Quy hoạch chiến lược kinh doanh của đường sắt việt nam vietnam railway đến năm 2020

TABLE OF CONTENTSCHAPTER 1: THEORETICAL BASIS AND PLANNING OF BUSINESS STRATEGY 4 1.1.2.2 Necessity of strategic management in the enterprise 7 1.2.1 Vision, mission and strategic object

MBA THESIS

“PLANNING THE BUSINESS STRATEGY OF VIETNAM

RAILWAY TILL 2020”

TABLE OF CONTENTS

CHAPTER 1: THEORETICAL BASIS AND

PLANNING OF BUSINESS STRATEGY

4

1.1.2.2 Necessity of strategic management in the enterprise 7

1.2.1 Vision, mission and strategic objective of the company 10

1.2.2 Analyzing and forecasting the business environment 13

1.2.2.3 Competitive environment of internal sector 17

1.2.3 Collecting results of analysis and forecast of business

environment

22

1.2.3.1 Summary table of results of analysis and forecast of

external and internal business environment

22

1.2.3.2 Types of matrices for evaluation of business environment 23

1.2.6 Strategic decision and institutionalization of strategy 271.3 Tools for formation and selection of strategy : SWOT 27

CHAPTER II: REAL SITUATION OF BUSINESS

TRATEGY PLANNING OF VIETNAM RAILWAYS

30

2.2 Analysis of VIETNAM RAILWAYS’s business

environment

33

2.2.1 National and International Economic Environment 332.2.1.1 Development Tendency of World’s Railway 34

2.2.4 Vietnam railways’s Business Environment 61

2.3.2 Process and Method for Strategy Definition 65

2.4.1 Existing Situation of Vietnam Railways 67

CHAPTER 3: SOLUTIONS AND

RECOMMENDATIONS FOR BUSINESS

DEVELOPMENT OF VIETNAM RAILWAYS UNTIL

3.1.2 Targets and Orientation of Vietnam Railways Sector and

3.2.1 Projection Method and Basis for Data Seclection 803.2.2 Railway Transport Demand from Key Economic

Corridors

81

3.2.2.2 Existing Transport Quantity in Key Corridors 82

3.4 Supporting Solutions for Strategic Planning 92

3.4.3 Solution on Finance and Fund Mobilization 953.4.4 Solutions on Human Resource Development 96

2.1.5 Table 2.1 Vietnam railways’s Business of Transport

Business in the Period of 2003 - 2008

31

Table 2.2 Business Results of other Vietnam railways’s

Sectors (2003 – 2008)

32

1

Table 2.3: Summary of criteria for railway development

of the countries and regions

35

2.2.1.4 Table 2.4: Quantity of Vietnam railways’s Annual

Transported Passengers and Freight

41

Table 2.5: Transported Passengers and Freights by

Railway and Proportion with Transport Sector

2.2.4 Table 2.10: Internal Business Environment 62

Table 2.11: External Business Environment 633.2.2.2 Table 3.1: Current Transport Quantity on Several Routes 823.2.2.3 Figure 3.1: Quantity of Transported Freights and

Passengers and Transport Methods

Table 3.5: Projection of Transported Freights after 2020 85

LIST OF FIGURES AND DIAGRAMS

1.1.2

3

Diagram 1.1: The process of general strategic management 9

1.2 Diagram 1.2: Diagram of the process of planning strategy 101.2.2

ODA: Official Development Assistance

BOT: Ministry of Transport of Vietnam

GDP: Gross Domestic Product

JICA: Japan International Cooperation AgencyWTO: World Trade Organization

AFTA: ASEAN Free Trade Area

R&D: Research and Development

3 The reason for choosing this project

Business development strategy is the very important part for the development ofenterprises Strategy defines the way and specific objectives that have been reached,

it also helps the enterprises prepare resources and adapt to the business environment

in each specific period to get the best business efficiency

The condition that our country has been involving deeper and deeper into the worldeconomy has created many opportunities and challenges for Vietnam enterprises,especially for transportation in general and railway transportation in particular One

of the general weak points of the current transportation is that it has not methodicalbusiness development strategies to make the most of opportunities and overcomechallenges to improve the competition power, maximize the operation efficiency.This study will contribute to provide a picture of transportation environment, sincethen, helping to choose and set up the business strategy of the companies to helpVietnam railways catch the strong points better to promote, take full advantage ofopportunities, overcome weak points, realize challenges to avoid and turn into newopportunities At the same time, this study also contributes to reference documentsfor transportation sector

4 Target and research objective

 Analysis of business environment impact of activity on provision oftransportation service of railway sector

 Realization of opportunities and challenges, strong points and weak points ofVietnam railways sector

 Since then, setting up and choosing the suitable development strategies and

at the same time, bringing out necessary solutions to implement thesestrategies to improve the ability of competition and business efficiency ofrailway sector, helping the sector develop solidly

Focusing on researching, setting up business strategy of Vietnam railways to theyear 2020 and the Vision to the year 2030.

6 Research method

The methods used in the research of thesis are:

 The methods of qualitative, data analysis, statistics, and comparison toevaluate the actual situation and bring out complete solutions

7 Project meaning

 In theory: Researching the basis, the process of setting up the strategies andthe way of choosing applicable strategy for setting up and choosing optimalstrategy for Vietnam railways

 Clarifying and applying the theory of setting up business strategy to aspecific company of Vietnam Railways

 Being the reference documents for transportation companies oftransportation sector to set up their development strategy

8 Project limitations

 Study scope: Limit to a specific business line

 The data are incomplete because of limited research framework

 Changes of State policy

 Fluctuation of the economy of the country and the world

9 Expected results of the project

 Choosing, setting up the development strategy in accordance with theactivities of Vietnam railways;

 Bringing out the specific solution, implementation plan of developmentstrategy of Vietnam railways in transportation sector

 Being the reference documents for companies of transportation sector

10 Project structure.

The project includes: Overview, three chapters and conclusion The main content ofeach chapter are presented as follows:

 Chapter 2: Real situation of business strategy planning of Vietnam railways.

 Chapter 3: Solutions and recommendation

CHAPTER 1

THEORETICAL BASIS AND PLANNING OF BUSINESS STRATEGY 1.1 The concepts

1.1.1 Business strategy

In fact, there are many different viewpoints on strategy Depending on

different research purposes and different development periods that economists havedifferent viewpoints on strategy

According to General Ailleret, strategy is “definition of ways and

applicable means to reach the identified targets through policies”.

F.J.Gouillart thinks that strategy of businessmen is “all decisions aimed at

holding important positions, defending and creating exploitable results and immediate using”.

“Strategy is the art of coordinating the actions and controlling them in order

to reach the long-term targets” (G Hissh).

“Strategy of an enterprise is to sketch the trajectory of development that is enough sustainable and long-term, around that trajectory we can arrange the

decisions and exact actions of company” (Alain Charlec Martinet).

Some economists in over the world added the business strategy to enterprise

development strategy Represent for this opinion is the economists of BCG, as they

think that “development strategy is the general strategy of a company, including

parts of secondary strategy such as: strategies of marketing, finance, research and development etc.,”

But for M.Parter and K.Ohmac, the purpose of business strategy is to

bring the most favorable conditions to create competitive advantage for the enterprise.

As usual approach, strategy is a system of long-term targets, policies andmain measures on manufacture and business, finance and human factor settlement

to lead the enterprise to the new step on quality

From the different conceptions of strategy, we can draw the most generalconcept of strategy as follows:

Strategy is a system of viewpoints, purposes and basic targets and solutions, policies in order to use the resources, advantages, opportunities of an enterprise best to reach the proposed targets in a fixed period.

Business strategy has the characteristics:

- Business strategy is the general strategies of an enterprise that determinethe targets and direction of business in a relative long-term period (5; 10 years…)and is fully aware of all production and business activities of company to ensure thecompany to develop solidly

- Business strategy just outlines the long-term and oriented directions, but inbusiness practice, we have to implement the combination of strategic andprovisional targets, combination of strategy and tactics, short-term and long-term.Since then, ensuring the business efficiency and overcoming the errors caused bythe strategy

- All important decisions in the process of set-up, decision, implementationorganization and check, assessment, adjustment of strategy must focus on thesupreme leader of the company This ensures the accuracy of long-term decisions,for the secret of information

- Business strategy is always built on the basis of comparative advantages.This requires that in the process of setting-up the strategy, the enterprise has toassess exactly actual situation of production and business to find out strong pointsand weak points and revise regularly internal factors when implementing thestrategy

- Business strategy firstly and primarily built for the business lines that arespecialized and traditional and strong of the enterprise This puts the enterprise intothe situation that has to set up, choose and implement the strategy as well asparticipate in business on the markets which have been prepared and strong

In shot, in can be concluded that no matter the strategy is considered inwhich point of view, aspect or at any development period, it has the function ofdirecting and forecasting for the future development of the enterprise on the basis of

the past analysis as well as the forecasted one of the business environment.

However, through various approaches, we can consider Strategy is the business

orientation to achieve the proposed objectives of an enterprise One of the features

of the current strategy is the motive and attacking characteristic It means that wealways have to vary facing to the changes of the business environment in the future.The variation here is not an adaptation but to be ahead one step because thetardiness of any enterprise in facing with the change of business environment willmade it to be defeated promptly CK Prahalad, who is an American professor ofbusiness management, ever said that “The chances are waiting every body outside,but seizing a new business opportunity is the same as shooting to a herd of flyingwild ducks, you can not catch them with a gun of fixed position” Therefore, if thestrategy is not close to changes, then the enterprise can not achieve its proposedtargets

1.1.2 Strategic management

1.1.2.1 Concept of strategic management

“Strategic management” is the new concept, less common as the concept of

“strategy” And as well as “strategy”, there are many different viewpoints onstrategic management:

“Strategic management is a collection of viewpoints and management actions that decide the long-term success of the company”.

This viewpoint said that the managers have to determine correctly the target ofthe company, and use the resources of the organization more effectively

“Strategic management is a collection of decisions and action measures leading to plan and implement the strategy to reach the targets of the organization”.

From the viewpoints above on strategic management, we can have concepts asfollows:

- Strategic management is the process of studying current and futureenvironments, planning the targets of the organization; proposing, implementingand checking the implementation of decisions to implement those targets in currentenvironment as well as in the future

Thus, strategic management analyzes the external conditions and internalcapabilities of the company As a result, internal strong points and weak points can

be determined to resolve to take advantage of external opportunities and minimizeinternal problems

1.1.2.2 Necessity of strategic management in the enterprise.

Strategic management has been affirmed its role clearly to the existence anddevelopment of enterprise The enterprise without strategic management oftenorients its plans with analysis of resources, prepares the plan with assumption ofstable environment and long-term plan will get much limitations And like this, inthe condition of competitive environment that is fiercer and fiecer, the enterprisewill be defeated and can’t be adapted flexibly under activities of environment Thegood strategic management will bring to the company more opportunities andsuperiority in competition

Strategic management is special important for the existence of the enterprise

- The process of strategic management helps enterprise see its objective anddirection The determination of objective and direction will help the leaders andemployees know, get a good hold of needed things and what to do to be successful.Having direction, objective, the leaders of enterprise will be easier in setting up andimplementing the short-term plans Strategic management will help the enterpriseknows its position and how many objectives gained compared to those proposedinitially

- Every organization operates within its own environment, it is similar to that

of an enterprise The business environment always change Such variation willcreate new changes and risks, especially sudden opportunities dangers when there

is a fast change in the environment It is the matter that in an environment with full

of variations, the questions is how to make use of opportunities and minimize aswell as overcome risks The enterprise managers can define beforehandopportunities and risks thanks to the control/administration of strategy The strategymanagement process is always focussed on the future This management forces theenterprise managers to analyze and forecast the prospective environmentaconditions Thanks to this, the enterprise can figure out and predict the future tograsp and make use of the opportunities on time as well as minimize impacts ofrisks The enterprises which apply the strategy management often have morechances to obtain active position when facing with the business environmentchanges To the enterprises, on the contrary, those which do not apply the strategymanagement, they will often make passive decisions, i.e they only change theiractivities after the change of business environment

- Strategic management helps an enterprise implement the strategy inaccordance with plan to implement the target most effectively Strategicmanagement will coordinate closely and uniformly the parts, the resources ofenterprise to reach the target Strategic management will decrease the overlap ofwork between departments, allocation of resources is more reasonable and checkand control of work is easier

In short, nowadays, strategic management has become a really important part

of management activities of enterprise If there is not strategic management andstrategy, the enterprise will have dispersed and overlapped operation, it is not in aframework of action Therefore the enterprise is difficult to have a long-termexistence to reach the target

However, an enterprise will only successes if it has good strategicmanagement capacity If the process of strategic management is not reasonable, theenterprise will be able to go against the target and deviation of requirement of rules.Nowadays, enterprises almost set up the strategy but have not paid attention to

strategic management, but if the enterprises don’t implement the strategy well, thestrategy will be only the result on paper.

On the other hand, to set up the process of strategic management, theenterprise needs a lot of time and effort But with regard to long-term benefit,enterprise must still apply strategic management

1.1.2.3 The process of strategic management

We can have the overview of the process of strategic management according to the following diagram:

Diagram 1.1: The process of general strategic management

1.1.3 Strategy planning

Strategy planning is the process that uses reasonable methods, tools and technic todetermine the business strategy of enterprise and each department of enterprise inspecific strategy period

Analyzing and forecasting

external business environment

Analyzing & forecasting internal business environment

Deciding strategy

Allocating resources

Checking, evaluating & adjusting

Setting up & implementing more short-term planning

Setting up policies

implementing strategy

Evaluating, adjusting strategy

1.2 The process of planning the strategy

We can have the overview of strategy operation of an enterprise according to thefollowing diagram:

Diagram 1.2: Diagram of the process of planning strategy 1.2.1 Vision, mission and strategic objective of the company

1.2.1.1 Vision: Vision suggests a direction for the future, a desire of the

organization on the things that the organization wants to reach Vision is an image,

a vivid picture on things that may happen in the future of the organization.Determining the vision is important in the success of the organization because itdefines the direction, show the priorities, necessary co-operations and it is the basisfor planning and effective operation

1.2.1.2 Mission: Each enterprise establishes with a mission Mission of enterprise

answers to the question: Why is the enterprise established, what is its long-termtarget? What does the enterprise do to exist and develop? When the mission of theenterprise is clear, members of the enterprise will be easier to have the decision ofwhat to do and how to do to the right direction and implement the mission with theirenterprise When the staffs understand the mission of enterprise, they will believe

Decidin

g to choose optimal strategy

Decidin

g to choose optimal strategy

Collecting results of analysis & forecast of external environment

of internal environment

Collecting results of analysis & forecast

of internal environment

Forming strategical options

Forming strategical options

Vision, mission of company

Vision, mission of company

nt the strategy

Determi ning tasks to impleme

nt the strategy

more in the business direction of them and their enterprise, they will see clearly themeaning of work that they have made

It is a paradox that there are many enterprises who have been cooperative fortheir development in the beginning difficult time of establishment but suchcooperation are broken up swiftly when they temporarily gain some stability in theirbusiness operation This matter can only be interpreted as the result of the uncleardetermination of long-term mission of enterprise founding members It is also can

be understood that in the initial time of the enterprise foundation, all membersstrived their best because they were afraid of the enterprise bankruptcy, but whenthe business is running rather stably, it is very difficult to assemble forces Thetargets/objectives of an enterprise is much more important than money as money isonly a tool An enterprise can only have the everlasting development when a clearmission for a long-term and great goal is set out

Determination of the vision and mission is the first content that is veryimportant in strategic management, it makes the scientific basis for the analysis andselection of strategy of the company Determination of mission statement of thecompany is not only for new companies, but also for companies that have long-termdevelopment in the business

1.2.1.3 Determination of strategic objective

Objectives are the states, specific criteria that enterprise wants to reach in afixed period Determination of objective is a very important step in setting up thestrategy Because right determination of strategy will allow to direct rightlystrategic activities, it determines next steps of setting up and implementing strategystages Objectives are also the bases for evaluation and adjustment of strategy

* Strategic objectives system of enterprise are often divided into two types:long-term and short-term objectives

- Long-term objectives are expected results that are proposed for relativelong time Long-term objectives are the concretization of supreme objective(mission) of enterprise, they are often determined according to following factors:

Labor capacity

Competitive position (market share)

Employment for employees

Other responsibilities for society

- Short-term objectives are specific results that enterprise plans to reach inshort period (often one year) Short-term must be specific, target results have tomention in detail

* Bases for determination of strategic objective:

- Mission of enterprise: because objective is the concretization ofmission, implementation of objective is implementation of mission step bystep

- Results of the process of research and forecast

* For determination of right objective, we have to satisfy these followingrequirements:

- Strategic objective has oriented to the implementation of supreme objective(mission) of enterprise

- Strategic objective that are selected is great, long-term objectives but theymust be specific, ensure the flexibility and quantified

- Proposal objective must be ensured by specific material resource ofenterprise

- Objectives have to be reasonable, united to each other and high feasible

1.2.2 Analyzing and forecasting the business environment

Business environment is the total of factors, external and internal factorshave interaction to each other, impact directly and indirectly to the production andbusiness of the enterprise Business environment fluctuates incessantly because thefactors that form the business environment always fluctuate Analysis of businessenvironment is the important mission of enterprise to identify and respondimmediately to those changes, and help the enterprise has positive strategies withthe changes of business environment

1.2.2.1 International economic environment

International environment includes all factors that are out of national bordersimpact on business of enterprise directly and indirectly Factors of internationalenvironment includes: international politics, national law, international economy,technical- technological factors and cultural- social factors

The international politics impacts on the following aspects:

- Political relations form in the world and in regions such as: the problems ofglobalization, formation, expansion or break of the treaty of the multipartite andbipartite alliance, etc., These relations impact on the production and business ofenterprise Example with the integration, if the impact is positive, it will help toexpand the market, increase the attraction of investment, improve the position in theworld; if the impact is negative, it will create the intense competition betweencountries in all over the world

- The change of political institutions of a country will affect the businessrelation between the enterprises of other countries and the ones of that country

- War occurred to have strong influence on business of enterprises ofrelevant countries The war in Iraq in the past time is a clear evidence of the effect

of war on the economy and business strategy as well as export strategy of relevantcountries.

Regulations of national law, international law and practices.

- The impact of national law Law of each country is the basis to set up thebusiness environment of the country The enterprises have to comply with the law

of the country in which they do the business Therefore, when the law changes, theenterprises will be affected And so, stabilizing the national law will make theenterprises feel secure to do the business and attract the investment of othercountries in the world

- The impact of international law and practices This factor affects the worldand regions For example, when Vietnam became a member of ASEAN of WTO,Vietnam has to comply with the regulations of ASEAN of WTO

The factor of international economy, it is performed by the following factors:

- The level of prosperity of international economy is performed by the norms

of GDP, economic growth pace, per capita national income When the economydevelops, demand of goods tends to increase, so it stimulates the production, etc.,

- Region and world economic crisis This crisis is linked so it impacts on theworld economy and thereby it affects each enterprise (investment capital,consumption of products…) However, the effect more or less depends on thenature of the crisis

- Changes in the international business relations create both opportunitiesand dangers for enterprises For example, the tariff after signing the Vietnam –American commercial agreement gives enterprises the opportunities to participate inthe U.S market but also gives the danger of fierce competition with U.S goods

The technical – technological factors The technical – technological factors

play an important role in improvement of ability of competition of enterprise andthe changes of those factors are linked Advanced technology may affect othertechnologies or may contribute to create new products or may improve the ability ofcompetition of existing products, etc.,

Cultural – social factors Cultural – social factors includes national cultural

character, manners and customs, consumption habit, taste, etc., National cultureimpacts directly on the formation of taste, consumption habit (such as theVietnamese culture is burning votive paper on the fifteenth day and the first day ofthe month and it made the product of votive paper) Because each country has aparticular culture so the establishment of business relations between countries mustcomply with the culture of each country

1.2.2.2 National economy environment

National economy environment includes all the factors of national economy that are out of competitive environment of internal sector impact the business of enterprise directly or indirectly [9, Page 67] National economy environment

includes the factors such as: economy, law, state management of economy,

technical – technological factors, cultural – social factors and natural factor

Economic factor The factors of economic environment such as: speed of

growth of economy, interest rate, exchange rate and inflation rate affect the marketstrategy of enterprise

- The speed of growth of economy The speed of growth of economy that hasdifference in different periods affects the consumption The economy in the period

of high growth will give many opportunities for investment, expanse of productionand business of enterprise and the market strategy of enterprise will change inaccordance with reasonable direction Conversely, when the economy falls downand degrades, it will make to reduce the consumption cost and increase competitiveforces and market planning will meet difficulties

- Interest rate The level of interest rate will decide the consumption, savingand investment When the interest rate increases, investment will decrease, peopletend to save and consume less for unnecessary goods, so the market strategy of thecompany will change because it can’t expand the market when the consumptionbecomes to decrease

- Exchange rate Exchange rate affects the export and import activities of thecompany directly and then brings out the adjustment on the market strategy of thecompany: the decision of choosing the market for investment when the exchangerate changes

- Inflation rate When the inflation rate is high, the control of prices andwages can not be done, investment projects become more risky and venturous andthe investment strategy for market is limited

Law and State management of economy factors

- Law factor Promulgation of quality legal system creates good conditionsfor sound business, compels enterprises have to do the business genuinely andresponsibly If the legal system is not quality, it will impact on the businessenvironment negatively

- State management of economy Forecast of the market, investmentactivities, giving the sound work environment, tax policies, investment policies,etc., of the State management agencies will impact on the production and business

of enterprise directly The impact will be good if the quality of activities of the Statemanagement agencies of economy good and vice versa

Technical – technological factors The rapid development of all technical –

technological sectors impact on the business activities of relevant enterprisesdirectly This impact is according to various aspects as follows:

- This impact creates new business sectors, so the trend of setting up strategyforms a new business

- This impact improves the business sectors, products, thereforeestablishment of quality orientation strategy, business stability

- This impact loses many sectors, stagger the sector of production andbusiness, establishment of the strategy of consolidation and defense

The development of technology also associates with information technology,therefore, improvement of the ability of approach and update of information willcontribute to improve the efficiency of management and business

Cultural – social factors Compared with other factors, cultural – social

factors impact on the activities of production and business slowly and deeply It isperformed as follows:

- Changes of manners and customs, lifestyle: the trend of import of newlifestyle impacts on the changes of product structure, therefore it impacts on thedemand on the market and impacts on the process of establishment of strategy

- Religion, belief: impact on traditional businesses

- Age, sex: impact on consumption taste and habit

Besides, cultural and social factors also impact on the establishment ofcultural environment of enterprise

Natural factors Natural factors impact on the enterprises in both aspects

positive and negative aspects It is performed as follows:

- Natural resources impact on the input factors of enterprises which use thenatural resources

- Geographic conditions: topographic, geological, climate conditions, etc.,impact on the sectors of product and business that base on environment (such asagriculture, forestry, seafood, etc.,)

The changes of season impact on the production of seasonal products andsince then they impact on setting up the strategy for seasonal enterprises, etc.,

1.2.2.3 Competitive environment of internal sector

Competitive environment of internal sector includes all the factors thatbelong to the sector and are out of enterprise impact on business activities ofenterprise directly or indirectly

An enterprise that participate in production of a sector that has been affected

by 5 competitive pressures according to model of 5 forces of M Porter

Diagram 1.3: Five competitive pressures in the environment of sector by M Porter

* The existing competitors: The competitors of internal sector are otherenterprises that have been done the business the sector and market area (divisionmarket) as ones of enterprise This is the frequent pressure and threatens directly to

an enterprise The competition of existing companies of internal sector on markethas a strong influence on the establishment of market strategy of an enterprise.Therefore, the analysis of existing competitors, particularly the competitive strengthand the analysis of immediate competitors is one of important work that helps anenterprise set up the strategy successfully

Competitive strength: Competitive strength often depends on followingfactors:

- Quantity and structure of competitors: In internal sector, if there are manycompetitors, the competitive strength is high, and as usual, one or severalcompetitors will have the leader position in the sector among the competitors, it willcontrol the strategies of smaller competitors Because it will have great influence tothe strategy of company so the analysis of strategy, direction of internal competitorswill help an enterprise have the direction for itself

- The difference of competitors: this factor will help the enterprise find outthe difference to competitors and therefore it may have the different strategy tocompetitors and will gain initiative in the business

sector

- Barrier of withdrawal: these are costs that the enterprise loses when leavingthe enterprise, these costs are often high so the enterprise should considers beforehaving the decision of leaving the market or not And then the company will set upits solid strategy to avoid that situation above.

Direct competitors: the determination of direct competitors will be a basis toset up the strategy for the company As usual, we have to analyze the competitorswhich have the same ability, the near or far, good or bad competitors through theirsignals from the market to know their strategies and from that we have information

to set up the strategy for the company

Besides of the factors above, the competitive strength also depends on thespeed of growth of sector, the proportion of fixed cost, holding cost, the difference

of competitors on culture, manners and customs, etc.,

* Customer: Customers is the people that have demands on the products andservices that are supplied by the enterprise The existence of customers is the basisfor the existence and development of the enterprise The relation between customersand enterprise is the influential relationship The customers often create the pressure

on the enterprise with the bargain: bargain for discount or for improvement ofquality That pressure makes enterprises take the initiative in finding and keepingcustomers They often say that the cost for keeping customers is only a third of thecost for finding new customers, so the set-up of good market strategy, establishment

of good relation with customers by price, service after selling and by productquality, etc., are the skills for existing customers care

* Supplier: This is an important factor in the strategy of setting up market.Suppliers are investors so they often put pressure on increase of price of inputfactors, so effect on price and product quality, then it brings about the effect on salemarket of the enterprise Therefore, analysis of this factor helps enterprise take theinitiative to find good suppliers to improve the quality of setting up the strategy

* New competitors: New competitors are the enterprises that will be able toparticipate in the sector and become the competitors of enterprise The appearance

of these new competitors will increase the competitive strength, decrease the profits

of the sector, especially, if they have a strong positions, they will take the market ofenterprise Therefore, analysis of the effect of this factor, the enterprise needs tohave specific strategy to win the competition of new competitors

* Replaced product: Replaced products are other products that may satisfythe demand of consumers The appearance of replaced product will make theproducts of enterprise not be favourite as before on the market, so creating thedanger of reducing the market of enterprise

Thus, the study and analysis of five competitors of M.Porter is importantbase for set up of good market strategy and win in the market

1.2.2.4 Environment of internal enterprise:

Environment of internal enterprise includes all internal factors that impact onactivities of enterprise directly or indirectly They include the factors of marketing,production; study and implementation; human resources; the organization structureand financial condition of enterprise

- Marketing activities Marketing activities are the process of planning and

implementation of ideas that concern the formation and determination of price,promotion and distribution of goods and services to create the exchange to satisfythe objective of each person and organization Marketing activities in the enterprisehave a great effect on the setting up market strategy Marketing activities are notonly marketing, finding of sale market as before, but also they are known from thestage of market research, production and sale to establish the specific program ofimplementation for the enterprise The information from Marketing activities isfactor that decides the strategy of enterprise We can say that nowadays theinformation is very diversified and from many sides, so the collection ofinformation has been chosen and has high reliability at the beginning, if not it willmake the information disturb and the strategy of the company will be in the wrongdirection

- Ability of production, research and development (R&D)

+ Ability of production: it often focuses on main issues such as: Scale,structure, technical level of production, form of organization of production, etc.,These issues impact on business cost as well as production duration and demand ofproducts, and they give competitive advantage for the enterprise.

+ Research and development (R& D): R & D not only helps theenterprise consolidate the current position, but also puts the enterprise to the highposition R & D is activity that has the objective of creation of new products,individual products, improvement of products, etc., If R & D is good, it will helpthe enterprise hasten its innovation as well as create individual products, and havemore competitive advantage day passing day

- Human resources Human resources are creative labour of an enterprise,

including management labour, R & D labour and technical labour that participate inthe production directly Skills, the way of work arrangement and consciousness oflabour have a direct impact on the efficiency of setting up the strategy, especially, ifsenior managers do not have the ability and good consciousness of management,they will make all activities of enterprise meet difficulties Therefore, enterprise has

to focus on training and fostering human resources reasonably

- The organizational structure of enterprise Organizational structure of

management system is a combination of different parts that have relations anddependent relations to each other and it is specialized, assigned responsibilities andspecific authority and arranged according to level to implement the functions ofenterprise management The set-up of strategy not only bases on individualmembers, but also bases on total power of all members in the enterprise, from board

of directors, departments, workshops to each person Thus, if the management is notgood, it does not connect the members of enterprise, activities of enterprise willbecome unconnected and inefficient

- Financial situation of enterprise Financial situation includes activities of

investment, procurement, reserve, storage, capital mobilization and allocation, etc.,

it impacts directly on business result and business efficiency of enterprise On the

basis of financial index, managers have the basis to establish reasonable marketstrategy For example, if financial ability of company can be applied to expandmarket, the managers will decide that strategy, if not, they will keep old businessstrategy.

- Collection and information handling system On the market economy,

information of business environment is an important basis to propose managementdecisions Data structure of environment information that enterprise collects andreserve is considered a property, available resources and can compare withcompetitors This is the resources have ability to help company improve the quality

of management decisions and affect on competitive ability on the market.Information system have a task of collection, classification, analysis, assessment,immediate supply of available data on internal and external factors for seniormanagers, managers of relevant departments and accumulation of them over thetime

The data of information system show strong points and weak points ofcompany compared with main competitors on the market At the same time, theyshow opportunities that company can catch in order and dangers needed to prevent

or reduced in the process An effective information system is the basis for managersknow the position of company, and what problems that company has to face in thepresent and in the future and know how to react the economic environmenteffectively

1.2.3 Collecting results of analysis and forecast of business environment

1.2.3.1 Summary table of results of analysis and forecast of external and internal business environment.

The results of analysis and forecast are collected in accordance with summary table

of factors of business environment

- The way of setting up the table: The table has structure of 5 columns

importance of factor to the sector

importance of factor to the enterprise

impact

Column 1: List of factors of business environment that affect the production andbusiness activities of enterprise

Column 2: Evaluation of importance of each factor to the sector of enterprise

Levels: Very important: 3 points

Important: 2 pointsLess important: 1 pointNot important: 0 Column 3: Evaluation of the impact of this factor on production and businessactivities of enterprise

Levels: Very important: 3 points

Important: 2 pointsLess important: 1 pointNot important: 0 Column 4: Presentation of impact trend of each factor

Positive impact, good: +

Positive impact good:

-Column 5: Determination of the total of trend through the marks and impact trend:

Mark = Column 2 x column 3 impact trend: sign of column 4

1.2.3.2 Types of matrices for evaluation of business environment

* Internal factors evaluation matrix (IFE)

Internal factors evaluation matrix (IFE) summarizes important strengths andweaknesses of functional business departments IFE matrix is developed according

Step 3: Classifying from 1 to 4 for each factor, in where: 1 represents thegreatest weak point, 2 represents the smallest weak point, 3 is the smallest strongpoint, 4 is greatest strong point Thus, the classification is base on the company

Step 4: Multiplying the importance of each factor by its classification ( =Step 2 x step 3) to determine the mark of importance

Step 5: Adding total marks of importance for each factor to determine totalimportant marks for the organization

Regardless of number of factors in the IFE matrix, total of the highest importantmarks that each company can have are 4.0, smallest is 1.0 and average is 2.5 If total

of important marks is higher than 2.5, the internal company is strong, if it is under2.5, the internal company is weak

* External factors evaluation matrix (EFE)

External factors evaluation matrix (EFE) help us summarize and quantify theimpact of environment factors on enterprise The development of a matrix includes

5 steps:

Step 1: Preparation of list of decided role for the success as identified in theprocess of evaluation of macro environment This list includes from 10 to 20 factors

of opportunities and dangers to the company and business of the company

Step 2: Classifying the importance from 0.0 (unimportant) to 1.0 (veryimportant) for each factor The classification shows the importance of that factor to

the success of the company in business The reasonable classification can bedetermined by comparing successful companies with unsuccessful companies in thesector, or discussing and have the unanimity of setting up strategy team Total oflevels of classification must be 1.0 Thus, the classification is base on the sector.

Step 3: Classification from 1 to 4 for each factor that decides the success toshow the way of response of existing strategies to this factor In where: 4 is goodresponse, 3 is over average, 2 is average, 1 is weak These levels base on thestrategy efficiency of the company

Step 4: Multiplying the importance of each variable by its classification (=step 2 x step 3) to determine the marks of importance

Step 5: Adding total marks of importance for each factor to determine total

of important marks for the organization

Regardless of number of opportunities and dangers of the matrix, Total of highestimportant mark that each company can have is 4.0, smallest is 1.0 and average is2.5 Total of important marks of 4.0 shows the strategy of company takes fulladvantage of external opportunities and minimize negative impact of externalenvironment on the company

* Competitive image matrix

Competitive image matrix identifies main competitors with their strengthsand weakness Competitive image matrix is an extension of external factorsevaluation matrix, because it includes internal and external factors with importancethat decide to the success of enterprise

Besides, in competitive image matrix, competitors are also considered andcalculated the total of important marks Total of evaluated marks of company arecompared with researched company The comparison supplies us a lot of importantinformation

The way of establishment of competitive image matrix is similar to theestablishment of external factors evaluation matrix

1.2.4 Setting up strategic options

The nature of this step is proposal of solutions and tools system forimplementation of objective of strategy

* Bases for setting up strategic option:

- Objective of strategy: because strategic solutions and tools that aredetermined are implementation of objective

- Resources of enterprise: strategic options have to base on the resources ofenterprise to ensure the reasonably and feasibility of solutions and tools, ensure theeffectiveness and efficiency of strategy

The options of strategy are also based on the analysis, application oftheoretical strategy models, experience, opinions of experts, managers Businessstrategy is the strategy for the company, so it may apply general strategy models forthe company such as: stable strategy, growth strategy, reducible strategy andcombined strategy

On the basis of determined objectives of strategy, resources of enterprise,planners propose solutions and bring out tools as much as possible

On that basis, planners will analyze, collect methods and tools Then, theyprepare strategic options

1.2.5 Choosing strategic options

The result of previous step is the formation of different strategic options Themission of next step is that the enterprise has to choose the most reasonable andfeasible strategic option

The selection of strategic option is the process of reviewing and analyzingoptions to have the optimal strategic option

As usual, the analysis of options answers for these following questions:

- Does that option impact on the reason of issue and resolve the issue? Andhow?

- Is that effective option? What is the consequence of the option?

- Are strategic solutions feasible and suitable for the enterprise?

The models of strategy analysis that businessmen always applies such as:

- Model of portfolio analysis: BCG matrix, business net of General Electric

- Model of analysis of Strengths, Weaknesses, Opportunities and Threats:SWOT (Strengths, Weaknesses, Opportunities, Threats)

1.2.6 Strategic decision and institutionalization of strategy

After previous steps, planners selected and brought out optimal strategic draft.However, to become the direction for all activities of enterprise officially, businessstrategy must be decided and institutionalized through documents by companyleaders Strategic documents are legal foundation for implementation of strategy,are means for dissemination of strategy for relevant objects

1.3 Tools for formation and selection of strategy- SWOT matrix

SWOT matrix (opportunities matrix, dangers, strong points, weak points) is amatrix that one axis describes strong points and weak points; other axis describesopportunities and dangers for business of enterprise in the specific strategy period.Through the analysis and evaluation opportunities, dangers, strong points, weakpoints, the enterprise has the basis to form strategic ideas and propose strategicdecision

SWOT matrix has 9 squares in which 4 squares are important factors, 4 strategicsquares are intersection of respective ones that describes strategy ideas and a blanksquare SWOT matrix is established in accordance with basic steps as follows:

Step 1: List of opportunities List of opportunities has strong impact on theresearched sector of enterprise For example, when researching the market, we canhave opportunities of market such as: opportunities of exploitation of new marketsegment, expanse of market to foreign countries, find of high-growth market,integration ability, etc.,

Step 2: List of dangers Dangers of market can occur are: high competition ofmarket, barrier to find new market, competitors win the market, market is saturated

or products are recessionary, etc.,

Step 3: List of strong points Strong points on market of enterprise include:

ability of having a general view of market, ability of strong finance, ISO system,trademark, marketing, etc.,

Step 4: List of weak points Weak points include: the products are notimpressive, bad management, organization of production is unreasonable, bad R &

D etc.,

Step 5: Combining internal strong points and external opportunities

Step 6: Combining internal weak points and external opportunities (square ofWO), taking full advantage of external opportunities to lighten internal weak points

Step 7: Combining internal strong points and external opportunities (square

of SO), taking full advantage of internal strengths to repulse dangers, reduceexternal threats

Step 8: Combining internal weak points and external threats (square of WT),this combination minimizes weak points and avoids dangers

Table 1: Model of theory of SWOT

Strengths

(S)

Using internal strong points to

exploit opportunities (SO)

Taking full advantage of strongpoints of enterprise to repair orreduce the disadvantage and

internal opportunities (WO)

Proposing defensive tactics toreduce internal weak points and

avoid external threats (WT)

CHAPTER II: REAL SITUATION OF BUSSINESS STRATEGY

PLANNING OF VIETNAM RAILWAYS

2 1.An Overview of Vienam Railways

Vienam Railways is a State-owned enterprise with 100% of the Stateinvestment and the establishment decisions and charter approval have been issued

by the Prime Minister

Vienam Railways is a special Corporation in Viet Nam The purpose of itoperation is not only for benefit but also for social/public obligations in order toserve the requirement of economic and culture exchange among regions andprovinces which railways is passing

Name: Tổng Công ty đường sắt Việt NamInternational Name: Vietnam RailwaysAbbreviated Name: VNR

Address: 118 Le Duan, Dong Da District, Ha NoiTel: 04 9425972 Fax: 04 9422866Website: www.vr.com.vn

The charter capital of Vienam Railways is the ownership capital at December

31st, 2008 which is VND 2,687 billion after being audited or defined by thefunctional organizations, units as specified by the Ministry of Finance

Charter on organization and operation, managing and operating structure;

Capital, assets and being responsible for the loans among the capital which isowned by the Company;

Stamps, accounts at the State Treasury, at local and abroad banks;

Balance sheets, central funds as specified by the regulations

* Milestones in Vietnam railways Development

1881 : The first railway line in Vietnam and in Indochina with the length of 71 km

between Saigon and My Tho was established

1955: The Prime Minister promulgated a decision to establish General Railway

Administration

1990: The General Railway Administration was reformed to be the Vietnam

Railways Union according to Decision No 575/QD/TCCB-LD dated April 10, 1990

of Minister of Transportation

2003: Establishment of Vietnam Railwayss Corporation based on the former

Vietnam Railways Union under Decision No 34/2003 QD-TTg dated March 4,

2003 of the Prime Minister

2005: The Law on Railways was approved by the National Assembly It is the

highest legal base for a sustainable development of Vietnam railways

2008 : Completion and putting into operation of the first locomotive assembled and

manufactured in Vietnam

*Business Activities

The main activities include the investment and trading of the State capital,management of the investment into different companies, management, maintenanceand trading of the railway infrastructure, settlement of problems, natural calamitiesand railway rescure, doing business of railway transport, carrying out scientific andtechnological activities, training activities, involving in real estate business,communication, finance, insurance and petroleum

Activities relevant to the main tasks comprise construction and installation oftraffic works, civil works, production of materials, manufacture, repairs oflocomotives, railway cars, mechanical products, labour export, activities lelating tothe asset trading and consulting services; doing business on hotels, restaurants,depots, communications, cultural and sport activities

- 20 companies with the functions on management, maintenance, repairs of the raiway infrastructure

- 01 company for new manufacture, overhaul of locmotives

Units with Corp.’s capital contribution (29 units)

- Construction & Installation and Material Production Units

Material Units

- Transport and Tourism Services Companies

- Mechanical, Rubber, Wood Production Production Units, Construction - - - Consulting Units

Administrative Units:

- Railway Project Management Units

- 3 PMUs for regions 1,2 and 3

- 31 Lang Ha PMU

- 136 Ham Long PMU

- Railway Vocational College

Figure 2.1: Vietnam railways’s Organizational Structure

* Major Results of Vietnam railways’s Business Activities in the period of

Table 2.2:Business Results of other Vietnam railways’s Sectors (2003-2008)

Average Growth Rate

1 Total Investment

936.4 77,0

1.540.5 96,0

1.473.6 18,0

1.567.0 45,0

1.881.2 59,0

1.954.2 07,0

9.35 3.202,0

2 Construction and Installation

Output

599.5 23,0

4.49 2.402,0

111,

7 Revenue

507.2 25,0

4.71 8.141,2

111,

3 Revenue

594.4 87,2

4.46 1.367,8

101,

2 Revenue

357.9 21,2

1.014.1 32,0

1.042.0 14,3

5.75 1.034,4

105,

9

Total Revenue

2.376 034

2.70 6.244

2.52 9.332

2.93 3.207

7.18 4.330

3.48 6.831

21.21 5.978,0

Viet Nam railway’s manufacture and business results in the period of 2003 –

2008 are rather optimistic with the good growth rate: Total revenue is over VND30,381 billion, annual average growth rate of 10.25%, including:

 Revenue from railway transport business of VND 13,197 billion, averageannual growth rate of 12.1%;

 Revenue from infrastructure business of VND 4,461 billion, average annualgrowth rate of 12.1%;

Revenue from construction and installation business of VND 4,077 billion,average annual growth rate of 11.7%;

Revenue from industries of VND 2,123 billion, average annual growth rate

of 6.6%;

Revenue from industries of VND 5,751 billion, average annual growth rate

of 6%;

The annual profits and contribution to the budget are of growing rate

The Corporation’s total number of personel at end of 2008, including thosefrom joint stock companies with contribution from the Corporation is 42,526 nosand the average income in 2008 is VND 2,968,200; average annual growth rate of13.4% (2003 - 2008); the working and living conditions of the staffs have beengreatly improved and the social policies have been fully implemented

2.2 Analysis of Viet Nam railway’s Business Environment

2.2.1 National and International Economic Environment

2.2.1.1 Development Tendency of World’s Railway

In recent year, due to application of technical and scientific achievements andadvanced technology into the railway sector, many modern railway routes have beencreated, especially in passenger transport The newly established express railways routeswith the speed of over 300 Km/h would have better advantages in the competition withother transport means, even airway

Currently, all over the World, the electrification in the railway sector has been paid

attention for considerable reduction of environmental impacts and fuel saving The traction

of first electrified railway is rather strong and high speed has rapidly become one of the

tendency in the railway development

Multimedia tendency and international mixed transport has been strongly developed The

unification of basic technical standards has been focused in order to ensure the trans-nation

operation, especially in Europe In the new development tendency, the standard railway

dimension (1435mm gauge) has been especially developed, accounting for over 50% of

the total worldwide railway length

2.2.1.1.1 An Overview of World’s Railway:

Currently, the railways have been established in 134 countries with total

length of 1.4 million Km Among those, the total length of Vietnam Railways is

2632Km, ranking at 66th position, and if basing on the average ratio of railway

length per capita, Vietnam’s rank is low, at 123rd position worldwide

In consideration of the technical aspects in developed countries and regional countries, it

can be seen that in addition to the development of the railway network, their attention has

been also put on development of modern and advanced railway technology The

electrified ratio of these countries is rather high, from 30 to 70%; the ratio of dual tracks

is also high, from 24 to 73% Up to now, 7 countries have invested into high

speed/express trains of 300Km/h and 9 countries have invested into the trains with the

speed from 200 to 300Km/h

length of national railway (km)

Railway Density

(km/100 0km 2 )

Percen tage of Dual Rails (%)

Electrified Ratio (%)

Max Speed of Passenger Trains (km/h)

Area (km 2 )

Population (1000 nos)

GDP (USD/cap ita)