Luận văn MBA xây dựng chiến lược kinh doanh bán lẻ giai đoạn 2010 2015 ngân hàng thương mại cổ phần VIB

Strategies help to answer the question for enterprises in which industry should be participated , the position of enterprise in the business environment, and the roles of each business s

LUẬN VĂN THẠC SĨ Xây dựng chiến lược kinh doanh bán lẻ giai đoạn 2010-2015 Ngân

hàng thương mại cổ phần VIB

THESIS TITLE

BUILDING UP A RETAIL BANKING BUSINESS STRATEGY

IN PERIOD OF 2010-2015 FOR VIETNAM INTERNATIONAL

COMMERCIAL JOINT STOCK BANK (VIB)

CONTENTS 2

LIST OF TABLES 5

LIST OF FIGURES 7

Chapter 1 SOME THEORIES OF BUILDING THE BUSINESS STRATEGY IN DECORATIVE PAINTS COMPANY .13

1.1 Concepts, classifications and the roles of business strategy in the company 13

1.1.1 The concept of business strategy in the Enterprise 13

1.1.2 Clasifying business strategy in the Enterprise 14

1.1.3 The role of business strategy 15

1.2 Content business strategy in the decorative paints company 16

1.2.1 Strategic content for businesses in the decorative paints company .16

1.2.2 The contents of strategies for functional level in the decorative paints industry 20

1.3 Grounds and procedures for building business strategy in the decorative paints company 22

1.3.1 Grounds to build business strategy in the decorative paints company 22

1.3.2 Analytical methods of environmental to build strategies of decorative paints company 23

Figure 1.1 SWOT / TOWS Matrix 25

Figure 1.2 BCG Matrix 25

Figure 1.3 Porter's Five Forces Model 28

1.3.3 The Business strategicplanning process 30

Figure 1.4 The Business strategicplanning process 30

SUMMARY OF CHAPTER 1 33

CHATER 2 STATUS OF ACTIVITIES IN ICI PAINTS CO., LTD VIET NAM 34

2.1 Overview of ICI Paints Co., Ltd Vietnam 34

2.1.1 Information of the company 34

Figure 2.1 Diagram of ICI Paint Vietnam Co., Ltd Organization System 36

2.2 Analysis, and assessment of the external environment of the company 36

2.2.1 Analysis of external environment of the company 36

Table 2.1 Country Facts in 2009 36

Table 2.2 Economic Indicators 37

Table 2.3 Effect on decorative paint market development 38

Table 2.4 Urban Migration 41

Table 2.5 Drivers of Market Size 42

A change of households classifying criteria based on relative points equivalent to their durables owned: 43

2.2.2 External assessment 48

2.3 Analysis, and assessment of the internal environment of the company 49

2.3.1 Internal analysis 49

Table 2.6 Volume and Value Share of Vietnam Paints Market in 2009 50

Figure 2.2: ICI company Historical Growth 51

Table 2.7 Financial Profit Summary 51

Table 2.8 Real labor wages in the company ICI 51

Table 2.9 Channel of Vietnam Paint market in 2009 59

2.3.2 Internal assessment 59

SUMARY OF CHAPTER 2 60

CHAPTER 3 BUSINESS DEVELOPMENT STRATEGY FOR ICI PAINT VIETNAM LTD., CO IN THE PERIOD 2010-2015 61

3.1 Summary of bases for business development strategy proposal 61

3.1.1 Vision, Mission and Strategic Intent of ICI Paint Vietnam 61

3.1.2 Applying analysis models to propose business strategies for Company 63

Table 3.1 ICI’s TOWS Matrix 63

Figure 3.1 BCG with external paint products of ICI 66

Figure 3.2 BCG with internal paint products of ICI 68

Figure 3.3 BCG of ICI with other products and services in the paint industry 70

Figure 3.4 Porter's Five Forces Model analysis of ICI 71

3.2 Company business strategy proposal 71

3.2.1 Enterprise business strategy proposal 71

3.2.2 Strategy proposal at functional levels of the Company 75

Table 3.2 ICI’s financial targets 82

3.3 Recommendation to the State and authorities 86

3.3.1 The State 86

3.3.2.Authorities 87

SUMARY OF CHAPTER 3 88

GENERAL CONCLUSION 89

LIST OF REFERENCE DOCUMENTS 90

LIST OF TABLES

CONTENTS 2

LIST OF TABLES 5

LIST OF FIGURES 7

Chapter 1 SOME THEORIES OF BUILDING THE BUSINESS STRATEGY IN DECORATIVE PAINTS COMPANY .13

1.1 Concepts, classifications and the roles of business strategy in the company 13

1.1.1 The concept of business strategy in the Enterprise 13

1.1.2 Clasifying business strategy in the Enterprise 14

1.1.3 The role of business strategy 15

1.2 Content business strategy in the decorative paints company 16

1.2.1 Strategic content for businesses in the decorative paints company .16

1.2.2 The contents of strategies for functional level in the decorative paints industry 20

1.3 Grounds and procedures for building business strategy in the decorative paints company 22

1.3.1 Grounds to build business strategy in the decorative paints company 22

1.3.2 Analytical methods of environmental to build strategies of decorative paints company 23

Figure 1.1 SWOT / TOWS Matrix 25

Figure 1.2 BCG Matrix 25

Figure 1.3 Porter's Five Forces Model 28

1.3.3 The Business strategicplanning process 30

Figure 1.4 The Business strategicplanning process 30

SUMMARY OF CHAPTER 1 33

CHATER 2 STATUS OF ACTIVITIES IN ICI PAINTS CO., LTD VIET NAM 34

2.1 Overview of ICI Paints Co., Ltd Vietnam 34

2.1.1 Information of the company 34

Figure 2.1 Diagram of ICI Paint Vietnam Co., Ltd Organization System 36

2.2 Analysis, and assessment of the external environment of the company 36

2.2.1 Analysis of external environment of the company 36

Table 2.1 Country Facts in 2009 36

Table 2.2 Economic Indicators 37

Table 2.3 Effect on decorative paint market development 38

Table 2.4 Urban Migration 41

Table 2.5 Drivers of Market Size 42

A change of households classifying criteria based on relative points equivalent to their durables owned: 43

2.2.2 External assessment 48

2.3 Analysis, and assessment of the internal environment of the company 49

2.3.1 Internal analysis 49

Table 2.6 Volume and Value Share of Vietnam Paints Market in 2009 50

Figure 2.2: ICI company Historical Growth 51

Table 2.7 Financial Profit Summary 51

Table 2.8 Real labor wages in the company ICI 51

Table 2.9 Channel of Vietnam Paint market in 2009 59

2.3.2 Internal assessment 59

SUMARY OF CHAPTER 2 60

CHAPTER 3 BUSINESS DEVELOPMENT STRATEGY FOR ICI PAINT VIETNAM LTD., CO IN THE PERIOD 2010-2015 61

3.1 Summary of bases for business development strategy proposal 61

3.1.1 Vision, Mission and Strategic Intent of ICI Paint Vietnam 61

3.1.2 Applying analysis models to propose business strategies for Company 63

Table 3.1 ICI’s TOWS Matrix 63

Figure 3.1 BCG with external paint products of ICI 66

Figure 3.2 BCG with internal paint products of ICI 68

Figure 3.3 BCG of ICI with other products and services in the paint industry 70

Figure 3.4 Porter's Five Forces Model analysis of ICI 71

3.2 Company business strategy proposal 71

3.2.1 Enterprise business strategy proposal 71

3.2.2 Strategy proposal at functional levels of the Company 75

Table 3.2 ICI’s financial targets 82

3.3 Recommendation to the State and authorities 86

3.3.1 The State 86

3.3.2.Authorities 87

SUMARY OF CHAPTER 3 88

GENERAL CONCLUSION 89

LIST OF REFERENCE DOCUMENTS 90

LIST OF FIGURES

CONTENTS 2

LIST OF TABLES 5

LIST OF FIGURES 7

Chapter 1 SOME THEORIES OF BUILDING THE BUSINESS STRATEGY IN DECORATIVE PAINTS COMPANY .13

1.1 Concepts, classifications and the roles of business strategy in the company 13

1.1.1 The concept of business strategy in the Enterprise 13

1.1.2 Clasifying business strategy in the Enterprise 14

1.1.3 The role of business strategy 15

1.2 Content business strategy in the decorative paints company 16

1.2.1 Strategic content for businesses in the decorative paints company .16

1.2.2 The contents of strategies for functional level in the decorative paints industry 20

1.3 Grounds and procedures for building business strategy in the decorative paints company 22

1.3.1 Grounds to build business strategy in the decorative paints company 22

1.3.2 Analytical methods of environmental to build strategies of decorative paints company 23

Figure 1.1 SWOT / TOWS Matrix 25

Figure 1.2 BCG Matrix 25

Figure 1.3 Porter's Five Forces Model 28

1.3.3 The Business strategicplanning process 30

Figure 1.4 The Business strategicplanning process 30

SUMMARY OF CHAPTER 1 33

CHATER 2 STATUS OF ACTIVITIES IN ICI PAINTS CO., LTD VIET NAM 34

2.1 Overview of ICI Paints Co., Ltd Vietnam 34

2.1.1 Information of the company 34

Figure 2.1 Diagram of ICI Paint Vietnam Co., Ltd Organization System 36

2.2 Analysis, and assessment of the external environment of the company 36

2.2.1 Analysis of external environment of the company 36

Table 2.1 Country Facts in 2009 36

Table 2.2 Economic Indicators 37

Table 2.3 Effect on decorative paint market development 38

Table 2.4 Urban Migration 41

Table 2.5 Drivers of Market Size 42

A change of households classifying criteria based on relative points equivalent to their durables owned: 43

2.2.2 External assessment 48

2.3 Analysis, and assessment of the internal environment of the company 49

2.3.1 Internal analysis 49

Table 2.6 Volume and Value Share of Vietnam Paints Market in 2009 50

Figure 2.2: ICI company Historical Growth 51

Table 2.7 Financial Profit Summary 51

Table 2.8 Real labor wages in the company ICI 51

Table 2.9 Channel of Vietnam Paint market in 2009 59

2.3.2 Internal assessment 59

SUMARY OF CHAPTER 2 60

CHAPTER 3 BUSINESS DEVELOPMENT STRATEGY FOR ICI PAINT VIETNAM LTD., CO IN THE PERIOD 2010-2015 61

3.1 Summary of bases for business development strategy proposal 61

3.1.1 Vision, Mission and Strategic Intent of ICI Paint Vietnam 61

3.1.2 Applying analysis models to propose business strategies for Company 63

Table 3.1 ICI’s TOWS Matrix 63

Figure 3.1 BCG with external paint products of ICI 66

Figure 3.2 BCG with internal paint products of ICI 68

Figure 3.3 BCG of ICI with other products and services in the paint industry 70

Figure 3.4 Porter's Five Forces Model analysis of ICI 71

3.2 Company business strategy proposal 71

3.2.1 Enterprise business strategy proposal 71

3.2.2 Strategy proposal at functional levels of the Company 75

Table 3.2 ICI’s financial targets 82

3.3 Recommendation to the State and authorities 86

3.3.1 The State 86

3.3.2.Authorities 87

SUMARY OF CHAPTER 3 88

GENERAL CONCLUSION 89

LIST OF REFERENCE DOCUMENTS 90

LIST OF FIGURES

6 3.3 Project team on new business strategy model

LIST OF GRAPHS

1 2.1 Vietnam Retail Banking market

2 2.2 Customer rate of banking service

4 2.4 Vietnam Commercial Joint Stock Bank as per total assets

2008

1 Neccesary of the research project

In the present context, when Vietnam is the member of many international organizations and with the trend of integration of regional economies and in the world, the business environment of enterprises will be expanded with new factors, many opportunities that’s why challenges are more competitive fiercely.To accommodate the business environment is changing, a successful business company need to have capabilities to cope with many changing situations, to forecast the trend of changes, to exploit the advantages, to know and promote the strengths and minimise the weaknesses of the company as well as to appraise the competitors To

do this, enterprises must be clearly outlined and built the own business strategy Business strategy is very important for the existence and development of enterprises The modern business management is focusing especially on the management of the business stratergy

ICI Paint Co., Ltd Vietnam has been established in 1995, is a member of the Imperial Chemical Industry of England In Vietnam, the decorative paints of ICI company is a market leader in the North and the second market share in South and Central It is so critical to build the SMART business stratergy for the company to maintain and to strengthen and to enhance its position in the context of so fierce competitive environment It will make the business successful

As a National sales director of ICI Paint Co., Ltd in Vietnam, I understand an enormous role of the building business strategy for company After discussion with members in the group 01.M05 and we all are agreed re to select the theme: "To Build the business strategy for Co ICI Paint Vietnam 2010-2015”

2 Purpose of Research:

The purpose of the topic is to develop the smart business strategy for ICI Paint Co., Ltd Vietnam in the period 2010-2015 and have the right solutions to implement effectively this strategy

3 Objective and scope of research:

Objective of research are the problem of business strategy and build business strategies of company with the managerial points of view.

Scope of research is the business strategy in the field of decorative paints business Limited research is ICI Paints Co Vietnam

Mainly data have been focused on three in 2007, 2008 and 2009

4 Methodological research:

With the logical and systematic approach, the topics are being used a combination

of research methods such as secondary research materials, survey, analysis, comparison, methods specialists, methods model

5 Structure exercises great:

Besides the introduction, list of references, the content of the topic are three chapters:

Chapter 1 Some theories of the building the business strategy in the decorative paints company

Chapter 2 Current status business of ICI Paints Co., Ltd Vietnam

Chapter 3 Solutions to build the business strategies for ICI Paint Co., Ltd Vietnam for the period 2010-2015

Chapter 1 SOME THEORIES OF BUILDING THE BUSINESS STRATEGY

IN DECORATIVE PAINTS COMPANY

1.1 Concepts, classifications and the roles of business strategy in the company 1.1.1 The concept of business strategy in the Enterprise

The vocabulary "strategy" is derived since a long time ago, before this term was first used in the military

Today, this term is used to spread and is introduced into most areas of economic, political, social , especially in the range of macro and micro economic Since the appearance to date, both in theory and practice, exist in many concepts of strategy There are some key concepts which have been mentioned often in the books and researchers that:

According to Michael Porter: "Strategy is the art of building the competitive advantages for a firm defense “

According to Alfred Chandler: " Business strategy is to define the fundamental goals and longterm goals for enterprises, to choose the policies and action plans to allocate the resources to achieve the fundamental that goals.”

According to William J Glueck: " Business strategy is the plans with uniformity, comprehensiveness and coordination designed to ensure that the fundamental goals

of the business will be achieved.”

Thus, the term “strategy”of Enterprises is implied and reflected the goals of the strategy, the time to do it, the process of decisionmaking for strategies, factors of competitive environment, advantages and weaknesses of Enterprises in general and for each activity in particular

Striking features of the strategy is its orientation and define solutions, major policy for key objectives Along with the plans, the orientation is decisive All the goals are qualified and linked together into a system of indicators reflecting a comprehensive production and business activities of enterprises.Therefore, building business strategy is the art of designing and organizing the

means to achieve longterm goals of the enterprise in close relationship with the business environment.

1.1.2 Clasifying business strategy in the Enterprise

According to different approaches, business strategies are classified into several types, typically as follows:

1.1.2.1 Based on level business strategy

Business strategy for enterprises level : General strategy, identify longterm goals and methods to achieve goals in each period Strategies help to answer the question for enterprises in which industry should be participated , the position of enterprise

in the business environment, and the roles of each business sector in the enterprise Business strategy level: the strategy to indentify how enterprises should compete

in each business sector to participate Generally, enterprises are operating in various business sectors are classified into the strategic business unit (SBU: strategic business unit), or called as the member units, relatively independent of each other Each SBU are assumed that one or several business sectors which are independentce of its own strategy but in unity with the overall strategy and interests

of the whole enterprise

Strategies for functional level : strategy must indentify what level supports for strategies of enterprises level , is the details of strategy at its level and related to the functional operational management They are the strategies in the functions such

as R & D, manufacturing, marketing, human resources, finance and must comply and are consistent of strategies of enterprises level

If a company is operating in a field of business then strategies of enterprise level are coinciding with business strategy It is conventional that in this business there are two levels of business stratergies are enterprises level and functional one

1.1.2.2 Based on the scope of the strategy

General business strategy: are refering to the most important questions, the most extensive and longterm meaningful, deciding the vital questions to the enterprises, the longterm guideline and longterm goals

Business strategy of each area: this strategic type is to solve the problems of production to implement the general strategies such as product, marketing financial stratergies and technology

1.1.2.3 Based on market direction

Business strategy is divided into four groups:

Group I: Strategies are focused to solve a critical questions, not spread of resources that focus on actions to be of decisive significance for production and business of the enterprise

Group II: Business strategy is based on comparative analysis and relative advantages of enterprises to be compared with other enterprises which are being produced same products then to find out the own strengths to run the business.Group III: Creative strategies of attacking and discovering new products and services

Group IV: Strategies are cultivated the possible capabilities of the surrounding to find out key elements

1.1.2.4 Base on the process strategy

Orientation strategy is including the orientation of major functions, tasks and strategic objectives are base on the basis of judgments of environment and analysis

of internal enterprises Orientation strategy is the fundamental projects of enterprise

Action strategic is including the plan for action in different situations and adjustment in the process of implementing strategy

With the framework of this major exercise, we are following the first approach to business strategy is "Based on the business strategy level.”

1.1.3 The role of business strategy

To help the enterprise to clearly see the direction in the future then the management administrators to review and make decision which directions should to drive enterprises and when can achieve the goals

To help the management administrators are always initiative in any changes of the environment, as well help them see clear opportunities and risks can be occured in the current business to analyze, evaluate, forecast business environment in the future From there to drive enterprises for taking any advantages or opportunities, and pushing back the risks to win.

To help enterprises to exploit and use up the resources, their potential Thence promote the maximum strengths of the enterprise for going up

To help enterprises to allocate their resources in the business fields on time reasonably

To help enterprises to unite and have the engagement of employees and management in implementing the objectives of enterprises Thence to create internal strengths

To help enterprises to increase sales volume and labor productivity and increased administrative efficiency, can avoid risks and prevent issues to be happened

1.2 Content business strategy in the decorative paints company

Strategic systems in an enterprise are including : Strategies for Enterprises, Business strategy level and Strategy for functional level The business of ICI is decorative paints ICI company have one business area then there are twolevels of strategy are Business strategy level and Strategy for function level (Strategic for company level is coincided with Business strategy level)

1.2.1 Strategic content for businesses in the decorative paints company

ICI business with a particular field of decorative paints, with the approach of administrative management then strategies for businesses are including: general strategy (Grand Strategies), Adaptive Strategies and Competitive strategies

1.2.1.1 Grand Strategies

Are general strategies of description of the overall ways which the business to pursue Decorative paints company need to choose overall appropriate strategies are including: stable strategies, strategic growth, strategies to narrow or strategy combination

Stable strategy is characterized by no significant changes It means that enterprise ago how is this still so now to continue to serve the group as before by providing products and similar services, preserve market share, and maintain interest rates and the withdrawal of the capital as in the past.

When the company leaders to pursue this strategy? When they see just pleased with the results the company business This strategy is appropriate to companies which operate in the environment is relatively stable and little changed However, It is not very easy for any business (or individual) to define a strategy for its stability, because it seems not much of the psychology and ambition of leaders are always to expansion and increased growth These administrators under this strategy can be provided is not even advanced player, or an often part player

Growth Strategy: strategy to seek growth in the activities of the business This strategy often involves increasing sales volume , increasing the number of workers

or increasing market share This strategy is many leaders as they pursue that, " the much more to the much better and the most to the best.” Growth Strategy can be implemented by the ways: direct extension (additional investment of machines, equipments, workshops …) mergers and takeovers (Mergers & Acquisitions); jointventure; diversification business fields

Narrow strategy: to seek for cutting off the scale and extent of diverse activities of company

Before the 1980s, noun "cut" or "narrow" easily cause loss of sympathy for small companies wanting to admit they are pursuing this strategy (which is only referring

to ongoing development as an Art language is preferred) However, to the end of

1980, people had recognized a narrow really becoming a trend and strategic, and manegement of the narrow was one of the problems which were discovered positive in the field of administration There are many reasons why decorative paints companies can look at this narrow strategy: fierce competition in both domestically and internationally; Reduce government intervention; Mergers and

takeovers; The important invention technology makes the business as are scaled with the number of employees less than

Mixture strategy: to pursue simultaneously two or more of the strategies stability, growth, or shrink depending on the actual business situation

1.2.1.2 Adaptative strategy

In the period of business, decorative paints enterprises need to determine position and orientation competition in the industry how their participation Therefore the research the enterprises need to research and choose business strategies to their suitable adaptation

Theory of adaptative strategy by both Mr Raymond Miles and Charles Snow had been proponented Firstly, Mr Miles and Snow had classified into four types of strategy: The defender (Defenders) who seeks (Prospectors), the analysis (Analyzers )and the reactor (Reactors) Thence they demonstrated that the success achieved by only one of the three strategies if there is a joint strategy with the environment of the enterprise, the internal structure and management processes The two men also showed that any companies follow the fourth will fail Specifically in decorative paints industry as follows:

The strategy "The defender" (Defenders): strategy to pursue stability by only producing a limited paints products to be directed at a narrow piece of the overall potential market

Initially, the defender market have penetration by offering a range of products is limited Over time, the defender eventually cut out to own a piece of the market as a their small autonomous region, and protecting it by the way that the competitors reached it very difficult, often through plans like the standard economic development and strengthen the prestige labels, quality of products, services, economical due to the scale

Thus, once find itself a suitable market segment, the defenders tend elusive the development and going outside "the forbidden area" of them This strategy is often seen in the business with relatively health, stable and predictable Defenders who

seek to grow by developing products within their paints and penetrating more new markets.

The strategy "The Search" (Prospectors): to pursue innovation by searching and exploring new products and new opportunities in the market

Contrary to the defenders (who is going to find stability), the searcher to pursue innovation Strong points of the prospectors have found out and exploited new products and opportunities in the market, so the list of items of products are broad and often changes Searchers often are the first ones into new markets

Strategy of analysis "(Analyzers): to seek the ways for reducing risky minimum

by following the innovations of competitors, but only after the innovation has been proved the successes

The analysis has been made by simulation and imitating Other paints companies have been copied the ideological success of the prospectors The thought of the analyzers is "the next life but is the overwhelming"

The first leading paints products are characterized by a hard right on the design, production, selling Thus, when competitors launch new products to market, they research the situation, interview the consumers to see products that have any advantages or disadvantages and what innovation must do Then to start producing better products , overcome the disadvantages of the competitors

Thus, the analyzers have to be able to parody the new products of the key prospectors , but at the same time it must maintain performance for the products and markets of their stability As a result, the analyzers often have marginal profit less than the prospectors, but they have better productivity The prospectors need to have a larger marginal profit to offset the level of adventure that they incurred expenses and other costs of their production

Thus, if the prospector is successful by moving efficiently, then the success of analyzer by doing both very careful way (hence, its new name is "the analyzer ") The analyzer is successful by the "fast follower” or "the second mover.”

The reactors: to have the typical of the type of decision is not stable and consistent This strategy often is occured when one of the three above the strategies are not pursued properly Overall, the response is incorrect response of situations, poor results and not willing to pursue any strategies properbly.

1.2.1.3.Competitive strategies

According to Michael Porter's theories of competitive strategy can be seen that in the decorative paints industry there is no company which can achieve at the average

by "is trying to do everything to everyone" Therefore, the management board need

to choose its business strategies are simultaneous of competitive advantages of its business industry and competitive advantages of enterprise For example, decorative paints company has to choose from the following competitive advantages: Strategy of leading prices: This strategy advocates compete by offering lower prices for paints products than competitors

Unique strategy: This strategy focuses on providing a special service for a certain narrow segments which the company has the advantages in the market

Strategy of leading quality: This strategy aims to conquer the customers with higher or highest quality of paints products than competitors

Strategy of the leading to the difference: This strategy advocates the competitions through the providing for our customers by differentiation of features and benifits

of the paints products comparing with competitors

1.2.2 The contents of strategies for functional level in the decorative paints

industry

Strategies of functional level (also called strategies for functions in company) These strategies need to be determined what need to be done to supports for the genenal business strategy They are the specefic business strategies for the functions in the company which have been related to general administration operations and the general strategies of enterprise Requirements of the strategy for funtional level are subject to and consistent with overall business strategy Goal is to create a frame or

diagram for direction , how to achieve setting objectives for each function in company After brief strategy for functions are execution plans.

In decorative paint industry it is focused to research strategies: Strategy of manufacturing and prodution operation , marketing, strategy of research and development (R & D), strategy of finance, strategy of human resources

1.2.2.1 Strategy of manufacturing and production operation

Paints company need to have specific strategies in the management for production with 08 contents : Forecasting production demand; product design and technology selection; capacity planning ; Locate businesses; layout of production; resources planning ; the level of production; production control system

1.2.2.2 Marketing strategy

To make marketing strategies , Decorative paints company should proceed the following steps: Identify target marketing  Market analysis Market segmentation Target market Define and variables Strategy marketing – mix policy implementation control and plan adjustment

Strategy of Marketing Mix is the core content of the marketing strategy, including the 4Ps : Product, Price, Place, Promotion

1.2.2.3 Strategy of Research and Development

Content of research and development in the decorative paints company to explore the products, services and processes and then apply that knowledge to create products, services and new process , is calculated to improve to meet the needs of customers or the market better

R & D is always the objective and important function of the advanced company, multinational companies in the world "A decorative paints company want to be the leader in the market there is no other choice that the company must always get a ahead of competitors to develop products and technologies to meet customer needs with affordable and costoptimized "

1.2.2.4 Strategic Finance

Questions that paints company need to be interested are priority:

Firstly, cash flow = surplus funds of company The cash flow depends on the cycle life of products and paints business industry.

Secondly, so good credit = current low debt which banks and investors see a promising the good business A good credit allows company to expand the use of the loan

Third, Flexible Finance = ability to meet financial needs are not anticipating

1.2.2.6 Strategy of human resources

Human resources are the core for the sustainable development and successes of comapany.Therefore, Paints company should develop appropriate strategies of human recources management , focused on six contents 1 human resource planning; 2 recruitment human resources; 3 layout human use; 4 personnel training and delelopment; 5 evaluate human resources 6 human offer policy

1.3 Grounds and procedures for building business strategy in the decorative paints company

1.3.1 Grounds to build business strategy in the decorative paints company

Strategic selection must be based on the basic grounds:

The first, the advantages of the compan through analysis of the facts:

The strengths or relative position of the company compared to competitors

Pursuant to the profit / high capital investment in the future of the paints industry Analysis of the value chain of customers, company and competitors

The second, goals: Strategies have been selected for achieving goals like?

The thirth, resources: financial, human resources, facilities engineering, technology

The fouth, qualifications and capabilities of the company: depend on the quality and level of capability, the ability and competencies of company that choose the appropriate strategy

The fifth, the legal basis and the reaction of stakeholders: suppliers, alliance partners and customers

The sixth, investment opportunities

In the process of building strategies, the magement administrator must use models

of environmental analysis associated with each company to help them make appropriate decisions

1.3.2 Analytical methods of environmental to build strategies of decorative paints

company

1.3.2.1 SWOT analysis

A scan of the internal and external environment is an important part of the strategic planning process in the Paint firms Environmental factors internal to the firm usually can be chiến lượcassified as strengths (S) or weaknesses (W), and those external to the firm can be chiến lượcassified as opportunities (O) or threats (T) Such an analysis of the strategic environment is referred to as a SWOT analysis.The SWOT analysis provides information that is helpful in matching the firm's resources and capabilities to the competitive environment in which it operates As such, it is instrumental in strategy formulation and selection The following diagram shows how a SWOT analysis fits into an environmental scan:

a) SWOT Analysis Framework

Environmental Scan / \Internal Analysis External Analysis/ \ / \Strengths Weaknesses Opportunities Threats

|

SWOT Matrix

Strengths: A Paint firm's strengths are its resources and capabilities that can be

used as a basis for developing a competitive advantage Examples of such strengths inchiến lượcude: patents; strong brand names; good reputation among customers; cost advantages from proprietary knowhow; exchiến lượcusive access to high grade natural resources; favorable access to distribution networks…

Weaknesses: The absence of certain strengths may be viewed as a weakness For

example, each of the following may be considered weaknesses: lack of patent

protection; a weak brand name; poor reputation among customers; high cost structure; lack of access to the best natural resources; lack of access to key distribution channels…

In some cases, a weakness may be the flip side of a strength Take the case in which

a Paint firm has a large amount of manufacturing capacity While this capacity may

be considered a strength that competitors do not share, it also may be a considered a weakness if the large investment in manufacturing capacity prevents the firm from reacting quickly to changes in the strategic environment

Opportunities: The external environmental analysis may reveal certain new

opportunities for profit and growth Some examples of such opportunities inchiến lượcude: an unfulfilled customer need; arrival of new technologies; loosening of regulations; removal of international trade barriers…

Threats: Changes in the external environmental also may present threats to the

firm Some examples of such threats inchiến lượcude: shifts in consumer tastes away from the firm's products; emergence of substitute products; new regulations; increased trade barriers…

b) The SWOT Matrix

A firm should not necessarily pursue the more lucrative opportunities Rather, it may have a better chance at developing a competitive advantage by identifying a fit between the firm's strengths and upcoming opportunities In some cases, the firm can overcome a weakness in order to prepare itself to pursue a compelling opportunity

To develop strategies that take into account the SWOT profile, a matrix of these

factors can be constructed The SWOT matrix (also known as a TOWS Matrix) is

shown below:

Figure 1.1 SWOT / TOWS Matrix

• SO strategies pursue opportunities that are a good fit to the company's

strengths

• WO strategies overcome weaknesses to pursue opportunities.

• ST strategies identify ways that the firm can use its strengths to reduce its

vulnerability to external threats

• WT strategies establish a defensive plan to prevent the firm's weaknesses from

making it highly susceptible to external threats

1.3.2.2 BCG Matrix analysis

Figure 1.2 BCG Matrix

Base on this approach model, it has been seen that there are the products which have been showing the potential ones in ICI Among of them there are some products “ less opportunity or non opportunity” to be existed If company continues

to maintain the production then it may threaten the existence of the enterprise The questions are to be raised what and how company should do with these products ? Since then, based on market share (high, low) of each type of product and growth

rate forecast (high, low) in the market then BCG have been given the segmentatation and positioning of the product (or group of products), called product matrix structure of the company, with developing the appropriate corresponding strategy for each position.

Product "Star” is just paints products have large market growth rate (demand for products is growing fast), have a high market share (many popular consumers like and love these products and brand) Normally, product "Star" is the business industry which have the great potential growth and high profit However, due to the high speed of growth that’s why the products need to be required more investment and continuous, so cash is generated in this products group can have a few or non (it can be poured into reinvestment)

Strategies for these products is invested to continue to dominate the market Product "Cash Cows” is the paints product with relatively large market share, but

in paints business industry is ripe or growing slowly Because of ripe, the large investment in equipment and advertising would not need anymore As a result, the products in this group have created quite a lot of cash (should be called "The cows")

Company strategy is squeezed the cash in these products as much as possible by maximise sales volume and limiting investment in “the cows” and keep it level can

be maintained, and usage this cash of “the cows” in order to invest in products “ star” that have a potential

Product "Question marks “ are demand of these paints products is growing very strongly in market , but market share of company is quite small

These are the products of high adventure because of demand in market of these products is growing so fast but the market share of company is very small The expansion of production requires large capital that’s why to make "a hard thinking"…There are some companies invest bravely to increase their market share, meanwhile other enterprises may be "afraid" to invest in this segment and let’s opportunity has gone

Product "Dog" is the paints products with low market share in the stagnance market (the demand is very low), or in very slow market growth rate Normally, for products group , the enterprise only lost more because its sales revenue have not enough for the costs

Strategy for the product category is to gradually abandon the production.BCG matrix method is said that if the paints company can analysis its products properbly base on this model, since then can choose appropriate strategies and be sacrificed shortterm profits for gaining market share, it will be profitable over in the long term The “ star” will become the “cash cows” when market is going to move into ripe stage.It is the most difficult decisions in the product category in

“question marks ” Some products need to have a dissolution , meanwhile other ones need to be turned into “star” The area in “question marks” is the adventure of enterprise and business owners often are so cautious, only want to invest limited, especially in the environmental conditions and legal in our country are also unstable Product "dog" is no doubt to have liquidation to get that money for the product “ star” or product “ question marks” or the changes necessary to extend the life cycle of them

1.3.2.3 Porter's Five Forces Model analysis

A Paints company is not an isolated unit in the world and performs within a market full of other competitors To be able to evaluate our position on market and to act accordingly we use the Porter's Five Forces Model This model helps ICI define and realize our business and its surroundings and identify threats and opportunities to focus on We review this model periodically to obtain uptodate data in this global and turbulent environment

Figure 1.3 Porter's Five Forces Model

The Porter Model consists of 5 elements which together comprises the environment business operate in These elements are: suppliers, customers, new entrants, existing competition and the product itself By assessing every one of these elements we get the whole picture of our company within the market and the rating helps ICI target the key areas We use the scale of 05 to evaluate the power of each element where 0 means no power and 5 very high power (reffering to the number in the brackets) Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation These are:

1 Supplier Power: Here you assess how easy it is for suppliers to drive up prices

This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on The fewer the supplier choices you have, and the more you need suppliers' help, the more powerful your suppliers are

2 Buyer Power: Here you ask yourself how easy it is for buyers to drive prices

down Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products

and services to those of someone else, and so on If you deal with few, powerful buyers, they are often able to dictate terms to you.

3 Competitive Rivalry: What is important here is the number and capability of your

competitors – if you have many competitors, and they offer equally attractive products and services, then you’ll most likely have little power in the situation If suppliers and buyers don’t get a good deal from you, they’ll go elsewhere On the other hand, if noone else can do what you do, then you can often have tremendous strength

4 Threat of Substitution: This is affected by the ability of your customers to find a

different way of doing what you do – for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it If substitution is easy and substitution is viable, then this weakens your power

5 Threat of New Entry: Power is also affected by the ability of people to enter your

market If it costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or if you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your positi on If you have strong and durable barriers to entry, then you can preserve a favorable position and take fair advantage of it

Key points: Porter's Five Forces Analysis is an important tool for assessing the potential for profitability in an industry With a little adaptation, it is also useful as a way of assessing the balance of power in more general situations

It works by looking at the strength of five important forces that affect competition:

• Supplier Power: The power of suppliers to drive up the prices of your inputs;

• Buyer Power: The power of your customers to drive down your prices;

• Competitive Rivalry: The strength of competition in the industry;

• The Threat of Substitution: The extent to which different products and services can be used in place of your own; and

• The Threat of New Entry: The ease with which new competitors can enter the market if they see that you are making good profits (and then drive your prices down).

By thinking through how each force affects you, and by identifying the strength and direction of each force, you can quickly assess the strength of the position and your ability to make a sustained profit in the industry

You can then look at how you can affect each of the forces to move the balance of power more in your favor

1.3.3 The Business strategicplanning process

According to Philip Kotler (1997), the business unit strategicplanning consists of steps shown in Figure 1.4:

Figure 1.4 The Business strategicplanning process

1.3.2.1 Business Mission and Objectives

a) Business Mission: A company's mission is its reason for being The mission often

is expressed in the form of a mission statement, which conveys a sense of purpose

to employees and projects a company image to customers In the strategy formulation process, the mission statement sets the mood of where the company should go

b) Objectives: Objectives are concrete goals that the organization seeks to reach, for

example, an earnings growth target The objectives should be challenging but

achievable They also should be measurable so that the company can monitor its progress and make corrections as needed.

1.3.2.2 Situation Analysis

Once the firm has specified its objectives, it begins with its current situation to devise

a strategic plan to reach those objectives Changes in the external environment often present new opportunities and new ways to reach the objectives An environmental scan is performed to identify the available opportunities The firm also must know its own capabilities and limitations in order to select the opportunities that it can pursue with a higher probability of success The situation analysis therefore involves an analysis of both the external and internal environment

The external environment has two aspects: the macroenvironment that affects all firms and a microenvironment that affects only the firms in a particular industry The macroenvironmental analysis inchiến lượcudes political, economic, social, and technological factors and sometimes is referred to as a PEST analysis

An important aspect of the microenvironmental analysis is the industry in which the firm operates or is considering operating Michael Porter devised a five forces framework that is useful for industry analysis Porter's 5 forces inchiến lượcude barriers to entry, customers, suppliers, substitute products, and rivalry among competing firms

The internal analysis considers the situation within the firm itself, such as:

Company culture

Company image

Organizational structure

Key staff

Access to natural resources

Position on the experience curve

Operational efficiency

Operational capacity Brand awareness Market share Financial resources Exchiến lượcusive contracts Patents and trade secrets …

A situation analysis can generate a large amount of information, much of which is not particularly relevant to strategy formulation To make the information more manageable, it sometimes is useful to categorize the internal factors of the firm as

strengths and weaknesses, and the external environmental factors as opportunities and threats Such some analysis often are referred to as SWOT Matrix, BCG Matrix and Porter's Five Forces Model analysis.

1.3.2.3 Strategy Formulation

Once a clear picture of the firm and its environment is in hand, specific strategic alternatives can be developed While different firms have different alternatives depending on their situation, there also exist generic strategies that can be applied across a wide range of firms Michael Porter identified cost leadership, differentiation, and focus as three generic strategies that may be considered when defining strategic alternatives Porter advised against implementing a combination

of these strategies for a given product; rather, he argued that only one of the generic strategy alternatives should be pursued

1.3.2.4 Implementation

The strategy likely will be expressed in highlevel conceptual terms and priorities For effective implementation, it needs to be translated into more detailed policies that can be understood at the functional level of the organization The expression of the strategy in terms of functional policies also serves to highlight any practical issues that might not have been visible at a higher level The strategy should be translated into specific policies for functional areas such as: Marketing; Research and development; Procurement; Production; Human resources; Information systems…

In addition to developing functional policies, the implementation phase involves identifying the required resources and putting into place the necessary organizational changes

1.3.2.5 Feedback and Control

Feedback and Control are essential activities because:

The strategic planning process outlined above is only one approach to strategic management It is best suited for stable environments A drawback of this topdown approach is that it may not be responsive enough for rapidly changing competitive

environments In times of change, some of the more successful strategies emerge informally from lower levels of the organization, where managers are chiến lượcoser to customers on a daytoday basis.

Another drawback is that this strategic planning model assumes fairly accurate forecasting and does not take into account unexpected events In an uncertain world, longterm forecasts cannot be relied upon with a high level of confidence In this respect, many firms have turned to scenario planning as a tool for dealing with multiple contingencies

SUMMARY OF CHAPTER 1

The contents of the chapter one have been summaried and the systematic whole of general knowledge of business strategies and management.Thence, can be used to build and delelop the business strategy for enterprises in general or decorative paints companies in particualar There are including the follows:

Overview of business strategies such as concepts, classifications and the roles of business strategy in the enterprises

Contents of the business strategies in decorative paints business It is shown clearly the basic contents of the strategies for enterprises and functional strategy level Methods to build business strategies in the decorative paints company , focusing on learning about the fundamental to build business strategies and methods of analyzing the business environment in the process of building business strategy.The above basic knowledge and theory of business strategy and strategic management will help to build the business strategy of ICI Paint Co., Ltd Vietnam and will be applied in subsequent chapters

CHATER 2 STATUS OF ACTIVITIES IN ICI PAINTS CO., LTD VIET NAM

2.1 Overview of ICI Paints Co., Ltd Vietnam

2.1.1 Information of the company

1.Name of the company: ICI PAINTS Co., Ltd VIET NAM

Headquarter: Me Linh Tower, District 1, Ho Chi Minh City The company has two factories producing paint The factory in Ben Cat District, Binh Duong Province with the production capacity of 40 million liters of paint per year, and the factory in District 9, Ho Chi Minh City with the production capacity of 25 million liters of paint per year

The company has five representative offices in Hanoi, Da Nang, Can Tho, Nha Trang and Ho Ho Chi Minh City

2 Parent company: IMPERIAL CHEMICAL INDUSTRY

The parent company of Vietnam ICI Co., Ltd is a global ICI Grouppaints which belongs to The U K Royal chemical Group The U.K Royal Chemical Group was established in 1926, the headquarter in the UK with the sales in 2009 of £ 5.6 billion pounds and net earnings of 480 million pounds This group has 35,000 employees and factories, and representative offices in 56 countries

In The U K Royal Chemical Group, ICI is a main member with the sales of over 40% of Group sales ( Sales in 2009 was 2.6 billion pounds), distributed in over 100 countries with 90% of decorative paint products

3 The investor of Vietnam ICI Co., Ltd Vietnam: ERGON INVESTMENTS

INTERNATIONAL LTD

Establishment permit number 2074788 issued on November 17, 1986 Headquarters

at 20 Manchester Square, London WIU 3 AN UK

4 Investment License: Investment License No 344/GPKCNBD by Head of the

Management Board of Binh Duong Industrial Zone issued on December 28, 1995

ICI Co., Ltd produces and trades on decorative paint in Vietnam market Its products are used to decorate and protect walls of buildings, offices, private houses and so on And they are widely used for surfaces of construction plaster walls, and concrete walls.

5 Operation period: 49 years.

6 Total investment capital: 29.800.000US dollars (Twentynine million eight

hundred thousand U.S dollars) Legal capital: 9.940.000 USD (Nine million nine hundred forty thousand U.S dollars)

7 Business status: The main brands of the company are Dulux, and Maxilite

Decorative paint products of the company have high quality and orientation to the high level segment of the market With sales of 46 million liters of paint in 2009, in recent years the company has had a high speed of the average revenue (about 20% per year)

2.1.2 Organization System of Vietnam ICI Co., LTD

With nearly 250 employees, two factories and five branches, ICI has been applying onlinemanagement function models quickly, flexibly and efficiently as follows:

SUPPLY CHAIN MANAGER

HUMAN RESOUCE MANAGER

OPERATIONS MANAGER

HO CHI MINH PLANT

OPERATIONS MANAGER BINH DUONG PLANT BRANCHES

MANAGER

Figure 2.1 Diagram of ICI Paint Vietnam Co., Ltd Organization System

2.2 Analysis, and assessment of the external environment of the company

2.2.1 Analysis of external environment of the company

2.2.1.1 Country Facts

2009 is predicted to be the difficult year toVietnam in general and paint business sector in particular, but Vietnam has initially got out of crisis, therefore paint

industry has also had better developments which are shown in table 2.1:

Table 2.1 Country Facts in 2009

Population 86 Million people, 60% < 35 years old

Urban Population 28% / Urbanization 3.1% pa

GDP/Capita (PPP) US $1.030

AB SocioEco Class 8 Million people with GDP/capita of Euro 2,500

( US$ 3400)

National GDP Euro 62 billion

Paints Market Size in

Currency Vietnam Dong – 18,500 : 1 US$ or 25,400 : 1 Euro

Inflation Rates 24% in 08; historical inflation is 7% 8% p.a

The economic indicators over the past three years are relatively good in comparison with the world and Vietnam is one of the few countries which can recover strongly

in the period 2010-2015; this will be very advantageous to paint industry development, shown in Table 2.2

Source: ICI Paints Asia

Table 2.2 Economic Indicators

2010 2015 assumption

Growth rate (%) in Construction

High inflation in 2008 but offset with low inflation in 2009 Face economic crisis in

2009 and expect to recover in 2010 onwards High FDI in 2008 and expect drop in

2009 – 2010 Construction Growth (20082012) in residential and commercial is 78% and infrastructure is 10% 12% In detail:

 Economic Highlights

Historical highlights

• Annual GDP growth: 6.5%8.5% from 19972009

• The highestever inflation rate: 24.4% in 2008

• Recorded trade deficit in 2008: 16 bil US$ (equals to 19% GDP)

• After “bubble” experience in stock market, VNIndex lost nearly 700 points – reached 379.12 points (40% of what it used to be) in H12008

• International financial crisis > new policy challenges forcing legislators to shift their focus from containing inflation to supporting economic growth.

• Fiscal stimulus, estimated to be worth under US$4bn by the IMF will go towards

a raft of infrastructure projects as well as other measures that will help to boost growth

• Government has introduced tax breaks and delayed the implementation of the new personal income tax regime

 however fiscal measures impact to GDP growth plan

 risk that any major effort on the part of the government to spend its way out

of the economic downturn will result in severe external imbalances

• FDI inflows are down significantly 72% year on year

• The construction industry appears to be holding up surprisingly well

 reduction in the price of building materials in the last nine months

 lower cost of borrowing to fund projectss

High inflation in 2008 (24%) but offset with low inflation in 2009 (7%)

Face economic crisis in 2009 and expect to recover in 2010 onwards

High FDI in 2008 and expect drop in 2009 – 2010, by how much?

Construction Growth (2010-2015) in residential and commercial is 78% and infrastructure is 10% 12%

Period 20042009, the factors which directly affect decorative paint industry are Construction, Demand for Urban Housing, Construction Industry, Tourism, Attitude

to Housing & Decoration, all these factors have positive effects on decorative paint industry It is predicted that this impact will be better in the next period 2010-

2015 However, two factors Real Estate Laws and Availability of Credit cause bad influences on this sector (Table 2.3)

Table 2.3 Effect on decorative paint market development

2004 2009

2015

2010-1 Construction

Driving force for the National economy fuelled by rising affluence, increasing demand for housing, office buildings, hotels, etc

2 Demand for

Urban Housing

Urban population is increasing at 3.1%

pa 28% of population is Urban, 65% Stay

in semi permanent homes

3 Construction

Industry

Growing at 10 11% pa, Approximate Government spending of 8 9% of GDP, Tourism key sector of Growth, Ownership

of property to foreigners

4 Tourism

One of the main destinations globally the government continues to focus and build hotels, resorts

5 Real Estate Laws Real estate prices very high,

Unregulated and speculative market

6 Availability of

Credit

Less than 20% of housing on formal credit, Access to loans generally limited, Loan terms generally 5 years

Note: (Good Effect) ; (Very good Effect) ; (Effect not good)

2.2.1.2 Vietnam Paints Market

The decorative paint market accounts for 48% of the paint industry and is defined as

5 categories: interior & exterior emulsions, enamel, sealer, skim coat The decorative paint market is split into 3 tiers namely are: Tier 1premium, Tier 2mid, Tier 3low The Country is segregated into 3 Regions – North, Central and South It

Source: ICI Paints Asia

is a developing country with crowded population, stable economic growth, and fast rate of urbanization, paint industry is growing strongly (2009, Volume 210 Mn L, Velue EUR 120 Mn), 80% of the houses have not been painted, so Vietnam is a paint market good potential developments which are shown in 6 points below:

1 Categories and Segments – 2009:

E n a m

el 21 9 M

n L

P ut

ty 9.

6 M

n E U

R

Undercoats 11.4 Mn EUR

(9%)

Exterior 31.5 Mn EUR ( 26.2%)

Interior 41.8 Mn EUR ( 34.8%)

Enamel 25.7 Mn EUR

VALUE: 120 Mn EUR

Source: ICI Paints Asia