Formulation of business development strategies for song da 10 joint stock company in 2015 2020

LIST OF ABBREVIATIONSSDT Song Da 10 Joint Stock Company SWOT Strengths, Weakness, Opportunities, ThreatsHASTC Ha No Securities trading center HosE Ho Chi Minh Stock exchange IT Informati

THESIS MBA TITLE Formulation of Business Development

Company in 2015 - 2020

TABLES OF CONTENTS

LIST OF ABBREVIATIONS 8

LIST OF FIGURE chart AND TABLE 9

ASSERTION 11

ACKNOWLEDGEMENT 12

INTRODUCTION 13

I Justification of the necessity of the capstone project 13 II Research objectives and applicability 15 III Scope of the research work 15 IV Approaches 16 V Research methodology 16 VI Structure 16 CHAPTER I - THEORETICAL BACKGROUND 18

I Fundamental issues of strategy and modern business strategy 18 1 Viewpoints about strategy 18

2 Typical features of a strategy 19

3 Types of business strategy 20

3.1 Classification of business strategy by levels 20

3.2 Classification of business strategies by content 21

3.3 Classification of business strategies by process 21

II The role of business strategies in modern business environment 22

1 Description of the formulation process of a strategy 22

2 Identification of corporate mission and objectives 23

2.1 Identification of corporate mission 23

2.2 Identification of strategic objectives 24

3 Analysis of business environment of a firm (external environment) 25

3.1 Impacts of external environment on business strategy 25

3.2 Evaluation of the environnemental impacts 29

4 Internal analysis of an enterprise 29

4.1 Analysis of the value chain of an organization 30

4.2 Analyses of financial situation 31

5 Strategy formulation and selection 32

6 Formulation of strategy by level 35

6.1 Business strategy 35

6.2 International business strategy 35

CHAPTER II – BUSINESS DEVELOPMENT STRATEGIC PLANNING FOR SONG DA 10 JSC 36

I An overview of Song Da 10 Joint Stock Company (SDT) 36 1 History and development 36

2 Development and achievements 37

3 Organizational and management structure of the company 38

II Analysis of corporate strategy and governance 39 1 External environment analysis 39

1.1 Macro environnent 39

1.1.1 The economic environment 39

1.1.2 Technological environment 42

1.1.3 Social and cultural environment 43

1.1.4 Political and legal environment 44

1.1.5 Global environment 46

1.2 Analysis of sector environment 48

1.2.1 Overview of the construction sector in 2009 48

1.2.2 Some issues regarding current underground construction in Vietnam 50

1.2.3 Summaries of opportunities and challenges for business environment of tunnel construction 52

1.3 Five competitive forces 54

1.3.1 Threat of current competitors 54

1.3.2 Threat of new market entrants 56

1.3.3 Company’s clients 56

1.3.4 The company’s suppliers 59

1.3.5 Substitute products 60

2 Internal environment analysis 63

2.1 Vision, mission statement, business principles and objectives of Song Da 10 Joint Stock Company 63

2.2 Business performance results of the most recent three years 65

2.3 Analysis on some financial criteria 67

2.4 Key product and service analysis 69

2.4.1 Tunnel construction activities 69

2.4.2 Dynamite drillings 72

2.4.3 Other activities 74

2.5 The SDT stock price 76

2.6 Labor policies 79

2.6.1 Situation of human resource 79

2.6.2 Salary, bonus and allowance policy 80

2.6.3 Recruitment and human resources attraction policies 80

2.6.4 Training policy 81

2.7 PR and Marketing activities 81

2.8 Technological equipment 82

2.9 Analyses of sustainable comparative advantages 82

2.10 Resources and potential competences 83

2.11 Internal Factor Evaluation 89

3 SDT’s key business strategies using SWOT matrix 91

CHAPTER III STRATEGIC SOLUTIONS AND RECOMMENDATIONS 97

I Strategic solutions 97 1 Strategic solutions 97

On the one hand, the mixed strategy is suitable with the company’s current situation 99

On the other hand, this strategy well serves the new plan 99

2 Objectives of the strategy 100

3 Strategic solution implementation 101

3.1 Product restructuring strategy 101

3.1.1 Product restructuring 101

3.1.2 Main estimated criteria for 2010 – 2015 103

3.1.3 Background of profit generation 103

3.2 Capital balancing strategy 105

3.3 Research and training strategy 105

3.4 Competition strategies 107

3.5 International business strategy 108

3.6 Marketing Strategy 110

3.6.1 Marketing intelligence (MI) 111

3.6.2 Formulation of market dossiers and sales projection 111

3.6.3 Studies of customers’ behaviors 112

3.6.4 Market segmentation and location goal 112

3.6.5 Follow-up steps 112

II RECOMMENDATIONS 113 1 Improvement of the company structure 113

2 Proper assessment and allocation of resources 114

3 Improvement of the steering information system for the implementation of the strategy 115

3.1 Management information channel: 115

3.2 Feedback channels: 116

4 Strict inspection 116

5 Human resources attraction, staff training, recruitment and appointment of quality personnel 117

6 Technology renovation and inverstment 117

7 Establish the company’s peculiarities 117

III Obstacles in the course of the studies and future orientation 118 1 Measurements 118

2 Time for studies 119

CONCLUSION 120

BIBLIOGRAPHY 121

II Other publications 121

Appendix 123

I Names and Responsibilities of Group's Members 123

II List of other organizations and individuals, who joined in the research

LIST OF ABBREVIATIONS

SDT Song Da 10 Joint Stock Company

SWOT Strengths, Weakness, Opportunities, ThreatsHASTC Ha No Securities trading center

HosE Ho Chi Minh Stock exchange

IT Information Technology

GDP Gross Domestic Product

SBU Strategic Business Unit

LIST OF FIGURE CHART AND TABLE

Table 2.2 – Changes in concentrated growth strategy 33Table 2.3 – Changes in integrated growth strategy 33Table 2.4 – Some major indicators in 2009 as against 2008 39

Table 2.5 –List of capital and market share of underground

construction companies in Vietnam as at 3/2010

Table 2.15– Criteria to define core competencies 86

Table 2.16– Outcome of combination of SDT’s sustainable criteria 87Table 2.17- Internal Factor Evaluation matrix 89

Table 2.21–Main estimated criteria for 2010 - 2015 103

3. CHarT

Chart 3.1 –Structure of SDT’s groups of activities 75

Chart 3.2–The illustration of price and trading volume of SDT shares in 3

recent years

76

Chart 3.3– The fluctuation of SDT stock price as compared with

MCV price in recent 3 years

77

Chart 3.4– The fluctuation of SDT stock price as compared with

HNX-index in recent 3 years

77

Chart 3.5–Number of employees by qualification level as at 12/2009 79

We affirm that we reserve the sole ownership of the topic “Business development strategic planning for Song Da 10 Joint Stock Company in 2010 – 2015” Data of

the thesis was provided by Song Da 10

Up to present, this is the first time this topic is studied The members of the groupare not in any conflicts with company’s interest

We would like to thank Song Da 10 Joint Stock Company for your enthusiasticsupport providing us data as well as arranging meetings with regard to thecompany’s business strategy Besides, we would like to sincerely thank professorsand PhDs who equipped us with corporate governance skills and knowledgethroughout the course These are essential background for this study as well asapplicable experience for practical uses We would also like to express our specialthanks to the Academic Board of Griggs University for your supervision during thecourse of our research

Finally, we are particularly thankful to the valuable tutoring from Madam Nguyen Thi Tuyet Mai – PhD, Sir Pham Ngoc Thang- MA and Sir Sean Mc Gough – PhD

in our completion of this research work

ABOUT THE AUTHORS

I Justification of the necessity of the capstone project

2008 is a remarkable year of the post economic crisis period in Vietnam and allover the world As part of the economic panorama, Vietnamese and worldconstruction industries have slowed down significantly due to tightened investmentflows and slumped material price that hinder and slacken many projects

As 2009 comes to its end, total business transactions attained 123,437 billion VND,which is 14.6% higher than the same period in 20081; there has been many ongoinglarge projects and they are in the finishing phase since materials price has been onthe fall, interest rates has started to take effect and public investment and ODAdisbursement has been strengthened

Nevertheless, many construction companies, especially those in basic construction,have faced a number of difficulties in their operation as a result of the worldeconomic crisis In particular, it is not as easy to approach and mobilize capitalsources for investment as before Lack in capital has prevented many projects fromstarting off and slacked off construction process Moreover, operation in somecompanies is inefficient and has not been able to fulfill management requirements

in new conditions when business areas are enlarged Many key activities in theindustry like urban construction have yet been paid appropriate attention At thesame time, investment attraction and project implementation are not carried out in aprofessional manner This has major impact on companies’ profit and othereconomic objectives

1 Ministry of Construction (2010) Report on the implementation of 2009 plans; direction and key tasks of the construction industry in 2010 Hanoi: Ministry of Construction gateway.

Song Da 10 Joint Stock Company which specializes in subterranean constructions

of Song Da Corporation has more than 30 years of developing and growing2 Thecompany has run many underground construction projects and now has leadingmarket share in the industry However, on investigating the company’s activities, ithas been found out that behind successful projects and positive profits in recentyears, there still exists insufficiency in the company’s activities which also occur inother companies during post global economic crisis period Moreover, the companyhas not taken its full advantages to surpass other companies in the industry.Financial results do not reflect the company’s existing potentials as well as keybusiness activities

Following WTO membership and the integration and corporation trend withregional and world organizations, construction companies have access to a variety

of modern modes and technologies These modes have energized constructioncompanies’ developments However, at the same time, they are disadvantages fordomestic companies in competing with foreign ones as barriers to competitiveadvantages in such key industries like subterranean construction have graduallyshaken

Under such circumstances, it is essential to seek and establish stable solutions andbusiness development strategies for underground construction companies Effectivebusiness development strategies not only trigger stable and sustainable development

as well as many other benefits for the company but they are also significantcontributions to the development of the industry and the country’s economy

Keeping in mind the above rationales, the topic “Formulation of Business Development Strategies for Song Da 10 Joint Stock Company in 2010 -

2 Song Da 10 Board of Management (2010) Annual Report 2009 Hanoi.

2015” is selected for its significance to the company in particular and to theconstruction industry in general.

II Research objectives and applicability

The research objective of the topic is practically meaningful The research provides

an overview of activities and development direction of Song Da 10 Joint StockCompany in the post financial crisis period as well as in the fierce competitioncondition among construction companies Particularly, significant attention is paid

on tunnel construction, an essential area in transportation and hydroelectricinfrastructure which are considered the locomotives of the country’s economy.Therefore, the primary objects of this study are subterranean constructioncompanies, as well as individuals and organizations operating in this field

The study will set out a panorama of the operations in Song Da 10 Joint StockCompany in recent years, analyzes operational strategies, recommends somesolutions that help reorganize management structure, strengthen business strategyand boost other operation strategies, aiming at strengthening the company in terms

of entrance barrier and the company’s value in the condition of post financial crisisand growing fierce competition

Besides, the topic is used as a reference for projects and other research onmanagement in construction industry and on operation efficiency of constructioncompanies over the last periods The study also has theoretical value which is a newsight into the company’s strategies and business management methods

III Scope of the research work

Despite the many lessons on business performance of construction companiesdrawn from the post financial crisis period, our research work, due to certainconstraints and obstacles, concentrates only on SDT’s business development

strategies, which are in central interest of its Board of Management and othersubterranean construction companies Subsequently, the capstone project content isadhered to studying the factors that affect SDT's sustainable growth from strategicpoints of view and given the post financial crisis period

IV Approaches

 Conduct surveys and collect information for summary and analysis, using

logical approaches;

 Hold field visits for assessment and comparative studies;

 Conduct consultation with international experts on management of

construction companies and subterranean construction companies;

 Organize interviews with domestic and foreign specialists, and the

Management construction companies to get their consultation ideas forimprovement of the capstone project's recommendations;

V Research methodology

In elaborating the whole capstone project, the dialectical and historical materialism

is utilized in combination with other approaches such as analysis, statistical work,group survey, scientific abstractionism and illustrative models

In analyzing the company's financial performance, cross-sectional and time-seriestechniques, trend analysis, common-size statements and financial ratio analysis aretapped

In other analyses, five forces, SWOT models, and several other theoretical modelsare to be presented in Chapter I and used

VI Structure

This research includes three chapters Chapter one presents the theoreticalbackground and new approaches of the capstone project Chapter two is the core ofthe whole paper It provides an analysis and assessment of current performance ofSDT in view of the operations of the entire construction service It also looks intosome issues of SDT's business strategies and governance, through which constraintsand the roots of such constraints can be identified The last Chapter gives an overallbriefing of the research work, puts forth measures and recommendations, and pointsout arising problems and obstacles that prevent the authors from fulfilling theircapstone project to the desired quality

CHAPTER I - THEORETICAL BACKGROUND

I Fundamental issues of strategy and modern business strategy

1 Viewpoints about strategy

From the traditional viewpoint of Michael Porter3, a strategy can be defined as “thestudy to identify the most suitable competitive position for an industry, and majorscope of activities where competition is present” Strategy, according to him,emphasizes the point of competition

Alfred Chandler – a professor from Harvard University4 has another idea.

“Strategy", in his view, "is to define long-term key goals of a company, action

programs and allocation of necessary resources to achieve those goals” JamesQuinn5 from Dartmouth University defines “Strategy as the model or plan of anorganization to integrate steering goals, corporate policies and priority order ofactions in a unified entity”

William F Gluek6 is of the view that “Strategy is a unified, comprehensive andintegrated plan designed to ensure a firm's achievement of its business targets”.Planning-based strategy development approach is no longer in fashion Practiceshows that detailed plans that are formulated formally sometimes fail, andcontingency plans, therefore, are needed in the business operations of a company Inthis regards, traditional viewpoints show certain weaknesses Strategy, in its nature,

3 Porter,M.E (1981) The contribution of Industrial Organization to Strategic Management New York:

Wiley.

4http://www.news.harvard.edu/gazette/2007/05.17/27-chandler.html (June, 10, 2009)

5 Quinn, J., B (1980) Strategy for change: Logical Inscrementalism; Homewood, Illinois, Irwin

6 Lawrence R Jauch and William F Gluek(1989) Business Policy and Strategic Management

is a science and a tactic in achieving targets Such nature, however, is notemphasized in the above viewpoints

In such context, newer concepts of a strategy gradually replace the traditional ones.Endeavors have been made to reflect the nature of the term "strategy" in theseconcepts while ensuring its compatibility with the changing business environment.With this approach, the modern concepts do not emphasize the projection andplanning aspects but rather the selection of strategies that respond to the targets setout by an organization

It is obviously uneasy to give a clear definition of a strategy Yet this problem can

be solved if attention is paid to each strategy’s factors, which are meaningful forany organization In any circumstance, these factors depend strictly on the currentsituation of each enterprise, member organization as well as organization structure

It is necessary to separate the definition of a strategy and the strategy formulationprocess in order to have a unified definition with the assumption that we had aconsistent strategy with goal, orientation and could face with changes in afluctuating environment

2 Typical features of a strategy

It can be seen that the concepts of a strategy are varied Yet, a strategy, from anyangles and at any time, has some most typical features that reflect the nature of thebusiness strategies of an enterprise specified below:

 A business strategy must clearly define the key goals to be achieved in

specified periods and must grasp at all aspects and levels of the productionand business activities of an enterprise

 Business strategies must be reflected in a continued process from

development to achievement, assessment and review, and adjustment of theset goals

 A business strategy must ensure optimal mobilization and full exploitation of

the firm’s resources like manpower, capital, technique and technology; andensure that the firm's advantages are promoted and opportunities are grasped

to gain comparative advantages in the market

 A strategy is an instrument that sets out long-term objectives of an

enterprise; and

 A business strategy defines the clear scope of competition of an enterprise

The essence of this characteristic is to identify clearly the business scope of anenterprise This is an important step of an enterprise in reflecting businessenvironment, positioning strategies, allocating resources and administering itsinvestment portfolio Two basic questions raised are:

What are we trading in? and What should we trade in?

This is a relatively complex problem since the market segmentation has a greatimpact on identification of organizational structure of a company

 A business strategy creates interaction between opportunities and threats of a

company, and between its strengths and weaknesses, from which itscompetitiveness is built

This feature highlights a key aspect of strategy – the long-term sustainablecompetitive advantage of a firm over its major competitors in the involving businesssector It is a modern approach to make a research on competition status of anenterprise

3 Types of business strategy

3.1 Classification of business strategy by levels

The common level-based classification of a strategy is:

Company (overall) strategies are the strategies formulated for the wholecompany in all the sectors that it deals in The objectives of the strategies ofthis type demonstrate the ultimate goal that the company is pursuing from itsoverall performance, directions and measures to achieve the goal

Business (sectoral) strategies are designed for a niche specialized businesssector When a company deals in one business sector, its business-levelstrategy is identical with its company-level strategy

Functional strategies are the strategies of specific service of a company such

as financial, marketing, and personnel, etc Functional strategies aresupportive in achieving the success of business and company strategies

3.2 Classification of business strategies by content

Based on contents of strategies, French administrators divided business strategiesinto the following types:

Commercial strategies are strategies applied in all trading activities of acompany from purchase of supplies to distribution and consumption of itsoutputs

Technological and technical strategies

Financial strategies

Human strategies describe directions and ways to mobilize and use humanresources for successful implementation of the above strategies

3.3 Classification of business strategies by process

Business strategies include

Orientation strategies that indicate major orientations on a firm's targets, itsdirections and ways to achieve such targets The strategies are built upon the

analysis of the internal and external environment of an enterprise They steerthe key strategic options of a firm.

Action strategies that comprises of action alternatives of an enterprise in aspecific situation and expected adjustments of the strategies Actionstrategies can be selected from the ones formulated in the development oforientation strategies, or from the strategies established during theperformance of orientation strategy

VII The role of business strategies in modern business environment

In modern business environment, strategies play an increasingly important role inthe existence and growth of an enterprise

Strategies are a tool to reflect collectively all the long-term goals of an enterprise.These goals are the ultimate targets that the firm wishes to achieve in its businessperformance Specification and documentation of such targets in the form ofstrategies helps every member of the enterprise be fully aware of where they want

to go, and what they need to do Consequently, this contributes to theaccomplishment of the firm's targets

1 Description of the formulation process of a strategy

Although there are various viewpoints of the various formulation approaches of astrategy, a normal process is composed of the following steps:

Figure 1.1 – Business strategy formulation procedure

4 Identification of corporate mission and objectives

4.1 Identification of corporate mission

Before looking into this issue, a question raised is what are the objectives andmission of an organization?

Corporate objectives of an organization are considered as reasons for its existence.The approaches of strategists, therefore, to target issues will steer the formulation of

a strategy and influence its content

Formulation (Decision on what to do)

Formulation (Decision on what to do)

Implementation (Achieved results)

Implementation (Achieved results)

technical, financial &

managerial resources of the firm

Identification of material,

technical, financial &

managerial resources of the firm

Human values and

determination of the leadership

Human values and

determination of the leadership

Types of objectives and policies to identify the Company and the business fields of the Company

STRATEGIES

OF THE COMPANY:

Types of objectives and policies to identify the Company and the business fields of the Company

Structure of the enterprise and

dynamic system Inspection system

Screening and Promotion

Organizational and behavioral

procedures Measurement standards and methods,

dynamic system Inspection system

Screening and Promotion The highest leader of the Company Strategic- Organizational Characteristics

Human Resources

The highest leader of the Company Strategic- Organizational Characteristics

Human Resources

The regular formulation of a mission statement is a continuous process that has sixsteps:

Step 1: Initiate initial idea of a business mission

Step 2: Assess external environment and review internal conditions

Step 3: Re-define the idea of a business mission

Step 4: Rewrite the mission statement of the company

Step 5: Organize the implementation of the mission statement

Step 6: Review and revise the mission statement

In writing the mission statement, it is necessary to take into account not only thewishes of the owner, the leaders, but also the internal and external factors of thecompany

4.2 Identification of strategic objectives

A company's objectives present clear orientations that it pursues, and influences itsbusiness performance For example, the increase of 15% in the company’s marketshare requires various actions to enhance its productivity Corporate objectives arealso good incentives For instance, to achieve the revenue of one billion in the nextyear can be a challenge to an enterprise Finally, a company's objectives are used as

an instrument for assessment and control It allows the company to check whetherthe planned business outcome is consistent with its requirements like whether thedelivery of the commodity can be contracted within two weeks This allows the firm

to take rational actions to get the desired outcome such as improved production andstorage and reduced order and delivery time, and raised sense responsibilities atwork

Target has also central role that is the result of comparison For each enterprise,target can be long-term, medium or short-term Economists assumed that anenterprise fixes its targets in eight main sectors as follows:

Market position; Renovation; Capacity; Financial and logistics source; Profits; Personnel development and efficiencies; Employee attitudes and efficiencies; Social responsibilities;

The absence of one of the eight foregoing sectors shall lead to serious consequences

to the whole enterprise In order to fix short-term targets and not to harm long-termones, a balance between these targets is required

5 Analysis of business environment of a firm (external environment)

5.1 Impacts of external environment on business strategy

External environment includes factors that may affect the performance of targets of

an enterprise The analysis of the external environment comprises of macroenvironment and sector environment (micro) The analysis of such factors shall help

an enterprise identify its position and environmental properties, the existence age,determine influences of the external environment and its targets, then be able tomake decisions in planning of strategy

Macro environment:

Macro environment includes various factors that have indirect impacts on activities

of an enterprise through its influences on factors of the sector environment, ofwhich there are 5 factors considered by administrators as those that influence moststrongly, that is: economic, institutional, legal, technological, social and naturalfactors

 Economic factors: have great influences on enterprises and the most

frequently movable factor, the most difficult factor to forecast among macro

ones Its movement always contains both opportunities and challenges forenterprises, of which the following moving trends are the most prominent:

- GDP and GNP trend: directly affects the growth rate of the economy, the

growth of disposable income of the population It shall make changes inconsumers’ needs, consumption market scale, affecting demand-supplybalance of products

- Interest: is a factor that has impacts on consumption saving and investment

trends; make consumption needs rise up or slide down, stipulate or limitinvestment in production expansion

- Inflation rate: affects prediction possibilities of investors, high inflation rate

shall make prediction more difficult, investment more risky, bringing aboutreduced investment, production and having impacts on sector competition.Balance of payment, exchange rate: affect the market and external economicrelations of an enterprise; sometimes result in the change in economic state

 Social, population, custom, preference factors, etc directly affect

consumption needs of the society

 Natural factor: is an important factor in human life; at the same time is an

input supply for many production sectors Natural factor is considered as theleast variable factor However, in the past decade, the natural environmenthas been seriously deteriorated This may have great impacts on movementtrend of enterprises

Sectoral environment:

Sector environment closely attaches activities of an enterprise; factors of theoperation environment shall decide the investment environment, competitionstrength and profits in the sector According to Professor Michael Porter, thecontext of the operation environment is subject to influences of five competitiveforces: risk of penetration of potential competitors, competition strength ofcompanies in the sector, power of buyers, power of sellers and threats of alternativeproducts

Figure 1.2 – Michael Porter's model of five competitive forces 7

- Threat of New Entrants: are companies that are currently not participating in

competitive rivalry within but are likely to penetrate into the industry Theirappearance shall increase competitive intensity, decrease profits within theindustry The penetration capacity of potential entrants will depend on theextent to which there are barriers to entry The higher penetration barriers7

M.E Porter, Competitive Strategy (New York: Free, Press, 1980

Threat of new entrants

Bargaining power of customers

Competitive rivalry within the industry Density of competitors

Competitive rivalry within the industry Density of competitors

are, the easier it is for other companies to enter this industry and vice versa.According to Joe Bain8, there are three major barriers hindering thepenetration namely Brand loyalty of customers, absolute cost advantages,and economies of scale If an enterprise has suitable strategies to enhancepenetration barriers in to the industry, the penetration threat of latent entrantsshall be restricted

- Existing players:

Existing players are regular pressure and direct threat to companies The moreaggressive the competition of existing players within the industry is, the moreprofit-making capacity, their existence and development are threatened It is suchlatent competition that existing companies within the industry keep enhancinginvestment costs with an aim to differentiating their market-access products,services or reducing their prices The competition intensity within the industry oftendepends on the following factors:

The number and capability of companies within the industry:

The number and capability of companies within the industry decides competitionnature and intensity within the industry In the industry with big companies ofequivalent capabilities, the competition tends to be fierce and much more inclines to

a price war In the event of only a few influenced companies prevail; they tend tohave connections with each other to control the market, which makes lessinfluenced ones reluctantly follow playing rules set out by the prevailing

Market demands: Demands for products and services of companies greatly affectthe competition intensity When product demands tend to increase, companies find

it easier to protect or expand their market shares, thus the competition appears less

8 J.E Barriers to New Competition (Cambridge, Mass: Harvard University Press, 1956) For a review of the modern literature on barriers to entry, see R,J Gilbert, “Mobility barriers and value on Incumbency” in R Schmalensee and R.D Willing, Handbook of Industrial Organization, (Amsterdam,, Holland 1989)

severe Conversely, when the demands tend to decrease, companies shall beindispensably involved in a fierce war with other companies if they want to protecttheir market shares and expand the market

The costs are higher and higher, which makes companies more difficult to leave theindustry, thus they have no other choices other than involving in a decisive battlefor existence This makes the competition intensity higher and higher, esp forindustries at maturity or degeneration stages In the event of low withdrawalbarriers, the competition intensity tends to drop

Apart from the foregoing factors, the competition intensity also depends on otherssuch as the differentiation of products, services among companies within theindustry, the growth rate of the industry, entry betting, and fixed costs, etc

5.2 Evaluation of the environmental impacts

To evaluate the environmental impacts, quantitative assessment of the impact ofenvironmental factors on operations of companies is widely used, in which factorsare synthesized through a five-step procedure:

Step 1: Make a list of factors decisive to the success of companies

Step 2: Assess the importance of each factor to the industry

Step 3: Identify the weight of each factor in relation with responsive capability of

companies’ current strategies or the importance to the companies

Step 4: Scale the marks of each factor

Step 5: Calculate the total marks

The total marks shall reveal impacts on the environment on companies, therebyidentifying opportunities and challenges companies are now facing This is the basis

to formulate business strategies to ensure the suitability of the strategies and themobilization environment

6 Internal analysis of an enterprise

The capabilities of an enterprise are a basic factor to decide what it can do, whetherits strategies can be successfully performed To ensure the feasibility of strategies,during their formulation, it is necessary to assess the current situation, to determinestrengths and weaknesses, from which differentiate capacity or the competitiveadvantages of the enterprise can be identified The internal analysis is conducted inthe following aspects:

6.1 Analysis of the value chain of an organization

Supportive

activities

Infrastructure

Strategictargets

Information systemHuman resourcesAdministration of materialsResearch & Development

Main activities Marketing

and sales

Production After-sale

services

Figure 1.3 – Value chain of an organization 9

The value chain is the synthesization of activities of an enterprise in order toincrease the value The value chain of an organization is constituted from twogroups of activities – main activities and supportive activities

Main activities are those that are closely attached to products and services of the

enterprise They include purchasing and management activities of input factors,marketing activities, service activities and after-sale customer care activities.9

Le The Gioi, Associate Professor, PhD., (2007), Strategic Management, page 166, Statistical

Publishing House

Consideration is made whether these activities contribute to cost saving andimproved quality of products and services, which best satisfies customers’ demands.The more the activities are saved; alongside with increased quality and satisfaction

of customers’ demands, the higher the value chain of the company is evaluated withits advantages in competition

Supportive activities contribute to better operations of the company and its more

effective performance They comprise of personnel management, technologicaldevelopment and purchasing

6.2 Analyses of financial situation

An important and indispensable part seems the results of the company’s businessperformance through its financial standards Through data of the analyzed financialstandards, we can clearly distinguish how its financial capability and financialplanning and management work is conducted

Apart from the above-mentioned factor, internal analysis includes such issues assustainable value, internal control, and control of investment risks that will beanalyzed and evaluated by activity

Upon the completion of the internal analysis, a table of strengths and weaknesses ofthe companies shall be synthesized This is the final stage, and the results of theinternal analysis The table of strengths and weaknesses is developed in alignmentwith the table of opportunities and challenges in the environmental analysis

The combination of the two tables – opportunities and challenges, and strengths andweaknesses builds up a SWOT matrix, which is the ultimate results of theenvironmental and internal analysis, and foundation for the formulation of the firm'sbusiness strategies

Table 2.1 – Analysis of SWOT matrix 10

On the basis of the SWOT matrix, the company is able to identify strategies to bringinto full play its advantages, and make full use of the opportunities, and avoidchallenges from the environment

7 Strategy formulation and selection

Strategies are a system of key policies and measures to implement and coordinateprograms of action, supportive organization and fulfillment of targets in the mosteffective way Company strategies cover the entire operations of firm that aretargeted to the most effective competition, predominance in the market, andsustainable growth Company strategies can be selected from the followingstrategies:

Concentrated growth strategy: To pursue this strategy, the company’s strategies

must focus on product renovation or the market while leaving other factors intact.The company strives to tap any opportunities of its current products, and services orthe operating market

10 http://www.sciencedirect.com/science (Februa, 20th 2010)

Table 2.2 – Changes in concentrated growth strategy 11

Products, services Market Sector Sector level TechnologyCurrent implementation

or new

Current ornew

Current Current Current

Concentrated growth strategy enables the company to direct all its efforts to theactivities that it has comparative advantage, and tap its prominent strengths todevelop its business However, concentrated growth strategy tends to missopportunities to expand the market, fail to take advantages of its prominentcharacteristics, or grasp development opportunities of other professions

Integrated (aligned) growth strategy: With this strategy, the Company shall take

measures to undertake the production of inputs or consumption of products Thecompany can implement frontward integration (in reverse order) or backwardintegration (in clockwise order) (total or entire integration, internal or external

integration) Table 2.3 – Changes in integrated growth strategy 12

Products, services Market Sector Sector

level

Technolog y Current implementation Current Current New CurrentIntegrated growth strategy enables the company to reduce costs and save on marketexpenditure, control the quality better, make use of business opportunities and bemore active in developing business methods This strategy can be applied to capableenterprises that are able to grasp opportunities in line with their long-term targets

11

http://epress.anu.edu.au/anzsog/centrelink/mobile_devices/ch03.html (February, 26 th 2010)

12 Le The Gioi, Associate Professor, PhD., (2007), Strategic Management, page 166,

Statistical Publishing House

Diversification strategy: In this strategy, companies shall take measures to develop

new products and services to conquer new markets for increased efficiency Theycan exercise concentrated and composed diversification strategies without relating,

in terms of technologies, to their current products and services Diversified strategymakes full use of the surplus financial resources, creates new competitiveadvantages, and restricts risks It also requires companies to improve theirmanagerial capacity, and calculate benefits and costs of their growth in thisdirection

Streamlining strategy: The strategy plays an important role in the restructure of

companies when offering new services It is implemented when business activitiesthat they are pursuing have little prospect for long-term development, and

unsuitable economy or appearance of new and valuable opportunities Streamliningstrategy focuses on cost cutting, and investment capital recovery

Mixed strategy: A company, at the same time, can apply different strategies It can

accelerate its growth in one sector while cutting down on another These activitiesare all aimed to achieve successful implementation of the company's overall goal inthe execution course of its business strategies

The choice of one from the foregoing strategies depends on a company’s capacityand the conditions of the involving environment From the SWOT analysis, thecompany can select the most business strategy that fits its operation most

8 Formulation of strategy by level

8.1 Business strategy

For sole-sectoral companies, their level strategy is identical with company strategy.For multi-sectoral companies, each of their business sectors needs a separatebusiness strategy Due to the different characteristics and the environmental

conditions of each sector, strategies designed for each sector are certainly not thesame

8.2 International business strategy

An international business strategy addresses two issues – oversea marketpenetration for expansion, and competition Competition in the international market

is similar to a great extent to the competition in the domestic markets The degree ofcompetition and complexity of the business strategy in the international markets ismuch higher than in local ones

CHAPTER II – BUSINESS DEVELOPMENT STRATEGIC PLANNING FOR SONG DA 10 JSC

I An overview of Song Da 10 Joint Stock Company (SDT)

1 History and development 13

Subterranean and underground service construction;

Hydroelectric, hydraulic, transportation and other constructions;

Industrial, public contrucstion and housing;

Mine exploitation and mineral processing;

13 Song Da 10 Board of Management (2010) Annual Report 2009 Hanoi.

Construction consulation (excluding legal consultation) ;

2 Development and achievements

Song Da 10 Joint Stock Company is a member enterprise of Song Da Corporation –Ministry of Construction The company’s predecessor is Subterrenan ConstructionCompany which was established under decision No 54/BXD- TCCB dated11/2/1981 of the Minister of Construction

During 25 years of establishing and developing, the company has been titledvariously, such as Subterrenan Construction Company, Song Da 10 SubterrenanConstruction Company In 2002, the company’s name was changed into Song Da

On 27/11/2006, SDT’s shares were licensed to be listed and on 14/12/2006, thecompany’s shares were officially traded in Hanoi Securities Trading Center

In 11/2007, one year after being granted the listing license, the Company increasedits charter capital from 60 billion VND to 117 billion VND, marking a milestone inthe new stage of development of the company’s operation

9 Organizational and management structure of the company

Organization structure of SDT is organized and operated in accordance with theState owned Enterprise Law and the characteristics of the construction industry Inthis chart, the General Assembly of Shareholders is the highest authority organ ofthe company and following is Board of supervisors The Supervisory Boardcomprises three members appointed by the General Assembly of Shareholders.Ranking the third is Board of Management, in which five members are selectedwith five-year term This board has an adequate power to implement all the rights

on behalf of its company, excluding the competences of the General Assembly ofShareholders

Board of Directors stands in the fourth position of the company The membership ofthis board consists of five persons who are appointed by Board of Management TheGeneral Director is the Head and responsible for the daily operations of thecompany within his assigned functions Four deputy managers of technological,economics, material-mechanical and construction field will support the GeneralDirectorin each and every aspect of their competences The last Board is FunctionalDepartments, SDT Joint stock company 10.1 and six branch enterprises

Organization structure of SDT14 (see appendix 3)

14 Annual Report 2009 of SDT

VIII Analysis of corporate strategy and governance

1 External environment analysis

9.1 Macro environment

9.1.1 The economic environment

Table 2.4 Some major indicators in 2009 (increased/decreased) as against 2008 (%) 15

Values of agricultural, forestry and fishery production +3,0

Total goods retailing and consumption service revenue +18,6

Besides the above important achievements, there are still a lot of restrictions whichrequire effective solutions to overcome, if not, Vietnam socio-economic

development plans in 2010 in general and the construction industry in particular

will be affected These restrictions consist of:

15 Source: General statistics office of Vietnam

Firstly, although the economy has grown considerably and overcome the difficultstage, the economic growth mainly based on the growth in width with the increase inthe resource volumes, especially investment capital increase hasn’t really based onthe increase in productivity of social labor and the efficiency enhancing, thereforethe growth quality was not high and stable yet The investment ratios as againstGDP were 41.3% in 2008 and 42.8% in 2009 but the growth of GDP in the twoyears only got 6.18% and 5.32 %, which was not corresponding The ability ofcompetitiveness of the economy and many sectors, products was still low while ourcountry had fully integrated into the world.

Secondly, although the economic structure has taken steps to move in the positivetrend, it hasn’t still got out of the traditional sector structure with a relatively highproportion of the material production sector in general and the agricultural, forestryand fishery sector in particular In recent years, the economic structure has movedslowly in which in 2009, the structure of GDP subject to the current price in thethree sectors: agriculture, forestry, and fishery; industry and construction, servicewere 20,66%, 40,24% and 39,10% correspondingly, not much different from those

in 2008 and the recent years The sector, region and product structures were stillunreasonable, didn’t fully prove the strengths of each locality, each area and thewhole country

Thirdly, the macro-economic balances were not really stable Although the budgetdeficiency has been controlled, it still gained up to 7% of GDP; the trade deficit in

2009 went down by 32.1% as compared with 2008 but still equaled 21.6 % of thetotal export turnover; the service deficit was 18.6% of the service export turnoverand increased by 17% as against 2008 The inflation was controlled in a reasonablelevel but as a whole, the price has been escalating and has potentiality to cause ahigh re-inflation

Fourthly, some social problems have been slowly solved The lives, especially those

of low income people, people in the farthest land, in the sparse ethic groups and in