Luận văn chiến lược kinh doanh của công ty một thành viên cung cấp nước hải dương

In general, in strategiv terms, above opinions contain and reflect thebelow issues: + Target of the strategy + Performance period + Process of making a strategic decision + Competitive e

LUẬN VĂN CAO HỌC Chiến lược kinh doanh của công ty Một thành viên cung cấp nước Hải

Dương THESIS MBA

BUSINESS STRATEGY OF HAI DUONG WATER SUPPLY SINGLE

MEMBER LIMITED COMPANY

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LIST OF THE ABBREVIATIONS

LIST OF DIAGRAMS, GRAPHS AND TABLES

DECLARATION

ACKNOWLEDGEMENT

AUTHORS GROUP

FOREWORD

1 Name of the topic

2 Meaning of the study topic

3 Target of the topic

4 Study scope of the topic

5 Study method

6 Major structure of the essay

CHAPTER I: BASIC THEORIES OF THE BUSINESS STRATEGIES

1.1 Business strategy overview

1.1.1 Concept

1.1.2 Levels of strategy

1.1.2.1 Company level strategy

a Centralized growth strategy

b Growth strategy by integration - association

c Growth strategy by diversification

d Reduction strategy

e Innovation strategy

1.1.2.2 Business unit level strategy

a Competitive strategies upon competitive strengths

b Competitive strategies upon market share position in the market

c Investment strategy

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d Business level strategy upon life cycle of a product

1.1.2.3 Functioning strategy

a Manufacturing and operating strategy

b Financial strategy

c Research and Development strategy

d Human resources strategy

e Information system administration strategy

f Marketing strategy

1.1.3 Business strategy building up process

1.2 Vision, mission and values

1.2.1 Vision

1.2.2 Mission

1.2.3 Target

a Kinds of target

b Role of the strategic target system of the enterprise

c Requirements for the strategic target system

d Factors affecting the strategic target system and selection of the strategic targets

1.2.6 Analsis of the industry environment

1.2.7 Analysis of the internal environment

1.2.8 Analysis summary table SWOT

1.3 Selection of the business strategy

a Selection of strategic plan by analysis of BCG Matrix

b Selection of strategic plan by matrix EFE

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c Selection of the strategic plan by competition image matrix

d Selection of strategic plan by the Internal Factor Evaluation Matrix (IEF)

e Selection of strategic plan with GREAT model

1.4 Organization of performing the strategy

1.4.1 Organization structure

1.4.2 Control system

1.4.3 Inspection, evaluation and adjustment of the strategy

a Target of inspection and evaluation of the strategy

b Requirements for inspection and evaluation of the strategy

c Contents of inspection, evaluation and adjustment of the strategy

CHAPTER II: REALITIES OF BUSINESS STRATEGY OF HAI DUONG WATER SUPPLY SINGLE OWNER COMPANY LIMITED

2.1 General introduction of Hai Duong Water Supply Single Member Limited

Company

2.1.1 Establishment and development history

2.1.1.1 Overview of Hai Duong Water Supply Single Owner Company Limited2.1.1.2 Establishment and development process of the Company

2.1.2 Lines of business

2.1.3 Organization structure and objectives of the departments

a Apparatus organization structure

b Functions, objectives and relationship in management apparatus

2.2 Results of business operations of Hai Duong Water Supply Single Owner Company Limited

2.2.1 Major products

2.2.2 Results of business operations

2.3 Advantages and difficulties of the Company during production and business2.3.1 Macroeconomic environment

2.3.1.1 Economic environment

2.3.1.2 Political - legal environment

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2.3.1.3 Technical environment

2.3.1.4 Social environment

2.3.2 Industry environment analysis

2.3.2.1 Realities of the industry environment

2.3.2.2 Five competitive forces

2.3.3 Competitive advantages of the Company

a Overview of the water industry

b Competitive advantages of the Company

c The Company position in the industry

d Assessment of development orientation of the Company against which of the industry and State policy

2.3.4 Analysis summary table SWOT

a Challenges for the Company

b Development opportunities

c Advantages

d Disadvantages

e Analysis summary table SWOT

2.4 Present business strategy of the Company

2.4.1 Applying strategy of the Company

2.4.2 Advantages and disadvantages of the present business strategies

2.4.3 Strategy performance in recently years

a Capital solution

b Consuming price solution

c Labor solution

d Market solution

e Purified water providing solution

CHAPTER III: BUILDING UP BUSINESS STRATEGY OF HAI DUONG WATER SUPPLY SINGLE OWNER COMPANY LIMITED DURING THE PERIOD OF 2010 -2015.

3.1 Orienting development of the Company

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3.1.1 Orienting to develop until 2015

3.1.2 Strategic target

3.2 Specification of vision, mission and values of the Company

3.2.1 Vision

3.2.2 Mission

3.3 Selection of business strategy until 2015

3.3.1 Applicable strategies of the Company to reach the target

3.4.2 Product and price policy

3.4.3 Human resources solution

3.4.4 Marketing solution

a Strengthen and increase market share at the districts of Hai Duong province

b Protect the market share at Hai Duong City

3.4.5 Financial solutions

a Source of funds for production operation

b Source of funds to invest in works and projects

3.5 Undertaking performance

3.5.1 Performance route

a During the period of 2010 -2012

b During the period of 2012 -2015

3.5.2 Inspection, assessment and adjustment

CONCLUSION AND SUGGESTIONS

1 For the management agency of the water industry

2 Solutions to policy and regulations of the Party, State and of the province

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LIST OF REFERENCE

Appendixes

1 Full name and objective of the group members

LIST OF THE ABBREVIATIONS

SWOT

Strength, Weakness, Opportunity and

ChallengesPEST

the analysis instrument relating to themacroeconomic, outside factors

Diagram 1.1: Business strategy building up process Page 21

Diagram 1.2: Five competitive forces upon M Porter Page 25

Diagram 1.6: Internal Evaluation Factors Matrix Page 40

Diagram 2.1: Organization model of the Company Page 49

2 TABLE

Table 1.3: SWOT matrix analysis table of the

Table 1.4: Application of BCG Matrix Page 37

Table 1.7: Strategy plan with GREAT model Page 40

Table 2.2: Business results during three years

Table 2.3: Customer quantity of the Company Page 52

Table 2.4: Merchandise water yield Page 52

Table 2.6: Major financial criteria Page 54

Table 2.7: SWOT analysis summary table of the

Table 3.1: Target at the end of 2010 and until 2015 Page 77

Table 3.2: Labor qualification structure Page 89

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Table 3.3: Human resources qualification structure Page 90

DECLARATION

We declare that : the topic “Business strategy of Hai Duong Water Supply

Single Owner Company Limited during the period of 2010-2015” is studied by

us The figures relating to the Company are provided by very Hai Duong WaterSupply Single Owner Company Limited

Up to now, this is the first time this topic is studied There is no contradiction ininterest with the Company among the group members

Hanoi, date March 2010

AUTHORS GROUP PERFORM

1 Nguyễn Văn Đoàn (Captain)

AUTHORS GROUP FOREWORD

1 Name of the topic: “Business strategy of Hai Duong Water Supply Single

Owner Company Limited during the period of 2010-2015”

2 Meaning of the study topic

Stable and sustainable development is the desire of the whole society, everynation and socio-economic organization on the whole world

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At present, the world economy is in the trend of globalization Many countriesand organizations have achieved many splendid successes at home and in global,formed the stable and solid foundation for the sustainable development.Nevertheless, some organizations failed to take their opportunities, strengths andlacking the solutions to overcome the difficulties and challenges As a result,they declined, went down to the slope without brake even went bankrupt It isbecause the formed and organized business strategy is not proper with theexisting potentials, without careful study of impacts of the internal, externalenvironment, opportunities, strengths, difficulties and challenges to build up theshort term, middle term or long term development strategy that is sufficient oftheoretical basis and market study realities.

Vietnamese economy having been integrated into the economy in region and onthe world, presented in expansion of the business environment of manyenterprises with a lot of the opportunities They still have to cope with manydifficulties, challenges and more and more fierce competition

At the present market condition, what determines successful of the enterprise isselection of the right way, forming and building up the reasonable, timely businessstrategy and proper with the objective and subjective conditions of each period andstage

For these reasons, the Vietnam enterprises in general and Hai Duong WaterSupply Single Owner Company Limited in particular are necessary to contactwith the knowledge of business strategy

Water industry is one of the fields are in developing process In general, watersupply system has been invested in construction at the first to third rate urbanareas rather than fourth and fifth rate urban araes and communes

In order to guarantee development of the water industry, the State policyencourages the socio-economic organizations at home and overseas to invest inpurifed water supply, in the fact, it is the competition between Vietnam and HaiDuong in water supply area and service Particularly, many foreign specializedwater supply organizations with the financial abilities and modern technologiesare conducting market survey and want to invest in Hai Duong

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Therefore, forming and building up business strategy of Hai Duong WaterSupply Single Owner Company Limited is suitable, ability of competition isstrong enough to survive in market economy is an urgent issue Simultaneously,building up the business strategy is the vital factor of the Company duringpresent period.

3 Target of the topic:

Study of this topic is to contribute to clarify some basic theory and methodologyissues in building up and performing business strategy of Hai Duong WaterSupply Single Owner Company Limited

This includes analyzing impacts of the business environment on financialbusiness operation, aware clearly of opportunities, challenges, strengths andweaknesses of the Company And then the necessary business strategicmeasures are proposed to enhance effects of the Company's business strategyduring the period of 2010-2015

4 Study scope of the topic

The topic concentrates on Business strategy of Hai Duong Water Supply SingleOwner Company Limited during the period of 2010 - 2015

5 Study method

The topic uses some following measures:

- Analysis comparison and synthetic method: Analyzing figures from thereports, source of information about Hai Duong Water Supply Single OwnerCompany Limited

- SWOT matrix analysis method: the analysis and settlement technical of theenvironment study results helping the enterprise to put forward the scientificstrategy

- Statistical method: Reckon up the tables and draw the conclusions of the trends

to evaluate operation situation of the Company and the Industry

6 Major structure of the essay

Foreword

Chapter I: Basis theories of business strategy

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Chapter II: Realities of the business strategy of Hai Duong Water SupplySingle Owner Company Limited.

Chapter III: Building up business strategy of Hai Duong Water SupplySingle Owner Company Limited

Conclusion and suggestions

List of reference

Chapter 1: BASIC THEORIES OF THE BUSINESS STRATEGY

1.1 Overview of the business strategy

1.1.1.Concept

Strategy administration is the strategic science and art for building up businessdirections and targets, conducting short-term and long-term plans based uponavailable resources helping each organization to achieve its long-term targets

So, what is strategy? Strategy is the direction and scope of operation of anorganization in long term to gain business strengths through determination of theavailable and usable resources in the specified business environment in orderthat meeting market demands and for benefits of all relevant entities

For further details, strategy is to

- Achieve the long-term targets of the business in sustainable manner

- Business market or part of business market of the company, business tactics shall beapplied

- How to take advantage over the competitors at those markets with the specificcustomers?

- Which resources are needed to achieve that target?

- Potential risks from outside may affect to execution of strategy: environment,competition, politics, resources

- The values that brought Owners and the Society by the enterprise as a member

of it

Apart of process, strategy management is considered as the management processincludes formation of the strategic vision, setting up the targets, drawing up and

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execution of a strategy and it must be adjusted to adapt with the circumstances

in the course of time

There are many different approaches to strategy so proposed strategic concepts aredifferent Up to now, there is no general concept of this category yet Some belowconcepts may be mentioned:

- M.Porter said that: “Strategy is the art of building up solid competitivestrengths for defense”

- “Strategy is to outline the progress orbits are solid and permanent enough

to arrange the exactly decisions and actions of the enterprise around it” This isopinion of Mr.Alain Charles Martinet, who was awarded a prize of HavardL’expandsion in 1983

- Alain Threatart in “Company's strategy” said that: “Strategy is an artused by the enterprise to against competition and gain the victory”

In general, in strategiv terms, above opinions contain and reflect thebelow issues:

+ Target of the strategy

+ Performance period

+ Process of making a strategic decision

+ Competitive environment factor

+ Strengths and disadvantages of the enterprise

+ The methods and ways to achieve the target

Hence, we found that the enterprise's strategy is the "product" combineswhat the market has, what the enterprise can do and what the enterprise wants

In conclusion, in operations of the enterprise, the strategy is: “An art ofdesign and organization of means to achieve the long-term targets andrelationship with the changing and competitive environment”

1.1.2 Levels of strategy

Strategy may be managed at the different levels, in general, however,there is three basic levels of strategy in the enterprise:

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1.1.2.1.Company level strategy

Company level strategy contains general orientation of the company formanagement growth of the affiliates, allocation of the financial resources andother resources for them This defines one expected structure of the product,services of the fields of business of the enterprise, line of business that theenterprise intends to execute and how to do business of each branch

Depending on objectives and targets needed to achieve the administrator shallchoose the proper strategies There are some strategies normally chosen by thecompany level:

- Growth strategy (including 3 strategies: centralized growth strategy, growth byintegration and diversification)

- Declination strategy

- Innovation strategy

a Centralized growth strategy

This is the decisive strategy with focus is placed on improving the products oravailable markets without changing any factor

To pursue this strategy, the enterprise should try to take all opportunities it gotfrom the products and services are under production, business or its availablemarkets by better performing what they are doing

The centralized growth strategy normally there is three types:

+ Market entry: This is to increase of market share for the available products andservices of the existing markets by trying so hard in marketing

This strategy is applied normally in following cases: As the present markets arenot saturated with the service products are providing by the enterprise, increase

of using demand of which and decrease of market share of the majorcompetitors whereas increase of sales of the whole industry or as highcorrelation between revenue and marketing costs

+ Building up a market: This is a strategy to grow by penetration into the newmarket to consume the service products are manufacturing or providing by the

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enterprise For this strategy, the enterprises build up the market by: Finding outthe market on quite new area, learning about the new using values of the productand find out the new target customers.

This market building up strategy is applied normally as: the new distributionchannels are ready to be effect whereas the new markets are not saturated or asthe enterprise is willing to expand production and business as all conditions areavailable

+ Product development: This is a strategy to grow through development of the newservice products to consume on the existing markets of the enterprise For thisstrategy, the enterprise can develop the new products by focusing on the separateproducts or group of products

This strategy is frequent applied as: The enterprise is having succesful ripeproducts or as the enterprise competes within the industry with thecharacteristics of rapid developments of technology or as the competitors putforward the better products with the competitive price

b Growth strategy by integration - association

This strategy is proper normally with the enterprises are trading in strongdeveloping economies As the existing opportunity is suitable with the long-termtarget and strategy of the enterprise, this allows the enterprise to consolidate itsposition and promote all of its technical abilities

+ Vertical integration growth strategy: That is the enterprise undertakes itselfmanufacturing and supply of the input factors for production process or operatesits own product consumption stage

+ Horizontal integration growth strategy: It is often including merging strategy,taking over strategy, affiliation strategy and economic association strategy

The emerging strategy may be performed by voluntary merging two or moreproduction and business units in order to deal with challenges and risks mayhappen or more absolutely take advantage of business opportunities duringstrategic period

Taking over stategy: This is made and developed through competition on

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market Thanks to competition the powerful enterprises and having largeeconomic potentials shall take over the small enterprises to develop as thestronger and larger enterprise However, performance of this strategy requiresthe enterprise must be strong enough in all aspects and it always meet with thelaw barriers.

The affiliation and association strategy (strategic alliances): this is made amongtwo or more equal incorporated partners They shall help each other in order todisperse risks, increase the power and market share

c Growth strategy by diversification

This is to invest in many different trades and fields of action as the enterprisegains a competitive advantage in present business activities In general, thisstrategy is to increase value This strategy is proper normally with the enterprisefails to achieve growth target in present trade with the products and businessmarkets of the enterprise

Generally, the enterprises apply this strategy as: Life cycle of the serviceproduct is coming to the saturation or depression point or the enterprise is inexcess of capital to invest in the new segment with higher profits, limit risks orincrease market power against the competitors

There are two kinds of growth strategy by diversification as: related or unrelateddiversification

 Related diversification means diversification of the new businessactivities relating to present business activities by resemblance inmanufacturing, marketing or technology etc

 Unrelated diversification is an attemp to grow by leading to the newmarkets with the new products are not relating to the products are manufacturing

by the enteprise in technology aspect

d Reduction strategy

This strategy is suitable with the enterprises need to be rearranged to increaseeffects after a rapid growth period As there is no opportunity to grow in longterm within industry and profitable trade, economy is unstable or as having more

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attractive opportunities that the enterprise desires to catch.

There are kinds of reduction strategy such as:

Cutting down expenses: This is the temporary short-term strategy to reduce theineffective divisions or temporary difficult issues of the environment conditions.Payback: This strategy is applied as the enterprise transfers, sells or shuts downone of its affiliates in order to change the content of operation in basically andpay back Result of this process is to reallocate the resources to bring theenterprises back to life or create the new business opportunities

Harvesting: This strategy is all attempts to maximum increase the circulationcashflows for the present purpose regardless of any consequence in the future.This is the best strategy for the enterprises have to dealth with depression of theindustry

e Innovation strategy

Innovation strategy is considered as one of the strategies have the most powerfulimpacts froms the outside Innovation may impact on competition structure butmay lose the competitive power at the same time Innovation is made duringoperating and cost strengths may be created for the enterprises Innovation of theservice product helps the enterprise to increase discrimination between theinnovated enteprises from the others

The innovation strategies are normally difficult to perform although has anenormous potential It is greatly careful in aspects of organization and strategy ifthe enterprises do not want to be in danger The bonus is remarkable but verydangerous if the enterprises do not know or unable to manage the innovationstrategy

1.1.2.2 Business unit level strategy

The business unit level strategy concentrates on improving competitive position

of the service products or a combination of the market product that the entepriseparticipates in business The business unit level strategy includes competitiontheme is chosen by the enteprise to emphasize, the way it's located in the market

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by itself to achieve the competitive advantage and different locating strategiesmay be used in the different backgrounds of each industry.

If the enterprise wants to determine exactly the targets as well as the solutionsduring strategic period, setting up the business unit level strategy is verynecessary Basis for which that is different needs of service product of eachdifferent group of customers, manufacturing technology, research anddevelopment activities, supply of input factors as well as consumption of theoutput products

The business unit level strategy always include:

a Competitive strategies upon competitive strengths

+ Low cost strategy: This is to create competitive strategy by manufacturing theservice product in low cost and may fix the lower price than that of thecompetitors of the same industry to attract the sensittive target customers withthe low price and gain the big market share This strategy is proper normallywith the large enterprises are possibility of reducing costs during operation Itallows the enterprise to leave the competitors behind by manufacturing serviceproducts in lower costs

In order to perform this strategy, the enterprise is obliged to bring into play itskey capacities, permitting the enterprise to increase production effects andminimize cost lower than the competitors at the same time

+ Product differentitation strategy: This is to create competitive strengths bycreating the service products with the differences in comparison with that of thecompetitors

The enterprise pursues this strategy is possibility of meeting the customers in theway that its competitors fail to do Therefore, the enterprise may fixes the higherprice than medium price of the industry Possibility of increasing earnings fromfixing the higher prices allows the enterprise could collect more profits thanaverage

The enterprises pursue the product differetitation strategy choose the high level

of differentation to gain the competitive advantage

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As pursuing the product differentiation strategy, the enterprise shall choose tosegment the market into the small markets The enterprise shall providedesigning products for every small markets and determines to become a largedistinct enterprise Nevertheless, the enterprise also can choose some smallmarkets where the enterprise has the special different strengths.

The product differentiation strategy always accompanies with the distinctivemarketing strategy

As pursuing this strategy, the enterprise needs to concentrate into the functionaldivisions are convenient to make differences in service products as R& Ddivision, marketing division and sale division to create competition on themarket

The enterprise pursues this strategy always spent higher expenses than theenterprise pursues low cost strategy Therefore, the enterprise needs to controlall costs without making different strengths so that product price is notexceeding the sum to be paid by the customer

+ Main point concentration strategy: This is to concentrate on the market wherethe enterprise has superior strengths over other competitors On the other hand,main point concentration strategy is giving its all mind into serving one specialbranch of the market that is fixed upon geography, group of customers or smallsegment on the particular line of product

Target of this strategy is to focus on meeting demands of the limited group ofthe consumers or a segment of the market

+ Low cost combination strategy and different strategy: In recently,change of production technology made selection between low cost strategy anddifferent strategy becoming unobvious Development of the technology allowsthe enterprise to collect benefits from both strategies Application of thetechnology and flexible manufacturing may allow the enterprise that pursuingdifferentiation strategy to conduct serial productions with the costs are equal tothe enterprise pursues low cost strategy Utilization of robots and flexible serialproduction plants reduce cost on production line and relevant costs to small

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production work.

b Competitive strategies upon market share position in the market

During development process, each business unit of the enterprises holds thedifferent market shares on every market area as well as in the world In manycases, one multi-professional enterprise there is a business unit holds a largemarket share and considered as the leading unit in market share The other unitshold the smaller markets in levels and standing behind the competitors.Therefore, although they are in the same enterprise, but each business unit needsthe different competitive strategy upon each market share position of which inthe market

Upon market share structure, the business units are divided as below:

Market share Business unit type of the industry

40% Market leading unit

30% Market challenging unit

20% The unit standing behind market

10% Unit is hiding in the market or finding its position in the

marketFor every kind of business unit above, it is necessary to put forward the propertarget and strategy Specifically:

+ Business strategy for the market leading business units: At every marketregion of each industry always there is business units are recognized as leadingthe market These are the units hold the largest market share and always stand atthe top of the competitors of the industry in: new product, price or development

of the sale networks

In order to protect the market, the leading enterprise may choose four generalstrategies:

- Innovation strategy: In assumption that it is necessary to do something better.Therefore these enterprises must always try in developing the new products,services or other ways to distribute

- Consolidation strategy: This is also a way to take initiative in order to preserve

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strength in the market By maintaining the reasonable price level and putforward the products with the new scale, form and design.

- Facing strategy: It is always normally quick and direct responses before thecompetitors This strategy model expressed the wars of promotion, price orkidnapping the dealers

- Disturbing strategy:

+ This strategy is for the challenging enterprises on the market They may belarge enterprises but not the number one enterprises on the market Target ofthese enterprises are holding more market shares and finding the way to lead themarket

Generally, these enterprises may attack directly the leading competitors, however,the competitors are the enterprises have strong and enduring competitive strengths,

so, this strategy has a high risk Therefore, these enterprises may use the differentstrategies for the best effects

+ The strategy for the enterprises are standing behind: The business units ranked atthe third position of the industry normally never want to face with the leadingcompetitors or challenging competitors because they have no full resources.Therefore, these enterprises shall avoid and follow closely the leading competitorsthrough imitation strategy

The behind business units have many strengths because they can learn thelessons, copy or improve the products or marketing activities of the leadingcompetitors Simultaneously, they shall save the P & D costs, costs ofdevelopment or expansion of the distribution channel

These enterprises may not challenge all leading enterprises in the market buttheir profits may be good or better because of the lower costs

+ The strategy for the enterprises are looking for a position in the market: Theyare trying to find and acquire the small positions in the market that seemed thelarge enterprises ignore or do not pay attention to

In order to take effect, too often these enterprises should carry out specializationmethods Simultaneously, they are necessary to develop the outstanding

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marketing strategies to confirm their prestige and attract the loyalty customersetc

on investment strategies of the enterprise

At the beginning process of establishment: Market share investment andbuilding strategy to create the competitive advantage Due to limits ofinvestment, the enterprise may choose specialization, focusing on some marketsegment to consolidate its position

Growth period: With a view to maintain the competitive advantage, out ofmaintaining the present market, the enterprise also needs to focus on expansion

to increase its market share This is the proper stage for the enterprise torecognize its strengths to put forward the suitable competitive strategies

Mature period: The growth speed was slowed down Within the industry hasestablished the different groups of strategy Therefore, at this moment,investment strategy most depends on competitive degree within industry andability of competition of the enterprise If the competitive environment is at highlevel, the enterprise needs to remarkable invest so that competitive advantage ismaintained and the existing competitive position is protected Otherwise, theenterprise would only enjoy the investment results of the previous period

Depression period: Demand of the product was reduced and the enterprise maylose ability to distinguish due to presentation of the more latest and effective

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technology At that time, the enterprise may choose the cutback strategy ofinvestment, minimum investment reduction or exit gradually from the market assoon as harvested enough.

d Business level strategy upon life cycle of the product

+ Product introduction period: Focusing on marketing and fixing price of theproduct

+ Product growth and development period: Strategic target of this period is how

to maintain the resources for growth with the market Here the essentialresources used for marketing activities and a part of which is used for researchand development activities of the product

+ Saturated/mature period of the product: this is the longest period during lifecycle of the product Out of protecting the market share, the enterprise alsoneeds to take notice of finding the unexploited market segments, marketcavities, improve the product design, create new features for the product andconsolidate stages of the production as well as consumption process of theproduct

+ Depression period of the product: During this period, the enterprise maychoose one of the two strategies: cutback of the costs, narrow field of activity toprepare for dissolution, liquid the product or recover the status quo of it byimproving or repeating life cycle of the product

1.1.2.3 Functioning strategy

This strategy focuses on management and utilization of the enterprise's resources inthe most effective manner The functioning strategies are developed to implementsuccessfully business unit level strategy and enterprise level strategy later

The functioning strategies are in the capacity of methods to implement thegeneral strategic targets of the enterprise It is established based upon thegeneral strategy, business unit level strategy and specific results of environmentanalysis and prediction, particular the market

During every strategic period, in order to guarantee conditions to implement

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system of the strategic targets, the enterprise should plan many differentfunctioning strategies such as: Marketing strategy, development researchstrategy, human resources administration strategy, financial strategy … etc.

a Manufacturing and operating strategy

Depending on scope of activity the enterprises may choose the differentoperating strategies

The small scale enterprises always choose the low investment strategy at thebeginning, maintain the frequent operation cost at low level and combine withthe specialization Upon this strategy, the administrators shall apply normallystrengths as the available experiences for saving cost

The large scale enterprises always make use of the advantage upon scale toreduce the production costs, maximum developing experiences of the workers inorder to reduce consumption of the fuel and materials and shortening completionperiod of the enterprise Besides, these enterprises may combine the operatingproduction division with the other divisions such as R&D, marketing etc inorder to improve the products as well as locate its products on the market

of borrowed funds with low interest rate, technology investment, and able toreduce costs are lower than the present …etc

For the enterprises compete by the concentration strategy for making difference,the financial division needs to gather funds for rising quality, improve theproducts and direct efforts of the financial activities in order to increase benefits

of the input factors, in present and future

For the enterprise selects combination of both slow cost strategy and difference

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making strategy of the financial administrative, it is necessary to examine bothlow cost and quality rising priorities in their financial decisions.

c Research and Development Strategy (R&D)

For the enterprise selects the low cost concentration strategy, the concentrationR&D methods to reduce the costs: innovating decision making process,redesigning the organization structure so that proper with changes of theenvironment, improving the business policies, innovating the leadership style,improving administrative activities of the functioning divisions …etc

For the enterprise selects the difference making concentration strategy, thetypical method of Research and Development of product/service such as: qualityimprovement, changing product composition, diversifying product design,changing style, increasing quantity and quality of the product supportingservices… etc

d Human resources strategy

Human resources administration is building up a qualified labor force helpingthe enterprise to achieve the long-term targets

The human resources strategies are common applied such as:

+ Head hunting strategy: This is a strategy to attract qualified labors before thecompetitors as the labors are learning, or unused good labors of the otherenterprises …etc

+ Arranging the proper works: According to qualifications and characteristics ofeach personnel in order to maximum develop creative ability of each labor,make use of the accumulated experiences of the personnel so that helping theenterprise to develop its competitive strengths and rise effects in business

+ Developing the favorable conditions for the personnel to work: Interest andsupport of the superiors to the juniors in materials and spirits if necessary, creategood conditions for everybody to promote the idea, build up a friendly andcomfortable operating atmosphere …etc

+ Building up the best lever system: In order to attract, exploit and maintain the

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qualified labor force for the organization: Proper salary payment for eachposition, operating results, commending and rewarding timely andcorresponding with the achievements, promotion and advancement etc tostimulate loyalty of the personnel to their enterprise.

e Information system administration strategy

One information system is clearly designed shall bring the whole of functioningdivisions of the business unit specific strengths In order to effective manage theinformation system; the administrator may use the strategies such as:

+ Developing the information system covering all markets upon geographicarea

+ Diversifying the data analysis system of the environment information:

+ Maximum exploiting the collected valuable information during every period inorder to carry out the effective response to happenings of the environment

f Marketing strategy

Functioning division level marketing strategy is very important in managing lifecycle of the product Depending on the business unit strategy, marketingmanagement strategy includes:

+ Locating market: The customers shall distinguish goods product brands of thecompany in comparison with that of the competitors in the market

+ Developing market share in the new market: This strategy is applied duringintroduction of the product within life cycle of the product

+ Protecting the market share: As obtained the big market share in the market orrevenue is at the peak during life cycle of the product, the marketing administratorsmust implement the existing market share protection strategy through the solutionsas: improving the product quality, design, adjustments in price, distribution channeletc

+ Narrowing market share: As product is falling into depression period in thepresent market, the marketing administrators need to implement the strategy ofnarrowing the market share through proper reduction strategies

+ Repeating life cycle of the product: In the fact, one product is falling into

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depression period in this market but still accepted in other market Therefore, themarketing administrators can implement the strategy of repeating life cycle ofthe product by trying so hard to find the new market for consumption of thepresent product and make use of the potential competitive advantage of theenterprise.

1.1.3 Business strategy building up process

The business strategy building up process contains below steps:

Step 1: Determining objectives and missions

Step 2: Evaluating, analyzing the outside environment

Step 3: Evaluating, analyzing the internal environment of the enterpriseStep 4: Building up the strategic plans

Step 5: Analyzing and selecting the strategic plan

Step 6: Conducting the selected strategy

Step 7: Checking, evaluating and adjusting strategy

Diagram of strategy building up process

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Determining objectives and missions Evaluating the outside environment Analyzing the internal of the enterprise Building up the strategic plans Analyzing and selecting the strategic plan Conducting the selected strategy Checking and evaluating performance

Diagram 1.1: Business strategy building up process 1.2 Vision, mission and values

Mission of the enterprise is combination of directions of work, desires andmethods that members of the enterprise should perform with the maximumefforts to gain the different benefits

Mission is the main function of the enterprise or answer why does the enterpriseexist?

Mission reflects important objection of the enterprise for the businessenvironment and presented normally through brief philosophies of theenterprise

Mission is the reason why the enterprise exists and presents struggle direction ofthe enterprise during existence period The enterprises may change the strategies

to perform the mission but rarely change its existence reason

Content of the mission document includes following factors: Customer,

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core product or service, market, technology, business philosophy or interests ofthe company to its personnel

1.2.3 Target

The target is most general understood as the destination needs to achieve Everyenterprise as well as every its part has its own targets Target of the enterprisemay determine the whole existence and development process but also may berelevant to each certain development period of it The strategic target system isthe destination is determined by the enterprise during a certain period

The enterprise level target includes normally general targets and targets of each field

of action for the whole of development process or each specific period of theenterprise

The enterprise division target is only containing targets in the scope of eachdivision and has specific feature

+ If in consideration of period, the whole target system shall be divided intolong-term target (strategy) and more short-term target (tactic)

Long-term target is in the long time It is normally targets as maximizing profits;grow ability and competitive position of the enterprises … etc

Short-term target describes results that the enterprise wants to achieve during theshorter period than long-term period Due to happening in the short time, the

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short-term targets are always more specific than the long-term targets.

b Role of the strategic target system of the enterprise

This is a basic for the administrators to choose business strategy and establishthe operating plans adapting with the environment

It is a motive power for the enterprise members try so hard to complete theobjective

This is one of the important standards helping the administrators to check,evaluate degree of completing the objectives of the enterprises, business unitsand functioning units etc during the same period

This is a factor to evaluate progress of the enterprise or organization duringdevelopment process

c Requirements for the strategic target system

+ Consistent: Consistent requires the targets must be united, suitable with eachother and completion of this target is not affecting performance of the others + Specific: Requirements for specific of the target system does not mentionabout period length, but requires to clarify what issue the target is related to?How long can perform the target …etc

+ Feasibility: Strategic target is the destination that the enterprise determinesduring one strategic period Therefore, this destination requires efforts of theperformer, not too high to achieve but practical and obtainable

+ Flexible: The business environment is always change so requires the targetsystem must be flexible to adjust timely everytime the environment changes.Flexibility is the condition guarantees turning into the strategic targets come trueand coming to effect

d Factors affecting the strategic target system and selection of the strategic targets

The strategic targets are affected normally by some factors from inside andoutside of the environment where the enterprise operates within

+ Influences of the enterprise internal factors are: abilities of talent and material

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resources of the enterprise, business philosophy, opinions of the enterpriseleaders, operations and achievements of the enterprise in the past

+ Influences of the outside factors: Conditions of the environment, outsideconcerned subjects …etc

Selection of the strategic target must base upon analysis of the factors areaffecting to strategic system of the defined strategic period The strategic targetsmay relating to: volume of work during strategic period, relating to profits, risksand ownership etc

1.3 Strategy analysis

1.3.1 Analysis of macroeconomic environment (using PEST diagram)

P (Politics) Political and law factors may have influences on trades of theenterprise

E (economics) Economic factors affect on production and business of theenterprise

S (Social) Social factors as change of the faith or behavior from increase ofearnings or approach with the international trends

T (Technonogy) Technical factors such as increase of Internet using or manyonline iinformation of fields of production and business of the enterprise

PEST is the analysis instrument relating to the macroeconomic factors, outsidebusiness environment of each enterprise This is usually used in businessstrategy and marketing strategy analysis

Macroeconomic environment analysis (PES) gives us the partial answer for thequestion: What the enterprise has to face with?

There are 5 macroeconomic environment factors that the enterprise has to dealtwith: natural factor, social factor, economic factor, political - legal factor andtechnical factor These factors impact on the organization in independentmanner or in combination with the other factors

a Natural factors

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The natural factors include: energy, natural resources, water, environmentpollution, lack of energy The natural conditions may affect to operations of eachdifferent kinds of enterprise, at different levels and densities in both positive andnegative trends.

b Social factor

All enterprises shoud analyze the social factors to fix the potential opportunitiesand threats The social factors are usually changing or making slow progressdifficult to realize sometimes The social factors including: life quality, lifestyle,flexible of the consumer, occupation, population, population density and religionetc

c Economic factor

The economic factor has very serious influences on the enterprises They arerelative on the wide range so the enterprises should select to recognize the mostdirect impacts Essential influences in economy always include: Interest rate,exchange rate, inflation rate and international exchange relationship

d Political - legal factor

The factors of political - legal environment govern and have very seriousinfluences on enhancing business results of the enterprise by impacting onoperation of the enterprises through the system of the legal instrument,macroeconomic regulating instrument etc

e Technical factor

The advanced technical and technology level allows the enterprise take theinitiative in rising goods quality, labor productivity and ability of competition,capital turnover and profit are increased and shall raise business results

1.3.2 Analsis of the industry environment (using 5 competitive forces of M.Porter)

Buyers Suppliers

Diagram 1.2 Five competitive pressure model upon M.Porter

- Hidden competitors: Hidden competitors are the companies now are absence butare still able to compete in the future Presentation of the hidden competitors alsoincrease competition with the enterprises of the industry Ability of competition ofthe competitors is evaluated through the concept "barrier" preventing adherenceinto the lines of business This barrier meant the enterprise should cost a lot ofmoney to adhere into some line of business The higher the cost is the larger thebarrier and on the contrary

Barriers for adherence always include:

+ Difference of the product makes the customers loyal to brands of thecompanies are in solid positions that stood firm on its legs Loyalty to the brand

is always being a barrier and the enterprises as the newcomers are very difficult

to fight over market share in the market The enterprises have enormouspotentiality should spend a lot of money to break the solid loyal to the previousbrands

+ Maximum advantage of price: The strengths of price may be occurred from:advanced manufacturing technology, accumulation of experiences, gratingpatent due to low costs of the resources … etc

+ Cost effects upon scale: Including cost reduction effects because ofmanufacturing on a large scale the standardized products, discounting with largeamount of materials on manufacturing input or advertisement on a large scale …

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- Present competitors:

The second action among 5 competitive actions upon Michael Porter model isthe competitive companies confirmed their solid positions in the market in thesame line of business Quantity, scale and strength of each competitor affectsbusiness activities and strategy of the enterprise The high competition isfollowed by reduction of competitive price and profits Therefore, pricecompetition factor is the risk for profits of the company

There are 3 factors forming competition rate among companies operate in thesame field, that is:

+ Competition structure: distribution in quantity and stature of the companiescompete in the same line of business

+ Growth speed of the trade: If growth speed of the trade not tense because themarket is large enough for the competitors, low growth speed of the trade shallturn competition among enterprises into the war between fighting over themarket share and expansion of the market share

+ Barrier preventing the enterprise from getting out of the industry: As businessactivities of the trade are inconvenient, revenue is sharp reduced and stagnantgoods without reasonable solutions to settle Price competition is gettingfiercely; the companies want to get out of the industry Nevertheless, it is noteasy because they have to suffer losses The higher losses the higher barrier and

on the contrary

In the fact, analysis of the competition activities on the market and collectionand analysis of the competitors are usually performed with following steps:Step 1: Identify, classify, evaluate and list the competitors upon market area.Step 2: Collect and evaluate the information of competitors

Step 3: Predict responses of the competitors

Step 4: Select the competitors to attack, avoid or cooperate

- Customer:

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Customer is the individuals and organizations need the service product provided

by the enterprise Customer has very strong influences on the business strategiesdetermine existence and development of the enterprise in long term As studyingbusiness environment to plan the strategies, customer information is veryimportant and is the first thing must be collected and evaluated

Depending on targets of the enterprise, collection of the customer information isnot similar to each other Normally, however, the administrator shall choose theproper information such as: Who is the target customer of the enterprise? Whatare their characteristics, scale of present and potential demands? What do theywant to buy the enterprise's product? What is advantage in negotiation of thecustomer …? Information of the customer may reveal opportunities or risks forevery enterprise

The customer may be considered as a threat for competition because they made theenterprise to reduce the prices or require high quality, perfect service This is aweakness for the enterprise because it increases operation cost of the enterprise.The customer may put pressure on the enterprise in following conditions:

+ Many small and medium scale suppliers of the industry provide goodswhereas there is a small number of buyers are large scale buyers

+ The customer buys a large number of products and services

+ The customer has many options for the diversified products

+ As all customers of the enterprise together to require the enterprise have to makeconcession

+ As the customers can find the material suppliers by themselves with the lowerprice than buying from outside

- Supplier:

Suppliers are individuals and enterprises possibility of manufacturing andproviding the input factors such as: Machinery and equipments for theworkshop, kinds of materials, spare parts, funds of labor service, energyinformation, transport means of the input factors affecting directly on business

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objectives, targets, operation process of the divisions, manufacturing costs,operation effects of the enterprise during each period …etc

The supplier may be regarded as a risk for the enterprise as they require increasingthe price or reducing quality of the supplied goods That is, profit of the enterprise isalso reduced

The suppliers may put the enterprise under pressure in following cases:

+ There is a small quantity of the suppliers

+ It is difficult to replace the input factors

+ Trade of the company is not important for the suppliers or purchasing power isjust holding the small density in output of the suppliers

+ As the buyers should suffer high cost because of changing the supplier

+ As the suppliers threat to integrate

Therefore, information of the supplier is the necessary data that the strategicadministrators must have and updated frequently for planning the long termbusiness strategy to make sure continuous manufacturing and business process

of the enterprise

Depending on every kind of specific input factors as: materials, labor funds…the essential information should be analyzed as follows:

+ Are there many product, service supplies that the enterprise can choose?

+ Which supplier is holding exclusive position on the market? Is there anydisadvantage for the enterprise as buying goods of the monopoly supplier …?+ How is supply - demand relationship or correlation between suppliers orquantity of the buyers in the market?

+ Is there any advantage of the supplier in negotiation?

+ How is the ability to supply in the long term?

+ Characteristics of the enterprise product of each supplier

+ Possibility of diversifying goods

+ Environment factors affecting to operation of the supplier…

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Each information of the supplier has private meaning and positive or negativeinfluence to operation of the enterprise Understanding each supplier with fulland updated timely information about them shall help the enterprise to takeadvantage of the opportunities as well as proper measures to prevent risks.

- Replacement

The enterprises of the same trade must compete with the enterprises of the othertrades may have product as the replacement for that of the trade Thereplacement limits potential profit margin of the trade by placing a maximumlimit for the levels of price that companies of the same trade may be profitable

in business This presented through elasticity of the demand upon crossed price

It is because goods may replace to each other shall cause competition on themarket As price of the main product increases shall encourage using trend ofthe replacement and on the contrary The more attractive ability to select price ofthe replacement the more solid threshold for profit of the trade

Influences on replacement for the enterprise:

+ Replacement has strengths in quality and price

In order to reduce pressure of the replacement, the enterprise must have specificsolutions such as:

+ Always have to take notice of investment and innovation of technology

+ Synchronous solutions to enhance product quality to compete with thereplacement

+ Always taking notice of the solutions to differentiate the product

During each development period, it is necessary to know how to search andwithdraw the suitable market segment or "branch" market

1.3.3 Analysis of the internal market

- Analysis and evaluation of the resources

Resources of the enterprise includes: human resources, tangible assets andintangible resources This is group of factors determines operability of theenterprise, success or failure in the market During each period every resource

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has its advantage or weaknesses in comparison with the competitors in themarket Therefore, the administrators always must know about information oftheir enterprises for the proper business strategies may be made.

+ Human resources: Human is the core factor in all operations of the enterprisesand determines success and failure of the enterprise Therefore, human power isthe first factor in resources that the administrators of the enterprises that havingbusiness orientation in long term must consider, analyze and solutions toimplement

+ Materials resources: Including the factors such as production funds, workshop,machinery and equipments, materials, information of the business environmentetc Every enterprise has private characteristics of materials resources in whichincluding both strengths and weaknesses Therefore, analysis and evaluation ofthe materials resources are important basics for the enterprise administratorsunderstand about the potential materials resources and limits for making thesuitable decisions

+ Intangible resources: Aside from above resources, every enterprise ororganization has other resources are only identified with perception, it isintangible resources This resource may be general achievement of the members

in organization or all specific individuals and affect to operation process of theenterprise The intangible is presented through many factors and theadministrators at all levels should have full basic knowledge in order to aware ofits presentation as well as importance

- Analyzing operations of the functioning divisions of the enterprise

+ Analyzing operation of Marketing division: Marketing is the system of therelated activities to study, forecast and specify demands and desires of the targetcustomers to meet by the better marketing mix than the competitors in the sameperiod and each market area

The basic marketing operations of the enterprise: Research the environment toidentify opportunities and challenges, segment the market, analyze thecustomers and factors relating to planning marketing strategy, design, organize

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performance and check the product strategies, price, selling promotion anddistribution network.

Knowing thoroughly marketing operations the administrator shall specifyobjectives of this function, works must be done of each period and determine todivide marketing function into the parts upon scale for effective management.+ Analyzing operations of the personnel division: Personnel administration is theoperations relating to recruiment, training, using, treatment, assessment andencouragement of the labor's loyalty to the organization In present violent competitionbackground, personnel administration plays very important role for strategicadministration of the enterprises, determines success or failure of the organization

On the other hand, personnel administration also contributes to development ofthe organization culture values, positive motivating enthusiasms of creativelabor the organization members

The information of personnel operations are useful for the administrators toanalyze and evaluate progress during the time as well as strengths, weaknesses

in comparison with the competitors in the same period This is a basic for theadministrators to prepare strategies, policies and action programs in personneladministration in the next period to take effect

+ Analyzing operations of the financial and accounting division: Financial andaccounting function relates to mobilizing and using of the materials resources ofthe enterprise during each period, conducting economic accounting at all stages ofproduction and business activities of the enterprise The financial and accountingfunction connected closely to operations of the other divisions, determinesfeasibility, effective of many other strategies and policies of the enterprise

Based upon above information, the administrator shall analyze, evaluate thestrengths, weaknesses of its financial and accounting operations in comparison withthe competitors to make the suitable financial strategies with each development ofthe enterprise

+ Analyzing operation of the research and development division: Research anddevelopment plays very important role in production and business operation ofthe enterprise Discovery and application of the new technology allows the

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enterprise to design the new products, enhance quality of present product,improve the manufacturing process to reduce the costs … And then, soremarkable competitive advantage for the enterprise is created.

The enterprises pursue new product strategy is very interested in research anddevelopment And they also cooperated with the universities, colleges andresearch centers in order to put the new research works into life

Depending on each case and target of the enterprise in every period, theadministrator shall collect and evaluate the present and potential ability toresearch and develop ò the enterprise It is the basic for making the decisions ofcompetitive strategy as: product differentiation strategy, low cost strategy … etc+ Analyzing operations of operating production: Operating production is theprocess of turning input factors into output factors at each stage of production andbusiness activities This function is connected closely to works of the operator at alldivisions of the enterprise, from production division to works of the administrationdivision and professional functioning divisions Depending on actual demand,function analysis shall be frequent, periodic or unscheduled performed

+ Analyzing operations of the information system in enterprise: Data structure

of environment information is collected and accumulated by the enterprise is akind of property, a valuable resource in comparison with the competitors Thisresource is possibility of helping the company to enhance quality of theadministrative decisions and affecting to ability of competition in the market

1.3.4 Analysis summary table SWOT

Analysis and evaluation of the above factors may help the enterprise togeneralize analysis and evaluation results of the business environment andarrange upon its trends and impact levels However, it is not enough becauseevery opportunity, risk, advantage, weakness may happen in the future with thedifferent firmness For instance, an opportunity is possibility of havingremarkable impacts on business activities of the enterprise but it is impossible tocome true If the enterprise ignores evaluation of it and has too manyexpectations for above chance, the enterprise is likely to fail Therefore, it is

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quite necessary to mention about evaluation the opportunities, risks, strengthsand weaknesses of the enterprise.

In order to evaluate those connecting closely its appearance during strategicperiod of the enterprise, first of all should base upon summary table of businessenvironment Because resources always be limited, therefore, in general, theenterprise does not have enough resources to take all opportunities as well asunable willing to cope with all hidden risks shall happen during strategic period.For this reason, it is quite necessary to specify order of priority for the opportunitiesand risks

In order to form the strategic thoughts based upon opportunities, risks, strengthsand weaknesses, should use SWOT Matrix SWOT Matrix is used to list all ofwhich within the enterprise in suitable order and position

According to the relationship between factors, the analyzers shall choose the properstrategic solutions through combination of: Strengths/opportunities (SO),Strengths/threats (ST), weaknesses/opportunities (WO), weaknesses/threats (WT)

Opportunity (O) Threats (W)

Strengths (S) Combining SO (using

strengths to make use theopportunities)

Combining ST (Makinguse of internal strengths

to prevent risks or limitthe external risks)

Table 1.3 Analyzing SWOT Matrix of the Company

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