Chiến lược phát triển của công ty cổ phần đầu tư và phát triển nhà hà nội – HANDICO giai đoạn 2015 2020

LUẬN VĂN THẠC SĨ Chiến lược phát triển của công ty cổ phần đầu tư và phát triển Nhà Hà nội –HANDICO giai đoạn 2015-2020 THESIS MBA DEVELOPMENT STRATEGY FOR HANOI HOUSING DEVELOPMENT AND

LUẬN VĂN THẠC SĨ Chiến lược phát triển của công ty cổ phần đầu tư và phát triển Nhà Hà nội –

HANDICO giai đoạn 2015-2020

THESIS MBA

DEVELOPMENT STRATEGY FOR HANOI HOUSING DEVELOPMENT AND INVESTMENT CORPORATION (HANDICO) DURING THE PERIOD OF 2015-2020

ACKNOWLEDGMENT

After a period of time participating at the International management ofbusiness administration jointly organized by Hanoi National University and GriggsUniversity (USA), members of our group have acquired the most advancedknowledge in the world in business management With the teaching method andissue raising method,… of domestic and foreign lecturers, we have been equippedwith a scientific way of thinking in order to research on new knowledge in variousfields concerning business administration in the future

Our group’s Capstone project is a fine combination between the knowledgetransferred from our professors and the practice that we ourselves have experienced.Due to time limit, the knowledge we have is still at a reasonable level, so ourcapstone project may have some shortcomings We wish to receive contributingideas from our professors and scientific council so as to further complete ourproject

We sincerely thank our lecturers, tutors and the entire staff of ETC Centerfor their enthusiasm and their assistance to create favorable conditions throughoutthe course We also wish to express our thanks to all the students ofGaMBA01.M03 who have strongly been united and helping one another during thetime of studying and researching

We would like to thank members of the Board of the Council, Board ofDirectors and all office staff of Hanoi Housing Development and InvestmentCorporation who have helped us collect data for analysis in our capstone project

Thank you very much!

Hanoi, December 2009

CHAPTER 1: THEORIES OF MANAGEMENT STRATEGY 12

1.1/ OVERALL ABOUT STRATEGY AND STRATEGIC MANAGEMENT: 12

1.1.1/ The concept of strategy and strategic management: 12

1.1.2/ The benefit of management strategy 14

1.2/ CONTENT OF MANAGEMENT STRATEGY: 15

1.2.1/ The Business Vision and Company Mission Statement 16

1.2.2 External environment analysis: 17

1.2.2.1 Macro environment analysis: 17

1.2.2.2/ Industry environment analysis : 19

1.2.3/ Internal environment analysis 23

1.3/ FORMULATION AND SELECTION OF DEVELOPMENT STRATEGIES 25 1.3.1/ Strategy formulation: 25

1.3.1.1/ Identifying objective and the importance of identifying objective: 25

1.3.1.2/ SWOT matrix and choosing business strategy: 26

1.3.2/ Selecting the best strategy: 27

1.3.2.1/ Cost Leadership Strategy 29

1.3.2.2/ Differentiation Strategy 30

1.3.2.3/ Focus Strategy 30

1.4/ CONCLUSION: 33

CHAPTER II: ANALYSIS OF ACTUAL SITUATION OF HANOI HOUSING DEVELOPMENT AND INVESTMENT CORPORATION (HANDICO) 34

2.1/ EXTERNAL ENVIRONMENT ANALYSIS: 34

2.1.1 Macro environment analysis: 34

2.1.1.1/ Political - legal environment: (P) 34

2.1.1.2/ Economic environment: (E) 36

2.1.1.3/ Social environment: (S) 38

2.1.1.4/ Technology environment: (T) 39

2.1.1.5/ International environment: 39

2.1.2 Industry environment analysis: 40

2.1.2.1/ Potential entrants: 40

2.1.2.2/ Existing competitors: 42

2.1.2.3/ Bargaining power of buyers: 43

2.1.2.4/ Bargaining power of suppliers: 44

2.1.2.5/ Threat of substitutes: 46

2.1.3 Summing up results of external environment analysis: 46

2.1.3.1/ Opportunities and ranking opportunities: 46

2.1.3.2/ Threats and ranking threats: 48

2.2/ INTERNAL ENVIRONMENT ANALYSIS: 51

2.2.1/ Overview about HANDICO: 51

2.2.1.1/ The process of establishment and development of HANDICO: 51

2.2.1.2/HANDICO’s organizational structureand management mechanism:54 2.2.1.3/ Main business activities of HANDICO: 56

2.2.1.4/ Mission, vision and value of HANDICO: 57

2.2.2/ Analysis of production and trade results from 2006-2008 58

2.2.3/ Analysis of internal environment of HANDICO 60

2.2.3.1/ Capacity in terms of equipment, infrastructure: 60

2.2.3.2/ Experience in operating and being master of technology: 61

2.2.3.3/ Production cost management and main material management 62

2.2.3.4/ Production quality: 63

2.2.3.5/ Management team: 65

2.2.3.6/ Strength in human resources: 66

2.2.3.7/ Management system for production and business activities 67

2.2.3.8/ Works sourcing, selling and marketing 68

2.2.3.9/ After-sales service: 69

2.2.3.10/ Analysis of selling price of products: 69

2.2.3.11/ Research and development 72

2.2.4/ Identifying outstanding capability and competitive edges 72

2.2.4.1/ Identifying outstanding capability: 72

2.2.4.2/ Identifying HANDICO’s stable competitive edges: 78

2.2.5/ Summing up internal environment analysis for HANDICO 79

CHAPTER III–FORMULATION AND SELECTION OF DEVELOPMENT STRATEGIES FOR HANDICO STRATEGIC SOLUTIONS AND IMPLEMENTATION PLAN 80

3.1/ FORMING BUSINESS STRATEGIES AND SELECTING THE BEST STRATEGY FOR HANDICO 80

3.1.1 SWOT analysis: 80

3.1.2 Selecting the best strategy for HANDICO: 84

3.2/ COST LEADERSHIP STRATEGY: 86

3.2.1/ Content of strategy: 86

3.2.1.1/ Short-term goals till 2015: 86

3.2.1.2 Long-term goals: 87

3.2.2/ Strategic solutions: 87

3.2.3/ Implementation plan: 90

3.3/ STRATEGY OF FOCUSING INTO KEY CLIENTS 94

3.3.1/ Content of strategy: 94

3.3.1.1/ Short-term goals till 2015: 94

3.3.1.2/ Long-term goals: 95

3.3.2/ Strategic solutions: 96

3.3.3/ Implementation plan: 97

3.4/ SHORT-COMINGS OF CAPSTONE PROJECT: 100

3.5/ DIRECTION FOR FOLLOW-UP RESEARCH: 100

CONCLUSION 102

REFERENCE DOCUMENTS 104

ANNEX 1 106

ANNEX 2 108

ANNEX 3 110

LIST OF FIGURES

Figure 1.1/ M.Porter ‘s 5-force competitive model 19

Figure 2.1/ PEST analysis 34

Figure 2.2/ Forecast of GDP growth of some regions, nations in 2009 and 2010 in comparison with the growth of recent years 37

Figure 2.3/ M.Porter ‘s 5-force competitive model 40

Figure 2.4/ Evaluation of opportunities for HANDICO 47

Firgure 2.5/ Evalutating impact of threats to HANDICO 49

Figure 2.6/ Summing up opportunities and threats for HANDICO 50

Figure 2.7/ Criteria and achievement during 2004-2008 53

Figure 2.8/ HANDICO’s chartered capital through various years 54

Figure 2.9/ HANDICO’s organization chart: 55

Figure 2.10/ HANDICO’s labor structure up to 31/8/2009: 56

Figure 2.11/ HANDICO production and trade results from 2006 - 2008 58

Figure 2.12/ Main equipmnet of HANDICO 60

Figure 2.13/ Typical constructions and projects implemented by HANDICO 63 Figure 2.14/ Typical constructions that HANDICO has won tender 69

Figure 2.15/ Main information about competitors 73

Figure 2.16/ Table of opinions of experts 76

Figure 2.17/ Table of opinions of internal survey in HANDICO 77

Figure 2.18/ Table of relationship in terms of HANDICO’s competitive edges78 Figure 2.19/ Summing up strengths and weaknesses of HANDICO 79

Figure 3.1/ Overall SWOT matrix for HANDICO: 81

Figure 3.2/ GREAT model for choosing the optimum strategy for HANDICO 85

Figure 3.3/ Implementation plan for cost leadership strategy 91

Figure 3.4/ Implementation plan for strategy of focusing into key clients 98

ASEAN Association of Southeast Asian Nations

APEC Asia – Pacific Economic Forum

GREAT Gains – Risks – Expenses – Achievability – TimingHANDICO Hanoi Housing Development and Investment CorporationPEST Politics, Economy, Society, Technology

R&D Research & Development

SWOT Strength, Weakness, Opportunity, Threat

SO Strategy for combining Strengths & Opportunities)

ST Strategy for combining Strengths & Threat

WO Strategy for combining Weaknesses & Opportunities

WT Strategy for combining Weaknesses & Threat)

Corporation Hanoi Housing Development and Investment Corporation

1 The Capstone Project Title: Development strategy for Hanoi Housing Development and Investment Corporation (HANDICO) during the period of 2015-2020:

2 The reason for choosing the Project:

During recent time, the world economy has experienced great changes;especially the financial crisis in the US has affected almost all the nations in theworld including Vietnam

After this economic crisis, we now can look back to find out the internalshortcomings and weaknesses of our economy At present, the Vietnameseeconomy in particular and the world economy in general tend to start recoveringand developing It is important that each economic organization must find out asuitable direction for its own to enable the stable development in the future

Vietnam has been regarded as an economy with rather fast economic recovery,which has been shown by the Government’s rescue packages to stimulate economicgrowth However, an undeniable fact is that the Vietnamese economy is growing at

a lower level than its potential due to major obstacles including inefficientinvestment, dilapidated infrastructure and a merely economy of semi-fabricationwith low added value From the 3rd quarter of 2007, domestic enterprises had toovercome the fiercest screening stage After this screening stage, the enterprises thatstill survive and develop have proven their high adaptability, agility and flexibility

in their business and production activities

For developing countries, construction is always considered one of the keyindustries, which plays an important role in the economic-social developmentcourse, especially during the industrialization and modernization of the country Itcreates basic physical facilities for the stable development in the future

At present, Vietnam is actively implementing administrative improvementmeasurements to create a fair legal and investment environment in order toencourage and attract domestic and foreign investors.

However, investors also have to face with and abide by the rules of the game inwhich they have their real rivals, there is no concession or sharing, and it is a fierce,risky and challenging battle

The rule of competition does not give exception to any economic entity orsector in the society and this rule exists in all fields Therefore, economic sectors ingeneral and construction in particular have to find their own way, build their ownspecific and suitable strategies and tactics for survival and development

Hanoi Housing Development and Investment Corporation (HANDICO) is a stateowned enterprise founded on September 21st, 1999 under the first “Corporation 90”model of Hanoi In the context that the economy is shifting towards the socialism-oriented economy, the foundation of HANDICO had an important meaning in terms

of arranging, splitting the enterprise-managing function of Bureaus, Departments,district authorities, focusing into the establishment of big and official economicorganization operating in the fields of construction, as well as implementing otherimportant responsibilities assigned by the municipality, meeting the demand ofinnovation in the business of housing development of the Capital in the modernsociety

The most important thing for HANDICO now is to work out an overalldevelopment plan for all its production and business activities in order to competewith domestic and foreign enterprises and to enlarge market share so as to achieveits growth target in all aspects during the period of 2010-2015 This is also thetarget of the writers when choosing this strategic planning topic

3 Purpose and scope of research:

Researching the basis for setting up development strategy, strategy process andthe way to select the optimum strategy in order to help HANDICO identify a

suitable strategy of production and business in the current business circumstance.From there, HANDICO can take on proper actions for expanding, reducing businesscost, using capital effectively, having profit as well as enhancing thecompetitiveness for the enterprise.

From the above-mentioned research, putting forth proposals for solutions toimprove the process of building up HANDICO’s strategy in the current businesscircumstance

Scope of research: This capstone project focuses into analyzing the strengths andweaknesses of HANDICO’s current strategy From that basis, building up andselecting business strategy for HANDICO during the period of 2010-2015

4 Implementation method:

Qualitative method: Applying theories of business strategy, bringing the models

of business strategy setting up and selecting into the practical situation ofHANDICO

Research methodology: Statistics, survey, analysis, comparison, synthesizingdata

Data: Primary and secondary

Data collecting method: Depending on data publicized on mass media andHANDICO’s capability portfolio

5 Structure of capstone project:

The capstone project consists of forewords and 3 chapters The main content ofeach chapter is presented as follow:

CHAPTER 1: THEORIES OF MANAGEMENT STRATEGY

- Overall about strategy and strategic management

- Content of management strategy

- Formulation and selection of development strategies

- Conclusion.

CHAPTER II: ANALYSIS OF ACTUAL SITUATION OF HANOI HOUSING DEVELOPMENT AND INVESTMENT CORPORATION

- External environment analysis

- Internal environment analysis -

CHAPTER III: FORMULATION ANDSELECTION OF DEVELOPMENT STRATEGIES FOR HANDICO

STRATEGIC SOLUTION AND IMPLEMENTATION PLAN

- Forming business strategies and selecting the best strategy for HANDICO

- Cost leadership strategy

- Strategy of focusing into key clients

- Short-comings of capstone project

- Direction for follow-up research

CONCLUSION

CHAPTER 1: THEORIES OF MANAGEMENT STRATEGY

1.1/ OVERALL ABOUT STRATEGY AND STRATEGIC MANAGEMENT: 1.1.1/ The concept of strategy and strategic management:

Strategy

Strategy is the mean or the tool by which objectives are consciously andsystematically pursued and obtained over time The word “strategy” derives fromthe Greek word stratçgos; which derives from two words: - "stratos" – meaningarmy and "ago" – which is the ancient Greek for leading/guiding/moving

Strategy is distinct from tactics In military terms, tactics is concerned withthe conduct of an engagement while strategy is concerned with how differentengagements are linked In other words, how a battle is fought is a matter of tactics:the terms that it is fought on and whether it should be fought at all is a matter ofstrategy

Johnson and Scholes (Exploring Corporate Strategy) define strategy asfollows:

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

In other words, strategy is about:

 Where is the business trying to get to in the long-term (direction)

 Which markets should a business compete in and what kind of activities

is involved in such markets? (markets; scope)

 How can the business perform better than the competition in thosemarkets? (advantage)?

 What resources (skills, assets, finance, relationships, technicalcompetence, and facilities) are required in order to be able to compete?(resources)?

 What external, environmental factors affect the businesses' ability tocompete? (environment)?

 What are the values and expectations of those who have power in andaround the business? (stakeholders)

Strategy at Different Levels of a Business

Strategies exist at several levels in any organization - ranging from theoverall business (or group of businesses) through to individuals working in it

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

business to meet stakeholder expectations This is a crucial level since it is heavilyinfluenced by investors in the business and acts to guide strategic decision-makingthroughout the business Corporate strategy is often stated explicitly in a "missionstatement"

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

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

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

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

How Strategy is Managed - Strategic Management

In its broadest sense, strategic management is about taking "strategicdecisions" - decisions that answer the questions above

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

1.1.2/ The benefit of management strategy

Studies show that if applied management strategies organizations willperform better than organizations do not perform this process Achieved ifappropriate between environmental organization's strategy, structure and processwill generate positive effects on the performance of the organization Benefits ofmanagement strategy have been tested in many different fields, can be short withthe three most basic are:

Develop clear strategic scenario for the company

Focusing more precisely on the important strategy

Improve awareness of the rapidly changing environment

However, to achieve effective management strategies always need a formalprocess and it can start with questions:

Where is the organization?

If no changes are be made after 1 year, 2 years, 3 years, 5 years, 10 years,will it be acceptable or not ?

If the answer is not acceptable, is it necessary to implement specificmanagement actions? What should be considered as risks and interests?

1.2/ CONTENT OF MANAGEMENT STRATEGY:

In the 1970's, many large firms adopted a formalized top-down strategicplanning model Under this model, strategic planning became a deliberate process inwhich top executives periodically would formulate the firm's strategy, and thencommunicate it down the organization for implementation The following is aflowchart model of this process:

The Strategic Planning Process

Mission

|V

Objectives

|V

Situation Analysis

|V

Strategy Formulation

|V

Strategy Selection

|V

Implementation

This process is most applicable to strategic management at the business unitlevel of the organization For large corporations, strategy at the corporate level ismore concerned with managing a portfolio of businesses For example, corporatelevel strategy involves decisions about which business units to grow, resourceallocation among the business units, taking advantage of synergies among thebusiness units, and mergers and acquisitions In the process outlined here,

"company" or "firm" will be used to denote a single-business firm or a singlebusiness unit of a diversified firm.

1.2.1/ The Business Vision and Company Mission Statement

- Vision

Statement to open a mission for the plan and strategy is the foundation for avision of the company Statement of mission or may be a motivating employeeswhen transmit the purpose and value of the company to customers andcommunities

A statement of vision is a report about a company where you hope toachieve Universal Declaration vision needed for strategic planning because itoutlines the future of your company as you achieve goals and your goals Thestatement of vision may be different between different lengths, can be a short, can

be a paragraph long, but must identify the final destination of you

Vision of your company is an important statement to guide the process ofplanning strategies A statement of vision will determine the best results for thecurrent initiatives and your potential

of the dominant company must always harmonious with the statement of mission

A strategic plan starts with a clearly defined business mission Mintzberg

defines a mission as follows: “A mission describes the organization’s basic function in society, in terms of the products and services it produces for its customers”.

1.2.2 External environment analysis:

1.2.2.1 Macro environment analysis:

A scan of the external macro-environment in which the firm operates can beexpressed in terms of the following factors:

 R&D activity

 automation

 technology incentives

 rate of technological change

1.2.2.2/ Industry environment analysis :

Figure 1.1/ M.Porter ‘s 5-force competitive model

Bargaining power of Bargaining

power of

(Source : Michael Porter, "Competitive Strategy: Techmques Analyzing Industries and

Competitors)

Porter (1980) argues that five forces determine the profitability of an industry Theyare featured in Figure 1.1 At the heart of the industry are rivals and theircompetitive strategies linked to, say, pricing or advertising; but, he contends, it isimportant to look beyond one’s immediate competitors as there are otherdeterminants of profitability Specifically there might be competition fromsubstitute products or services These alternatives may be perceived as substitutes

by buyers even though they are part of a different industry There may also be apotential threat of new entrants, although some competitors will see this as anopportunity to strengthen their position in the market by ensuring, as far as they can,customer loyalty Finally it is important to appreciate that companies purchase fromsuppliers and sell to buyers If they are powerful they are in a position to bargainprofits away through reduced margins, by forcing either cost increases or pricedecreases This relates to the strategic option of vertical integration which will beconsidered in detail later in the book Vertical integration occurs where a companyacquires, or merges with, a supplier or customer and thereby gains greater controlover the chain of activities which leads from basic materials through to finalconsumption

Any company must seek to understand the nature of its competitiveenvironment if it is to be successful in achieving its objectives and in establishingappropriate strategies If a company fully understands the nature of the five forces,and particularly appreciates which one is the most important, it will be in a stronger

position to defend itself against any threats and to influence the forces with itsstrategy The situation, of course, is fluid, and the nature and relative power of theforces will change Consequently, the need to monitor and stay aware is continuous.

An industry is a group of firms that market products which are closesubstitutes for each other (e.g the car industry, the travel industry)

Some industries are more profitable than others Why? The answer lies inunderstanding the dynamics of competitive structure in an industry

The most influential analytical model for assessing the nature of competition

in an industry is Michael Porter's Five Forces Model, which is described below:

Porter explains that there are five forces that determine industryattractiveness and long-run industry profitability These five "competitive forces"are:

- The threat of entry of new competitors (new entrants)

- The threat of substitutes

- The bargaining power of buyers

- The bargaining power of suppliers

- The degree of rivalry between existing competitors

Threat of New Entrants

New entrants to an industry can raise the level of competition, therebyreducing its attractiveness The threat of new entrants largely depends on thebarriers to entry High entry barriers exist in some industries (e.g shipbuilding)whereas other industries are very easy to enter (e.g estate agency, restaurants) Keybarriers to entry include

- Economies of scale

- Capital / investment requirements

- Customer switching costs

- Access to industry distribution channels

- The likelihood of retaliation from existing industry players

Threat of Substitutes

The presence of substitute products can lower industry attractiveness andprofitability because they limit price levels The threat of substitute productsdepends on:

- Buyers' willingness to substitute

- The relative price and performance of substitutes

- The costs of switching to substitutes

Bargaining Power of Suppliers

Suppliers are the businesses that supply materials & other products into theindustry

The cost of items bought from suppliers (e.g raw materials, components) canhave a significant impact on a company's profitability If suppliers have highbargaining power over a company, then in theory the company's industry is lessattractive The bargaining power of suppliers will be high when:

- There are many buyers and few dominant suppliers

- There are undifferentiated, highly valued products

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

- Buyers do not threaten to integrate backwards into supply

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

Bargaining Power of Buyers

Buyers are the people / organizations who create demand in an industryThe bargaining power of buyers is greater when

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

- Products are standardized

- Buyers threaten to integrate backward into the industry

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

- The industry is not a key supplying group for buyers

Intensity of Rivalry

The intensity of rivalry between competitors in an industry will depend on:

- The structure of competition - for example, rivalry is more intense

where there are many small or equally sized competitors; rivalry is less when anindustry has a clear market leader

- The structure of industry costs - for example, industries with high fixed costs encourage competitors to fill unused capacity by price cutting

- Degree of differentiation - industries where products are commodities

(e.g steel, coal) have greater rivalry; industries where competitors can differentiatetheir products have less rivalry

- Switching costs - rivalry is reduced where buyers have high switching

costs - i.e there is a significant cost associated with the decision to buy a productfrom an alternative supplier

- Strategic objectives - when competitors are pursuing aggressive growth

strategies, rivalry is more intense Where competitors are "milking" profits in amature industry, the degree of rivalry is less

- Exit barriers - when barriers to leaving an industry are high (e.g the cost

of closing down factories) - then competitors tend to exhibit greater rivalry

1.2.3/ Internal environment analysis :

Understanding a business in depth is the goal of internal analysis This analysis isbased resources and capabilities of the firm

Resources

A good starting point to identify company resources is to look at tangible, intangibleand human resources

Tangible resources are the easiest to identify and evaluate: financial resources andphysical assets are identifies and valued in the firm’s financial statements.

Intangible resources are largely invisible, but over time become more important tothe firm than tangible assets because they can be a main source for a competitiveadvantage Such intangible recourses include reputational assets (brands, image,etc.) and technological assets (proprietary technology and know-how)

Human resources or human capital are the productive services human beings offer the firm

in terms of their skills, knowledge, reasoning, and decision-making abilities

Tangible

Financial The firm’s borrowing capacity, and

its internal funds generation determine its capacity to weather fluctuations in demand and profits overtime

 Debt to equity ratio

 Ration of net cash

to capital expenses

 Credit rating

 (WE need different ones)

Physical The physical resources related to

plant, equipment, assets, technology, raw materials

 Resale value of assets

 Age of capital equipment

 Flexibility of PPE Intangible

Technological

Stock of technology in the form of proprietary technology (copy right, patents, trade secrets) and expertise

in the application of technology (know-how)

Reputation of the company with

 Brand recognition

 Price premium overcompeting brands

 Percent of repeat buying

 Level and consistency of

suppliers, employees, govermment and the community.

company performanceHuman

Resources

The training and expertise of employees determine the skills available to the firm

The adaptability of employees determine key aspects of strategic flexibility of the firm

The commitment and loyalty of employees determines the capacity

of the firm to attain and maint ain competitive advantage

 Educational, technical, and professionnal qualifications of employees

 Compensation relative to industry

 Record of labor disputes

Expertise in strategic controlEffectiveness in motivating and coordinating business units

Management of partnershipsOverall company

management/resource managementInformation Management Comprehensive and effective information system

that can be used for managerial decision makingResearch and Development Capability in basic research

Innovation of new products Manufacturing

Product Design Design capability

Marketing Brand management and promotion

Promotion and exploiting reputation for qualityUnderstand of and responsiveness to market trends

Sales and Fulfillment Effectiveness in promoting and executing sales

Efficiency and speed of fulfillmentQuality and effectiveness of customer service

1.3/ FORMULATION AND SELECTION OF DEVELOPMENT STRATEGIES

1.3.1/ Strategy formulation:

1.3.1.1/ Identifying objective and the importance of identifying objective:

Objective is specific, clear, feasible, in a shorter time Objective is regarded

as a specific vision of the enterprise

Main goal is the future status of the company trying to implement or finalresults of the actions planned

To that, the objective must have four characteristics:

- First, a target is considered to be well established if it accurate and canmeasure

- Second, a target is set to be the critical issues

- Third, a goal was set up well to the challenges and can make

- Fourth, a goal is built so well identified with a period of time can beachieved

- Finally, the objectives to provide good tools to evaluate theimplementation of management

Objectives can be set at two levels:

- Corporate level: These are objectives that concern the business or

organization as a whole

- Functional level

Both corporate and functional objectives need to conform to the commonly

used SMART criteria.

The SMART criteria (an important concept which you should try toremember and apply in exams) are summarized below:

- Specific - the objective should state exactly what is to be achieved.

- Measurable - an objective should be capable of measurement – so that it

is possible to determine whether (or how far) it has been achieved

- Achievable - the objective should be realistic given the circumstances in

which it is set and the resources available to the business

- Relevant - objectives should be relevant to the people responsible for

achieving them

- Time Bound - objectives should be set with a time-frame in mind These

deadlines also need to be realistic

1.3.1.2/ SWOT matrix and choosing business strategy:

SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats

SWOT analysis is an important tool for auditing the overall strategic position

of a business and its environment

Once key strategic issues have been identified, they feed into businessobjectives, particularly marketing objectives SWOT analysis can be used inconjunction with other tools for audit and analysis, such as PEST analysis andPorter's Five-Forces analysis It is also a very popular tool with business andmarketing students because it is quick and easy to learn

The Key Distinction - Internal and External Issues

Strengths and weaknesses are Internal factors For example, strength could

be your specialist marketing expertise A weakness could be the lack of a newproduct

Opportunities and threats are external factors For example, an opportunity

could be a developing distribution channel such as the Internet, or changingconsumer lifestyles that potentially increase demand for a company's products Athreat could be a new competitor in an important existing market or a technologicalchange that makes existing products potentially obsolete

It is worth pointing out that SWOT analysis can be very subjective - twopeople rarely come-up with the same version of a SWOT analysis even when giventhe same information about the same business and its environment Accordingly,SWOT analysis is best used as a guide and not a prescription Adding and weightingcriteria to each factor increases the validity of the analysis

1.3.2/ Selecting the best strategy:

Pair the SWOT factors to formulate strategies

We formulate strategies in the four categories

Namely:-1 SO Strategies (Strengths and Opportunities Strategy )

2 ST Strategies (Strengths and Threats Strategy )

3 WO Strategies (Weaknesses and Opportunities Strategy )

4 WT Strategies (Weaknesses and Threats Strategy )

If the primary determinant of a firm's profitability is the attractiveness of theindustry in which it operates, an important secondary determinant is its positionwithin that industry Even though an industry may have below-average profitability,

a firm that is optimally positioned can generate superior returns

A firm positions itself by leveraging its strengths Michael Porter has arguedthat a firm's strengths ultimately fall into one of two headings: cost advantage and

differentiation By applying these strengths in either a broad or narrow scope, threegeneric strategies result: cost leadership, differentiation, and focus These strategiesare applied at the business unit level They are called generic strategies because theyare not firm or industry dependent The following table illustrates Porter's genericstrategies:

Porter's Generic Strategies

Broad

(Industry Wide)

Cost Leadership Strategy

Differentiation Strategy

Narrow

(Market Segment)

Focus Strategy

(low cost)

Focus Strategy

(differentiation)

1.3.2.1/ Cost Leadership Strategy

This generic strategy calls for being the low cost producer in an industry for

a given level of quality The firm sells its products either at average industry prices

to earn a profit higher than that of rivals, or below the average industry prices togain market share In the event of a price war, the firm can maintain someprofitability while the competition suffers losses Even without a price war, as theindustry matures and prices decline, the firms that can produce more cheaply willremain profitable for a longer period of time The cost leadership strategy usuallytargets a broad market

Some of the ways that firms acquire cost advantages are by improvingprocess efficiencies, gaining unique access to a large source of lower cost materials,

making optimal outsourcing and vertical integration decisions, or avoiding somecosts altogether If competing firms are unable to lower their costs by a similaramount, the firm may be able to sustain a competitive advantage based on costleadership.

Firms that succeed in cost leadership often have the following internalstrengths:

 Access to the capital required making a significant investment inproduction assets; this investment represents a barrier to entry that many firms maynot overcome

 Skill in designing products for efficient manufacturing, for example,having a small component count to shorten the assembly process

 High level of expertise in manufacturing process engineering

 Efficient distribution channels

Each generic strategy has its risks, including the low-cost strategy Forexample, other firms may be able to lower their costs as well As technologyimproves, the competition may be able to leapfrog the production capabilities, thuseliminating the competitive advantage Additionally, several firms following a focusstrategy and targeting various narrow markets may be able to achieve an even lowercost within their segments and as a group gain significant market share

1.3.2.2/ Differentiation Strategy

A differentiation strategy calls for the development of a product or servicethat offers unique attributes that are valued by customers and that customersperceive to be better than or different from the products of the competition Thevalue added by the uniqueness of the product may allow the firm to charge apremium price for it The firm hopes that the higher price will more than cover theextra costs incurred in offering the unique product Because of the product's unique

attributes, if suppliers increase their prices the firm may be able to pass along thecosts to its customers who cannot find substitute products easily

Firms that succeed in a differentiation strategy often have the followinginternal strengths:

 Access to leading scientific research

 Highly skilled and creative product development team

 Strong sales team with the ability to successfully communicate theperceived strengths of the product

 Corporate reputation for quality and innovation

The risks associated with a differentiation strategy include imitation bycompetitors and changes in customer tastes Additionally, various firms pursuingfocus strategies may be able to achieve even greater differentiation in their marketsegments

Because of their narrow market focus, firms pursuing a focus strategy havelower volumes and therefore less bargaining power with their suppliers However,firms pursuing a differentiation-focused strategy may be able to pass higher costs on

to customers since close substitute products do not exist

Firms that succeed in a focus strategy are able to tailor a broad range ofproduct development strengths to a relatively narrow market segment that theyknow very well

Some risks of focus strategies include imitation and changes in the targetsegments Furthermore, it may be fairly easy for a broad-market cost leader to adaptits product in order to compete directly Finally, other focusers may be able to carveout sub-segments that they can serve even better

A Combination of Generic Strategies - Stuck in the Middle?

These generic strategies are not necessarily compatible with one another If afirm attempts to achieve an advantage on all fronts, in this attempt it may achieve

no advantage at all For example, if a firm differentiates itself by supplying veryhigh quality products, it risks undermining that quality if it seeks to become a costleader Even if the quality did not suffer, the firm would risk projecting a confusingimage For this reason, Michael Porter argued that to be successful over the long-term, a firm must select only one of these three generic strategies Otherwise, withmore than one single generic strategy the firm will be "stuck in the middle" and willnot achieve a competitive advantage

Porter argued that firms that are able to succeed at multiple strategies often

do so by creating separate business units for each strategy By separating thestrategies into different units having different policies and even different cultures, acorporation is less likely to become "stuck in the middle."

However, there exists a viewpoint that a single generic strategy is not alwaysbest because within the same product customers often seek multi-dimensionalsatisfactions such as a combination of quality, style, convenience, and price Therehave been cases in which high quality producers faithfully followed a singlestrategy and then suffered greatly when another firm entered the market with alower-quality product that better met the overall needs of the customers

Generic Strategies and Industry Forces

These generic strategies each have attributes that can serve to defend against competitive forces The following table compares some characteristics of the

generic strategies in the context of the Porter's five forces

Generic Strategies and Industry Forces

Focusing develops core competencies that can act as

Large buyers have less power to negotiate because

differentiating attributes, reducing threat of substitutes

Specialized products & core competency protect against substitutes

Rivalry Better able to

1.4/ CONCLUSION:

Chapter I contains basic concepts of strategy and strategic management.These concepts are the basis for formulating, selecting and implementing strategy.They are necessary foundation for researching the actual situation of Hanoi HousingDevelopment and Investment Corporation HANDICO which will be analyzed in

Chapter II At the same time, they will help to come up with proposals andrecommendations for the implementation of strategies for HANDICO during theperiod of 2010-2015 which will be mentioned in Chapter III.

CHAPTER II: ANALYSIS OF ACTUAL SITUATION OF HANOI HOUSING DEVELOPMENT AND INVESTMENT CORPORATION (HANDICO)

2.1/ EXTERNAL ENVIRONMENT ANALYSIS:

2.1.1 Macro environment analysis:

Figure 2.1/ PEST analysis

(Source: web site: www.marketingteacher.com)

2.1.1.1/ Political - legal environment: (P)

One of the outstanding advantages of Vietnam as compared to othercountries in the region is that Vietnam has a stable political, security and defensesystem which helps attract investment and boosts economic growth.

The fact that Vietnam joins WTO will have good effect, create jobs andincrease labor income Joining WTO helps Vietnam increase commercial exchangeand increase foreign direct investment into Vietnam The legal changes always havegreat impact on the production and business activities of economic entities.Government management by legal system will avoid administrative interventioninto the movement of enterprises and the market Stability in terms of politics, laborforce and development guideline during recent years and in the coming years willcreate favorable conditions for the growth of the country’s economy in general andconstruction enterprises in particular

During recent years, the construction of legal system has been a point offocus and been applied timely, especially in the construction field, there has been aLaw closely relating to enterprises in the industry such as: Law of enterprises No.60/2005/QH11 dated November 29, 2005, Law of tender No 61/2005/QH11 datedJune 18, 2009, Law of housing No 56/2005/QH11 dated November 29, 2005,…accompanied by Decrees, Circulation timely issued by Ministries, Departments toinstruct the implementation

These systems of legal documents are an important legal corridor for theeconomic growth in general and the construction industry in particular It createsfavorable conditions for domestic and foreign economic sectors to invest in andexploit the construction business in Vietnam For the construction field, legalsystem also creates a fair competitive environment, forms a basis to choose suitabletenders, ensures technical requirements for constructions and helps utilizeinvestment capital effectively, helps clearly define the responsibilities and rights ofgovernmental management organizations

Although the system is rather perfectly launched, when being put intopractice, below-law documents sometimes cross one another and do not catch up

with the market happenings Local administrative organizations still require a lot ofpermits which bothers investors and construction enterprises, ending up with theprolongation of project implementation, cost and expense increase.

The government has already issued policies to encourage the equalization ofstate enterprises and issued decisions asking state corporations to be equalizedwithin a limited time range With such a determined policy, most of state enterpriseshave been going on the road of equalization, supplying to the market diversifiedproducts with big capital value

The Ministry of Construction is going in the right direction As agovernmental managing organization for construction, the Ministry of Constructionhas gradually got rid of supervising corporation, put hand-on management intoconstruction businesses The Ministry pushes up the development of constructionindustry through short-term and long-term development programs, architecture andspace blueprint in various areas, regions, industrial zones, residential areas,balancing and managing the activities in construction market by Laws, Decrees,Circulations The Ministry has created favorable conditions for enterprises tooperate under the mechanism of market economy, be subject to the regulation of themarket as well as diversify investment capital for construction

In addition, the trend of international integration is increasing Vietnam isbeing considered an attractive destination for foreign investors and big economicgroups However, besides the favorable conditions, Vietnamese enterprises alsohave to suffer from the pressure of fierce competition, tariff barriers and privilegesfrom the Government will no longer exist, so enterprises are forced to improve themanagement level, invest in technologies and equipment to create quality,diversified products at the lowest cost This is also a challenge to the constructionindustry in general and Hanoi Housing Development and Investment Corporation inparticular

2.1.1.2/ Economic environment: (E)

Competition is always regarded as the “soul” of the market economy,therefore the first and most important task that enterprises need to do on a regularbasis is to develop products suitable with the market.

It is stated by economic experts that 2009 is the year of constructionsbecause it is the most favorable moment to speed up the construction schedule aswell as break ground for new constructions

At the moment, the Government is paying attention into consumptionencouraging programs, focusing into construction industry, especially theconstruction of infrastructure and housing for the poor Therefore, although theindustrial manufacturing in 2009 is still forecasted to be under difficulties due to theglobal economic crisis, the construction industry has a chance to grow thanks to theGovernment’s consumption encouragement policies to boost economy recovery

During recent time, due to the world and domestic economic crisis,Vietnamese enterprises, especially construction ones have met a lot of difficulties

On April 16, 2009, the Prime Minister issued the decision to reduce 50% VAT forsome product categories including building materials of all kinds – which helpsdirectly reduce price of building materials

Beside the positive effects, the fast economic growth has caused the shortage

of raw materials and energy Prices of input raw materials for construction industrysuch as bricks, sand, stone, steel, cement, power, mechanical spare parts,assembling service continuously increase

The giant economies of the world have been undergoing the worst economiccrisis since the years 30 of the last century Many poor countries, which depend onexport are having slow growth rate or even negative growth The world economyhas been in the danger of collapse with the disruption of a number of banks andfinancial institutions in rich countries, however strong policies and measures havehelped economies to overcome that danger At the moment, the main concern is thatunemployment will not reduce drastically as the recovery is still going slowly

Figure 2.2/ Forecast of GDP growth of some regions, nations in 2009 and 2010

in comparison with the growth of recent years.

COUNTRIES YEAR 2000-2007 YEAR 2008 YEAR 2009 YEAR 2010

(Source: The Economist, July 25th, 2009 World Development Indicators and

IMF data center)

2.1.1.3/ Social environment: (S)

The economic growth, together with the young population, young intellectualswith booming demand for housings is one of the factors driving the growth of theindustry

The shifting from agricultural economy to industrial, service economy has led tothe movement of a population from country sides to cities These are people with highdemand for housings and they are also potential customers for the Corporation

The Government’s policies to encourage oversea Vietnamese to invest intothe homeland (including real estate investment) being brought into play is a factordirectly influence the construction industry

The average income in Vietnam in 2008 was USD1,024/person is a favorablecondition for investment activities When the economy grows stably and incomegets higher and higher, there will be increase in demand for working and living(houses, offices, entertainment complex,…)

Pursuant to Decision No 76/2004/QĐ-TTg dated 6/5/2004 in which the PrimeMinister approved the housing development direction up to 2020, Vietnam put forththe target of reaching 15m2 floor/person by 2010 and 20m2 floor/person by 2020 inurban areas; 14m2 floor/person by 2010 and 18m2 floor/person by 2020 in rural areas.

The population of Vietnam up to 0:00 of April 1, 2009 is about 85.8 millionpeople (rural areas account for 70.4% and urban areas account for 29.6% equal to

25.37 million people) (Source: Statistics Bureau – 2009) Therefore, demand for

houses, offices, urban infrastructure, traffic works will be very big in the future

If reaching the target of 15m2 floor/person in urban areas and 14m2/person

in rural areas by 2010, we will need up to 1,270 million m2 of floor, not to mentionthe demand for developing industrial zone, infrastructure, cultural constructions,commercial centers,… It shows that the construction market in the future will be sobig

2.1.1.4/ Technology environment: (T)

With Vietnam’s economic integration by joining WTO and the open-doorpolicy for big economic groups to come into Vietnam, there has been a scientifictechnical revolution in the construction industry Many advanced technologies andequipment have been applied into civil and industrial constructions in Vietnam suchas: Top-down construction technology, hard-core construction technology for highbuilding, reinforced floor technology, centrifugal casting technology, reinforcedsteel connection for concrete technology, finishing technology for unpeel-offceiling…

Modern technologies have helped investors to build up 30-35 storeybuildings and now up to 70 storey building with reasonable cost and reduced timingschedule, yet still ensure the technical requirement and quality for constructions

With the ongoing fast development of science and technology, machinery isreplacing manual labors The question posed to Vietnamese construction enterpriseswho have limited investment capital is how to effectively exploit the equipment

already invested, at the same time meeting the demand of the market in the bestway.

The application of technology has created the differentiation and increasedthe competitiveness among companies, therefore companies must pay properattention to continuous renovation, technology improvement in order to increasequality and reduce production cost

2.1.1.5/ International environment:

The trend of international integration has had great impact on economicpolicies and development direction of the country The Vietnamese economy hasofficially joined the international arena and become a reputable address for foreigninvestors to expand, cooperate for their production and trade business On the otherhand, these factors also pose a pressure to local companies to build up businessstrategy, therefore Vietnamese companies need to attach importance to setting upoverall objectives of the society such as motivating and keeping talent people,improving working capability, building civilized and modern corporate culture

2.1.2 Industry environment analysis:

Figure 2.3/ M.Porter ‘s 5-force competitive model

(Source: web site : www saga.vn)

2.1.2.1/ Potential entrants:

After the Government issued Laws, Decrees, Circulations for theconstruction industry and some policies to encourage investment into real estate,

legal barrier for new enterprises to join the industry has almost been dismantled.According to the statistics of the Ministry of Construction and ContractorAssociation, during the last 5 years, the number of contractors has increased over

12% per year (Source: Contractor Association) For new entrants into the industry,

barrier for joining tender mostly lies in the experience portfolio and constructioncapability

According to the Law of Tender No 61/2005/QH11 dated 29/11/2005, whenjoining tenders, the tendering companies will be ruled out from the first round iffailing to meet the 2 criteria below:

- Years of experience, average income during 3-5 recent years (beingcertified by competent authority or being audited) higher than price of the tenderpackage;

- Having done similar constructions during the 35- recent years (beingcertified by project owners)

In some constructions, there are other criteria such as: Main equipment forbuilding construction owned by tendering companies or coordinated withspecialized suppliers of equipment: Drilling equipment, ready-mix concretebatching system, tower crane,… This equipment require high investment capitalwhich can hardly be realized by new entrants; or criteria for highly qualifiedengineers and workers, project managers of 5-10 years of experience, engineerswith 3-5 years of experience, enough workforce in place, ISO 90001:2000certification,…

So, with such criteria required by the Law of Tender, there are barriers anddifficulties for new entrants to join the industry

However, HANDICO has 10 years of experience, workforce of 21.138people, adequate machinery and equipment Therefore, the Corporation usuallyachieves maximum score when participating at tenders On the other hand, theVietnamese construction market is fairly large, there is a high complication ofconstructions in terms of quality, scale There are different segments for civil