Building busines strategy for advanced international Hanoi Joint Stock Company (AIC-HN) in 2012 - 2016 period

Advanced international joint stock company needs to have strategic orientation in attempt to stand firmly in supplying market of existing medical wastewater treatment technologies and pr

GRIGGS UNIVERSITY GLOBAL ADVANCED MASTER OF BUSINESS ADMINISTRATION PROGRAM

STRATEGIC MANAGEMENT BUILDING BUSINESS STRATEGY FOR ADVANCED

INTERNATIONAL HANOI JOINT STOCK COMPANY (AIC-

HN) IN 2012 -2016 PERIOD

Group Number: 2 Students’ name: Nguyen Hung Cuong

Nguyen Khanh Van

Bui Huy Hoang

Ho Ngoc Viet

Vu Quang Hoang Anh

HANOI 2012

CONFIRMATION OF ADVANCED INTERNATIONAL HANOI JOINT

STOCK COMPANY (AIC-HN)

We Advanced International Hanoi Joint Stock Company confirm that we the research group including the members mentioned below to be allowed to get access to the internal documents, data as well as contact with the operation fact to study about the strategic orientations of AIC-HN, serving the research purpose of the group to complete the MBA course:

1 Nguyen Hung Cuong

Nguyen Khanh Van

Bui Huy Hoang

TABLE OF CONTENTS

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1.3.1, POKER’ S S:f6FrCES MOE] sséieccsscssecosuscavevessscowscxevesessaxeseowencsuwecansesetesereseauseseteees 19

1.3.2: External factor evaluation tiatrix (EE) ssssssissssssssssssssccasssccessssssariscesvvonesenee 20 1.5.3 lntermial factor mnatEiS (UPB ccnwnscumasioninenummmnrcmmnmenmneunauens 2

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LG CSP NE MEPIS keugeendinddrtioistiL160133600903654446066886606594sỀeeckioingevgksli9neu4V51YBGLAG000/G00610E 25

CHAPER 2 ANALYSIS BUSINESS ENVIRONMENT OE AIC-HN Zi

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2A: SWOT HH V NỈ Ga án kásxsssegrootdbongsossxe6oViGIEENGGISGS.0L661681000300/340084380085600898640ã008 54

2 Ls SU OTICIS cecccrseccecameneranani WENT iietiemmeennnmmem 54

sat” VYGH KHE NẾ ÄueeuaabenadrdaibaiioiidSaElsassrssrssnEinress9VSYNGGSE40101009//000V000000/5901/0078810066 56 4.5% QPOTDHTẨEE san siaieesesedierstiiigiltieriISEEEkSSgWESsl34/5/66083/9559088-8666866861446010384 58 điả/G: THYCH Sueeeesesreenauerraatrroitorrtgtisiy600S00595/0185482ốbmexgeetresnsikÐtexv6490000000 007009989 60 2/5, SWUOT rđgtiixr 0E AT HN GaeeeeeenemoseennndddiidatiegsssgkGGIIGES9105404649/600460003 63 CHAPER 3 CHOOSING BUSINESS STRATEGY AND SOLUTIONS FOR AIC-

HN IN ‘THE PERIOD OF 2012 TO 2016 scccsmmmnnnxonneanmnsssncsssaaneaseneniennasonnnseo 65 3.1 Development objectives of AIC-HN up to 2 Í6 . <5 <5 5Ă<sssessesssess 65 3.1.1 Forecast on growth rate of wastewater treatment producfs: 65 3.1.2 Development objective of Advanced International Joint Stock Company

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LIST OF FIGURE AND TABLES

List of figures

Pare 1,02 PED 6 le cccerasenssncteitennd:nrewnenseneneersncnveennenarncaiiasneninenbaiaiaceanngnenenenee eieeterte 16 Pig) 1.27 BM Porter 6 116 TOrses IGE ccscrencnemerrecemenemeeneeameemenan 20 File 2.1; AI GSHN 5i@ffgariissiii SHUEEUTE scars exscusn een oonnensenccnaaiorminedascdinnnnmmnniomvnevewmens Lo Figure 2.2) Medical WaStewaler TESUMENE SYSTCNT cenrecnnvencrnmncxrenennnunensevsvenserencvemeeexucene 30 Figure 2.3; Uipanizatiot ii Viet trom 2000 16 2073 csssscncnceminmnennemnnmuoan 34 Figure 2.4: Market share of medical wastewater treatment market - - ao Figure 2.5: Supplier`s management system of AIC-HN Q.9 y2, 39 Figure 2.6: Steps of biological wastewater treatment technology . -«<- 41 tittire 2.7: L.aqbor siraeliure dÍ AI -ETN TÂN 21T eaaeaeaeeridddiitoekGG01100621964464038482ssex 44 Fipte 2.5: Custoiners str6tte 1Á HN guuseessereeesnorseeirrardsrvareerdirvregerginseiggeevs 56 Figure 2.9: Clean Investment FDI in Vietnam from 2006 to 2012 -<<<<<5 59 Pwilre 3.12 Cost Sttacture for AIC-HN products scccosssucamanenenencasnmenanaunumanmenene 73

List of tables

Tabie 1.1: ENNIGTDäI TRE LOT TNSITDN cacmnmeasenscuecns amen 21

Fable T.2: Internal fretor evaluation matrix (PE) «ssiiccsssdicrenrevsesmermveceecresnemermnenewenmecures ZZ

OES hE WT FE Dễugueeeerneeseeemsrorentraysrtinurnnfghotpg9EPPDESfERSESRSGTUESGE-I.000i070010G1603/5000 23 Table 2.1: Comparison of the technology of medical wastewater treatment system of AIGAFIN With, GEES COMPETE” oe secanconnc nena emenaeaennerEn RN ERncRRERRNER CNN NEN EERIE 37 Peete 2.00) The ey Ee Wate OL ALGAE suennynnoaeinntadagieitatoigtoglinoigitot00015ng3941088360000-33834018800g 42 Table 2.3: Growth rate and quality of work force in period 2005 —- 2011 45 Table 2.4: Comparison on technology of medical wastewater treatment companies 47 iable 2.5: Balance sheet of AIC-FIN 10 2008 = 2010 scence sass ansnssnsrnnnassspuasaucssdibeceetonenns 49 Table 2.6: Groep of Tinaweial ied BÍ AC cncccnennncersssmnmcanamemenenomneemenrsmranearnens 51 Tage duc he Terr ere GF ACA er omeracem mee 700360401006 53

Table 2.9: Competitive profile matrix of AIC-HN =5 1 1 1 6] 4L lð 2.100: l4 -EÍN 600 VU L TRÍ Nueaeureegtrtrntorooaogiitosertitaesttlig:8i439011800000G1 L2 0:49 383009/888018G 63

18016 0.1712.161 TA CHIA TT dang ẽỳaỳgaggatgqtRagGitaaditasleesof36ssessesesoorsestenrsersmteeee 68

Table 3,3¡ SUYSTEDI© THIHSIIGBINHOH SHÁD E8 seeeeseeenresesveveoodsestssosiioiVE3498201 000/00000014010/ 76

INTRODUCTION

1 Reasons for choosing the research topic:

Economic globalization is the inevitable trend of the world today; it dominates all economies in the world Vietnam’s membership of WTO has given many opportunities and challenges to Vietnam enterprises Therefore, to stay firmly and develop well in this cutthroat competitive environment, Vietnam enterprises have to figure out right directions and business development strategy

In coming years, Vietnam economy starts to develop steadily and the people's incomes increase higher The process of industrial activities has exhausted the natural resources, polluted the environment; consequently, the community’s living standards are degraded Nowadays, medical wastewater treatment from hospitals is a matter of great concerns, which is thought to develop together with the economic development Besides,

this matter is a burning issue and receives a lot of concerns from State, Ministries and

Branches In the current situation, not only inhabitants, the Government but also hospitals themselves require a good medical wastewater treatment before recharging into general treatment systems in order to have no impacts on surrounding environment Currently, there are many organizations being in need of being supplied with medical wastewater treatment system; and also there are many divisions at home and abroad expecting to meet these demands Advanced international joint stock company needs to have strategic orientation in attempt to stand firmly in supplying market of existing medical wastewater treatment technologies and products and have further development in the future

In order to make contribution to the development of Advanced International joint stock Company, we choose the topic: “Building business strategy of advanced international joint stock company Hanoi (AIC-HN) in the 2012-2016 period.”

2 Target and scope of the research

> Target: The target of this topic is have comprehensive evaluation on business Operation actuality of the Company and find out advantages and weaknesses,

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opportunities and threats in order to map out business strategy for the Company in the 2012-2016 period

In terms of the research group, this is a chance to apply learned theories on strategic management in a specific situation in order to experience by themselves and improve their knowledge, benefit the current jobs of the author group

» Research scope: advanced international joint stock Company is known as a company operating in various fields such as labor export, real estate investment, fund management and selling commercial products However, the research topic only focuses

on the aspect of supplying technological products on medical wastewater treatment Topic scope is building the theoretical basis on establishing the most basically business strategy for a company Regarding advanced international joint stock Company (AIC- HN-), the topic puts the emphasis on analyzing some basic factors affecting the establishment of business strategy in order to build appropriate business strategy for the Company in the 2012-2016 periods about providing medical wastewater treatment technical products The topic’s content includes:

Chapter 1: Theoretical basis on building business strategy: This chapter describes the concept on business strategy and the process of planning a business strategy

Chapter 2: Analysis on business environment of the Company: this part introduces the birth and development of company and major businesses Moreover, it introduces visions, missions and core values of the Company: analyzes external and internal environment in order to find out opportunities, strengths and weaknesses to build strategic plans

Chapter 3: Selecting strategic projects and implementing solutions: this part describes target of the Company until 2016, the Company’s selection of business strategies in the 2010-2016 periods At the same time, it raises solutions to implement that strategy and some proposals to the Company and the Government

3 Research method

This project focuses on researching analyzing all information, secondary data of most fundamental contents through mass media and directly from internal divisions of

advanced international joint stock Company

Research and establishment of matrixes on selecting strategies is carried out by specialized method referring to reference experts’ opinions specializing in products and business environment situation of medical wastewater treatment in Vietnam in order to set criteria and evaluation for those criteria This method is easy to implement but the disadvantage is that the accuracy of this method is lower than that of real survey because its results come from subjective opinions of experts However, this method's effectiveness is good enough for building a feasible business strategy

4 Scientific and practical meaning of research topic

> Scientific meaning: In market economy business strategies play a decisive role

in the success of company It is not only important to one specific company but also all companies In order to survive and develop in the market economy, it is a priority to have effective business strategy

>» There are different approaches to build a business strategy for a company The important meaning of this topic is collecting theories from various sources so as to map out the process of building business strategy basically and it must be easy to understand and implement

> Practical meaning: Business strategic establishment process is applied to build business strategy in the field of providing products of health waste water treatment for advanced international joint stock Company (AIC-HN)- a medium and small-sized company, mainly operating in terms of commerce, providing technological products on environmental treatment, in the 2012-2016 periods Therefore, research and proposal of this business strategy for AIC-HN Company is able to be applied for same size companies in commercial field

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CHAPER 1 THEORETICAL FOUNDATIONS ABOUT SETTING UP

BUSINESS STRATEGY

1.1 Concept and classification of business strategy:

1.1.1 Concept of business strategy:

“Strategy” a word of military origin, derives from a Greek word “Strategos” According io military theorist Clawzevit, military strategy is the art of commanding in upper hand position Strategy is the art of distributing and applying military means to gain the victory Today, strategy term is used in many various fields of the society; especially in economic field According to Fred R.David, strategy is means to obtain long-term goals; Johnson and Scholes re-defined the strategy in the conditions of the environment with a lot of speedy changes: “Strategy is the direction and scope of an organization over the long-term: which achieves advantages for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholders expectations” Similarly, there are many more definitions

In short, strategy is the planning of orientation and ways to obtain the planned targets

Business strategy: Bruce Henderson, a strategist cum the founder of Boston Consulting Groups said that “strategy is a deliberate search for a plan of action that will develop a business competitive advantage and compound it However, the difference between the competitors and you is the foundation of your advantages”

In today’s competitive environment, it can be said that business strategy is create competitive advantages for the purpose of obtaining business targets in the best ways 1.1.2 Classify business strategies:

1.1.2.1 Basing on strategic levels:

»” Corporate strategy: Is the overall strategy of the organization aiming at obtaining its goals

” Business level strategy: Refers to the aggregated strategies of a strategic

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business unit in the organization each strategic business unit will make their efforts to obtain their goals and the overall of these units will help obtain the goals of the whole organization

» Functional strategy: This base on the functions of the organization such as financial strategies human resource strategy, marketing strategies

1.1.2.2 Basing on the scope of the strategies:

» Generic strategy or so-called the corporate strategy which mentions to the most important matters that cover the whole of the organization and have long-term meanings, can possibly decide the life or death of the organization

» Functional strategy: is the secondary strategy such as marketing strategy, financial strategy, price strategies, distribution strategy

>» Generic strategy (or corporate strategy) and functional strategy link closely together to create a complete business strategy

1.1.2.3 According to strategic approach:

> Concentration strategy: only focuses on key points that have decisive meanings

to the production and business situation of the company but not spreads out resources

>» Relative strength-based strategy: The strategic planning thought is base on the organization’s analysis and comparison of products or services in comparison with those

of its competitors, takes its strength to prop up its business strategy planning

> Creative attach strategy: Business strategy relies on the new exploitation to gain priority in front of the competitors

> Liberal strategy: this strategy does not aim at key factors but exploits factors that surround the key ones

1.1.3 Business unit strategies

1.1.3.1 M.Porter’s competitive strategy:

» Cost leadership: this strategy creates competitive advantages owning to have lower cost than any other competitors do which enables either superior profits or a capacity to offer lower prices

» Differentiation: Being able to offer customers products, services and Marketing programs that are different to those of anyone else in the market and that customers’ value and will prefer in order to attract the customers

~ Focus: Is the combination of low cost and differentiation

1.1.3.2 Competitive strategies for business units according to their market share During the business process, each business unit has its own position in the market: therefore, each business unit has !ts own suitable strategies

» Strategy for leading business units in the market: In each business sector, there

is a leading business unit; this unit has the greatest and leading market share compared with its competitors To stay firm in this leading position, this unit has to have its own strategies mainly including:

e Strategy of extending the total market demands: exploiting the most of the ability to consume by such methods as looking for new geographical locations, new customers, developing new tools or encouraging the customers to use the organization’s products much more, etc

e Strategy of market share protection: leading business units always have to face

up with threats from losing their leading positions; therefore, it is necessary for them to have leading position protection strategies such as location defensive strategy by constantly checking the market and the competitors, using some solutions as reorganizing its activities to maintain low cost perfect services, etc for the purpose of keeping the customers; diversify the products to increase the selections of the customers or incessantly innovate to increase value-added of the customers, etc

+ Flanking defense strategy: pay attention to protect its weaknesses that are easily attacked

+ Front defense strategy: attacking the competitors before they attack us To implement this strategy, there must be good and qualified staffs who have ability to observe and understand the competitors

+ Counter-attacking defense strategy: When being attacked, it is needed to

counter-attack to maintain our position

+ Mobile defense strategy: always renew and develop new products, new markets, and diversification, etc aiming at watching for fluctuations of the market

+ Shrinking defense strategy: by concentrating resources into our strengths

e Market share extension strategy: Leading units in the market always have advantages to extend their market share by mergers and acquisitions of smaller competitors, or attacking weak competitors

1.1.3.3 Competitive strategies for business units challenging the market:

Units ranking the second, the third positions in the market normally use these strategies but these units have strong potentials to possibly attack leading units or other units to increase their market share To implement these strategies, it is needed to determine clear targets, competitors and choose suitable attack strategies such as front attack strategy, flanking attack strategy, etc

1.1.3.4 Strategies for business units preceding the market:

They are weak business units that cannot afford to face up with strong units; therefore, these weak units find ways to avoid or precede strong units Possibly selected strategies such as business complete simulation strategy, in which weak units simulate strong units totally; partly simulation strategy, in which weak units simulate a part of the strong units; improved simulation strategy, in which the weak units imitate and have suitable improvement

1.2 The steps involved in building business strategies

1.2.1 Determine the missions or duties of the enterprise:

Each enterprise has certain missions or duties; all activities of the enterprise have

to orient to its missions Therefore, business strategy must derive from enterprise's missions; missions are foundations of business strategy and the goals of the strategy aim

at complecing the missions of the enterprise

Therefore first of all, the formulation of business strategy is determining the missions or duties of the enterprise

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1.2.2 Determine business goals:

Goals are business results or the targets to which the enterprise will orient; goals are the first as well as the most important foundations to set up business strategy

The missions of the enterprise is general, but the goals are concretize the missions

or cuties of the enterprise; for instance, the duty of a bank is mobilize the capital and lend

an interest: so its goal is how much it mobilizes and loan and for how long? The number and tke types of customers

The goals are set up basing on missions or duties of the enterprises and internal or external factors of the enterprise The goals or targets must be suitable with both subjective and objective conditions, which means that it is necessary to consider setting

up and adjusting on the basis of internal and external factors of the enterprise

1.2.3 Internal and external factor analysis:

All enterprises or business sectors are placed into a certain environment including subjective factors (internal factors) and objective factors (external factors) To analyze internal factors and external factors of the enterprise, we can use available data or data surveyed from internal and external factors of the enterprise

1.2.3.1 External factor analysis:

External factors are objective ones that have influences on the business and production activities of the enterprise including all that have negative and positive impacts Positive factors are opportunities for the enterprise such as the increase in market demands, supporting policies of the Government, macroeconomic regulations of the State Negative factors are threats on the enterprise such as the decrease in market demands; the increase in the number of competitors; the increase in input material prices

It can be said that external factor analysis is analyze opportunities and threats of the errerprise

To analyze opportunities we collect all external factors that can bring back opporunities for the enterprise: then analyze evaluate these opportunities: at the same time point out which opportunities are the best and which ones should be made use of

next time

To analyze threats: we collect all external factor: then analyze and evaluate each factors bad impacts on the business process: at the same time, point out which factors have worst impacts on the enterprise and which ones need paying attention to next time

External factors can be divided into 2 types: macro environment and micro -

environment

Technological Development of new technologies

Source: Strategic Management, Fred, David Figure 1.1: PEST Model

> Macro environment: Macro environment has influences on the business process of the enterprise including such factors as economy, policy, science technology,

etc

> Micro environment: Mainly competitive forces In market economy, the enterprise normally faces up with the competition One effective tool to analyze competitive forces is M.Porter’s 5 forces model

1.2.3.2 Internal factor analysis

The internal environmental factors are the subjective factors affecting business operations of enterprise including negative and positive factors The factors having positive impacts are strong points of enterprises such as qualified and professional staff abundant financial resources: strong brand fame The main negative factors are the

weaknesses of the business, such as limited financial resources, less professional sales staff

It can be said that analysis of internal environmental factors is analysis of strengths and weaknesses of the business

To analyze the strength analysis, we gather all advantageous elements and then analyze compare to competitors and assess level of creating business advantages for your business of each factor; pointing out elements that have most negative impact to the enterprise: defining factors that need to be corrected right away and which is followed

To analyze the weaknesses weakness, we gather all the disadvantageous elements

of business, and then analyze, compare to competitors and assess the adverse impact level

on business process of enterprise of individual factors; at the same time, pointing out factors that have the most negative impact to the enterprise and identifying factors that need to be corrected immediately and which is followed

The basic fields of internal environmental factors:

> Human Resources and Organization: Including factors such as: the quality of human resources, organization and structure of human resources and policies to maintain and develop human resources, etc

> Financial resources: including factors such as financial capacity, financial management, accounting systems, etc

> Managerial capacity: including factors such as quality management capacity, business management, human resources management, etc

> Marketing and sales: including factors such as research and development market, distribution systems, after-sales service, marketing campaigns, etc

1.2.4 Business strategy establishment:

Based on the target of the enterprise the internal and external situation of enterprise we establish a business strategy including the following basic contents:

> Identify opportunities and options that can help companies achieve business objectives set

» Select the enterprise's target market that helps businesses take advantage of opportunity in best way

» Select kinds of products and services supplied to the target market

» Develop strategies Marketing mix for product market chosen:

e Product strategy: Specify types and the number of product supplied, quality, price size design and other issues related to products that meet requirements of target market and can achieve the goal of the business

e Pricing strategy: Setting the price mechanism in conjunction with payment to meet customer requirements

e Distribution Strategy: Organizing the system of distribution channels to bring products to target market as quickly as possible

e Marketing Strategy: This is a strategy for branding support, image enhancement for businesses to attract more customers

1.2.5 Solutions for business strategy implementation:

It is solutions for human resources, financial resources, business and management organization to implement the business strategy set In other words, it is the arrangement and layout of corporate resources to successfully implement the business strategy chosen, such as:

> Arrange business structure and organization appropriately

> Allocate, maintain and develop human resources

> Allocate financial resources

> Develop a model of scientific and effective management

1.2.6 Implementation of business strategy:

Strategic management process does not stop when the company has set out the strategy to pursue It is required a shift from the strategic intent to the strategic actions Once the employees the board of directors of the enterprise understand the tasks and understand that they are a part of the business, it will be much easier and consensus in the implementation of that process will help the company obtain success

Strategic enforcement is often referred to as action stage of strategic management ['nforcement means motivating employees and executives to turn the plan into concrete actions Three main work of the strategic enforcement is to establish annual objectives, and policies for the departments, and resource allocation This phase is often considered

as the most difficult stage in the process of strategic management

1.3 Analyzing tools to set up business strategies

1.3.1 Porter’s 5 forces model

According to 5 competitive forces model by M.Porter, the enterprise has to suffer from 5 competitive forces including: rivalry among existing firms; threats of new entrants; bargaining power of buyers; bargaining power of suppliers; threats of substitute products and services (figure 1.3 M.Porter’s five forces model)

> Rivalry among existing firms: In the business, there always exist many enterprises trading the same types of products; to exist and develop, these enterprises always find ways to create their own advantages to occupy the positions over their competitors; therefore, en enterprise always faces up with competitive forces from its existing competitors

> Pressure from the buyers: The buyers always demand the enterprises to fulfill their needs for both products and prices; therefore, they always bargain with the enterprises so as to receive the best products and at lowest prices Therefore, the enterprise always suffers from the bargaining power from the buyers

> Pressure from the suppliers: This is input pressure To run the business, the enterprise always needs materials, and services from other suppliers Therefore, they always suffer from bargaining power pressure of the suppliers

> Threats of new entrants: New entrants are potential one that will soon join the industry and create competitive forces on the enterprise

> Threats of substitute products and services: These products and services will change the market demands: therefore these substitutes will influence on the business operation of the enterprise

Bargaining Rivalry among existing firms Bargaining

1.3.2 External factor evaluation matrix (EFE)

Internal evaluation factor matrix (IFE) summarizes important strengths and weaknesses of business departments as well as overall enterprise IFE matrix is developed in five steps:

Step 1: Making a list of factors crucial to the competitiveness of enterprises in an industry (usually from 10 to 20 factors)

Step 2: Assigning a weight from 0.0 (not important) to 1.0 (most important) for each factor It should be noted, the weight assigned to the factors show relative importance of those for the success of the enterprises in industry Thus, for enterprises in the industry, the importance of factors listed in step | 1s the same

Step 3: Assigning a rating from | to 4 to each factor (actually point to a wider range) Marking the biggest weakness when sorting by one, the smallest weakness when

sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting

by 4 So, this is the point of reflecting competitiveness of each factor in enterprise against rivals’

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

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise The total score shows that, this is the absolute competitiveness of enterprises

Accordingly, if the total weighted scores of all factors to be included in the IFE matrix are 4, the enterprise’s competitiveness is absolute If it is between 2.50 and above,

it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than

(weighted scores) (weight)

Step 1: Making a list of factors crucial to the competitiveness of enterprises in an industry (usually from 10 to 20 factors)

Step 2: Assigning the a weight from 0.0 (not important) to 1.0 (most important) for

each factor It should be noted, the weight assigned to the factors show relative importance of those for the success of the enterprises in industry Total importance of factors listed is 1

Step 3: Assigning a rating from | to 4 for each factor (actually point to a wider range) Mark the biggest weakness when sorting by one, the smallest weakness when sorting by 2, the minimum strength as classified by 3 and biggest strengths when sorting

by 4 So, this is the point of reflecting the adaption of enterprise to threats and opportunities from environment

Step 4: Calculating weighted score for each factor by multiplying the importance

of that factor with the corresponding classification scores

Step 5: The total weighted score for all factors in the matrix is given by summing the number of relevant factors of each enterprise

Accordingly, if the total weighted scores of all factors to be included in the IFE matrix are 4, the enterprise’s competitiveness is absolute If it is between 2.50 and above,

it shall be absolutely competitive on average In contrast, the total number of points in the IFE matrix is smaller than 2.50, the absolute competitiveness of enterprises is lower than

Table 1.2: Internal factor evaluation matrix (IFE)

List internal factors:

Matrix SWOT is a tool that collects all elements of internal and external factors of

the enterprise and combines these factors into such business strategies as:

Table 1.3: SWOT matrix

Core competence is the foundation of adjusting and planning new strategies; this term implies the proficiency in professional knowledge or skills of the enterprise in its main businesses; the enterprise has more advantages over its competitors and is highly evaluated by the buyers According to David Collis and Cynthia Montgomery, key value

is evaluated in some below factors:

+ The competitors find it hard to imitate or copy

+ Advantages in long-term beings

+ Suitable with the enterprise

1.4.2 External factors:

External factors are objective ones from external environment of the enterprise that can cause negative or positive impacts on the enterprise and brings both threats and opportunities to the enterprise

Opportunity (O): They are favorable factors from external environment the enterprise can take advantage of to develop such as increased demand, new policies of the State, science and technology advance

Threat (T): They are factors from external environment that can threaten the development of the enterprise such as: increase in competition, the change in policies of the State, the fluctuation of material prices

1.4.3 Strategies from SWOT matrix:

Strategies from SWOT matrix are withdrawn from the combination of such factors

as the strengths, the weaknesses, the opportunities and the threats Proposed strategic methods:

Strength — Opportunity (O — S): Proving the strengths to make use of opportunities

Strength — Threat (T- S): Prove the strengths to avoid threats

Weakness — Opportunity (O — W): Make good weaknesses to take advantages of

opportunities

Weakness — Threat (T — W): Make good weaknesses to avoid threats

1.5 Competitive profile matrix:

Competitive profile matrix compares an enterprise with its major competitors based on factors affecting the competitiveness of enterprises in an industry, helping strategists recognize strengths and weaknesses of an enterprise as well as its competitors: and determine the competitive advantages of the enterprise and weaknesses that the enterprise needs to overcome

To formulate a competitive profile matrix, five following steps are needed:

> Step 1: Listing about 10 factors having significant influence on the competitiveness of enterprises in the industry

> Step 2: Assigning a weight to each factor ranging from 0.0 (not important) to 1.0 (very important) The rating shows the respective importance of each factor depending on its influence on the competitiveness of enterprises in the industry The sum

of all weights must be equal to 1.0

> Step 3: Assigning a rating from | to 4 for each factor The rating of each factor depends on the response of the enterprise to each factor, in which 4: good; 3: above average; 2: average; |: weak

> Step 4: Multiplying the weight of each factor with its rating to calculate weighted score of each factor

> Step 5: Adding the weighted scores of all factors to calculate the total weighted score of the matrix Comparing the total weighted score of the enterprise with its major competitors in the industry to evaluate the competitiveness of the enterprises

1.6 QSPM matrix:

QSPM matrix is the tool used to re-quantify the information analyzed in the initial stages allowing managers to select the optimal strategy According to Fred R David QSPM matrix includes six basic steps as follows:

zStep 1: Listing major external opportunities/threats and = major

GaMRA0'.X¥03'0 - Group ? Page 25

weaknesses/strengths of the enterprise

> Step 2: Assigning a weight to each critical internal and external success factor The rating is similar to EFE and IFE matrices

> Step 3: Determining strategic alternatives that enterprises should consider implementing

> Step 4: Calculating the attractiveness score for each strategy The attractiveness score shows the relative attractiveness of each strategy compared to other strategies The rating ranges from | to 4 (1: not attractive; 2: somewhat attractive, 3: reasonably attractive, and 4: highly attractive)

>» Step 5: Calculating the total attractiveness score Total attractiveness scores are defined as the product of multiplying the weights (step 2) by the attractiveness scores (step 4) in each row The higher the total attractiveness score, the more attractive the strategic alternative

> Step 6: Calculating the sum total attractiveness score by adding all total attractiveness scores in each strategy column of the QSPSM The higher difference between the sum total attractiveness score in a group of strategy, the more attractive the

strategies are

CHAPER 2 ANALYSIS BUSINESS ENVIRONMENT OF AIC-HN

2.1 Overview of AIC-HN

2.1.1 The establishment and development of AIC-HN

» General information of AIC-HN

Full name Advanced International Joint Stock Company Hanoi

Abbreviation: AIC-HN

Head office: No 69 Tue Tinh Str., Nguyen Du Ward, Hai Ba Trung Dist., Hanoi Company scale: 109 people

>» Establishment and development history

Before being privatized in 2005, Advanced International Joint Stock Company Hanoi — AIC-HN formerly was an affiliated centre of Transportation Ministry with a limited fund and a staff with five people and belongs to AIC group of companies

After 11 years of operations, AIC-HN has fully developed The company’s staff increased to over 109 people, the business capital has reached thousands of million VND The company has strong relationship with more than 12 countries and doing business in

63 provinces across the country The company has been implementing in environmental treatment in which medical wastewater treatment is company’s top value

Over many years, AIC-HN has continuously harvested many achievements in business as well as contributed a great part to society Therefore, acknowledging those contributions, the Government as well as many political-social organizations and departments across the country has given AIC-HN many prestigious awards such as:

+ Typical entrepreneur Certificate and Red Star Award

+ Prime Minister’s certificate of merit

+ For-young-generation medal from Ho Chi Minh Communist Youth Union's central Committee

+ Vietnam Gold Star Award of the Association of Vietnam Young Entrepreneurs

+ Title of Typical Vietnamese Businesswomen of the Vietnam Women’s Union + Certificate of Merit from the National Committee on International Economic Cooperation for outstanding achievements in product, brand name development

+ Youth Employment Award of the International Labor Organization ILO and The National Committee on Youth of Vietnam (NCYV) for excellent achievements in production and business and job creation for youth

+ Typical Vietnamese entrepreneur Certificate of Chamber of Commerce and Industry Vietnam

+ Award for the social Advancement and sustainable development of the General Labor Confederation of Vietnam

+ The Ministry of Resources and Environment’s Certificate of merit and Gold Cup for Environmental Protection career

+ Excellent Brand in 2010

+ Especially, third-class Labor Medal awarded by the President

Besides, the company has ahuge number of awardsand Certificates of Merit by the Ministry of Transport - the managing units and other local authorities across the country

The company is working effectively with the proper organizational apparatus Each business sector was operated by particular functional departments

> Organization structure

After more than 11 years of development the company, now the company has independent organization structure with specific sections which are responsibility for suitable jobs, and also ensure the connection between sections to create the stable operation of company

> Accoutn and Finance

| _» System control Sec

+» Doccum entC ontroling

gemen —> Commercialoperation -

tof _ nena nn Tớ

uction alan aime

Source: Human resource section, AIC-HN

Figure 2.1: AIC-HN’s organization structure

2.1.2 Business scale

The environment protection is the topic of whole society for years, but the companies are doing business in this section is not very popular and AIC-HN is one of the first companies who have entered this field In its development history the company focus on building medical wastewater treatment for hospitals In far future AIC-HN will try expand its business scale to household, and industrial zones wastewater treatment The below figure is the company’s medical wastewater treatment system

Gu MRAC) X9310- Croup ?

2.1.3 Vision, mission and core value

2.1.3.1 Vision

» Expanding business and manufacturing sectors

» Providing high-quality, professional and prestigious services

» Maturing market, enhancing AIC-HN brand name on global market

>» Improving working environment professionally with satisfactory preferential treatment

» Management board together with the whole staff are striving for AIC-HN company’s development

2.1.3.2 Mission

After visiting Nikken Sekkei Company in Japan, Ms Nguyen Thi Thanh Nhan, general director of Advanced International Joint Stock Company got shocked and really moved because of such a professional working system All staff of this company working very seriously and tirelessly, which is utterly different to other companies She wondered:

“how can Japanese people produce high-quality products with the international standard while other countries cannot carry out even when they have sufficient material facilities?” The difference maybe lies in the management staff who has to become the pioneer with strong determination to fulfill all the planned tasks and strategies Every employee

always put the company’s objectives above individual benefits They consider the company their second family where their benefits go along with the company’s development Therefore the General Director decided to launch a business mission for the company and inform the whole staff of this mission:

“Advanced International Joint Stock Company (AIC-HN) will be specialized in providing a diversified range of products and services with high quality and competitiveness benefiting shareholders as well as creating development opportunities for the whole AIC-HN’s staff, contributing a great part to community development.”

The mission is a basic foundation for AIC-HN Holdings’ business strategies later

It also helps all employees of the company fully understand the meaning of their work, enhance their working responsibilities and try utmost to implement the task

In environmental treatment sector, mission of AIC-HN company is: “AIC-HN- a companion of Vietnamese environment improvement”

AIC-HN’‘s core value:

> Professional

> Customer oriented

> Reputable

2.2 AIC-HN’s business environment analysis

2.2.1 External environmental analysis

2.2.1.1 Macro factors analysis

Economic conditions: Thank to great achievements of innovation, Vietnam's economy have some basic advantages in 2005 Socialist-oriented market economy has

been formed and gradually completed Economic competence and facility system has been strengthened After experiencing the decline due to global economic crisis and recession the economy has recovered and kept the high rate of growth in almost all sectors especially industry and service There is a positive trend in macro-economic balance such as State budget revenue and expenditure, currency, credit

Declining State budget deficit, increasing export, improving international payment balance as well as controlled inflation are remarkable achievement of Vietnam However, the economy still faces many difficulties when poor infrastructure still halts the development Natural disasters such as storm, flood and climate change also affect badly people’s life According to National Assembly report on development orientation in the coming years, Vietnam’s economy will follow sustainable development that facilitates environment protection, environment pollution solutions: waste treatment, domestic, industrial and river's wastewater treatment, especially medical wastewater treatment Increasing demand for environment protection is such a good opportunity for environmental treatment industry to develop Saving planet for later generation is very an operating guideline of AIC-HN in the sectors of waste and water treatment Hundreds

of environmental treatment projects in the health sector such as domestic and industrial toxic waste treatment have been being designed and implemented by the company

Political condition: Regarding the importance of environment protection, the Government always pays great attention to investment in pollution treatment The amount

of capital invested in environment saving increases annually During the last 12th National Assembly, the Prime Minister has spent 3 sessions for handling medical waste which always is a concerned issue of whole society Ministry of Public Health has developed plans for environmental protection period 2009 — 2015, striving to reach the objective that All Central government and private hospitals along with 70 percent of provincial hospitals, and 50% district hospitals will have performed medical waste disposal to ensure environmental standards by 2015

To this end the Ministry has conducted inspection and condition assessment of Waste management, especially liquid waste in hospitals Hospitals and Clinics under

Department of Health: required hospitals to upgrade or build new wastewater treatment systems if their treatment systems do not meet environmental standards A wide range of projects have been approved with a total cost of VND 700 billion The Ministry has established an overall project to tackle environmental pollution of health facilities that have the high-risk of contamination; this scheme has been adjusted 9 times but it is still in waiting period of the Prime Minister for approval

Minister of Natural Resources and Environment has agreed to fund environment priority to support the three-line hospitals for up gradation of wastewater and solid waste treatment systems According to initial statistics of the Ministry of Health, about 47% of central hospitals 18.5% of provincial hospitals and 18% of hospitals, and district health centers have inefficient wastewater treatment systems Moreover, of about 200 dangerous medical waste incinerators, there are up to 60% not to be qualified in gas treatment

The Health Ministry is working hard to implement the investment of wastewater treatment systems for the five central hospitals and 16 hospitals of 5 provinces in Mekong River Delta with a $150 million-loan from the World Bank The Ministry has also established a specific mechanism for the experienced enterprises with high financial potential prepay capital on their own (without interest) to carry out a number of urgent projects, including the repayment mechanism for businesses in order to solve immediately the problem in those who make the worst pollution in 2012 Besides, the Ministry of Health is proposing to increase funds for additional items of waste water treatment projects which were approved previously but didn’t cover these items

Technology condition: In the process of industrialization -modernization as well asregional and global integration, the country will encounter many environmental issues Which need addressing on the way to sustainable development To implement the strategy of environmental protection-sustainable development, it is important to enhance the environmental science and technology systems

The environmental — challenges are increasingly complex, however, with — the development of science and modern technology together with active measures of social and economic management, environment protection campaigns have get many

achievements, solving the public concerned matters.In the field of environmental treatment, many types of machinery such as pumps, blowers, electronic weighing swstems, etc, have been improved considerably with high degree of automation and productiveness, higher safety and reducing cost Obviously, environmental science and technology is a very good way for the business to renovate their production technology as well as improve their product quality

Social condition: Recently, the issue of protecting environment is the hot topic which attracts the interest of the whole society The establishment of Environmentalism and Green Liberalism with members are people who wants to protect environment and restore ecological have marked up the interest of society to this sector In Vietnam this issue also becomes more and more attractive to the enterprises, Government and each person Together with the attraction of environmental protection is the nonstop increasing in urbanization ration lead to the demand for hospitals And this is also the biggest reason for pollution of medical water source

Source: Forecast of Ministry of Resource and Environment, 2010

Figure 2.3: Urbanization in Vietnam from 2000 to 2025 The heat of society to environmental focus on the treatment of wastewater treatment for household, industrial zone, hospital then the construction of wastewater treatment system for these units become more and more important With below reasons

Ge MBACT_X9219 Group 3 Pag> 34

AIC-HN focus on providing quality products and services for a better development of Vietnam

2.2.1.2 Micro environmental analysis

> Density of rivalry

With the long term development history and the support from Ministry of Transportation and Ministry of Public Health the main market share for AIC-HN in providing medical wastewater treatment system is quite big in Vietnam, especially in the South The market share can be seen as below figure:

The South

The Middle

The North

Source: Market analysis report, 2010, AIC-HN Figure 2.4: Market share of medical wastewater treatment market

The main competitive factors of big competitors are technology And comparison

of these companies in details as following:

electronics engineering services environmental engineering and mechanics Together with SEEN Union, Seen Technology J.S.C will participate in the implementation of industrial and civil projects to promote the strengths of each unit

Medical wastewater treatment system of SEEN: is mainly applied with following methods of treatments:

+ Biological treatment method using activated sludge

+ Physicochemical method

+ Filtering method using activated carbon

Regarding the medical wastewater treatment systems, Seen Company manufactures some equipment of the treatment system such as physicochemical treatment equipment, sludge press, chemical substance mixing equipment, etc AIC-HN does not manufacturing associated products, but imports the system as a whole from G7 countries, Japan and Europe to create synchronicity and modernity

Regarding revenue: Seen Company accounts for 20% of the market share of wastewater treatment in the market by low cost From 2009 to 2011, AIC-HN accounts for 30% of the market share and strives to dominate 70% of the market share by 2016

> Green Global Environment Co., Ltd

The company was established on 6.4.2006 by Decision No 4102038214 of Planning and Investment Department of Ho Chi Minh The company operates with the guideline on applying new technologies in processing, producing high quality products according to environmental standards, making proper investment and operating costs The company's products account for 10% of the market mainly with domestic products Green Global Environment Co., Ltd competes with AIC-HN in terms of price

Ca MBAOT ¥0310 - Group ? Page 36

Table 2.1: Comparison of the technology of medical wastewater treatment

system of AIC-HN with other competitors’

TREATMENT TECHNOLOGY OF

AIC-HN

TRADITIONAL TREATMENT TECHNOLOGY

Appropriate property of Effective to wastewater

with the average content of

pollutant BOD<1000 mg/l | pollutant BOD<1000 mg/1

2 | Capacity to remove N,P | High Average

5 | Capacity enhancement Easy to integrate modules Difficult owing to needing

to build more tanks

Simple, not needing complicated observational system

Operating room is clear and easy for operators and

is very high Needing to be

supplemented regularly as the floating

microorganisms are easy to

GaMBAO] X0310 - Group 2 Page 37

drift out via the sediment tank

_— a Beceereree fe

Energy expense for| |

Having room for

Having pressory filtering Color and muddy level containing filtering

system, ensuring the

13 | of wastewater after materials, ensuring the

complete removai of color being treated complete removal of color

and muddy level and muddy level

surplus toxic ozone

15 | Period of construction Average: 75 days Long: 100 days

Low: Periodical check:

Once/2 weeks

to increase number of competitors Because of the big investment in wastewater treatment in general and medical wastewater treatment in particular, the customer also has a many requirement in choosing services providers They have power in selecting cheap and prestige contractors With the long-term development in environmental treatment sector and the reputation of a organization under Ministry of Transportation the company can easily compete with competitors in project bidding

process 1s a complete cycle in which suppliers is frequently evaluated in quality, management and qualification The supplier's management system ensure the good control all supplier and the stability of equipment’s quality

Besides quality of suppliers, the cost evaluation is also considered The control point in cost side is mainly under below items:

+ Logistic: Most of equipment and system are imported then the transportation cost is considered to minimize operation cost to company

+ Technology: The technology is detemination factor to quality of products distributed by AIC-HN it also determine the capacity of medical wastewater treatment projects constructed by AIC-HN then technology then they all determine operation cost for company

+ Risk managemet: Good risk management ensures a stable supply and also the low management cost in price of products then it is considered in choosing supply for AIC-HN

Purchasing Quality Logistics Technology Risk

Performance Performance Performance Performance | S°¥rcing situation

Fulfillment

of technical Requirements

Agreements ˆ Aspects ì Roadmaps Logistic

%

Sub-Criteria to be defined according to rating purpose

Figure 2.5: Supplier’s management system of AIC-HN The cost control system in particular and the suppliers management in general is

applied base on the process of European supplier management system then it will limits the threats come from suppliers to ensure quality stable and low cost from suppliers

> Threat of new entrants

From the publication of "Environment protection law" in 2005, enterprises which doing business in environmental protection field will have favorable principles in below activities:

+ Free using land to build waste treatment factories

+ Reduce income tax, VAT and environmental tax

+ Preference in borrowing bank credit

With above preferences, it has created good conditions for new companies in both principles and capital to join into environmental protection field And since then there's a large number of new companies in this sector have been built After the publication of Environment protection law, other support rules also introduced to create favorable condition for enterprises in this field and the "Environmental industry" is developing in Vietnam

Some of important protocols of Government to this sector are: 04/2009/ND-CP on 14/01/2009 of Government, 230/2009/TT-BTC on 08/12/2009 of Ministry of Finance and 249/QD-TTg on 10/02/2010 of Prime Minister about developing environmental services then new enterprises in environmental sector will have lots of favorable With all above favorable legal policies it is attractive for investors and companies to join into this sector then the threat of new entrants has become bigger and bigger to AIC-HN

in these years

> Substitute products

Currently, there are three main types of medical wastewater treatment technologies: Chemical, physical and biological Each type has advantage and disadvantages for example physical technology provides a safe and efficient way to resolve wastewater but it also requires big investment in building a factory and it is not Suitable for Vietnam condition To chemical technology this is cheap and efficient treatment but it is not the safe one when it uses many other harmful chemicals Anyway