Mean

Comments: The verification results have the Sig coefficients (2-tailed) ≤ 0.05; this

shows that the difference between customer expectation level and EMC satisfaction level according to each core factor is statistically significant Accordingly, EMC has

advantages of factors, including: Operation; Model and Transaction On the contrary, EMC does not fulfill customers’ expectations for factors including: Install and Brand – Product information

Appendix 2.9: The verification results of paired factors comparison

Table 2.3: Comparing expectation and satisfaction levels of criteria

Expectation level - Mean

Satisfaction level - Mean

Appendix 2.10: The verification results of paired criterion comparison

Comment: The verification results have Sig Coefficient (2-tailed) ≤ 0.05, proving

that the difference between customer expectation levels and EMC satisfaction levels according to each criterion is statistically significant

There are 4/12 criteria whose EMC satisfaction level is higher than customer expectation levels Among which, three criteria of factor 1 having great difference

can be considered as strengths of EMC The criteria include: Timeliness of

breakdown repair (-.68); Sense of responsibility over against breakdown (-.66) and Breakdown repair method flexible (-.53)

There are 8/12 criteria whose EMC satisfaction level is lower than customer

expectation one Weaknesses of EMC focus on 3 criteria of fairly great difference:

Delivery in time (1.10); Advanced manufacturing technology (.90) and Capability

to withstand external breakdown (.84) Especially, two criteria are evaluated to be under mean in terms of the satisfaction level by customers, including: Delivery in time (2.73) and Advanced manufacturing technology (2.97) These are the major

weaknesses to be overcome soon

 Summary of research results

There are five core factors creating the competitive advantage in the TFR market, and these factors are learned from objective criteria that customers care about upon choosing the TFR products purchase

The advantages of EMC cover factors including Operation, Model and Trade transaction; the weaknesses consist of factors: Brand – Product information and

Install

For the criteria-based assessment, EMC’s strengths and weaknesses focus on criteria having the great difference between expectation and satisfaction levels The specific information is set forth as follows:

 Strengths:

- Timeliness of breakdown repair: EMC has established a professional

system of situations processing that assures to minimize the interrupted time of electricity supply for customers

- Sense of responsibility over against breakdown: The customers highly

appreciatedthe EMC’s after-sales policies which are in accordance with reasonable rights assurance standards for customers

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- Breakdown repair method flexible: The EMC utilizes flexible processing

methods for customers to select without differentiating breakdowns responsibility from customers

In summary: All of 3 criteria which to satisfy customer’ requirements in operation step, so after-sales services are advantages of EMC

 Weaknesses:

- Delivery in time: The manufacture operation activities lack

synchronization that results in the delay of delivery schedule

- Advanced manufacturing technology: Machine and equipments are old,

backward and not in accordance with the value chain

- Capability to withstand external breakdown: The product technology has

not ensured the high safety in case the breakdown occurs from external electric networks that affects the TFR quality

In summary: In 3 criteria above, the first criterion belongs to the field of manufacture management and arrangement; the second and third one belong to the

field of infrastructure So both infrastructure and production organization are

weaknesses of EMC

 To apply the research’s results

The research’s results showed 5 core factors which creating advantage in the domestic TFR market and EMC’s strenghts, weaknesses, opportunities, threats in the cutomer’s opinion That results are combined with analyzing EMC’s value chain

to establish the internal factors evaluation matrix (IFE) and to point out EMC’s strenghts and weaknesses; That results are also combined with analyzing EMC’s external business environment to establish the external factors evaluation matrix (EFE) and to point out EMC’s opportunities and threats; Continue step, establishing the SWOT matrix base on strenghts, weaknesses, opportunities, threats which were specified

2.2.2 Analyzing EMC’s value chain

2.2.2.1 Supply activities

Most of the materials supplied to EMC’s production activities come from foreign import, as a result, the activities are influenced by the fluctuation of the world market and the currency exchange rates Since the floating capital is rather limited, EMC cannot store the materials in order to control the input costs In 2008, EMC directly imported and stored a great amount of copper (cathode) and electric steel plates (tole silic), stabilizing the strategic materials supply and controlling the production expenses However, because of small capital, the storage of a great quantity of materials has led to financial tensions in some certain periods

EMC has implemented the electromagnetic wire manufacture technology (main materials for TFR manufacture) This technology has enabled to meet 70 – 80% of the supplying demand with appropriate progress and at lower price

In summary: Controlling the strategic material supply is a unique strength of EMC

under the current pressure on the TFR production from the suppliers (detailed analysis in 2.3.2.2)

2.2.2.2 Production activity

Currently there are 10 workshops including: 3 workshops for producing and repairing distribution TFR, 1 workshop for repairing and producing transmission TFR, 2 mechanical workshops which serve the TFR production, 1 hydro-mechanical device workshop, 1 painting workshops, 1 copper wire workshop and 1 diesel generator repairing workshop

The production technology requires a great deal of labor The devices have already gone out of date; some are new and modern but do not belong to a complete production line The labor productivity is low The annual yield includes 7000 distribution TFR, 20 transmission TFR and 1000 tons of mechanical devices per year

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The value structure: TFR takes the highest percentage of the company’s output value; the output value of transmission TFR tends to rise In general, EMC still has unused production capacity

Table 2.4: EMC’s yield statistics from 2000 to 2008

Source: EMC’s statistical data [4]

In the field of quality controlling: EMC pays great attention to the quality controlling system (ISO-2001) from the designing process, trial manufacturing, importing materials to selling and storing products However, because the devices are old, inconsistent and because the labor demand for the technology is too high, the quality is not insured for every product On the other hand, the fact that there is

no regulation to trace the responsibility when there’s a fault product does not attach the laborer’s responsibility to the products’ quality As a result, the laborer’s working attitudes are not good

The inconsistent production organization is the reason leading to EMC’s late distribution The production technology and methods are EMC’s weaknesses, which accord with the research results in Chapter 3

In summary: Technology Production Line and Production Organization are

EMC’s weaknesses

2.2.2.3 Consuming Status

The sales have tendency to regularly rise every year The sales of distributing and transmission TFR are still the majority – from 85% to 95% Most of the sales are from domestic market The export sales only account for small percentage, mainly come from the exportation of TFR to Cambodia In 2009, EMC has achieved 2 first