Chiến lược kinh doanh của công ty TNHH một thành viên đạm bắc hà giai đoạn 2010 2015 đến 2020

The strategy helps enterprise realize its objectives andthe way in its process of business and production; also helps enterprise grasp andmake use of business opportunities; simultaneous

LUẬN VĂN THẠC SĨ Chiến lược kinh doanh của công ty TNHH một thành viên

Đạm Bắc Hà giai đoạn 2010-2015 đến 2020

THESIS MBA THE BUSINESS STRATEGY OF HA BAC NITROGENOUS FERTILIZER AND CHEMICAL ONE-MEMBER LIMITED

COMPANY OVER A PERIOD OF 2010 - 2015

(TOWARDS TO THE YEAR 2020)

1

CHAPTER I: THEORY OF ENTERPRISE BUSINESS STRATEGY 10 1.1 The concept of strategy and the role of business strategy 10

1.1.1 The concept of strategy and strategic administration 10

1.1.2 The role of business strategy 13 1.2 Tools for analyzing and evaluating the strategy 14

1.2.1 Analyzing the business environment 14

1.2.2 Analyzing the internal environment of enterprise 18 1.3 Tools for determining position and orienting strategy 22

2

1.3.1 IE matrix 22

1.4 Types of competitive business strategy 26

1.4.1 Cost leadership strategy 27

1.4.2 Differentiation strategy 27

1.4.3 Focused business strategy 27

1.4.4 Integrated cost leadership/ differentiation strategy 28

1.4.5 Evaluating and selecting the strategy based on GREAT

model

28

CHAPTER II : ANALYZING THE CURRENT STRATEGY OF

HA BAC CHEMICAL AND NITROGENOUS FERTILIZER ONE-SINGLE MEMBER

2.1.1 General introduction of HANICHEMCO 30

2.1.2 HANICHEMCO production and business situation over a

2.2 Analyzing and evaluating HANICHEMCO’s real situation 34

2.2.1 Analyzing the business environment 34

2.2.2 Analyzing HANICHEMCO’s internal situation 52

2.2.3 Analyzing and evaluating the real situation of

HANICHEMCO

by IE matrix

57

3

CHAPTER III: EVALUATING, SUPPLEMENTING, ADJUSTING

AND COMPLETING STRATEGIES AND

SUPPOSING SOLUTIONS TO THE IMPLEMENTATION OF HANICHEMCO’S DEVELOPMENT STRATEGIES

OVER A PERIOD OF 2010 – 2015 (TOWARDS THE YEAR 2020)

61

3.1 HANICHEMCO’s development strategy over a period of

3.1.1 HANICHEMCO vision and mission over a period of

2010 – 2020

61

3.1.2 Development strategy for HANICHEMCO over a period

of 2010 – 2015 (towards the year 2020) 61 3.2 Analyzing and evaluating HANICHEMCO strategy 63

3.2.1 Analyzing and evaluating the business strategy by SWOT

matrix

63

3.2.2 Assess strategies by GREAT method 67

3.3.1 The currently existing unreasonable business strategy

3.3.2 Cause of the unreasonable existence 71

3.3.3 Some supplements to improve HANICHEMCO’s business

strategic management during period 2010 – 2015

4

3.4 Solutions for the strategy of HANICHEMCO 75

3.4.1 Solutions for expanding production scale (low cost strategy) 75

3.4.2 Solutions to make a difference and keep its difference 76

3.4.3 Solution on product’s diversification 78

3.4.4 Solution on management model and human resources 80

LIST OF FIGURES, MODELS AND CHARTS

Pages

Figure 1.1: The process of strategic administration 12

Model 1.3: M E Porter’s 5-force model 17

Figure 1.6: Types of business strategies

26

Figure 2.1 Diagram of HANICHEMCO organization structure

31

Chart 2.2: Business norms over a period of 2005-2009 33

Chart 2.3: Output of key products over a period of 2005-2009 33

Figure 2.4: Urea distribution system of the company 44

6

LIST OF TABLES

Pag es

Table 1.1: The factors of macro environment 16

Table 1.2: Visible resources

19

Table 1.3: Invisible resources

20

Table 2.1: Production and business norms over a period of 2005 – 2009 32

Table 2.2: Urea’s product capacity of the world 36

Table 2.3: Area and production of cereals 40

Table 2.4: Demand forecast for Urea in Vietnam to 2015 42

Table 2.5: Capacity of fertilizer manufacturing plant in Vietnam 42

Table 2.6: Urea consuming quantity of the company 45

Table 2.7: The amount of purchased coal from 2005 to 2009 47

Table 2.8: The purchasing coal price of HANICHEMCO 47

Table 2.9: Evaluate the strengths and weaknesses compared with other

Table 2.11: The human resource structure of the company 56

Table 2 1 3 : The internal factors 59

Table 3.2: Quantitative matrix by GREAT criteria 68

Table 3.3: Comparison of two strategies 70

Table 3.4: Quality standard of Urea 77

7

A GENERAL INTRODUCTION

1 THE BACKGROUND AND THE ESSENTIAL OF THE CAPSTONE

STUDIED 1.1 BACKGROUND

Viet Nam has built and developed its economy from a poor and backward country,which was seriously devastated by the continuous wars During a long time, VietNam had applied centrally planned economy but in fact it was an order and non-market economy As a result, it restricted and annulled the motivation andcompetitiveness between economic forces, affected the mobilization and utilization

of country resources in order to create a momentum for development Besides, themanagement has made several mistakes, which caused by self-opinion, imposition,lack of socio-economic knowledge Therefore, the production and businessefficiency was very low and was on the tendency of ever decrease, leading to longlasting stagnant economy Consequently, the socio-economic crisis happened at the

end of 1980s

Viet Nam has introduced the reform policy since 1986 with its objective of buildingthe market economy according to the orientation of socialism After 20-year ofreform, Viet Nam has gradually operated its economy in line with market laws Itcreated a momentum for the country development thanks to the maximization use ofthe available resources In addition, Viet Nam has overcome the socio-economic

crisis and reached growth

The socialism-oriented market economy is the generally economic model, whichwas selected by Viet Nam in the renovation period It is a multi-sector economy inwhich the State sector plays a key role The State enterprises take the lead position

in the economy

1.2 THE ESSENTIAL OF COMPLETION OF HANICHEMCO

8

DEVELOPMENT STRATEGY

Ha Bac Nitrogenous Fertilizer and Chemical one-member limited company(HANICHEMCO) is a State enterprise located in Bac Giang province withobjective of production of fertilizers and chemicals Over the last 50-year ofconstruction and development, HANICHEMCO has contributed to the production

of agriculture and has ensured food security Besides, its other products weresupplied to meet the consumption demand of the socio-economy

However, in the face of current opportunities and challenges in the internationalintegration, the existing weaknesses of HANICHEMCO need to be overcome aresmall scale, unreasonably organizational structure, low competitiveness, lowinvestment into the replace of technological process, backward techniques andweak management, etc Thus, it demands to set up a reasonable strategy forbusiness and production development so as the company is able to become a strongunit of Viet Nam Chemical Corporation To do so, the company has to

continuously increase its production and business efficiency

As we know, the business strategy has played an important role and brought aboutgreat benefit to enterprise The strategy helps enterprise realize its objectives andthe way in its process of business and production; also helps enterprise grasp andmake use of business opportunities; simultaneously gives solutions to surmountdangers and threats in the competitive market; contributes to enhance the efficiencyfor use of resources and to increase the competitive position with a view to ensuringthe sustainable development for the enterprise The strategy creates the firm basesfor building policies and decisions on production and business suitable for market

fluctuation

In the past, HANICHEMCO “business strategy” was simply a plan of production

and business with the annual objective counted on a basis of result gained in theprevious year plus the growth percentage (normally 5%  10%) Since the Decision

No 217/ HDBT was issued on Nov 14, 1987 by the Ministerial Council regardingthe reform policies on “socialism planning and self-financing applied to state

9

enterprises”, HANICHEMCO has made great efforts and has been active inbuilding an independent business and production plan Hence, it has obtained quite

a lot of renovations and developments; has brought into play its resourceseffectively to push investment and maintained the high growth rate; has stabilizedboth production and consumption; has exceeded the planned target and has greatlycontributed to the state budget and the society As a result, it is ranked in the

chemical industry in Viet Nam

The company’s strategy is normally set for a period of 5-year Its production andbusiness strategy for a period of 2010 – 2015 (till 2020 included) was based on theresult achieved over a period of 2005 – 2009 and the development orientation ofViet Nam Chemical Corporation However, it is necessary for this strategy to berevised, analyzed, evaluated, adjusted and supplemented to meet new requirements,which derives from market fluctuation, impact of economic recession and thecompany’s real situation as well as the opportunities and challenges in the years to

come

Three out of 4 members in our group are currently working at HANICHEMCO Byour real experience and knowledge and with the support of teachers in the grade ofInternational Business Administration Master – Griggs University, we unanimouslystudy, analyze and evaluate HANICHEMCO production and business developmentstrategy over a period of 2010 – 2015 (till 2020); given this, we suggest,supplement and adjust for the purpose of completing this production and businessdevelopment strategy; advise HANICHEMCO Steering Board for an effective

implementation

2 THE OBJECTIVES OF THE CAPSTONE

*) The study group collected and learned about the theoretic system, tools andmethods for evaluation and basic analysis of strategic management science as afoundation for the analysis and evaluation of development strategy for

HANICHEMCO over a period of 2010 – 2015 (towards the year 2020)

*) To analyze the strong points, weak points, opportunities as well as

10

challenges of HANICHEMCO and of its competitors.

*) To analyze and evaluate the development strategy for HANICHEMCO over

a period of 2010 – 2015 (towards the year 2020) on a basis of the analysis

mentioned

*) To propose adjustment and to supplement strategy of HANICHEMCO over

a period of 2010 – 2015 (towards the year 2020)

*) To propose solutions with a view to implementing the strategy ofHANICHEMCO over a period of 2010 – 2015 (towards the year 2020)

3 THE STUDY METHODS

The methods used for strategic analysis and evaluation comprise of:

The study group used the recent documents and data of production and business of

Ha Bac Nitrogenous Fertilizer and Chemical One-member Limited Company as abase for analysis and evaluation of production and business strategy in their

capstone

4 THE CAPSTONE STRUCTURE

The capstone includes 3 major parts excluding table of contents, list of tables,charts, diagrams, figures and references with the following structure:

B ANALYSIS

CHAPTER I: THEORY OF ENTERPRISE BUSINESS STRATEGY

1.1 The concept of strategy and role of business strategy

1.2 Tools for analysis and evaluation of business strategy

1.2.1 Analyzing the business environment

1.2.1.1 PEST Analysis – Political, Economic, Social and Technological factor

(analyzing the macro environment) 1.2.1.2 Method of 5-competitive pressure (analyzing the industrial

environment)

1.2.2 Analyzing the internal situation of enterprise

1.2.2.1 Based on resources 1.2.2.2 Based on fields administered 1.2.2.3 Based on chain of value

1.3 Tools for determining the strategic position and building strategy

1.3.1 IE matrix 1.3.2 SWOT matrix

1.4 Types of competitive business strategy

1.4.1 Cost leadership strategy 1.4.2 Differentiation strategy 1.4.3 Focused business strategy 1.4.4 Business strategy set up on a basis of the integration of different

business strategies 1.4.5 To evaluate and select the strategy according to GREAT model

CHAPTER II: ANALYZING THE CURRENT BUSINESS STRATEGY OF HABAC NITROGENOUS FERTILIZER AND CHEMICAL ONE-MEMBER

LIMITED COMPANY (HANICHEMCO)

2.1 Overview

12

2.1.1 Introduction of HANICHEMCO 2.1.2 HANICHEMCO production and business result over a period of 2005 –

2009

2.2 Analyzing and evaluating HANICHEMCO’s real situation

2.2.1 Analyzing business environment 2.2.2 Analyzing HANICHEMCO’s real situation 2.2.3 Analyzing and evaluating HANICHEMCO’s the real situation by IE

matrix.

CHAPTER III: ANALYZING, SUPPLEMENTING, ADJUSTING AND COMPLETING THE STRATEGY AND SUPPOSING SOLUTIONS TO THE IMPLEMENTATION OF HANICHEMCO DEVELOPMENT STRATEGY OVER A PERIOD OF 2010 – 2015 (TOWARDS THE YEAR 2020) 3.1 HANICHEMCO’s the development strategy over a period of 2010 – 2015

(towards the year 2020) 3.2 Analyzing and evaluating HANICHEMCO strategy

3.2.1 Evaluating the business strategy by SWOT matrix

3.2.2 Assess strategies by GREAT method

3.3 Assessing strategy of HANICHEMCO, the additional issues need to be

modified to improve are

3.3.1 The currently existing unreasonable business strategy of

HANICHEMCO 3.3.2 Cause for the existing and unreasonable issues 3.3.3 Some supplements to improve HANICHEMCO’s business strategic management during period 2010 - 2015 (towards to the year 2020)

3.4 Solutions to HANICHEMCO strategy over a period of 2011-2015

3.4.1 Expanding the production scale and implementing the strategy at low

cost

13

3.4.2 Making the differences 3.4.3 Product diversification 3.4.4 Management model and human resources administration

3.4.5 Other solutions

3.5 Suggestion

C CONCLUSION

B ANALYSIS CHAPTER I: THEORY OF ENTERPRISE BUSINESS STRATEGY

1.1 THE CONCEPT OF STRATEGY AND THE ROLE OF BUSINESS

STRATEGY

14

1.1.1 The concept of strategy and strategic administration

1.1.1.1 Strategy

In currently competitive business environment, we can find some successfulenterprises and some unsuccessful ones Enterprises all have to find their own waysfor their survival Hence, every enterprise has to create its own competitiveadvantage, which is considered as its strategy The strategy could be considered as

ideas, plans and supports for enterprise’s success in the competition with its rivals.

There are several concepts of strategies depending on authors They are:

- According to Oxford dictionary: “the strategy is the series of complex

activities with a view to mobilizing resources of an organization so as to obtain a certain aim” The strategy is used to mention “the method” of an activity but not

“the concept” of that activity.

- In business, Chandler - is one of pioneers initiating the theory of strategic

administration – defined the strategy as “the determination of long-term objectives

and aims of the enterprise and the application of chain of activities as well as the

allocation of necessary resources to implement this objective”.

- In the environment of quick fluctuation, Johnson and Scholes defined: “The

strategy is a long-term orientation and scale of an organization for the purpose of gaining its competitive advantage via the allocation of its resources in order to meet the market demand and to satisfy the desire of relating parties”.

- According to opinions of Hitt A.M., Ireland D.R and Hoskisson E.R asmentioned in the book entitled “Strategy administration, competitive competence

and globalization: Concept and Situation” that the strategy is defined as “series of

complex activities with a view to mobilizing resources so as to obtain the aim

already set.”

- In fact, the business strategy could be understood as the operation method of

an enterprise It decides the kind of product or service which the enterprisefocuses on, the business scale, resources for production, profitability and

development potential of the enterprise

15

The concepts of strategy are not only different in aspects but also in levels Thereare three levels of strategies including company strategies, business strategies andfunctional strategies The company strategies head to the aim and general scale ofthe organization The business strategies relate to the successful mode ofcompetition in specific markets The functional strategies (operational strategy) helpcompany and business strategies implement effectively thanks to component parts

of resources, process, human resources and necessary skills

*) The prominent characters of the business strategy are

+ The strategy clearly determines the primary objectives and business orientation of

the enterprise;

+ The strategy’s orientation has to ensure the firm and continuous development in

the fluctuant business environment;

+ The strategy ensures the maximum mobilization and optimal combination of theexploitation and use of enterprise resources in the present and in the future; bringsinto play the strengths and grasps opportunities to gain competitive advantage;+ The business strategy of enterprise is reflected in the consecutive process;+ The business strategy must comprise of attack spirit and win in the market;+ The business strategy is usually built for a long period (normally 3, 5 or 10 years)

1.1.1.2 Strategic administration

The strategic administration is a set of management decisions and activities to

determine the long term productivity of a company.

The strategic administration include consecutive activities such as environmentcontrol (both internal and external); building, implementing and evaluating strategy.Therefore, the strategic study emphasizes on internal strengths and weaknesses

*) The content of strategic administration includes

+ To determine the key mission and objectives of the organization;

+ To analyze the internal and external environment of the organization;

+ To select the strategy that can match strengths and weaknesses with opportunities

and threats;

16

+ To accept the organizational structure and the control systems to carry out the

strategies selected

According to the opinions of Hitt A.M, Ireland D.R, Hoskisson E.R and based ondefinition of strategy, it could be summarized that the process of strategic

management includes “a full set of commitments, decisions and necessary activities

for companies so as they can obtain the competence of strategic competition, maintain the competitive advantage and the profit above the average level”.

The whole process could be illustrated in the following diagram:

Source: Slide 5, lecture 1, Strategy management

Figure 1.1: The process of strategic administration

Looking at the diagram, we can find that the objective of a process of strategicadministration is to achieve the competence of strategic competition and the profitabove the average level To realize the above-mentioned objectives, the mostimportant step for an effective process of strategic administration is to analyze theinternal and external environment The analysis will be the premises for buildingstrategic tasks and aims and implementing the strategy after that If all the abovesteps are successful, the enterprise will obtain the competence of strategic

External environment

Coroperationstr ategy

Merger &

restructuring

International strategy

Co-operation strategy

Company administration

Structure & control

Leading strategy

Starting the company & reform

The competitive strategy with the profit above the average level

However that is not the end of the process The consecutive feedback of information

is very important also for the purpose of increasing the inlet quality, which helpsimprove the task and that process will be reiterated at higher level Thisconsecutiveness creates the sustainable advantage of competition and the profit

above the average level

1.1.2 The role of business strategy

From the concept of strategy and strategic administration, we can find the very

important role of strategy to enterprise

The business strategy is the most important part in the whole strategies ofenterprise The other parts of the general strategy must be based on the businessstrategy in order to build and adjust The business strategy has great significance tothe existence and operation of enterprise It helps set the major objectives and theenterprise will prepare the reasonable mobilization of short-term and long-termresources given such objectives The strategy will ensure the plans not to deviate Agood business strategy will help enterprise gain more profit, take the firm and safestand in the business environment and adapt to that environment Therefore, theenterprises have to build business strategies suitable for concrete condition andcircumstance It could be said that it is a vital condition to any enterprise

In the aspect of plan, the business strategy is considered as overall plan of theenterprise It puts forwards long-term development tendencies and major objectives

of the enterprise; points out basic resources of the enterprise; proposes solutions topossible fluctuations in the competitive environment Hence, the strategy is aprimary plan whose tasks of determining resources, focusing resources onobjectives, making use of enterprise’s power to implement those objectives

In summary, the role of strategy is expressed in the 3 following basic contents:

+ The strategy helps enterprise have long vision;

+ A good strategy will set practical objectives and find the way to reach those

objectives;

+ The strategy helps enterprise improve its knowledge of frequent fluctuation in

18

business environment and helps give flexible and appropriate solutions.

1.2 TOOLS FOR ANALYZING AND EVALUATING THE STRATEGY

1.2.1 Analyazing the business environment

1.2.1.1 PEST Analysis – Political, Economic, Social and Technological

factor (analyzing the macro environment)

The external environment includes not only the society and the economy but also

the industrial environment in which the enterprise are operating

Overall, enterprises and organizations all are doing business in the world of dailychange; are affected by and depend on factors of nature, culture and society,technology, economy, politics and justice The enterprise cannot exist without theconsecutive interaction with the external environment It is necessary to consider allthe above factors before building the strategy so as the enterprise could get success

by bringing into play its strengths

19

Source:

http://www.shell-livewire.org/business-library/business-planning/why-u-need-a-business-plan/PEST-analysis/

Figure 1.2: External environment

In 2007, the external environment was defined by Hitt A.M; Ireland D.R and

Hoskisson E.R that “The elements of the society affect the industry and enterprises

doing business in the industry” In concrete, these factors are listed in the following

table:

20

Table 1.1: The factors of macro environment

Natural factor

Natural condition (climate, environment)

Mineral resources Geographic allocation

Economic factor

Inflation rate, interest rateTrade balanceBudget balance

Saving rateEnterprise savingGross Domestic Product

Political and

judicial factor

Anti-monopoly lawTax lawPolicy adjustment

Labour codeEducational policy and

principle

Socio-cultural

factor

Labour forceLabour diversificationAttitude to workPopulation, age structure

EnvironmentJob change and occupational

fondnessThe concepts re products andservices are changed

Technological

factor

Product is improvedKnowledge of science andtechniques is introduced

Private sector focuses on studyand development incombination with government

support

In the macroscopic aspect, the analysis of external environment help enterprises

comprehend their opportunities and

1.2.1.2 The method of 5-competitive pressure (analyzing the industrial

environment)

The industry is defined as “the group of companies specializing in the production of

products, which can substitute for each other or these companies have influence on the others” Besides, the industry can “include the diversified mixture of competitive strategies, which enterprises use to build strategically competitive advantage and

profit above the average level”.

21

Analyzing the industry will help enterprises determine the industry’s attraction.Accordingly, an attractive industry is an industry that owns high barrier ofpenetration, low role of suppliers and customers, few substitutes and moderatecompetition On the contrary, an unattractive industry with low profitability ownslow barrier of penetration, strong power of suppliers and customers, quite a few

substitutes and fierce competition

The Michel Porter 5-force model is a useful tool, which is used to analyze theindustry Porter has built a frame in which 5 competitive forces in the same

industry are determined, including:

Model 1.3: M E Porter’s 5-force model

1- Potential competitors: If a new company easily penetrates the market, the

competitiveness is fierce The factor that limits challenges from new companies is

barrier of penetration

22

Source: http://www.mba-tutorials.com/strategy/65-porters-five-forces-model.html

2- Power from suppliers: It can be understood as the pressure of suppliers to

enterprises A supplier has a strong governing power if they can cause great

impacts on output and profit of enterprise

3- Power from buyers/customers: This is pressure from customer to

enterprise The customer has a strong governing power if he/ she can cause great

impacts on output and profit of enterprise

4- The availability of substitutes: What will happen if customer uses the

products and services of competitors? If the expense for this change is low, the

enterprise has to face a serious threat

5- Competitors: Lastly, the appearance of competitors expresses the competitive

intensity between enterprises in the industry The industry of high competitiveness

usually creates less profit due to high expense for competition

The curriculum “Hit A.M; Ireland D.R and Hokisson E.R” has confirmed that

“analyzing competitors” is the way to “collect and interpret information on all

competitors of enterprise” Comprehending the competitors’ environment of

enterprise will supplement the knowledge in the general study and the industrialenvironment The aim of analyzing competitors’ environment is to focus on the

forecast of competitors’ moves, intentions and reactions

1.2.2 Analyzing the internal environment of enterprise

1.2.2.1 Based on resources

Unlike the result of macroscopic analysis that showing the opportunities andchallenges, the enterprises can determine what they are able to do via the study ofmicroscopic environment In other words, the enterprises expect to determine their

major competence to create a sustainable competitive advantage

The resources are defined as “the asset of enterprise including human resources

and value of brand name The key resources comprise of the inlet value for the production process of enterprise such as equipments, machines, inlet capital, employees’ skill, trademark, financial sources and management competence”.

There are two kinds of resources including visible and invisible resources

23

Visible resources are financial sources and physical assets of value in the financial

report of company In addition, the visible resources of a company also comprise ofits scientific and technological resources and the organizational quality All of these

parts are listed in the following table:

Table 1.2: Visible resources

- Ability to clear debts by itself

Organizational

resources

Structure of official report relationship, processing of

giving official decision and control

Physical resources - The sophistication and arrangement of factories and

equipments

- Approach to materials

Technical resources - Technical assets such as copyright, trademark, patent,

business know-how

Invisible resources are the resources that difficult to realize but they are gradually

becoming more important to enterprises in comparison with visible assets because it

could become the major resource for competitive advantage

Table 1.3: Invisible resources

- Fame for effectiveness and support

These invisible resources include human resources, initiative resources and trade

fame (prestige)

Potential competences are an ability to develop the summarized resources with a

view to obtain the latest result as expected These competences are graduallyexpressed through the complicated interaction between visible and invisibleresources by time and are usually based on the development and exchange of

information and knowledge via company’s human resources

Core competence is defined as prominent activities conducted by the company in

comparison with its competitors, or as activities from which the company hascreated its own value for products and services for a long time There are fourcriteria to determine the major competence of enterprise including value, scarcity,

high expense for copy and level of irreplaceability

1.2.2.2 Based on fields administered

Analyzing the relationship administration stresses on the awareness of interactionstyle and the administration of externally competitive and co-operative forces Theanalysis of common value may not expose the whole importance of the relationship

as well as the competitive advantages, which are gained by enterprise by itsadministrative competence The relationships are built on basis of existing relationswith purchasers; supplying sources of land, labor, capital and materials; current and

potential competitors; substitutes and other partners, etc

The industrial analysis evaluates the external factors also but at the industrial level.For example, 5-competitive force model of Porter determines the competitive level

25

in the industry Analyzing the relationship administration is acknowledged in theaspect of enterprise It also reviews the external forces but stresses on value Thisanalysis focuses on enterprise’s competence in reducing negative forces or

enhancing active forces

1.2.2.3 Based on value chain

The value chain reflects activities relating to commodity stream inner the enterpriseand supporting activities for this commodity stream; associates with other businessactivities inner as well as outside enterprise Using this tool helps concretelyrecognize where the value is created and the nature of competitive advantage ofenterprise At least, each business unit must be considered by a chain of value Thecreation of lots of value chain for every single business unit will be useful if

products and services are quite different

Four steps are used to analyze the value chain:

1- Recognizing the relating elements of value chain by using a diagram of

internal commodity chain

2- Describing what enterprise do for every single activity

3- Recognizing the way to increase value of every single activity in theory and

classifying the effect on expense or the difference

4- Standardizing the best way to do this activity

In general, analyzing the internal or external environment or SWOT will help usclearly understand the strength as well as weakness of the company, the bestopportunities as challenges Analyzing SWOT will help the company select the bestway to utilize of resources given the internal and external situation of company.Once the analysis of SWOT is successful, the company can select the most suitablestrategy to make use the strengths and opportunities as well as to overcome its

and selecting the strategy for the enterprise, including:

- SPACE matrix used for determining the strategic position of the enterprise

- BCG matrix used for determining the strategic position of product, ofenterprise; for analyzing portfolio structure in order to point out the investmentorientation and to allocate resources as a base for making business decision

- MC Kinsey matrix used for determining the position of enterprise in the

business environment

- SWOT matrix used for evaluating, analyzing strengths and weaknesses,

opportunities and challenges to enterprise

- IE matrix uses the internal and external factors of enterprise to determine the

strategic position of enterprise

In this capstone, we concretely introduce matrices used for analyzing, evaluating

and determining the strategic position of enterprise as follows:

1.3.1 IE matrix

This matrix uses internal and external factors in order to determine the strategicposition of enterprise and to help enterprise evaluate and select the strategy

accurately thence

To make the below table based on the internal and external factors:

Table 1.4: Weighting score

No The impact of business

environment on enterprise (or internal factor of enterprise)

Weighting Rating Weighted

score

The environmental factors (around

10 factors affected should be put

forward)The internal factors of enterprise (the

Using thescore card

of unit orpercent

Score

of 1 - 4

27

factors play the decisive role in

competitive capacity of enterprise)

The determination of score of the internal factor is similar and the synthesized point

represents the enterprise’s position on vertical axis

Model 1.4 IE matrix

Having determined the enterprise’s position in the IE matrix, if the position islocated the area of 3 cells at the left-top corner, it means the encouragement ofgrowth; if the position is located in the area of 3 diagonal cells from the bottom tothe top, the enterprise should keep stable and is located in the area of remaining

cells, the enterprise should better withdraw from the market

Source: David, Fred R (1999) Strategic Management: Concepts (7th ed.).

Upper Saddle River, NJ: Prentice-Hall, Inc., p 191.

WEAKNESSES - W List of weaknesses

W T

How do I address the weaknesses that will make these threats a reality

Model 1.5 SWOT matrix

It is necessary to give at least 10 concrete and primary criteria for an accurateanalysis and evaluation of strengths, weaknesses, opportunities and challenges Theenterprise’s strategy is built given such analysis Through the matrix model, we

have four below basic strategies:

+ The strategy for combining strengths with opportunities (SO) This strategyrecommends the use of enterprise’s strengths in order to make use of opportunities.+ The strategy for combining strengths with threats (ST) This strategy uses

29

Source: http://www.markintell.com/swot-analysis-tools-templates

strengths in order to avoid threats.

+ The strategy for combining weaknesses with opportunities (WO) This strategyrecommends enterprise to overcome weaknesses by utilizing opportunities.+ The strategy for combining weaknesses with threats (WT) This strategyencourages the minimization of weaknesses and the avoidance of threats.Besides, it is possible to combine the integration of strengths, weaknesses as well asopportunities and threats for building the different-integrated strategies This

depends on the specific condition of each enterprise

1.4 TYPES OF COMPETITIVE BUSINESS STRATEGIES

The business strategy is defined as “a united and combined chain of commitments

and activities, which are used by company to gain the competitive advantage by exploiting the major competence in the specific product markets” The objective of

business strategy is to create a difference between the relative position of companyand of other competitors To reach that position, the company has to decide whetherthey should conduct business activities in a different way or conduct another

activities compared to its competitors

Hitt A.M; Ireland D.R and Hoskisson E.R recommend types of business strategy in

the following diagram

30

Source: Slide 11, lecture business strategy

Figure 1.6 Types of business strategies

1.4.1 Cost Leadership Strategy

The cost leadership strategy is “the entire of activities with a view to providing

products or services with particularities which are accepted by customers at lowest cost in comparison with competitors” This strategy is applied to standardized

products, which are accepted by majority of customers at lowest price if possible

It is compulsory for the company in chase of this strategy to carry out severalactivities of saving cost Firstly, the company must have good facilities This helpssave resources and creates higher productivity Secondly, the company mustminimize total production expense In addition, the production process must besimplified and expenses for external suppliers must be tightly controlled

1.4.2 Differentiation strategy

Differentiation strategy is defined as “the group of integrated activities was made

to create original products in important particularities, which are difficult to imitate by competitors and this original will bring about the added value to enterprise” This strategy is suitable for company specializing in non-standardized

products and targeting the market segmentation in which customers prefer the

difference in features to low price

To reach a quite different advantage, the company has to enhance the efficiency ofproduct and service; to create the sustainability via customers’ knowledge ofproduct and service original Therefore, a company should increase customers’ faith

to its products so as they do not want to use another products and services

1.4.3 Focused business strategy

The focused business strategy is defined as “the group of activities to produce

commodities or services served for a specifically competitive segmentation” The

competitive segmentation may be a group of specific purchasers, differentsegmentation of a product line or differently geographic market

There are two kinds of the focused business strategies including the focused

31

strategy using the different approach and the focused strategy using the low costapproach To conduct a focused strategy, the companies must have competence in

“completing basic activities and different supports in order to develop and maintain

competitive advantages and to gain the profit above the average level”.

1.4.4 Integrated cost leadership/ differentiation strategy

This integrated strategy is expected to bring about better position for companies inthe condition of quick adaptation to the environmental change in the receivingperiod of new skills and technologies Such a kind of company can enhance its

major competence in the competition with its competitors

According to Hitt AM, Ireland DR and Hoskisson ER, a company is in chase ofintegrated cost leadership/ differentiation strategy should be flexible in the strategyincluding the development of the flexible manufacture system (FMS), theappropriate information system and the general quality management system (TMQ).The flexible manufacture system is specialized by the controlled process via thesystem to produce series of product at moderate and flexible quantity This helps

enterprise produce lots of product kind at moderately low cost

The electronic information network connects the company with its suppliers,distributors and customers By effective connections with related parties, thecompany can meet customers demand on product quality and good delivery speedbeyond their expectation Besides, the network can improve the work amountbetween staff in the company and its partners (suppliers and distributors) Customer

Relation Management (CRM) will be effectively implemented also

The system of comprehensive quality management helps enterprise improve productquality, increase customer satisfaction, reduce expense and shorten time to launch

new products

1.4.5 Evaluating and selecting the strategy based on GREAT model

32

Table 1.5 Model GREAT

was given the highest general marks in the GREAT model

CHAPTER II: ANALYZING THE CURRENT STRATEGY OF

HA BAC CHEMICAL AND NITROGENOUS FERTILIZER ONE-SINGLE

MEMBER LIMITED COMPANY (HANICHEMCO)

33

2.1 HANICHEMCO OVERVIEW

2.1.1 General introduction of HANICHEMCO

Ha Bac Chemical and Nitrogenous One-Single Limited Company is a subsidiary ofthe parent company – Viet Nam Chemical Corporation The company has its legalstatus, its own stamp, and its bank accounts domestically and abroad The company

operates in pursuant to Law of Enterprise and company regulations

Date of establishment: 01 May 1960 Full name: HA BAC CHEMICAL AND NITROGENOUS FERTILIZER ONE-

SINGLE MEMBER LIMITED COMPANY

Vietnamese abridged name: HABAC CHEMICAL AND NITROGENOUS

FERTILIZER COMPANY

International transaction name: HABAC CHEMICAL AND NITROGENOUS

FERTILIZER LIMITED COMPANY

English abbreviation name: HANICHEMCO Head office: Tho Xuong ward – Bac Giang city – Bac Giang province Charter capital: 352.000.000.000 VND (three hundred fifty two billion

Vietnamese dong only.)

Key products:

- Producing and selling urea fertilizer, mixed fertilizer NPK;

- Producing and selling basic chemicals;

- Producing and selling electricity;

- Producing and selling liquid NH3, liquid-solid CO2, CN gas products

Other activities:

- Building works, making investment projects for building works, designing

equipment and technology for chemical works;

- Investing in financial business;

- Doing business in other fields in accordance with stipulations of law

Organizational structure of the company:

34

Figure 2.1: Diagram of HANICHEMCO organization structure

2.1.2 HANICHEMCO production and business situation over a period of

Corporation

The production and business result of company over a period of 2005 – 2009 have

showed at major norms in the following table and 2 charts:

Table 2.1: Production and business norms over a period of 2005 - 2009

Economic

Department

Technical Department

Production Units

Administrative Units

Member Council

General Director

Inspection Board

Deputy General Director

35

NORMS

increased rate/ year (%)

Budget

contribution

BillionVND

Business norms over a period of 2005 - 2009

Industrial production value Turnover total

production value Effect

Chart 2.2: Business norms over a period of 2005-2009

Chart 2.3: Output of key products over a period of 2005-2009

2.1.2.2 Preliminary assessment of the company’s operation result

Norms of the company’s production and business in the last 5 years all have been

good:

+ Norms have mostly grown, of which the highest growth rates are theefficiency of production and business (89%), budget contribution (38.6%) and CO2growth rate (63.7%) Total turnover and laborers’ income are moderately high(above 10%) This reflects the effective production and business situation of thecompany, the improved laborers’ life, resulting in high socio-economic efficiency

for the province and the whole industry

+ Several norms have grown but not at high level This reflects the maximum

37

Output of key products over a period of 2005 - 2009

Urea output Electricity output CO2 output

exploitation of production competence of technological line Thus, the investment

in production expansion in the future is necessary (next period)

In the long run, the company has gained a remarkably growth over a period of

2005 – 2009 The investment and renovation have showed clearly efficiency Agood result of production and business not only brings about high efficiency infinancial aspect for the company but also the socio-economic efficiency (viaannual norm and budget contribution of the company) This result will create amomentum for making the development strategy for the company in the years to

come

2.2 ANALYZING AND EVALUATING HANICHEMCO’S REAL

SITUATION

2.2.1 Analyzing the business environment

2.2.1.1 Analyzing the macroscopic environment

International environment

+ For technology

In the industry of fertilizer production, all urea producers in the world currently useblack-coal, gasoline and natural gas – 3 most popular energies at present – asmaterials The demand for 3 these energies is expected to quickly increase in thefuture The urea production technology from black-coal is mainly applied in China– where urea fertilizer is produced from black-coal powder, accounting for 65.9%meanwhile the urea produced from other materials such natural gas, oil sludge, etcjust accounts for 34.1% The production of urea from black-coal is firstlyintroduced in 1950 and till now it has been developing into the 3rd generation withmodern technology including gasification of coal powder made by Shell (Holland)

or Texaco (the US); the synthesis technoloy of ure made by Snamprogetti (Italy) orStamicacbon (Holland) in which the major features are to reduce raw materials andenergy consumption by 50% in comparison with the previous technology Theowner of the above technologies came to Viet Nam already to seek co-operation andinvestment opportunities and to express their goodwill in handing-over of these

38

technologies to Viet Nam for investment and production.

+ For the allocation of major urea production and consumption areas in the worldCurrently, 80% of total urea output in the world produced from natural gas Ureaproduction factories mainly are located at the natural gas-abundance regionsincluding Russia, Middle East, Indonesia, etc From 2000 – 2005, the world ureaoutput increased by 19%, mainly in Asia, Middle East and CCCP Meanwhile quite

a new projects were built or expanded, the output of several other factories werecut In the US and Japan, lots of factories had temporarily stopped production for a

long time due to the increased price of oil in the world

Table 2.2: Urea’s product capacity of the world

Unit: 1000 tons

Year 2010 (expected)

(Source website agro.gov.vn)

From the statistics table above, the urea world market is mainly concentrated inAsia (approximately 60%) Hence, other Asian countries which close geographical

39

distance with Vietnam have become competitors with Vietnamese producingfertilizers firms in general and for particular HANICHEMCO However, ureaproduction technology in most of these countries are from petroleum gas so whenthe price goes up, the production price will also increase On another hand, Chineseurea is produced from coal so it has competitive advantage like low production cost

and cheaper price

According to the International Fertilizer Industry Association(IFA) forecast, from

2005 to 2010 period, the production capacity of the world can increase 14 milliontons in which 60% is consumed locally West Asia region will contribute nearly50% quantity, followed by China 35%, the remaining 15% from Russia and India

+ For the world economyWithin fifteen years recently, the world has witnessed three major financial crisesthat are the Mexican currency crisis in 1994, the Asian financial crisis in 1997-1998and the ongoing global financial crisis in 2008 According to the World Bank, thereare "43 poor countries suffering the consequences of the global recession."

In this global financial crisis, Vietnam is still remaining one of the fastest growingeconomies in the world, with the GDP growth on average rate at 8% from 1990 to

1997 and from 1998 to 2003 at 6,5% From 2004 to 2007, the GDP growth rate wasmore than 8% per year Foreign trade and foreign direct investment has improved

significantly

+ For economic integrationThe World Trade Organization (WTO), regional economic organizations and smalleconomic areas have created quite a fair playing field for economic activities ofcountries However, economic integration also creates many challenges like

increasing competitiveness and high level of risk

Participate in regional economic and the world cooperation, Vietnam became amember of ASEAN in 1995, joined the APEC forum since 1998 and becamemember of WTO since 2007 The event has special meaning in economic relationsbetween Vietnam and other countries that is Vietnam has officially become the

40