BUSINESS STRATEGY OF THE HOUSING AND URBAN EVELOPMENT CORPORATION (HUD) IN VISION OF DEVELOPING THE MODEL OF VIETNAM REAL ESTATE GROUP

BUSINESS STRATEGY OF THE HOUSING AND URBAN EVELOPMENT CORPORATION (HUD) IN VISION OF DEVELOPING THE MODEL OF VIETNAM REAL ESTATE GROUPKEY THEORETICAL BASIS FOR BUSINESS STRATEGY FORMULATION OF THE HOUSING AND URBAN DEVELOPMENT CORPORATIONEVALUATING THE REALITY OF BUSINESS STRATEGY FORMULATION TASK AT THE HOUSING AND URBAN DEVELOPMENT CORPORATION SOLUTIONS TO IMPROVE HUD’s STRATEGY FORMULATION TASK

BUSINESS STRATEGY OF THE HOUSING AND URBAN EVELOPMENT CORPORATION (HUD) IN VISION OF DEVELOPING THE MODEL OF VIETNAM REAL ESTATE GROUP CONTENT PAGE INTRODUCTION 4

CHAPTER 1: KEY THEORETICAL BASIS FOR BUSINESS STRATEGY FORMULATION OF THE HOUSING AND URBAN DEVELOPMENT CORPORATION 7

1.1 Concepts of business strategy 7

1.1.1 Definition of a business strategy 7

1.1.2 Strategic management process 7

1.1.3 Necessity and the role of a business strategy 11

1.2 Substances in enterprises’ business strategy formation 14

1.2.1 Defining duties and objectives of the enterprise 14

1.2.2 SWOT Analysis 15

1.3 Business strategy implementation .29

1.3.1 Objectives, conditions of the business environment and the selected strategies 29

1.3.2 Organize the implementation apparatus 29

1.3.3 Allocation and adjustment of resources 30

1.3.4 Set up a plan of implementation 31

1.3.5 Designing strategy’s structure and control system 31

1.4 Monitoring and Evaluation (M & E) 34

CHAPTER 2: EVALUATING THE REALITY OF BUSINESS STRATEGY FORMULATION TASK AT THE HOUSING AND URBAN DEVELOPMENT CORPORATION (HUD) 36

2.1 General features of the Corporation 36

2.1.1 Establishment and development process of the Corporation 36

2.1.2 Features of Corporation’s business operation 37

2.2 Current situation of business strategy formulation of HUD 45

2.2.1 Objectives and philosophy in business strategy of HUD 45

2.2.2 The process of corporate strategy formulation 47

2.2.3 The Corporation’s corporate strategy formulation method 50

2.2.4 Implementation organization 50

2.2.5 The Corporation’s business strategies 53

2.3 Remarks on HUD’s business strategy formulating 75

CHAPTER 3: SOLUTIONS TO IMPROVE HUD’s STRATEGY FORMULATION TASK 77

3.1 Strong points, weak points, Opportunities, Challenges in the HUD Corporation’s business strategy formulation task 77

3.1.1 Opportunities 77

3.1.2 Challenges 78

3.1.3 Strong points 79

3.1.4 Weak points 80

3.2 Several solutions by HUD’s Leadership Board to improve its business strategy formulation task 80

3.3 Some suggestions and recommendations to improve HUD’s business strategy formulation task 82

CONCLUSION 91 REFERENCE 93

INTRODUCTION

1 Necessity and meaning of HUD’s business strategy formulation

Our economy is operating on a state-regulated market regime and has beenincreasingly integrating into that of the region and the world To ensure successfuleconomic integration, the first responsibility is laid on the shoulder of enterprises.Stemming from that reality, each enterprise is required to build their businessstrategies that are closely linked to international integration A precise businessstrategy plays a decisive role in the success of an enterprise, guiding the enterprisetoward a sustainable development in the market economy regime A businessstrategy also helps members of the enterprises be well-aware of the aims anddirection of their enterprise so that they can clearly figure out what and how theyshould do Besides, business strategies facilitate the enterprises to timely grasp andutilize the opportunities as well as minimize the risks due to upheavals in thebusiness environment

The Housing and Urban Development Corporation is among the leading brand names

in the area of housing and urban development With its 20 year experience ofoperation and development, its status is increasingly consolidated and enhanced indomestic and foreign markets Currently, the company is operating under the model

of parent-subsidiary companies with the parent company as the state-owned

enterprise operating in line with the Law on Enterprises and 16 subsidiary companiesincluding 15 joint-stock companies, 1 state-own limited one member company and

11 affiliates To ensure the company’s sound development in the future, the urgingissue to be addressed is that it should be able to build a stable and long-term businessstrategy that is flexible upon the ups-and-downs in the business environment;develop the company into a cooperation to meet increasing needs for housing andurbanization, thus contributing to the nation’s cause of industrialization andmodernization

Over the past years, HUD has set up an appropriate business strategy, thus enabling it

to have solid developments However, improving business strategy formulation todevelop the Company into a strong Cooperation in the area of housing and urbandevelopment is a matter of strategic importance, especially against the backdrop ofour economy’s deeper integration into the world’s Therefore, our group has chosenthe issue of “Business strategy of the Housing and Urban Development Corporationwith linkage to the construction model of a Vietnam’s Real Estate Group” to be thegrand exercise for the graduation of the Master of Business Management Program

2 Exercise’s objectives and responsibilities

a Objectives

Studying the matters of theoretical and practical manner as well as evaluate thereality of the Company’s business strategy formulation in order to suggest solutionsfor improving the business strategy formulation task to serve as a basis for turningthe Company into a real-estate business group

- Proposing solutions to improve the business strategy formulation task at theHousing and Urban Development Corporation as the basis for theestablishment of a national group operating in the field of housing and urbandevelopment

3 Exercise’s subject and scope of study

- The exercise’s object of study is the business strategy formulation task inenterprises

- The exercise’s scope of study is to focus on studying the business strategyformulation task at HUD during the period of 2009-2010 and its developmentorientation to 2015

4 Practical issues of the exercise that may contribute to the Company’s business strategy

- Systematizing some theoretical issues relating to the business strategyformulation of enterprises that can be used as reference materials for businessstrategy formulation task for enterprises

- Contributing to helping HUD map out fundamental orientation in the process ofanalyzing and evaluating the business strategy formulation current situation at theCompany, through which shortcoming and their origins can be found out

- Helping improve the business strategy formulation task at HUD, thuscontributing to the formation of a development strategy to set up Vietnam’s Housingand Urban Development Group

5 Exercise’s structure

The exercise is divided into 3 chapters:

Chapter 1: Key theoretical basis on the Corporation’s business strategy formulation Chapter 2: Evaluation of the Corporation’s business strategy formulation task Chapter 3: Solutions to improve the Corporation’s business strategy formulation task.

CHAPTER 1

KEY THEORETICAL BASIS FOR BUSINESS STRATEGY FORMULATION OF

THE HOUSING AND URBAN DEVELOPMENT CORPORATION

1.1 Concepts of business strategy

1.1.1 Definition of a business strategy

So far, there have been many definitions of a business strategy, among which thesetwo following ones are most popular:

- A business strategy is a plan of projecting and controlling business activities ofthe enterprise including identifying the objectives of the business strategy (3 years, 5years, 10 years etc); decision-formulation process of the enterprises and analysis ofthe business environment In other words, the business strategy is a “product” thatcan be combined with what the environment has; what the Company may have; andwhat it wants to have Therefore, the nature of a business strategy is the meanstoward long-term objectives and the ideas of a business strategy is the aim ofwinning in competition and business market

- A business strategy is a set of long-term objectives, policies and grand solutions

on business and manufacture; finance; as well as human factors in order to bring theenterprise’s business into a new height with higher quality

1.1.2 Strategic management process

The concept of management have long come into being, however, it is not until theend of XIX and early XX centuries that theories of management including ideas andthoughts systematized and studied based on scientific analysis did appear with theschool of scientific management and the newly released school of quantitativemanagement to fit with the need for competitiveness in modern business activities

Strategic management is a process of studying the environment to form strategicobjectives, policies and solutions for enterprises’ business; to put these businesspolicies and strategies into practice so as to make decision on adjusting, monitoringand evaluating the implementation process of these business policies and strategies

1.1.2.1 Strategy formation period

Strategic formation is a process of setting up business duties, implementing study andresearch to identify inner and external factors, outlining long-term objectives andselecting alternative strategies This strategy formation period is sometimes called

“strategy plan-formulation” Strategy formation involves 3 fundamental activities:

- Conducting studies relating to the collection and digestion of data andinformation on the market and business sectors of the enterprise This process iscalled “having a glance at the business environment” In essence, conducting thisstudy is to define important strengths as well as weaknesses in the functionalbusiness area Different forms of surveys may be developed and conducted to studyinner factors i.e staff’s spirit, production efficiency, advertising effectiveness andcustomers’ loyalty

- Combining intuition and analysis: several administrators and enterprises’ ownersthink that certain particular gifts may count in using intuition for initiating excellentstrategies Although some organizations nowadays can survive and prosper thanks tointuitive geniuses in management, the majority might not be as so lucky Mostorganizations can, instead, make benefits by combining in tandem between intuitionand analysis in decision formulation

- Decision formulation: since no organization can have unlimited resources,strategists ought to make decision as to what alternative strategy should be selected

to bring most benefits to the company Decisions during the strategy formationperiod should link the organization with the products, markets, resources and specifictechnologies within a prolonged period

1.1.2.2 Strategy implementation period

- Strategy formation is usually deemed the period of actions of strategicadministrators Implementation implies the mobilization administrators and staffs tocarry out the set strategies Fundamental activities in this period include:

- Setting up annual targets: i.e landmarks that organizations have to fulfill towardlonger-term objectives Annual targets should be measurable, quantitative,challenging and prioritized These targets are normally set at the company, sectionand functional office levels in a big company They should be released under theform of achievements in management, marketing, finance, accounting, operation, andinformation R&D A series of annual targets is needed for each long-term objective.These annual targets are extremely important in the strategy in the sense that they arethe basis for resource distribution

- Policies: policies are means toward ends They include instructions, regulationsand procedures given out to support efforts toward the set targets Policies are theguidance for decision-formulation and reflect repetitive or periodic situations.Policies as well as annual targets are of great importance in strategy implementation

as they cover expectation of the staff and administrators in the organization Policiesalso enable cooperation and inner synchronizing among different departments withinthe organization

- Resource distribution: this is a central administrative activity taking into accountthe strategy implementation Strategic management allows resources to be distributedaccording to priorities set by annual targets Nothing should be more harmful to thestrategic administrative process and the organization’s successes than the fact thatresources are distributed in an inappropriate ways against the priorities that havebeen adopted in annual targets All organizations have at least 4 categories ofresources that can be used for achieving the targets:

+ Financial resources;

1.1.2.3 Strategy evaluation period

Most strategic makers agree that strategy evaluation period is essential to bringprosperity for the organization Timely evaluation can raise an alarm foradministrators about obstacles or warn possible obstacles before a situation becomesserious

Timely and fully responsive information as the foundation for strategic evaluationmay be nothing different from current available information So much pressure fromleading administrators may render lower-level ones to figure out data that they thinkwill satisfy the higher-level

Although one or many strategies may be right, however, this kind of theoreticalthinking may be wrong in that strategic evaluation embraces both short-term andlong-term objectives Normally, these strategies do not affect short-term activityoutcomes until it has been so late to make necessary changes It can not be verifiedthat a typical strategy is the best or guaranteed that it can act Nevertheless, it can beevaluated through serious mistakes Richard Rumel has suggested 4 criteria forstrategic evaluation, namely consistency, suitability, favorableness and feasibility.Strategic management process

Including: Commitment → Decision → Action

Strategic competitive advantages:

- Sustainable competitive advantages;

Annually there are about 20,000 enterprises in the United States plunged intobankruptcy and 50,000 cases of failure in business There are many causescontributing to those failures apart from the lack of a clear and efficient strategy, yetstatistics also show that strategies can create financial advantages in the company

It may be the beginning of an effective and efficient administrative system, restoreconfidence in the current business strategy or suggest necessary adjustments

- Strategic management creates in every person an important awareness Both theDirector Board and employees thoroughly understand and commit to implemententerprise’s objectives Once every staff in the enterprise understands what it is doingand why it is doing so, they will feel that they are a part of the enterprise and willcommit to support every of its activities

From the above-mentioned concepts of a business strategy, fundamental features

of a business strategy can be clearly seen, those are:

- The business strategy has to clearly identify fundamental goals needed to beobtained for each period and thoroughly grasped in all aspects and levels of thebusiness and production activities of the enterprise

- The business strategy has to ensure to mobilize and combine to the utmost theexploitation and use of resources (human resources together with other visible andinvisible property) It is also compulsory to bring into full play, both in the presenceand future, the advantages and grasp any opportunity to gain advantages incompetition

- The business strategy of the enterprise is manifested throughout a continuousperiod from strategy formation to implementation, evaluation, monitoring toadjustment

- The business strategy is designed to be implemented for a rather long time(usually 3 years, 5 years, 10 years etc)

With those characteristics, it can be said that the formation and implementation of abusiness strategy, particularly in the market regime, is of significant meaning for thesurvival and development of the enterprise in that:

- It helps the enterprise well recognize their goals and path forward to serve as thefoundation for identifying which orientation the enterprise should take for theirproduction and business and when it can reach certain objectives

- Upheavals in the market always create both opportunities and challenges.Building a strategic implementation will thus help the enterprise to grasp and utilizethe opportunities to overcome risks and traps of the market

- Building the strategic implementation will set up solid bases for the enterprise tomake decisions in line with developments of the market

- Building the strategic implementation also plays a decisive role in increasing theefficiency in resource using and in enhancing competition status to ensure asustainable development for the enterprise

1.2 Substances in enterprises’ business strategy formation

1.2.1 Defining duties and objectives of the enterprise

Objectives are the desired outcomes that the enterprise should strive for Theobjectives guide all decisions and form measurable criteria for implementation inpractice

An enterprise is established with certain aims Nevertheless, it does not alwaysclearly understand its duties, resulting in the fact that the tasks completed do notbring about high efficiency as expected Sometimes, due to not mastering the setobjectives and duties, these enterprises have chosen the wrong way, formulation allfollow-up efforts become meaningless The enterprises, therefore, should know fromthe very beginning the tasks that they need to implement.

Defining the strategic objectives and duties of the enterprise is a very important start

in the implementing the strategic business management Clearly defining andspecifying the objectives is an important step for the enterprise’s success

* Principles in defining objectives:

- Concreteness: the objectives should clarify the following questions: what are therelevant issues? how is the implementation progress? what are the final outcomesthat need to be obtained? The more specific the objective is, the easier it becomes toproject a strategy to implement that objective Concreteness hereby impliesquantifying the objectives i.e they should be defined under the form of concretetargets

- Feasibility: a set objective must be feasible; otherwise it may becomeadventurous or counter-productive Consequently, if the objective is too ambitious,the implementers will be discouraged whereas a modest one will be ineffective

- Consistency: the set objectives should be harmonious with each other so that theimplementation process of one objective will not hinder that of the other.Contradicting objectives usually lead to intra-enterprise contradictions; hence, itshould be wise to prioritize the objectives The objectives, however, are not alwayscompletely consistent with each other In such a case, there should be reconcilingmeasures in the implementation of objectives

- Flexibility: the set objectives have to be adjustable to adapt to changes in theenvironment so as to avoid risks and grasp opportunities Yet, it should be cautious in

changing objectives as these changes require to go hand in hand with respectivechanges in relevant strategies as well as the plans of action

1.2.2 SWOT Analysis

All enterprises have their own strong and weak points in their area of business Noenterprise has only weaknesses or strengths in all aspects Inner weak and strongpoints as well as external risks and opportunities are fundamental features that theenterprises should take into account on forming their strategies Identifying weak andstrong points has to be made in comparison with other enterprises operating in thesame field and the operation results of the enterprise Enterprise’s strong points arethose whereby it does better than its competitors and that other enterprises do noteasily possess Together, these strong points create the competitive advantages of theenterprise The weak points are enterprise’s shortcomings which should be adjustedwhen the enterprises form its strategy

1.2.2.1 Analyzing the external business environment to identify opportunities

it should avoid Within the scope of impacts of the business environment, theyinclude:

- International environnement;

- National economic environnement;

- Business sector environment

1 Analyzing the impacts of the international environment

Analyzing the international environment gives us a partial answer for the question:what is the enterprise facing with? There are 5 factors from the internationalenvironment that the enterprise should cope with, namely world politics,international economics, international laws, world science and technology, andinternational culture These factors have independent impacts or combining ones withother factors on the organization.

- World politics: At the one hand, political stability and peaceful coexistence aremaintained; at the other hand, military, political and diplomatic influence isprolonged This factor creates both opportunities and challenges for enterprises’import-export activities

- International economy: international economic organizations, multi-nationalcorporations, international economic growth rate etc affect world supply anddemand, prices, international competition, wide and in-depth level of integration intoworld market etc;

- International laws: rules and laws of international organizations i.e WTO, WB,IMF, ISO, together with bilateral and multilateral agreements are intertwined Ifmastered, it will be an opportunity, otherwise, a risk;

- World science and technology: An opportunity if following the trend to shortenthe development gap; a risk if slowly renovated;

- International culture: influence from foreign cultures of developed nations;contradictions and conflicts among different cultures It is required to absorb withselection, be self-adapted, and build the enterprise’s culture with its owncharacteristics to develop A risk may be inevitable if completely dissolved anddependent

2 Impacts from the national economic environment

- Politics and laws are the legal framework of the business environment and theeconomic role of the state i.e political and policy stability of the state, improvement

and legal effect in practice It is an opportunity if the business environment is stable,equitable, and competitive and the role of enterprises and businessmen are honored; arisk if otherwise.

- Economics: economic growth rate, bank’s interest rate, inflation, increase ininvestment etc all have impact on supply and demand, and the prices of commodityand service This is an opportunity if they create favorable conditions for enterprises,

a risk when the economy slows down, inflation and investment fall

- Technology: levels of technology material and infrastructure, policy of scienceand technology development, investment, technological transfer, intellectualproperty This is an opportunity if investment on technological innovation andregistration of trademarks are made, otherwise a risk

- Natural conditions and infrastructure: include transport, communication, level

of environmental pollution, the state’s role in environmental protection It will be anopportunity if enterprise’s business operation is facilitated, otherwise the enterprisemay have to increase business expenditure

- Social culture: the trend of upheavals in the young population, tendency offamily mobilization, life style, psychological habits, religion etc This will be anopportunity should analysis be done to actively welcome changes; a risk should theabove-mentioned impacts are not well-understood

3 Analyzing the business sector’s environment

- Types of competitors in the market

+ Based on the status of the enterprises, including leading companies, followingones, and those who are looking for a place in the market

+ Based on the products: competitors in products, competitors in types ofproducts, competitors operating in the business field and competitors in dividingprofits from a group of customers

- It is necessary to collect information about the competitors i.e classifying them,their goals and judgment about them as well as their strategies and potentials

- Define the level of market competitiveness basing on the following factors:

+ Number of competitors;

+ Level of growth in the business sector;

+ High or low fixed costs;

+ Market demand;

+ Barriers in withdrawing from the business sector

On that foundation, the enterprise’s mode of doing business and competitive means

in the market should be defined

c Suppliers

- Are providers of commodity and service for the enterprise and its competitor

- Suppliers are “stronger” than the enterprises may be a disadvantage in the casesi.e there are limited suppliers, the enterprises do not have capability to search forother suppliers; or the products are not important to suppliers but to the enterprises

- Otherwise, if suppliers are “weaker” than the enterprise, it will be an advantage

- It is necessary to select and diversify suppliers and sources of products toreduce input costs

d Trade intermediaries

Including individuals, collectives, and organization participating in propaganda,advertising, transport, distribution, sale and service for the enterprises

- Types of trade intermediaries include retail agents, sale brokers

- Benefits on using sale agents

- To be a broker, a profound understanding of the products, master ofcommunication, customer persuasive skills, and a reasonable distribution of brokercost are very much required

- The enterprise should have measures to study, classify, select and link theintermediaries so that they can sell goods for it

e Public relations

They are any groups of people that have the rights and impacts on businesscapability of the enterprise including the government, social opinion, active publicand inner public

- The public plays a role of multiplying enterprise’s reputation, supporting itsbusiness and increasing its social responsibilities

- Measures to enhance public relations:

+ Investing time and effort;

+ Well fulfilling the enterprise’s social responsibilities;

+ Protecting the natural and ecological environment;

+ Selecting an experienced and prestigious spokesman

1.2.2.2 Analyzing internal factors that can increase competitiveness and enable the enterprise to gain advantages against its competitors

All organizations have strengths and weaknesses within their functional units There

is no organization with only all strengths or weaknesses in every area.Strengths/weaknesses, opportunities/challenges clearly lay the foundation forforming objectives and strategies Evaluating the inner environment is to check andreview all aspects of the company and intra-unit relations as well as point out itsstrengths and lingering weaknesses, serving as the premise for maximizing strengthsand minimizing shortcomings and correcting existing weaknesses Weaknesseshereby imply attributes that reduce the enterprise’s resources as compared to itscompetitors

1 Products and business area

Regulations on the enterprise’s targets and scope of operation include products,volume, commodity structure, current product life circle, trademarks, supply serviceand quality

Decisions on the scope of business, apparatus, and modes of business will affect the

2 2 Human resources and human resource management

Quantity, structure, quality of the human resources; training and education of humanresources; use, treatment, encouragement of labors; and enterprise’s regime of humanresource management.

3 Information system

The information system should be complete, updated, reliable and efficient enough toenable leaders to make precise decisions

4 Enterprise’s management activities

Key officials, organizing structure, operation mechanism (proper decentralization)will lead to suitable decisions in accordance to market situations and create valueadded for the enterprise

5 Marketing activities in business

It is necessary to build a marketing strategy for the focal market Parameters i.e.products, prices, distribution, promotion comprehensively and harmoniously usedwill help reduce costs and increase marketing efficiency

6 Financial factors and business effect

The quantity, business capital structure, sources of funding, fund allocation tobusiness activities, increased liquidity, checked incomings and outgoings, andfinancial management regime will help increase business effect

7 Enterprise’s cultural order and discipline

Enterprise’s regulations, etiquette and formalities in meetings, business philosophy,anecdotes about leaders with entrepreneurial, sectional and national characteristicswill be an apparent advantage Unclear characteristics will be a weak point

8 Enterprise’s brand name and reputation

Product’s trademarks, brands, symbols, slogans, packing, geographical instructions,features of intellectual property are necessary components of a strong brand name

9 Science and technology

Inventions, innovations, new scientific and technological applications, and favorablegeographical locations if reasonably invested will create strengths for the enterprise

1.2.2.3 Methods of evaluating the business environment

When analyzing and evaluating factors of the business environment, there will bethousands of emerging opportunities and challenges that needs measures taking intoaccount the most attractive opportunities and the worst threats

Most frequently used methods:

 General table about the business environment

 Matrix of internal and external factors

 Analyzing SWOT matrix

 Priority order of opportunities and challenges

To synthesize the above analyzing process, it is quite sensible to make use of theSWOT matrix

* Matrix SWOT (Strengths, Weaknesses, Opportunities, Threats)

Next, a systematic comparison at each respective level among the factors should becarried out to identify the coordinating level

- S/O coordination can be made by combining key strengths with opportunities ofthe enterprise The enterprise should make use of its strengths and opportunities tocompete with others so as to unceasingly enlarge its market

- W/O coordination is the combination between enterprise’s weaknesses and itsopportunities This combination opens a chance for the enterprise to surmountweaknesses and take advantage of opportunities

- S/T coordination is the combination between strengths and threats in which dueattention should be given to using strengths to overcome threats

- W/T coordination is the combination between enterprise’s weaknesses andthreats This combination poses a requirement for the enterprise to adopt measures toreduce weaknesses and avoid threats by imposing prevention strategies

1.2.2.4 Forming and selecting types of business strategies

1 Functional strategy

Create competitive advantages by means of functional strategies

a Achieving significant efficiency.

- Economy of scale

- Learning effect

- Experience curve

- Flexible production upon customer’s demands with big volume

- Marketing and its efficiency

- R&D strategy and its efficiency

- Human resource strategy and its efficiency.

- Information system, Internet and its efficiency

b Achieving excellent quality.

In order to gain excellent quality, the entire enterprise is required to commit to

quality and have a clear customer-based focus

c Achieving exceeding improvements.

Failure ratio in new product introduction is quite high due to factors i.e uncertainty

in poor commercialization, poor location strategy, technological short-sightednessand slowness in introducing the product into the market

d Establishing improvement capability.

Companies can carry out some steps to set up an improvement capability and escapefrom failure Those three seemingly most significant steps are:

 Form basic and applied research skills;

 Develop a good project’s selection and development process;

 Combine, to a certain extent, different functions within the company throughthe inter-functional product development group and paralleled developmentprocesses

e Achieving exceeding rate in meeting customer’s demands.

- Focus on customers;

- Satisfy customer’s demands;

- Achieving exceeding rate in meeting customer’s demands

2 Strategy at the business level

a Strategy at business section level.

Strategy at the business section level is the combination of commitments and actionsthat help the enterprise gain competitive advantage by bringing into full play its corecapabilities in specific productivity market

b Selecting a common business strategy.

A successful strategy for competition must base on sources of competitiveadvantages The enterprises will have to strive consistently to form competitiveadvantages through an unlimited series of strategies A strategy for competition isdesigned to make use of the value chain and other strengths to form the competitiveadvantages Although there are various competitive strategies, generally there areonly 3 fundamental approaches to form the competitive advantage, namely leadingcost strategies, formulation difference strategies and concentrated strategies

c Groups of strategies and business strategies.

Companies operating in the same field can pursue different types of businessstrategies whose differences relate to factors i.e selection of market segment forserving, quality, productivity, leading technology, customer serving, assessment andadvertising policies

d Selection of an investment strategy at the business section level.

It’s obligatory to invest on an investment strategy which forms the value and type offunctional and financial human-personnel resources to gain competitive advantage

 Competitive status;

 Life circle effect;

 Selection of investment strategy

3 Strategies at the company level

a Focus on a single business area.

Strategies that focus on a particular business area will enable the enterprise toconcentrate its resources and capabilities on a single business activity Concentrated

resources and capabilities are effective strategies for enterprises to avoid spreadingits strengths too much in diversified markets

Another advantage of concentrating on a single business activity is that the enterpriseand its tasks are more firmly cemented

b Vertical integration.

Vertical integration strategy implies that the company is producing their own inputs

or distributing their own outputs Vertical integration is the choice that enables thecompany to compete in various periods of the chain i.e from materials to customers

c Vertical integration projects.

- Short-term contracts and competitive auction

- Strategic alliances and long-term contracts

- Establishing long-term cooperative relationships

d Diversification.

- Create value through diversification

- Management costs and limitations of diversification

e Strategic alliances.

g Review company’s list of items.

- Make the list of items

- Limitations of list formulation: the patterns are too simple; linkagesbetween relative market and cost savings are not favorable

- Companies as a list of core capabilities

- Penetrating strategy

h New inner investment.

i Acquisition – a penetrating strategy.

Acquisition is a strategy whereby a company buys the control power or 100 benefits

of another one with an intention to turn the annexed company into a dependentbusiness unit in its list of business units

k Joint venture – a penetrating strategy.

m Restructuring.

Restructuring is a significant strategy whereby companies change their set ofbusiness units or the financial structure Enterprises can use 3 directions of strategyfor restructuring, namely reduce the scale, narrow the scale and sell the business sectionaway

4 International strategy

a International strategy is the one in which the company sells its products or services outside its domestic market

b Cost reducing and local satisfying pressure.

- Cost reducing pressure;

- Local satisfying pressure;

- Differences in customers’ tastes and hobbies;

- Differences in infrastructure and traditional customs;

- Differences in distributing channels;

- Requirements from the local governments

d Decisions of penetrating the essential markets.

- Fix the penetrating schedule;

- Penetrating scale and strategic commitments

e Selecting penetrating methods.

Consideration of penetrating into a foreign market poses an issue of selecting thebest way for such a penetration There are 5 key projects for selection, namelyexporting, selling copyrights, granting business power, joining a joint venture with alocal company; establish a subsidiary company completely belong to the company’sownership at the host country

f Strategy of global alliances.

g Operation of alliances.

1.3 Business strategy implementation

1.3.1 Objectives, conditions of the business environment and the selected strategies

1.3.1.1 Reassess objectives of the business strategy

Objectives of the business strategy are normally defined on the basis of theenterprises’ business strategy Enterprises usually classify objectives of the businessstrategy into long-term and short-term ones According to the administrative levels,the general goals of the enterprise and its affiliated sections are fast growth andstability The strategic objectives need to be clear, detailed, measurable and time-limited since it can speed up the tasks in many years ahead Therefore, “Our utmostaim is customers We cannot just worry about our partners’ revenues In fact, weshould begin by maximizing value for customers and let revenues naturally flowtoward us from that.”

1.3.1.2 Reassess conditions of the business environment and selected strategies

In the present time, there have been many factors of environmental changes thatenhance the role of the strategic administrative area and wider social aspects mayhave impacts on a sector and companies in that sector i.e demography, economics,politics, social culture, science-technology and globalization

Most note-worthily is U.S traditional markets which have made breaking inventions

in science and technology, particularly those in electronics, bio-technology andinternet that have helped create brand-new industries With the fact that the marketincreasingly become more competitive, the value chain is an important tool toimprove the competitive capability of each enterprise Globalization and economicfreedom have brought about many uncertainties for strategy formulation

1.3.2 Organize the implementation apparatus

Organizing the apparatus is a process of specifying the tasks that needed to be done;setting up departments, units and assigning the units and individuals to fulfill thosetasks; creating vertical-horizontal relations within the organization to effectivelycarry out its strategic objectives An efficient apparatus is a safeguard for well-implementing the administrative function and effectively support the defined generalobjectives In order to have an efficient apparatus, it is necessary to be fully aware ofthe objectives and keep in mind the 4 foundational factors for apparatus organizing.Those are enterprise’s objectives and operation strategy, business or social context,enterprise’s production technology or business techniques, qualifications andcapacity of enterprise’s human resource Apart from those key factors, due attentionshould also be paid to the following principles: specialization, scientificness, logic,and conformity with the practical context, particularly the fundamental principles ofthe administrative structure The main substances of these principles are linkages tothe objectives, balancing principle, flexible principle and unanimously commandprinciple

Administrative scope together with organization division is one of the most interestedissues and serves as a scientific basis for organizing the apparatus Defining theadministrative scope needs to rely on 6 factors, namely administrator’s capacity,lower-level’s qualifications, level of decentralization from the higher level to thelower ones, planning nature of the tasks, changes of tasks, technology and means

Carry out the apparatus organizing process with 7 steps:

Step 1: Identify enterprise’s objectives:

Step 2: Analyzing tasks;

Step 3: Set up departments and offices;

Step 4: Fix number of staff;

Step 5: Assign tasks and responsibilities;

Step 6: Coordinate the implementation of tasks;

Step 7: Evaluation and restructuring

1.3.3 Allocation and adjustment of resources

Current enterprises should reasonably and scientifically adjust their resources as well

as specify criteria i.e valuable, scarce, extremely expensive to copy, and withoutalternatives Core capabilities are resources and abilities that bring about competitiveadvantage for a company and create a competitive distinction of a company andmanifest that company’s characteristics, as well as facilitate some companies toneutralize the challenges and exploit the opportunities in the future

1.3.4 Set up a plan of implementation

The plan of a general business strategy is designed upon visions of the enterprisewhich bear the guiding nature for enterprise’s overall activities and thus bearing along-term strategic meaning It includes the following steps of strategy planning,strategy’s concretization, plan-formulation, deployment for implementation, revenueanalysis, and strategies’ analysis

1.3.5 Designing strategy’s structure and control system

1.3.5.1 Designing strategy’s structure

Designing the organization means selecting methods of combining organization’sstructure and the monitoring system so that the company can efficiently pursue itsown strategy, thus creating sustainable values and competitive advantages

When factors of the organization’s structure are appropriately designed to fit withother factors, it will help accelerate an efficient implementation of the strategy.Efficient structures lead to stability and flexibility Structure’s flexibility brings aboutchances to develop competitive capabilities and resource allocation for activities toform necessary competitive advantages The strategy and the structure havereciprocal relationships The structure is defined in line with the company’s selection

of strategies Once set up, the structure, however, may affect current strategy’sactivities as well as future strategy’s selection

Strategies and model of structure development

Functional structure in implementing the low cost strategy

Functional structure for implementing the differentiating strategy

1.3.5.2 Designing the control system

1.4 Monitoring and Evaluation (M & E)

The core issue of enterprise’s management is how to make the enterprise’s apparatuswell-operated, produced goods high-qualified and business well-doing In otherwords, management can be measured by means of products’ quality

However, together with the enlargement in terms of scale and operation scope underthe form of a multinational company, the strategy formulation task does help developthe operation of an enterprise Therefore, the issue posed for an enterprise’sadministrators is how to outline a flexible development policy that can fit with eachlocality but remain unified and consistent in the whole enterprise

This is deemed the most precise meter of each section’s operation efficiencyregardless of differences in scale, level and area An operation record will be a usefultool that all management levels including the corporation’s CEO use to manage theirunits’ operation This record will not only mark each single unit but give marksbasing on cooperation efficiency among the enterprise’s sections and levels ofmanagement and 4 constructing factors of the operation record

Of course, the enterprise’s operation evaluation framework and this record variedfrom different enterprises Yet, they all rely on fundamental factors for evaluation,namely finance, customers, process, mutual understanding and cooperation capabilityamong the staff

- Financial prospect: Every unit in the enterprise will be marked based on theirefforts in increasing sources of capital i.e negotiating and cooperating plan with biginvestors, finding funding sources from other organization like trade unions orgovernments

- Customers’ rights: What benefits does each unit bring to customers: reducedprices, good services or exceeding quality as compared to their competitors? Thisrecord will also be marked basing on the unity of customer service among the saleagents, and global branches This means that with a same trademark, customers in

China will be served similarly to those in the US The Hilton hotel chains and McDonald fast-food trademark are 2 among the most successful case studies

- Efficiency of the production process: this factor is marked basing on the closecooperation among sections, for example sharing how the processes of materialprocurement, production, distribution and research help save costs

- Mutual understanding and cooperation ability among staff: this factor includesrecruitment process, staff training and communication channels among sections Thischannel includes the information system via internet, staff database and mediachannels i.e meetings and capabilities of doing teamwork among different sections Therefore, the evaluating method of building a common record for eachmanagement level is seen as a simple and efficient way as it provides acomprehensive assessment based on the 2 grounds, namely independence within eachsection and cooperative ability in the whole enterprise in which the latter is morehighly appreciated and may serve as the basis to assess the general efficiency of thewhole enterprise

CHAPTER 2

EVALUATING THE REALITY OF BUSINESS STRATEGY FORMULATION TASK AT THE HOUSING AND URBAN DEVELOPMENT CORPORATION (HUD)

2.1 General features of the Corporation

2.1.1 Establishment and development process of the Corporation

The Housing and Urban Development Corporation (HUD) is a State-ownedcorporation organized and operated in accordance to the Decision No 90/TTG dated07/03/1994 of the Prime Minister The corporation was established in 2000 (inaccordance to Decision No 08/2000/QD-BXD dated 02/06/2000 of Minister ofConstruction) Its predecessor was the Housing and Urban Development Company(established on 10/10/1989, based on Decision No 843/BXD-TCLD of Minister ofConstruction)

HUD was transformed to the operating model of parent-subsidiary companies inaccordance to Decision No 595QD-BXD dated 30/03/2006 of Minister ofConstruction

The Corporation has its international transaction name of Housing and Urban

Development Corporation (HUD in short) and operates nation-wide

With almost 20 year experience of growth and development, the Corporation’s statushas been increasingly enhanced and its brand-name has become one of the leadingtrademarks of Vietnam in the field of housing and urban development, thuscontributing a significant part to the national industrialization and modernization HUD is proud of its establishment and development process that closely ties to thecountry’s renovation period and its significant contribution in the area of housing andurban development

The Corporation is the pioneering business in the area of nation-wide housing andurban development and the one to carry out investment in the first new urban block

in Hanoi, namely Linh Dam Urban Block that meets comprehensive criteria in terms

of technical infrastructure and urban services This model has been later multiplied toform a key trend at many localities and cities in Vietnam Linh Dam Urban Block hasbeen selected by the Ministry of Construction and the Association of Architects to beone of the two model urban block of the nation which has been highly appreciated bythe Government, Ministries and branches, localities as well as public opinion

2.1.2 Features of Corporation’s business operation

2.1.2.1 Corporation’s main areas of operation

- Invest on developing new residential quarters, urban blocks, tourist attractionsites, recreation and leisure centers, concentrated economic and industrial zones; aswell as trading in housing and urban infrastructure and industrial zones

- Manage and exploit collective services in new urban blocks, tourist attractionsites, recreation and leisure centers, concentrated residential quarters, and industrialzones

- Provide offices and houses for rent

- Produce and trade materials, equipments and construction materials; import andexport materials, technological equipments, and material materials

- Execute the construction of civilian power works, industry, transport, irrigation,postal and telecommunication services, technical infrastructure works at urbanblocks, industrial zones, and electricity network and transformer stations

- Provide consultation on investment and construction of housing, urban,industrial zones, tourist areas, and technological infrastructure projects includingmake and assess an investment project, design schemes, surveys; design and buildthe total estimation and assess the designs and project’s total estimation; provide

consultations on bidding and economic contracts relating to designing, executing,building and assembling works, providing materials, equipments; manage projects;monitor execution; checking upon taking over the works and evaluating their quality.

2.1.2.2 Corporation’s organizing structure

HUD has been decided to be transformed to the operating model of parent-subsidiarycompanies since 03/2006 and officially operated under this model since 08/2006

The parent company: includes Board of Directors, Management Board, Board of

Managers, 14 specialized departments (offices), 6 management boards, and 2 estate transaction centers The number of staff at the parent company is 367(including 2 PhDs, 28 Masters and almost 90% officials having undergraduate andpostgraduate qualifications)

real-Subsidiary companies: The Corporation has invested in its 16 subsidiary companies

including:

 Owning two 100% state-owned companies;

 Owing 14 stock companies by holding more than 50% charter capital (5subsidiary companies formed by privatization, 2 companies established in

2003, 4 in 2007, 3 in 2008);

 Contribute investments in 6 associated companies;

 Contribute investments in 2 joint-ventures

The transformation of operation to the model of parent-subsidiary companies haschanged the administrative instructing relationship to an economic one throughcapital ownership that has initially created firm linkages between the parent companyand its subsidiaries to form the combined strengths, enhanced capacity and enlargedscope of operation to adapt to the new mechanism

The organizing structure is manifested by this diagram:

2.1.2.3 The Corporation’s business results in recent years and indexes guided in its development strategy to 2015

The annual growth of the Corporation always stands at a high and firm level with theaverage of more than 20% from business and production values to turnovers andrevenues Housing and infrastructure trading accounts for a large part and theownership capital source currently reaches more than 1,400 billion VND, 14 timesbigger since its inception By 2008, the Corporation has completed and put into use

140 blocks of apartments with approximately 2.3 million m2 area of floor at all types,mainly high apartment buildings The total scale of the urban development projectsthat HUD has been and is implementing throughout the nation is more than 2,000hectares

The business results are manifested through the attached annex table

1.Production and business results from 2006 to 2009

Source: data from the Report of annual production and business plan totalizing

2 Analysis of the Corporation’s production and commerce activities

a Figures of total production and commerce value

The production and commerce value of the corporation in 2008 reached 5,000 billiondongs, representing a 27% increase compared with the value in 2007 and a 90%increase compared with the value in 2006, it is expected to reach 5,800 billion dongs,growth of 16% over in 2008

In the total value of the production and commerce activities, the value of propertycommerce activity attained 70%, the value of construction was only 30%

b Figures of revenues

Revenues in 2008 reached over 4,150 billion dongs, a 30% increase over in 2007, a80% increase over in 2006, it is expected to reach 4,800 billion dongs in 2009,representing growth of 15$ in comparison with in 2008

c Figures of investment

Investment in 2008 reached 4,000 billion dongs, a 57% increase over in 2007, a 80%increase over in 2006, it is expected to increase 15% compared with 2008

d Figures of benefit before tax

Benefit before tax in 2008 reached 300 billion dongs, a 53% increase in comparisonwith in 2006, it is expected in 2009 to reach 400 billion dongs, representing growth

of 33$ over in 2008

e Figures of total property value

Total property value in 2008 is more than 8,600 billion dongs, a 40% increasecompared with in 2007, it is expected to reach over 10,480 billion dongs in 2009, a21% increase in comparison with in 2008

3 Evaluation

Generally, the annual growth rate of the Corporation always reaches at the high level,the average growth rate of the above figures reached more than 15%/year all, inwhich there are the evaluation figures for the production efficiency increased 50% ofbenefit over the previous year, or the evaluation figures of scope increase 40% ofproperty value over the previous year Especially, total property value of the