TO BUILD UP THE BUSINESS STRATEGY of MECO JSC IN PERIOD 2009 2015

The necessity for building up a business strategy. The application meaning of the studied theme for the enterpriseAnalysis of external environment: General environment: opportunity and challengeEnvironment in relevant professional job trades:+Specific features of the professional job trade+Competitive forces; Customers; suppliers; replaceable products; potential competitors; direct competitorsEnvironment of competitive rivals: Analysis of future orientations, present strategy, assumptions and capability of competitors.To build up business strategy for the enterprise, the performance solutions and recommendations for the enterprise

TO BUILD UP THE BUSINESS STRATEGY of MECO

JSC IN PERIOD 2009 - 2015

TABLE OF CONTENTS

PREFACE 3

CHAPTER I BASIS FOR ARGUMENT 11

1.1 Business strategy: 11

1.1.1 Definition of strategy, business strategy: 11

a) Definition of strategy: 11

b) Definition of business strategy: 12

1.1.2 Basic matters in building up business strategy: 13

1.1.3 Target of business strategy: 15

1.1.4 Basic business strategies: 17

1.1.5 Relationship between business strategy and other strategies: 21

a) Corporate Strategy 22

b) Business Strategy (competitive strategy) 25

c) Functional Strategy (or Operational Strategy) 25

1.2 Procedure for building up business strategy: 26

1.2.1 To analyse external environment 27

a) Macro environment: 27

b) Analysis of job trade environment 28

c) Model of five competitive forces: 28

1.2.2 Selection of business strategy 41

CHAPTER II ANALYSIS OF ACTUAL SITUATION OF THE ENTERPRISE 43

2.1 Overview on the Enterprise 43

2.1.1 Summary of establishment and development process 43

2.1.1.1 General introduction 43

2.1.1.2 Summary of establishment and development process 43

2.1.2 The Company Organization Structure 46

2.1.2.1 Organization Structure Chart 46

2.1.2.2 Function & Task 48

2.1.3 The Company Management Structure 49

2.1.4 Main business activities 50

2.1.5 Posted Securities 52

2.1.5.1 Securities type : 52

2.1.5.2 Nominal Value : 52

2.1.5.3 Total posted securities : 52

2.1.5.4 Restriction on the holding ratio to the foreigner 52

2.2 Analysis of status and result of production and business activities in the years 2006, 2007, 2008 53

2.2.1 Main business activities 53

2.2.1.1 Construction and installation activity 53

2.2.1.2 In regard to the industrial – mechanical production activities 55

2.2.1.3 Trading – Export & Import activities 56

2.2.2 The turnover and profit structure of production and trading activities through the years of 2006, 2007, 2008 57

a) Net turnover structure of production and trading 57

b) The gross profit structure of production and trading activities 58

2.2.3 Result of business activities 59

2.3 Analysis of strategic and administration matters of enterprise……….61

2.3.1 Assessment on condition of building up strategy of enterprise: 61

2.3.2 Analysis of business environment of enterprise 63

2.3.3 Company’s position in comparison with other enterprises operating in job trade 72

2.3.4 Analysis of internal company: 74

a) Analysis of value chain: 74

b) Analysis of core capability 77

2.3.5 SWOT Analysis 79

CHAPTER III : BUILDING UP BUSINESS STRATEGY FOR COMPANY, PERFORMANCE SOLUTION, RECOMMENDATIONS 83

3.1 Building up business strategy for company 83

3.1.1 Statement of mission 83

3.1.2 Determination of task 83

3.1.3 Determination of target 83

3.1.4 Selection of solution for business strategy : 85

a) Cost – Leadership Strategy : 87

b) Differentiation Strategy 89

c) Strategy of close relation with customers 91

3.2 Some solutions for strategy performance : 93

3.2.1 Company Administration : 93

3.2.2 Culture and Leadership for strategy : 97

3.3 Action plans: 98

3.4 Quality Control: 99

3.5 Recommendations: 100

CONCLUSION 102

REFERENCES 103

TO BUILD UP THE BUSINESS STRATEGY of MECO

JSC IN PERIOD 2009 - 2015Enterprise: Vietnam Mechanization Electrification & Construction

Joint Stock Company (MECO JSC)

PREFACE

1 General context:

At present, majority of enterprises over the world pays so much attention andhighly treasures the building-up of business strategy, they determine this is a top-ranking task for the each enterprise The directors of big-sized enterprises oftenspend a big part of their time for studying the business strategies (according to thedata given by some articles it takes about 40% of annual time)

In 1947, there was only 20% of American enterprises having businessstrategy; in 1970 this amount had reached 100% Many American enterprisesassume that the business strategy building-up is the job occupying the most of time

As mentioned by Mr Wilson, the Chairman of General Electric (GE) of America,having said: Every day I can do just a few jobs, however there is a job that neverfinished, it is to build up the future planning

( Source: www.royal.vn/index2.php?option )

There are quite a lot of examples actually proving that even the mostsuccessful strategies still can not be forever long-lasted We may should be vigilantwith the signs showing it is time to change or to adjust and modify the existingstrategies

Tens of years ago, the Japanese Canon company was just a small company, inwhich the American and Japanese big-sized enterprises were not much interested.However, right that time, the company had already their strategy for developing to

an international leading big company in the field of production of small-sizedcamera, cinecamera and had intention to defeat the American Xerox company in thefield of producing photocopier, printer and other various office machines From

holding 13% market of photocopier in America in 1998, until now Canon hasgained 36,6%; and the market share of Xerox from 38,3% has been reduced to14,2% remaining at the same time Canon has also overtaken Xeroc in the market offast-speeded laser printer Not only so, the Canon also has become a fearfulcompetitor to Lexmark specializing in production of sprayed printer, to EastmanKodak in the field of digital camera, and also to GE right in the trade on which thisgroup has gained success, i.e the superior photo-taker used in the health care job.Kodak had led in trade of producing film used for taking photos in the years of1970th, however in the early years of 21st century Kodak was faced to strongattacks by the strong competitors in digital technology such as Fuji, Sony, Canon…forcing them to reduce 72% dividend of shareholders to increase investment with 13billions USD for business of digital trading with hope of enabling to increase profitfrom 13 billions USD to 16 billions USD in 2006 and according to statement given

by Managing Director of Dan Carp, only doing so can help Kodak to maintain anddevelop further ( Source : www.igo-doanhnhan.bl ogspot.com/2007/08)

Epson was a typical example of profit decrease fue to loss of market sharewhen presenting a strategy of producing low priced laser printer in 1989 withexpectation of hastening market decrease of needle printer and assumming that theloyal customers of Epson might should buy their laser printer However, they havefailed to Hewlett-Packed, a leading company in field of laser printer having enteredinto market with product of laser printer with price lower than the laser printerproduced by Epson

For Vietnamese enterprises, according to the assessment by Mr Jago Penrose,

a financial policy analysis expert of United Nations Development Programme(UNDP) in 2007, it was said that “the enterprises having been considered as biggest

in Vietnam are only almost equivalent to the small and medium-sized enterprisesover the world”

Previously, the building-up of business strategy was not treasured yet by theenterprises, however in order to adapt themselves to the international integration, it

The Biti’s company has proved their coping capability with competition fromthe 1990th years when pioneering in building up Vietnamese trademark, soonpenetrating into Cambodia market and Laos market to get a high turnover.

The garment making company No 10 has a fairly daring decision toconcentrate on producing highly qualitative shirt and complete jacket, usingadvanced technology with highly skilled labour This has helped company toovertake foreign competitors having many products which are easy to beproduceable

The Vietnamese milk products company of Vinamilk has highly treasured thestrategy of developing national distribution network and trademark right from1990th years

The Vietnam National Oil & Gas Group (PetroVietnam) is an example forpenetrating into new market such as the marine transport market, which is naturallyconsidered as trade job done by Vietnam National Shipping Lines Corporation The Vietnam Machinery Erection Corporation (LILAMA) from position ofbeing a pure machinery erection enterprise only, has treasured strategy of becoming

a first strong EPC Contractor in Vietnam At present, most of big industrialbuildings in the country all require the experiences, man-force of managers, staffsand workers of LILAMA

However, at present the matter of establishing a business strategy which ismethodical and scientific right at beginning of trade is still a barrier not easy toovercome for the Vietnamese enterprises

2 The necessity for building up a business strategy The application meaning of the studied theme for the enterprise:

From the 60th years of the 20th century, starting from some big sizedenterprises in America, Japan, then largely spreading in the countries having trend

of shifting from long-term planning for determination of specific annual tasks,criteria to building up a business strategy with guidance policies and mottos foractivities of the enterprises The reason for this change is originated from context of

business environment having been continuously changed in regard to technology,political environment, customers, competitors,… causing the tasks, targetsdetermined in long-term plans 5-7 years to be regularly reviewed and re-calculated.

In order to enable maintaining and developing, the enterprises must reply to thequestions: which types of business may should be performed? If it is required tochange the business activities or not? Which competitors are penetrating into themarket? How the existing customers are changing now? Which developingtechnologies may impact to the enterprise?

The Vietnam Mechanization Electrification & Construction Joint Stock

Company (MECO JSC) has the orientation of developing trademark, leading

MECOJSC to become a strong trademark in the market by the policy of firm and sustainable development and growth in business activities – as being the top-

ranking target in long-term development strategy of company At present, thecompany has a plan for establishing business strategy in period 2010 – 2012,developed until 2015 Therefore, our study group selects the theme “To build up thebusiness strategy in period 2010 to 2015 of the MECOJSC”

The group members are also much expected to help the Company Leadership

to apply this theme in building up business strategy for the enterprise in the comingperiod

3 Purpose of study:

The theme has been studied with purpose of getting general and overallknowledge about building up a business strategy for an enterprise generally and forthe MECOJSC Company particularly in period 2010 – 2015

4 Scope and object of study, restriction of theme:

The theme concentrates on studying circumstances of MECOJSC Company inperiod 2009 -2015, with:

- The study data from years of 2006, 2007, 2008 and early year of 2009

- The investigation time at the Company is from June to early July 2009

Restriction of theme:

- The business strategy is only applicable for a definite period, from 2009– 2015

- It is applicable for MECOJSC Company solely

5 Method for performing study, data source:

The MECOJSC is a Joint Stock Company having posted their securities on thejoint stock transaction place so it is possible to exploit the data about company in alegal, easy manner with high reliability This is an enterprise related to field ofconstruction and mechanical and electrical works, therefore it is possible to analyse,compare with many other enterprises operating in the same trade job as in the studygroup there are 2 members having knowledge and understanding in this field Wehave approached Mr Nguyen Binh Duong - General Director and have beenexchanged and discussed in very expansive manner, ready to provide theinformation and data related to the enterprise serving this theme Currently, thereare available many documents in form of printed books, written articles in theInternet relating to the theme Therefore, the selected method for performance ofstudy is included:

- To directly collect the information at Company;

- To refer to the data having been filed previously at the Company;

- To get an interview with the Company General Director;

- To refer to the documents, printed books, written articles in the Internet;

- To refer to the textbooks of Training Program for International BusinessAdministration Master, the instructional documents for main task of theprogram;

- To investigate, analyse, summarize for getting reliable conclusions;

- To analyse with SWOT

Data source:

- Secondary source:

+ Company Statement given in 2007, 2008, quarter 1 of 2009 postingsecurities at Hanoi Joint Stock Transaction Center.

+ Company financial reports in 2007, 2008 taken at the company

+ Documents in printed books, Internet, learning textbooks

- Primary source:

+ Analysis data based on the references and comments given by experts

6 Structure of main task:

Besides the preface, conclusion, reference list and appendixes, the maincontent of main task is divided into 03 chapters:

Chapter I Basis for argument

It is the chapter introducing argument basis of theme of building up businessstrategy, as the foundation for developing next chapters

1.1 Business strategy:

1.1.1 Definition of strategy; business strategy

1.1.2 Basic matters in business strategy

1.1.3 Target of business strategy

1.1.4 Description of business strategies

1.1.5 Relationship between business strategy and other strategies

1.2 Procedure for building up business strategy:

1.2.1 Analysis of external environment:

- General environment: opportunity and challenge

- Environment in relevant professional job trades:

+ Specific features of the professional job trade

+ Competitive forces; Customers; suppliers; replaceable products;potential competitors; direct competitors

- Environment of competitive rivals: Analysis of future orientations,

present strategy, assumptions and capability of competitors

1.2.2 Analysis of internal environment of enterprise:

- Competitive advantages

- Focus Strategy on a specifically competitive market

Chapter II Analysis of actual status of Enterprise

2.1 Enterprise overview:

2.1.1 Summary of formation and development process

2.1.2 Company organization structure: organization chart; function and task2.1.3 Management structure

2.1.4 Main business activities

2.1.5 Posted securities

2.1.6 Some main features of enterprise impacting to building-up of businessstrategy for company:

- Features in organization

- Features in business activities

- Features in capital sources

2.2 Analysis of situation and Result of production and trading operations in the years of 2006, 2007, 2008

2.3 Analysis of strategic matters and administration of the enterprise:

2.3.1 Evaluation on existing status of strategy building up for the enterprise2.3.2 Analysis of environment of job trade for the enterprise

- The competitive forces in the professional job trade

- Customers

- Suppliers

- Replaceable products

- Potential competitors

- Direct competitive rivals

2.3.3 The company’s position in comparison with other enterprises operating

in the professional job trade

2.3.4 Internal analysis of company:

- Analysis of value series

+ For the auxiliary activities:

+ For the major activities:

- Analysis of the core capability

2.3.5 Analysis of SWOT: strong points, weak points, opportunity andchallenge to the company

2.4 The outstanding matters of the enterprise, the causes

Chương III To build up business strategy for the enterprise, the performance solutions and recommendations for the enterprise

3.1 Statement of mission, task and strategic target of business of the company

3.1.1 Statement of mission

3.1.2 Determination of task

3.1.3 Establishment of target

3.1.4 Selection of solution for business strategy:

- Cost – Leadership Strategy

CHAPTER I BASIS FOR ARGUMENT

The strategy is related to the definition of competitive advantage and control

of organization sources such as human, property, finance,… aiming to develop andensure its own essential interests Kenneth Andrews is the man who first time gave

these prominent concepts in the classic book The Concept of Corporate Strategy.

Following him, the strategy is what the organization may should do based on itsown strong and weak points in a context having both opportunities and threateningchallenges

In 1962, the strategy was defined by Chandler as being “determination of

basic long-term targets, purposes for the enterprise and determination of series of actions as well as distribution of sources required for performance of this target”

(Chandler,A.(1962); Strategy and Structure Cambrige, Massacchusettes MITPress)

According to Bruce Henderson, the strategist and concurrently founder of

Boston Consultancy Group: “Strategy is a careful search of action plan for

developing and combining the competitive advantages of the organization The differentiations between you and competitive rival are the bases for your advantage”

(Source: Effective business strategy, Harvard Business Essentials, Publisher

of Generals, Ho Chi Minh City, page 10)

According to Michael E Porter, the top-ranking strategy professor of Havard:

- “Strategy is creation of an unique and valuable position, including a series

of various groups.”;

- “Strategy is to perform balancing various factors aiming to gain a best

combination in competition The strategy nature is to decide what should not do.”;

- “Strategy is to create a harmony among activities by the company.”

(Source: Micheal E Porter, “What is Strategy?” Harvard Business Review,

November, December, 1996, pages 68, 70, 75).

So, what is the strategy ? Strategy is a plan aiming to bring to the organization

a competitive advantage in comparison with the competitors Strategy means havingunderstood the target in business under current performance by the enterprise,concentrating to plan how to reach such target « Strategy is a series of compoundactions aiming to mobilize the sources that an organization can get in order to reach

a determined purpose»

Strategy has a strongest impact when its essence as being values of enterprisehas been clearly understood: where are the priority criteria in aspect of products,customers, supplier, investor, shareholders and business environment Strategy isnot a single management procedure, but it is a process including from commitments

to decisions and actions of enterprise aiming to reach competitive advantage, firmand sustainable competitive advantage, profit above the medium level

b) Definition of business strategy:

According to Boston Consultancy Group: "Business strategy is the

determinations of distribution of available sources with purpose of changing the competition balance and shifting advantage to your side’’

According to Michael E Porter: "Business strategy for coping with competition

is combination between targets to be reached and means that enterprise should seek to reach the targets’’

Definition of Business Strategy according to textbook of StrategicAdministration of Griggs is a series of commitments and actions which are used by

a company to gain a competitive advantage by means of exploitation of essentialcapabilities in a determined market

In other words, strategy is:

- Business strategy: where the enterprise attempts to reach in long termduration (direction)

- Business strategy: In which market the enterprise has to compete and whichactivities the enterprise should perform in that market (scaled market) ?

- How the enterprise shall do in order to operate better in comparison with thecompetitive rivals in that market (advantages) ?

- Which sources (skill, property, finance, relationships, technical capability,equipments) required to enable competition (sources) ?

- How the factors from external environment can impact to competitivecapability of enterprise (environment) ?

- Which and what values and expectations that powerful persons inside andoutside enterprise are needed (capital contributors) ?

(Source: www.Saga.vn)

1.1.2 Basic matters in building up business strategy:

There are greatly numerous matters requiring the enterprises to care when building

up business strategy for themselves, we however are so much favourite with the speechgiven by Professor Michael E Porter at seminar conference “global competition andVietnam advantage” - 1/12/2008, when building up the business strategy, enterpriseshould conform to the 5 following principles:

- To clearly determine a group of typical values which shall be given tocustomers having the unique in comparison with competitive rivals,

- To determine a series of differential values and to adjust them in accordancewith expectations of customers,

- To determine the balance and clear exchange (to select what should not do),

- To ensure the activites in series of values to be fit, matched andsupplementary to each other,

- To ensure the continuity in strategy with regular improvements in strategyperformance

The continuity of strategy is mainly aimed to get a firm and sustainablecompetitive advantage This continuity helps enterprise to throughly understandtheir own business strategy, to build up their unique skills, to build up recognitionfeatures clearly for customers as well as to distribution channels and otherenterprises outside, strengthening the suitability – match going through series ofvalues The regular change of orientation in business does not only cause cost butalso makes customers confused and mistaken, therefore, in order to get successfulthe enterprise has to maintain continuity in regard to group of typical values It isthe continuous improvement that is the manner for enterprise to perform their owngroup of typical values The continuity in strategy shall allow enterprise to learn and

change faster, more effectively (Source: Saigon Businessman Newspapers).

The first important step in process of building up a mission declaration is todetermine the business activities of organization The essential matter in thisdetermination is to answer to questions: ‘What is our business activities’, ‘What isit’ and ‘What should be it’ For answering to the question ‘What is our businessactivities ?’ - Derek F Abell has suggested company should determine businessactivities on three aspects:

- Who will be satisfied (which group of customers ?)

- For what they shall be satisfied (what do the customers need ?)

- The manner and way for satisfying demands of customers (by the skills or

what particular capability ?)

Customers: The search and attraction of customers are constantly a most

important target for each enterprise If there are not customers, all the works such asproduct development, production scale extension, goods distribution, shallbecome meaningless Therefore, the analysis of external factors is normally startedwith study of customers The customers normally are divided into groups havingcommon features Market segmentation (including consumption market and jobtrade market) is the method of dividing a large and unhomogeneous market intosmaller segments having many homogeneous features

To determine demands to be satisfied from customers: The customers’

demand is normally related to interest and characters of products; as being theirexpectations to characters and effective abilities of products The customers demand

in many cases is neither correct nor wrong, also neither bad nor good

To determine the essential capabilities required to satisfy customers demands: the essential capabilities are foundation for all new strategies or strategy

corrections and adjustments The companies use essential capabilities to performstrategies of value creation aiming to satisfy customers demands and only thecompanies capable to incessantly improve, renovate and develop their own potentialcan expect to satisfy or exceed the expectations of customers through the timepassing However, the essential capabilities must be can not be transcribed, longlasted, able to suit, firm and sustainable, having competitive advantages

1.1.3 Target of business strategy:

Target is the future status that company attempts to perform or the final result

of planned activities For example, if being patient with mission of maintainingposition of being the number one company over the world in job trade of universalspace, the commercial universal space group of Boeing company by themselves hasdetermined some targets in the year of 1992 The top-ranking target is to maintain aminimum market share of 60% in job trade of big-sized commercial jet-plane Thesecond target is to reduce half of time for manufacturing a big-sized commercial jet-plane engine in 1997, and the third target is to reduce 30% cost for producingairplane engine in that year

( Source : The "Strategic Management" by PGS.TS.Le The Gioi; TS Nguyen Thanh Liem; Th.S Tran Huu Hai - Publisher of Statistics, 2007).

The companies, because of profit may have various targets An importanttarget above all others for most companies is to maximize income for shareholders.And, in order to gain this target, the companies normally give the decisions on longterm and short term targets of business

- Target of long term business strategy: It is the expected result which isproposed in a relatively long time duration According to Peter F Drucker, the longterm targets of enterprise are related to the following 7 fields: Profit rate;productivity; competition position; job development; relation among staffs andworkers; leading position in regard to technology; responsibility to community.

- Target of short term business strategy: It is the specific results that enterpriseintends gaining in a short time duration

So, what is a correct target ?

The target of business strategy is supposed to be correct when it is proposedfor all administration levels of company requiring to ensure the particularities:

- Particularity of accuracy and measurability If the target is not exactly

determined and measurable, the company can not review the process towardsreaching this target Target should be measurable, so the administrators have criteriafor reviewing their own performance

- Target must direct towards important matters In order to maintain

concentration, the company may should operate with some targets Therefore, theselected targets only should be important targets With the above example ofBoeing, the targets about reducing cost and shortening time have concentratedadministrators’ attention on 2 basically important things enabling company toestablish a competitive advantage, i.e cost and responsibility to customers

- The target is challengeable however can be performed Target challenges

administrators to a motive in finding measures to improve activities of organization.But, if target is not realistic, can not be practicable, the staffs shall refuse And onthe contrary, if target is too easy, it shall not encourage the administrators In thecase of Boeing example, the setting of target to reduce 30% cost for the unit, thismeans requiring a remarkable improvement of operation efficiency of Boeing andthis is a challengeable target Furthermore, experiences in other companies haveshown that it is possible to gain reduction 30% cost for unit in a period of 6 years,therefore, the given target is not an unpractical one

- Target should be determined with a reachable time duration The time

binding is important because it points out that the success must ensure timing butnot thereafter

- Target bears the consistency The consistency means targets must be

suitable to each other, be united with each other and the completion of a target shallnot obstruct the performance of other target However, the unity is not imperative to

be fully compatible to each other Actually, there is always contradiction between atarget with the other one Therefore, in order to minimize the potentialcontradictions among targets, it is required to determine the priority order, topresent the selections among contradictory solutions and to try to harmonize them

It is possible to refer to some options:

+ The immediate profit is contradictory with the long term growth;

+ Profit of business activities/ net turnover are contradictory with competitionposition;

+ Endeavour in direct selling is contradictory with endeavour of developingmarket;

+ Penetration into existing market is contradictory with development of newmarkets;

+ Profitable purpose is contradictory with non-profitable purpose;

+ Growth is contradictory with stability

1.1.4 Basic business strategies:

The business strategy is built up aiming to form differentiation between acompany position in an inter-relationship with its rivals Basically, companiesoperating for profit all are aiming to the same purpose, i.e to determine and pursue

a strategy helping them to protect themselves and to get profit in a some marketsegment According to viewpoint given by Harvad, mostly any business strategiesall belong to one of some form of variation from one among the following fourtypes of basic strategy:

- Strategy of leading by low cost and application manner

- To create differentiation for a product or service by creating real value forcustomers.

- Strategy about relationship with customers and 6 methods for makingstrategy become valuable to customers

- Strategy of network effectiveness: the winner will get everything

Professor Michael E Porter gave three solutions of comprehensive strategyused in competitive environment:

- Strategy of dominating in regard to cost,

- Strategy of differentiation,

- Strategy of focusing

Strategy of leading in regard to cost is the generalization of actions aiming to

produce goods or services having particularities acceptable to customers with alowest cost in relationship with all competitive rivals In other words, cost-leadership strategy is based on the capability of enterprise supplying product orservice with a cost rate lower than competitive rivals

With the cost-leadership strategy, enterprise has two competitive advantages:Products shall have a lower price in comparison with the competitive rivals andenterprise can stay more firmly than competitive rivals when the rivals are increased

in job trade By both these reasons, the cost-leadership strategy seemingly createsenterprise to have profit higher than average In the context of world economiccrisis as nowadays, many enterprises are forced to adjust their strategy, to improvetheir activities in order to reduce the cost and expense In regard to enterprisesworking in construction job trade, in order to get the construction contracts they donot have other way than presenting a possible lowest price, but still can satisfyrequirements of technique, quality and time schedule

To gain a position in regard to low cost, companies can control cost factorsand restructure the series of value if required

The cost factors are included:

- Change of production procedure,

- Establishment of new distribution channel,

- Direct selling instead of indirect selling

Restructure of series of values such as:

- Technical application for management of raw materials,

- In-advance integration,

- Post integration

- Change position as conformable to suppliers

In order to become the leading in cost, many administrators direct all strategicselections towards product, market, or capability of creating differentiation which iscreated by itself aiming to gain competitive advantage of low cost Regarding theadvantage of each common strategy it had best according to model of fivecompetitive forces given by Michael E Porter: with the competitive rivals in thesame job trade, with the negotiation ability of suppliers, with the negotiation ability

of customers, with the product replacement, with the potential threatening from newcompanies

However, companies having selected cost-leadership strategy havedisadvantages, because:

- The competitive rivals, by using their basic potentials, can imitate thestrategy of company leading in cost

- The procedures having been used for production and distribution of goodsand services may become outdated due to the renewal of competitiverivals

- Concentration on reducing cost can be exchangeable with the awareness ofcustomers in creation of differentiation

Differentiation Strategy is series of necessary actions for producing service

goods (with an acceptable price) on which customers suppose such products aredifferential and such differentiations are important to them

In order to create differentiation, administrators normally perform restructuringseries of value aiming to maximize capability through control of cost factors ifrequired, such as:

- To reduce the cost,

- To increase the usability of products or services,

- To create the strength and firmness through customers awareness about theunique

The strategies selected when particularizing are normally supply of after-saleand comprehensive repair service; creation of products attractive to customers

As the cost-leadership strategy, differentiation strategy also has advantagesand disadvantages When reviewing advantages, we review too in context of model

of five competitive forces Such are the in-advance advantages ensuring thecompany to resist rivals by the loyalty of customers to trademark of differentialproducts in comparison with competition of price (competition with rivals); it ispossible to reduce the negotiation power of buyer because the really differentialproducts shall make reduced sensitiveness to price increase (bargain power ofbuyer); it is possible to reduce the negotiation power of supplier; it is possible toresist new companies having intention of penetrating into market; have a goodposition in comparison with the replaceable products

Disadvantages of differentiation strategy are located in:

- Differentiation in regard to price between products of company havingdifferential products and a company leading in cost may be too big

- Until some time, the differential product shall can not create values forwhich customers are ready to pay

- The rivals may imitate, copy and fake

Focus Strategy (including strategy of concentration on cost and concentration

on differentiation) is a series of actions needed to do for producing goods andservices aiming to serve demand in a specifically competitive market segment

To perform a focus strategy, companies need to perform a series of basic andauxiliary actions in accordance with superiority manner aiming to build up andmaintain the competitive advantage with a profit rate above medium The focusstrategy allows companies to orient sources towards some activities of series of

However, this strategy also has a danger of getting competition, such as:

- A company following focus strategy may be made “lost concentrated” bythe rivals,

- A big competitive rival may keep a keen eye on the focused market of acompany,

- The like and preference given by customers in a focused market may beshifted towards similar products of bigger market

1.1.5 Relationship between business strategy and other strategies:

In any organization, strategies all exist under some various grades – spreadingfrom the whole enterprise (or a group of enterprises) to each individual agentworking there

Corporate strategy – related to overall target and size of enterprise aiming tomeet the expectations from capital contributors This is an important grade as it islargely impacted from investors in enterprise and concurrently it also guides theprocess of issuing strategic decision in the whole enterprise Normally, thecorporate strategy is clearly described in the “mission declaration”

Business strategy – more related to how an enterprise can successfullycompete in a specific market It is related to strategic decisions on selection ofproducts, meeting customers demands, gaining competitive advantage incomparison with rivals, exploiting and creating new opportunities

Operational strategy (or functional strategy) – related to how each part ofenterprise shall be organized for successfully performing the strategic direction atcompany grade and at every part in enterprise Thus, the operational strategyconcentrates on matters of sources, treatment process and human

To further clarify about the relation among strategies, we will morespecifically analyze the above mentioned strategies

a) Corporate Strategy

The corporation graded strategy answers key questions, i.e., company isincluding what business activities and how company shall manage such business

activities So, the corporate strategy determines actions to be performed by

company aiming to gain competitive advantage by means of selecting, managing a group of various business activities competitive in some job trades and product markets An effective corporate strategy makes the business units overall gained

comprehensive income exceeding what they can do if having no strategy,contributing to strategic competitive capability of company, and bringing tocompany the capability of gaining income above medium

The corporate strategy is shown in the forms: concentration on a singlebusiness field, vertical integration, diversification, restructuring and buyingenterprise, international strategy, joint-venture strategy

- Strategy of concentration on a single business field helps the company to

enable concentrating sources of material, technology, finance, generaladministration and its own competitive capabilities aiming to succeed in a field Theadvantage of this strategy is to make companies to attach more to their own works.But it also has disadvantage, i.e to miss opportunity for creating value and yieldinghigher profit thanks to moving the sources and capability of company to otheractivities

- Strategy of vertical integration: means the company is producing input for

itself (backward integration, or up stream integration) or dispersing its own outputs(forward integration, or down stream integration) The strategy of verticalintegration is normally originated from expectation of increasing competitiveposition of the core business activities Companies pursue this strategy with aim ofallowing to create barriers for new competitive rivals, fostering investment inspecialized properties to raise effectiveness, to protect quality and to make planningimproved

However, it also has disadvantage in regard to cost, disadvantage arisen whentechnology is fast changing and disadvantage when demands are not unforeseen

- Strategy of diversification: Generally speaking, the strategy of diversification

is normally directed to purpose of increasing value A successful strategy of

allowing the company business conditions to apply business-graded strategies forincreasing income and reducing cost Simultaneously, it also makes the marketstrength increased relatively in comparison with the rivals Numerousadministrators use the diversification strategy to increase the size of company, andaccordingly, can make increased fees for administrators

When the diversification is considered as to create value for a company, thereare still numerous opinions given by experts (among that including study ofMichael E Porter) assuming that diversification strategy has a trend of makingreduced rather than improving possibility of producing interest This has beenalready tested and experienced in some Vietnamese enterprises, who make tradingwith many job trades, with many various types of product, not conforming to thecore capability of enterprise, resulting in less effectiveness in capital using and lesseffectiveness of economy

- Strategy of restructuring and buying enterprise: Companies using strategy of

buying enterprise has benefits of increasing market strength, overcoming barrierswhen entering, creating favourable conditions for development of new business,strengthening diversification, re-orienting the company competitive scope, learningand developing new capability

Restructuring is a strategy through which company changes the complex ofbusiness units or its financial structure It is used when the company has excessivelydiversified, being attacked by competitive rivals to the core fields of company, theadvantage of vertical integration strategy and diversification strategy has beendecreased

- International strategy: The enterprises use this strategy when:

+ International markets bring about newly potential opportunities

+ New market expanding helps to prolong the life cycle of products

+ Potential needs for product are bigger

+ Necessary sources can be ensured

Beneficially international strategy: To make increased market scale, increasedincome through investment, increased advantage of scale (or experiences curve),having advantage of position.

For MECOJSC Company, with the orientation of developing trademark,

leading MECO to become a strong trademark in the market by the policy of firm and sustainable development and growth in business activities, the Company iscarrying out many strategic selections at company grade such as diversificationstrategy, international strategy, vertical integration strategy However, according tothe group’s viewpoint based on acquired theories, the MECOJSC Company mayshould not develop further the diversification strategy as the Company does nothave numerous competitive advantages in comparison with some other big-sizedenterprises operating in the same job trade This issues shall be analyzed in the nextChapter II

With 50 years of experiences operating in the fields of mechanicalmanufacture, repair, installation of mechanical equipments and accessories servingagriculture, forestry and water resource job trades, it may have to say it is the corecapability of company, however, through the results of business activities in years

of 2006, 2007, 2008 and beginning of 2009, the turnover value mainly is tradingand construction and installation At present, company is bravely investing in fields

of construction, trading real properties, commerce in domestic and foreign markets.With a management model almost concentrated at company grade as presently, withabout 24 branches and projects located over the country, the Leadership needsdetermine if it is required to restructure the company or not in order to makeconformable to target of expanding enterprise size

b) Business Strategy (competitive strategy)

Business Strategy is a determination on how an enterprise can compete in a

previously defined job trade or a specific field In order to firmly develop in somefield, the company must have established the competitive advantages in comparisonwith other rivals, therefore business strategy is also considered as a competitive

strategy The business strategy of an enterprise itself is the manner for creating avaluable position by enterprise in that job trade Therefore, strategy also leads to aharmony among enterprise activities, thanks to which the persistent efforts in thewhole enterprise shall together unanimously strengthen potential advantages incompetitive position of the company.

The strategy at grade of business unit (SBU) determines how each enterprisecan complete its own function and tasks (and therefore, contributing to complete thecorporate strategy) in its own operation field

The business graded strategy has the same importance for single-disciplinarybusiness units and each individual enterprise in an interdisciplinary business unit

In part of basic business strategies, the group shall present specifically aboutdefinition and solutions of basic business strategy

c) Functional Strategy (or Operational Strategy)

Functional Strategy is the strategy directing to effect improvement of basic

activities within the company scope, such as production, marketing, materialmanagement, research and development (R&D), sources Although, each functionalstrategy can concentrate on a determined function, however, in order to reallyimprove function of a some competitive block, it is required a close co-ordinationamong the functions This functional strategy creates basis for other functionalstrategies, for instance, marketing strategy, financial strategy, R&D strategy andoperational strategy takes a role of strengthening competitive strategy of enterprise.The functional strategy assists corporate strategy and business strategy For thesingle-disciplinary business units and each business base in interdisciplinarybusiness units, functional strategy is similar to each other

1.2 Procedure for building up business strategy:

Strategy planning is a process, which may be divided into 5 steps:

(1) To select the mission and major targets for company

(2) To analyze the external environment to identify opportunities andthreats

(3) To analyze the internal environment to successfully identify strong andweak points of company.

(4) To select strategies based on search of sources, capability and coreability and to develop them for dealing with the dangers, taking fulladvantage of opportunities from external environment,

(5) To perform the strategy

The task of analysis of external environment and internal environment ofcompany and then selection of strategy is considered as the task of building upstrategy The strategy realization shall be included of designing a suitableorganizational structure and control system for bringing strategy into performance

Procedure for building up business strategy is shown in following figure:

Figure 1.1 Procedure for building up business strategy

TO ANALYZE BUSINESS JOB TRADE

TO INTEND AND SELECT BUSINESS STRATEGY

TO INTEND AND SELECT BUSINESS STRATEGY

1.2.1 To analyse external environment

Strategy must be planned on basis of expected environmental conditions,therefore, a good strategy management depends much on the thoroughunderstanding of environmental conditions with which organization is coping.External environment that organization often meet is including of macro-environment and job trade environment

a) Macro environment:

Actually, the job trades and enterprises are located in a large macroenvironment, including six segmentations: economy, technology, social culture,demography, legal politics and global The changes in macro environment mayhave impact directly to any some force in job trade Therefore, to make the strengthrelatively changed to other powers and to itself, finally means making changed theattractiveness of a job trade

For the business environment in Vietnam, according to assessment given bythe World Bank organization (WB) at Business Environment Report in 2008 (DoingBusiness 2008), overall, Vietnam is ranked at 91 in 187 economies having beeninvestigated and upgraded 13 ranks comparing to year 2007 The businessenvironment having been met by investor when doing business in a country wasassessed by WB according to 10 criteria, from started founding enterprise untildissolving enterprise (criteria of founding enterprise, issuing business permit,labourer recruitment and dismissal, property registration, capital loan, protectinginvestor, paying tax, international commerce, contract performance, dissolvingenterprise) According to assessment given by WB, in 2008 the businessenvironment in Vietnam already had considerable improvements, but still has manymatters requiring to pay attention for resolving and reforming in order to createconditions allowing enterprises to maintain and firmly and durably develop

b) Analysis of job trade environment

The job trades are much various in regard to economic particularity,competitive situation, prospect of getting profit in future The economic

particularity of each job trade varies depending on factors such as scale and rate ofmarket growth, rate of changing technology, geographical borderline of market(local or global), quantity, scale of buyer and seller, scale in regard to product ofseller, types of distribution channels,… The competitive forces in job trades arevarious also Furthermore, job trades are also very much various in regard tocompetitive focus, may be price, may be quality,…

The administrators can not form a long-lasted orientation, or a strategicdecision, if they do not thoroughly understand about strategic status of company,competitive conditions with which it must cope, manner for creating suitabilityamong sources and capability with such conditions

For analysing factors of job trade environment having direct impact tocompany activities, the model of 5 forces given by Micheal E Porter is a mosteffective tool

c) Model of five competitive forces:

Micheal E Porter has determined the five strong impacts ruling competition

in an industrial job trade, helping administrators to recognize opportunity anddanger with which the enterprise must cope in the job trade:

- Threat from new rivals,

- Negotiation capability of supplier,

- Negotiation capability of buyer,

- Threat by replaceable products or services,

- Competitive strength in job trade.

However, when making use of this model for analysing specifically situation

of each enterprise, we will meet advantages, disadvantages Thus, the importancewhen using these models is to have accurate judgements about each factor of themodel:

Model of 5 forces given by M.Porter is presented as follows:

(Source : MBA for Leadership, author Steven Silbiger, General Publishing House

of Ho Chi Minh City.)

The competitive model shows that the more strong competitive forces, themore it restricts capability of existing companies in price increase and gettinghigher profit The task given to administrators is to awake to the opportunities anddangers, which will be brought by the change of five forces, through that to build up

an appropriate strategy

Analysis of competitive rivals in job trade The job trade is defined as a group

of companies offering to sell a product or service replaceable for each other Theeconomists suppose that replaceable products are the products having very big need

of elasticity If price of a product increases and makes need of another productincreased, such two products are fully replaceable and vice versa

Danger of having competitors

Competitive rivals in job trade

Competition among existing Companies

Buyer’s ability

to pressurize the price

Danger of having competitors

Negotiation capability of Buyer

Potentially new rivals

Replaceable products

For example, the price wars had shaken the American aviation job trade inearly 1990th years, that time the need of travel by aviation was decreased due toAmerican economy fallen into crisis, the aviation firms started reducing price formaintaining amount of their own passengers Whenever a some firm reduced theprice, other competitive rivals reduced immediately, too To result in a circle ofextremely reduced price cycle, causing this job trade lost 7.1 billions USD betweenyear 1991 – 1992, more than the total loss of 50 years before, and some transportfirms having been established long time ago such as Pan American were bankrupt.

(Source: Strategic Management, Publisher of Statistics in 2007, page 113)

An extremely important thing is that companies when analysing thecompetitive rivals in job trade must grasp the judgements from competitive rivalsabout themselves and other companies in the job trade Company needs collectinformation about strategies, targets, strong and weak aspects and responses of therivals Company must get known about strategies of each rival in order to foreseethe coming measures and responses When knowing strong and weak points of eachcompetitive rival, company can complete its own strategy aiming to get advantages

in front of restrictions of rivals, and simultaneously to avoid penetrating into placeswhere rivals are strong there

With the particularity of construction, mechanical manufacture job tradewhere MECOJSC Company is doing business, there are too many competitiverivals having great potential, being stronger than the Company in regard to bothcapacity and overall sources such as: LILAMA Corporation, Song Da Corporation,COMA Corporation, Vinaconex Corporation, HUD Corporation,… and there aretoo many companies participating in business in this field, therefore the Companymust balance its own capability sources for completing development strategy TheCompany need grasp and know the matters about competitive rivals such as: Whoare the competitive rivals ? What and how are their strategies ? What are theirtargets ? What are their strong and weak points ? How are their respondingmanners?

Potentially new rivals The potential rivals are enterprises who are not present

yet in job trade, but can impact to job trade in the future The matter that potentialrivals are numerous or few, their pressure to job trade is strong or weak shalldepend on factors of attractiveness of job trade This factor is shown throughcriteria such as interest percentage-rate, amount of customers, amount of enterprisesoperating in the job trade

With a job trade considered as attractive, the barriers for adhering to job tradeare very big, the supplier and the buyer has a relatively weak position, less threatsfrom replaceable products, the competition among rivals is medium Nobody canmeasure that Apple shall give birth to the musical player i-Pod, defeating the hero

of muitimedia technology as Sony Clearly, the attractiveness of demand of musicallistening instruments has led iPod to become a most preferable technologicalproduct It is Sony who themselves have made barriers in regard to their own

technology, trademark decreased due to too much paying attention to development

following the width of multifarious trades, leaving the tiny man of Apple to

penetrate into and control the whole market, turning the competitive advantage ofSony into a burden for themselves

Negotiation capability of buyer The buyer is a competitive pressure which

may impact directly to overall production and trading activities of job trade Thebuyer make pressure to enterprise in regard to price, product quality, attachedservices and it is themselves who is the competition controller in the job tradethrough decision of buying goods The buyer of a company may be finalconsumption customers of company’s product, but also may be companiesdistributing its products to final customers, such as agencies, retail dealers.Especially, when analysing the distribution companies, it is required to payattention to their importance, they may directly go deeply into and bullyimmediately in internal enterprise The advantage of analysing competitive pressurefrom customer side is to help us successfully determining: scale and importance ofthe job trade However, if the information about buyer are not exact, it will lead topresenting inaccurate judgements, even wrong, about the scale of job trade

Negotiation capability of supplier The amount and scale of supplier shall

decide the competitive pressure, their power of negotiation to job trade, enterprise.The suppliers may be considered as a threat when they can pressurize increasingprice or reducing quality of input supplied by them to company, therefore restrictinglucrative possibility Conversely, if the suppliers are weak, it again gives anopportunity for company to force reducing price and to require high quality.However, the possibility of supplier giving requirement to company is depended onthe relative authority between them and company

Threat from replaceable products The replaceable products are products of

job trades which serve customer demands as similarly as with respect to the jobtrade under analysis, currently For example, companies operating on coffee jobtrade are competing directly with companies operating in job trade of tea andrefresher So, the price given by companies in coffee job trade may be restrictedbecause of presence degree of tea and refresher products The existence ofreplaceable products represents a competition, making restricted possibility ofsetting high price, therefore limiting its lucrative possibility The threat fromreplaceable product increases when:

- Buyer is not required to pay a high expense when changing products,

- Price of replaceable products is better,

- Quality and effectiveness of replaceable products is better than the products

under using currently

Actually, special products which are highly appreciated by customers shall berarely born impact from this threat

Actually, companies operating in the same job trade normally createdifferentiation with other companies in accordance with factors: distributionchannel, market segmentation, product quality, technology, price policy, service forcustomer, advertisement and promotion Because of this differentiation, in most ofjob trades there will be formed the company groups among that each memberpursues similar strategies, to be called a strategic group The competition among

companies outside group (For example, competition between Coca-cola with Pepsi;competition among companies operating in construction job trade is very severe),and the companies in the same strategic group normally have a similar position inregard to market position, have similar products, similar strategic actions.

Through the above analysis, we have seen that the model of five competitiveforces and strategic group are useful tool for thinking and analysing nature ofcompetition in the same job trade in order to recognize opportunities and threats.However, this model also has restrictions, i.e.: having assumed the competitivepicture with past data and disregarded the role of improvement; overlooked theimportance of differentiations in every particular company when too emphasizingthe structure of job trade, strategic group

Analysis of environment of competitive rivals:

The companies can not overcome rivals if they do not follow up and monitorthe actions of rivals, do not understand their strategies, their coming plans

The best information source for understanding strategies of rivals is to judgewhat have been being done by the rivals, what have been being said by the leaders

of rivals Simultaneously, to judge the distribution of geographical market, strategicintentions, target of market-share, competitive position in strategic group of jobtrade, capability to accept risks, and latest steps are attacking or defending

To analyze rivals, company must judge which companies shall take animportant role in job trade in the future, which companies shall lose importantposition in the future ? So successful determination of rivals shall help strategists tosuccessfully anticipate the movements of rivals

1.2.2 Analysis of internal environment of enterprise

The main purpose of analyzing internal environment is to identify face ofpotential sources as well as existing ones which create the firmly and durablycompetitive advantage of enterprise

Competitive advantage Companies can get competitive advantage and gain

profit above medium if their core capabilities are taken a full advantage, gatheredand used as a lever However, the core capabilities only get competitive advantage

when company maintains discipline, principle The firmness of strategiccompetitive advantage depends on resistance ability of major competitive potentials

in front of changes of environment, depends on ability of changing core capabilityand depends on difficult degree that competitive rivals meet when imitating the corecapabilities of company

A company is considered as getting competitive advantage when its profit rate

is higher than average rate among job trade Company has a sustainable competitiveadvantage when it can maintain a high profit rate in a long time duration The twomajor factors representing competitive advantage are the value amount felt bycustomers about company’s goods or services and the cost paid to produce them

So, the factors creating competitive advantage are effectiveness, quality,improvement and satisfying customers

When analyzing internal environment of enterprise, administrators concentrate

on analyzing sustainable competitive advantage, analyzing present strategy andanalyzing financial efficiency

Analysis of sustainable competitive advantage There are two major manners,

i.e analysis of sources and analysis of series of value

Analysis of sources show the reserves of source, capability and propertiesavailable for business unit or in the whole company When analysing, it is normallyconcentrated on financial sources (budget, capital, loan ability); material properties(land, machineries and equipments, workshop); manpower source (skill, enthusiasm

of managers, staffs, and administrators); invisible properties (trademark, values andculture of company); technological properties (copyright, invention license) andlong term contracts The important thing is that analysers must clearly identify thesources contributing to capability of creating income for enterprise, but not listingthe sources

Analysis of series of value shall help strategic planners to classify valuablesources of company in order to identify its own competitive advantages Analysis ofseries of value permits companies to understand the chain creating value for their

product (goods and service) having value equivalent to their competitive rivals butwith lower cost (cost-leadership strategy); or by how manner to produce a productwhich customers want to buy with higher price (differentiation strategy)

Figure 1.2 Model of value chain

Normally, it is possible to use four steps to analyse the value series:

- To identify related factors by using a diagram of internal goods chain;

- To describe what enterprise does at each activity;

- To identify manner of increasing value of each activity theoretically and

classify them;

- To assess activities by standard comparison with the best manner of rivals,

of job trade or theoretical model

When analysing the value chain, to analyse capabilities of creating value ofbasic activities, including:

- Internal logistics: The activities related to using materials, storage yard,

inventory, to be performed to turn input into product

- Production activities: Including necessary activities for turning input

supplied by internal logistics process into final product

- External logistics: Including activities related to collection, storage and

transport of final product

- Marketing and selling: Including activities aiming to ensure performance of

exchanging goods and service in market in a most effective manner Suchworks concentrate mainly on basic phases of complex of marketing-mix:market research, product development, planning price policy,establishment of distribution channel and promotion to assist selling

- Service: Including activities having been designed for upgrading or

maintaining value of product

The above are basic activities partly contributing to create the overall value

chain of enterprise Each activity should be considered in a relationship with

capability of rivals According to that, each company must assess if each activity of themselves is stayed at superior level or equivalent or lower level

Analysis of capabilities of creating value by auxiliary activities:

- Buying and selling: including activities for buying input fuels necessary for

company’s product Besides fuels and materials, it is required to say aboutproduction tools and means such as workshop, machineries andequipments, laboratory, furnitures needed for office,… as well as otherconditions serving production These activities are performed by manyvarious sections of enterprise, but all very actively participate in process ofcreating value for product as well as operation result of enterprise

- Technology development: including necessary activities for upgrading

product value and procedure used for producing product The technologydefinition is understood in a large meaning, including both productiontechnology and management technology, having a relation close to eachother to create a mutual value for enterprise Technology developmentincludes also research and development (R&D), this is an importantactivity contributing to create new value for product and contributing intothe value chain of product or enterprise Besides R&D, the production

fields, the production technology development level has a largely decisivemeaning for final value of value chain.

- Manpower management: including activities related to recruitment,

employment, training, development and payment to staffs Manpowermanagement is an important activity present at all chains during process ofcreating value Actual situation shows, which enterprise really paysattention to investment in manpower development and management, suchenterprise shall create differentiation in market and occupy competitiveadvantage for long time

- Company infrastructure: including activities such as general management,

planning, finance, accounting, legal assistance, relationship withGovernment organizations to wholly support the value chain

Like the basic activities, auxiliary activities are considered in a relationship with capability of rival companies According to that, each company must assess if each activity of themselves is stayed at superior level, equivalent or lower level

Analysis of present strategy:

When analysing strategy, firstly to describe about present strategy of businessunit (competitive strategy) and enterprise (corporate strategy) The strategydescription normally concentrates according to direction of strategy product –customer, competitive philosophy and strategic logic

Corporate strategy: in order to understand a corporate strategy, it is required

to consider its business units, geographical scope where it is located for operation.The consideration through reviewing if enterprise concentrates on a single businessfield Otherwise, it is required to review the degree of vertical integration anddiversification If enterprise diversifies, it is required to determine if business unitsare related to each other If they are related it is required to review the degree ofrelevance So, it shall identify which business unit is the most important (unitreceiving the most of distribution sources, or receiving biggest commitment)

Strategy of Product - Customer Required to determine the focus that is

oriented by enterprise with respect to segmentation of product - customer

Philosophy of competitive strategy of enterprise, required to clearly understand

the competitive manner of enterprise according to cost-leadership strategy, ordifferentiation strategy, or a combined complex In this part it is required todetermine the major means used by enterprise for reducing cost or increasingdemand In other words, where are the key activities in the value chain

Functional strategy Which function types has been being performed by

enterprise, which activities required to be joint ventured, which activities required

to be conglomerated and how is the impact by each activity to the profit

Finally, it is required to review the suitability degree among strategic levels

To analyse financial efficiency:

Financial efficiency analysis throug the numbers: lucrative capability, fastpayment capability, using of economic lever, operation parameters For enterprise,financial efficiency is not the sole purpose, however, it is acknowledged that if it iswanted to firmly and durable develop, it must get profit

Analysis of SWOT is used for summarizing researchs of external and internal

environments External environment analysis is aimed to detect opportunities anddangers to organization Internal environment analysis is aimed to determine strongand weak points of organization, identify sources, ability and core capability oforganization

SWOT are the first letters of:

S: Strength;

W Weaknesses;

O Opportinities;

T Threats.

Strength: The capabilities helping organization to be capable for good performance

of points required to be pushed up Including: Valuable or secret capability;valuable property; valuable human source; organizational property; invisibleproperty; basic competitive capabilities; a particularity which may place company

to a market advantage; a conglomerated association increasing strength

Weaknesses: The points to be surmounted as they prevent organization from

reaching good effectiveness in work performance It is included: not available orshort of effectiveness in regard to know-how, experience capability; short ofinvisible and visible properties; do not have core capabilities in basic fields

Opportunity: Trend, motive, events and idea that organization can take full

advantage

Threats: The events or pressures which may happen out of control that organization

needs count or needs decide manner for limiting impact

Opportunity and challenge when analysing external environment are related tofactors: customers; pressure on price; competitive rivals; distribution channel;technology; macro economy; stipulations by Government; supplier; interest rate;political environment

In summary, the SWOT analysis takes an important role, helping organization

to enable planning better strategies thanks to grasping opportunities, avoiding orreducing the challenges from outside, taking full advantages of strength andsimultaneously surmounting the weaknesses inside

On basis of SWOT analysis, based on the target, direction of developingbusiness and sources, people can present the forecasts based on the 4 combinationtypes shown in following Table

Model of SWOT Analysis