developing strategy of danhim ham thuan dami hydro power joint stock company after equitizing 2010 2015 pdf

 Governmental economic policies: Wage legislation-minimum wage and overtime, economic development strategies of government, preferential system, government grant…  The business outlook

CAPSTONE PROJECT REPORT

DEVELOPING STRATEGY OF DANHIM – HAM THUAN – DAMI HYDRO POWER JOINT STOCK

COMPANY AFTER EQUITIZING (2010-2015)

Class: GEMBA01.E02 Group 6:

1 Pham Thi Hong Ha

ACKNOWLEDGEMENT

From the depth of our heart, we would like to give all best words to thank all staffs

and Professor of Educational Technology & Career Development - Vietnamese National University, Hanoi, who have a great enthusiasm, knowledge and guidance

to help us finish this capstone project

To achieve the result today, we never forget to present our thankfulness to The Management Board of Da Nhim - Ham Thuan - Đa Mi Hydro Company, who give

us several worth advises during establishing DHD’s developing strategy

For financial support, we thank Electricity of Vietnam (EVN) The scholarship from EVN has made our dream of study master program to be fulfilled Moreover, EVN has given us an opportunity to study in an International environment which gives us much more confidence for our work in future

Finally, we are grateful our family for all material and mental supports that they have given us during the time of studying

TABLE OF CONTENTS

Page Additional cover page

Acknowledgements i

Table of contents ii

List of Abbreviations v

List of tables vi

List of figures, graphs and diagrams vii

INTRODUCTION 1

Chapter 1: CORPORATION STRATEGY THEORY 5

1.1 Overview of strategy and strategic management 5

1.1.1 What is strategy? 5

1.1.2 Strategic management determination 5

1.1.3 Strategy at Different Levels of a Business 6

1.1.4 The components of strategic management 6

1.2 Benefits and limitation of strategic development to corporate 17

1.2.1 Benefits 17

1.2.2 Limitations of strategic management 18

1.3 Strategy planning process 19

1.3.1 Strategy formulation 19

1.3.2 Strategic implementation 20

1.3.3 Strategic evaluation 20

1.3.4 Strategic management model 21

1.4 The strategy hierarchy 22

1.4.1 Corporate strategy 22

1.4.2 Business unit level strategy 24

1.4.3 The functional strategy .26

1.5 The tools for strategies formation and selection .31

1.5.1 External factor evaluation (EFE) 31

1.5.2 Internal factor evaluation (IFE) 31

Chapter 2: ACTUAL SITUATION ANALYSIS OF DA NHIM – HAM THUAN – DA MI HYDRO POWER COMPANY 33

2.1 Da Nhim – Ham Thuan – Da Mi hydro power company introductions 33

2.1.1 Da Nhim hydropower plant 33

2.1.2 Song Pha hydropower plant 34

2.1.3 Ham Thuan hydropower plant 34

2.1.4 Da Mi hydropower plant 35

2.1.5 Business fields 36

2.2 External environment analysis 37

2.2.1 Macro environment analysis 37

2.2.2 Present situation of Vietnam electricity market 41

2.2.3 Electricity competition analysis 42

2.2.4 External factors evaluation matrix (EFE) 55

2.2.5 Determine opportunities and threats 56

2.3 Internal enviroment analysis of DHD 58

2.3.1 Results of the manufacturing business of the company over the years 58

2.3.2 Resources and potential ability analysis, identify core values 60

2.3.3 Identify company value chain 64

2.3.4 Internal factor evaluation matrix 66

2.3.5 Determine strengths and weaks of the company 67

2.4 Customer survey about quality of electricity supply 70

2.4.1 Survey target 70

2.4.2 Survey design 70

2.4.4 Quantitative study 73

2.4.5 Study results 75

2.5 Equitization plan of the Company 86

Chapter 3: DEVELOPING STRATEGY OF DANHIM – HAM THUAN – DAMI HYDRO POWER JOINT STOCK COMPANY AFTER EQUITIZING (2010-2015) 90

3.1 Define vision, mission and objectives of DHD 90

3.1.1 DHD’s slogan: DHD Lighting Highland 90

3.1.2 DHD’s view 90

3.1.3 DHD’s mission 90

3.1.4 Targets of DHD 90

3.2 Build up developing strategy of Danhim – Ham Thuan – Dami hydro power Joint Stock Company after equitizing (2010-2015) 91

3.2.1 Electricity production strategy 91

3.2.2 Service products: provide technical services by Da Nhim technical service center 102

Chapter 4: CONCLUSION 107 REFERENCES

APPENDICES

LIST OF ABBREVIATIONS

DCS Distributed control system

DHD Da Nhim-Ham Thuan-Da Mi Hydro Power joint stock

Company

Pc Price in power purchase contract

Qc Quantity in power purchase contract

SPSS Statistical Package for the Social Sciences

LIST OF TABLES

2.1 Economy development and power consumption createria in 16

nations in 2020 and assumption for Vietnam in 2020 from EVN

38

2.2 Electric generation capacity of EVN plants and outside EVN

plants in 2008

45

2.12 Descriptive statisticsthe importance of the company to the criteria

for the assessment of experts in the industry

78

2.13 Descriptive statistics the levels of satisfy criteria of the company

through the evaluation of experts in the industry

79

LIST OF FIGURES, GRAPHS AND DIAGRAMS

Graph

Diagram

2.2 Expectation frame according to descriptive statistics assessment 81

INTRODUCTION

1 General context

According to national electricity network development strategy period 2006-2015 considering to 2005 (Electricity plans VI) which was approved by Prime minister’s decision No 110/2007/QĐ-TTg on 18/7/2007:

Target of electricity development

The development of electricity has to adapt to load demand above Ensure to fulfill execute project process of building hydro power plants with such benefits as: flood defense, water supply, electricity production, develop thermal electricity from gas

Encourage to build thermal from coal, invest in small capacity hydro power plant, new energy and recycle energy for remote areas such as urban, mountain and boundary area

Exchange energy with neighbor countries to ensure national power source for stable

development

Above information show that demand of using electricity in Vietnam has grown continuously along to the development of society The supply electricity ability of EVN still has some limitation due to shortage of source, investment capital, shortage of spare source and shortage of electricity at rush hour As a result, EVN has to apply policy to cut power in shift at most of area leading to negative affect significantly to social development The main reason of this situation is the tardy

most of new power projects which lead to unequal status between supply and demand in electricity

Therefore, the urgent duty of Vietnam is speeding up building power sources not only for high capacity but also medium and small capacity power plants in styles IPP and BOT Furthermore, several companies outside EVN also have right to invest in electricity production such as hydro power and wind power which can help EVN adapt to load demand This also opens opportunities for companies which supply technical services for small scale hydro power plants in the region

When the competition electricity market is put into operation, electricity generation companies have to consider bidding the reasonable price per kWh to achieve highest profit

2 The necessary of this topic

Vietnam has become a member of WTO, and Vietnam’s economic is in stage of integrating to the World economic Enterprises from Vietnam are facing to not only opportunities but also challenges which affect to their remaining and development Therefore, each company has to build a development strategy which based on its competitive advantage These advantages will contribute to perform competitive advantage of the nation

The difficult in economic today give negative affect to all fields in society including electricity branch However, electricity branch is suffered less than other fields due

to its monopoly position

Due to shortage of electricity in Vietnam, Da Nhim – Ham Thuan – Da Mi HPP still works effectively with stable of output consumption However, in order to open business ability and to ensure stable development, a business strategy to obtain the best profit in future is necessary This also is a reason that we choose this topic for

our research project

3 Research target

Determine strengthen and weakness of DHD to research the vital ability which

Determine opportunities, challenges in present and future to establish the best appropriated strategy

Building a development strategy for DHD in 2010-2015 periods

Solutions for researching works focus on two main problems:

 Bidding the best price on competition electricity market

 Open wide and improve quality of technical services for power plants in the region

4 Scope of research

The project gives a general view about process of establishing development strategy

of DHD after equitizing Input data for researching is based on real situation combine with forecast result from 2010 to 2015

Strategy is divided into several stages Scope of this project will focus on the first stage of building business strategy for DHD This project will establish business levels and solutions to make this strategy to be fulfilled

Using SPSS program to process data, analyze and evaluate result

Analyzing business environment of electric industry by “Five Competition Forces” method of Michael Porter

Analyzing SWOT of DHD

Analyzing value chain of DHD

And other methods

6 Structure of the research project includes:

Introduction

Chapter 1: Corporation strategy theory

Chapter 2: Analysis real situation of DHD

Chapter 3: Building development strategy of DHD after equitizing in 2010-215

period

Chapter 4: Conclusion

CHAPTER 1: CORPORATION STRATEGY THEORY

1.1 Overview of strategy and strategic management:

1.1.1 What is strategy?

Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations

In other words, strategy is about:

 Get business targets in long-term (business and social reposibilities) sustainably

 Which markets should a business compete in and what kinds of activities are involved in such markets?

 How can the business perform better than the competition in those markets?

 What resources (human resources, skills, assets, finance, technical competence…) are required in order to be able to compete?

 What external, environmental factors affect the businesses' ability to compete: environment, competition, polictics, resources,… risks management plans?

 What are the values and expectations of those who have power in and around the business?

1.1.2 Strategic management determination:

 Strategic management is a science and art of strategy to provide overall direction and goals to the enterprise, implement, and execute the short-term and long-term plan base on existing resources to enable the organization to achieve its long-term objectives

 Concerning to process, strategic management is a level of managerial activity under specifying the organization's mission, vision and objectives, drafting a strategy, implementing that strategy and adapting the strategy to environment towards objectives

1.1.3 Strategy at Different Levels of a Business:

Strategies exist at several levels in any organisation - ranging from the overall business through to individuals working in it

Corporate Strategy - is concerned with the overall purpose and scope of the

business to meet stakeholder expectations This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business Corporate strategy is often stated explicitly in a "mission statement"

Business Unit Strategy - is concerned more with how a business competes

successfully in a particular market It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc

Operational Strategy - is concerned with how each part of the business is organised

to deliver the corporate and business-unit level strategic direction Operational strategy therefore focuses on issues of resources, processes, people etc

1.1.4 The components of strategic management:

In practice, a thorough strategic management process has three main components, shown in the figure below:

1.1.4.1 Strategic Analysis

This is all about the analysing the strength of businesses' position and understanding the important external factors that may influence that position The process of Strategic Analysis can be assisted by a number of tools, including:

a PEST Analysis - a technique for understanding the "environment" in which a

business operates

PEST is used to research the impact of factors in macro-environment The factors are:

Figure 1.2 PEST analysis

These are four factors what affect directly to many economic sectors, they are outside business and economic sector, which have influence upon the business and economic sector as a objective factors Base on the influences, business will give the adaptive policies and operational activities

Political factors: When doing business in an administrative unit, they must obey

the local legistration in that area

 Political stability: we will consider the stability of legistration in political conflict, diplomacy Which setups has high stablility will contain the good condition for operational activities and vice versa, which setups in unstable condition will take adverse effect to business in its area

 Taxation - tax rates and incentives: export duty, import duty, consumption tax, income tax… will affect to business revenues, profit

 The related laws: investment law, business law, labor law, antitrust law, antidumping law

 Policy: the policies form government will facilitate the business or hamper business Such as trade regulations, economic sector development, economy development policies, competitive regulations, customer protection regulations…

Economic Factors: business need to consider the state of a trading economy in the

short and long-terms and the state intervention into economy

 Status of economy: any economy has their own cycle, each period of economic cycle, business must give the most suitable decision for themselves

 The factors affect to economy: interest rates, inflation rates

 Governmental economic policies: Wage legislation-minimum wage and overtime, economic development strategies of government, preferential system, government grant…

 The business outlook in future: growth rate, GDP development, GDP per investment rate…

Sociocultural Factors: The social and cultural influences on business vary from

country to country, and they are the customers’ characters in that area

 Culture values are the values that build up the society, promote the development of society So that the social and cultural factors are often protected effectively and strictly; especially for cultural spirituality We also cannot deny the cultural interference into vary of countries The interference will change the psychographics, life style and create the prospect of good business to economic sectors

 Besides culture, social features is also need to consider when researching the market, social features will devide the society into different customer groups, each group has the different characters, psychology, income…

Technological Factors: The world is still living in technological evolution; the

mass of new technoloty has been borned and intergrated into products, services

 Rate of technological development, period of technology and rate of technological backward: if in the past, the tech-firms must spend a long time

to double the speed of microprocessor, at present, the needed period is about 2-4 years

 Influences of IT, Internet into business

Besides above considered factors, globalization is a macro factor affect to economic activities that the business must consider in market reseaches

Economic intergration factors

 Globalization has created a competitive pressure; the competitors are from all over the world Affiliation process will make a change in business to adapt the comperative advantage, division of labour in area and over the world

 The importance is after affiliation complete, the barrie to trade will be remove gradually, the coporations have a chance to trade with partners at remote geographical areas, the domestic market will be upgrade to global market

b Five Forces Analysis – is a tool to define the competitive forces that shape the

industry or market

The first competitive force: Bargaining Power of Suppliers

 The number and the scale of suppliers: the number of suppliers decides the competitive force, bargaining power to industry, and over business If the market is dominated by a few large suppliers, the buying industry often faces

a high pressure on margins from their suppliers

 Alternative the suppliers’ products: in this issue, we consider the alternative ability of input from suppliers and switching cost

 Information about suppliers: information about suppliers has the big impact

to selecting input suppliers for business

 For every industry or business, suppliers always increase the high pressure if they have big scale, suppliers association and own the rare and valuable resource

Figure 1.3 Five competitive forces model

The second competitive force: Bargaining Power of Buyers

Buyers or customers are competitive fore may take influence to all operational business of industry

There are two types of buyers: Monopsonistic, quasi-monopsonistic buyers or distribution buyers both of types are give pressure to business in prices, quality of goods, accompanied services and they rule the competition in industry via deciding the purchase price

Like bargaining power of suppliers, we consider the impact of competitive force to industry from buyers: scale, important role, switching costs, information about customers

According to Micheal-Porter, the new entrants are the business, who are not in market but they have the influences in future The new entrants are many or just some, high competitive level or not are dependent on the below:

 The attraction of industry: this issue shows as ROI, number of customers, the existing players

 The barriers to entry an industry: the elements make the entry process become more expensive and complex

The fourth competitive force: Threat of Substitutes

 Substitutes are the products, services which can sastify approximately the existing products or services in the industry

 The substitutes of beer, wine are products or services to sastify the similar demands Some goods can replace for alcohol beverage: coffee, tea, playing sport Via above example, we can see the main competitive force of substitutes is the performance ability compare with the same purpose product, additionally, the factors such as prices, quality, culture, politics and technology are also affect to the threats of alternative products

 The suddenness, unpredictability of substitutes: even inside an industry, with the development of technology, business can create the substitutes for their own

 The switching costs: using a solar hot water system can replace a using electric water heater system, but the user must modify all system and it is also hard to install, sot the solar hot water system is still not popular

The fifth competitive force: Competitive Rivalry between Existing Players

This force describes the intensity of competition between existing players (companies) in an industry, creating a competitive force

 Status of industry: demand, development rate, the number of competitors in market…

 Structure of an industry: intensive industry or decentralized industry

 Decentralized industry: is an industry with many businesses competing together, but not any business can control the rest of businesses

 Centralized industry: an industry with one or a few business rules the industry

 Barriers for exit: similarly to the barriers for entry, the barriers for exit are the factors that make the exiting industry become complexly:

 Technological barrier, investment barrier

 Bind to labour

 Bind to government, the relative organizations

 Bind to strategy, plan

Forces from stakeholder

In the book “Strategic Management & Business Policy" by Thomas Thomas L Wheelen and J David Hunger has noted the forces from close relationships It is included:

c SWOT analysis – is a useful method of assessing a business, its resources and its environment

 SWOT analysis model

 SWOT analysis model is a useful tool to realize and to give dicision in all situations in any business

 SWOT provides a tool for strategy analysis, auditing the overall strategic position or direction of a business or a business plan

SWOT analysis is analyzing the external environment factors that business must face to (opportunities and threats) and also the internal factors (strengths and weaknesses) It is an important tool what requires a long time, high effort, high expenditure, good ability in collecting, analyzing and processing the information effectively

To do SWOT analysis, people often put the self - questions:

Strengths

 What is your strongest business asset?

 What are your best working activities?

 Which needed resource, ability resource?

 What do you offer that makes you stand out from the rest?

The issue must be considered from the vision of yourself and from the others’ look Advantages are usually formed when compared to competitors For example, if all the competitors offer high quality products, a high quality manufacturing process is not the advantage, that is the essential to survive on the market

Weaknesses:

• Anything can be improve?

• The work that you do worst?

• Need to avoid performing?

• Must consider the issue on the basis of inside and outside Others may see weaknesses that you do not see by yourself

• Why your competitors can do better than you? At this point, must consider the real and face with the truth

Opportunities

 Where is a good opportunity?

 What trends concern you know?

 Opportunities can stem from technological change and not just international market or even in narrow spaces, from a change in state policy related to operations field of the company, from the change of social patterns, population structure or fashion…, from the events in the region

 The most useful searching is reviewing the advantages of their own and question whether the advantages may open new opportunities or not

Threats (risks):

• What obstacles are encountered?

• What the competitors are doing?

• The specific demands of work, products or services are changing or not?

• Changing technology my harm anything with the company or not?

• Is there any problem on overdue debt or cash flow?

• Are there any weaknesses are threatening the company?

Analysis often helps to find out what to do and turn weaknesses into prospects Results of the SWOT analysis process must ensure the specification, accuracy, practice and feasibility for the enterprise, because they will use the results to make the next steps such as strategies formation, targets strategies and mechanisms to control specific strategies

F i g u r e 1 4 S W O T a n a l y s i s m o d e l

d Value Chain Analysis

Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business Influential work by Michael Porter suggested that the activities of a business could be grouped under two headings:

(1) Primary Activities - those that are directly concerned with creating and

delivering a product (e.g component assembly);

(2) Support Activities, which whilst they are not directly involved in production,

may increase effectiveness or efficiency (e.g human resource management) It is rare for a business to undertake all primary and support activities

Value Chain Analysis is one way of identifying which activities are best undertaken

by a business and which are best provided by others ("out sourced")

Linking Value Chain Analysis to Competitive Advantage

What activities a business undertakes is directly linked to achieving competitive advantage For example, a business which wishes to outperform its competitors

through differentiating itself through higher quality will have to perform its value

chain activities better than the opposition By contrast, a strategy based on seeking

cost leadership will require a reduction in the costs associated with the value chain

activities, or a reduction in the total amount of resources used

Operations The manufacture of products and services - the way in which

resource inputs (e.g materials) are converted to outputs (e.g

Service All those activities associated with maintaining product performance

after the product has been sold

Support activities include:

Secondary

Activity

Description

Procurement This concerns how resources are acquired for a business (e.g

sourcing and negotiating with materials suppliers)

Infrastructure Concerned with a wide range of support systems and functions such

as finance, planning, quality control and general senior management

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps:

(1) Break down a market/organisation into its key activities under each of the major headings in the model;

(2) Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage;

(3) Determine strategies built around focusing on activities where competitive advantage can be sustained

1.1.4.2 Strategic Choice

This process involves understanding the nature of stakeholder expectations (the

"ground rules"), identifying strategic options, and then evaluating and selecting strategic options

It allows companies adapt to change in external trends, internal capabilities and resources effectively, understand the position of company in future and can manage the development of company

The most important target of strategy is getting the understanding and the coherence among managers and staffs When they understand what company is doing and why company does that, they often realize that they are a part of company; they become more coherent to support it The managers and staffs will have a creative thinking

and adapting to change when they understand the tasks, the target and company’s strategy

Managers, administrators and staff at the lower levels will become "the owner" of the strategy through their relationships in the planning process

Financial benefits

The research shows that, the companies use the strategic management theory is more profitable and more successful than the companies do not use The company has high achievement, which reflects a strategic direction and emphasis more to long-term These companies tend to plan the system to prepare for future fluctuations in the operating environment, make decisions to understand better coming situation about the consequences both in the long term and short - term On the other hand, the companies with poorly activities often related to the short-range operations and does not reflect is a good material for future conditions

Non-financial benefits

Management strategies help companies avoid financial risks; it also shows many advantages, such as perception of increasing threats from the environment, understanding the strategies of competitors, labor productivity increased, the opposition changed to decrease Management strategies to increase the abitity in preventing the problems of the company, as it encourage mutual relationships between administrators at various levels and functional departments Reciprocal relationship may allow companies to promote the administrator and its employees

by nurturing them, sharing the objectives of the company with them, empowerment and recognition of their contribution

1.2.2 Limitations of strategic management:

Primary weakness in establishing the process in business management strategy is taking long time and hard effort

The strategic business plan can be wrong understand that they are rigid as assigned

in writing The strategists think that their original plan must be done without attention to additional information

The failed limit of the environment forecast in long-term sometimes is very large Actually evaluating the long term prospects do not need exactly to detail, but they are set out to make sure businesses do not have to make big changes and still adapted to fluctuations with a little breakup

Some companies seem still in planning stages and have a less attention to implementation issues This phenomenon has led some administrators to the doubt about the usefulness of process management But the problems are not from strategic management, it is from the people who manipulate it

Although the disadvantages caused some companies do not manipulate the process

of strategic management in their business, but potential problems in generally can

be overcome if you know how to manipulate the process of strategic management properly

1.3 Strategy planning process:

1.3.1 Strategy formulation:

Strategy formulation is a combination of three main processes which are performing

a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental Concurrent with this assessment, long-term objectives are set And also replace the current strategy by a new one to meet changed circumstances

Policy making

Correction taking

taking

Diagram 1.1 The processes and activities in strategic management

It has many strategic management tools what allows the strategists can integrate into offering and choosing the feasible alternative strategy Some of the tools are External Factor Evaluation matrix, Internal Facter Evaluation, Strategic Position & Action Evaluation Matrix, Boston Consultancy Group Matrix (BCG), and the Quantitative Strategic Planning Matrix (QSPM)

Because not any organization has unlimited resources, so the strategist must decide which is the best alternative strategy to benefit company The decisions in strategic formulation will keep the relationship between business and products, markets, resources and specific technology in long-term

1.3.2 Strategic implementation:

Strategy implementation means translating the strategies into actions and results Implementation means mobilizing the strategists and personnel to execute the issued strategies It is often considered that the most difficult period, implementing the strategy requires discipline, devotion and sacrifice from every staff

The activities in strategic implementation take influences to all strategists and personnel in organization Challenge of strategic implementation is couraging the staff taking their own pride and empathy into getting the expected objectives

1.3.3 Strategic evaluation:

The last period of strategic management is strategic evaluation Three main activities in this period are: (1) reauditing the base elements in current strategy, (2) measuring the achievement, and (3) performing adjusted activities Strategic evaluation is important because the current success doesn’t secure a success in future The success always borns the new problems, which business self-satisfy with their success, they will wither themselves

The members in organization must observe both current execution of strategy and the results of strategies If the strategy cannot get the expected targets or strategic targets, in itself the strategy or implementation process must adjust a part or renew completely

1.3.4 Strategic management model:

Strategic management process can be studied and applied in the use of a model Each model represents a type of process Illustrating at the diagram 1.2 is the model

of comprehensive strategic management, what is widely accepted

Identify the tasks, goals and current strategies of the organization is the suitable starting point in management strategy for the current situation and condition of the company, because it can eliminate some of the strategies and even apply a specific action Each organization has a specific mission, goals and strategies even if these factors are not set, or write down or the launch media officially

Diagram 1.2 Comprehensive strategic management model

A change in any part of any model may require a change in one or all of the other components A transformation in the economy can represents a great opportunity and requires a change in strategy and long-term goals Thus forming operations,

implementation and evaluation strategies should be implemented on the basis of continuity, not only at the end of the year Strategic management process is really never ends

1.4 The strategy hierarchy

1.4.1 Corporate strategy: Examining strategies for different business levels that

the enterprises pursue Depending on the tasks and goals need to achieve, the

strategist decided to choose the appropriate strategy:

+ The growth strategies

+ The decline strategies

+ The innovation strategies

For the electricity sector, Vietnam is in the strong development stage, the growth strategy and innovation strategy are suitable models

1.4.1.1 Growth Strategy

Concerntrated growth strategy

As the mainstream strategies focus on improving the product or market but does not change any element

When pursuing this strategy, the business must attempt to exploit every opportunity about products and services are currently producing, trading or the consumer market, supply by making better implementations that they are conducted

In fact this strategy is accordant to the business which still has the ability to exploit

the market, for prestigious brand products, and capable or diversifiable models

Integration growth strategy (merge)

Merge is appropriate for the businesses are doing in strong economic sectors, the available opportunities in accordance with the objectives and long-term strategies that companies are doing Types of integration growth strategy (merge):

Vertical integration growth strategy: is the strategy that the enterprises undertake

the production and supply of inputs to production processes by themselves or resolving their own consumption stage

+ Merge strategy: the merge strategy can be done by merging two or more production units voluntarily The goal is to increase the strength to face the challenges and risks may occur or to take full advantage of business opportunities in the strategic period

This strategy is done in cases of the business has the same business purposes, both wish to exploit the same opportunities, share risks and they have competitive advantages may complement each other

+ Annexation strategy: Growth strategy through annexation be formed and developed through the competitive market Via competition the strong businesses, has big potentials may annex the small businesses to grow into large-scale enterprises with more powerful

A business can only implemente the annexation strategy if they strong enough, and not be hampered by legal factors

Growth strategy by diversifying

Is the strategy to invest in many sectors, many different areas when the company has competitive advantage in the current business Businesses pursue diversification strategies to increase their value

This strategy is suitable for businesses cannot achieve growth targets with current products in the current industry and markets

There are two growth strategies by diversifying:

+ Relevant diversification: is the diversification into new business activities that are related to current business activities with similarities in manufacturing, marketing and technology

+ Irrelevant diversification: attemping to growth by exploiting new markets with new products that are not related to products that companies are producing in technological production

1.4.1.2 Innovation strategy:

Innovation strategy is one of the strategies has the most outside an impact First, innovation can recover the growth of the business, and then of the whole industry

Innovation may also impact to the structure of competition For example the ongoing development in the field of computing and telecommunications has borned many new competitors

Some methods are given to developing this strategy: first approach stresses the success evaluation in technical innovation and economic, and also assess its impact

in the competition

1.4.2 Business unit level strategy:

In small and medium enterprises, single business my just need corporat strategy is sufficient for the company but for large enterprises, especially enterprise has several branches in different parts of the market, then the strategic and planning analysis at business unit must be taken The strategies at business unit level:

1.4.2.1 - The strategy competition based on competitive advantages:

a - Low cost strategy:

Leading by low-cost strategy to create competitive edge by producing the products and services at low costs to setting price lower prices of competitors in the industry;

it may attract the target customers who are sensitive with low cost and may get a large market share

There are two advantages arising from this strategy:

First, because of low costs, the business can set a lower price than competitors but still in equal to their profitability If the enterprises in the same sector set equal prices to their product, the enterprises with lower costs will get higher profits Second, if internal sector competition increases and the business begin to compete

on price, the low-cost businesses will be able to withstand the competition better than other businesses

b- Products differentiative strategy:

Strategy to create competitive advantage by creating commercial products or services difference compared with competitors

The objective of the products differentiative strategy is getting competitive advantage by creating products and services can meet different needs, which are the unique or specific needs of different groups of customers of the business

Essentially, differentiative products are creating products and services have outstanding technical features than competitors, so that the business can set a higher price than the average price in the same sectors Ability to increase income for businesses by setting high prices can get a higher average profit in the same sector c- Key focus strategy (focus strategy):

Is the strategy focused on markets that businesses with outstanding compared to competitors (low cost advantage or products differentiative strategy) In other way, key focus strategy focusing on serving a particular market segment assigned by geography, by customer classes or a small segment on a particular product line

d - Combining low-cost strategy with products differentiative strategy:

Recently, the changes of production technology, particularly the development of flexible production technologies have made the strategic choice of low cost or diffirentative products do no longer exist Because the development of technologies, the businesses can easily understand that they can benefit from both strategies

1.4.2.2 Competitive strategies for the leading market unit

"Innovation strategic" with assumptions that need to do something better So the leading market companies always try to lead the industry in the areas such as developing new products, services and new distributing ways

"Strengthening strategies": This is also active way in order to secure the competitive power in the market The focused things are keeping reasonable prices and offering products with the different scale, form and designing new models

"Confrontation strategies" often involves quick and direct rival to challenges The form of this strategy is the promotion war, prices war

1.4.2.3 The business unit level strategy during the growth and development periods of the product:

Strategic objectives of this stage are how to ensure the resources for growth accordant to the market Resources are used to focus on marketing activities mainly

During this period should also associate with R & D strategy as innovation the process and developing product to grow the product consumption

1.4.3 The functional strategy

1.4.3.1 The strategy of the production process: Objectives of the strategic

production process is finding out the methods of producing the products or services

to meet the needs of customers with affordable and restrictions on other management

Power output strategies: The scale of production facilities and how it is using are the important factors for the development of competitive advantage The company will exploit the strategy as staff-change, adjusting the equipment and processes, improved working methods to achieve higher performance or improved products

On the other hand management capacity also includes strategies for using performantly and effectively the existing equipment, forecasting capacity needs in the future to ensure that the devices maybe take advantages when necessary

The location strategy: One of the most important competitive decisions of a

company is where to locate the base, because the position has a large impact on costs and revenue of an organization The objective of the strategic location is maximizing profits and minimizes costs when setting the location in a certain area The factors are affecting the selection of locations such as labor costs and available labor resources, located near fuel of sources and suppliers, nearby markets etc

The working layout strategy: The strategy determines who can do, and what can do,

when and under what conditions The working layout strategies: labor specialization and employment expanding; enrich jobs, rationalizing the production and working methods, the rewarding system Working layout also includes setting out criteria for different results for different jobs

The arranging workspace strategy: The placement or arranging a workplace has a

large impact on labor efficiency The objective of layout strategy is developing a way to organize effectively and meet the needs of product designing and quality

products, processing equipment and capacity, quality of operational activities and the limits on factories and locations

The strategic management of production/operation: the strategies of producing

functionality that an organization can use, including strategies related to producing funtions management/activities Including strategic decisions on areas such as: the general planning techniques, the just in time system (JIT), the process of purchasing management, inventory management systems, techniques on materials needs planning and the techniques to make short-term plan, the project management procedures, and controlling maintenance Each of these strategies is to make production of the organization effectively and performatively

1.4.3.2 Strategic financial management business:

Financial strategies related to the choices in collecting and using financial data and accounting There are four major aspects that we will find out, which is evaluating financial operation, forecasting financial situation, planning, and budget estimating, financial combination and the other financial management decisions may use

Assess financial activities: We often review financial activities of the organization

by reviewing the financial report and evaluating the information there To assess the financial activities, we must look deeper into the information that these reports provide

The financial rations standardized the financial information to compare this period with the other period or to compare the organization with their branches Without this information, the makers will have very little knowledge on operational organization according to quantitative and financial standpoint

Financial forecast, planning; draft budget: the financial forecast is used to estimate financial needs in the future of the organization When forecasting the built-makers can plan, draft budget in accordance with that report

Finance Coordination: Strategies to coordinate finance are related to decisions on financial structure and capital structure of an organization Capital structure is

related to the long-term capital that organization uses Makers determine the optimal financial structure based on two factors:

(1) How the organizations want to divide total capital into a short-term or long-term capital?

(2) The ratio of total finance that organizations want to get from sustainable or long term source

1.4.3.3 Human Resource Management

Human resource management includes major operations such as determining human resource needs in the future; layout work for employees; implementation of policies

on treatment, evaluation of performance, developing potential ability of human resources, create favorable working environment Human resources management helps companies develop and use potential ability of the organization effectively

"Head hunting" Strategy: This is a strategy to attract skilled workers before the competition, when the employees are in the process of learning, or attract skilled labor force is being wasted by other organizations including units of competition

Arranging work in accordance with professional skills and personal characteristics

The objectives to exploit the most creativity of workers, take advantage of accumulated experience, allowing business units to develop competitive advantage and improve efficiency in their activities

Develop the favorable conditions for employees to work the most effectively

Creating the most effective promotion system: in order to attract, exploit, maintain

and develop a workforce for long-term organization The key lever that companies need to develop: paid adequately; reward timely; promotion or advancement staff based on ability to complete the work, encouraging self-study in staff; training and building capacity regularly, building staff assessment standards; satisfy the material and spiritual benefits workers

1.4.3.4 Information system management strategy

Today's information about environment is considered as a valuable resource, what

competitive advantage in the market To collect information, enterprises need a system of information, its duty is determining the necessary information, conducting the collection, processing, analysis, and provide timely for functional deparments

To manage information systems effectively, the administrators can use the following strategies:

+ Developing an information system to covered all markets by geographic area + Diversificating data analysis system for information of environment

+ Exploiting the most valuable information has been collected in each period

1.4.3.5 Marketing Management Strategy

Marketing functions of an organization plays a very important role in pursueing sustainable competitive advantage According to Phillip Kotler: "Marketing is defined as a process of management with social characters, whereby individuals and groups have what they need and want through creating, providing and exchanging the goods and values with others freely.”

The basic steps of the marketing process:

Market research; market segmentation; select target market; positioning products; design Marketing - Mix; implement marketing plan; marketing testing Some important contents of the marketing process:

All markets consist of actual customers and potential customers These customers may vary by one or more ways This difference can be used to segment a market The variable segments of the market are geographic; population; income, occupation, education level; religion, ethnicity and nationality; psychology etc When the feasible segments were identified, the next step is finding what targets are the most attractive targets

Product Positioning: When an organization has identified the factors that may

differentiate, the important things need decide is highlighting what are the differences At least seven different positioning strategies: characteristics positioning, return positioning, using /application positioning, consumers

positioning; competitor positioning, products positioning; quality/price positioning Each feasible strategy is built on the basis of what the organization considered as the most important differentative factors in setting up a competitive advantage

Marketing – Mix Designing: The marketing –mix strategies go through the details

of what are values that products bring to customers, how it was evaluated, how it was introduced, and where it is sold This is the 4P principle often mentioned in marketing; these are the products, price, promotion (advertisement), and place (location)

Product: An important aspect is how the organization approachs to the new

products development When the opinions on products have been deployed, organizations will have different strategies for development and testing those products

Price: choosing price strategies dependent on fixing target price of the organization

(continue develop, maximizing current profits, maximizing current income, growth

up the sales, the highest price policy, leading position in product quality, or other goals)

Advertisement: An effective integrated marketing strategy requires trading

promotion strategies The trading promotion strategy requires using variety kinds of communication tools and different kinds of advertising marketing It includes advertising, sales promotion, public relationship

Location: location strategies include the selection of distribution channels for

product or service A further important field of locations strategy including the distribution of specific products, often called logistics marketing Finally, locations strategy will include decisions about methods and means of transportation

1.4.3.6 Implementation different functions strategies

Implementation of the strategy is just simply put them into operation Each function strategy must perform their specific tasks to contribute to the overall goal of the organization When the strategy function is done through the working process, it is

important to promote an organizational environment in which all the parts all work

to complete the objectives, tasks and plans of the organization

1.4.3.7 Evaluation of the strategy and auditing

How do we know these function strategies work effectively or not and what we must do if they are ineffective? Strategy assessment at function level uses the specific activities ratings, quantitation and qualititation for each functional area Strategy assessment includes consideration of what has been undertaken If actual results do not meet standards, the strategic function must be change

1.4.3.8 Coordinate with other functional strategies

The functions strategies play an important role in the operation of the plan, tasks and objectives of the organization That why they must be coordinated with other levels of strategy and changed to adapt to changes in strategy The importance is managing well the functions strategy of an organization, consequently, the resources, potentials and basic capabilities can be developed into sustainable competitive advantage

1.5 The tools for strategies formation and selection

In fact, when formulating and selecting strategy, we have the tools:

+ Phase 1 of formation include EFE matrix, the competition image matrix, and IFE matrix It called intrant stage; it summarizes basic information has been entered and necessary for the strategies formation

+ Phase 2, known as matching phase, the techniques was used in stage 2 is the matrix of threats - Oppotunities - strengths - weaknesses (SWOT)

1.5.1 External factor evaluation (EFE)

The EFE allows the administrators summarize and evaluate information in economic, social, cultural, demographic, geographic, political, governmental, legal, technology and competition

1.5.2 Internal factor evaluation (IFE)

Internal factors are considered very important in every business strategy and objectives of the business After considering these internal factors, the strategic

administrators should setting up a matrix of factors to consider the reactivity and recognize the strengths, weaknesses Since then, it helps businesses using the strengths to exploit, and prepare resources to confront their weaknesses and finding methods to improve these weaknesses