DEVELOPING BUSINESS STRATEGY FOR VIET v STANDA JOINT STOCK COMPANY

THEORETICAL BACKGROUND TO THE DEVELOPMENT OF THE BUSINESS STRATEGY FOR THE COMPANY ASSESSMENT OF CURRENT BUSINESS SITUATION OF VIETNAM JSCDEVELOPMENT OF COMPANY BUSINESS STRATEGYDETERMINATION OF STRATEGIC BUSINESS ACTIVITIESSPECIFIC MEASURES FOR IMPLEMENTING BUSINESS STRATEGYPOSSIBLE RISKS IN IMPLEMENTATION OF STRATEGIES AND MEASURES

THESIS DEVELOPING BUSINESS STRATEGY FOR VIET-V-STANDA JOINT STOCK COMPANY (V-STANDA., JSC) FOR THE

PERIOD 2015-2020

TABLE OF CONTENTS

INTRODUCTION……….Page 3

II SUBJECTS AND SCOPE OF THE STUDY ……… Page 5III SEQUENCES OF THE STUDY .Page 6

IV SOURCES OF THE DATA Page 6

V METHODOLOGY ………… .Page 6

VI CONTRIBUTION OF THE STUDY Page 7VII RESULTS OF THE STUDY ……… Page 7VIII ORGANIZATION OF THE CAPSTONE PROJECT Page 7

CHAPTER 1

THEORETICAL BACKGROUND TO THE DEVELOPMENT OF THE BUSINESSSTRATEGY FOR THE COMPANY ……… Page 91.1. BUSINESS STRATEGY – THE MAIN OUTCOME OF THE BUSINESS

STRATEGY DEVELOPMENT PROCESS process ……… Page 91.2. PROCEDURES OF BUSINESS STRATEGY DEVELOPMENT Page 21

CHAPTER 2

ASSESSMENT OF CURRENT BUSINESS SITUATION OF VIETNAM STANDARD JOINT STOCK COMPANY (V-STANDA., JSC) ………Page 372.1 GENERAL INFORMATION OF V-STANDA., JSC ……….Page 372.2 ANALYSIS OF MACRO ENVIRONMENT ……….Page 432.3 ANALYSIS OF TRADING SECTOR……….Page 452.4 ANALYSIS OF INTERNAL ENTERPRISE ENVIRONMENT……….Page 532.5 ANALYSIS OF STRENGTH, WEAKNESS, OPPORTUNITY AND THREAT

V-OF V-STANDA (SWOT ANALYSIS)……….Page 572.6 IDENTIFICATION OF CORE COMPETENCE OF V-STANDA

COMPANY………Page 57

CHAPTER 3

DEVELOPMENT OF COMPANY BUSINESS STRATEGY……… Page 613.1 STATEMENT OF VISION, MISSION, TASK AND OBJECTIVE OF COMPANY BUSINESS STRATEGY ……….Page 613.2 DETERMINATION OF STRATEGIC BUSINESS ACTIVITIES………Page 623.3 SPECIFIC MEASURES FOR IMPLEMENTING BUSINESS STRATEGY Page 693.4 POSSIBLE RISKS IN IMPLEMENTATION OF STRATEGIES AND

MEASURES……… Page 75

CONCLUSION……… ……….Page 78 REFERENCES……… ……….Page 80

ANNEX……… Page 81

CAPSTONE PROJECT REPORT

Project Title: Developing business strategy for V-STANDA Joint Stock Company

(V-STANDA., JSC) for the period 2010-2015.

Contents

I Aims, goals, subjects, scopes, and methodology

II Theoretical Background

III Analysis of real situation of V-STANDA Joint Stock Company

IV Developing business strategy for the period 2010-2015.

V Sound measures to realize the strategy.

INTRODUCTION

Business, though possibly simple like street-vending, cannot depend on good luck orsudden inspiration That means one cannot be a newsagent today and lottery ticketseller tomorrow or tobacco seller the day afterwards

A street-vendor has to make clear that he sells newspapers or lottery tickets orcigarettes in order to save money, look for customers and build up relationship, etc.Then, during the business, he himself has to work out his own way to make money onthe certain roads or areas, or figure out competitive advantages gradually, etc Suchconsiderations become essential in the life of the street vendor and govern his dailyactions until the market has some changes or the others have capital on hand and theyfind out a new business opportunity

Apple used to be an unknown company 28 years ago, but now it has become a known IT brand with the annual revenue of over US$ 32 billion The key for Apple'ssuccess lies in the design initiatives and flexible changes in the way to meet thedemand of target customers stated in the famous speech by Steve Jobs that he wishedMac would become "the centre of digital life" Such strategies inspired the introduction

well-of a range well-of its products like iPod, iPhone, iMac, or Macbook Air If Mac is the centre,iPhone (iPod as well) is the gentle satellite in accordance with the Mac system and

draws customers to Apple's world With a sound strategy and vision figuring outconsumer trends, Apple has really succeeded

FPT and Vietnam Computer Company are the two enterprises in the IT area It washard to make a difference between the two companies regarding sales, profits, capacityand potentials 20 years ago But now hardly anyone knows Vietnam ComputerCompany whereas FPT has become a strong economic group of Vietnam with revenue

of billions of USD per year and an average turnover growth rate of 30% per year Apartfrom that, FPT exports its software to the world, and becomes strategic partners of theleading IT groups like HP, IBM, Intel, etc It is clear that a big difference was made inmarket analysis, corporate strategy development, as well as realistic measures toperform strategies

Such typical examples show that if a business wishes to gain success, it should possess

a sound strategy and effective measures to realize it On the other hand, due to theeconomic globalization, increasing scarify of resources, IT boom and fast changes inthe demand of the market resulting in a more complex and fluctuating business climate,there is a must for all enterprises to work out right business strategies to graspopportunism, avoid risks and ensure sustainable development

Over 20 years since Vietnam transformed itself from a central-planning economy to amarket oriented one; thousands of enterprises have emerged, including both successfuland unsuccessful enterprises In general, the majority of Vietnamese businesses havedeveloped spontaneously without a long-term vision and strategy, which is especiallythe true case among small and medium sized enterprises Recently, in the current trend

of globalization and integration, especially thanks to the dramatic growth of theInternet, Vietnamese enterprises have availed themselves to more opportunities to learnand exchange business experiences with foreign ones Vietnam's entrepreneurs havebeen aware of the importance in formulating and realizing their strategies V-STANDA Joint stock Company is the case Currently, the company is working out thedevelopment of business strategy for the period 2010-2015 Based on basic information

obtained about the company during a long process, on what the Viet-Stand gained, andwhat the company is going to do in the following years, we found that this is a realisticCapstone project satisfying the program's requirements Thus, our group has come toagree on the name of the Capstone project title as "Developing business strategy forViet V-Standa Joint stock Company for the period 2010-2015".

I AIMs, GOALS OF THE STUDY

1 Aim of the study

To develop a business strategy of Viet V-Standa Joint stock Company for the period2010-2015 and a vision until 2020

2 Goals of the study

 Identifying basic values and core capacities of Viet V-Standa Joint StockCompany

 Evaluating business activities of the company in the recent years (from 2006 to2008) based on the financial criteria

 Analyzing strengths and weaknesses, opportunities and challenges for thecompany in the period 2006-2009

 Develop business strategy for the period 2010-2015

II SUBJECTS AND SCOPE OF THE STUDY:

1 Subjects of the study

The subject of the study is the business environment of the company, including boththe internal and external The external environment contains the factors directlyaffecting the business activities of the company; the internal environment is the internalstrength of the company Studies and analysis of such environments lay the ground forlatter evaluation, analysis and development of business strategies of Viet V-Standa

2 Scope of the study:

The research on business strategies of Viet V-Standa for the period 2010-2015 is based

on financial reports from 2006 to 2008, annual sales reports, and market analysis by the

business department (These are the past statistics Naturally, certain limitations in theevaluation of financial criteria may exist)

3 Field of the study.

To formulate the business strategy within the framework of the overall strategy of VietV-Standa Joint Stock company

III SEQUENCES OF THE STUDY

1 Analyzing the business environment

2 Analyzing the production and business situation of the company

3 Realizing opportunities and challenges

4 Choosing strategic models

5 Identifying business aims and goals and develop relevant strategies

6 Conditions and measures to ensure the successful implementation of thestrategies

IV SOURCES OF THE DATA

1 The secondary data

 Financial and Accounting Department: Financial statistics

 Board of directors: Statistics of investment projects and annual plans

 Business Department: Analysis of sales reports and markets

 Administrative and Human Resources: Statistics of human resources

 Newspapers, Magazines, and course books

2 Primary data

 The data analysis will be based on the discussion with the Director of theCompany

V METHODOLOGY

During the process of the study, our group will adopt the following research methods:

1 Collecting the data directly at the company as well as referring the data from

2006 to 2009 to the corporate filing system of vouchers and books

2 Referring to previous newspapers, magazines and course books as well asthe Internet.

3 Analyzing, synthesizing, comparing, contrasting, explaining, elucidating,inducing, and calculating the data for reliable outcomes

4 Adopting the consultation of experts during the study process in order toenhance the quality of the study and meet the realistic demand

5 Adopting SWOT analysis method which is a technique used to analyze andprocess the results of the study concerning the business environment, helpingthe company to develop a sound strategy

VI CONTRIBUTION OF THE STUDY

1 To apply the theory of business strategy development in the specific case of STANDA., JSC

V-2 To select and formulate the business strategy suitable with the core capacity,strengths, weaknesses, opportunities and challenges of V-STANDA., JSC

VII RESULTS OF THE STUDY

1 To develop the proper business strategy for V-STANDA., JSC

2 To work out the framework for realizing the business strategy based on theimplementation and supervision plans of V-STANDA., JSC

3 To give orientations for the follow-up goals in order to develop businessstrategies in the next stages

VIII ORGANIZATION OF THE CAPSTONE PROJECT

Regardless of the introduction, conclusion, references and appendixes, the maincontents of the Capstone project are divided into four chapters:

Chapter 1: Theoretical Background to the development of business strategy for

An overview of the company, and an analysis of the business environment andinternal strengths of V-STANDA., JSC shall be offered in this chapter.

Chapter 3: Development of the business strategy for V-STANDA., JSC.

This chapter deals with relevant solutions and a business strategy framework in linewith the mission, goals and aims of the company

Chapter 4: Action mottos to realize the business strategy

Feasible measures to implement the business strategy shall be identified in thischapter

Conclusion

Annex

CHAPTER 1 THEORETICAL BACKGROUND TO THE DEVELOPMENT OF THE

BUSINESS STRATEGY FOR THE COMPANY

1.1 Business strategy – the main outcome of the business strategy developmentprocess

1.1.1 Definitions of business strategy

There are many definitions of business strategy which come from different points ofview

Alfred Chandler defined a business strategy as "the identification of long-term goalsand aims of an enterprise and the application of a range of actions as well as the

distribution of these essential resources" (Chandler, A (1962) Strategy and Structure.

Cambrige, Massachusetts MIT Press.)

Jame Quin offered a more general view: "a strategy is a pattern or a plan to synthesize

essential goals, policies, and a range of actions into an integral part" (Quin, J., B

(1980) Strategy for Change: Logical Inscrementalisim Homewood, Illinois Irwin)

Johnoson and Scholes perceived a strategy in a condition with many fast changes: "Thestrategy is the long-term orientation and size of an organization with an aim atobtaining competitive advantages for the organization through the identification of itsresources in a changeable environment and meeting the market demands and

expectations of relevant parties" (Johnson, G., Scholes, K (1999) Exploring

In his definition of business strategy with five "P"s, Mintzberg generalized differentareas of strategic management as follows:

Plan: a range of actions consistently planned

Pattern: consistent behaviors during the time either planned or unplanned

Position: the organization in accordance with its environment

Perspective: Ways to take an insight into the world

Ploy: Specific methods to deceive rivals

Besides traditional approaches mentioned above, many businesses understood strategy

in a new way: a business strategy is a plan to control and use resources, assets andfinance in order to strengthen and ensure the corporate essential interests

According to Kenneth Andrews, a strategy is what an organization has to do base on itsstrengths and weaknesses in the context of available opportunities and risks BraceHenderson, the founder of Boston consultation group included the concept of businessstrategy in that of competitive advantages

A competitive advantage is a situation in which the company is placed at a betterposition compared with its rivals to bring about economic benefits for its customers

"Strategy is the cautious search for an action plan to develop and combine with thecorporate competitive advantages Differences between you and your rivals serve as afoundation for your advantage." Brace Henderson believed that two rivals cannot exist

if their businesses are identical It is necessary to make a difference if they wish tosurvive Michael Porter stated "Competitive strategy is related to differences which are

a range of different activities to form a system of unique values"

Whatever approaches, the nature of business strategy is figuring out the future image of

a company in its business field and capacity Thus, the term "business strategy" can beunderstood in the three most popular ways:

 Indentifying long-term goals for the business

 Putting forward overall action programs

 Selecting action plans, and implementing the distribution of resources to realizesuch goals

The development and implementation of business strategy has really become theleading takes and an important content or function of business management popularlyadopted among enterprises The most popular concept is "business strategy is like an

art to combine all activities and control them in order to achieve long-term goals of anenterprise."

It is necessary to realize at least three strategic levels: corporate strategy; strategy ofbusiness units and strategy of functions Corporate strategies are oriented towardsgeneral goals and scope of the company Strategies of business units are related to theway a company can compete successfully in specific markets Strategies of functions orstrategies of activities are the ones to ensure strategies of business units and thecompany to be successfully implemented, based on resources, processes, humans andnecessary skills

Considering the business strategy as a part of business management serves as anapproach to business management by strategic ideas: Good strategies are not sufficient,and it is necessary for an enterprise to have a good ability to realize such strategieswell Business management is strategic This is the current approach to strategicbusiness management

1.1.2 Basic features of the business strategy:

 The strategy pinpoints fundamental goals, and business orientations needed to

be achieved in each period and fully understood in all areas of businessmanagement The orientation of business management strategy is aimed atensuring the sustainable and continuous development of a company in achangeable business environment

 The business strategy only drafts long-term orientations and frameworks forfuture operation Accordingly, the business strategy simply serves a guideline

In reality it is necessary to combine strategic goals with economic goals, orconsider the appropriateness of such strategy and make proper adjustments tothe business environment and conditions in order to ensure the corporateperformance and address mistakes caused by the orientation of the strategy

 - The business strategy is established on the basis of competitive advantages ofthe company to ensure ultimate mobilization and effective usage of corporate

resources (humans, tangible and intangible assets), core capacity at the presentand in the future with a view to promoting strengths and grasping opportunities.

 The business strategy reflects a continuous process of strategy development,organization, implementation, assessment, examination and adjustment

 The business strategy is always aimed at success in competitions It isestablished and carried out on the basis of realizing and making most of businessopportunities and competitive advantages for better business management

 Every strategic decision in the process of strategy development, organization,implementation, assessment, and adjustment is mainly made by senior executiveofficers

1.1.3 Role of the business strategy:

Given the basic features of the business strategy mentioned above, it can be said thatthe development of the business strategy is of great significance to the existence andgrowth of the company in the market economy

The roles of the business strategy for the V- Standa can be shown in the followingareas:

 The business strategy helps the company to be fully aware of its futureorientation and serves as a guideline for all corporate activities

 The business strategy helps the company to grasp and make use of businessopportunities and take the initiatives to cope with potential risks and threats inthe marketplace

 The business strategy helps enhance the effective exploitation of resources,promote the position of the company in the market and ensure its continuous andsustainable development

 The business strategy creates concrete foundations for the company to makegood decisions in line with the ups and downs of the market It also lays theground for research, investment activities, staff training, and market expansionand production promotion

1.1.4 Constituents of the business strategy

After all, whatever different concepts or definitions of the business strategy, it can be

seen that the business strategy is constituted by a strategic target and solution.

Strategic targets

A very important thing a company should know before taking actions is being aware ofits orientation This orientation is established through the formulation of different goalswith a view to increasing the adaptability of the company to current or futureconditions The concept of goals can be understood in a broad sense and analyzed intotwo types: long-term and short-term targets

A short-term and long-term strategic business target can be a target or a more specific

result that a company would like to achieve in a certain business area The targetoriginates from the strategic goal of the company

Long-term business target

The long-term target is the desired outcome after a long period Though the long-termtarget sometimes can be more specific than the functions or responsibilities, it is not asconcrete as the short-term one According to Peter F.Drucker, long-term targets of acompany involve seven areas as follows:

 Responsibility in the public

Short-term strategic business targets

They are specific outcomes a company wishes to gain in a period relatively shorter thanthat of the long-term ones

Strategic solutions

 It is important to find out strategic solutions which show the way to achievestrategic goals Strategic solutions can present the ability of a company in thedistribution of human resources and priority arrangement These solutionsusually attach to the core capacity of the company as well as the restrictions

of the business environment Selecting a sound solution can exert asignificant impact on the feasibility of the strategy

1.1.5 Relationship Between the business strategy and other strategies

Basically, a strategy is to achieve a particular goal or it is a "medium" that individuals

or organisations adopt to gain their own goals "Medium" does not mean specificactions but it refers to plans, policies and principles for specific actions According to

Wordsmyth dictionary, a strategy is a plan, method, or series of actions designed to

achieve a specific goal or effect.

The fundamental goal of a business is its existence and sustainable development Thus,how do we have to earn money in oder to survive for a long time? There are twopossible solutions to this question First, it is necessary to identify specific businesslines Second, how to compete should be pointed out

Chúng ta nên

Kiếm tiền bằng cách nào ?

Chúng ta nên Kinh doanh ngành nghề nào ?

Chúng ta nên Cạnh tranh như thế nào ?

CHIẾN LƯỢC

TỔ CHỨC

CHIẾN LƯỢC KINH DOANH

Figure 1.1: Goal - Strategy

a.Company strategy

The strategy of V-Standa is shown in the following forms:

Which business line should we choose? Organizational

Strategy

Business Strategy

How should we compete?

How should we

earn money?

Vision It is how a company sees itself in the future Charlotte Villiers defined:

"vision is an ideal image a company wishes to have if it makes the best use of its

own potential resources and its staff"

The concept of visions and goals, though closely interrelated, bears a few differences.Both of them infer that a group shares a positive idea about something which ispowerful However, the concept of visions focuses on the explicitness of the idea abouttangible things like a building, a new product or an expected event On the other hand,the idea of goals tends to emphasize the desire for the goal in any way

Mission It is a form of goals which an organization wishes to achieve in a long

term Like visions, responsibilities do not mean strategies but they simply serve

as suggestions in an overall orientation of strategies The general responsibility

of an organization is to set up the starting point by identifying why it can exist

or how it can adapt itself to a certain type of architecture In other words, theresponsibility is presented in a concise manner and focuses on internal issueslike reasons for corporate existence, basic goals corporate activities aim at, anddifferent values for employees The responsibility also describes how theorganization would like to finish the products and deliver them to customers

Business Model It is what a business uses to make revenues and profits It is

only a small part of the strategy Whatever effective business model a company has,

it is necessary to have a strategy to help the company to compete with rivals withthe same business model

Strategic plan It presents strategies in form of desired goals, methods to

achieve such goals, and plans to make use of resources in a specific period (usuallythree to five years) For a large sized company with multi-sectoral business, astrategic plan includes business plans of the business units for different businesslines and each corporate section It also conveys a master plan of the company and

it is annually adjusted

 When the business climate becomes fluctuated and unpredictable, the strategywill not focus on detailed plans Instead, it turns to visions, responsibilities,principles, guidelines and goals as mentioned above.

The business strategy identifies a business line(s) a company is doing or will do How abusiness line is dealed with and how well the relationship between the corporatebusiness line and society can also be shown in the strategy (e.g linkage with othersubsidiaries of the company or independent practice, acquisition or new speculation,maintenance, suspension, or participation) In other words, corporate strategies infer tothe selection of business lines

For example, the strategy of Samsung Electronics is that it will promote the key

business lines like memory chips and TFT-LCD screen The company also focuses on high quality products like LSI systems, LCD small and medium-sized screen, and optical accessories.

b Business strategy (competitive strategy)

The business strategy is to identify how a company can compete in an establishedbusiness line or a specific area If the company wishes to maintain a sustainabledevelopment in a certain field, it has to set up its own competitive advantages over itsrivals Therefore, the business strategy is regarded as the competitive strategy

The competitive strategy of a company serves as the way a company creates a valuableposition in its business line This includes a far-sighted vision (literally andconnotatively) on target customers and how the company can bring values tocustomers A competitive strategy does not simply show a pure vision, but it is acombination of specific activities and procedures, helping the company to create anunique image among customers Thus, the strategy also brings up a harmony amongcorporate practices and accordingly, long-lasting efforts of the whole company willunit, increasing the potentials of the corporate vantage point

The strategy of business units identifies how each unit can complete its responsibilities

in its own business line (and then, contribute to realize the overall corporate strategy)

The business strategy is of equal importance to single business units and individualcompanies in the multi-business sectors.

c Functional strategy

The functional strategy is supportive of the corporate and business strategies The

functional strategies of single business units and business establishments in business units are similar to each other These strategies lay the foundation for otherstrategies For example, strategies of marketing, finance, research, and activitiessupplement the competitive ones of a company and they map out actions andprocedures for the company to gain benefits from its vantage point Analysis ofstrategies by functions can identify the suitability of each business function with thecompetitive strategy and focus on the coordination among different functions

multi-d Relationship among the corporate, business and functional strategies (Figure 1.1)

Business level

Departmental level

Departmental level

Departmental level

Analyzing the environment

Identifying functions, responsibilities and objectives

Analyzing and selecting strategies

Carrying out

Checking

CẤP CÔNG TY

Phân tích môi trường Xác định chức năng, nhiệm vụ và mục tiêu.

Phân tích và lựa chọn chiến lược.

Thực hiện.

Kiểm tra.

Phân tích môi trường Xác định chức năng, nhiệm vụ và mục tiêu.

Phân tích và lựa chọn chiến lược.

Thực hiện.

Kiểm tra.

Phân tích môi trường Xác định chức năng, nhiệm vụ và mục tiêu.

Phân tích và lựa chọn chiến lược.

Thực hiện.

Kiểm tra.

CẤP DOANH NGHIỆP CẤP BỘ PHẬN

Figure 1.2: Relationship among the corporate, business and functional strategies

Business level Corporate level Departmental Level

Analyzing the environment Identifying functions, responsibilities and objectives

Analyzing and selecting strategies Carrying out Checking

Analyzing the environment Identifying functions, responsibilities and

objectives Analyzing and selecting strategies Carrying out Checking

Analyzing the environment Identifying functions, responsibilities and

objectives Analyzing and selecting strategies Carrying out Checking

p

R e v e r s e r e l a t i o n s h i

p

The information flow between the corporate and business levels (figure 1.1) usuallyemerges early in the procedures as planning experts of the corporate level ask eachbusiness unit to provide the input database for their plan-making process After that,objectives, functions, responsibilities and strategies are transferred from the corporatelevel to the business unit ones and provide them the input data for their plan-makingprocess Finally, reverse information (feedbacks) is transferred to the corporate level.For many companies, the marketing strategy which plays an important role inestablishing linkages with other functional strategies is the core of the business unitlevel one However, for some companies, production or development and research may

be fundamental in the business unit strategy It is necessary for each business unitstrategy to be compatible with the corporate and other business ones The business unitstrategy is based on a group of different departmental strategies (Fig.1.2)

Goals and strategies related to the functional level are in line with business unit strategies and are aimed at the achievements of all business unit goals Corporate and business unit plans are targeted.

Short-term goals are in accordance with functional strategic goals with

a view to the realization of all functional plans

Single business unit

Leaders of the company

Human resources Finance Marketing Research and Development

Product Price Distribution Promotion

Figure 1.2: Hierarchical levels of strategy

Similar to that of the business units

Similar to that of the business units

multi-1.2 Procedures of business strategy development

The procedures of business strategy development are a combination of activities that

turn inputs into outputs, which can be shown in figure 1.3.

CHIẾN LƯỢC CÔNG TY

DỰ TÍNH VÀ LỰA CHỌN CHIẾN LƯỢC KINH DOANH PHÂN TÍCH NỘI BỘ CÔNG TY PHÂN TÍCH NGÀNH KINH DOANH

Figure 1.3: Procedures of business strategy development

Corporate leaders/ Business Unit

Of them, the business strategy is designed on the basis of the corporate responsibilitywhich identifies business objectives and necessary activities and helps leaders to definegoals In turn, such goals can clarify the corporate responsibility They are also used as

a means to make action plans and assessment of the procedures On the other hand,they are based on the reality of the external environment and internal capabilities

1.2.1 Analysis of business lines

The strategy is formulated on the basis of estimated conditions; therefore, the goodstrategic management depends on the in- depth understanding of the conditions anorganization is facing The overall environment the organization usually interacts withcan be divided into three levels: macro environment, interactive environment, andinternal environment The macro environment has an effect on all business lines indifferent ways The interactive environment is found in a specific industry and all thecompanies of the same industry are under the influence of their relevant interactiveenvironment In this case, the combination of the macro and interactive environment iscalled as the external environment of the organization

The analysis of the external environment will help the company to answer partly to the

question: What is the company facing and what risks and opportunities can the

business activities have? Many external factors can have a direct or indirect impact on

the performance of the company or its rivals In order to analyze the direct influence ofthe external factors on the business practice, a model of five forces by Micheal Porter isused as the most powerful tool

As far as we know, the business line includes a group of companies producingsubstitute products (goods or services) to satisfy a certain demand of customers Theresponsibility of a strategic manager is to analyze competitive pressures in the businessenvironment so that he or she can recognize risks and opportunities his or her company

may encounter Theoretically, the chosen model of five forces by M.Porter will helpstrategy-makers to do like that When this model is used to analyze specific situations

of each business, several strengths and weaknesses will inevitably emerge Therefore, it

is important to make concise assumptions about each factor of the model

 The model by M.Porter is described in figure 1.6 as follows:

Các đối thủ cạnh tranh trong ngành

Sự tranh đua giữa các công ty hiện có mặt trong

ngành Các đối thủ mới tiềm ẩn

Hàng hoá thay thế

Nguy cơ có các đối thủ cạnh tranh

Nguy cơ có các đối thủ cạnh tranh

Khả năng ép giá của người mua

Khả năng ép giá của người cung cấp hàng hoá

Figure 1.4: Model of five competitive forces

Competitors of the same business line Knowing what rivals think about the

company and others of the same line is an advantage However, if the assumption is notexact, it will create "blind" points, i.e weaknesses of the rivals Similarly, the companywill have incorrect assumptions about the business line or its business environment.For example, American car manufacturers used to think that the demand for small carsdepends on the economic condition But they made it wrong because foregn rivalscould manufacture more luxurious cars of higher quality which won the popularity ofthe customers

Potential competitiors

Risks of potential competitors

Supplier’s bargaining power

Buyer’s bargaining power

Risk of potential competitors

Substitutes

Rivals of the same business

Rivalry of existing companies

Potential competitors They are the businesses which have not emerged in the

line industry but they may have an effect on it in the future The quantity of potentialrivals and the level of their influence on the business line will depend on the followingfactors:

 The attractiveness of the line: This factor can be shown through such criterialike interest rates, number of customers, number of line businesses

 Barriers to the integration into a business line: They are factors making theaccession to a business line more difficult and costly, i.e technology and capital.Commercial factors like distribution networks, brands, customer systems, or specificresources including primary raw materials (controlled), patents, human resources, andgovernmental protection No one could imagine that Apple would be able to launchIpod, defeating Sony - a powerful multimedia leader It is clear that the attractiveness

of the demand for sound devices for listening to music has made Ipod the most popular.Sony itself created technology barriers and its brand became weak as a result of itshorizontal development strategy with multi-business lines So Apple as a child of themultimedia industry could penetrate into and control the whole market, making Sony'scompetitive advantage become its own burden

Customers They serve as a competitive pressure that can exert a direct impact

on the whole production and business practices of the line industry The customers can

be divided into two groups: Retailers and Distributors The two groups can put thepressure on businesses regarding prices, product quality, follow-up services and theythemselves are the controllers of the competition in the line industry through theirbuying decisions

Especially, concerning the distributors, it is necessary to pay attention to theirimportance They can directly create an overwhelming position inside a company Let'stake an example For SMEs in Vietnam, it is very difficult and troublesome tointroduce their products to the distribution system of supermarkets because theyencounter price and quality pressures Almost all Vietnamese products like garment

and textile, or footwear find it hard to break into large markets like the US or EU ifthey are not channeled through a distribution system Therefore, as a story goes, a pair

of shoes made in Vietnam was sold to a distributor at a low price; whereas theVietnamese bought this kind of shoes in a foreign country at a dear price The analysis

of competitive pressures from customers can help indentify: the size and importance ofthe business line However, the incorrect information about customers will result infalse assumptions about the size of the industry

Providers The quantity and size of a provider will decide their competitive

pressure and negotiation ability in the business line and in a company

Substitute goods The main competitive pressure of substitute goods is the

ability to meet demands, compared to that of the other line products In addition, prices,quality, and other factors of the environment like culture, policy, and technology willhave an impact on the risks of substitute goods However, a weakness of the substitutegoods is their unexpectedness and unpredictability For example, a substitute can bemade within the internal industry with the development of technology

SWOT matrix is used to synthesize researches on external and internal

environments of the economic identities The analysis of the external environment isaimed at realizing opportunities and threats for a company That of the internalenvironment is to identify the strengths and weaknesses of the company

SWOT matrix is constituted by four factors: S= strength; W = Weaknesses; O =Opportunities; T = Threats

Strengths: The abilities help a company or an industry to be able to perform well

Weaknesses: They need to be addressed because they prevent a company or an industryfrom effective performance

Opportunities: They are trends, driving forces, events, and ideas a company or anindustry can make use of

Theats: They are events or pressures that may emerge beyond the control a

company or an industry needs to consider or decide how to restrict their influences

The four factors mentioned above are grouped into two:

 Group 1: Strengths (S) and Weaknesses (W) are the internal factors controlled

by the company like business management, accounting – finance, products andproduction, etc The goal of the company is in an attempt to make the most of itsstrengths and address its weaknesses

 Group 2: Opportunities (O) and Threats (T) involve different issues of

economy, politics, society, government, technology, competitive trends andevents which can bring benefits or risks to the company Opportunities andthreats can be beyond the control of the company Therefore, they are calledexternal factors

Thus, it is possible for the economic industry to map out strategies to graspopportunities, avoid or reduce external threats, make the best use of strengths andaddress weaknesses SWOT can be a powerful tool for the company to realize andanalyze influential trends in the time to come when the quantitative data is notsufficient enough for recurrent quantitative analysis

On the basis of SWOT, criteria, guidelines for business development and resources,one can make predictions as in table 1.1

Table 1.1: Model of SWOT analysis

Opportunities O-S strategies:

Using these strengths to takeadvantage of these opportunities

If the analysis of the model by Micheal Porter helps the policy-makers to recognizeopportunities, or risks of the company, the model of the value chain will help them toclassify valuable resources of the company to realize its own competitive advantages.

In other words, M.Porter introduced the value chain to help assess the corporatecompetitiveness and more exactly to help the company to position themselves in themarket in a relationship with distributors and rivals The value chain can help thecompany to have a method to create its competitive advantage by answering the twobasic questions: 1) How to provide customers products (goods or services) of valuesequal to those of the rivals at a lower cost 2) How to produce products that customerswould like to buy at a higher price (Differentiation strategy) Thus, the value chainanalysis will be of great significance as a key for the company to figure out itscompetitive edges on the way of making values

Figure 1.5: Value chain model

The primary value chain activities are divided into five groups: (inbound logistics,operations, outbound logistics, marketing& sales and service) However, this division

is relative because the characteristics, quantity, and quality demand for businessactivities will depend on the business line and nature of a firm M.Porter presentedsome typical features of these groups as follows.

Inbound logistics Involving activities of transportation, receiving and

warehousing the raw materials, distribution to manufacturing such as: loading,warehouse transportation, quality check of raw materials, inventories, dispatch, andpayment for providers The whole activities take place inside the surveyed subject(enterprises, industries, economic organization)

Operations: All the activities related to the process of transforming the input

into finished products or services are called operations In fact, this group is diversifiedand depends on the type and feature of production They can be designs, prototypeproduction, testing, mass production, quality testing, packaging, storage, repair andmaintenance of equipment These activities may take place in plants, factories,production centres in an area or in different places all over the world

Outbound Logistics: These are all the activities concerned with collecting,

warehousing and distributing the final product and/or service to the customers Forexample, dealing with orders, making schedules, and performing the accurate andtimely distribution of the final product or service to the customers at a low cost

Marketing and sales These activities are to ensure the most effective exchanges

of goods and services in the market They concentrate on basic stages of the marketingmix: market research, product promotion, formulation of price policies, establishment

of distribution channels and sales promotion Of them, sales and sales promotion draw

a special attention from managers

After-sales services (services) They include activities supporting the

consumption of the product or service and creating added values after the product orservice is sold: installation, maintenance, repair, manual, replacement, consultation,etc on the demand of customers These activities are varied, serving as a centre tofacilitate and build up brand names in an effective way for a firm However, many

companies, especially the ones involved in the developing market like Vietnam, havenot really paid due attention to these functional activities.

Those primary activities mentioned above help create the overall value chain of

a firm It is clear that this chain can change and adjust itself to the types of products orservices, business fields, and business lines For example, for a firm dealing in thedistribution area, naturally logistics activities receive the most attention On the otherhand, in a sefl-sufficient enterprise attached to a certain space like hospitality services,logistics hold a minor role; instead, the most importance for this type of business is theproduction process (or service procurement) For banks, the value-creating activitiesare marketing and service However, in whatever areas, and with whatevercharacteristics of a product or service, it is important to have all the five primaryactivities to established a complete value chain All of them play an important role increating competitive advantages for a company, an industry and a national economy

Support activities for the value creating process of a firm are usually mentioned with

four main matters: 1) procurement; 2) technological development; 3) human resource management; 4) firm infrastructure Like those of primary activities, the type, feature, constituents, and other factors of the four support ones heavily depend on the specific conditions of a company, an industry or a nation

Procurement activities First of all, they are responsible for purchasing raw

materials that are necessary for the company's production or operations Apart fromraw materials, tools and production means like plants, equipment, machines,laboratories, offices, etc as well as other resources for production can be included.These activities are performed by different units of a firm They play an active role inthe process of creating values for a product (service) or corporate outcomes as the inputprocurement usually goes hand in hand with the improvement in the use of productioncosts, having a direct impact on the price of finished products

Technological development Each product is produced on a certain technological

basis which helps increase the values of the product, playing a crucial role in the value

chain of a firm The concept of production technology in a broad sense is acombination of many types of technology including management technology closelyinterrelated, creating competitive values for the company Especially, it is notable thatresearch and development help create new knowledge and values, making an activecontribution to the value chain of a product or a company Besides R&D, thedevelopment of production technology holds an essential role It is a decisive factor forthe final value of the value chain in many areas.

Human resource management This is a function concerned with recruitment,

development, training, remuneration and rewards for the workforce of the company.Human is the basis of every value Thus, human resource management is an importantactivity in every stage of the value creating process In reality, those who really payattention to human resource development and management will make a difference inthe marketplace and attain sustainable competitive advantage

The process of recruitment, training and human resource development at ViettelTelecom can serve as a typical example With the sound, concrete and realisticstrategy, Viettel Telecom drew a group of skilled, creative and enthusiastic staff It isthis group that really helped Viettel Telecom to take the lead in the telecommunicationsmarket of Vietnam in a short time (about five years)

Firm infrastructure This includes planning and control systems, such as finance,

accounting, and law, relationship with the public authorities, quality control, andcorporate strategy, etc Like the human resource management, the activities of firminfrastructure have a direct influence on all groups of activities in the value chain

1.2.3 Plan and Selection of strategic solutions

The competitive strategies of the business level can enable a firm to gain competitiveadvantage, "overcoming" rivals by the three different methods:

- Cost leadership,

- Differentiation,

- Concentration on a target market segment

Cost leadership This strategy helps a firm to overcome its rivals by producing goods

and services at a lower cost There are two lucrative advantages of this strategy: First,the company has the right to set the selling price lower than those of its rivals and makethe same profits as them If the rivals want to set the selling price of their products atthe same low cost, the company still makes more profits than them thanks to its lowerprice of the finished products Second, in the event of a price war, (usually at the break-even point of the products), the company with cost leadership can maintain someprofitability while its rivals suffer losses

However, the question is how to have either or both of the two advantages mentionedabove The answer depends on the outstanding feature of the company concerningmanufacturing and material management In other words, the functions ofmanufacturing and material management are the focus of cost leadership strategy Theonly goal of the strategy is to save and reduce every penny of production costs, thoughrather exaggeratedly described, in order to achieve competitive advantage

Experience effects It is the way a company can have advantages of its large size, great

resources and always knows how to improve itself to take the lead

Low cost besides experience effects That is the way a firm can manage well to gain a

low cost through its close control, avoidance of losses from the production process andproductivity increase The company can adopt automatization to reduce costs becauseautomatic labor will replace human labor, increasing a gradual accumulation ofbenefits The exploitation of values enables the company to have low costs

Table 1.2: Cost leadership strategy and value chain

Human resource stability (avoiding

most reasonable vendors/providers.

+ Standardization

V-of productionprocess

+ Suitablevolume ofdeliveredproducts+ Means oftransportation

+ Streamlinessales staff

+ scaled system

Large-of distributionand

advertising

Provision ofcorrect usermanuals,andreduction inmaintenancecosts

Strategy focusing on a key market segment

This strategy is different from strategy to lead in price reduction and strategy forproduct differentiation since it is directly aimed to meet the demand for a limited group

of customers In other words, a strategy focusing on serving a “market segment” that isparticularly allocated by geographical location, customer grade or a market segment of

a specialized product route For example we can focus on a segment of product routewhich serve for hi-speed cars or high-grade fashion of designers or market segmentsfor high, medium and low income people etc or for children and the elderly etc Inother words, key strategy is the strategy which enterprise, based on their organizationalarrangements, controlling procedures, encouraging and incentive systems, shall try totake control over competitive advantages of expenses or differentiation in somespecialized market segments to meet the demand of a small number of customers

Enterprise that “hides” in specialized market can avoid confrontation with itscompetitors, particularly big competitors.

Making assessment to select a strategic solution is not just simple by looking atthe results obtained since maintaining investment target, high return on investment orshort term profit are not adequate indicators to reflect the success of enterprise Howcan we know that a strategy is effective or not?

- A good strategy should be developed on values and objectives;

- A good strategy should concentrate on concrete knowledge of competitiveadvantages This knowledge should be clearly demonstrated in a shortsentence;

- A good strategy has to be consistent It has to be consistently followed upthrough coordination of activities in order to establish an comprehensiveprogram which strongly support one another;

- A good strategy shall not be easy to change over time It identifies a dynamicdirection to clearly limit options of the enterprise but does not prevent it fromeasily adapting in an uncertain and changeable future

More discussion is conducted on a controversial issue that is “Strategy, acommitment or flexibility” One side supports the idea that strategy requirescommitment (in economic aspect, investments are fixed) The other argues that strategyrequires flexibility in a changing world, thus it is better not to make quick decision onany option However, strategy in fact requires both commitment and flexibility Thesetwo features will not be in a conflict if an enterprise recognizes that current investment(commitment) is aimed to develop their capacity (flexibility) with a view to assistingtheir success in a future of uncertainty and changeability Strategy identifiesinvestments which are potential and those need to avoid Commitments on core valuesand a vision of the nature of competitive advantages are essential These values andvisions indicate a strategic orientation which is not defined or prepared a plan Thechoices which base on this orientation have to be consistent with those values and

visions This means that the visions should clearly indicate the difference betweenproducts and competitor but does not simply emphasize high quality, leadership orobjectives which sound interesting but ambiguous.

Flexibility is not simply opportunism Flexibility is developed through investmentactivities to build capacity which other enterprises do not have if they have notpreviously put their investments in similar activities (in economics, it is known aspractice options) For instance, pre-investment in a product line will give us the choice

to expand that product line Pre-investment in new technologies will facilitate theenterprise in using those technologies or better apply them (with lower cost) incomparison with their competitors in the future Pre-investment in organizationalprocedures and knowledge will help the enterprise to carry out their activities in such amanner that their competitors cannot easily compete

Flexibility is absolutely not a strategic position but it is an outcome of strategicthinking Investments in capacity development will create flexibility to successfullyimplement the strategy in a world of change These investments will determine futureopportunities so that the enterprise can maintain its competitive advantages Hence,maintaining all choices is not reasonable or unrealizable; a successful strategy has todevelop necessary capacities to create values for future customers Selection to developwhat capacity and create what opportunities should be directed by core values and

vision at the centre of enterprise strategy Therefore, commitment to objectives, values

and mission is very important because it is a compass to lead the enterprise future.

On that basis, a strategic solution will be selected if that solution satisfies factors of

unique, compromising ability and harmonized coordination As analyzed in previous

part, competitive advantages stem from differentiation: to serve various demands,diversified customers or different geographical locations or provide variousapproaches, various products or different value measurements The objective is to findout a way to create the value that customers cannot get from other sources The most

popular mistake in strategy selection is imitation A successful strategy requires

choices not to follow competitors’ path

Another popular mistake is to try to obmit compromises among different

competition positions of enterprises It would be short-sightedness if we think that itwould be beneficial when we confront with our competitors It should be remembered

that obmission of compromise would also facilitate your competitors’ chance to

challenge your position Strategy should move towards the target to increasecompromise between positions but should not abolish it In addition to makingcompetitive advantage to become more sustainable, special positions can also improvethe sector structure

Strong leadership is essential to define a different and unique position ofenterprise and points out directions that enterprise should not follow Strong leadership

is also important to clearly communicate the values and strategies of the enterprise;thus choices that are offered by managers of enterprise shall be consistent with theenterprise intentions That consistency is essential for successful implementation of thestrategy; otherwise there will be functional decisions (e.g marketing, operation orfinance) which conflict one another or conflict with competitive advantage that theenterprise is seeking for

When global competition is ever increasing, a challenge in creation of aharmonized coordination among activities and consistency with strategic objectives is

to make decision on a place where global activities are synthesized and to work outways to coordinate dispersed actions Dispersion is more attractive when local markethas the demand for it or the government requires representation in the locality, whentransport fee is high, local learning is needed or focusing on a single location will bringabout substantial risks which require self-insurance by diversified locations

When activities are dispersed, creation of harmonization and consistency amongactivities will face many challenges Such information, knowledge and technologyfrom different locations need to be effectively synthesized; objectives and selection of

the strategy has to be clearly communicated in all functional divisions in globalnetwork of the enterprise These challenges make imitation to synthesize globalactivities more difficult Hence, good coordination can make suitably dispersedactivities become a considerable competitive advantage.

Chapter 2ASSESSMENT OF CURRENT BUSINESS SITUATION OF

VIETNAM V-STANDARD JOINT STOCK COMPANY (V-STANDA., JSC)

2.1 GENERAL INFORMATION OF V-STANDA., JSC

2.1.1 Name of the company:

 Name: Viet V-Standard Joint Stock Company

products;

 Sell, purchase and lease machinery, equipment in electric, electronics and mechanics sectors./.

2.1.4 List of products:

The company is currently manufacturing two main types of product, which are:

 Voltage regulators, transformers, inverters, converters, safeguard equipments;

 Sockets of various types;

(ii) Metal sheets processing

 Control cabinets, electric cabinets, rack cabinets, office lockers, library shelves;

 Ladders, cable spouts, supermarket shelves, covers of petrol stations

 Cabinets, shelves, tables, chairs for pupil and teacher;

In the two above mentioned product lines, voltage regulators and electric equipmentsare traditional products which bring highest revenue, accounting for 70%-80% of totalannual revenue

2.1.5 Establishment and development

V-STANDArd Joint Stock Company was established on 18 September 2003 fromCentre for Electronics and Technology of Vietnam Computer Company 1 – Ministry ofIndustry in accordance with equalization orientation for state owned enterprise

After establishment, with new mechanism, technological capacity, skilled technicallabor and accumulative production experience (Centre for Electronics and Technologywas founded in 1992), the company has rapidly expanded its production, developedtraditional well-known products of the old centre such as voltage regulators,transformer, electricity source equipments with brand name of V-STANDA, at thesame time developed new products

Since its establishment in 2003, the Company had only a workshop of 2,500 m2 andabout 60 workers with small scale production which cannot meet the requirements fordevelopment expansion Therefore, the Company implemented a constructioninvestment project of a new factory in Quang Minh industrial park, Me Linh district,

Ha Noi with total area of 30,000 m2, expanded the production line of stabilizer,invested more in new technological equipments, particularly fabrication technology onautomatic control machine by CNC technology (Computerized Numeric Control)which use in thin metal sheet fabrication Investments was aimed at improvingproduction capacity of traditional products as well as oriented to develop new products.The company is currently applying Quality Management System ISO 9001, version2008

2.1.6 Time and experience of professions

Total number of years of experience in electricity source equipment: 13 years

Total number of years in thin metal sheet production: 6 years

2.1.7 Organizational and management structure of the company

Board of Directors (05 persons): is responsible for managing the company, has theauthority to represent the company to make decision, carry out right and obligations ofthe company BOD has the power to make decision on strategy, medium-term development plan and annual business plan of the company; Makedecision on investment option and investment project as specified byCorporate Regulations; Make decision on solutions to develop market,marketing and technology Other rights and obligations are regulated byEnterprise Law and Corporate Regulations

Management and executive apparatus:

01 General Director, 02 Deputy General Directors and 01 Chief Accountant

Departments and Divisions (05): Marketing-Sales, Finance-Accounting, Human

Resources, Planning-Materials, Technical Departments

Centre (02): R&D Centre, Technical – guarantee service Centre

Factory (01)

Total number of staff: 210

Of which : Staff with university degrees of different disciplines: 30

Staff with diploma and intermediate level: 41Skilled labor: 90

Organizational structure: