developing solutions to implement the 2011 2015 differentiation focus strategy aroma professional english

VIETNAM NATIONAL UNIVERSITY, HANOI SCHOOL OF BUSINESS NGO THI THUY LINH DEVELOPING SOLUTIONS TO IMPLEMENT THE 2011-2015 DIFFERENTIATION FOCUS STRATEGY OF AROMA PROFESSIONAL ENGLISH MA

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

NGO THI THUY LINH

DEVELOPING SOLUTIONS TO IMPLEMENT THE 2011-2015 DIFFERENTIATION FOCUS STRATEGY OF AROMA

PROFESSIONAL ENGLISH

MASTER OF BUSINESS ADMINISTRATION THESIS

Hanoi, 2011

VIETNAM NATIONAL UNIVERSITY, HANOI

SCHOOL OF BUSINESS

NGO THI THUY LINH

DEVELOPING SOLUTIONS TO IMPLEMENT THE 2011-2015 DIFFERENTIATION FOCUS STRATEGY OF AROMA

PROFESSIONAL ENGLISH

Major: Business Administration

Code: 60 34 05

MASTER OF BUSINESS ADMINISTRATION THESIS

Supervisor: Dr Vu Anh Dung

Hanoi, 2011

TABLE OF CONTENTS

ACKNOWLEDGEMENTS i

ABSTRACT ii

TÓM TẮT iv

TABLE OF CONTENTS vi

LIST OF ABBREVIATIONS viii

LIST OF FIGURES ix

LIST OF TABLES x

INTRODUCTION 1

1 Research background 1

2 Research objectives 2

3 Research questions 2

4 Research focus 3

5 Data collection methodology 3

6 Structure of the research report111 4

CHAPTER I: LITERATURE REVIEW 5

1.1 Business strategy 5

1.2 Environmental analysis 10

1.2.1 External analysis 11

1.2.1.1 Macro analysis 11

1.2.1.2 Industry analysis 13

1.2.2 Internal analysis 18

1.3 SWOT analysis 22

1.4 Strategy implementation 24

CHAPTER SUMMARY 29

CHAPTER 2: ANALYSIS OF EXTERNAL AND INTERNAL ENVIRONMENT FOR AROMA PROFESSIONAL ENGLISH 30

2.1 AROMA’s profile 30

2.2 External analysis 31

2.2.1 Macro analysis 31

2.2.2 Industry analysis 39

2.3 Internal analysis 47

2.3.1 Company structure 47

2.3.2 Current strategy 49

2.3.3 Value chain analysis 53

2.4 SWOT analysis 66

CHAPTER SUMMARY 72

CHAPTER 3: RECOMMENDATIONS TO IMPLEMENT THE SELECTED STRATEGY 73

3.1 Recommendation base 73

3.2 Recommendations to implement the set 2011-2015 strategy 75

3.2.1 Recommendations related to the current service 75

3.2.1.1 Stimulate marketing and branding activities 75

3.2.1.2 Research and develop the program for individual/group clients 77

3.2.1.3 Open more new branches 78

3.2.2 Recommendations related to new services 78

3.2.2.1 Research and develop the TOEIC service for university students 79 3.2.2.2 Search the partners for education cooperation 86

3.2.2.3 Launch the service of knowledge management consultancy 87

3.3 Action plan 89

CHAPTER SUMMARY 92

CONCLUSION 93

REFERENCES 94

LIST OF ABBREVIATIONS

IELTS International English Language Testing System

PEST Political, Economical, Social, Technological

R&D Research and Development

SWOT Strength, Weakness, Opportunity, Threat

TOEFL Test Of English as a Foreign Language

TOEIC Test Of English for International Communication

LIST OF FIGURES

Figure 1.1: Michael Porter’s generic strategies 7

Figure 1.2: Environmental scanning chart 10

Figure 1.3: Michael Porter’s five forces model 14

Figure 1.4: Michael Porter’s Value chain model 19

Figure 1.5: SWOT analysis framework 22

Figure 1.6: SWOT matrix 24

Figure 2.1: Vietnamese GDP growth and inflation (2005-2010) 33

Figure 2.2: Vietnam’s population structure 36

Figure 2.3: Vietnam’s Internet usage by age (2010) 37

Figure 2.4: Competitor rank in terms of tuition fee 45

Figure 2.5: AROMA’s structure 47

Figure 2.6: Value chain model of AROMA 53

Figure 2.7: Cyn.in- AROMA knowledge management system 61

Figure 2.8: List of corporate clients 63

LIST OF TABLES

Table 1.1: Important variables in PEST analysis 11

Table 2.1: Forecast summary on Vietnam economy 2010-2015 34

Table 2.2: English training company comparison 42

Table 2.3: Survey results on Learners Feedback 64

Table 2.4: AROMA’s SWOT analysis 67

Table 3.1: AROMA’s SWOT matrix 74

Table 3.2: Action plan for the period of late 2011-2015 90

1 Research background

English has become the common language in the world In the perspective of deeply integrating into the world economy, Vietnam also emphasizes the importance of using English as a popular language The more needs of using English in communication arise, the more needs of learning English increase and also the more English centers appear Those centers diversify their services from academic to communicative English, from elementary to advanced levels, for different customers from children to adults, from individuals to enterprises

The market is huge, the competition is rough As an English center, AROMA’s board of managers has to find out which is the best way to go, on the other words, which is the best strategy to follow in order to survive and compete with existing firms in the market Fortunately, AROMA currently

has already implemented a specific strategy, so-called a differentiation focus strategy to develop itself During the period of 2008-early 2011, AROMA

paid attention on providing one kind of English which is not general, not academic, but professional; for one kind of customer which is not children, not students but working people These focus and differentiation orientations have brought AROMA some certain success through customer awareness and feedback; therefore, the board of managers agrees to follow the strategy in the next five years (late 2011-2015) Besides strengthening the current service, the company has to diversify its operation into other new services which are still differentiated and focused in order to get sustainable development, because five-year is a long time period However, up to now, they have had

difficulties in finding the most effective ways or solutions to carry out these two strategic directions This issue leads to the work of this thesis

2 Research objectives

This study focuses on identifying and explaining basic concepts in analysis of

a generic strategy and applying the theoretical background in a real case study

of AROMA Professional English The main objectives of the study are to

analyze the external and internal environment of the company to find out its current strengths and weaknesses, and potential opportunities and threats in the process of strategy fulfillment and then to recommend some solutions to overcome such difficulties and implement the strategy in the period of 2011-

2015, helping the company continuously position itself in the market as a professional company

3 Research questions

In the scope of the study, the author tries to answer the main question: What are the suitable solutions to implement the set 2011-2015 differentiation focus strategy of AROMA?

To find out the answer for the question, the author must clarify some issues as follows:

• What are the main competitors of AROMA in the market?

• What are the Strengths, Weaknesses, Opportunities and Threats of AROMA?

• What are the solutions to carry out the set 2011-2015 differentiation focus strategy?

This study only focuses on recommending solutions to carry out the differentiation focus strategy which has been set by the board of managers of AROMA for the period of 2011-2015 Consequently, business strategy development is not the focus of the study

5 Data collection methodology

In the study, the author uses the following methods of collecting and analyzing the data:

The most important way is case study, which includes qualitative study, analyzing and comparing to rivals During the process of suggesting the company solutions, the author also makes focus group, gathering some key managers of the company in a meeting, interviewing them and convincing them about the good solutions to follow

On the other hand, a survey on leaner feedback is carried out and also some interviews are conducted to gather the information and give the conclusion

Besides, secondary data also are used Data are collected via believable sources in the Internet, websites of the company’s rivals, articles in the

newspaper, reports and so on

6 Structure of the research report

Apart from Introduction and Conclusions parts, the thesis includes three

chapters In Chapter 1, the author reviews some literatures such as strategy

concepts and environmental analysis which cover some models, for example

PEST, Five forces, Value chain and SWOT In Chapter 2, the author assesses

environmental forces as well as analyses the internal strengths and weaknesses of AROMA in order to implement the set differentiation focus

strategy in the period of 2011-2015 In chapter 3, the author recommends

some solutions to implement the differentiation focus strategy of AROMA effectively

Chapter 1: Literature review

Chapter 2: Analysis of external

and internal environment for AROMA Professional English

Chapter 3: Recommendations to

implement the selected strategy

CHAPTER I: LITERATURE REVIEW

1.1 Business strategy

Strategy is the process of developing sustainable competitive advantages through positioning the company in the market, and effectively developing and utilizing critical resources and competencies.1

Strategy is not about what a company can do It is about what it chooses not

to do: not correct of the past problem; not capture all opportunities; not proposed to do everything.2

Depending on the scope of strategy, there are corporate strategy, business strategy and functional strategies Business strategy is narrower in scope than corporate strategy and wider than functional strategies Apart from two other scopes, in this thesis, the author focuses on the business strategy

A business strategy, in cases so-called a competitive strategy, refers to how a company competes in a particular business A competitive strategy is concerned with how a company can gain a competitive advantage through a distinctive way of competing.3

According to Michael Porter, there are three “generic” competitive strategies for outperforming other corporations in a particular industry: lower cost, differentiation and focus These strategies are called generic because they can

1 Vadim Kotelnikov, “Sustainable competitive advantages, How to survive against your competition over a

long period of time”, Ten3 Business e-Coach, Business Coach

2 Rich Horwath, (2009), Deep Dive: The Proven Method for Building Strategy, Focusing Your Resources and

Taking Smart Action

3

Michael E Porter, (1985), Competitive Advantage: Creating and Sustaining Superior Performance,

Institute for Strategy and Competitiveness, Harvard Business School

be pursued by any type or size of business firm, even by not-for-profit organizations

Porter further proposes that a firm’s competitive advantage in an industry is determined by its competitive scope, that is, the breadth of the target market

of the company or business unit Before using one of the generic competitive strategies, the firm or unit must choose the range of product varieties it will produce, the distribution channels it will employ, the types of buyers it will serve, the geographic areas in which it will sell, and the array of related industries in which it will also compete These decisions should reflect an understanding of the firm’s unique resources Simply put, a company or

business unit can choose a broad target (i.e., aim at the middle of the mass market) or a narrow target (i.e., aim at a market niche), combining these two

types of target markets with the two competitive strategies results in the four variations of generic strategies When the lower cost and differentiation

strategies have a broad mass-market target, they are simply called cost leadership and differentiation When they are focused on a market niche (narrow target), however, they are called cost focus and differentiation focus

Figure 1.1: Michael Porter’s generic strategies

(Source: Michael Porter, Competitive Advantage: Creating and Sustaining

superior performance, The Free Press, New York, NY, 1985)

Cost leadership

It is a low-cost competitive strategy that aims at the broad mass market and requires “aggressive construction of efficient-scale facilities, vigorous pursuit

of cost reductions from experience, tight cost and overhead control, avoidance

of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on” Because of its lower costs, the cost leader is able to charge a lower price for its products than its competitors and still make a satisfactory profit Wal-Mart and Dell are companies successfully following this strategy Having a low-cost position also gives a company or business unit a defense against rivals Its lower costs allow it to continue to earn profits during times of heavy competition Its high market share means that it will have high bargaining power relative to its suppliers (because it buys in large quantities) Its low price will also serve as a barrier

to entry because few new entrants will be able to match the leader’s cost advantage As a result, cost leaders are likely to earn above-average returns

on investment

Differentiation

This strategy is aimed at the broad mass market and involves the creation of a product or service that is perceived throughout its industry as unique The company or business unit may then charge a premium for its product This specialty can be associated with design or brand image, technology, features, dealer network, or customer service Differentiation is a viable strategy for earning above-average returns in a specific business because the resulting brand loyalty lowers customers’ sensitivity to price Increased costs can usually be passed on to the buyers Buyer loyalty also serves as an entry barrier; new firms must develop their own distinctive competence to differentiate their products in some way in order to compete successfully Examples of companies that have successfully used a differentiation strategy are Walt Disney Productions, Nike, and BMW automobiles Research does suggest that a differentiation strategy is more likely to generate higher profits than is a low-cost strategy because differentiation creates a better entry barrier A low-cost strategy is more likely, however, to generate increases in market share

Focus strategy

The focus strategy is also known as a 'niche' strategy which is often used by smaller firms A company could use either a cost focus or a differentiation focus

Cost focus is a lower cost competitive strategy that focuses on a particular

buyer group or geographic market and attempts to serve only this niche, to the exclusion of others In using cost focus, the company or business unit seeks a cost advantage in its target segment A good example of this strategy is

Potlach Corporation, a manufacturer of toilet tissue Rather than compete directly against Procter & Gamble’s Charmin, Potlach makes the house brands for Albertson’s, Safeway, Jewel, and many other grocery store chains

It matches the quality of the well-known brands, but keeps costs low by eliminating advertising and promotion expenses As a result, Spokane-based Potlach makes 92 percent of the private label bathroom tissue and one-third of all bathroom tissue sold in western U.S grocery stores The cost focus strategy is valued by those who believe that a company or business unit that focuses its efforts is better able to serve its narrow strategy target more efficiently than can its competition It does, however, require a trade-off between profitability and overall market share

Differentiation focus is a differentiation strategy that concentrates on a

particular buyer group, product line segment, or geographic market Morgan Motor Car Company (manufacturer of classic British sport cars), and local ethnic grocery stores follow this strategy successfully In using differentiation focus, the company or business unit seeks differentiation in a targeted market segment This strategy is valued by those who believe that a company or a unit that focuses its efforts is better able to serve the special needs of a narrow strategic target more effectively than can its competition

No specific competitive strategy is guaranteed to achieve success, and some companies that successfully implement one of Porter’s competitive strategies find that they cannot sustain the strategy Each of the generic strategies has its risks For one thing, cost leadership can be imitated by competitors, especially when technology changes Differentiation can also be imitated by competition, especially when the basis for differentiation becomes less important to buyers For example, a company that follows a differentiation

strategy must ensure that the higher price it charges for its higher quality is not priced too far above the competition or else customers will not see the extra quality as worth the extra cost Focusers may be able to achieve better differentiation or lower cost in market segments, but they may also lose to broadly targeted competitors when the segment’s uniqueness fades or demand disappears

1.2 Environmental analysis

Before a company can begin its strategy, it must scan the external environment to identify its possible opportunities and threats and its internal environment for strengths and weaknesses Environmental analysis helps the company avoid strategic surprise and ensure long-term health The process and results of such analysis can be summarized in Figure 1.2 below:

Figure 1.2: Environmental scanning chart

- Company structure

- Value chain model

Situational analysis

- SWOT analysis Strategy Formulation and Implementation

1.2.1 External analysis

External analysis enables the company to obtain a clear picture of opportunities and threats The analysis including macro and industry analysis can be assisted by tools including PEST model, and Five Forces model

1.2.1.1 Macro analysis

PEST analysis stands for "Political, Economic, Social, and Technological

analysis" and describes a framework of macro-environmental factors used in the environmental scanning component of strategic management.4 Some

analysts added Environmental and Legal It is a part of the external analysis

when conducting a strategic analysis or doing market research, and gives an overview of the different macro-environmental factors that the company has

to take into consideration It is a useful strategic tool for understanding market growth or decline, business position, potential and direction for operations

Table 1.1: Important variables in PEST analysis

(Source: J David Hunger & Thomas L Wheelen, (2008), Essentials of

expectations

technological efforts Foreign trade

Birth rates Telecommunications

infrastructure Health care

education

Political factors are how and to what degree a government intervenes in the

economy Specifically, political factors include areas such as tax policy, labor law, environmental law, trade restrictions, tariffs and political stability Political factors may also include goods and services which the government wants to provide or be provided (merit goods) and those that the government does not want to be provided (demerit goods or merit bads) Furthermore, governments have great influence on the health, education and infrastructure of a nation

Economic factors include economic growth, interest rates, exchange rates and

the inflation rate These factors have major impacts on how businesses operate and make decisions For example, interest rates affect a firm's cost of capital and therefore to what extent a business grows and expands Exchange rates affect the costs of exporting goods and the supply and price of imported goods in an economy

Social factors include the cultural aspects and include health consciousness,

population growth rate, age distribution, career attitudes and emphasis on

safety Trends in social factors affect the demand for a company's products and how that company operates For example, an aging population may imply

a smaller and less-willing workforce (thus increasing the cost of labor) Furthermore, companies may change various management strategies to adapt

to these social trends (such as recruiting older workers)

Technological factors include technological aspects such as R&D activity,

automation, technology incentives and the rate of technological change They can determine barriers to entry, minimum efficient production level and influence outsourcing decisions Furthermore, technological shifts can affect costs, quality, and lead to innovation

1.2.1.2 Industry analysis

Besides analyzing the macro environment, a company must analyze its industry which it is operating in The results of the analysis can help the company clarify its major opportunities and threats

The goal of competitive strategy for a business unit in an industry is to find a position in the industry where the company can best defend itself against these competitive forces or can influence them in its favor Following the Porter theory, competition in an industry is rooted in its underlying economic structure and goes well beyond the behavior of current competitors The state

of competition in an industry depends on five basic competitive forces: rivalry, threats of substitute, buyer power, supplier power, and threat of entry.5

5

12 Manage The executive fast tract, “What is the five forces model”,

http://www.12manage.com/methods_porter_five_forces.html

Figure 1.3: Michael Porter’s five forces model

(Source: Michael E Porter, (2008), The Five Competitive Forces That Shape

- Rate of Industry Growth: Slow market growth causes firms to fight for market share In a growing market, firms are able to improve revenues simply because of the expanding market

- Product or Service Characteristics: High storage costs or highly perishable products cause a producer to sell goods as soon as possible If other producers are attempting to unload at the same time, competition for customers intensifies Many people choose a video rental store based on location, variety

of selection and pricing because they view videos as a commodity- a product whose characteristics are the same regardless of who sells it

- Amount of fixed costs: High fixed costs result in an economy of scale effect that increases rivalry When total costs are mostly fixed costs, the firm must produce near capacity to attain the lowest unit costs Since the firm must sell this large quantity of product, high levels of production lead to a fight for market share and results in increased rivalry

- Height of Exit Barriers: High exit barriers cause a firm to remain in an industry, even when the venture is not profitable The brewing industry, for example, has a low percentage of companies that leave the industry because breweries are specialized assets with few uses except for making beer

- Diversity of Rivals: A diversity of rivals with different cultures, histories, and philosophies make an industry unstable There is greater possibility for mavericks and for misjudging rival's moves Rivalry is volatile and can be intense 6

6

J David Hunger & Thomas L Wheelen, (2008), Essentials of strategic management, Fourth edition,

Pearson Prentice Hal, pp 40-41

Threats of substitutes

Substitute products are those products that appear to be different but can satisfy the same need as another product The identification of possible substitute products or services is to search for other products or services that can perform the same function, even though they may not appear to be easily substitutable Substitute products can come in many shapes and sizes and do not always come from traditional competitors

Tea can be considered a substitute for coffee If the price of coffee goes up high enough, coffee drinkers will slowly begin switching to tea The price of tea thus puts a price ceiling on the price of coffee This shows when switching costs are low, substitutes may have a strong effect on an industry 7

Buyer power

Buyers affect an industry through their ability to force down prices, bargain for higher quality or more services, and play competitors against each other

A buyer is powerful when:

- There are few dominant buyers and many sellers in the industry

- Products are standardized

- Buyers threaten to integrate backward into the industry

- Suppliers do not threaten to integrate forward into the buyer's industry

- The industry is not a key supplying group for buyers

7

J David Hunger & Thomas L Wheelen, (2008), Essentials of strategic management, Fourth edition,

Pearson Prentice Hal, pp 40-41

Supplier power:

Supplier power can affect an industry through their ability to raise prices or reduce the equality of purchased goods and services A supplier is powerful when:

- There are many buyers and few dominant suppliers

- There are undifferentiated, highly valued products

- Suppliers threaten to integrate forward into the industry (e.g brand manufacturers threatening to set up their own retail outlets)

- Buyers do not threaten to integrate backwards into supply

- The industry is not a key customer group to the suppliers

Threat of entry

New entrants are newcomers to an existing industry They bring new capacity, desire to gain market share and have substantial resources Therefore, they are threats to an established corporation

The threat of entry depends on entry barriers, which are the following:

- Economy of scale: It refers to declines in unit costs of a product as the absolute volume per period increases Economy of scale deter entry by forcing the entrant to come in at a large scale and hence facing strong resistances from existing firms or come in at a small scale and accept a cost disadvantage position

- Product differentiation: Established firms have brand identification and customer loyalties, which have built up from past marketing, customer service, product differentiation or simply being the first into the industry Differentiation creates a barrier to entry by forcing entrants to spend heavily

to overcome existing customer loyalties

- Capital requirements: It may require a huge amount of capital to entry into

an industry, not only for production facilities but also for other costs such as customer credit, inventories or startup expenses

- Access to distribution channels: Distribution channels for product or service have been already served by existing firms in the industry A new firm must persuade the channels to accept its product or service through many ways such as reducing price, giving advertising allowance and so on

- Cost advantages independent of size: Existing firms may have cost advantages over potential entrants, for example: proprietary product technology, favorable access to raw materials, favorable location, government subsidies and learning curve

- Government policy: Government can limit entry into an industry through such controls such as licensing requirements and limits on access to raw materials 8

J David Hunger & Thomas L Wheelen, (2008), Essentials of strategic management, Fourth edition,

Pearson Prentice Hal, pp 40-41

company’s strengths and weaknesses This will include finding out the company’s value chain

The value chain is a systematic approach to examining the development of competitive advantage It was created by Michael Porter in his book, Competitive Advantage (1985)

Figure 1.4: Michael Porter’s Value chain model

(Sources: Competitive advantage, Michael Porter, 1985)

The chain consists of a series of activities that create and build value They culminate in the total value delivered by an organization The 'margin' depicted in the diagram is the same as added value The organization is split

into 'primary activities' and 'support activities.'

Primary Activities

Inbound Logistics

Here goods are received from a company's suppliers They are stored until they are needed on the production/assembly line Goods are moved around the organization

Operations

This is where goods are manufactured or assembled Individual operations could include room service in a hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine

Outbound Logistics

The goods are now finished, and they need to be sent along the supply chain

to wholesalers, retailers or the final consumer

Marketing and Sales

In true customer orientated fashion, at this stage the organization prepares the offering to meet the needs of targeted customers This area focuses strongly upon marketing communications and the promotions mix

highest possible quality They will be responsible for outsourcing (components or operations that would normally be done in-house are done by other organizations), and repurchasing (using IT and web-based technologies

to achieve procurement aims)

Technology Development

Technology is an important source of competitive advantage Companies need to innovate to reduce costs and to protect and sustain competitive advantage This could include production technology, Internet marketing activities, lean manufacturing, Customer Relationship Management (CRM), and many other technological developments

Human Resource Management (HRM)

Employees are an expensive and vital resource An organization would manage recruitment and s election, training and development, and rewards and remuneration The mission and objectives of the organization would be driving force behind the HRM strategy

Firm Infrastructure

This activity includes and is driven by corporate or strategic planning It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department 9

9

Marketing teacher, “Value chain model”, chain.html

http://www.marketingteacher.com/lesson-store/lesson-value-1.3 SWOT analysis

A scan of the internal and external environment is an important part of the strategic planning process Environmental factors internal to the firm usually can be classified as strengths (S) or weaknesses (W), and those external to the firm can be classified as opportunities (O) or threats (T) Such an analysis of the strategic environment is referred to as a SWOT analysis

Figure 1.5: SWOT analysis framework

The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates As such, it is instrumental in strategy formulation and selection

S (Strengths) refers to the company’s resources and capabilities that can be used as a basis for developing a competitive advantage A competitive advantage is an advantage over competitors gained by offering consumers

greater value, either by means of lower prices or by providing greater benefits and service that justifies higher prices 10

W (Weaknesses) refers to the absence of certain strengths For example, each

of the following may be considered weaknesses: lack of patent protection, a weak brand name, poor reputation among customers, high cost structure, and lack of access to the best natural resources, lack of access to key distribution channels

O (Opportunities) can be viewed from external analysis, for example an unfulfilled customer need, arrival of new technologies, loosening of regulations and removal of international trade barriers

T (Threats): Changes in the external environmental also may present threats

to the firm Some examples include shifts in consumer tastes away from the firm's products, emergence of substitute products, new regulations or increased trade barriers

After scanning its SWOT, the company can have an overall look at its operation and find out what is the best choice for a competitive strategy 11

To develop strategies that take into account the SWOT profile, a matrix of these factors can be constructed The SWOT matrix is shown below:

10

Wikipedia, “Competitive advantage”, http://en.wikipedia.org/wiki/Competitive_advantage

11 Quickmba, “SWOT analysis”, http://www.quickmba.com/strategy/swot/

Figure 1.6: SWOT matrix S-O strategies pursue opportunities that are a good fit to the company's

strengths

W-O strategies overcome weaknesses to pursue opportunities

S-T strategies identify ways that the firm can use its strengths to reduce its

vulnerability to external threats

W-T strategies establish a defensive plan to prevent the firm's weaknesses

from making it highly susceptible to external threats

1.4 Strategy implementation

Base on strategic analysis, the company’s leader must decide strategic implementation The senior management team must come together to review, discuss, challenge, and finally agree on the strategic direction and key components of the strategy

After the pros and cons of the potential strategic alternatives have been identified and evaluated, one must be selected for implementation By now,

many feasible alternatives probably will have emerged How is the best strategy determined?

Perhaps the most important criterion is the ability of the proposed strategy to deal with the specific strategic factors developed earlier in the SWOT analysis If the alternative does not take advantage of environmental opportunities and corporate strengths and lead away from environmental threats and corporate weaknesses, it will probably fail

Another important consideration in the selection of a strategy is the ability of each alternative to satisfy agreed-upon objectives with the least use of resources and with the fewest negative side effects It is therefore important to develop a tentative implementation plan so that the difficulties that management is likely to face are addressed This should be done in light of societal trends, the industry, and the company’s situation based on the construction of scenarios

Once the senior leadership team has completed the top-level strategy, the next step is to break that overall goal down into functional areas or core strategies Typically this will include service/operations management, technology management, product management, supplier management, people management, and financial management, or some variation on these areas Each identifies how they contribute to achieving the overall strategic plan They can model the steps taken by the senior team and conduct a SWOT analysis from their vantage point Once the core strategies are defined, the senior team must ensure that the overall strategy will be achieved; that is, that the sum of the parts (functional strategies) will add up to the whole (overall strategy)

Strategy communication continues to be critical, so operational definitions should not be overlooked Each functional area should create their own definitions to ensure agreement and commitment A common source of problems in implementation is that divergent functional perspectives may not

be aligned with the overall strategy Unless these issues are addressed, each area may interpret the plan with a lens of "How does my area win?" rather than "How does the organization win?"

Key stakeholders can be engaged in different ways Aside from events, publicity, and personification of the vision and strategy by key leaders, stakeholders can be engaged by soliciting their input on the current state of the organization and the vision (similar to the SWOT analysis described earlier) Involving stakeholders in this manner should be done seriously, with

an intent to use their distinct perspectives; this can add to the soundness of the analysis Asking for opinions and then ignoring them can arouse distrust and resentment

As the strategic plan and performance measures are being created, the organization must make sure that they are aligned with the systems, structure, culture, and performance management architecture The best plans may fail because the reward systems motivate different behaviors than those called for

in the strategy map and measurement design For example, if a team approach

to business development is outlined in the plan, but sales commission remains individual, organizations will be hard pressed to see a team focus

There are a lot of pressures which affect the decision of selecting the best strategy for the company The first pressure comes from stakeholders The

attractiveness of a strategic alternative is affected by its perceived compatibility with the goals of key stakeholders in a corporation’s task environment Creditors want to be paid on time Unions exert pressure for comparable wage and employment security Governments and interest groups demand social responsibility Shareholders want dividends Management must consider all of these pressures in selecting the best alternative

To assess the importance of stakeholder concerns in a particular decision, strategic managers should ask four questions: (1) Which stakeholders are most crucial for corporate success? (2) How much of what they want are they likely to get under this alternatives? (3) What are they likely to do if they do not get what they want? (4) What is the profitability that they will do it? With answers to these questions, strategy makers should be better able to choose strategic alternatives that minimize external pressures and maximize stakeholders support In addition, top management can propose a political strategy aimed at influencing key stakeholders

Secondly, pressures from the corporate culture also affect strategic decisions

If a strategy is incompatible with the corporate culture, it probably will not succeed Foot-dragging and even sabotage could result if employees fight to resist a radical change in corporate philosophy Precedents tend to restrict the kinds of objectives and strategies that management can seriously consider The “aura” of the founders of a corporation can linger long past their lifetimes because they imprinted their values on the corporation’s culture In considering a strategic alternative, strategy makers must assess its compatibility with the corporate culture If the fit is questionable, management must decide whether it should (1) take a chance on ignoring the

culture, (2) manage around the culture and change the implementation plan, (3) try to change the culture to fit the strategy, or (4) change the strategy to fit the culture Further, a decision to proceed with a particular strategy without a commitment to change the culture or manage around the culture (endeavors that are both tricky and time consuming) is dangerous Nevertheless, restricting a corporation to only those strategies that are completely compatible with its culture might eliminate the most profitable alternatives from consideration

The third pressure on strategic choice comes from the needs and desires of key managers Even the most attractive alternative might not be selected if it

is contrary to the needs and desires of important top managers People’s egos may be tied to a particular proposal to the extent that they strongly lobby against all other alternatives Key executives in operating divisions, for example, might be able to influence other people in top management to favor

a particular alternative and to ignore objections to it People tend to maintain the status quo, which means that decision makers continue with existing goals and plans beyond the point when an objective observer would recommend a change in course People may ignore negative information about a particular course of action to which they are committed because they want to appear competent and consistent It may take a crisis or an unlikely event to cause strategic decision makers to seriously consider an alternative they had previously ignored or discounted

CHAPTER SUMMARY

The literature review provides managers an overview of environmental analysis on a company’s strategy Based on analyzing external and internal factors that conclude the company’s strengths, weaknesses, opportunities and threats; and combining with the company’s goals, once choosing the strategy

to follow among lower cost, differentiation and focus, strategic implementations need to be done.; otherwise the company will be stuck in the middle of the competitive marketplace with no competitive advantage and will be doomed to below-average performance

Base on the literature review, in the next two chapters, the author will state one specific case of a company- AROMA Professional English and analyze what strategy they are following, what are their achievements and difficulties

in implementing their strategy and then give them some recommendations to select the better solutions to implement the strategy in the next five years

CHAPTER 2: ANALYSIS OF EXTERNAL AND INTERNAL ENVIRONMENT FOR AROMA PROFESSIONAL ENGLISH

2.1 AROMA’s profile

AROMA, a Vietnamese company, was established in early 2007 in Hanoi, and operated with some diversified services such as translation, information technology and some others related to computer and computer software However, in 2008, the company moved to the industry of English training and soon decided that it would be the main service

AROMA currently is specializing in providing professional English courses for working people Lessons are based on typical working contexts such as meeting, occupations, appointments, negotiations and so on Only working people and no students are accepted to join the class This is the main service served by AROMA

AROMA has three kinds of training course in accordance with three kinds of customers they serve: in-house training course for enterprises; public training course for AROMA learners at premise; and individual course for individuals

- To create the value for community through developing company services for the sake of the community

National Plan of Action on Education for All and other documents emphasize the followings:

- Education and training is the Priority-Number-one national policy

Together with science and technology, education is the determining factor for economic growth and sustainable social development Investment for education is considered investment for development

- Education is the foundation of science-technology development, of the human resources development to satisfy the requirements of a modern society and it plays the key role in enhancing national awareness for the

responsibilities and capability of the present and future generations

- Educational innovation should be in keeping with the demands for socio-economic development; at the same time, creating a learning society that provides life long education for all and promotes all for education is an urgent task

- To continue educational innovation systematically and comprehensively in order to enhance the quality and effect of education; and to serve the country’s sustainable development 12

Thanks to these strategic viewpoints, education in general and professional education in specific has been paid much importance The Ministry of Education and Training has set the goals for professional education: to establish the practical technical training system meeting the demand of socio-economic development, to pay attention to short-term vocational training and training of skilled workers, technicians and professional staffs at high level on the basis of upper secondary or professional secondary education.13 These

12 Ms Le Thi Hoang Cuc, (2004), Country report, Vietnam and education for sustainable development:

reality and prospects, Vietnam National Commission for UNESCO, Head of Education Unit, Vietnam

13 Ministry of Education and Training, (2006), “The development goals of other levels”

movements create opportunities for many education organizations who would like to invest in education

Economic factors

The global financial and economic crisis is having impacts on Vietnam’s enterprises, workers and families, contributing to Vietnam’s worsening economic situation In 2008, Vietnamese GDP growth reduced to 6.2%, down from more than 8% in the preceding 3 years The sharp rise in global fuel and food prices had a negative impact on consumer price, forcing inflation rate reach to a peak of 23% (See in Figure 2.1 below)

Vietnamese growth and inflation

GDP growth Inflation

Figure 2.1: Vietnamese GDP growth and inflation (2005-2010)

(Sources: ADB reports & General Statistics Office reports, 2009-2010)

Since 2009, the GDP has been in a better situation According to reports of the General Statistics Office, although GDP growth in 2009 was lower than that in 2008, it has over met the Government’s goal of 5% GDP in 2010 has increased by 6.78% compared to it in 2009 This growth exceeds the goal of