Xây dựng chiến lược kinh doanh cho công ty cổ phần thiết bị VINACOMIN từ 2015 đến 2020

LUẬN VĂN THẠC SĨ Xây dựng chiến lược kinh doanh cho công ty cổ phần thiết bịVINACOMIN từ 2015 đến 2020 THESIS MBA BUILDING BUSINESS STRATEGY FOR VINACOMIN MACHINERY JOINT STOCK COMPANY F

LUẬN VĂN THẠC SĨ Xây dựng chiến lược kinh doanh cho công ty cổ phần thiết bị

VINACOMIN từ 2015 đến 2020

THESIS MBA

BUILDING BUSINESS STRATEGY FOR

VINACOMIN MACHINERY JOINT STOCK COMPANY

FROM 2015 TO 2020

Vinacomin Machinery Joint Stock Company (VMC in abbreviation form) havingheadquarter at No 486, Tran Phu Road, Cam Pha Town, Quang Ninh Province wouldlike to give some comments on the working period of the MBA program’s group ofstudents and assessment of the report: “BUILDING BUSINESS STRATEGY FORVINACOMIN MACHINERY JOINT STOCK COMPANY FROM 2015 TO 2020”proposed by the group.

1 About the working period at VMC.

The researching group with four members has contacted and come to work atVMC since October 26th, 2009 In the receiving and working meeting with the group

of students, VMC Director very welcomed the intention and researching contentpresented by the group’s leader

Board of Directors committed to provide necessary document, hold practical trip(if necessary) and arrange workroom at VMC for the group when they came to collectdata or hold discussions

In the working period at VMC (from October 26th to December 12th, 2009) thegroup seriously observed the Company’s rules and regulations, had serious workingattitude, prudent and reasonable behaviors

In the data collecting, analyzing and report drafting process, the researchinggroup held two workshops to present draft strategy and consulted the opinions of theCompany board of leaders

All the document and reports borrowed by the group were returned sufficiently

on December 12th, 2009

2 Assessment of the report’s content.

Under the academic viewpoint about building and administrating strategy, VMCdoes not have any comment on the report The report has applied tools to analyze

models methodically and particularly helped VMC locate ourselves and be aware ofour status on the synthesis of business environment elements.

Under practical viewpoint, the report has mapped out the business strategy ofVMC from now to 2015 logically and practically Most importantly, VMC is verysatisfied with the detailed solutions recommended by the report to realize thefundamental targets of the strategy

The report’s applicability to reality is its core value VMC realizes that thisbusiness strategy is very suitable and fairly detailed to VMC in this period; at thesame time it does not go against the strategic orientation of the Vietnam National Coal

- Mineral Industries Group as well as the Prime Ministerial Decision TTg, dated December 26th, 2002 VMC board of leaders will accept this report(offered to VMC by the group) and continue to perfect it to set the basis for theimplementation of our business strategy in 2010-2015 period

186/2002/QĐ-Finally, on behalf of the staff and workers of Machinery Joint Stock Company –Vietnam National Coal – Mineral Industries Group, I would like to thanks teachersand students for your affection and interest in our Company We hope that the relationbetween study and research is always attached to reality and supports organizationsand enterprises as the way University of Griggs - USA and Center for EducationalTechnology and Career Development – Vietnam National University have orientedtheir groups of students recently

We would like to sincerely thank and wish healthy all the teachers and students

of MBA program, Griggs University – USA and Center for Educational Technologyand Career Development – Vietnam National University

Recipients:

- As dear;

- The group of students;

- Save at personal department, archives

COMPANY’S DIRECTOR

We would like to express our gratitute to all those who gave us the possibility

to complete this capstone project report We would like to thank Teachers of Griggs University and Educational and Training Center – Vietnam National University for organizing this great MBA program

We also would like to thank VINACOMIN, especially Dr Phung Manh Dac – Deputy General Director of Vietnam National Coal – Mineral Industries Group, Chairman of Administration Board of VMC Company; Dr Ta Ngoc Hai – Mechanics Department Manager, Vietnam Coal – Mineral Industries Group; Mr Cao Ngoc Dau – Institute Head of Mine Energy Mechanics and Mr Nguyen Cong Hoan – Director

of VMC company for contributing ideas and creating conditions for us to complete this report, without them this report could not be completed.

We would like to give our special thanks to our families for their patience, support and encouragement during all the time we carried on this capstone project report as well as the entire period of the MBA program.

Bui Ngoc Lan Mai Ngoc Thach

Le Van Bang Duong Bao Linh

COMMENT ii

ACKNOWLEDGEMENT iv

CONTENTS v

List of abbreviated words vii

List of tables vii

List of figures viii

GENERAL INTRODUCTION 1

Chapter I: REASONING BACKGROUND 4

1.1 Overview of business strategy 4

1.1.1 Concept of business strategy 4

1.1.2 Business strategic management 5

1.1.3 Benefits and limitations in business strategy building 5

1.2 Analyzing environmental factors impact business strategy 6

1.2.1 External environment 6

1.2.2 Enterprise’s internal environment 9

1.3 Building business strategy 9

1.3.1 Information for building strategy 9

1.3.2 Expert method to forecast business environment 10

1.3.3 Analyzing matrix SWOT 11

1.3.4 Determining competition status of the enterprise 13

1.4 Choosing business strategy 17

1.4.1 Concentrated growth strategy 17

1.4.2 Diversification strategy 18

1.4.3 Integration growth strategy 19

1.4.4 Narrowing strategy 19

1.4.5 Suitable strategy for living circle of product 19

1.4.6 Joint venture and association strategy 19

1.4.7 Competition strategy 19

1.4.8 Brand name strategy 20

1.5 Implementing the strategy 20

1.5.1 Reviewing strategic environment 20

1.5.2 Evaluating, adjusting and ensuring resources 21

1.5.3 Determining organization structure to implement the strategy 22

1.6 Checking and evaluating business strategy 22

1.6.1 Controlling basic grounds of company’s strategy 22

1.6.2 Reviewing basis of the strategy 23

1.7 Research method of the report 23

1.8 Scientific and practical meaning of the report 23

Chapter II: ANALYZING REAL STATE OF VMC 25

2.1 Overview of the enterprise 25

2.1.1 Process of establishing, developing of VMC 25

2.1.2 Human resources and organizational structure 28

2.1.3 Traditional product line of VMC 30

2.2 Analyzing situation and results of business activity of VMC from 2005 - 6/2009 34

2.2.1 Business production situation 36

2.2.2 Market 37

2.2.3 Business efficiency 38

2.3 Analyzing business environment 39

2.3.1 Analyzing external environment 39

2.3.2 Analyzing internal environment 45

2.4 Results and shortcomings of VMC in the past time 47

2.4.1 Results 47

2.4.2 Shortcomings need to be improved 48

2.5 Analyzing problems of strategy and administration of VMC 48

2.5.1 General objective of the strategy 48

2.5.2 Strategy orientation 48

2.5.3 Basic objectives 49

2.5.4 Impact’s factors 50

Chapter III SOLUTIONS, RECOMMENDATIONS AND CONCLUSION 55

3.1 Recommending business strategy 55

3.2 Solutions to fundamental implementation and management of business strategies 55

3.2.1 Modernization of manufacturing technology 56

3.2.2 Modernization of repairing technology 56

3.2.3 Improvement of ernegy supply system 57

3.2.4 People development strategy 57

3.2.5 Science technology development 58

3.2.6 Environment protection and Industrial hygiency 59

3.2.7 Labour protection and Ocupational safety 60

3.2.8 Corporation 60

3.2.9 Brand name Development 60

3.2.10 Enhancing marketing activity 61

3.2.11 Organization 61

3.3 Proposal 61

3.4 Conclusion 62

REFERENCES 64

List of abbreviated words

VMC VINACOMIN – Machinery Join Stock Company

WTO World Trade Organization

EPC Engineering - Procurement - Construction

CNC Computer Numerical Control

COALIMEX Coal Import and Export Joint Stock Company - Vietnam National

Coal – Mineral Industries GroupMATEXIM Material and Complete Equipment Export - Import CorporationLILAMA Vietnam Machinery Erection Corporation

LICOGI Infrastructure Development and Construction Corporation

VINAINCON Vietnam Industrial Construction Corporation

IMSAT Institute for Medical Science and Technology

NARIME Institute for Mechanical Engineering

List of tables

Table 1.1 Evaluating influences of business environment 11

Table 2.1 Labor structure of VMC at the time of September 30th, 2009 29

Table 2.3 Manufacturing, repairing devices capacity of VMC 32Table 2.4 Results of business activities of VMC from 2005 to June, 2009 35

Table 2.6 Value of mechanical production and revenue density of five

inside sector units

44

Table 2.7 Collecting the business environment of VMC 51

List of figures

Figure 1.1 Model of competitive forces in ME Porter 8

Figure 1.5 Specializing the market 18Figure 1.6 Specialization optionally including many fragments 18

Figure 2.2 Sale revenue density of outside sectiors 38

GENERAL INTRODUCTION

Machinery joint stock company directly under Vietnam National Coal –Mineral Inducstries group, which is abbreviated as VMC (VINACOMINMachinery Joint Stock Company) was changed from Cam Pha CentralMechanics Company The company was established in 1968, has headquarters

at 486, Tran Phu Road, Cam Pha town, Quang Ninh For years of building anddeveloping, VMC has become the leading equipment, accessoriesmanufacturing company in Vietnam and is gradually reaching to internationalmarket Products of VMC mainly are equipment, accessories serving mineores, cement, and electricity industry in the whole country Scale of theenterprise is relatively big with 1,300 staffs and annual revenue is about VND

800 billions Average growth speed of the company in the last five years hasreached 20%/year VMC organizes production into groups: accurateprocessing, steel component production, rough draft supply (founding,processing pressure) and other auxiliary production

At present, VMC is a joint stock company under Vietnam Mine - MineralGroup The company has relatively diversified number of commodities, hasmany customers of different organizations For many years, VMC has hadmany achievements in business production, contributing to industrialization –modernization process of Vietnam mechanics sector in general and minesector in particular

To be in accordance with the market economy and internationaleconomic integration that Vietnam is building and developing, implementingDecree No 109/2007/NĐ-CP dated June 21st, 2007 of Prime Minister onchanging State owned enterprise to joint stock company and Resolution of theBoard of directors of Vietnam Mine - Mineral Group on changing enterprises

in the group to operate according to equitization model, VMC has officiallychanged operation to joint stock company model from March 30th, 2008 VMChas ownership structure as follow: State holds 36%, staffs hold 37.5%, trade

union hold 1.5% and external shareholders hold 25% Charter capital of VMC

is VND 40,850 million

Before changing to equitization, VMC operated according to StateEnterprise Law and was controlled by plan of superior, and thus businessstrategy building and administration of the company was not displayed clearly.Business production activities of VMC mainly were to ensure output andrevenue according to the assigned plan, even profit target When changing tooperate according to charter of joint stock company, it is clear that VMC has

to become more initiative and pay more attention to business strategy buildingand administration of the company This is also a common interest of all theenterprises when changing from State owned companies to joint stock ones.From the real state above, our study group did choose the thesis:

“BUILDING BUSINESS STRATEGY FOR MACHINERY JOINT STOCKCOMPANY – VIET NAM MINE - MINERALS FROM 2015 TO 2020” to bethe content of Capston project of International business administration mastertraining program

The objective of this report is to evaluate relatively comprehensive thereal state of business production of VMC Find existing advantages, strongpoints as well as challenges, weak points of the company At the same time,discover opportunities, risks threatening the company in the future From that,build business strategy of VMC from 2015 TO 2020

Study group set the mark of 2015 for business strategy of VMC to givepetition and recommend relatively comprehensive and specific solutions.However, our group also set a goal that business strategy of VMC must havelook forward to 2020 to be in accordance with the development strategy ofcoal sector which was built, as well as Decision No 186/2002/QĐ-TTg datedDecember 26th, 2002 of Prime Minister regarding ratifying developmentstrategy for Vietnam mechanics sector to 2010, and vision to 2020

Research scale of this report is reasoning background on buildingbusiness strategy; studying, analyzing the real state of the enterprise to buildthe most fundamental business strategy for studied enterprise – VMC.

The report has main parts as follow:

Chapter 1: Reasoning background on business strategy In this part, the

report will show concepts of business strategy and processes to make abusiness strategy in the most fundamental way

Chapter 2: Analyzing the real state of VMC In this part, the report will

concentrate on introducing the overview of VMC, collecting and analyzing,evaluating the business production situation of VMC in 5 recent years Theresearch group finds out strong points, weak points, opportunities andchallenges of the enterprise From that, build business strategy of VMC from

2015 TO 2020

Chapter 3: Solution, proposal and conclusion The research group

recommends comprehensive, specific solutions for VMC and petition forVMC, superior agency and State

Our group hopes to apply knowledge from the course of the InternationalBusiness Administration Master Training Program, Griggs University, UnitedState into practice This report helps members of the group improveknowledge and is a useful scientific report for VMC to apply in practice

Chapter I: REASONING BACKGROUND

1.1 Overview of business strategy

1.1.1 Concept of business strategy

Term “strategy” originating from Greek language with two words

“Stratos” means military, formation and word “Agoss” means leadership,control The strategy was used firstly in military to illustrate big, long-termplans which were given on the reliable basis that what the enemy could andcould not do Commonly, strategy is understood as science and art of militarycontrol It is applied to make overall plan and carry out large-scale campaign.Beginning from the 1960s of the 20th century, strategy has been applied

in business area and term “Business strategy” was born Over time, peopleaccess to it in different ways According to traditional approach, strategymeans determining long-term basic targets of the enterprise and implementingaction program together with distributing necessary resources to reachdetermined targets We also understand that strategy is a way that enterprisesuse to orient the future to reach and maintain development [15, 23]

At present, term “business strategy” is used with three most commonmeanings: determining long-term, basic goal of the enterprise; giving generalaction programs; choosing action plans, implementing to distributing naturalresources to do that goal

Specific feature of strategy is moving and attacking In the process ofadministering strategy, we must attach special importance to forecast, takeinitiative in anticipating changes of the business environment to outlineoffensive solutions to take advantage of opportunities, restrict possible risks inbusiness environment of the enterprise

According to ME Porter (1980), in his book “Competitive Strategy”, hadstated that there were three common types of competition strategy: minimal

analysis diagram to study an operation field and develop new concept “valueseries”, helping enterprises determine their own competition advantages.

1.1.2 Business strategic management

Business strategic management is a process of determining strategicgoals of the organization, building policies and plans to achieve goals andallocate resources of the organization for the implementation of thesespolicies, plans [16, 17, 22, 25]

The process of administering strategy is implemented through four mainstages It includes analyzing the situation, building strategy, implementingstrategy, evaluating and controlling

Analyzing the situation includes external and internal environment Thisanalysis often involves political, environmental, social, technological analysis;analysis of factors affecting the organization and of strong, weak points,opportunities, challenges

Building strategy includes determination of mission, establishment ofgoals, strategy and policy proposal

Implementing strategy includes action programs, budget, and process.Evaluating and controlling involve evaluation of results and making ofnecessary adjustments

When building strategy, we understand that, business strategy does notmean determining goals, visibility of the enterprise; but business strategy must

be proposals with unique and be suitable to the enterprise in each certain stage.Strategy needs to create a different value chain from competitors, and clearlydetermine what needs or need not to be done, and show unchanged nature inposition

1.1.3 Benefits and limitations in business strategy building

In the market economy, building and implementation of business strategywill bring many benefits for the enterprise Business strategy helps theenterprise know clearly its direction in the future so that the administrator can

consider and decide the direction of organization and when to reach a certaingoal It helps administrator clearly realize opportunities and risks occurring inbusiness of the integration economy At the same time it helps to analyze,evaluate and forecast environmental conditions in the future, take advantage ofopportunities, and decrease risks It can help the enterprise overcomecompetition and get success Bussiness strategy helps administrator makedecisions to deal with each business environment, improve businessproduction efficiency, and pushing the enterprise to go up It help theenterprise create better business plans through the use of system approaches,creating basis for the increase of connection and closeness of staff andadministrator in the implementation of goal of the enterprise Businessstrategy helps the company increase the revenue, working capacity andbusiness production efficiency, avoid financial risks, increase preventiveability, prevent risks that the company may face in business

However, strategy also has some limitations It takes the enterprise muchtime, cost for strategy building The strategy must be always suitable for theenvironment, if it is so inflexible, the enterprise may face risks Limitation ofshortcomings in long-term market forecast is sometimes big If we cannotimprove, it can cause high risk If the organization does not implement thestrategy well, it may fail

1.2 Analyzing environmental factors impact business strategy

1.2.1 External environment

External environment includes macro and sectional environment Macroenvironment has long-term influence on a large scale on business productionsector, and business strategy of the enterprise The enterprise, when analyzingmacro environment needs to use PESLTE (Policy - Economic - Social -Technology - Law - Environment) model [20]

When making business on an administrative unit, enterprises need to

will create favorable conditions for business activity Enterprises shouldcarefully analyze policies related to State management Anti-monopoly law,tax, labor law, competition, commerce regulation policy, protection barrier,consumer right protection regulations, priority sectors, etc all have influences

on revenue, profit of enterprises or are challenges to them

Influences of the economy on an enterprise can change the possibility ofcreating value and income of the enterprise Four important factors of macroeconomic environment are growth rate of the economy, interest rate, exchangerate and inflation rate

Social cultural factors create foundation of society and lead otherchanges Social changes such as awareness of health, labor diversification, andattitude of working quality create opportunities and threats for many businesssectors Cultural interference of other cultures into nations will changeconsumption psychology, life style, create opportunities for some businesssectors

Technological changes continually increase It is both creative anddestructive factor, both opportunity and threat The most important influence

of technological change on height of barrier takes part in and re-makessectional structure from the root

Demographic environment relates to population, age structure,geographical distribution, ethnic minority group, income distribution Globalenvironment relates to important political events, basic global market, etc.Change of these environments all may create opportunities and threats tobusiness sector

Enterprises cannot have strategic decisions if they do not have deepunderstanding of strategic situation of company, nature and conditioncompetition, way to create conformable between resources and capacity withsuch condition Sectional environment have direct influences on business

strategy of enterprise Enterprises should analyze influences of sectionalenvironment according to five-competition force model of M E Porter.According to him, they are (1) Threat of new entrants, (2) Competitive rivalrywithin the industry; (3) Bargaining power of customers; (4) Bargaining power

of suppliers; (5) Threats of substitutes products [25]

Figure 1.1 Model of competitive forces in ME Porter

Potential competitors include companies which do not compete in thesector currently but they have capacity to do so if they want Identifying thesecompetitors is important as they threaten existing market share of companies

If the risk of taking part is low, current companies will use advantages of thisopportunity to increase the price

Strong competition between competitors in the sector can create bigthreat of profit making capacity If sectional competition is weak, companieswill have opportunity to increase the price and get high profit Competitiondegree in the section depends much on sectional competition structure,demand condition and high barrier of leaving section

Competitive rivalry within the industry Density of competitors

Threats of substitutes products

Negotiation capacity of buyers is considered as competition threat whenthey are in the position of offering lower price or when they demand for betterservice (increasing cost).

Negotiation capacity of suppliers is considered as threat when they forceprice raise or reduce demand for input quality that they supply for companies,decrease profit making of companies

The existence of alternative products limits possibility of setting highprice, profit making of companies

1.2.2 Enterprise’s internal environment

It includes technological level, marketing, financial capacity, laborer, etc.This analysis should find out key capacity of enterprise Enterprise’s internalenvironment creates strong points, competition advantages of enterprise

1.3 Building business strategy

1.3.1 Information for building strategy

Enterprise should have information system serving strategy buildingactivity That is information about business environment inside and outside theenterprise which is collected into a system and treated to ensure scientificnature There are some ways of collecting information as collect continuously,collect periodically and collect irregularly To establish an information system

of analyzing and building strategy, we need to carry out following activities:determine information demand, determine information sources,

Number and type of information which can be collected to draft manybusiness strategies However, not all information is valuable and accurate.Thus, administrator needs to select information in accordance withrequirements of business production

The secondary information is the one which is collected for anypurpose to serve strategy building It includes internal secondary information

and external one Such as payment form, debt report, accounting report,business statistics.

Information contents need to be collected, including: collecting andanalyzing information about competition, human resources, production

Considering whether competitor has competition strategy or not,threatens us or not? Whether competitor can display their competition content

or not, put to customers’ conference for discussion or not Whether competitorhas business trick inside the enterprise or not

Information about human resources includes evaluations on staffcapacity of enterprise, scale and characteristic of existing labor market, salarystructure of the enterprise compared with other competitors

Information about production related to cost price as labor cost,transport cost The enterprise should know how attitude of the public aboutproduct and service’s price, product’s quality, efficiency of production means,reserve of materials, etc

Technology has influences on opportunities and threats to business

production activity of the enterprise, thus, when drafting strategy, we mustaccount for technology Technique progresses can have deep influences onservice products, market of suppliers, distributors, competitors, producingprocess, practical marketing and competition status of the enterprise

1.3.2 Expert method to forecast business environment

Expert method to forecast business environment is a forecast methodbasing on quick collection and treatment of forecast evaluations of experts.This method requires to make the table to evaluate influences of businessenvironment (Table 1.1)

Table 1.1 Evaluating influences of business environment [12]

3= high; 2=

medium; 1=

low

Classifying affecting degree

of each factor tothe company:

3= much; 2 = medium; 1=

little

Describingaffecting nature: (+)

= good; (-)

= bad

Multiplying numeric value in column 1 with column 2, column

3, showing affect degree and settingmark (+) or (-) in achieved resultColumn 1 lists the most important business environment factors and theircomponents, such as international business environment factors, competitors,marketing, price, advertisement

Column 2 is used to classify environmental factors according to theirgeneral importance degree to the sector such as price, exchange rate, bankinterest rate

Column 3 is used to illustrate influences of factors in creatingopportunities and strong points of companies which are marked with (+), andrisk and weak point factors are marked with (-)

Column 5 is adjusting coefficient for each factor, multiplying importancevalue of each factor to the section (column 2) with its influence degree to thecompany (column 3) and fixing mark (-) in column 4 with calculated result

1.3.3 Analyzing matrix SWOT

SWOT matrix (matrix of strengths, weaknesses, opportunities, risks)includes an axis of the matrix which describes the strengths and weaknesses;other axis describes the opportunities, risks of business operations of theenterprise in the period identified Through analyzing and evaluating theopportunities, risks, strengths, and weaknesses, the enterprise built strategicideas and decision strategies Understanding weak points will help enterprises

manage and remove risks that they have not been aware [12,19] SWOTmatrix with nine cells in which four cells are important factors, four cells arestrategic cells which is intersection of the corresponding cell describing thestrategic ideas and a blank cell SWOT matrix is built according to thefollowing 8 basic steps:

Step 1: Listing opportunities mainly from external environment,according to importance order Lists are opportunities which impactpowerfully to areas that business need research Such as conducting marketresearch, the opportunity of market can have such as exploiting new marketsegments, expanding abroad market, finding high-growth markets, ability tointegrate

Step 2: Listing threats mainly from external environment, according toimportance order Risks of market can occur are high competition of market,high barrier during finding new markets, competitors are winning the market,saturation of market or degradated products

Step 3: Listing main strong points of the enterprise, according toimportance order The strengths of market of the enterprise include the ability

to cover the market, strong financial capability, ISO system, brand,marketing…

Step 4: Listing main weak points of the enterprise, according toimportance order Weaknesses include the product which is not impressed,poor management, unreasonable manufacturing organizations are not rationalproduction…

Step 5: Combining internal strong points with external opportunities andwriting result of SO strategy Using strong points to exploit opportunity

Step 6: Combining internal weak points with external opportunities andwriting result of WO strategy; Limiting weak points to exploit opportunity;

Step 7: Combining internal strong points with external threats andwriting result of ST strategy Using strong points to avoid risks

Step 8: Combining internal weak points and external threats and writingresult of WT strategy Minimizing risks and avoiding disaster.

Table 1.2 Model of theory matrix SWOT

Weakneses

(W)

Take advantage of externalopportunities to overcomeweaknesses in the enterprisebefore take extral opportunities(WO)

Make defensive strategy to reduceinternal weaknesses and avoid theenvironment external threat (WT)

1.3.4 Determining competition status of the enterprise

o Building Mc Kinsey matrix or GE matrix (Figure 1.1.) to

determine competition status of the enterprise

Attractiveness

of the section

Competition status

growth Invest for growth Grow or retreatMedium Invest

selectively forgrowth

Grow or retreat Grow or retreat

retreat Grow or retreat Eliminate

Figure 1.2 Mc Kinsey matrix [10]

Strategies in the matrix include 3 main areas:

Area 1 includes three squares in the left corner above, enterprise shouldconcentrate resources to develop

Area 2 includes three squares at the cross line from left below corner tothe right corner above, enterprises should be careful when making investmentdecision to grow, narrow or retreat from the section.

Area 3 includes three squares in the below right corner, enterprises areweak in competition status and business ection is not attractive, so theyconcentrate on harvesting and eliminating strategy

To build GE matrix, enterprises need to implement following steps:Building attractiveness matrix of business sector reflects attractivenessdegree of business sector to enterprises according to following order: (1)Choosing at least 10 factors showing the attractiveness of the business sector,these factors are collected when analyzing the environment outside theenterprise (market scale, market growth, average profit rate, number ofcompetitors, capital, number of suppliers, preferential policies, technologicaldevelopment of the sector, circle nature of the demand, number of alternativeproducts); (2) Determining coefficient of importance degree of each factor,according to evaluation of enterprises according to degree from 0 (notimportant) to 1 (very important) Total factors in the matrix must be = 1; (3)Evaluating attractiveness of each factor according to mark ladder from 1 (notattractive) to 5 (very attractive) Multiplying coefficient of importance degreewith attractiveness mark to determine mark for each factor; (4) Adding mark

of all the factors in the matrix to determine total mark for the matrix ofattractiveness of the sector and determine position of this matrix on length of

GE matrix

Building matrix of competition status of the enterprise, reflectingcompetition status of the enterprise in business sector according to followingorder: (1) Choosing at least 10 factors reflecting competition status of theenterprise in the business sector, these factors are collected when analyzingexternal environment of the enterprise (market share, product quality,distribution capacity, brand name prestige, cost price of product unit,

production technology, advertising efficiency, production scale, internalfinancial capacity, R and D ability); (2) Determining weight of each factoraccording to evaluation of the enterprise about its importance Degree from 0(not important) to 1 (very important) Total weights must = 1; (3) Evaluatingattractiveness of each factor according to mark ladder from 1 (not attractive) to

5 (very attractive) Multiplying weight with value of each factor to determinemark for each factor; (4) Adding marks of all the factors in the matrix todetermine total marks for matrix of competition status of enterprise anddetermine position of this matrix on the width of GE matrix

Determining position of the enterprise on the GE matrix: is reflected with

a circle with center is intersection point between position of matrix ofattractiveness of the sector and position of matrix of competition status Thebigness of the circle depends on sector scale, the black part is market share ofthe company in the business sector

Based on position of the enterprise on GE matrix, determining strategicplan for enterprise

GE matrix has strong point as it uses many factors to determineposition of the enterprise, so it has high flexibility However it also has weakpoint as evaluation of factors is subjective and the matrix only considersenterprises at current time, not development stage of the sector

o Internal – External matrix based on total important marks of IFE

matrix reflected on X axis and of EFE matrix on Y axis

Matrix assessment of internal factors (IFE) summarize and evaluate theimportant strengths and weaknesses of the parts of business function IFEmatrix was developed by five steps:

Step 1: Create list of important factors have been identified as criticalduring the audit This list consists of 10 to 20 factors, including strengths andweaknesses

Step 2: Sort importance from 0.0 (not important) to 1.0 (very important)for each factors The classification shows relative importance of factors for thesuccess of companies in the industry Total score of importance must be 1.0.

Step 3: Classification from 1 to 4 for each element, including: 1represents the greatest weakness, 2 is the smallest weaknesses, 3 is thesmallest strengths, 4 is the biggest strengths Thus, the classification based onthe enterprise

Step 4: Multiply the importance of each factor to its classification(meaning, step 2 x step 3) to determine the score of importance

Step 5: Add score of the importance of each factor to determine thetotal score of importance for the organization No matter how many IFEmatrix elements, the highest total score of importance that a company canhave is 4.0, the lowest is 1.0 and average 2.5 Total score greater than 2.5indicates that this company is internal power companies, and small than 2.5indicates that it is weak

Matrix assessment of external factors (EFE) helps us summarize andquantify impact of environmental factors to the business Built matrix EFEincludes five steps:

Step 1: create list of factors crucial role for success as identified in theprocess of evaluating the macro environment This list consists of 10 to 20factors, including the opportunities and threats impact the company and thebusiness of the company

Step 2: Sort importance from 0.0 (not important) to 1.0 (very important)for each factor The classification shows relative importance of factors for thesuccess of the company in the business of the company Appropriate level ofclassification can be determined by comparing the successful company withunsuccessful company in the industry, or discuss and reach consensus of teambuilding strategies Total of classification levels must be 1.0 Thus, theclassification based on the industry

Step 3: Classification from 1 to 4 for each factor of success critical toshow how the current strategy of the company's response to these factors 4 is

a good response, 3 is above average, 2 is average, 1 is weak The rate is based

on strategic effect of the company

Step 4: Multiply the importance of each variable with its classification(step 2 x step 3) to determine the score of importance

Step 5: Add score of the importance of each factor to determine the totalscore of the organization Regardless of the number of opportunities and threats inthe matrix, the highest total score of importance that a company can have is 4.0, thelowest is 1.0 and average 2.5 The highest total score of importance 4.0 indicatesthe strategy of the company take advantage of external opportunities and minimizenegative impact of the external environment on the company

Strategies for the enterprise inclue three main areas:

Area 1 enterprise lying in square I, II, III should develop and build

Area 2 enterprise lying in square III, V, VIII should hold and maintainArea 3 enterprise lying in square VI, VIII, IX should harvest or eliminate

1.4 Choosing business strategy

1.4.1 Concentrated growth strategy

Concentrated growth strategy means focusing on business in a businessproduction area that has opportunity in the market currently Concentratedgrowth strategy bases on the promotion of marketing activity or improvement

of existing products and development of the market, does not need to changeany factor.

Concentrated growth can follow one of the following models [9]:

Figure 1.4 Concentrating on a market

including many fragments

Figure 1.7 Specializing products

1.4.2 Diversification strategy

Diversification strategy is a strategy implementing many businessproduction activities on different markets To implement this strategy, thereare many plans Depending on strong, weak points of enterprise in each period

to choose plan [1] We have following plans:

Correlative diversification: adding new products or services but theyhave connection and are suitable for technology and marketing

Uncorrelated diversification (wide diversification): adding new productsand services which have no connection for old customers It means that newproducts made by technology are not related to existing product makingtechnologies

Mix diversification: adding new products and services which have noconnection for new market It means that new products look forward to newmarket and in terms of production technology, they are not related to existingproduct making technologies.

1.4.3 Integration growth strategy

Is a strategy that enterprises in the same or different sector combine toeach other to become a new organization to improve competition capacity inthe market This strategy has long and wide integration forms

1.4.4 Narrowing strategy

Strategy of narrowing business is re-arrangement, cutting of cost andproperties after a time of rapid growth to enhance business productionefficiency This strategy includes measures of cutting cost, withdrawinginvestment capital, strategy of giving up operation, etc

1.4.5 Suitable strategy for living circle of product

Depending on stages of the product, market, we give strategies as followstrategy in the market penetrating stage, strategy in the growth stage, strategy

in the saturated stage, strategy in the market regression stage [26]

1.4.6 Joint venture and association strategy

Is the strategy that companies associate to each other for the purpose ofexploiting any opportunity in business production Enterprises have specialpotentials, if they participate in joint venture, they will supplement mutuallyand get high efficiency

1.4.7 Competition strategy

Means implementing measures to enhance competitiveness of theenterprise, including [11, 24]:

- Taking the lead in terms of low cost: objective of this strategy is to

produce new products, services with lowest cost among producers in the samesector This is the strategy creating competition advantage in terms of price

- Differentiating the product: objective of this strategy is to reach

competition advantages by creating products, services with unique strongpoint, satisfying special demand of customers

- Centralizing: objective of the centralizing strategy is to concentrate on

meeting demands of a customer group according to geographic area, incomedegree, consumption custom, etc

1.4.8 Brand name strategy

Brand name is a new issue to Vietnam and it has been newly paidattention to by the world economists Recently, people have brought out plans

of evaluating value of a strong brand name Brand name value is formed due

to higher life Consumers gradually change from determining value on thebasis of usage value to brand name of the product They increasingly tend tochoose products having strong brand name (prestigious of quality, reliability)other than price

1.5 Implementing the strategy

After choosing and deciding suitable strategy, administrator shouldcommunicate spirits of the strategy to the staff to understand every matter ofthe strategy Every member of the enterprise must be close to theimplementation of strategy and have highest effort to do it Theimplementation of business strategy must be done according to followingprocesses:

1.5.1 Reviewing strategic environment

The first important step in implementing the strategy is to reviewcollected analysis results previously and decisions related to the target,

of the proposed objectives and strategy It is also to evaluate whether in theprocess of building strategy, environmental factors change or not If they arethe same, there is no need to change the strategy If not, we must adjust thestrategy accordingly.

Building annual strategic objectives: big objective of the strategy is onlyimplemented through the building of annual objectives That is division ofgeneral goal into specific ones to assign to specific units, individuals forimplementation This creates consensus and connection of everyone inimplementing the strategy The establishment of long-term strategic objectives

is basis for the distribution of resources; tool to control developments inreaching long-term objective; creates priorities of the company, divisions,summarizes into action instructions Annual objectives should be measurable,conformable, suitable and challenging to enhance effort of each division and

of the whole company

Building implementation policies of the strategy, including: directionprinciples; methods, procedures, rules, forms; administrative jobs to assist thepromotion of jobs according to the target; tools, mechanism scale of rewardand fine, etc create limitations to operation kinds

1.5.2 Evaluating, adjusting and ensuring resources

After reviewing and clearly realizing given strategies and plans, weneed to carry out distribution of resources including mental power, financialand material resources factors

The important question need to be raised is “do we have enoughresources to implement given strategies effectively? if there is lack of anyresources for the implementation of the strategy, we must adjust two big issuesrelated to resources quality which needs to be paid attention here”

Adjusting resources to improve quality and quantity of resources such

as improving skills, training professional knowledge for human resources.This adjusting aims implement business strategy effectively

Ensure that there are sufficient resources to implement the strategy.Administrator must have spare measures to ensure resources despite changes

of the external environment

1.5.3 Determining organization structure to implement the strategy

To implement the strategy, enterprise should determine an appropriateorganizational structure in which the first thing is organizational structuremodel [13] There are some structure models as follow [8, 21]:

- Organizing according to strategic business unit This is a model which

is organized according to segment of market, product stages It is suitable forbig companies with diversified activities to some extent

- Organizational structure according to customer This structure is

convenient for serving small customer groups in strategies of developing smallmarket fragments

- Organizational structure according to matrix The functional

departments and the segment of market product connect to each other throughmatrix

1.6 Checking and evaluating business strategy

The evaluation of the strategy includes three fundamental activities [10]

1.6.1 Controlling basic grounds of company’s strategy

Is an act of checking and comparing collected results with expectedresults, receiving acts that can ensure that work is being implemented inaccordance with the plan [18] Administrators often use four followingstandards to evaluate the strategy: consistency, conformability, convenience,feasibility

1.6.2 Reviewing basis of the strategy

Considering competitors bases on questions as how competitors reacted

to our strategy, how strategy of competitors changes, why strategy ofcompetitors is more successful, our competitors satisfied with their currentposition, how we can combine effectively to our competitors

Considering internal and external factors External factors include acts ofcompetitors, changes of the economy, of technological science, populationstructure changes Internal factors include strategy that we selected is effective

or not, targets maybe out of date already

Some questions need to be raised when evaluating: (1) Are our strongpoints still really strong, (2) Do we have any other weak points at present, (3)

Do external opportunities remain opportunities, (4) Are there any moreexternal opportunities at present, (5) Are external threats endangering us

1.7 Research method of the report

Our groups did concentrate on studying, analyzing secondaryinformation, data collected from materials, mass media and in particular directmaterials, reports from internal VMC

As time condition as well as organizing capacity of market survey of thegroup is limited, studying and building of matrixes to choose business strategyare implemented with expert method We used general data Consulted ideasfrom leading experts in the sector having deep understanding of VMC andrelevant fields such as product, quality, market, competitors On that basis, wecould establish criteria which were basis for analysis, evaluation of practicaltargets

1.8 Scientific and practical meaning of the report

In the market economy, business strategy has decisive nature to thesuccess and failure of each enterprise If an enterprise wants to exist anddevelop, firstly, its business strategy must be appropriate and effective This

report is a scientific document synthesizing REASONING BACKGROUND

of scientists to apply in practical conditions of the studied enterprise Contents

of business strategy were built to ensure scientific nature and practicalconformability of the enterprise

Building business strategy for VMC from 2015 TO 2020, lookingforward to 2020 to implement effectively in the current situation of VMC.Besides, business strategy of VMC must be ensured to be suitable businessstrategy of Vietnam Mine - Mineral Group, orientation documentspromulgated by State and current international integration tendency

Chapter II: ANALYZING REAL STATE OF VMC

2.1 Overview of the enterprise

Transaction name: Machinery joint stock company - TKV

International name: VINACOMIN- MACHINERY JOIN STOCKCOMPANY

Abbreviated name: VMC

Address: No 486, Tran Phu road, Cam Pha town, Quang Ninh Province.Telephone: (84) 33.3862319 Fax: (84) 33.3862034

VMC is a member of Vietnam Mine - Mineral Group VMC specializes

in manufacturing big mechanical equipment of Vietnam The company liesbeside Bai Tu Long Bay side, connects to China and other economic zones inthe country by National Road No 18 The company has its own lighter port,does not lie far from Cua Ong International port and Cai Lan deep water port.Thus, import, export materials and equipment are all traded conveniently withcountries in the world market

VMC is equipped with modern equipment, technological chain to meetrequirements of repair and manufacturing of 32.000 tons of products/years,serving coal exploitation sector and other economic sectors Productionworkshops in the company are arranged according to stages and are consistentaccording to close technological chain from equipment founding, hammering,mechanical processing, thermal treatment, assembling stage to repair stage.VMC has 22 ha area of workshop, including 90.000 m2 of lean-to area

In addition, VMC also has its own wharf with the area of about 31.000m2.This is a relatively favorable condition for VMC to uphold its strong points inmanufacturing heavy equipment

2.1.1 Process of establishing, developing of VMC

On July 23rd, 1968, Cam Pha Central Mechanics Plant was establishedpursuant to decision No 739QĐ/CP of the Government, under Hon Gai Coal

Union Initial design efficiency of the plant was 16.900 tons of equipment,repair, and spare accessories/year Including:

Quantity of equipment and machine repair 13.500 tons/yearQuantity of accessories manufacturing 3.400 tons /year

In 1979, due to requirement of developing coal sector with expectedexploitation output was up to 20 million tons of coal/year Cam Pha CentralMechanics Plant was invested for expansion in stage II, increasing efficiency

to 32.000 tons of equipment, accessories/year, including:

Repairing open-air exploitation equipment 12.900 Tons/year

Repairing selective light equipment 2.600 Tons/yearRepairing technological equipment 2.400 Tons/year

Manufacturing equipment, accessories 4.080 Tons/year

Quantity of repairing machine and equipment 26.300 Tons/yearQuantity of accessories manufacturing 5.700 Tons/year

On May 15th, 2004, Prime Minister had Decision No 81/2004/QĐ-TTgchanging to Vietnam Machinery – Coal One member limited company, underVietnam Coal Corporation, with total charter capital was VND26.419.178.815 and 1.345 staffs [6]

On March 30th, 2008, the Company changed operation according to jointstock company model with capital control rate of State was 36% At present,VMC has 5 main production divisions, 16 departments and 14 productionworkshops [7]

- Rough draft making division: Includes Founding, Pressure processingdivision; rough draft sawing division of Department of Materials, concentratedrough draft making stage of Structure 2 workshop This division has duty tocreate rough draft for mechanical processing stages, steel component and atthe same time creates products (product, semi-finished product) to store andsell to outside

- Mechanical processing division: includes workshops:

Mechanical workshop 1, 2: mainly are cutting and sharpening processingElectricity mechanics Workshop: manufactures accessories serving the repair

of specialized tool machines and equipment inside and outside the companyInstalling Component Workshop I, II: manufacture steel component products,building mechanical, and hydromechanics products

Tool workshop: mainly process cutting and sharpening and produce knife tool,pawning things serving mechanical processing activity

Mechanics Workshop III: process cutting and sharpening, component, thermaltreatment, rise seeding

- Equipment repair division, includes workshops:

Mine machine Workshop I, II: Repair or install, recover, manufacture newlyelectricity, hydraulic power excavators, kiln digging machine, drillingmachines, selecting equipment, wharf, railways, etc

Transportation division: Ensures transportation capacity for manufacturing,repair, at the same time takes part in repairing transport equipment andhydraulic power excavator of different types

Electricity mechanics workshop: Repairs mechanical processing equipmentfor units in Vietnam Mine - Mineral Group and external units

- O2, N2 production division: Energy workshop: produces O2, N2 gas tomake internal serving and sell in the market Ensures sufficient supply ofelectricity, water, and steam energy for internal production of the company

- Basic building and precast concrete component production division:

Building and putting together workshop: builds new, repairs housing,architectural things and produces precast concrete components servinginternally and selling to meet demand of the market inside and outside the coalsector, builds and puts together industrial and civil works

2.1.2 Human resources and organizational structure

Before 2004, due to “difficulties in terms of job, low income, thenumber of official engineers was not supplemented for many years, many

engineers and high-level workers asked for work movement, causingremarkable shortage of technical staff” [5] While the number of indirect staffwas high, causing certain difficulties in balancing labor structure.

From 2004 to now, arrangement of innovation to improve labor qualityhas been implemented actively from different financial sources: subsidizingfund according to Decree 41CP; Fund for arranging labor structure innovationpursuant to Decision 971, 1139 of Vietnam National Coal - Mineral Group, etcassisted, innovated more than 540 laborers who cannot meet requirements ofproduction, and through that gradually improves quality of the working staff

At present, the Company has more policies of supporting andencouraging young, newly graduate engineers, which has attracted manytechnical engineers to prepare force for the development strategy of theCompany Together with supplementation of technical officers, skillful workertraining activity is also paid attention; the number of high-grade workers hasincreased in some recent years, contributing to meet requirements in terms ofquality of worker staff “From 2004 to now, the Company has recruit 295 newlaborers including workers, technical, professional engineers, supplementing

to the human resources” [2]

Human resources structure to now (compared with 2004) has increased

in terms of quality: Unskilled laborers decreases from 7,74% to 4,9%;technical workers increases by 1,7% (14,5/12,8%)

Average worker level 4,6/4,3 increases by 0,3

Age of human resources has been remarkably younger, more than 50%

of labor force has age from 36 to 45, which is red-blooded age and thesepeople can accumulate many experiences in their operation field

Current labor structure is relatively suitable at rough draft making stage,mechanical, component processing stage, equipment repair, internal energy supplysuch as steam, pressing gas, water, etc Laborers who are in charge of operation,economic, technical management execution have been more creative, active in